RE: The Economist
Emmie, won't repeat the post in the interest of brevity.
I would describe your thoughts about energy as somewhat ill-informed, but as usual, agree or disagree, you do a good job of presenting your points without being objectionable, and in that spirit I'd like to try to add some perspective that may help you understand the issues better.
Looking at the numbers is the best way to understand that we need alternatives AND we need drill here, drill now, AND we need conservation. Probably about equal parts of all three, at least that would be a good way to start out, and adjust from there as we gain experience.
We use 20 million barrels of oil per day, of which we import 13 million barrels, the latter number being similar to the amount of that oil we use for transportation. As pointed out by Richard Heinberg in his book, The Party's Over: Oil, War, and the Fate of Industrial Societies, our dependence on oil has come about largely because oil is more energy dense, easier to transport, capable of being refined into a wider variety of products, and more versatile than any other source. David Sandalow (Brookings energy guru) essentially agrees in his book, Freedom from Oil, and also notes that oil is the cheapest source. Both of these guys are widely regarded as being on the left side of the spectrum, so these are hardly conservative talking points. The problem with their books (both of which I'm quoting in an article I'm writing right now) is that, when they get to the parts where they are talking about proposed solutions, they kinda sorta forget to address these realities.
In addition to the foregoing, any alternative currently under consideration suffers from at least one of the following deficiencies:
1. Scale -- the source simply isn't, and cannot be, big enough to displace enough oil to matter
2. Infrastructure -- the source itself may be there, and may even be ready to go, but the necessary infrastructure to get it to flow easily in the stream of commerce isn't there, and isn't going to be there any time soon
3. Price -- the source is much more expensive than oil
Wind, and most other alternatives addressed in the current Obama proposals, are not substitutes for oil. This is why I say that Obama's plan will have us importing more oil in 2015 than we do today; it's alternatives won't displace current oil consumption nearly as fast as its prohibitions on drilling will cause domestic production to decline, leaving a wider gap then than now. Wind makes electricity; we currently get less than 3% of our electricity from oil. Wind would displace coal or natural gas as sources for electricity. The source of Boone Pickens' plan is that he wants to develop wind farms, but he is afraid that if he does he will depress the price of natural gas, and he also has a lot of gas production. Like Ross Perot's opposition to NAFTA, the Pickens Plan is largely a product of personal economic self-interest dressed up as concern for humanity; that doesn't necessarily make it a bad idea (Perot's was a bad idea), but it should be understood in that light. It is instructive that Pickens now seems to be abandoning, or at least significantly modifying, his plan because he can't get rights for transmission lines to move the electricity from his windmills to the places that need electricity (this is one example of the infrastructure argument above).
The way that wind could impact oil consumption is widespread adoption of electric cars. The Obama goal is to have a million electric cars on the road by 2010. That will displace, at the very most, 200 thousand barrels of oil a day (work out the numbers for yourself if you want to). We need way more than a million electric cars on the road, but that will have to wait for two developments:
1. Enough electric generation capacity, and enough transmission capacity, that when people go home at night and plug in their cars to charge, it won't black out the country. This means we need wind and solar and nuclear. A big problem with wind and solar is that they aren't "on demand" sources; if we get a spike in demand on a cloudy day (or at night) and the wind isn't blowing, wind and solar can't fill that need. Nuclear can, as can natural gas (and to a lesser degree coal and oil fired plants, which require more warmup time).
2. Improved batteries to store electricity more effectively and efficiently, so that the range of electric cars can be expanded. Proponents like to point out that the current range is about 50 miles, and the average commute is about 25 miles, so the present situation is "perfect." It's anything but; the relationship noted means that electric cars are impractical for roughly half our population, not to mention those in the other half who like the ability to run a few errands on their way to/from work. Obviously, better storage technology would also help address the "on demand" issue noted above with regard to wind and solar.
One problem with electric cars, and with CAFE standards (another favorite of the left) is that we only turn over about 7% of our national motor fleet every year. That means it's going to take a long time for either to work their way into the market in large enough numbers to make a difference. That's not a reason not to pursue them, it just emphasizes the need to plan realistically for the effects, and understand the need for interim measures to get us over the hump until the alternatives blossom.
One thing that would get us over the hump is sugar cane ethanol. This has been one of Brasil's "magic bullets" and they now get about 44% of their motor fuel from sugar cane ethanol and biodiesel, with ethanol being by far the larger of the two. Corn ethanol is pretty much a mistake; its primary value is to demonstrate how badly government planning screws things up. We have caused starvation by skewing world food markets, we still only get something less than 10% of our gasoline from ethanol, and we've probably done more harm to the environment by clearing forests for corn fields than we've done good by reducing oil use. Sugar cane has one huge advantage over corn--it is 4 times as efficient a source. You have to use 1 gallon of gasoline/diesel/ethanol to make 2 gallons of corn ethanol, but you get 8 gallons of sugar cane ethanol for the same effort. The same 4 to 1 factor, or thereabouts, applies to acres required to farm, so the farm/forest tradeoff described above is much more favorable. We can't produce enough sugar cane domestically to replicate Brasil's experience, but we can come pretty close by importing from Brasil and other Latin American countries. The problem is that right now the midwest farm states have pushed huge subsidies for corn and penalties for alternatives, and Obama was one of the worst in this. If we pulled the subsidies and penalties, and tried to get to 35% ethanol, the market for corn ethanol would remain strong and the farmers would do just fine, but nobody has the political courage to do this (and with the Iowa caucuses opening the presidential campaign, that courage is going to be in short supply). What would we gain? Well, we'd still be importing, but we'd be importing from a lot closer to home. More significantly, for the first time we'd actually have an alternative to oil--if OPEC jacks the price of oil too high, we use more ethanol, or if Brasil jacks the price of ethanol too high we use more oil. And I have to believe that ethanol production would give Latin American economies a huge boost, and I know of no better way to ease the twin pressures of immigration and drugs. I've seen estimates that Cuba could supply enough ethanol to displace up to 20% of our current gasoline consumption. Fidel did not want to do this, but Raoul seems open to it; that alone would be grounds to end the silly trade restrictions IMO.
As for drill here, drill now, it's probably not the long-term solution (although that's not absolutely certain, as I will explain), but it's an awfully important part of surviving the next few years. Sugar cane ethanol could have an impact immediately. Drill here, drill now could have an additional impact in three to five years. Yes, I know there was a much-ballyhooed report out of the Energy Department last year that said it would be 10 years, but you have to actually read the report to find out what it really said, rather than trust the lying liars who bandied those findings about. Implicit in the study was the assumption that there would be no change in the policy with respect to offshore drilling for 5 years. So 5 of the "10" years could be wiped out by changing the policy tomorrow. From there, the study assumed that significant amounts of oil would flow in the 4-6 year time frame. The industry says 3-5, and I think the major difference between those two estimates is different assumptions regarding the speed of regulatory approvals (which could always be expedited for good reason).
Drill here, drill now would have an impact on price long before the first barrel flowed because it would impact the futures market and thus speculation. Oil "speculators" are not some evil force; think about it, you can't speculate without some degree of economic necessity to drive the speculation. What happens in oil is this. Assume you can store a barrel of oil for $1 a month. Assume you believe that in 24 months the price of a barrel of oil will be $125. If today's prices are $60 a barrel, you can buy up oil and store it, have $84 invested in the oil in 24 months, sell it for $125, and make a huge profit. So you will bid up today's price, to as high as about $100 per barrel (because that's the point at which you no longer make money). Drill here, drill now would immediately reduce the pressure on the futures price, and that would in turn reduce the upward impact of speculation on the current price.
As long as we are going to be dependent on oil (and for reasons that I've outlined, I hope you now understand that even with the most aggressive and successful--and lucky--alternatives development program, that's still a long way out) it makes sense to produce as much as we can domestically and import as little as possible. From an economic and national security perspective, I think that's obvious. Less obviously, it's also true from an environmental standpoint. First, the process of bringing oil in by tanker from overseas imposes far greater environmental risks than domestic drilling--three are more spills from tankers than from drilling, the potential for a catastrophic spill is greater from a tanker than an oil well, the mere act of transporting the oil burns fossil fuels that are not needed is we don't haul the oil in. Second, the process of drilling domestically under greater environmental controls is far safer than drilling in some third world countries that are more than willing to look the other way on safety and environmental issues in order to create the economic resource flow.
How much would we get from drill here, drill now? Obviously nobody knows for sure. Best guess is that of the prospects that the oil companies would currently like to explore but are prevented from doing so, some will prove to be dry, some will yield about what is currently expected, some will yield more than is currently projected, and the combination of the last two alternatives will lead to further discoveries that will in total greatly exceed anything that is currently expected. That expectation is based not on geological information, but on historical and economic information; that is simply what always has occurred, and the underlying reasons for that result suggest that it is reasonable to expect a continuation of that trend until the earth has been fully explored (and we are centuries away from that point). That is certainly what Brasil is experiencing in the Santos and Espiritu Santo basins. They've discovered multiple new fields in that area, each roughly the size of ANWR, in the last couple of years.
Much is made of the fact that we only have enough worldwide oil and gas reserves for 10 years or so more production. That's not a geological fact, it's an economic fact. The economics of the industry are such that it doesn't make economic sense to have more than about 10 years of reserves at any point. So stuff doesn't get developed faster. As a result, we've had roughly 10 years worth of reserves at pretty much any point for the last 100 years, we've continued to produce at faster and faster rates, and we've never run out. We're very unlikely to run out, or even threaten to run out, any time soon. But that day will come someday, and it's not too early to start transitioning away from oil in anticipation.
Speaking of ANWR, I'd be in no hurry to develop it. Each year we wait brings us new discoveries of how to minimize environmental damage. At some point, it will make lots of sense to develop it, so I would never support a permanent ban. But I think it makes a lot of sense to keep it in our hip pocket, and don't play that card until the time is right. And my best guess is that the time will be right when the world truly starts to find the string of new discoveries running out.
Those are some thoughts. Consider them and perhaps we could explore some of them further.
As for the scenario you laid out. Yes, we could easily transition to making windmills for the next few years, and our automakers might be a good place to look for that, since they don't seem adept at making autos any more. But while it would be a good thing, it wouldn't really put a dent in our oil demand. And we need to be looking at reducing demand--and increasing supply--in that specific area.
(This post was last modified: 07-22-2009 11:17 AM by Owl 69/70/75.)
|
