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Energy and Security

| 53 Comments | 1 TrackBack
Continuing my dialog with Kevin, my second point was:
Second, we're too dependent on ME oil. We're going to do something about it, both by pushing conservation, expanding alternative energy, and expanding exploration. We're going to build the damn windmills off of Cape Cod;
I've been reading up a bit on this (note that it's a pretty information-rich subject, and unlike areas of political theory or strategy, where I feel free to just sit down and let it rip, I do think that some knowledge of fact is pretty important here - a knowledge which I'll freely confess to lacking, and welcoming input from other, more-knowledgeable parties, to get), and really realize that energy security has to be dealt with in three overlapping arenas.
First, in recognizing that our economic well-being depends to a significant part on our ability to buy energy from people who don't like us very much, and may at any time choose to stop selling it to us, or take military steps to keep other people from selling it to us. The nature of our response to this will determine a lot about our future: first in our willingness to accept the notion that people can boycott us, and that our response won't be - as the Japanese was - military; second in that we may well have to project military power to keep the 'people who don't like us' from militarily imposing their desire not to sell to us on others. And you betcha, I'm certainly aware of just how narrow and permeable is that distinction. Second, in realizing that in strategic military and economic conflicts such as the ones we seem to be in today, that our ability to resiliently respond to changes in circumstance - our ability to adapt our economy and our political and military responses - is going to be a more fruitful path to take than one that attempts to build ever more massive defenses of rigid economic and social structures. Third, in realizing that not all of the risks to our society through our use of energy come from hostile action. Happenstance (exemplified in the form of the recent blackout), our own bad behavior (as in the gaming of the California regulatory system),and unforeseen or unmanaged consequences (among others, environmental) all will come into play in trying to figure out how to approach these. I initially wrote a 4,500 word screed, and quickly realized that a) it was just too damn long to post on a blog (unless you're Bill Whittle!); and b) I was moving down into a level of detail not supported by my knowledge of the facts. So let me lay out a couple of summary facts, and then some policy challenges and the directions (60,000 foot strategies) I think we ought to be considering in response. First, we're getting better at using energy efficiently. The EIA has a history. In 1972, the year before the OPEC embargo, we used 18,650 BTU per 1996 dollar of GDP. This was a slight improvement on the 1949 figure of 20,620. By 1982, we were using 14,890 BTU/dollar, and in 2002, we were using 10,310 BTU/dollar. We're decoupling our economic strength from our direct consumption of energy, and that's a good thing. It implies a kind of 'systemic efficiency' that we need to keep working to improve. Second, our current exposure to Islamist boycott (what we're really talking about here) is not today critical. Here are just a couple of numbers; they are 2002 numbers from the great www.eia.doe.gov site, unless noted. Our total annual energy budget for 2002 was 97,350,684 billion BTU (bBTU). Of that, the following % of our total energy consumption was from |coal & coke: |22.9%| |natural gas: |23.7%| |oil: |39.2%| |nuclear: |8.4%| |pumped hydro: |-0.1%| (essentially, this consumes energy in order to create reserves for peak demand times ) |hydro: |2.7%| |total renewable: |6.1%| Of that total energy budget, 38,183,179 bBTU, or 39.2% of our annual budget was in the form of oil, and of that, approximately (I say approximately because the readily accessible numbers include other petroleum products that may not have been used for energy, but for chemical feedstocks, etc.) 19.7% of that was imported from the Persian Gulf states, and if you include Indonesia and Algeria, approximately 22.5% of our imports come from countries where the Islamist movement could feasibly take power. No natural gas was imported from Islamist states. That suggests that about 8.8% of our annual energy budget is exposed to Islamist control. That number probably isn't exact, but it probably isn't too far off (note that if someone who knows more than I could learn about this in three or four hours of searching wants to pitch in here, I'd love to have my back-of-the-hand numbers validated or corrected). Note that as domestic production flattens or declines, our demand for imports will probably increase, depending on the growth on the economy and efficiency in use. So we need to replace approximately 10% of our energy budget in order to be secure from energy blackmail by Islamist states. This would imply, as an example, a 50% increase in renewable energy (mix of biomass, wind, and geothermal) for a gain of 3%, combined with approximately a 10% increase in domestic oil and gas production. combined with a 3% increase in efficiency to completely shield ourselves from the economic and political risk of a boycott. 50% of those changes would make the effects of a boycott relatively insignificant, and would probably go a long way toward discouraging such a boycott. But a boycott isn't the only risk we face. First, our economic and social well-being is inextricably tied to the well-being of our wider community, which would include Europe and East Asia. Their political vulnerability is lower (i.e. they are less likely to be subject to a boycott), but they, like us, are vulnerable to disruptions in the infrastructure - which could be caused by a far smaller group than could effectively lead a peaceful boycott. So we need to work to secure the network at it's most vulnerable nodes - the transshipment points, pipelines, and shipping lanes. That won't be easy, as long as they run through areas that are thinly populated, hard to control, and immediately accessible to the people who don't like us very much. As long as we're talking about securing the network, let's talk about our domestic networks, which are underfunded and maintained, overly complex, and highly vulnerable to temporary collapse through accident or sabotage. I've talked in the past about redefining security to deal with 4G challenges; about creating, as Bruce Schneier says:
Where Schneier had sought one overarching technical fix, hard experience had taught him the quest was illusory. Indeed, yielding to the American penchant for all-in-one high-tech solutions can make us less safe—especially when it leads to enormous databases full of confidential information. Secrecy is important, of course, but it is also a trap. The more secrets necessary to a security system, the more vulnerable it becomes. To forestall attacks, security systems need to be small-scale, redundant, and compartmentalized. Rather than large, sweeping programs, they should be carefully crafted mosaics, each piece aimed at a specific weakness. The federal government and the airlines are spending millions of dollars, Schneier points out, on systems that screen every passenger to keep knives and weapons out of planes. But what matters most is keeping dangerous passengers out of airline cockpits, which can be accomplished by reinforcing the door. ... Good security [which] is built in overlapping, cross-checking layers, to slow down attacks; it reacts limberly to the unexpected. Its most important components are almost always human. "Governments have been relying on intelligent, trained guards for centuries," Schneier says. "They spot people doing bad things and then use laws to arrest them. All in all, I have to say, it's not a bad system."
Amory Lovins, at the Rocky Mountain Institute, is making these same points about our energy infrastructure.
The energy that runs America is brittle - easily shattered by accident or malice. That fragility frustrates the efforts of our Armed Forces to defend a nation that literally can be turned off by a handful of people. It poses, indeed, a grave and growing threat to national security, life, and liberty. This danger comes not from hostile ideology but from misapplied technology. It is not a threat imposed on us by enemies abroad. It is a threat we have heedlessly - and needlessly - imposed on ourselves. Many Americans’ most basic functions depend, for example, on a continuous supply of electricity. Without it, subways and elevators stall, factories and offices grind to a halt, electric locks jam, intercoms and televisions stand mute, and we huddle without light, heat, or ventilation. A brief faltering of our energy pulse can reveal - sometimes as fatally as to astronauts in a spacecraft - the hidden brittleness of our interdependent, urbanized-society. Yet that continuous electrical supply now depends on many large and precise machines, rotating in exact synchrony across half a continent, and strung together by an easily severed network of aerial arteries whose failure is instantly disruptive. The size, complexity, pattern, and control structure of these electrical machines make them inherently vulnerable to large-scale failures: a vulnerability which government policies are systematically increasing. The same is true of the technologies that deliver oil, gas; and coal to run our vehicles, buildings, and industries. Our reliance on these delicately poised energy systems has unwittingly put at risk our whole way of life.
He points out, in this document (pdf) that:
*Tightly coupled system: 20 years ago, U.S. had a few months’ usable total storage, well-head-tocar; refineries had 3 - 5 days, pipeline customers 5 - 10 days; generally far less now *>50% of U.S. refinery capacity was in three states (TX, LA, CA), >69% was in six states *Refinery concentration and specialization have increased markedly since 1981 *In 1978, sabotage of 77 refineries would cut cap. by 2/3, "shatter" economy (GAO); takes one RPG, wrench, rifle,...at each site *~84% of U.S. interstate gas flowed from or through Louisiana *A few people could shut off, for 1 y, 3/4 of gas and oil supply to eastern U.S. in 1 night w/o leaving Louisiana
Lovins' prescriptions are a little more extreme than the one's I'd advocate today - not because I think he's necessarily wrong, but because I think that a less-radical approach is both more politically attainable - but in a nutshell, his policy hierarchy looks like this:
Designing for resilience * Fine-grained, modular structure * Early fault detection * Redundancy and substitutability * Optional interconnection * Diversity * Standardization * Dispersion * Hierarchical embedding * Stability * Simplicity * Limited demands on social stability * Accessibility/vernacularity
His specific policy prescriptions are centered around: * Conservation * Dispersed Generation * Demand-based Pricing Basically, what he suggests is that we work to become intelligent about using energy (note that this isn't the Hard Green 'let's all go live in agrarian villages'-type conservation, this is the let's encourage fuel-efficient vehicles, rather than subsidizing the purchase of light trucks for passenger use, as we do today. Personal note: I needed a vehicle that had three rows of seats for trips with the three boys, plus storage behind the third seat for camping and ski gear, plus the ability to tow 1,500 pounds of trailer and racebike. In 2000, I had three options: Large SUV (Suburban, Excursion), Full-size van (Ford Econoline), or minivan (Honda Odyssey). I chose the Odyssey, which gets 24mpg in everyday use, tows the trailered racebike over Highway 14 to Rosamond without complaint, and has as much interior volume as a Suburban. But it's easy to park, and handles better. If everyone who bought a SUV between 2000 and 2003 made the same decision, we'd have made a dent in the 6% exposure we have to Islamist energy. Dispersed generation suggests that a strategy based on a fragile, complex, and undefendable energy infrastructure may not be the right way to go. The efficiencies of smaller package generators are increasing, and when combined with the flexibility of power-on-demand and the absence of transmission risk and loss, there can be some significant advantages to them. This suggests that nukes, which are by definition large and inflexible generators of power, may not be the best way to go. Note that I don't have the 'ohmigawd, uranium' issues around nuclear power (which kills far fewer people per kilowatt-hour than, say, coal). But I do think that large-centralized plants aren't where we should be putting our focus, and further that ramping down the economy in fissionables ought to be a good idea. But I'm not adamant about it. Demand-based pricing is also a critical feature of the model, in which we simply charge the true cost of the peak-load supply at times when it must be brought online. That's a key point; building economic policies that attempt, as closely as possible to mirror the true cost of the goods purchased. (On the Wal-Mart issue, one issue I have is the lack of health coverage for a substantial number of their associates - coverage which I help pay for, even if I don't shop there, because I pay for the public health care burden the employees impose through my taxes) So here's the mix of policies I'd support after a week of thought (obviously subject to change as I learn more from all the commenters who will pile on): * Improve vehicle fuel efficiency by doing four things: # Increasing CAFE standards, and setting a more-ambitious schedule of improvements; # Defining light-duty trucks (SUV's and pickups) clearly designed and sold for passenger use as passenger cars for CAFE and safety standard purposes; # eliminating tax incentives to buy fuel-inefficient vehicles; # explore tax credits for improvements in fuel efficiency in trucking (a large user of energy where there ought to be big incentives to save) Note that I'd trade all these for phased-in increases in gas (and diesel) taxes (maybe we could implement Andrew Tobias' notion of paying for a minimal vehicle insurance pool via a gas tax as well). * Improve residential and commercial fuel efficiency through changes in building codes. * Review of utility and building regulation to reduce the regulatory barriers to small-scale 'package' generation. Note that this last will get me in trouble with a number of enviro types, who want the smaller power plants (like the one in Redondo Beach near me) shut down. They'd rather have electric cars and power plants in remote areas; but the true cost of that kind of overcentralized system is blackouts and an insecure infrastructure.

1 TrackBack

Tracked: December 9, 2003 3:45 AM
Excerpt: FIGHTING TERRORISM....PART 2....Continuing my slow motion dialog on terrorism with Armed Liberal, here's part 2 of his 6-part plan:Second, we're too dependent on ME oil. We're going to do something about it, both by pushing conservation, expanding alte...

53 Comments

AL -

Very interesting post. It will take time to digest it all.

One thought - while Islamist "exposure" to US energy resources is less than 10%, what is the same "exposure" to the energy resources of other "Western" nations such as Europe, Japan, S Korea, etc? Without doing a lot of research, seems to me their "exposure" is much higher than the US. In the event our adversary's take advantage of thier leverage over other Western nations, then even our limited "exposure" will be economically painful.

Moreover, these countries today rely heavily upon the U.S. to protect them in this realm (e.g.: US Navy patrolling the Strait of Hormuz). Adversary use of our partner's energy "exposure" would likely spur more strident policies protection from this weakness. Indeed, some of our partner's anquished responses to US actions may be related to their energy dependance and concern over a perception that the US may not be there for them when push comes to shove.

BTW - I like your recommendations WRT CAFE. The overwhelming majority of US petroleum consumption is dedicated to serving our transportation needs (about 60-70% of all petroleum usage in US). Greater efficiency in this arena will lessen overall petroleum dependancy (or incentivize more driving!). Of course, CAFE opponents will surely tell you that higher mileage goals will also lead to more highway fatalities since vehicle will be made even lighter to achieve the statutory mandates. I would add that CAFE should be extended to big trucks, commerical busses, etc.

SP

Good post, and obviously the product of a lot of thought and research. Predictably, I respond.

Indeed, SP has picked up on something you missed. The OECD countries are much more exposed than we are, which may help to explain their reticence to upset stability in the ME, as well as their stance vis-a-vis Israel.

Second, more important than today's energy consumption patterns is tomorrow's energy consumtion patterns. While we get lots of our energy from Canada, Mexico, Venezuela, and Russia today, the Persian Gulf is where the most of the world's proven reserves are. Oil production in non-Gulf areas has been relatively flat, and extraction is getting farther afield. At some point, we're going to hit the bottom of the price curve, and substitutes will start to become more and more attractive.

Furthermore, as natural gas becomes more important, we're back to the Gulf, because that's where most NG is, too. Right now, it isn't really cost-competitive to import NG across the ocean, but new shipping technology could emerge.

An interesting paradox of a policy of reducing current and future US importation of Gulf oil and natural gas is that while we're trying to encourage development in the Middle East, we're also trying to figure out how we'll stop giving them so much of our money in the future.

This paradox can be resolved when you realize that extraction-based economies discourage the development of healthy societies, both because without taxes, citizens don't develop a relationship with their governments, because extraction-based economies generally lead to corruption and concentrated wealth, and because there aren't enough incentives to develop human capital, among other reasons. Just look at Appalachia; it's a fucking mess.

So in the long run, we may be doing them a favor by buying less oil. But we'd better make sure we're doing everything we can to develop robust and well-rounded economies in the meantime, while ensuring that the riches of extraction are shared by all.

On the domestic side, while I'm generally in favor of distributed generation (solar seems like the best long-run solution to me, since all energy ultimately derives from the sun anyway), we should make sure that DG solutions don't increase emissions. It becomes a lot harder to monitor lots of little generators than a smaller number of stacks. I'm not in favor of a system under which the EPA dictates acceptable types of technology, because I believe it is more expensive and discourages innovation; on the other hand, we need to figure how to ensure that Farmer Joe's on-farm gassification system isn't violating the CAA.

As for windmills, it may be that because they take energy out of the air, may cause massive disruptions in the global climate if used too extensively. We ought to be careful.

Unfortunately, disrupting anyone's supply of Middle East oil will drive up our oil prices. Anyone who currently buys lots of Middle East oil will, in the event of a supply disruption, start bidding against us for oil from our current major sources.

I'd say the best way to end the SUV subsidy is to level the playing field by removing CAFE standards entirely.

Conservation isn't going to be a good long-term answer. Eventually, we're going to want to use more energy for things such as personal air transport, joyrides to orbit, etc.

A good way to get the "hydrogen economy" off the ground is to build nuke plants out in the boonies (lest they scare lots of people in population centers) and use them to crank out hydrogen. Hydrogen is an energy storage medium, not an energy source (until we go to space to get it), and effectively bringing nuclear power long distances and fueling our cars with it would be a good thing.

Oh yeah, and sell off the Federal lands that have lots of oil under them. We're not really using them for anything, anyway.

Conservation isn't going to be a good long-term answer.

Not a panacea, but it can't hurt, and in many cases saves money in the long run. That personal jet of yours should be energy efficient.

And Ken, you seem to be forgetting that the whole point of the post is how to reduce dependency on Gulf oil, not how to have cheap energy supplies. If that's you're goal, you might want to think again about how cheap nuclear energy actually is.

Instead of so much governmental intervention, why not just tax all oil and petroleum based products (can you buy anything without plastic? even at the grocery store, the packaging and bags are made from oil!) extracted from or brought into the country by 5% escalating to, you pick the cap, at an increment of 1% per year thereafter. The revenue could be used to expand the EITC and reduce low income tax rates to minimize regressivity and provide revenue neutrality. The market would have a clear signal about where to shift resources and people could make their own more intelligent decisions about petroleum consumption.

It is the same principle you referred to regarding security...large centralized systems do not work as well as decentralized ones. Get the government out of the energy business and let the market make efficient decisions about how to use petroleum resources. If people choose to make different decisions than you would, i. e. SUVs,, well, that's their right as long as they don't make me pay for it, which is what you are proposing.

While browsing for the current economics of solar power, I came across this *heating system*. Providing energy in the form of heat to a stationary target seems a vastly simpler way to save on fossil fuels than redoing the transportation system. As a New Englander, a large part of my energy costs go into heating. If you want to save oil quickly, these seems that way to go initially.

As has been pointed out elsewhere, CAFE standards simply encourage people to driver bigger cars farther.

The problem with reducing our use of middle eastern oil is price. The PG region is, and for the foreseeable future will be the lowest cost producer. If we reduce consumption, the higher cost fields will become unprofitable leaving the lower cost ones... in the PG.

It gets even more difficult when we take into account the way oil is traded. It's bought and sold in a global market. WE can stop using PG oil, but as long as the world consumes a lot of oil, a significant fraction of it will come from the PG region. We want to be free of the low-cost producer, but that's very difficult with any policy.

Moreover, oil has lots of great properties. It's a great fuel for transport (high energy density, volatile, but not tooo volatile) and you can turn it into plastic and all sorts of chemical products. There are lots of uses for oil, and substituting for all of them, or even a big chunk of the uses is a tough problem.

The bottom line is that oil will continue to play a large role in the economy, and as long as it does the middle east will be able to export a lot of oil profitably. We should be thinking in terms of several decades to really uncouple our society from middle eastern oil.

Michael

It occurs to me that if we factor in the costs of the various wars the US has engaged in to secure this energy-critical region, oil from the PG region doesn't look so cheap any more.

We're just paying higher prices in a different way. Wouldn't it make more sense, as a cost within the economy, to choose to pay higher prices for oil elsewhere on the world market, and avoid use of PG oil?

Yes, oil is a freely traded economy. But it's getting a free ride from the US taxpayer; the costs of political stabilization in the region are rather incredibly high.

I think we would have been better off to pay higher prices, avoid PG oil, and let market forces go to work on reducing energy uses overall, with a higher basis cost for energy.

The current energy basis costs are artificially low.

Praktike, Regarding windmill disruptions: as you note, all of the energy comes from the sun anyway. If the windmill energy load is significant enough to distrup the system, a solar solution producing the same energy would provide a similar disruption. I.e., interfering with the wind to extract a gigawatt of generation would have similar effects to interfering with albedo to extract a gigawatt of solar generation.

Ross: Good comment. The majority of citizens would be better off with a free market solution, but the producers are better off if they can externalize costs onto the government and the taxpayers. And the decision makers/professional politicians are better off if they can concentrate the wealth in a smaller number of larger contributors. The game is rigged towards Arthur Silber's corporate statism *link.

"It occurs to me that if we factor in the costs of the various wars the US has engaged in to secure this energy-critical region, oil from the PG region doesn't look so cheap any more.

We're just paying higher prices in a different way. Wouldn't it make more sense, as a cost within the economy, to choose to pay higher prices for oil elsewhere on the world market, and avoid use of PG oil?"

No it doesn't. The problem is that other countries will continue to buy oil from the Middle East, and that money will fund terrorist operations against the United States. We'd have to pay the costs to secure the Middle East even if we didn't buy any oil at all from any source.

(I guess we could blockade the entire Middle East and prevent everyone in the world from buying it. But the drawbacks would be considerable, to say the least)

Anyway, we already buy a comparatively small percentage of our oil from the Middle East and we still<?i> have to pay the costs of securing the place. Pushing that number down to zero doesn't seem like it would have much of an effect.

still have to pay the costs of securing the place.

Dear AL:

Once again a thought-provoking post. One point you neglect to mention is that we were and, I believe, still are the Saudi Arabia of coal. We made a decision some years ago to reduce our utilization of coal in energy generation to reduce air pollution. But coal can be "cleaned up" and this could be become sensible if the price of oil rose high enough. Other alternatives including hydrogen fuel cells become more attractive as the price of oil rises.

Maybe Ross Perot was right when he suggested a substantial excise tax on oil for security reasons. After all even a stopped clock is right twice a day...

Other alternatives including hydrogen fuel cells become more attractive as the price of oil rises.

As someone else noted above, hydrogen fuel cells are just energy storage. The energy has to generated somehow. Our current policy seems to be burning coal to make fuel cells, so you just might get your wishes!

This page (Department of Energy) is very informative. The graphs and pie charts are a little more user friendly. Our allies' relience on ME is pretty surprising. In 2000, 42% of W. Europe's oil imports came from the ME, and 75% of Japan's came from the ME. (Although the US uses more oil than Europe, IIRC Europe imports slightly more total barrels from the ME than the US does.)

Another interesting site is Alexander's Gas & Oil Connections, but I really have no idea how reliable it is.

I must echo the refrain: Get rid of CAFE. As a designer in the automotive industry, it gives me nightmares thinking about how many lives have been sacrificed to that program. If you want "blood for oil", CAFE is it. There are less deadly ways of saving energy.

Outside of few rather unusual locations, wind power simply isn't reliable enough to feed into the grid. It's use where the wind doesn't blow most of the time can actually require throwing away power from plants that can't be stopped on a dime when the wind decides to gust. And storage doesn't help, you'd be better off storing power from the baseline plants.

Where's the real potential savings? Home co-generation. A substantial portion of the country reliably has to burn huge amounts of fuel in order to heat their homes; We might as well heat our homes with waste heat from generators feeding the grid.

And I might note that you can pull the same trick in the summer for air conditioning, using absorption type air conditioners...

I think the jury's out on what the cumulative effect of CAFE standards is on safety.

Yes, I know about the Heritage Foundation's work on the subject, but there's counter-evidence about the safety of SUVs:

SUV drivers are three times more likely to die from a rollover crash than car drivers.

SUVs are two-to-four times more likely to cause fatalities in an accident than an average midsize car.

Then there are also a number of technologies that could improve fuel efficiency while have no effect on weight, like changing tire tread designs and letting engines turn off when at a standstill.

Putting $600 worth of safeguards in place, such as a stronger roof, unibody construction, and improved seat belt technology could do much to offset concerns about weight, if they are indeed legitimate.

But you're right; it's a tough call.

The evidence for CAFE costing lives isn't from the Heritage Foundation, although I think that praktike means the Competitive Enterprises Institute which has written a lot on this. A panel from the National Academy of Sciences concluded in 2001 that 1,300 to 2600 traffic deaths yearly could be ascribed to CAFE. Just this month, the NHTSA put out a report with similar conclusion albeit higher estimates.

Robin, sorry, you're right. I have seen the NAS stuff as well. I trust that much more than I trust the NHTSA figures, however.

What we call an average mid-sized car today was a "compact" car not so long ago.

Look, I'm not going to defend SUVs from a safety perspective, though I think they're catching a lot of the blame for deaths in impacts with smaller cars that can't take hitting light poles, either. The fact is, SUVs are a creation of CAFE, a substitute for the large conventional cars we aren't allowed to sell anymore. And large conventional cars are VERY safe.

I don't want people driving Expeditions, I want them to drive station wagons.

Ross:

The involvement in conflict in the PG region has cost a great deal, and that does belong in the picture, but the context is important. Most of that was related to maintaining influence vis-a-vis the USSR. If we dissociate ourselves from the PG over the next few years, and wind down our security commitments, then the region is still the low cost producer of oil!

If there isn't another hegemonic power controlling the region restricting supply, then the PG will continue to export a large volume of oil due to cost. Security considerations have driven US policy in the area for a long time to prevent that from happening, becase moving our economy away from oil may be wise policy but being forced to do it overnight is disasterous.

Oil is pumped out of the ground in lots of rough areas without a massive western security presence. There's lots of money to be made selling PG oil, so someone is going to try to sell it. So we're going to have to deal with PG oil being a big factor in the oil market as long as there is a big oil market.

In the long term, we may be able to reduce oil consumption dramatically, but I just don't see it working fast enough to be a real tool for the war on terror.

Michael

I want to point out the existence of an organization called OPEC. OPEC stand for Organization of the Petroleum Exporting Countries. Currently the oil standard is backed by the US dollar.

As the U.S. dollar slips against the EURO, OPEC is considering switching from the USD to the EURO. If this happened the US would see economic collapse.

This article is a little extreme, but notice the relationship between energy, security, the US and the Euro in this article http://www.olywa.net/wip/June2003/UNSupPow.html

Islamic oil is far less dangerous than a currency switch by OPEC...

Glancing through the comments above, a couple of things are missing.

First, the Saudis and their friends absolutely have to SELL their oil, else their economies implode (as the Kingdom of Saudi Arabia may be doing anyway, but more slowly). They are significantly more dependent on oil revenues than they were in 1972. So they will sell their oil onto the market, even if they attempt to boycott the US -- with the end result that the oil gets to us anyway, through middlemen, and at not much higher a price. A corollary to this is that the Saudis, etc. will still enjoy a huge revenue from this resource, unless the US does something drastic like take their oil fields away from them (unpopular but possible) or organize a global boycott (impossible: would require military conquest of the rest of the world).

Second, our "proven reserves" are elastic and vary as a function of price per barrel. We have gobs of oil, it's just more expensive to produce and refine. Nowhere but the PG does sweet crude practically squirt out of the ground. Our oil reserves go up when the price of oil rises enough -- and go down as wells are capped, etc., in the presence of a cheaper foreign source.

Third, let the market do the work -- NOT the government. If gasoline rises to $20 per gallon, you won't need CAFE or anything else to convince consumers to drive the most fuel-efficient vehicle they need and can afford, or to think about using another method of transportation. It's a problem which will solve itself. Just like electricity costs of $1/kwhr -- which would drive consumers into using less electricity or finding alternative ways of getting it.

The role of government should be to get the heck out of the way, instead of imposing soviet-style controls on what cars we drive, what and how much electricity we use, how to generate it, etc. A government bureaucracy is necessarily less efficient and collectively far less intelligent in its allocation of resources than 300 million consumers left to their own resources and their own decisions. Have faith in the people of America, they're smarter than you think, and don't require a nanny to tell them what to do.

Windmills displace coal and uranium burners. They don't do much for oil whose major use is transportation.

It will be 10 or 20 years before electric power will have much influence on transportation. Twenty or thirty years before wind takes over from oil. Possibly longer.

It is going to happen. Just not in a time frame that will affect the current war.

Capitalism is constantly driving down prices. This gives much incentive to redice inputs for a given output. Profit works petter than government mandates.

praktike,

Solar is no panacea either. Used significatly it could change the albedo of the planet.

The best way to reduce energy consumption is to reduce the number of humans. The Communists were quite good at this. It is a wonder that they have no significant influence in the energy debates except for the Greens. Starvation, torture, and out right murder are not near as popular as they used to be. Well at least we still have progressive socialism.

It seems to me though that except for the National Socialists the socialists have some catching up to do.

praktike,

I'm with you. Cheap energy is the problem.

If we could drive up energy costs by a factor of 10 we could accomplish wonders. First it would kill off a lot of marginal people. That would reduce energy consumption right there.

In addition it would cause those living on the margins to start using trees for an energy source. When this happened in Berlin post WW2 the forrests around Berlin were stripped bare. If we then made cutting trees a summary execution capital offence we could get rid of lots more parasites.

Anything that makes life more difficult for the poor of the world I favor. I'm a progressive too.

There are a few uncovered points so far.

1. Combine hydrogen (good energy storage) with intermittent generators like wind farms and you end up with a steady supply of energy. You start operating them and generate a reserve of hydrogen and after sufficient reserve is there, you start releasing hydrogen into the energy system at a rate equal to the average production over time. This gives you predictable production from a source that spikes. The same logic works for solar.

2. Our energy consumption is, actually, unimportant. Yup, that's right, unimportant. The third world needs to get integrated into the global economy to deny terrorists safe havens. That ends up raising demand tremendously. The amounts needed on the planet aren't available on planet. If we go full out on drilling, mining, nuking, gas burning, hydrogen producing, the whole works, there still isn't enough available even if the third world becomes as efficient as the 1st world, and it's not.

To get the job done is going to require exotic new sources of energy and an infrastructure that is multi-fuel tolerant. That ends up being hydrogen fuel cells and extraterrestrial solar (orbital or lunar), fusion, geothermal core taps, or some other currently impractical scheme.

Brett,

Wind is not very reliable if you are talking about one turbine to power one house.

In the agregate they are quite reliable. Typically a turbine produces 1/3 it's nameplate rating over time. If you agregate a number of turbines over a significant area they can handle 20% of their name plate rating as base load.

In addition there are some low cost storage methods in the works that will change the equation over time.

Right now Texas uses wind to replace natural gas. They sell the gas saved to the rest of us. Considering that wind is dispatchable over the same time frame as a gas turbine plant they are quite complimentary.

TM Lutas,

At 1KW per sq meter input during the daylight hours there is plenty of energy available for every one.

Without mining Titan.

Can't anybody use a slide rule any more?

The problem with the long-run price curve of oil is that as long governments are willing to subsidize exploration costs and not charge market prices for drilling rights, the price of oil will be artificially low. And yes, of course, substitutes will become more desirable as we move up the long-run price curve.

Furthermore, as mentioned above, the stability costs of extracting oil from all of these places--and Africa, Latin America, and Russia aren't exactly stable, either--aren't internalized in the price. Of course, extraction costs from these ares are a lot lower than in, say, the North Sea, but high discount rates due to instability also favor rapid extraction. There's plenty of uncertainty about user costs, however, since big multinationals have the ability to move their money all around the globe.

Finally, the external environmental costs of oil extraction aren't generally internalized, either. Hard to calculate, but I'd be willing to bet that prices are artificially low on that score.

What would happen if we went to a system of full pricing w/o subsidies? I'm willing to forgo things like CAFE standards the day that happens...

And M. Simon, I'm in favor of cheap energy. I'm also in favor of operating at social optima, which is best for everyone. Markets are great, so let's make them function efficiently.

"Solar is no panacea either. Used significatly it could change the albedo of the planet."

God forbid chlorophyll should ever catch on.

m simon - Yes, people can use slide rules, perhaps you should try the exercise to get an understanding of how much energy we actually need.

praktike - stability costs are a problem but we have to bear them anyway at this point because unstable places are good harbors for terrorists with WMD aspirations no matter whether they have oil or not.

TM, all I was saying is that the stability costs should be factored into the price of the oil.

Getting back to the original topic ... I perceive A.L.'s project-management background in the above; what he wrote looks an awful lot like a risk response plan. My only suggestion is to more precisely define the scope: when Kevin says "we're too dependent on Middle Eastern oil," what risks must be managed as a result? How are they prioritized? What category of strategy (avoidance, transference, mitigation, or acceptance) applies to each? What is the timeframe for addressing each? Given a couple of decades, we can safely assume that nanotech will meliorate our energy concerns into nonexistence; but what do we shoot for by 2005 or 2010 or 2015?

pratike and TM Lutas: The stability costs would be better handled if we didn't subsidize the industry. , and let the industry handle their own costs and rely on local stabilization. If we are the default stabilizer, we are enabling the failed states to continue whatever it is that is destabilizing, and are a clear target for the destabilizers/terrorists.

In other words, as long as the potential terrorists see foreign governments as supporting their corrupt, interchangeable, governments for the service of international concerns, they will see international terrorism as a better way of helping their families than staying home on the farm. If you want less international terrorists, divert them to intranational terrorism by not subsidizing foreign governments.

Interesting, AC #8. So we let, say, TotalFinaElf or Shell to hire their own security? Kind of like what happens in Africa? That's worked out well...

Yup. Chevron left Sudan in the '80s after losing some employees to terrorist attacks. If TotalFinaElf and Shell think it is good business, they shouldn't get support from our government. If we sell US planes, helicopters, and arms to some corrupt government, we have to expect that the bombed might think we had something to do with it. Let TotalFinaElf, France, Airbus and whoever else be targets for the ire of the oppressed.

*GN:TFE&Africa*
*GN:Shell Oil Africa*

If we subsidize oppression, the oppressed will figure it out. In any case, putting the security cost on the taxpayers rather than directly energy companies/consumers is a huge subsidy. If ME oil is a small fraction of our consumption, and a large fraction of Europe's consumption, they should subsidize it, not us.

AC #8 - My point is that for national security reasons we're already committing to taking care of the stability concerns as a government. Given that, it makes little sense to assign those costs to one form of energy over another. Shall we also assign the costs of patrolling the high seas to oil companies because tankers thrive under those protections?

This suggests that nukes, which are by definition large and inflexible generators of power, may not be the best way to go.

This may not necessarily be true anymore.

Pebble Bed Modular Reactors are designed to be relatively small and not able to go critical due to the design of the fuel, which is embedded wihin graphite spheres that keep the actual fissionable material from getting close enough to any other fissionable material to get too hot.

Also, there's a Toshiba design that they're trying to get installed in Galena, Alaska. It's essentially a big nuclear battery that lasts (theoretically) 30 years.

The reality might prove less stellar than the theory, of course. Nuclear power has had a tendency to not quite live up to its claims.

If we're considering distributed (co)generation of electricity by any means, there will have to be a radical change in the control systems associated with the power grid. How do you keep from frying the linesmen when cutting the trunk connection no longer removes all the sources? How does one manage energy flows of a complexity that will dwarf those that led to the Northeastern blackout? It's as big a problem as going from a switched to a routed data network. Anyone know what's going on, if anything?

Lots of great comments; I'm in "stupidly busy" mode (hint: Don't take projects with year-end deadlines when you also have a charity project with a mid-December deadline which can't be changed, plus then stupidly accept a position on the board of another charity - which I got by complaining) so will skim a couple of responses.

1st, since this about energy security, I'll suggest that it's truly appropriate to factor some of the security costs. OECD countries surely do have security issues of their own - and my respinse is to suggest that they consider upping their security contribution.

Second, it's not about conserving for conservation's sale. It's about not wasting energy stupidly on leaky windows so we can have skycars and orbital elevators.

Third, I'd suggest that the first place I'd be encouraging investment is in a revamped distribtion network with exactly the kinds of flexibility that Tim is mentioning.

Lovins originally suggested that we get away from distributing electrons directly, and that we simply crack hydrogen with the local surplus, and pump it into the natural gas distribution network, creating a blend. Anyone know whatever happened to that idea?

A.L.

Just as we have utility controlled interuptable power for things like air conditioning, to make distributed cogeneration practical you'd have to hand the local utility control over your generator, so that they'd be able to adjust voltage and phase, and probably have a watchdog timer that cut off it's connection to the grid if it wasn't authorized by the utility frequently. It's clearly not as simple as just plugging a generator from Sears into your wall outlet instead of your fridge.

The fun thing is, once any substantial number of people are generating their own power, the cost of the grid itself gets divided among fewer customers, driving up the cost of centrally generated power, causing more people to go to cogeneration... A practical home cogeneration setup would pretty rapidly force a change in the way we distribute electricity.

Brett -

I'l disagree slightly with your collapse-of-the-grid model, and suggest that most of the affordable cogen schemes I've seen require some assistance during peak loads, and need somplace to put the spare electrons during off-peak loads - so the grid still has a place. It's just a different kind of 'emergent' grid.

A.L.

Lost in this discussion of energy security is the effect of exogenous shocks.

The more we reduce our economic dependence on oil, the less vulnerable we'll be to sudden cuts in supply. Remember the 1970s? Since OPEC effectively controls the market price of oil, and Saudi Arabia in particular, a cabal of corrupt Saudi princes has an inordinate ability to wreck our economy. This is true whether we import or not (since the price of oil will be set by the world market), so reducing the potential macroeconomic impact of, say, a coup in Riyadh, is a good thing regardless of where we get it.

As for Iraq--holder of the world's second-largest proven reserves--if the new administration proves pliable,we'll have a nice insurance policy against Saudi power. Those of us who are both eager to topple the House of Saud and eager to have a healthy economy would be wise to consider when and how best to proceed.

For a walk on the wild side of resource economics:

http://www.nationalreview.com/comment/zycher200309250848.asp

And finally, from Kresgin’s astonishing bag of tricks:

http://smh.com.au/articles/2003/10/20/1066502117600.html

Brett - a couple of issues:

- The current grid is largely a sunk cost, albeit the regulators make the utilities capitalize it on a near-eternity schedule. But in the real world of cash flow, shifting users off-grid will have some marginal effect due to loading maintenance costs onto fewer customers, but it won't have the crushing impact that would occur if there were fresh capital required.

- The analogy to the switched vs. routed network also works here: the downfall of the PSTN business model didn't begin because of users abandoning it, but because of a new usage model - arbitrarily routed, always-on connectivity - that was economically infeasible on the old installed base. That demand (plus a lot of cheap capital) created the IP backbones, which are only now beginning to significantly erode the POTS business. By analogy, in the power grid case, there's going to have to be an economically or otherwise compelling usage model that both obsoletes the current grid, and stands on its own two feet financially - because the capital won't be cheap this time, and the incumbents are even more monopolists than the RBOCs ever were.

- There are already a lot of cautionary tales for investors in the 'smart power' sector. Try googling 'Cellnet Data Systems Chapter 11' for one example. Given the extreme dependency of such ventures for market access on the very utilities whose grid they would help make obsolete, it's a scary proposition. When the commercial Internet kicked off, there were both regulations to force BOCs to allow connections by ISPs, and technical means (modems) to allow the superimposing of packet traffic on the 'final mile' of a switched network. Neither exists in the case of the power grid, unless I've missed something.

BTW, though this is a dose of cold water, I'm quite serious in my interest. If you follow my link and noodle around, you'll find I've got some investment exposure to the energy sector already, and I'm looking for more. But I'm not suicidal....

TM Lutas,

I was into energy way before it became a popular obsession. In the slide rule era.

I did my first solar cell project in 1962.

How bout you?

TM Lutas,

Oh yes. I forgot to mention I qualified as a nuclear reactor operator in 1966.

How are you on heat transfer and fluid flow?

I suppose actually knowing something about the subject disqualifies me from commenting.

I stand by my statement. There is an abundance of natural income energy from the sun without the expense and difficulty of going off planet.

It will take time to develop. In the mean time we will need to burn a lot of chemicals to support tthe current levels of civilization.

BTW have you read any of my energy articles in Joe's archive? There is a path to renewables and the world is on that path. In my articles I lay out some of the way points on the road. The end is not in doubt. Only the speed.

All forms of energy have a cost. Pay me now or pay me later.

I might also point out that those who say wind is not sufficiently reliable have no understanding of the subject on a continent wide basis. In addition they are unaware of the complimentary nature of wind and natural gas. Fortunately the Texans get it so you don't have to.

Please folks. The www is chock full of info on the subject. Study a little before trying to appear knowldgeable. You will look a little less foolish to those who have studied the subject.

AL: one big concern with hydrogen is hydrogen embrittlement. Hydrogen molecules are small and cause cracks in metals to grow and fail. this mentions it.

As long as we are revisiting the subject might I suggest a refresher on my Logistics article here at WOC.

We know what we need to do. We are on the way. It will take 20 to 30 years or more.

The Islamonazis are not going to give us that time.

It the words of the immortal Bugs Bunny (I think) "this means war".

A.L. this was a very thoughtful post. I've definitely liked some of the stuff that RMI is talking about -- they have gotten some of the essential points long before the dinosaurs have. One paper I read by them makes the point that it is not energy that the economy needs, but rather the services that energy provides (hot showers, mobility, comfortable buildings, etc). This means that if we can get the services for less energy, our society is actually richer (rather than poorer). Our real challenge is to reduce our need for energy to get the things we need -- and the guys in charge are totally focused on the wrong things. (Make more energy.)

I've also read Amory's paper written with Woolsey which talks about why a simpler, distributed energy system is the most resilient and one we should strive for ourselves.

One of the real problems I have with this administration is they so often are solving the wrong problem -- and not only that, they purposely promote the worst solution for a problem. (For example a full subsidy to buy a Hummer. And no subsidy for a hybrid. Who thought up this insanity?)

Mary, actually, the energy bill did contain a hybrid subsidy, but there was a worry that it was too generous, and there were some shenanigans in conference committee that led to a perverse outcome...that is, as I understand it, you couldn't get a tax break if your hybrid was too efficient.

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