Beyond Economics

The End of Growth and Time for a New Era

Category Archives: Energy

The Price of Oil and Beyond


Sunset on the Age of Oil

The American Dream of suburbia and the post-WWII global economy were built on cheap oil. Although the price of oil is down by over 40-50% from the $100 level of recent years, they are still higher than during the formative post-war period or even that of the 90s ($10-$30).

Oil and gas are now in a lose/lose situation. When prices are high for a sustained period, it will spur production (supply) but put a drag on world economic growth (demand), leading to a surplus and then a price collapse. When prices are low for a sustained period, while not helpful for alternatives, oil and gas companies will suffer more and production will eventually be cut back while demand rises, leading prices to go back up. Over time, technology improvements in extraction and production will be more than offset by rapid depletion rates. The low-hanging fruit has been picked.

Meanwhile, the economics of solar and wind will continually improve and are now close to competitive, even without subsidies.

Nominal and Inflation Adjusted (Real) Price of Crude Oil, EIA, BLS, EIA, BLS

A Brief History of Oil Prices

Convential Oil

When oil was easy

  • The industrial economy of the 20th century is built on cheap and easy oil
  • The birth of OPEC and its actions in the mid to late seventies cause a spike in the price of oil, leading to inflation, down-sizing of cars, and talk of alternative energy
  • OPEC realizes that they would be better off in the long run with a growing world economy addicted to cheap oil
  • At the start of the 21st Century, globalization has really kicked in, China is growing at 10+% and the price of oil starts a steady march upward as rapidly rising demand leads the depleting supply of conventional oil
  • Rising oil prices and a U.S. housing and credit crisis infects the world economy, crashing economic demand and oil prices
  • As the economy recovers, economic demand and high oil prices return
  • Saudi Arabia, as the swing producer in OPEC, stabilizes prices at around $100/barrel by increasing or decreasing production as needed
  • On the Supply Side, with consistently high oil prices at or above $80-100/barrel, unconventional sources are developed and come online (deep water, American shale from fracking, Canadian tar sands, and soon, Arctic)
  • On the Demand Side, with consistently high oil prices, world economic growth is slowed and there are incentives to economize with higher gas mileage cars and other energy efficiencies (demand destruction)
  • The result: with supply up and demand down (slowed), oil prices weaken and then crash, fueled by speculation on the down side.
  • This time, Saudi Arabia decides not to intervene in hopes of putting unconventional sources, primarily U.S. shale, out of business by driving prices below the cost of production (also hurting Iran and Russia as a bonus).
  • Venezuela’s economy is virtually destroyed as the country had become too dependent on oil export revenues and failed to maintain their oil industry infrastructure under Chavez.
  • Saudi Arabia’s plan is not entirely successful. Shale production does back off some at lower prices, but much production continues as producers need the cash flow.
  • After losing market share long enough, OPEC, led by Saudi Arabia, finally agrees in November 2016 to make some production cuts in order to bring oil prices up from the $40s to the $50s.
  • For now, US sale production is operating somewhat as a swing producer, able to shut down and start up drilling relatively quickly in response to prices.
  • For the time being, it appears that prices will stabilize in the $50-60 range.
  • When oil prices were lower and US gasoline hovered just above $2.00/gallon, Americans returned to buying larger SUVs and pick-up trucks. With prices now settling slightly higher at closer to $2.50/gallon, we shall see if this enthusiasm continues.


Why Oil Prices May Be Volatile

“The best cure for low prices is low prices. The best cure for high prices is high prices.”

Here is the key to it all:


  • On the supply side, low oil prices will disincentivize further development of North American shale (from fracking) and then deep water and tar sands
  • On the demand side, low oil prices are already sending Americans back to pick-up trucks and SUVs and providing a stimulus to the economy
  • Eventually (6 months to 2 years), supply will be down, demand will be up, and prices will rise again
  • When prices rise again, production (supply) will increase but economic growth (demand) will slow and the vicious cycle will repeat
  • Meanwhile, economic and geopolitical wildcards could come into play at any time for better or worse
  • Financial speculation can drive prices up and down quickly and excessively but fundamentals will eventually prevail to some extent since oil storage can serve as a buffer but is not unlimited

Why Unconventional Oil is So Costly

Much of the low-hanging fruit (cheap oil) has been picked.

Deep Water

1 mile down to the sea floor, 2 miles further down to the oil seam. When something goes wrong… relief_well_diagram

Fracking for Shale Oil and Gas

See my full post on fracking for more on the environmental and economic costs. Fracking -Diagram-2

Canadian Tar Sands

Imagine the energy, water, and expense of steaming oil out of this. Tar-Sands-1

Think these unconventional sources will continue to be produced with low oil prices? Think again. Low oil prices will wreck havoc on the debt-laden unconventional oil producers and oil service providers. This could be the next financial crisis and is already leading to whispers that there may be a need for bailouts.

For Further Exploration

The Not So Promised Land of Fracking


The movie Promised Land depicts the dilemma faced by rural farms and towns by the fracking boom. While the makers of the film do reveal their biases in terms of the potential environmental and economic exploitation of poor, rural America, they attempt to provide a balance of perspectives that include some surprising twists with the conclusion left up in the air. Although we don’t actually see fracking or the results of it in the film, here is what a fracked landscape looks like.


The oil, gas, and financial industries would have us believe that the shale gas and oil boom will provide the US with domestic, clean, affordable energy for a hundred years, creating millions of jobs and stimulating the economic growth that we so desperately need. The reality may be quite different.

Here is How Hydraulic Fracturing (Fracking) Works

Fracking -Diagram-2

The diagram above shows only one well for the purpose of simplicity. Frack sites are typically 1-3 miles apart and each pad at each site may contain 4-12 wells or more. The diagram below is another representation of the pattern of horizontal drills that are needed for tapping into gas trapped in shale, as contrasted with conventional gas drilling where a single well taps into a single large reservoir.

The remainder of this post will cover some of the larger economic and environmental  issues with more technical references provided at the end.

The Economics Fail:
Low Prices and High Depletion Rates

“We are all losing our shirts today… We’re making no money. It’s all in the red.” Despite its commercials, this is what ExxonMobil CEO Rex Tillerson said in July, 2012 to the Council on Foreign Relations.

Low prices are great for consumers and the chemical industry but terrible for the natural gas industry and its shareholders. They did not get into the business of producing shale gas in order to sell it for $2-3/MMBtu (about 1000 cubic feet). The industry needs to get about $4-6 to break even and $6-8 to really profit from the complicated and expensive process of fracking. What happened is that the supply grew much faster than the demand and prices crashed. In addition, they are finding that the depletion rates fall off sharply after the first year so that they need to keep leasing more land and drilling furiously (increasing supply) in order to grow the forward hedging of production rates they must report to investors.

NG-Coal-PricesThe industry is between a rock and a hard place (no fracking pun intended). What is the industry doing to get the price up? 1) Waging a PR campaign to convince the country that shale gas is the answer to our energy and economic problems. 2) Shifting from shale gas to shale oil development (oil can get the world price because it is portable and exportable). 3)  Applying for permits for liquid natural gas (LNG) conversion facilities at our ports so that it can be exported (taking advantage of the world price that is $10-14. For shale gas fracking to work economically for the industry, it won’t be such a great deal for consumers (switching from oil to natural gas) and energy utilities (switching from coal to natural gas).

TradersThere is likely to be considerable volatility in energy markets over the coming decades, as supply and demand struggle for balance and prices lurch from one extreme to another. Currently low gas prices have already dealt a serious setback to fledgling solar and wind industries that were just getting close to economic viability. The coal industry has been seriously upset as well (probably a good thing). Price volatility is not good for anyone except futures traders.

Next, let’s break down the myths that the industry is promoting to build short and long-term demand (and get prices up) in their pitch to have shale gas be the answer to our energy dreams:

Myth #1: Natural Gas Production is Environmentally Safe

Frack-Fire-2The industry claims that fracking has been done safely for many decades. While fracking was first done around 1947, the combination of technologies and processes that have resulted in the current shale gas boom have only been in play since about 2007. In addition to the development of several key methods, there are some who say that the fracking boom really did not get under way until the passage of what has come to be known as the Halliburton (Cheney) Loophole to the Clean Water Act. It exempted energy producers from identifying the chemicals used in the fracking process out of proprietary concerns.

EncanaA presentation by Anthony Ingraffea, a former industry insider and currently a professor of Civil and Environmental Engineering at Cornell University, explains why the fracking process is extremely complicated and how the chances of something going wrong become very likely when human error and industry pressure for profits come together in the plans to develop tens of thousands of wells per year in out of site rural areas all over the country.

TruckSiteThe industry claims that they are highly regulated by the states and that this is preferred because the states know best and we shouldn’t have “one size fits all” federal regulations. Just the opposite is true. This is a complicated national issue that crosses state lines and many states are woefully under-prepared  and under-staffed to regulate the industry. In addition, state regulators are much easier to influence and corrupt.

There are many other sites that focus on the environmental problems with fracking so I won’t spend any more time here and now turn to other issues.

Myth #2: Natural Gas is Cleaner than Coal (by 50%)

example-of-gas-flaringIt is said that natural gas is the cleanest of the fossil fuels and that, if we use it to replace coal for electricity production and to replace oil for transportation and heating, this will help to reduce CO2 emissions in the fight against global warming climate change. While it may be true that the actual burning of natural gas produces 50% less carbon emissions than the energy equivalent burning of coal, we need to look at the overall life cycle production of producing unconventional shale gas by the process of hydraulic fracturing (fracking). Anthony Ingraffea, a former industry insider and currently a professor of Civil and Environmental Engineering at Cornell University, has done a study (somewhat controversial) suggesting, as others have, that shale gas production might not be that much better, if not worse, than coal in terms of total greenhouse gas emissions. This stems from the energy intensity of producing shale gas along with the methane that is either flared off or leaked out along the way. Although much shorter lived than CO2, methane is estimated at 20-100 times more powerful as a greenhouse gas. One could argue that, even if natural gas is the cleanest of the fossil fuels, additional energy resource development should be in the direction of alternatives.

Myth #3: The Shale Gas and Oil Boom Will Create Millions of Jobs

Frack-Pumps-WorkersEven the president said something to this effect in his 2012 convention speech. Again, if you listen closely you will notice that the claim is that millions of jobs will be supported (vs. created). So I guess we get to count the waitress who serves at least one person who works for the industry and construction worker who repairs the damaged road from the fracking truck traffic. Interesting, that we could count that when the taxpayer is probably paying for the road repair and thus subsidizing the industry. From a macroeconomic perspective, oil and gas production is very capital intensive. Financial resources invested in alternative energy deployment might well create three or more  times the number of jobs and leave us with something much more sustainable in the process.


Myth #4: The Shale Gas and Oil Boom Will Lead to U.S. Energy Independence

U.S. energy independence would supposedly offer a number of benefits from both a security and economic standpoint from less reliance on sometimes hostile foreign sources of energy. There is also the implication that energy costs would be lower.

First, if you listen closely, it’s really “North American” not American energy independence, since our neighbors in Canada (with Tar Sands) and Mexico are being counted for oil. Second, since there is one world price for oil, it almost doesn’t matter where it comes from. While it is true that Middle Eastern sources have been hostile to us in the past, including the embargo of the 70s, they need to sell to us and the world as much as we need to buy from them. They need the continued revenues to keep their restive populations happy. They also learned in the 70s that their long-term interests were in keeping the rest of the world hooked on oil rather than making spiteful cut-offs that might lead us to find alternatives. OPEC and primarily Saudi Arabia have in fact been a stabilizing force of late in keeping the price of oil relatively stable at around $100/barrel for oil.

US_Oil_ProductionConsumption.69210701_stdAmerica does have great energy resources in terms of the total supply of oil (limited), coal (among the largest in the world), and natural gas (now potentially abundant with shale gas). When it comes to liquid fuels, however, we use about 19 mbpd (million barrels per day) of oil. Conventional production of oil is about 6-8 mbpd with shale (tight) oil that could be produced from fracking, possibly adding another 2-3 mbpd. This adds up to 10-11 mbpd which is about equal to what Saudi Arabia is producing, thus the recent claim that the U.S. may become the world’s largest oil producer. All of this is a long way off, has a number of caveats, and is still far from oil independence.

aerialFrackingAssuming we could ramp up production, leaving rural landscapes looking like this and leaving other environmental consequences aside, we could theoretically convert our transportation system and infrastructure to run on natural gas. Such an infrastructure transformation would be very expensive and one wonders who would pay for it.

There is one more important economic element to consider. The industry is moving to build liquefied natural gas (LNG) conversion facilities at our ports in order to export LNG. Exporting sounds like a good thing until you realize that it would mean lower supply and higher prices domestically. The reason for exporting is to take advantage of much higher world prices. Until natural gas can be converted to liquid form, it can’t be exported.

Incidentally, when you hear about the U.S. becoming an oil exporter, listen again. It is not crude oil (which we still import 40-50% of); it is actually refined oil products (other than gasoline) that the industry is exporting to take advantage of world prices and excess refinery capacity in some areas.

The Bottom Line

Let us enjoy inexpensive natural gas prices for now (which I am). Low prices will not work for the oil and gas industry. None of this will work for the environment. Nothing good will come from fracking in the long run. I’ll leave you with this rather sad image.



The Future of Economics and Society as We Know It

Richard Heinberg delivers a clear and powerful message on the urgent need for the world to begin the transition to a sustainable future. He takes a big picture perspective on the interconnectedness of economics, energy, the environment, and society.

We are, and will be, seeing a cavalcade of environmental and economic disasters, not obviously related to one another, that will stymie economic growth in more and more ways.

Each will be typically treated as a special case, a problem to be solved so that we can get “back to normal”.

In September 2008, the global financial system nearly collapsed. The reasons for this sudden, gripping crisis apparently had to do with housing bubbles, lack of proper regulation of the banking industry, and the over-use of bizarre financial products that almost nobody understood. However, the oil price spike had played a critical (if largely overlooked) role in initiating the economic meltdown.

The end of growth is a very big deal indeed. It means the end of an era, and of our current ways of organizing economies, politics, and daily life. Without growth, we will have to virtually reinvent human life on Earth.

Interview of Nate Higgins on

So I’m not necessarily calling for a stock-market crash in the next decade, but I am calling for within the decade we probably won’t have a stock market. That’s a scary thing to contemplate, but this entire system is based on more every year, and we’ve extended the system by a decade or more by little bells and whistles and allowing people to buy houses with no money down and the repeal of Glass-Steagall.

And since 2008, the crash in private and household credit has been made up by government stepping in and providing 11% of our GDP just from deficit spending. And that bullet has now been spent. So the whole thing starts to unravel once they’ve spent all the bullets they have. And I don’t know that it really matters, really; stocks go down 10% or 50% or 100%, we have to restructure the way that we think about society.

Competing for nominal, digital wealth is going to go away as the main cultural objective. 

This is a fascinating, in-depth discussion of our economic, environmental, and societal predicament. If you have the time, this really ties it all together. Until recently, Nate Higgins was lead editor of The Oil Drum, one of the most popular and highly-respected websites for the analysis and discussion and global energy supplies, and the future implications of the energy decline that we are facing. He holds a Master’s Degree in Finance from the University of Chicago and recently completed his PhD in Natural Resources at the University of Vermont. Previously, he was President of Sanctuary Asset Management and a Vice-President at the investment firm Solomon Brothers and Lehman Brothers.

Nate Higgins Web Site

Additional Resources on Peak Oil

Post Carbon Institute
Founded in 2003, Post Carbon Institute is leading the transition to a more resilient, equitable, and sustainable world.

The Oil Drum
The Oil Drum seeks to facilitate civil, evidence-based discussions about energy and its impacts on the future of humanity, as well as serve as a leading online knowledge-base for energy-related topics.

“A Game-Changer” for the U.S. Auto Industry

One of every three Motor Trend magazine covers over the last year featured a Mustang. The last two issues showcased the Volt. The staff of Motor Trend are mostly muscle car guys but they were gaga over the Volt. Has the transition to the era of the electric car finally arrived? The Volt is technically classified as an extended-range EV (electric vehicle) in that it has a small gas engine to provide range beyond 35-50 miles, but it will be the first car that Americans will plug in.

“This is a fully developed vehicle with seamlessly integrated systems and software, a real car that provides a unique driving experience. And commuters may never need to buy gas!”

As one of the consultant judges on this year’s COTY panel, Chris brought the deep insight and professional skepticism you’d expect of someone who’s spent his entire working life making cars. But our 2011 Car of the Year, Chevrolet’s ground-breaking Volt, has blown him away. Like all of us on the staff at Motor Trend, Chris is an enthusiast, a man who’ll keep a thundering high-performance V-8 in his garage no matter how high gas prices go.

“I expected a science fair experiment. But this is a moonshot.”

In the 61-year history of the Car of the Year award, there have been few contenders as hyped — or as controversial — as the Chevrolet Volt. The Volt started life an Old GM project, then arrived fully formed as a symbol of New GM, carrying all the emotional and political baggage of that profound and painful transition. As a result, a lot of the sound and fury that has surrounded the Volt’s launchhas tended to obscure a simple truth: This automobile is a game-changer.

Motor Trend: Car of the Year (feature story)

How the Volt Works (more technical)

Motor Trend vs. Rush Limbaugh
Why the right-wing can’t stand the Volt

For a truly revolutionary approach to our automotive future, see Shai Agassi’s TED presentation. More to come about this in a future post.

“I expected a science fair experiment. But this is a moonshot.”Read more:

China, Electric Cars, and the Future

Coda - Chinese electric car to be built in US

With all the hand-wringing in the business press about China manipulating its currency, we may be missing the big picture. In a recent op-ed piece in The New Your Times, Thomas Freidman (The World is Flat) calls attention to how China is aggressively investing in the future. Thankfully, the US government helped save GM from itself and we at least have the Chevy Volt, which could be a game changer in its own way.

Their Moon Shot and Ours
By Thomas L. Friedman, 9/25/2010

China Inc. just named its dream team of 16-state-owned enterprises to move China off oil and into the next industrial growth engine: electric cars.

China is doing moon shots. Yes, that’s plural. When I say “moon shots” I mean big, multibillion-dollar,25-year-horizon, game-changing investments. China has at least four going now: one is building a network of ultramodern airports; another is building a web of high-speed trains connecting major cities; a third is in bioscience, where the Beijing Genomics Institute this year ordered 128 DNA sequencers — from America — giving China the largest number in the world in one institute to launch its own stem cell/genetic engineering industry; and, finally, Beijing just announced that it was providing $15 billion in seed money for the country’s leading auto and battery companies to create an electric car industry, starting in 20 pilot cities.

Not to worry. America today also has its own multibillion-dollar, 25-year-horizon, game-changing moon shot: fixing Afghanistan.

If we both now create the market incentives for consumers to buy electric cars, and the plug-in infrastructure for people to drive them everywhere, it will be a win-win moon shot for both countries. The electric car industry will flourish in the U.S. and China, and together we’ll tackle the next challenge: using auto battery innovations to build big storage batteries for wind and solar. However, if only China puts the gasoline prices and infrastructure in place, the industry will gravitate there. It will be a moon shot for them, a hobby for us, and you’ll import your new electric car from China just like you’re now importing your oil from Saudi Arabia.

Read more of this post

Gulf Oil Leak News, Images, Data, and Diagrams – 7/5

For More Technical Information and Updates

Atlantic Tropical Storm Forcast

A History Presidential Promises About Energy Policy
(From The Daily Show, 6/16)

Diagram of Relief Well Drilling Operation

First (large) diagram shows approximate scale for depth operations. Second (smaller) diagram shows current progress as of 7/5.

6/6 Update: Capture underway

The first image is the #4 cap before being placed on top of the BOP after the shear cut several days ago. The second image shows the cap in place with oil and gas escaping. Capture rates will be reported every morning. It was 10,000 BPD (barrels per day as of 6/6). This could be anywhere from 1/2 to more than 2/3 (BP’s CEO says “vast majority”) of the approximate total flow from the BOP, depending on what original flow estimate you use, ranging from 12,000 to 20,000. The maximum capture is 15,000 with the single existing recovery ship. More accurate estimates should be available soon, taking into account the increased flow from the full release (not limited by the kink) and also the increase that might occur from a relief of back pressure. The trick now is to increase the capture rate carefully to the maximum possible without sucking in sea water, i.e. there will, by necessity, have to be some oil escaping since there is not a tight seal. There is still the option of trying the diamond cut again to get a tighter seal. Note: the third diagram shows the contraption above the cap. Remember that there is a pipe within a pipe.

6/3: Fine Cut Fails: Back to Top Hat

Yesterday, the first cut of the major length of the riser pipe using the large “shear” cut method was successful. This took weight off the entire contraption. During the second cut at the top of the 5-story BOP (blowout preventer), the finer “diamond” cut saw jammed but was then freed. However, BP has now given up on the finer cut and will have to use the more crude shear cut method to remove the riser pipe. This means that they cannot get a nearly tight seal using the LMRP cap. They will now have to go back to the more open Top Hat device.

The bottom diagram shows the LMRP (Lower Marine Riser Package) Cap procedure. Also shown is a smaller BOP. BP has now been told by the government that they cannot attempt to install a second BOP because of problems within the current BOP. As a result of the failed top kill effort, it is not entirely clear how oil is making its way through and which systems within it are working. There is a risk that trying to block the current BOP with might create pressure within that could cause the entire unit to blow and release even more oil. Thus, the capture attempt that is underway until the long-term relieve wells can be drilled.

General Information Sources

How will the Gulf oil situation affect oil prices? Here is one take from Business Day at The New York Times:

Deepwater wells in the Gulf produce around 1.3 million barrels a day, against total global output of roughly 85 million. A two-year moratorium on new drilling would reduce potential output by only 300,000 barrels a day in 2015, the International Energy Agency calculates — a piffling 0.4 percent of current world production. Oil titans in the Middle East could easily pick up the slack. Saudi Arabia alone has four million barrels a day of spare capacity, PFC Energy reckons.

The fate of deepwater drilling in the United States does, of course, matter much more to the likes of BP and Exxon Mobil, which are shut out of many of the world’s biggest oil fields by national oil companies. But the United States government can afford to wait until oil majors show they know how to plug a deepwater well. America’s army of auto-crazy drivers won’t suffer.

Oil Flow Rates and Natural Seepage

BP initially claimed that only 1,000 bd (barrels per day) were being released. This was soon upped by the government and BP to 5,000 bd, a figure that was used for weeks even though some scientific observers estimated numbers in orders of magnitude higher. An internal BP memo from the 1,000 bd days was relased by Ed Markey today that indicated BP thought it was 14,000 bd even back then. BP is now claiming to be capturing about 15,000 bd with little visible reduction in the apparent flow rate. (It’s hard to say, other factors might also have increased the flow once the riser was cut. Nevertheless, BP has certainly underplayed this all along.

This diagram, in a post from The Oil Drum, compares natural seeps to “normal” oil spills/leaks which occur from oil exploration and drilling. For the Gulf of Mexico, natural seepage is about 2,700 bd, which may be the source of some of the stray tar balls and distant plumes and sheens. (So BP may be technically correct to claim that not everything is from the leak.) However, given the proportions shown in the diagram, normal spill rates would be only about 260-270 bd compared to to the at least 15,000 bd that BP is now recovering which may or may not be making a significant dent.

Technical Update Video
Although produced on 5/24, this is an interesting explanation and animation of the various methods that have recently been tried and will be tried in the next few weeks. It is from BP and contains some expected spin, but nevertheless it is very educational for those interested in the technological and logistical complexity.

BP’s Now Failed “Top Kill” Plan
On Saturday, the Top Kill method was abandoned after three days of intensive efforts including 16 Junk Shots (sending pieces of debris such as shredded tires into the blow-out preventer to try and jam it up).
Diagram from the latest issue of The Economist (detailed explanation)

Oil in the Marshes

More Images of the Disaster
This is an amazing set of pictures, both horrific and beautiful at the same time.

Other Videos & Illustrations

Unconventional Natural Gas: A Game Changer?

Perhaps. You may have heard about hydraulic fracturing (“fracing”, pronounced “fracking”) and horizontal drilling, a technique to release natural gas trapped in hardy shale-rock formations. These sources of natual gas around the world have been known about for some time but not thought to be economically viable. This article from The Economist has major implications for geopolitics, climate change, and energy independence based on both the quantity and location of these unconventional reserves.

NIMBY and environmental concerns may be a contraint. The Comments at the bottom are worth reading and provide both support and skepticism.

An Unconventional Glut
Newly economic, widely distributed sources are shifting the balance of power in the world’s gas markets
Mar 11th 2010 | HOUSTON | From The Economist print edition

The availability of abundant reserves [of unconventional natural gas] in North America contrasts with the narrowing of Western firms’ oil opportunities elsewhere in recent years. Politics was largely to blame, as surging commodity prices emboldened resource-rich countries such as Russia and Venezuela to restrict foreign access to their hydrocarbons. “The problem is, where do you go? It’s either in deep water or in countries that aren’t accessible.” This is forcing big oil companies to get gassier…The oil majors watched from the sidelines as more entrepreneurial drillers proved shale’s viability. Now they want to join in.

[One] idea that would have ramifications for the global oil sector is to gasify transport. T. Boone Pickens, a corporate raider turned energy speculator, has launched a campaign to promote this, and has support from the gas industry. All this is some way off. The coal industry will not surrender the power sector without a fight. The gasification of transport, if it happens, could also take a less direct form, with cars fuelled by electricity generated from gas.

A gasified American economy would have profound effects on both international politics and the battle against climate change. Displacement of oil by natural gas would strengthen a trend away from crude in rich countries, where the IEA believes demand has already peaked as a result of the recent spike in oil prices.

But two factors could reverse the picture again. The first surrounds the uncertainty about how fruitful shale exploration will be outside North America. Second, there are reasons for caution above ground, too. Despite natural gas’s greener credentials than oil’s or coal’s, shale drilling has critics among environmentalists, who worry that water sources will be poisoned and landscapes despoiled.

Bill Gates, Climate Change, & Conservation

In a recent article in The Huffington Post, Bill gates suggests that we should focus on innovation rather than conservation in order to bring about the CO2 reductions needed to stave off climate change. I think he does make some good points here.

Why We Need Innovation, Not Just Insulation (1/20/2010)

If the goal is to get the transportation and electrical sectors down to zero emissions you clearly need innovation that leads to entirely new approaches to generating power.  Should society spend a lot of time trying to insulate houses and telling people to turn off lights or should it spend time on accelerating innovation?… you can never insulate your way to anything close to zero no matter what advocates of resource efficiency say. You can never reduce consumerism to anything close to zero…In fact it is doubtful that any such efforts in the rich countries will even offset the increase coming from richer lifestyles in places like China, India, Brazil, Indonesia, Mexico, etc.

With that kind of clarity, people will understand the need to get to zero and begin to grasp the scope and scale of innovation that is needed…There just isn’t enough work going on today to get us to where we need to go.

What I am afraid of is that Gates’ point will be misinterpreted and misused. Americans, especially, are afraid that the implications of climate change mean a great sacrifice in our way of life. I think that this is why the denial campaign has been so successful of late. If climate change isn’t really happening or is a hoax, we won’t have to change afterall. However, when it soon becomes unavoidably obvious that the earth is warming and the climate is being disrupted, the denial campaign will change its tune and latch on to part of Gates’ logic, i.e. that conservation won’t actually help very much so let’s just wait for a technological fix or geoengineering to save us, no point in undue sacrifice.

This article from TreeHuggar makes a few other countervailing points.

Bill Gates’ Vision of Combating Climate Change is Mostly Myopic (1/21/2010)

I’m not sure any advocate of energy efficiency would say it can get you to zero emissions…What some of the most vocal of them do say though is that we could reduce electricity demand by 34% through efficiency improvements in the United States. That alone could replace 62% of coal fired electricity.

…there’s a huge difference between a standard of consumption based on human need and ecological sustainability and the dominant paradigm of consumerism-based, aggregate-growth-fetish culture spreading around the world.

The scale of the conjoined issues of climate change, peak fossil energy, population growth, biodiversity loss, and natural resource overconsumption are such that even those of us who deal with them on a day in day out basis have trouble grasping the big picture all at once…We’re talking massive paradigm shift, behavioral changes, economic changes, even changes in consciousness I’d argue, to deal with them.

…but there is no one solution…no silver bullet.

Using Corn for Ethanol

Mazed and Confused, Economist, 8/10/09

From what I can gather the connection goes something like this (much simplified, of course):

All-important Iowa presidential caucus -> support for corn for ethanol -> U.S. soybean crop displaced -> Brazilian soy crop displaced -> arable grazing land for cattle (for hamburgers, etc.) displaced -> rain forest burned and seeded for cattle grazing -> global warming (burning + loss of trees) -> offsets benefits of using ethanol…not to mention the increased cost of corn for other uses (sweeteners, cattle feed, etc.)

The article points out other, better ways to produce ethanol (also see comment below).

This is a fairly balanced article that, together with the comments, shows how the truth is not clear cut and how both data and theory can be used to support one’s point of view or agenda. The article also points out that there are not just two opposing sides to the corn ethanol issue (e.g. big oil is not happy either).

Many public issues involve similar complexity, if not more (e.g. health care). If you read the article and then the comments (starting from the bottom), you will quickly see that much this is well beyond the average voter’s desire or ability to follow. So what is the Average Joe to do? He relies on media sound bites and the simple, black and white, us vs. them world view from his favorite trusted source, like Fox News or MSNBC. These sources may originally get selected based on a single issue over which he feels passionate. The chosen source or sources’ perspective then becomes his own on all other issues. The sources themselves need to maintain their perspective to keep their audience. A self-reinfocing, echo chamber results.