01/05/10 12:13 PM
Oil 2010: There Will be Blood (But Less Oil)
Whew! It's been a very exciting decade in petroleum. We started in the spring of 2000 with an infamous Foreign Affairs article fretting about the "shocks to the world of cheap oil," a cataclysm they expected to set in at around $7/barrel. By summer of 2008 we'd hit $145/barrel, and now, despite falling demand and a surplus of supply, prices are about $80. We've had many exhausting years of real war in Iraq that some argue is "over" oil, and a long-running domestic political war over climate change. Yet, at the 11th hour (December 2009), no U.S. oil companies bid to drill in Iraq's oil fields and no less a climate denier than Exxon came out in favor of limiting carbon emissions with a tax shortly before buying a big natural gas company. This is not the oil world as we knew it.
So what is it?
1. Maybe U.S. gasoline consumption has peaked
For many decades increasing oil use has lubricated our far flung suburbs, our commutes, our love of farm fresh baby lettuce and products from China. But in 2009, the recession pushed U.S. gasoline demand down by 3.5 percent and diesel by 6.5 percent. New fuel economy standards for cars and trucks are likely to push that down further, and greenhouse gas emissions regulations will do more still. (The EPA will release its mobile source aka vehicles finding in March.) High oil prices will do even more. The first casualty of this trend is the U.S. refining industry, which has closed 4 refineries in the last few months and will probably close more. This is somewhat ironic. It was only two years ago that some people were demanding that the US build more refineries and supposedly box the ears of the environmentalists who were supposedly the main barrier to their growth.
The Good: Everybody from environmentalists to survivalists to Peak Oilers to tea partiers wants the US to "get off foreign oil." Here we go!
The Bad: Unpredictability. Repercussions range from the closing of the refineries (which could lead to higher prices during peak months) to declining US influence in the world oil market.
2. Oil is no longer the only energy game
Exxon's purchase of gas exploration company XTO shows how the major US oil companies may deal with the decline in gasoline use and profits--by diversifying into lower carbon fuels. That's a win for everyone, particularly people who breathe. A more interesting, and possibly more telling, example is giant domestic refiner Valero, which is closing a big sour heavy crude refinery in Delaware City while purchasing ethanol producer Verasun and buying a stake in Australian bio diesel producer Mission NewEnergy. But, as analysis by ClearView Energy Partners LLC points out, this is really greening their spreadsheets because Valero could be avoiding as much as $250 million/year in carbon costs while gaining as much as $500 million a year in biofuel tax credits and other subsidies.
The Good: The system might be working! When the carrots and sticks are in place to push fossil fuel companies in a low carbon direction, the great engines of capitalism will go to work.
The Bad: Fossil fuels are the devil that we know, environmentally and politically. The environmental costs of bio-fuels and unconventional natural gas could be very high. We'll need new bureaucracies to regulate, and new interest groups to figure out how much trading oil's environmental risks for new ones is worth to us. Also, we'll need to keep an eye on those subsidies as Doug Koplow does at Earth Track Inc.
3. Volatility
We just don't know what will happen when, but we know things will happen. No need to believe me, though. Read Tom Kloza of OPIS.
4. The curious substitution of "energy" for "power" at the gas station
For years gas stations have supplemented their declining income from gasoline by selling us soft drinks, chips and all sorts of fantastic stuff designed to fit in our cupholders. As tobacco sales slumped during the past decade, shelves became stocked with power bars and power drinks, among other things. Over the past year "power" has given way to "energy" in the form of the expected energy drinks (modeled on Red Bull) and weird permutations such as caffeinated beef jerky (one brand is Perky Jerky), potato chips, and oh, just dozens of seemingly revolting products that can be found on the blog "energy fiend." Again, the spectacle of capitalism at work! But should we think of the substitution of "energy" for "power" in more metaphorical terms? Is the U.S. slowly abandoning the old structures of its international power and starting to embrace our real natural resource--energetic creativity? Dunno, and I fear I'd have to eat a lot of Perky Jerky to believe it. But we can hope.
And finally, apropos of absolutely nothing but the concept of smoked meat, here is a guide to using a Slim Jim and a cucumber to cut through metal. Happy New Decade!
12/09/09 11:33 AM
Dissecting the "Leaked" Danish Documents at Copenhagen
But this does point out the fact that whatever comes out of the climate talks in Copenhagen are the end of the political world as we've known it since World War II, because China's emerging as a leader, not only of developing countries, but as an idea factory for the world. China's offer to reduce the energy and greenhouse gas intensity of its economy by 45 per cent by 2020 is not only a real and large commitment, it's a radical idea that combines economic growth and climate protection--the kind of idea that has not been put forward by developed countries. (And it is the very opposite of the "small shoes will make your footprint smaller" climate porn mentioned above.) In a hair-by-hair analysis of the significance of China's offer, Carnegie Endowment's William Chandler dispatches the naysayers: "Criticism of China's 2020 target is neither productive nor justified, and, if not a cynical ploy to avoid U.S. action, can be explained only by lazy scholarship or reflexive "China bashing."
But China's offer is even more radical in its long-term implications for the world order. As Chandler points out, some parts of China's economy are very inefficient and will not be able to make the average gains of 45 per cent. That means that some parts of the economy--particularly the strategic industries--will make much larger gains. And that means that China's industries will start to compete with the West on more than just cheap labor. This is a complete re-ordering of the post-post colonial world in economy and hegemony. Last week Skip Laitner, a senior economist with ACEEE.org, mused in a letter to colleagues, "China clearly sees energy efficiency as a huge productivity tool in ways that I don't believe we fully appreciate within the United States." He noted that China's new economic orientation suggests that China's efficiency gains will outstrip those of the US, adding, "They may also become the world's innovation leaders and that does not necessarily bode well for the U.S."
And all of that explains why some climate negotiators might prefer a fantasy version of a climate treaty.
11/11/09 1:32 PM
Update: Azerbaijan's "Donkey Bloggers" Get 2 Years in Prison
Two months ago I posted on the energy politics around Azerbaijan's arrest of two "donkey bloggers," who obliquely criticized the government. Today Radio Free Europe Radio Liberty is reporting that the two young men have been sentenced to 2 years in prison. The article contains cell footage from inside the courtroom as well as outside. The article also quotes a US State Department statement about the sentences:
"The State Department issued a statement calling the court's decision "a step backwards for Azerbaijan's progress toward democratic reform." The statement criticized "the nontransparent investigation, closed-door hearings, and disproportionate legal charges," saying they "raised concerns about the independence of the police and the judiciary as well as about restrictions on freedom of expression in Azerbaijan."
This is terrible news for the bloggers themselves, who were arrested for "hooliganism," after a scuffle in a restaurant which they say was politically motivated.
I think it's interesting to look at the actual video (also embedded above) that they made of a "donkey" giving a press conference. (It has subtitles) Reportedly, the government spent $41,000 per donkey to buy two foreign donkeys. And in the video, reporters ask the "donkey" about his flight and he talks about losing his luggage, and being fondled by Azeri admirers. When the reporters ask why he's worth so much money, he stands up to play the violin! It's a strangely adorable protest video, and one that says a lot about the delicate line government critics walk in Azerbaijan.
10/28/09 4:47 PM
Obama's Energy Policy is Hardly Electric
In last week's speech at MIT, Obama relieved many by finally coming out fighting on the topic of energy and climate change. His speech was one truism after another: The system of energy that powers our economy also undermines our security and endangers our planet." Sharing opportunities around the world means that we also share crisis.The world is in a peaceful competition for new sources of energy. For younger people, this is the challenge of a generation--a clash between innovative futurism and pessimism. Lisa Simpson, the cartoon goddess of wonky types, couldn't have written a better, smarter analysis of our energy issues herself.
Unfortunately, the speech was all analysis and no vision. Green jobs, new technology, "room for debate on how we do it," and, "no silver bullet," blah blah. The speech revealed the truism that the Stimulus is the bedrock of the administration's reform of energy policy--doling out $80 billion across the landscape is the most powerful tool they have--and the one that's least likely to be set upon by naysayers.
Later in the speech Obama took forceful aim at the people who will oppose changing energy and climate regulation. He said we're all "complicit" in "the pessimistic notion that our politics are too broken and our people too unwilling to make hard choices for us to actually deal with this energy issue that we're facing. And implicit in this argument is the sense that somehow we've lost something important--that fighting American spirit, that willingness to tackle hard challenges, that determination to see those challenges to the end, that we can solve problems, that we can act collectively, that somehow that is something of the past."
All true. And yet. And yet. Where IS Obama's vision? In his Smart Grid speech, he compared the electrical grid to the U.S. highway system before Eisenhower. But the reform of energy and emissions is a bigger project than the Interstate Highway System, bigger than the TVA, and will create more domestic enemies than the Space Program. (Space was a famous last frontier--no one was there. In energy, lots of big players have been here for a century, paying off their infrastructure investments, like pipelines, refineries, power plants, many times over.) It's bigger than all of these combined with the Anti-Trust movement of the early 1900's. But we don't have a story for it yet.
The key to Americans meeting all of the challenges of the past has been our willingness to believe in a Great Narrative to justify risk and sacrifice. We all know that Obama can tell a heck of a narrative, but it will mean he has to take a stand, and risk making mistakes, which he hates to do. Starting today, he needs to stop talking about the comfortable stuff like Smart Grids, and start talking big...and risky.
Photo Credit: Flickr User Ian Muttoo
10/22/09 6:22 PM
Next on Oprah: Carbon Confessions and Zombie Troubles
Those who fight greenhouse gas regulation are right that this is far more than just legislation--it's a new set of values in both senses of the word. The economists who say carbon taxes or cap and trade are no more than a way to valuating externalities, a "rational" way to fight emissions, are probably not yet imagining how we irrational humans will run with all of this. Like that giant scap plastic vortex swirling in the North Pacific, the culture is quietly agglomerating a sense of the commons, and from that a consciousness of "bad ownership," will develop.
So Berners-Lee was wise to get out in front of the curve once again (the first time was that interweb thingy) and declare his apology. But he wasn't the only one making a CO2nfession last week: SAP chairman Leo Apotheker mentioned that the IT industry has the same carbon footprint as the airline industry. And the National Research Council, on a commission from Congress, announced that even the non-carbon pollution costs of fossil fuels are high: as much as 29 cents per gallon for gasoline and between 1/500th of a cent and 12 cents per kilowatt hour of electricity (depending which generator supplies your electricity and what fuel they use.)
What I'd like to see is a TV program (patterned on the Biggest Loser) where companies and individuals fess up to their carbon excesses and try to atone for them with the help of a chirpy Climate Coach. First up I'd nominate the makers of those electricity guzzling appliances that got "Energy Star" ratings undeservedly, and the people who were supposed to be verifying the Energy Star eligibility. What's the sense of taxpayers spending money promoting the Energy Star program if it doesn't stand for anything?
My second nomination would be for the movie Zombieland, which makes no claims to being a documentary, but does demonstrate a complete divorce from energy reality. The characters drive a 2003 H2 Hummer for hundreds of miles without ever filling up. (We all agree that zombies are real right?) Assuming they're going 60 mph and getting 10 mpg they should need to fill up every 5 hours and 20 minutes. (The tank holds 32 gallons.) Yet they go through the whole film without explaining how they get gasoline. It's a new age... someone needs to answer for this. I'm hoping Oprah! takes it on.
(Photo: Flickr/net efekt)
10/05/09 2:19 PM
Is the Climate Legislation Worm Starting to Turn?
First, on the foreign policy front, the U.S. was forced to recognize that it cannot enforce sanctions on Iran without China's support, and China is too wrapped up in its oily relationship with Iran to push hard. In front of our very eyes, the great constellations of power and energy have realigned. (And we're not EVEN getting into the lost Russian ship, the pirates/ecologists, and the supposed missiles that may or may not have been bound for Iran. Not that the "pirate's" story makes any sense either.) Dominating the oil market as the world's greatest consumer is no longer enough to get what we want; this means that a dramatic about-face towards creating low carbon trading blocs might be a cheaper way to consolidate power in a more multi-polar world.
On the home front, two climate sticks: the EPA is going to regulate CO2 emissions from large emitters, and Senators Kerry and Boxer released a less wimpy climate bill. Together, these two actions almost make Waxman Markey--with its big free carbon credit allocations for utilities-- look carrot-ish.
Which leads to the third plot point. Last week, utilities PG and E, Exelon, and PNM broke with the US Chamber of Commerce, which has gotten increasingly histrionic about CO2 emissions reductions to the point of calling for a "Scopes Monkey Trial" over the scientific proof of man-made global warming before dialing it back a few days later. (Here's the Chamber's own blog on the utilities who left, kicking off with a pugnacious quote from PJ O'Rourke's Parliament of Whores.) And now, Politico reports, more than 150 business leaders from utilities, manufacturers and clean-energy companies plan to "swarm" Capitol Hill on Tuesday and Wednesday. They're swarming, or love-bombing Congress with the message that they want clear climate change regulation, sooner rather than later, simpler rather than complex, and they intend to profit from it. Among them are all of the companies that left the Chamber of Commerce last week.
The fourth plot points can be found in the graphs at the EIA's Short Term Energy Outlook, which show that U.S. carbon emissions shrank 6 percent over the past year. In the first half of the year, U.S. petroleum consumption fell by an almost unprecedented 6.3 percent, electricity use fell by 4.4 percent--largely the result of a shrinking economy--but a huge divergence from year on year rises in the past. Interestingly, coal fired electrical generation fell by 12 percent--more than twice as fast as the electricity demand drop. Huge! Nobody wants to shrink carbon emissions by shrinking the economy (precisely what all the fuss is about) but since we're already in the midst of a major reorganization of energy, capital, and labor, this is a logical time to lay the new ground rules, even much as the financial regulatory agencies are trying to figure out the new rules for banking.
Maybe.
Photo Credit: Flickr User Pfala
09/17/09 11:28 AM
The Frugal Genius of "Swarm Power"
The puzzle: What's the cheapest way to increase electricity generation while reducing carbon emissions, bearing in mind that installing more wind and solar will require investing $2 trillion in new transmission lines and a single 1 Gigawatt nuclear power plant now runs about $17 billion?
Two additional facts: Generating electricity accounts for 41 percent of US greenhouse gas emissions, and two-thirds of those emissions are the result of energy being lost as heat, i.e. wasted.
The German Answer: Put thousands of VW workers on the assembly line to make home-sized natural gas furnace/hot water heater/generators. These generators, based on a natural gas engine already used in the Golf, are 92 percent efficient (because they can use the waste heat for heating water or homes) and can either produce electricity for home use or put it out on the grid. In other words, they're removing much of the second fact (waste), and also removing the need to build many more transmission lines. And, if the company Lichtblick is to be believed, they'll be creating the generation capacity of 2 nuclear power plants (2 Gigawatts) by installing 100,000 of these units in German homes at a total cost of $1.5 billion. (Far cheaper than the nukes, with no radioactive waste or risk of its weaponization.)
But wait, this is more than a fancy furnace. It's also a business model and a stealth energy policy. The units, networked together as "SchwarmStrom" or swarm power could be turned on and off by a smart grid controller to balance the mix of wind, solar, nuclear and what all on the grid at a given time, earning homeowners some bonus money for the power they generate and eliminating the need for some of those transmission lines and backup generators to deal with the ebbs and flows of wind and solar.
And then there's the super ultra unasked bonus question. Two percent of the US's greenhouse gas emissions are from manure ponds alone, and more are from municipal sewage and landfill. The Swarm Power generators could run on biogas, reducing methane emissions from manure AND emissions from coal fired generation in one go.
VW isn't the only car company working in this space; Honda also has similar unit. I haven't heard that US companies are working on this idea, but it would be a good three-fer as a stimulus program: build the engines, do away with the $8000 tax credit for first time home buyers and just give them a combo furnace generator; and jump start the process of building a smart distributed grid with lower CO2 emissions. Having a power plant in the basement has a certain Little House on the Prairie appeal too.
But will we? I think this is the kind of pragmatic path US policy makers are likely to miss. They're so focused on BIG GREEN projects like offshore wind or floating windmills and on small chartreuse projects like corn-derived disposable silverware and CFL lightbulbs that the vast middle ground of wasted energy is ignored.
Look at this chart of energy flows--it's a giant bowl of spaghetti and meatballs with 99.2 quads of energy entering on the left and 42.15 going to work on the right. (Note the tiny vermicelli like threads contributed by wind and solar, and the enormous lasagna noodle of waste aka "rejected energy"--57 Quads!) If you can get beyond the geekiness of the image, there's something poignant about it. Weirdly, it reminds me of the Andrew Wyeth painting called Christina's World, where the paralyzed woman in the dress crawls slowly across a rolling field. The energy flow chart is a portrait of paralysis--of policies and prices that have made it more profitable to waste energy than to put it to work. Stare at the broad gray lines depicting waste and see frittered potential, a failure of can-do, a sad stasis of the imagination. Christina, of course, didn't make her world, but we've spent generations making the flow chart and we have to figure out how to un-make it. Swarm Power is a good place to start.
(Photo: Flickr User christian.senger)
09/10/09 2:22 PM
Climate Change and the Culture of Surrealism
There's so much tasty stuff in this paragraph, it's hard to know where to begin, but the kicker, from the standpoint of the 20-year-old narrator, is that everyday surrealism "would be the future." In contrast to the relentless graphs and dog paddling polar bear of an "An Inconvenient Truth," Moore's observation feels emotionally real to me. I hear my friends folding the new surrealism, the new reality, the freakish uncertainty, into their lives and conversations in exactly this unscientific way. And it also made me feel sad for the days when Christmas flies may seem normal.
But what are the politics of this adaptation strategy? We use surreal now to describe objects that are unexpectedly juxtaposed. But when it was started by European artists struggling to come to terms with the horrors of World War One, Surrealism was a movement for social change. I guess nearly a hundred years of modernityn have turned surrealism into a passive spectacle--a way of viewing reality as art arranged by a dotty curator. Odd juxtapositions no longer provoke an organized political response, but the confusion of cognitive dissonance.
I've been experiencing that all week as I get on the 880/980 onramp in downtown Oakland and note that someone lost an entire truckload of mattresses on the side of the freeway. I've been amusing myself by trying to figure out the right metaphor for the scene. So it didn't even occur to me until this morning that both the city of Oakland and the state of California are too far gone to pick up a bunch of mattresses littering the roadway. Surrealism has become a gateway drug for passivity and acceptance, failure of government... and more surrealism.
Take for example, this recent report by National Geographic on technological fixes for climate change, which include:
Flying Volcanos
Cloud Ships
Space Mirrors
Real and Unreal Trees
Artificial Rock Weathering--Deliberate acid rain applied to mountains and rocks to dissolve them and bind CO2 into the new compounds formed from dissolved rock. One scientist described this as "the endgame."
(It reminds me of that end times spiritual that goes "Oh Sinner! You will weep for the rocks and mountains, when the stars begin to fall." (See the Seekers version; or a wonderful bunch of high school kids singing in a well-tuned, bunker-like stairwell.))
Sin, Surrealism, Faith in Juels-Verne-style Technology--these are the cultural tools we have to understand this change, and our options, and they fall short. It's ridiculous to think of carbon emissions, energy use, and SUV's in terms of sin and equally misguided to count the Christmas flies. We don't just need a climate bill, I think we need a new way to conceptualize what we're going through. A "new" surrealism.
Foad Mardukhi operates an idiosyncratic list serve and he recently forwarded an old Op-Ed about climate change as an existential crisis for Western civilization written by Anatol Lieven that seems more relevant now.
"The question now facing us is whether global capitalism and Western democracy can follow the Stern report's recommendations, and make the limited economic adjustments necessary to keep global warming within bounds that will allow us to preserve our system in a recognizable form; or whether our system is so dependent on unlimited consumption that it is by its nature incapable of demanding even small sacrifices from its present elites and populations.
If the latter proves the case, and the world suffers radically destructive climate change, then we must recognize that everything that the West now stands for will be rejected by future generations. The entire democratic capitalist system will be seen to have failed utterly as a model for humanity and as a custodian of essential human interests."
09/02/09 3:58 PM
Talking Donkeys, Ramadan with Barack, and Our "One True Friend"
For the U.S., Azerbaijan--with its Russian, Georgian, Turkish, and Iranian borders--has been too small and too strategic to fail. One member of the country's beleaguered opposition told me that from the Azeri perspective the fall of the Soviet Union just moved the Politburo from Moscow to Washington, which stepped in to provide security guarantees, asking for pipelines and influence in return. One cost of that friendship was that Azerbaijan wasn't much of a democracy. In its short modern history of the country, the State Department runs out of euphemisms for lousy elections before mentioning that the country's parliament abolished presidential term limits in March of this year.
Despite that, President Aliyev (son of the previous President Aliyev. Ahem.) appears to feel awfully insecure and is now engaging in a crackdown on trivialities. Security forces recently arrested two so-called "donkey bloggers" for posting on Youtube a donkey answering questions at a fake press conference and praising the government for its treatment of donkeys. (Late addition: I have been told they were actually arrested for brawling in a restaurant.) Last month, state security services detained the 43 Azerbaijanis who dared vote by text message for an Armenian singing group in a Eurovision song contest. "When I was called to the MNS, I thought they were arresting me for the strong criticism of President Ilham Aliyev I'd written on Facebook. I had even forgotten that I'd voted for Armenia. When in the MNS they started to interrogate me about this, I almost burst out laughing," said Rovshan Nasirli, who was called to the ministry on August 12. "After they kept me for two hours in an empty room, two men came to me, saying they worked for the main department of the MNS. One had a list in his hand of all the people who voted for the Armenian entry, and their addresses. They said that people like me should be sent to prison. They said, 'Today you vote for an Armenian, tomorrow you will go to blow up the metro for them.'" Crackdowns can appear to reaffirm the power of an angry paranoid state in the short term, but in the long run they breed revolutions.
There are other, less seemingly trivial, issues afoot in Azerbaijan. Recently, the country struck a deal to put some gas in Russia's pipeline. And after years of being the posterchild for the Extractive Industries Transparency Initiative by publishing its national oil contracts, it made two deals without revealing the details.
Beyond doling out Ramadan invites, I'm not sure that the U.S. has the attention, the strategic leeway, or the policy tools to ask more of Azerbaijan now. But as the relationships between Europe, the Caucusus, the Middle East, and Russia evolve, the U.S. is going to need more of all three. More importantly, we're going to need a more sophisticated sense of our own role in the world, and a more nuanced sense of just how important those pipelines are to us.
Photo Credit: www.flickr.com/photos/statephotos/3583378144
08/28/09 2:52 PM
Happy 150th Birthday to Oil
After the discovery at Drake's Well, oil was mostly used for lubrication and lighting. What we think of as the automobile age actually took a long time to get started:
26 years to invent an internal combustion engine and a gas pump (1885) (Timeline is here.)
41 years until there were 14, 800 autos registered in the US and the first really huge oil well (Texas's Spindletop) came roaring out of the ground with a higher daily production than all US oil wells combined. (1901)
49 years until the first Model T. (1908)
54 years before you could drive your internal combustion engine into the first gas station. (1913)
61 years until there were 8.5 million cars registered in the US. (1920)
The business and regulatory model seems to have developed a little bit faster.
11 years for Rockefeller to devise a business model that disciplined the cycles of boom and bust into a monopoly. (1870)
42 years before Ida Tarbell began exposing the model in McClure's magazine (1902), leading to the ultimate break up of Standard Oil into 37 companies 50 years after the discovery. (1909)
Now taking bets:
How long to until there are a million non-gasoline cars on the road?
How long until we've cut oil consumption by 33 percent?
How long until a radical, scandalous post-oil business model emerges?
How long until we regulate it?
(Photo: Flickr User sara.atkins)
Thanks to Branko Terzic for "Gas Gas" and translation.




