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Optimism, harsh realism, and blind spots—10 years later

(Note: Commentaries do not necessarily represent the ASPO-USA position.)
Ten years ago, energy analyst Steve Andrews challenged widely respected energy guru Amory Lovins via email for what Andrews thought was an overly optimistic vision—about coal consumption trends, evolution in the auto industry, future world oil production, etc.—articulated in the Rocky Mountain Institute‘s Spring 2000 newsletter. RMI published the subsequent email exchange at http://www.rmi.org/Content/Files/RMI_SolutionsJournal_FallWin00.pdf in the fall of 2000; most of it is reprinted below, with a few updated facts. Ten years later, read it for the blind spots everyone had.
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Steve Andrews: On page 2 in an article on global warming, you state: ―Coal is already defunct or on the way out in most of the world. Its use is now falling even in the United States, China, Russia, and Eastern and Western Europe.‖ Then how do you square your statement with June 1999 figures showing that world consumption is stable over the period 1988–98? While your other figures are correct, consumption is up in Japan, India, South Korea, and South Africa, hence the leveling. How can you call coal ‖defunct‖, saying that it is ―on the way out in most of the world‖?
Amory Lovins: You were right up to 1998. We‘re right starting in 1998. Chris Flavin with the Worldwatch Institute wrote…on 15 March 2000 that ―…the good news in world energy markets the past two years is almost entirely in the coal sector. For the first time, we can say that world coal demand is on an unambiguous downward track—in Eastern and Western Europe, Russia, China, and even (finally) North America. These declines have been so sharp in 1998 and 1999 that Worldwatch is now estimating that global carbon emissions have fallen for two consecutive years. As a result, carbon emissions in 1999 were actually slightly below the 1996 level. The last time the world had this much ‗good news‘ on the carbon front was during the last oil crisis 20 years ago.…‖ China, by the way, officially projects a 2000 coal burn that‘s back to the 1986 level!
[UPDATE: World coal consumption in 2009 vs. 1999 was up 46% and China‘s was up 134%.]
Andrews: I want to challenge the RMI company line on the world’s future oil consumption. Please consider these facts, then respond to the question below them if you have a moment:
A. There are some 700,000,000 mostly inefficient gasoline and diesel vehicles in the world today-—inefficient, at least, compared to both hybrids and your pet fuel-cell-powered vehicles. Turnover is slow. While cars in the U.S. last an average of 16 years on the road, those very same vehicles are often taken to Mexico and maintained for many more years. While no reliable figure is available, an estimated life expectancy of 20-plus years for the world mechanized fleet is probably not unrealistic.
B. There are some six billion people in the world, a few handfuls more than when ―...Stone Age man ran out of stones....‖
C. The appetite for cars worldwide is powerful; fortunately, economics in the developing world limit the purchasing power there to some degree. [UPDATE: Obviously this is now much less true.]
D. The appetite for gas-guzzling SUVs is mind-numbing in this country. Light-truck category sales are over 50 percent.
E. The unwillingness of the U.S. driving public to tolerate rises in gasoline prices, from either taxes or short-term supply issues, is almost frightening. As per 1996, politicians are pandering to see what
they can do to ―ease the driving public’s pain‖ until supply/demand intermittently makes the gasoline price issue fade away….
F. Two of the world’s three largest oil producers (the U.S. and the former Soviet Union) reached their peaks in oil production a while back (1970 and 1988, respectively). [UPDATE: while Russian oil production has peaked, the FSU‘s hasn‘t yet thanks to Kazakhstan and Azerbaijan.]
G. World oil discoveries peaked during 1962 (USGS figures). Today, we discover one new barrel of oil for every four barrels we produce.
H. Several oil industry retirees and current oil company officials have stated that world oil production will peak, hit a high point in daily production and then slowly decline, between 2005 and 2010. (Shell is more optimistic, using perhaps 2025 or 2030; BP has previously acknowledged 2010 or so.) [UPDATE: World oil production could remain on plateau, perhaps even grow production for a few more years, unless things fall apart.]
Lovins: About right until G; remember that there‘s no point spending money now to prove up reserves when you have ample ones to extract within your E&P [exploration and production] time horizon to meet your demand and market-share expectations. H depends on tacit assumptions about demand growth; you need to consider not only geological and economic/technological supply but also efficiency and substitution if you‘re to have any insight into future supply/demand balance. This is probably where we most differ.
[UPDATE: Efficiency and substitution remain elusive. World oil consumption grew 14% between 1999 and today, despite some crushing demand destruction during 2H2008/1H2009.]
Andrews: Given the above, I have a serious question for the RMI Hypercar Brain Trust: How many hybrids and fuel-cell vehicles do you anticipate in 2010? (Round numbers of millions….)
Lovins: Collectively these could well have a market share around half—more like two thirds if one is optimistic.… You can run the fleet numbers yourself. Just remember that improvement in the marginal vehicles‘ fuel economy by then should be roughly four to eight times that of the same-class new vehicles today, because platform physics, not just driveline, will be improving markedly; that a rapidly increasing fraction of the fuel burned will not be petroleum-based (initially mainly natural gas reformed to hydrogen, first downstream and later at the wellhead, and later mainly renewable electricity); and that accelerated-scrappage policies to hasten the stock turnover will be very attractive. All three of these effects multiply.
[UPDATE: No fuel-cell ―hyper cars‖ are on the U.S. market today. Hybrids are well under 5%. And the efficiency of the US transportation fleet isn‘t much higher in 2009 than it was in 1989.]
Andrews: Given the above facts…unless you foresee a very high level of efficient vehicles flooding the market virtually overnight and worldwide—at nearly 100 percent of annual production by 2010—I question how you can make the statement ―That’s why oil prices and shortages are ultimately beside the point.‖ I hope you are right because if you aren’t, then in my opinion the above is a very irresponsible statement, leading one to believe that all by itself ―evolution will take care of everything‖ in a timely ―technology über alles‖ fashion, without any economic hardship or upheaval.
Lovins: I‘ve been assessing detailed options for efficiency and substitution in this industry for nearly 30 years. For what it‘s worth, total U.S. primary energy consumption is now within 2 percent of the ―soft energy path‖ I published in Foreign Affairs in 1976. That‘s not entirely coincidental.
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What‘s the take-home here? Is it that Lovins, who really is a genius, was bested by Andrews, who confesses that he‘s a couple slices short of a full loaf? Even if true, that‘s irrelevant. What matters is that nearly all of us have blind spots and natural proclivities that prevent us from anticipating, seeing or acknowledging shifting trends, even shifting megatrends just 10 year out. Lovins and Worldwatch were wrong about coal. Lovins was wrong about the 2010 US car market, will likely be wrong about oil. Andrews badly missed the current shale gas trend. IHS has repeatedly blown their rate and price of new supply forecasts. M. King Hubbert knew he was wrong about natural gas but didn‘t know why. The US EIA has been terrible at long-term oil forecasting. What‘s your blind spot?

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