Environment & the World

Thursday, March 8, 2007

Hubbert’s Peak and Oil

Filed under: Books, Energy, Geology, Oil, Politics — amirj @ 10:10 pm

I recently read the book Out of Gas by David Goodstein, which reflects upon energy use especially in light of the coming oil shortage. One thing this book got me thinking about was Hubbert’s Peak and when we really might start to feel the pain of declining oil supplies. Goodstein makes the point that Hubbert’s Peak followers and the major oil companies (using BP’s data as representative) essentially agree that we only have about 40 years of oil supply left at current consumption rates.

If I understand correctly, Goodstein argues that the major oil corporations and the Hubbert followers disagree on the point of crisis. According to Hubbert’s peak, societies will start to spiral into an energy crisis once we pass peak oil production. Passing the peak would be the turning point when supply can no longer keep up with our energy needs–leading to higher prices and shortages. In contrast, the energy corporations seem to argue that we can rest assured about our oil supplies until we’ve pretty much pumped out everything we can.

In thinking about this issue, there are at least three points that deserve further discussion and analysis.
1. Is Hubbert’s view correct that oil supplies will start to fall short of demand once we pass the peak?
2. How much proven reserves of oil are there?
3. What are our contingency plans in the face of an oil shortage?

Hubbert’s view has credibility to it. He correctly predicted that U.S. oil production in the lower 48 states would peak around 1970, which is exactly what happened. Furthermore, the Hubbert curve also adequately characterizes the production curve of individual oil wells. The general trend of oil production appears to follow a rising curve which tops out once half of the oil has been extracted. After that peak, production declines. It therefore doesn’t require a big stretch of the imagination to assume that global oil production would follow the same pattern.

Another way of looking at this point would be to ask whether it is plausible that we can keep raising production to meet increasing demand until we’ve exhausted our oil supplies. It might be; but it also might not be very realistic. Declining oil reserves necessarily mean that certain oil fields will dry up or will start to yield less. Increasing our production in tandem with a growing global thirst for oil means that new oil fields will have to be brought on-line faster than existing ones dry up. The challenge, however, is that new oil fields lie in remote regions and pumping more oil from existing regions would require costly new technologies as the oil becomes harder to extract. The large capital investment in technology, discovering new fields, and bringing them on-line imply that oil-reliant economies might already experience more pressure (at least in terms of cost) well before we’ve extracted the last drop.

The second point is also contentious because the limited time frame in which our oil-thirsty economy can survive depends on the amount of proven reserves. The OPEC 2005 Bulletin estimated that there are 1.15 trillion barrels of proven reserves left in the world (pdf, p.45). The U.S. Energy Information Administartion estimated world oil reserves in 2006 at 1.29 trillion barrels of oil (pdf, p.28). At current global consumption (excel spreadsheet) rates of about 84 million barrels of oil per day this means we have 42 years of oil left in the earth.

The problem with the above calculation is that it assumes that global consumption of oil will remain at present levels in the future and that the proven reserves of oil will also remain the same. In reality, both of these numbers are dynamic. A look at global demand statistics for oil reveals that they rise every year. EIA estimates show that by 2025 global oil consumption could be at about 115 million barrels per day (p.26).

On the other hand, the size of proven reserves could increase for a while (pending new discoveries). The same EIA document estimates that by 2025 we will have 2.96 tillion barrels worth of proven oil reserves in the world (p.29), however it is not clear whether that number takes into account the additional amount we will have consumed by then. In Sept. 2006, an official at Aramco (the Saudi oil company) stated that 4.7 trillion barrels of oil remain. As the Wall Street Journal points out, though, “3.5 trillion of the roughly 4.7 trillion barrels of oil Mr. Jum’ah is counting on will depend on the development of new technologies… He also factored in 1.5 trillion barrels from nonconventional sources, such as Canadian tar sands.”

Estimating future reserves is quite a hotly contested matter, nor is it straightforward. An increase in proven reserves does not translate into prolonged bliss for the oil economy. Advanced extraction techniques and nonconventional sources would most likely be more costly and energy-intensive, so prices could rise and we’d be getting less net energy per barrel produced. Furthermore, some people have taken a more cynical view of proven reserve statistics. High jumps in reported oil reserves have led some to suspect certain countries have over-reported the size of their reserves for political/economic gain.

All this begs the question, what is our backup plan? What happens if oil fields dry up faster than expected, or if we face another oil embargo? Or even, what’s our plan once oil runs out? The U.S. has built a transportation infrastructure that relies almost entirely on oil products, and it’s just not clear at this point what would happen when gas prices spike even higher and when the shortages begin. How will millions of people commute to work? What sacrifices will we be forced to make when gasoline costs rise even more? What about airfare? Road trips? Our three-car garage lifestyle? Higher transportation costs will also affect the prices for products we buy, most of which are shipped 10 to 1000 miles to reach our store shelves.

No matter what view you take on peak oil, it’s clear that our way of life as we know it will no longer be possible if we continue to build economies and lifestyles dependent on ever rising appetites for oil. Oil consumption does not need to grind to an instantaneous screeching halt, however we need Plan Bs and Cs and we need to develop alternative energy sources that will make our economy more resilient in the face of oil supply shocks. After all this fretting, I haven’t even made mention of the climate change angle, an issue intimately connected to, and one that will only be exacerbated by, ever more voracious oil consumption. In a scathing dose of reality, James Howard Kunstler describes our attitude towards the oil dilemma as sleepwalking into the future. Indeed, it is time to wake up.

Monday, February 19, 2007

Solar Boom?

Filed under: Economics, Energy, Oil — amirj @ 2:47 pm

Did you know that we’re in the middle of a solar economic boom of sorts? Even though this is a story that ought to interest and tickle environmentalists, it seems that the environmental community hasn’t accorded the topic nearly as much attention as the business community has. Indeed, this has been a business story with a heavy financial market angle, but is that all it should be?

So, what’s been happening? In the last two years numerous solar companies have begun to trade publicly on Wall Street, with a burst of solar initial public offerings in the past three months alone. If their growing market presence is notable, though, their market performance is even more so. Many of these solar companies’ stocks have soared. A look at a comparative chart of some of these stocks shows that their value has jumped up anywhere from 20% to 100% in the last three months alone. To get an idea of how impressive that is, compare those percentage gains to the single-digit interest rate that you earn in your savings account and then imagine what would have happened to your money had it been invested in those solar stocks. Furthermore, a look at the three major U.S. market index stocks (the Dow, Nasdaq, and S&P500) shows overall market gains of 2% – 4% over that same three month period, indicating that the solar stocks have truly been on fire.

Of course, this solar story is not without blemishes. There are some companies involved in the solar industry whose stocks have not done that well in the same period. A look at this chart reveals three such examples. Nevertheless, the number of solar stocks surging seems to outnumber the number of sluggish ones thus suggesting that a boom might be more of the rule and the sideways action or decline more of an exception. The other impressive angle to this story is that this recent boom took place when oil prices have been trading at relatively low prices compared to the summer highs near 80$/barrel. My impression has been that market leaders tend to favor alternative energy stocks when the price of oil spikes and brush it aside when the price of oil slides down to more tolerable levels–though that shortsighted trend might be decoupling.

What all this makes me wonder, then, is what should this story mean to the environmental community? To the environmental movement? The environmental community has focused on the dangers of climate change and with regard to energy, the need for governments to pass stronger pollution regulations and do much more to support alternative energy initiatives. The environmental community has, at times, also been willing to give pats on the back to corporations that show some kind of leadership in improving their energy efficiency and in supporting alternative energy. What the environmental community seems to shy away from is blatant attention to and support for the private sector companies that have made it their business to develop and sell the technologies that environmentalists want to see adopted on a larger scale.

It’s tough to pin-point the exact reason why the environmental community keeps its distance from the business sector. There are probably many reasons, some deeply ideological and value-based, others more plain. The thought of environmental non-profits cozying up to for-profit businesses seems like an unnatural fit, and perhaps might even be limited by tax laws(?). The lack of attention to industry trends might also have to do with the fact that environmentalists might feel let down by a corporate-dominated landscape which built a U.S. economy so heavily reliant on fossil fuels and so averse to environmental protection.

Times have changed, though. Green is more chic than it used to be and companies have started to discover that “going green” can pay off. To bring us back full circle, my question, then, is now that the  market seems to be sending us the right signals about solar power, what can we do to make sure that the market won’t let us down again? 

Thursday, January 25, 2007

State of the Union ’07 & Energy

Filed under: Climate Change, Energy, Oil, Politics, Transportation — amirj @ 2:21 pm

I thought it would be worth discussing the President’s take on energy and the environment in his State of the Union speech. Here’s the relevant portion of his speech:

“Extending hope and opportunity depends on a stable supply of energy that keeps America’s economy running and America’s environment clean. For too long our nation has been dependent on foreign oil. And this dependence leaves us more vulnerable to hostile regimes, and to terrorists — who could cause huge disruptions of oil shipments, and raise the price of oil, and do great harm to our economy.

“It’s in our vital interest to diversify America’s energy supply — the way forward is through technology. We must continue changing the way America generates electric power, by even greater use of clean coal technology, solar and wind energy, and clean, safe nuclear power. (Applause.) We need to press on with battery research for plug-in and hybrid vehicles, and expand the use of clean diesel vehicles and biodiesel fuel. (Applause.) We must continue investing in new methods of producing ethanol — (applause) — using everything from wood chips to grasses, to agricultural wastes.

“We made a lot of progress, thanks to good policies here in Washington and the strong response of the market. And now even more dramatic advances are within reach. Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we’ve done and reduce gasoline usage in the United States by 20 percent in the next 10 years. (Applause.) When we do that we will have cut our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East.

“To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 — and that is nearly five times the current target. (Applause.) At the same time, we need to reform and modernize fuel economy standards for cars the way we did for light trucks — and conserve up to 8.5 billion more gallons of gasoline by 2017.

“Achieving these ambitious goals will dramatically reduce our dependence on foreign oil, but it’s not going to eliminate it. And so as we continue to diversify our fuel supply, we must step up domestic oil production in environmentally sensitive ways. (Applause.) And to further protect America against severe disruptions to our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve. (Applause.)

“America is on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil. And these technologies will help us be better stewards of the environment, and they will help us to confront the serious challenge of global climate change. (Applause.)”

Watching the live delivery and generous applause during this section of the speech was more exciting than processing it and reading all the reactions.

Notable:
-Recognizing “global climate change” and the need to confront it.
-Reducing our dependence on foreign oil.
-Reducing gas consumption by 20 percent in 10 years.
-Strengthening fuel economy standards.
-Supporting more ethanol, hybrid technology, wind and solar power.

Sticky:
-Clean coal, clean diesel
-Nuclear power
-Doubling capacity of Strategic Petroleum Reserve
-“Alternative fuels” (coal to gas?)
-Not enough decisive action

Some reactions:
The Sierra Club is unimpressed.

 The Union of Concerned Scientists supports the fuel economy proposals, but remains cautious and says more needs to be done to address global warming.

Steven Mufson at the Washington Post and Dave Roberts at Grist examine the energy proposals from the State of the Union ’07 point by point leaving us with little for which to cheer.

With the President increasingly supporting some political action on energy issues and a Democratic majority in Congress there is still a possibility for some positive developments. With the Democrats largely eager to push for progressive energy policies they might meet the President half way this year and finally get something done.

Friday, January 12, 2007

Natural Capitalism, Ch. 2

Filed under: Energy, Oil, Reading Group, Transportation — Cathy @ 11:14 am

There’s way too much in this chapter for me to do justice to in one post.  To give a quick summary of the main ideas, H&L first point out the major inefficiencies of the current automotive industry and then propose their natural capitalism-based solution, the “hypercar” which is significantly more efficient (80-200 mpg) and also leads to a significant reduction in the materials needed in the manufacturing process, while also catalyzing the switch to a fuel cell-based electricity generation system.  They then go on to discuss the problem that hypercars can’t solve: “too much driving by too many people in too many cars.”  They do propose some interesting policy ideas for dealing with this problem, including various methods for encouraging public transit (e.g. having employers charge a yearly parking fee, paying their employees the same amount every year, and letting them pocket the difference if they can find a cheaper way to get to work).

The two key components of the hypercar are its ultra-light weight and its hybrid engine, which H&L predict would evolve into a fuel cell. The hypercar would weigh 2-3 times less than a normal car, by taking advantage of light-weight carbon composites, rather than steel.  This light weight translates into much larger gains in energy efficiency, because, as H&L point out, most of a car’s power goes into moving the car, not the driver.  With an ultra lightweight car body, other components (such as the suspension, engine, etc) can also be smaller and lighter, compounding the efficiency gains.  The reductions in materials use achieved by a hypercar are quite staggering: “92% less iron and steel, 1/3 less aluminum, 3/5 less rubber, and up to 4/5 less platinum.”

They then present a rosy view of the hydrogen economy.  They suggest that fuel cells could be made commercial by widespread deployment in stationary applications, i.e. buildings.  As with other distributed generation systems, this could ultimately be cheaper than constructing new large centralized power plants.  But the key question of course, is where to get the hydrogen for the building and hypercar fuel cells.  Initially they suggest reforming natural gas and sequestering the carbon produced in this process.  Again they are a little vague on the timing of this; from other sources I’ve heard, it sounds like fuel cells won’t be commercially available in the price range they need for hypercars for another 20 years or so.

Unfortunately this is one chapter where the age of the book (1999) starts to show.  I wonder if H&L would be as optimistic about the power of “advanced technology, customer demands, competition, and entrepreneurship” to re-shape the auto industry if they were writing the book today.  In this chapter they mention that the president of Toyota in 1997 “predicted hybrid-electric cars would capture one-third of the world car market by 2005.”  H&L further report that “by the spring of 1998, at least 5 automakers were planning imminent volume
production of cars in the 80 mpg range.”  What happened?  H&L seemed to have neglected the large factor that consumer demand plays in moving a giant and reactionary industry like the automotive industry. It appears that Americans’ love of SUVs can only be curbed by high oil prices, not by more efficient vehicles alone.  Also, the cultural and educational difficulty of convincing the public that an ultra lightweight car is just as safe as an SUV may prove a major hurdle. Instead of H&L’s optimistic view that the “strategic advantages … of saving oil, protecting the climate, and strengthening the economy may justify giving automakers strong incentives to pursue their introduction into the marketplace even more aggressively”, we are still stuck with a government that is too timid to raise the CAFE standards.

Friday, January 5, 2007

ExxonMobil’s approach to climate science

Filed under: Climate Change, Energy, Oil — Cathy @ 7:56 pm

Amir has previously written a couple of posts highlighting Exxon Mobil’s sky-high profits, so I thought it would be interesting to talk a bit about where some of that money is going.  According to a report released this week by the Union of Concerned Scientists, Exxon has spent $16 million between 1998-2005 to basically spread confusion and disinformation on climate change, and has earned itself the honor of being the world’s most active corporation in undermining climate science.  Specifically, Exxon funds a network of organizations that publish and advocate for non-peer-reviewed scientific articles debunking climate change.  In many cases, donations from Exxon accounted for more than 10% of the annual budgets of these organizations.  Granted, the amount of money spent by Exxon on this issue pales in comparison to its $36 billion annual profits for 2005.  But on the other hand, perhaps Exxon’s huge profits make its actions against climate change all the more indefensible since the company is not exactly hurting. 

The fact that Exxon is one of the leading debunkers of climate science, is not exactly news.  However, I was rather impressed by the audacity of some of the organizations mentioned in the report.  To give an example of the quality of these organizations, many of them are still touting a petition that was allegedly signed by 17,000 scientists contradicting global warming and asking Congress to reject the Kyoto Protocol.  It turned out that the petition signatories included “numerous fictional characters” and Scientific American “estimated that approximately one percent of the petition signatories might actually have a PhD in a field related to climate science.”

The biggest lesson for environmentalists from Exxon Mobil’s work is the importance of framing.  By repeatedly emphasizing the uncertainty of the science, Exxon has forced environmentalists and scientists to keep debating with them in the media about the science.  With the debate still stuck on the science, there was no room to argue that perhaps the solutions to climate change would be desirable for non-environmental reasons, by bringing new manufacturing jobs or encouraging urban revitalization.

The UCS report also touches on how Exxon Mobil’s disinformation campaign might be brought down.  One of the most promising strategies is shareholder activism – promising because it has already started.  In 2006, institutional investors with $6.75 billion in ExxonMobil stock accused the company of “making a massive bet – with shareholder’s money – that the world’s addiction to oil will not abate for decades.”  Unlike the other major oil companies – including BP and Shell – Exxon has refused to start investing in renewable technologies and even divested in most of its alternative energy holdings under its previous CEO.  Although ExxonMobil’s recent profits suggest that their short-term strategy is good, it seems that everyone else – including shareholders and fellow oil companies – is starting to see the writing on the wall.

Tuesday, December 12, 2006

Congress Okays More Drilling

Filed under: Energy, Oil, Politics — amirj @ 1:46 am

This past weekend both the U.S. House and Senate overwhelmingly approved the Gulf of Mexico Energy Security Act (S. 3711). This legislation makes 8.3 million acres available for new oil and natural gas production projects.

The Act also contains other provisions, the inclusion of which enabled the Act’s proponents to frame it in a positive, progressive light. As a “consolation” (or a slap in the face depending on your viewpoint) for environmentalists, the Act allocates funds from drillling revenues for coastal wetlands restoration, hurricane protection and flood control projects in the Gulf States in addition to funds for parks and green space preservation in all 50 states. Thanks to these provisions, the Act manages to rationalize, on the surface, increased oil exploration and extraction in as a win-win solution. Along the same lines, the bill comes off as a benevolent boost for efforts to help protect Gulf states from future hurricanes and especially as a much-needed source of rebuilding funds for Katrina-stricken Louisiana. It also justifies the drilling in terms of creating new jobs and helping the U.S.A.’s energy security.

On that latter note, D-LA Senator Landrieu’s press release on the bill reads: “The area is projected to produce enough natural gas to sustain more than 1,000 chemical plants for 40 years, and enough oil to keep 2.7 million cars running and 1.2 million homes heated for more than 15 years.” These statistics fail, however, to convey that the U.S.’s voracious appetite for hydrocarbons means that all this new oil and natural gas would serve more as a light hor d’oeuvre than a serious fix for our petro cravings. At a consumption rate of over 20 million barrels of oil per day, all of the oil that this bill makes available would only satisfy a meager 2 months worth of the U.S.’s oil needs. Simiarly, with U.S. natural gas consumption at about 22 trillion cubic feet per year, the 6 trillion cubic feet of natural gas believed to be in this area would only meet an equivalent of one quarter of a year’s worth of U.S. natural gas demand. Of course, the oil and natural gas from this area would not be pumped out in such a short period of time, nor would this area ever constitute the sole source of hydrocarbons for the U.S. at any point in time. Nevertheless, these general calculations illustrate how minute these sources are compared to the total U.S. demand.

In a completely unsurprising move, President Bush praised the Act and will likely sign it into law swiftly. Ironically, even though the President has professed that this country is addicted to oil, signing this new law will do no nothing to wean us off the addiction. In fact, the sort of short-term, pseudo-petro-security this Act provides will only assuage our fears over the looming oil shortage, distract us from urgency of the matter, and will exacerbate our global warming emissions in the time being.

The Sierra Club opposed this bill, arguing that it makes more sense to improve car fuel efficiency and invest in wind and solar power. Indeed, it would have been much more fruitful for Congress to look into ways to improve energy efficiency and to reduce our humongous rate of fossil fuel consumption. Small-scale energy efficiency projects rolled out across the entire country could easily save more energy than we would ever pump from this area in the Gulf of Mexico. Furthermore, Congress could have seized this opportunity to show some really innovative and inspiring leadership. Instead of providing Gulf states with funds, generated from additional fossil fuel extraction, to protect the environment and guard against future hurricanes, Congress could have authorized financial incentives for new solar and wind energy projects in these Southern states, the tax revenues from which could serve the same end goal.

Thursday, October 26, 2006

ExxonMobil Rolls in Dough

Filed under: Economics, Energy, Oil — amirj @ 3:14 pm

I’ve known for a while that ExxonMobil was making big bucks, but I was completely astonished when I learned about the magnitude of their profits. This summer I had one of those jaw-dropping, I-can’t-believe-it-and-I-don’t-know-what-to-say moments when ExxonMobil reported its second quarter profits for 2006.  The massive corporation raked in $10.36 billion dollars in profits in three short months. This landed ExxonMobil the second largest quarterly profit in U.S. history. Not that it makes too much of a difference considering they bumped themselves out of second place (previously held by ExxonMobil’s $9.9 billion 3rd-quarter profits for 2005); and it probably doesn’t make too much of a difference considering they also hold the highest quarterly profit ever in U.S. history thanks to their unbelievable $10.71 billion dollar profits in the fourth quarter of 2005.

History sort of repeated itself today when ExxonMobil announced its 3rd-quarter profits for this year. Guess what happened? They reported an astounding $10.49 billion profit, once again bumping themselves out of second place for the highest quarterly profits in U.S. history. As you can see on the table in the same USATODAY article, ExxonMobil now holds the four highest quarterly profits in U.S. history–all from 2005 and 2006. What could the fact that these records were set in the last two years imply about the society we live in? Something about these numbers becomes mind-numbing when you start to think about how U.S. debt has exploded during the same time-period.

ExxonMobil is such a massive, complicated and mind-boggling corporation that it’s difficult to say anything very significant or penetrating about it in one short blog post. For the sake of a little reflection, though, let’s consider its charitable giving. One would hope that such a driven and rich corporation would, at the very least, give back almost as generously as they take from consumers at the pump. ExxonMobil reports its 2005 global contributions at $132.8 million. Their website breaks down that number into the many sectors they support: higher education, civic and community, disaster relief, arts, environment, etc.

Nearly $133 million is a handsome sum indeed. Because that number is so large, here’s a little attempt to put it into perspective. If you break down ExxonMobil’s profits as USATODAY did, you’ll discover that $133 million is roughly one day and 4 hours worth of its net income in the second quarter of 2006. If you take ExxonMobil’s 2005 annual net income of $36.1 billion, then their respective 2005 annual giving of $133 million amounts to about 0.37% of that year’s profits.

Wednesday, October 18, 2006

2006 Gas Mileage: U.S. Still Fails

Filed under: Oil, Politics, Transportation — amirj @ 2:16 pm

The EPA and Dept. of Energy yesterday released gas mileage stats for 2007 model vehicles, giving us yet another opportunity to reflect upon the sad state of our nation’s fuel economy. Before delving into the depressing details, here’s the better side of things: the EPA’s top 10 Fuel Economy leaders for 2007.

Rank          Manufacturer/Model                MPG
                                                             city/highway

1              Toyota Prius (hybrid-electric)      60/51
2              Honda Civic Hybrid                      49/51
3              Toyota Camry Hybrid                  40/38
4              Ford Escape Hybrid FWD             36/31
5              Toyota Yaris (manual)                34/40
6              Toyota Yaris (automatic)            34/39
7              Honda Fit (manual)                    33/38
8              Toyota Corolla (manual)             32/41
9              Hyundai Accent (manual)            32/35    
                Kia Rio (manual)                          32/35 
10            Ford Escape Hybrid 4WD              32/29
                Mercury Mariner Hybrid 4WD      32/29

Source: http://www.epa.gov/fueleconomy/overall-high.htm

While some of us would probably prefer to walk, bike, or take public transportation over driving all the time, we realize that the former are not always possible and therefore applaud Toyota and Honda for bringing to the market cars that can surpass 50 miles per gallon. The rest of the cars in the top 10 also deserve credit, even though the list leaves something to be desired. In an age of complicated petropolitics, rising gas prices, and increasing oil scarcity shouldn’t the top 10 most fuel efficient cars, at the very least, all top 40 miles per gallon? And shouldn’t the best of the best start to approach 100 mpg?

This past July the EPA released a report on fuel economy trends since 1975 which wasn’t exactly full of good news. The estimated national average gas mileage for 2006 was an unimpressive 21.0mpg. Mind you, “This average is the same as last year and in the middle of the 20.6 to 21.4 mpg range that has occurred for the past fifteen years, and five percent below the 1987 to 1988 peak of 22.1 mpg.”

Despite all the technological advances, 20 years have passed since the US reached peak fuel economy, and we can’t even match that level. Shame on us! We now have hybrids, cars that can run on biodiesel and ethanol, and BMW will soon introduce a hydrogen car, but as a nation we’re still guzzling more gas and doing so less efficiently than we did in 1987. For a nation that is bemoaning higher gas prices and whose gas money has financed (and still does) nations that are overtly hostile to it, our behavior is extremely hypocritical.

Aside from financially and politically hurting ourselves, we have also failed to meet our own standards. In 1975 Congress passed legislation that created the Corporate Average Fuel Economy (CAFE) standards. The goal was to double car fuel economy by 1985. That goal was 27.5 mpg. Not only did we fail to reach it in 1985 (remember, peak fuel economy was reached in 1987 at 22.1mpg), more than 30 years after the passage of that legislation and 20 years after our own missed deadline we have still failed ourselves.

Breaking down the 2006 21.0 mpg statistic into its components, we can see what the real culprits are. From the EPA report, “For model year 2006, cars are estimated to average 24.6 mpg, vans 20.6 mpg, SUVs 18.5 mpg, and pickups 17.0 mpg. The increased market share of light trucks, which in recent years have averaged more than six mpg less than cars, accounted for much of the decline in fuel economy of the overall new light-duty vehicle fleet from the peak that occurred in 1987-88.”

We can only blame SUVs, vans, and pickups so much though. Today, thirty years after CAFE, at 24.6 mpg our smaller, lighter, and more fuel-efficient cars have still failed to reach our own gas mileage standards.

Tuesday, September 12, 2006

Implications of Oil Below $64

Filed under: Economics, Oil — amirj @ 6:15 pm

After a week of plummeting oil prices, the same thing happened today. The markets closed with oil below $64 per gallon at a six month low. This is not terribly surprising. The hurricane season has been quite calm, despite threatening words this summer Iran and Venezuela haven’t cut off oil supplies, the summer vacation/driving season is coming to a close, etc. While the news of this short-term slump is at odds with the first post I made to this blog, in which I predicted that oil prices will continue to rise into the future, I stand by my contention. Since global economies are so heavily reliant on petroleum products to generate energy and to fuel transportation (among other uses) and since we live in a capitalist regime that is predicated upon economic growth, we can only expect that future growth and dwindling supplies of oil will cause prices to climb in the future. Inasmuch as this is true, this sort of logic drives environmentalists crazy because they believe that economic growth should not be linked so heavily to oil consumption for all of its harmful effects on climate change, air pollution, etc. Others take their concerns about oil a step further–dismayed by the very notion that progress equals economic growth and also concerned about the power dynamics of the global oil economy which facilitate megacorporate concentrations of power and turning a blind eye to human rights violations in oil-exporting nations.

 Even though most consumers will be celebrating lower gas prices, this dip has some negative consequences as well. For one, it helps us forget, or, at least, rationalize the status quo. It gives us a little reason to stop complaining about rising gas prices, and it quells our yearning for the days when oil sold for $30 per barrel and we could fill up a tank of gas at around $1 per gallon just a few short years ago. Unfortunately, what we lose along with this are the anger and frustration at high gas prices, and with it, the impetus to do something about it. In terms of impetus, the weeks that brought higher and higher oil prices also ushered in heightened interest in renewable energy, carpooling, cheaper mass transit, and interest in fuel efficient and hybrid cars. These are the times when people most readily accept the argument that environmental protection and sustainable development make economic sense and when political impetus to attain energy independence coincides with environmental interests. The convulted irony of oil economics is that these rare eclipes, by definition, occur when oil prices are high and households, corporations, and governments are pinching pennies due to higher gas and other energy expenses. So when the will finally exists, the money to realize it lacks more than ever.

Now that oil is at a six-month low, by virtue of our culture’s short-sightedness, many people will breath a sigh of relief and feel empowered to maintain the status quo of our energy consumption habits. The allure of a few saved dollars has a funny way of assauging concerns over climate change, air pollution, and global power structures. Nevertheless, these environmental and social concerns still stand legitimate and insufficiently addressed. It’s a vicious cycle of sorts that I hope we can break free of. I just hope we can find the political will and strength to overcome the inertial comfort of temporarily lower oil prices to do something before we find ourselves helpless in a world of irreprable damage and paralyzed by unafforable energy costs.

Friday, August 18, 2006

Global competition for oil

Filed under: Climate Change, Energy, Oil, Politics — Cathy @ 11:16 pm

Just read a long and interesting article in Der Spiegel on oil politics:

http://service.spiegel.de/cache/international/spiegel/0,1518,429968,00.html

Basically the article talks about how, sooner or later, the U.S., China, and India are going to clash over oil and natural gas resources.  Already, China’s demand for oil has led it to support the current Iranian regime; President Ahmadinead rightly notes that “the West needs us more than we need the West.”  Africa is another hotspot, with both the United States and China pushing for oil development along the West African coast – regardless of the corruption and consequences for human rights.

The article’s main conclusions are that: China, the US and India will have trouble securing the oil resources they need in the coming century, the EU’s energy security is uncertain, Russia is likely to be a winner if it can stabilize its government, and Brazil and Sweden will be fine.  Brazil has a well-developed biofuel economy and Sweden is developing one, with the goal of being independent of oil by 2020.  More investment into alternative transportation fuels would probably be a wise idea for the U.S., China, and India too.  The United States certainly has the resources for a significant biofuels industry based on crop residues.  China might as well, although China also has significant coal reserves; converting coal into liquid fuels and sequestering the carbon would probably be a better alternative than the current path of propping up corrupt and unstable governments for a source of energy that is damaging the climate.

 It is not surprising that the role of oil as a driving force in African poverty and political corruption (at least in some parts of Africa) rarely surfaces in public debate.  While oil does indeed bring money into many African countries, it often ends up fueling corrupt and brutally repressive governments, such as that in Nigeria.   As the article points out, “The standard of living has declined for most of the population in corrupt states such as Nigeria, Algeria and Gabun, for example.”  China gets 5% of its oil imports from the Sudan, with the consent of its genocidal government, so it’s no surprise that the Chinese are not anxious to have that government toppled (China has been blocking the imposition of UN sanctions against Sudan).  If oil exports were less of a driving force, not only would there be less corruption, but I suspect that the rest of the world would be able to turn a more objective eye to problems in Africa.  After all, it is rather difficult to make serious progress in promoting transparent governance and reducing poverty when our oil dollars are simultaneously funding the corrupt regimes.

  (There is more detail on the East Africa’s role in the global oil scene in a previous Spiegel article: http://service.spiegel.de/cache/international/spiegel/0,1518,389138,00.html)

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