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Tilting at windmills and energy literacy

I want my, I want my MTV...
Money for nothin' and
Chicks for free

    —Dire Straits, Brothers In Arms (1984)

I thought about calling this column A Bittersweet Victory, but this isn't the time to gloat. With the oil price bouncing around between $125 and $135/barrel, and both the trucking and airline industries in trouble, it seemed like time to declare victory. That verdict would be premature.

I chose Tilting At Windmills and Energy Literacy instead because we are now being bombarded with ludicrous suggestions about how to get out of a crisis brought about by a gradual peak & decline of world oil production, a trend which has been evident for three long years now. An energy literate public and media would be able to debunk this nonsense, filtering out the noise that obscures the true signal.

It would be satisfying if those of us who have argued that a near-term peak (bumpy plateau) in world oil production would have severe economic effects could take credit for the surge of "peak oil" awareness in the media, but that assessment would be wrong. Press reports rarely consult knowledgeable sources, and the recent appearance of Robert Hirsch on CNBC was the notable exception that proves the rule.

It's mostly the oil price that's doing the talking now, not anything any of us said or did. Thus our society has now moved from complacency to near panic. This was predictable.

A New Agenda?

When Paul Krugman writes a column entitled Stranded in Suburbia, it's probably time for some of us to move on. The old agenda, at least for me, was straightforward analyses showing that the world's oil supply was in trouble or studying the economic effects of pricy oil. We need a new agenda. What will our new mission be? Let's quote Krugman, adding some commentary in italics, to explore this question. I believe a take-no prisoners approach is warranted here. ("..." indicates omitted text.)

I have seen the future, and it works...

Krugman can hardly say he sees a future that doesn't work.

If Europe’s example is any guide, here are the two secrets of coping with expensive oil: own fuel-efficient cars, and don’t drive them too much...

The two secrets. That's all there is to it? Is Europe really a guide?

Notice that I said that cars should be fuel-efficient — not that people should do without cars altogether. In Germany, as in the United States, the vast majority of families own cars... But the average German car uses about a quarter less gas per mile than the average American car. By and large, the Germans don’t drive itsy-bitsy toy cars, but they do drive modest-sized passenger vehicles rather than S.U.V.’s and pickup trucks.

In the near future I expect we’ll see Americans moving down the same path [as Germany]. We’ve already done it once: over the course of the 1970s and 1980s, the average mileage of U.S. passenger vehicles rose about 50 percent, as Americans switched to smaller, lighter cars...

Germany's land area is 137,858 square miles. It would fit neatly inside Texas (268,601 square miles). 

A typical liberal economist, Krugman believes efficiency and substitutes are all that's required to counter exorbitant oil prices resulting from increasing scarcity over time. Unlike the 1970's and 1980's, we are facing what Kunstler calls the "long emergency". This goes on basically forever. Once you make one set of efficiency moves, you've got to make another, and then another. Inevitably, some people will be, and not in The Rapture sense, Left Behind. At the very least, this means no car at all.

Admittedly, the next few years will be rough for families who bought big vehicles when gas was cheap, and now find themselves the owners of white elephants with little trade-in value. But raising fuel efficiency is something we can and will do.

If you live in suburbia and need to make long commutes you can no longer afford, and you can't trade in your SUV to get a smaller more efficient car, and you're up to your ears in credit card debt and living from paycheck to paycheck, what exactly are you supposed to do to fix your transportation problem?  Even if you somehow manage to keep your job? It's going to be "rough" Krugman says.

Can we also drive less? Yes  —  but getting there will be a lot harder... Any serious reduction in American driving will require more than [canceling vacations, riding the few buses available]  —  it will mean changing how and where many of us live.

You'll be driving less if you can't afford the diesel or gasoline, that's for sure. "Changing how and where many of us live"—Krugman may be on to something. 

To see what I’m talking about, consider where I am at the moment: in a pleasant, middle-class neighborhood consisting mainly of four- or five-story apartment buildings, with easy access to public transit and plenty of local shopping.

Atlantai85 It’s the kind of neighborhood in which people don’t have to drive a lot, but it’s also a kind of neighborhood that barely exists in America, even in big metropolitan areas. Greater Atlanta has roughly the same population as Greater Berlin — but Berlin is a city of trains, buses and bikes, while Atlanta is a city of cars, cars and cars (that's I-85 pictured left).

The "kind of neighborhood that barely exists in America."1 That's nice for Krugman! He's an economist at Princeton, he doesn't live in Atlanta. What about the rest of us poor schmucks? 

And in the face of rising oil prices, which have left many Americans stranded in suburbia — utterly dependent on their cars, yet having a hard time affording gas — it’s starting to look as if Berlin had the better idea.

Changing the geography of American metropolitan areas will be hard. For one thing, houses last a lot longer than cars. Long after today’s S.U.V.’s have become antique collectors’ items, millions of people will still be living in subdivisions built when gas was $1.50 or less a gallon.

How will people be able to live in "subdivisions built when gas was $1.50 or less a gallon" when gas is $7.50/gallon or more? Are these suburbanites going to live off the garden in the backyard? Band together to tear up some of that concrete and asphalt to make more tillable acreage? No, they'll need to unload their houses and move.

OK, let me see if I've got this right. You're out there in suburbia, this isn't Germany, the Housing Bubble has collapsed, credit is tight, you can't trade in your SUV, a Prius (or future Plug-in Hybrid) is unaffordable, your mortgage debt exceeds your house's value, and now you've got to sell your house and move someplace where you can work and shop locally. But you can't unload your house because nobody wants it even if you sell it at a loss. Are you just going to walk away from your mortgage? Where will you go? And what about soaring real estate prices for the desirable locations like Princeton, New Jersey? How exactly is all this going to work? Krugman doesn't say.

Infrastructure is another problem. Public transit, in particular, faces a chicken-and-egg problem: it’s hard to justify transit systems unless there’s sufficient population density, yet it’s hard to persuade people to live in denser neighborhoods unless they come with the advantage of transit access...

Good point! Germany has trains, buses and bikes. The U.S. does not. Maybe we ought to be building them like there's no tomorrow, the chicken or egg problem notwithstanding?  But where are the resources we need going to come from to rebuild our neglected, aging infrastructure in an inflationary world caused by diminishing available energy?

It takes a long time to come to grips psychologically with the potential implications of peak oil. Krugman has just started thinking about it. He's a newbie, he's in the early stages. So, education is one role I can see taking on as time goes on. Energy literacy is important because Americans need to know what to expect in the future out to 2020 and beyond. People require a reality check.

So, don't get your "peak oil" views from a Born-Again Paul Krugman. What he doesn't say is more important than what he does say. You need to ask the hard questions that Krugman doesn't address. You need to read between the reassuring lines, exercise some critical judgment, and take a hard look at where you stand.

Asking hard questions and looking for answers is not the same as saying that civilization is on the verge of collapse and we're all doomed, although that outcome certainly lies within the realm of possibility—it's important to acknowledge this because it spurs people to action. I hope Americans will band together to make things work out, even with less and less energy to go around over the long run. It needn't be the Dark Ages, but it will definitely be different. This is a common point of confusion both outside and even within the "peak oil" community itself.

In the interest of energy literacy, let's do some clarifying and debunking. Learning how to spot a phony argument is a critical skill if you're going to get serious about preparing for the Long Emergency.

Tilting At Windmills

I chose a couple illustrative stories more or less at random from the plethora of examples available lately.

  • Scott Simon of NPR's Weekend Edition interviewed economist Phillip Verleger2 about gasoline prices on May 24th. Verleger opined "that if demand drops significantly and if refiners do many of the things they're planning to do, we could easily see $2.00/gallon gasoline within 4 or 5 years."

    Verleger noted that "there's [heavy] crude oil sitting on ships off Iran that the Iranians can't sell." The problem is that "there's not enough light sweet crude oil" to support diesel demand because of a disruption to Nigerian supply and "because the U.S disrupted supply by putting light crude into the Strategic Petroleum Reserve." Oh, my! From the Oil & Gas Journal's Why suspension of SPR price can lower oil prices by editor Bob Tippee (May 16, 2008).

    "Under bipartisan pressure from Congress, the Department of Energy on May 16 announced it is suspending by as much as 13 million bbl [35,000 barrels per day] this year's acquisition of crude for the Strategic Petroleum Reserve" [SPR]...

    In his Senate testimony, Verleger noted that a leap in crude prices last year away from 2006 levels coincided with DOE's revival of acquisition of crude for the SPR. About 33% of crude acquired for SPR is sweet.

    Verleger estimated that SPR purchases lowered global supply of light, sweet crude by as much as 0.3% and raised the price by perhaps 10%. At the time, the light, sweet crude price was $94/bbl.

    35,000 barrels per day going into the SPR represents 0.17% of America's daily oil consumption. That's between one and two tenths of a percent. That's a drop in the bucket. Grasping at such straws is not a solution to the global production peak of light sweet crude (Chris Skrebowski, editor of Petroleum Review). That Iranian crude is crappy, it's a nightmare to refine, and the Iranians won't lower the price they want for it.

    The bogus argument made by Verleger (and OPEC) is that there is insufficient capacity to refine all the lousy oil we have into the middle distillates we need (kerosene, diesel, jet fuel, heating oil). We are being asked to believe that there is a glut of this lousy oil out there waiting for the refining capacity to catch up. Tain't so, not true. Only OPEC has some spare capacity, and there's not much of that, heavy, sour oil or not (ASPO-USA, September 19, 2007). Everyone cites this Iranian example because it's the only one they have.

  • The House of Representatives voted to sue OPEC by a vote of 324-84. From Let's Sue OPEC! That'll Teach Them! (Energy Tribune, May 21, 2008).
    When it comes to energy policy, Congress goes from dumb to dumber. The latest example: a bill passed by the House of Representatives on May 20 that will allow the U.S. government to sue OPEC for conspiring to raise prices. There are several reasons why the bill, which passed by a margin of 324 to 84, makes no sense. I’ll focus on two: reciprocity and hypocrisy... [Read the article and see Robert Rapier's R-Squared Energy Blog for some details]

    The other problem with the House measure is its blatant hypocrisy. Congress has restricted drilling in the U.S. by making (for example) the Arctic National Wildlife Refuge [ANWR] and other areas off-limits to oil and gas exploration...

    Yahoo_finance_task_and_blodget On the bright side, there is a hilarious (and insightful) video from Yahoo! Finance featuring Aaron Task and Henry Blodget that covers our elected leaders' "pathetic" response to  the oil crisis, including suing OPEC—good luck with that! says Aaron Task (click on the picture left).

    As the Energy Tribune notes, it is hypocritical of the U.S. to demand that OPEC meet our energy needs while we refuse to pursue all the supply options at hand. Moreover, trade relations go two ways. We want to exercise our God Given Right to cheap oil, and Saudi Arabia could demand cheap wheat in return. (Saudi Arabia's water depletion problems have led to peak wheat in the Kingdom.) As Rapier points out, we can plant and harvest wheat every  year—until our favorable climate, top soil and depleted aquifers give out—but once the Saudi oil is gone, it's gone. We are demanding that Saudi Arabia sacrifice their sole source of wealth so we can drive our cars. Americans don't have to make sacrifices, do they? Change our non-negotiable way of life? No way!

    So the House of Representative says screw those Arabs. They're singing a new version of the great Dire Straits tune Money for NothingI want my, I want my SUV. More than one person has said that adult life (or the Congress) is a lot like high school. High school? It looks more like preschool to me. OPEC will act in their own self-interest. That's what people do unless you coerce them. We are not in position to threaten OPEC. (See Iraq.) Suing OPEC is not a way out of our predicament.

I could have used other horror stories, including the current confusion over ANWR—this subject requires a column of its own—or oil company executives explaining how the oil markets work in testimony before a Senate inquisition. Perhaps the first thing we should do is offer a free energy literacy program to all members of Congress. Maybe then they'll stop Tilting at Windmills and get about the serious business of meeting the oil crisis head-on.

Won't Be Fooled Again

There may be short-term "corrections" of the oil price in the next few years in which the price falls a bit for a few weeks or a few months. Don't be fooled. This oil crisis is here to stay. All the effective solutions are on the demand-side. Efficiency, conservation and proximity are the keywords. If Americans are going to make meaningful sacrifices and adjustments, they will need to understand the issues. They will need to be energy literate.

Contact the debunker at [the original article]

Notes

1. Krugman has got all his ducks in a row—he lives in a "pleasant ... neighborhood ... with easy access to public transit and plenty of local shopping." This is posh Princeton, New Jersey, Krugman is talking about, not Atlanta, Phoenix, Los Angeles, Denver, or God Forbid, Las Vegas. God Bless the Child, Billie Holiday sang, Whose Got His Own. You would be amazed at the extent to which a person's personal circumstances influence their view of the world. Comfortable people are always eager to tell stressed-out people with real problems what they should be doing.

2. Where did the NPR's Scott Simon dig this guy up? Verleger called in from his hometown, Aspen, Colorado. Playground of the rich, Aspen is not exactly Everytown USA. See the Krugman note just above.

Editorial Notes: Dave "the debunker" comes down rather hard on Paul Krugman. To put it into perspective, economist Krugman is one of the few prominent commentators to be writing about peak oil (he even reads The Oil Drum!). What is more, Krugman is one of the very few in the mainstream press to be thinking about changes in infrastructure (suburbs, mass transit, etc.) Far more common is the kneejerk impulse to find a scapegoat -- OPEC, oil companies, speculators, environmentalists -- somebody to blame and punish. Those are clearly dysfunctional approaches. Dave admits that Krugman is going in the right direction, though not has far as he (or I) would like. As for Krugman's lack of comprehensive solutions to the U.S. suburban mess, one can hardly blame him. Does anyone have a pain-free answer? I welcome Krugman's peak oil columns and hope more opinion leaders follow suit. One has to walk before one can run, and many of us in the peak oil world have had years to get used to the idea. Let's give other people time to come up to speed. -BA UPDATE (May 28) Author Dave Cohen writes: Yes, I did come down hard on Krugman. I respect Krugman as far it goes,but here's my point: we need to talk plain truth now because we're running out of time. With the trunking and airline industries already on their knees, I think we have run out of time to let people "get used to the idea" and give people "time to come up to speed." We're not very far from an oil price that will bring our economy down. The middle distillates (diesel, jet fuel, etc.) market is driving the the oil price. We're getting near a tipping point that, as Tom Whipple has written, may result in shortages in the 4th quarter when the heating oil season ramps up. Diesel is now $4.78/gallon. Airlines must pay up front for jet fuel. Focusing on gasoline alone, as Krugman does, and buying more fuel efficient cars in the future just doesn't cut it. The future is now. UPDATE (May 28) Long-time EB contributor Byron King writes: [In the media appearances that I have been doing - radio, and appearances on CNN, Fox & CNBC], I tell people the truth as I know it, but I try to do it in a way that avoids the "Abandon All Hope" approach. First, the media don't want that. Does not sell. They won't book doom & gloom. Second, people want to hear actionable ideas. So I give them actionable ideas. What's the "answer?" Well, we have to do it all. Wind, solar, conserve, efficiency, change lifestyles, and... everything else too. Drill ANWR? Drill offshore? Sure, why not? Will we solve the problem by drilling ANWR or offshore? No. And OBTW, these are 10, 20, 30 year efforts.... long term, into the next generation. Bit will we help out with the problem by NOT drilling? No, it will only get worse. So drill. It will mitigate the problems, not solve them. Meanwhile, I just tell people to enjoy the $4 gas... it will get more expensive. These are the good old days.

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