Democrats & Liberals: Archives

The only way most people, firms and countries invest in alternative technologies is when the prices of what they are using rises. You are a good example with your hybrid cars. I have seen it with my staff. They are starting to take more advantage of mass transit and many are asking to telecommute more often. This is a good example of adaptation on the individual and organizational level. Getting our guys to telecommute one day a week saves 20% of their commuting energy bill.

It is not, however, the end of cheap oil. Oil has a price range. In today’s dollars, it can go to about $60. This is pretty much been its ceiling price (adjusted for inflation) for thirty years, and the trend is down, not up. That is because at that price, alternatives make much more economic sense. It starts with the little changes I mentioned above, and then goes to alternative technologies, like your hybrid. Then it moves to the organizational level where whole processes are reengineered. It is painful, but we have gone through this before and we end up better off.

Our friends the Saudis understand and fear this process. That is why they like to keep the price of oil in a narrow band. If the higher prices make oil a less important part of the energy mix, as they did during the last oil crunches, that’s great. The less important oil becomes, the less important the Middle East becomes and it is not a good thing to be so dependent on such a volatile region.

The high price of oil stimulates alternatives. We had shortages in the 1970s only because we tried to keep the prices artificially low. We are not currently making that mistake.

Americans will do the right thing, but we should explore all the alternatives first. Winston Churchill is right, but it is a tautology. Like saying you always find your keys in the last place you look. The genius of our system is that it generates lots of alternatives.

Jack, you use this argument a lot, even for Iraq. Obviously it’s not the end of the world, and I never said it was. We’ll muddle through it, but as you say, it’ll painful.

But why bother going through all the pain when you don’t have to? Why risk having to fall back on 19th century coal power as an energy source if leapfrogging to clean, renewable energy souces is totally viable?

It’s possible to get to the next stage piecemeal without completely destroying civilization. But why take the risk when you don’t have to? Why would you want to do it the hard way?

Anyhow, I’m taking Cheney’s advice and making conservation a personal virtue. I’m also joining groups like the Apollo Alliance because, unlike those on the right who say it can’t be done, I’m an optimist.

BTW, I just saw where the EIA says mandatory greenhouse gas emissions caps like in the Kyoto protocol are totally affordable,

Mandatory limits on all U.S. emissions of carbon dioxide and other “greenhouse” gases would not significantly affect average economic growth rates across the country through 2025, the government’s says.

…EIA estimated that the cost to each U.S. household of using a market-based approach to limit greenhouse gases would be $78 per year, from 2006 to 2025. That would reduce the gross domestic product in 2025 by about one-tenth of 1 percent, it said.

The commission also had recommended a 36 percent increase in the average fuel economy for cars and light-duty trucks between 2010 and 2015 and doubling to $3 billion a year the budget for federal energy research and development. In addition, it called for new tax incentives for gasifying coal and building nuclear plants.

Adding those measures to the greenhouse gas plan, EIA estimated, would reduce the nation’s gross domestic product in 2025 by about four-tenths of 1 percent.

My household is willing to chip in a couple dimes a day to stop global warming. That’s chump change.

AP

I use the argument alot because I think it is valid across a wide range of situations. Too often when there is a problem, people propose inappropriate solutions. Sometimes the best solution is to do nothing, or more precisely, let other people do what they do. Doing nothing should be the default option for government.

I have both less and more confidence in the U.S. consumer than you do.

Polls always indicate that Americans are willing to pay more for “green products” but such green products don’t sell as well as the polls would indicate. You are I are old enough to remember the previous energy crisis. People talked all the time about conservation and finding alternatives, but nobody did much about it until the prices went up. Then suddenly everyone was working on the problem. When the prices went back down (in real terms) the enthusiasm for change went with it. BUT changes had been made. Until the energy crisis, energy demand rose in lockstep with GNP, but in the last 30 years, our nation’s economy has grown more than 170 percent while energy consumption grew only 45 percent. In other words, the amount of energy used to produce each dollar of economic growth decreased by 44 percent. This didn’t happen because of good will and the government’s synthetic fuels initiative was a disaster (economically and environmentally). It happened because there was incentive.

Government has a role to play and a big one. Government on all levels can be early adopters of better technologies. Government can funnel research dollars into energy sources. Government is a big player in mass transit and governments control zoning. But there are always hard choices that government won’t make. For example, it is very difficult for government to raise prices, yet this is the best conservation method known. In my own county, we have the paradox of government NOT allowing denser development around Metro stations. Lobbies of concerned citizens and local environmentalists don’t like such things.

I do not propose we loosen environmental standards and neither does President Bush. In fact, they are getting stricter each year. Within those standards, clean renewable energy can be developed.

People adapt, but not until they have to. We decry this, but it makes perfect sense. Timing is important. It is like the guy who is saving pennies today because he figures the copper content will be worth more than a penny in about 20 years. He is a little too far ahead of the curve.

I believe in the market. It worked before. It works now. The market is the best plan for an uncertain future. That doesn’t preclude government, as I mentioned above, but government has to work within market mechanism. Prices on energy will need to rise if we are to solve this problem. There will be pain associated with the changes. No amount of planning by government of anyone else can avoid this. But with the free market, the pain is the pain of the birth of a new and better system.

Great article AP, here is another good link. And for other smart, healthy and responsible choices, this great link is also helpful.

AP
We both know that the majority will do nothing more than sit around, bitch and blame the other side. Getting us nowhere.
Bush could invent a totally safe and efficient air powered car and would still get blamed for killing air molecules or something.
The same thing would happen if hillary (blah) did it in 08.
We’ve lost focus of whats best for us as a nation and instead worry about whats best for our party and its future.
Like you, I do what I can to help, but it wont do any good until EVERYBODY realizes it must be done.
Nice post.

1. I don’t think anyone mentioned the increasing oil demands of the developing world, especially China.

2. I do think that American gas prices are going to continue to rise, but only something severe is going to peel our hands off our steering wheels.

3. Yeah! either way, more people are opting to move back into cities. I blame sprawl for creating a gas demand in the first place (alongside some other smaller things). And…

4. I already drive less because it costs more. Way less. I drove 6000 miles these past 12 months. I’m proud of myself.

Alternative energy supplies produced by the market are the only solution. Even though I am a Conservative, the amount of oil in the House and Senate stifle the development of alternative sources of energy.

@Everyone who thinks gas prices will continue to rise forever:

I would argue that from 2010-2022 the crude oil price will drop down to $25. The argument for this scenario wold be that oil is valued at speculative prices now and needs a correction, but stronger US-led growth for the world in the next bubble from 2006-10 and contiued extreme growth in China and Asia will lead to strong pressures on supplies.

I think it’s important for people to realize that this is a world-wide oil bubble and will not be forever sustainable. As it is, the fair value of oil now is estimated to be between $25-40. Of course, oil may very well run up to $90 by 2010, but afterwards it’s clear-sailing :P

And that’s the deal. Our government should be knee deep in legislation debates over the most expedient methods of shoring up alternative fuel development, testing, and marketing. 10’s of millions of homes could benefit from a solar water heater mounted near their house or on the roof - and it will pay for itself in 7 to 10 years. As demand and supply grows, these units could be selling for as little $200 with plumbing costs of about $150 to 200. Currently, these units run upwards of $1000 to install.

This is just one example. City planners need to install bike paths and storage racks. Much more can be done by corporations and cities to encourage ride share arrangements. Many cities have let mass transportation erode or dissappear. It is time to bring it back.

A national plan for all new suburban development to incorporate housing and jobs into local communities is decades overdue. Seattle is a prime example of how city planning can remake downtowns with work and urban dwelling all occuring in short distances to each other.

But, there is no such planning by this administration. They are vested in the oil corporations either directly or by campaign contribution. Ralph Nader has been tireless in documenting these ties and the future consequences, but, few wanted to hear it.

And there are gutless wonders so focused on dangers overseas, they can’t see the dangers they themselves pose to our future by their incredible lack of focus and integration of policy here on the domestic front. And the malaise is bipartisan, folks. Just enough on each side of the aisle to resist domestic focus to insure that nothing substantial happens.

It is incredible sad and we are becoming an incredibly inept nation with regard to stearing this huge ship of state toward a better future. Alvin Toeffler was so damned right, that the future was going to make ostriches of us all.

Maybe Bush should spread Freedom to Venezuela next?

David

An off subject comment. I had supper with Alvin Toffler once. He is less interesting than his books. The insights he wrote about are sort of like the random parts of a dream. We all interpret them and they seem to make sense because of our interpretations. I don’t believe he would survive on this blog, where he had to follow up on his ideas.

What is interesting is that a person can make piles of money that way. Ever since, I have been trying, without success, to crack that code.

AP,

You fail to mention that even if we had more oil, the refineries in America haven’t been updated in years.

When was the last time we even built one?

You are I are old enough to remember the previous energy crisis.

We’re also old enough to remember that crisis was the result of an oil embargo targeted at the US. It was an artificial shortage. We’re now looking at the prospect of oil demand forever more outstripping production.

That G7 meeting was interesting because… well, here’s the headline I saw in my paper this morning, G7 Officials Say World Can Adapt to Higher Oil

Finance officials from rich nations gathering in Washington for weekend talks said on Friday the economies of the world need to devise ways to adjust to higher energy costs.

…U.S. Treasury Secretary John Snow, on Bloomberg television, acknowledged that costlier oil hurt. But he also indicated the G7 was preparing for an era in which energy prices are likely to stay at levels not foreseen as recently as a year ago.

Some of you are thinking oil prices will drop in the long-term. I’m passing on the message that we are sitting at the top of a steep bell curve representing oil production. Prices will trend upward exponentially from here on out.

Anyhow, it’s obvious we’re not going to get any leadership on this issue from the Bush administration. As the EIA pointed out, their energy bill will increase our reliance on foreign oil by 85% and won’t stop the rise of gas prices. In this new “culture of personal responsibility”, it’s every family for themselves. Good luck, everyone.

If you want to help then go out and buy a diesel truck. Diesel fuel is is about 40- 50% more fuel efficient and if you burn biodiesel then you can help an American Farmer. There are fewer emmission from todays diesel versus the diesel you remember from your childhood.NYC is under a pilot program for clean burning biodiesel, as are many school systems across the country. Reduce the legislative overload to introduce into the fuel supply. When this happens things will change, and it’s on the way. Just your average conservative making a difference.

Chris you offer a fool’s choice. If a person weighing 180 pounds wants to make a difference, they should trade in their car using gasoline at 24 mpg for a diesel truck with a payload capacity of 1000 lbs. plus passengers plus another quarter ton of metal of its own weight, to drive their 180 lbs. to and from work or the grocery store? Diesel trucks are more efficient hauling payloads way beyond the normal American’s needs. There is no savings here… Think about it…

Are you a diesel truck salesman?

My best friend drives a Volkswagon TDI (Turbo Diesel Intake) car and uses biodiesel. It’s a normal-sized, kind of cool car. You don’t have to drive a huge transport truck to take advantage of biodiesel.

… of course, we can’t GET biodiesel where we live, but if it was available, he’d use it. *chuckle*

AP,

“We’re now looking at the prospect of oil demand forever more outstripping production […] Prices will trend upward exponentially from here on out.”

You’re being sarcastic I hope… because this is just flat-out wrong.

Zeek,

When do you belive that the oil companies will update their refineries?
Gas prices are very quick to rise, and very slow to lower.

Rocky,
“When do you belive that the oil companies will update their refineries?”

Probably never. It isn’t exactly profitable for them as I’m sure you know so why would they?

“Gas prices are very quick to rise, and very slow to lower.”

Actually, crude oil prices can plunge just as fast as they can rise. However, they haven’t historically (since 1946) had long-term, sustained corrections while the uptrends prove to be far more sustainable. I stand by my belief that by 2022 the price of crude oil will be about $25.

I hold little hope for cheaper oil as this is a consummer driven economy. Notice the Hemi, Hummer,and Ford Tough adds. I’f we had any leadership in this country, they’d ask us to support our troups by conserving fuel so we would not have to be over there in the first place. The oil company’s won’t drill us out of this mess as it is more profitable for them to buy up their own stock than invest in more expensive and had to get oil.

Zeek:

I stand by my belief that by 2022 the price of crude oil will be about $25.

Great prediction!! Now we have to stick around for 17 years to see if you are right!!

Craig

We’re now looking at the prospect of oil demand forever more outstripping production […] Prices will trend upward exponentially from here on out

You’re being sarcastic I hope… because this is just flat-out wrong.

How so, Zeek?

We are at the limit of production capacity. Demand is currently outstripping production. Even with new facilities OPEC is proposing, no one is saying the long-term forcast looks good. Especially with billions of new oil consumers in countries like China and India emerging.

Globally, two barrels are already being pumped for every new barrel found. It’s a fact that US production hit it’s peak in 1970. And over the last couple years, every major oil company has revised its unrecovered reserves downward - some of them, multiple times.

Based on what I’ve read and what I see in the financial section of the paper, I believe global production of cheap oil is at its peak. Many oil companies are even now starting to take another look at the more expensive extraction of oil from shale and tar fields.

As sustained failure to meet demand makes it clear that we’re on the downside of Hubbert’s curve, the market will drive prices up. By 2022, I predict oil prices closer to $100/barrel.

BTW, thanks for mentioning biodiesel. That’s another good option. Lobby your mayor and city council to start a pilot program in your town so you can tap their supply. ;)

Friends,
Full Disclosure Note: In addition to being Right of center, I am a geeky engineer in the energy (predominantly power) industry, and I barely remember the 1970’s (no —not due to drug use).

We’re also old enough to remember that crisis was the result of an oil embargo targeted at the US. It was an artificial shortage.

Well, yes and no. When Nixon created the EPA circa 1972, one of the first responses by industry was to convert many little coal-fired power plants to burn much cleaner forms of oil. The embargo affected US supplies by about -5%. I believe the use of oil in power plants significantly outweighed this artificial shortage. While the embargo does indeed pose an interesting illustration of what could happen in our current clash of civilizations, let’s be honest — attempting to clean-up power plant emissions was one of the sources of the oil crisis of the 1970’s.

Well, that’s interesting, Kentucky Jon. But I do remember it, and I don’t remember it that way. Here’s a history of the oil embargo from answers.com.

A coworker of mine drives a VW TDI, he gets 19 miles/dollar. I drive a Honda Del Sol, I get 14 miles/dollar. I get 30 miles to the gallon in my honda.

Any given person reading this blog has the capability to make there OWN biodiesel. The ingredients are available, and it is not hard to make.

I think one thing that is being missed here, is exactly what you just thought when you read my first two paragraphs. I DON’T CARE. MOST people don’t care!

When people start caring, is when there wallets begin to be affected, significantly. I’m am saying a 5 cent rise is not going to do it. $1 per gallon will, and we are approaching this mark pretty quick. China, India, for sure. We are going to have issues ahead of us. This is why I feel it is the governments respondsibility to FORCE us into spearheading future technologies. So, when we are affected significantly, let’s say around 2010+, it will not be a big deal, because we would have already figured it out.

Bush isn’t helping, I agree with you all! If left to the people, as is the generic conservative point of view, none of this will happen, and we will be at war forever (or until China and India are done fighting over us!)

Finding alternatives is the only answer. I sold my car and ride my bike exclusively now. obviously, my range is limited, but I can make the 8 miles to and from work no problem.

Most people dont want to peel their hands from the steering wheel because they are just too lazy to walk or ride.

America grows obese, riding F-350 full tons and watching TV 8 hours a day, and we wonder why we have so many problems.

“Finding alternatives is the only answer. I sold my car and ride my bike exclusively now. obviously, my range is limited, but I can make the 8 miles to and from work no problem.”

James Fitzgerald,

Unfortunately I can’t fit an 8 foot ladder on a bike. There are some of us for which a vechicle is nescessary. I drive a Highlander. A small 2-wheel drive suv.
The fools that drive huge four-wheel drive vehicles (Hummers, Suburbans, etc.), that will never see off-road are the greatest problem.
Need has been replaced with want.

Rocky

Two guys on two bikes can carry that eight foot ladder, although they may be unable to turn any corners.

Jack,

Then there’s the 75 pound toolbox and the Computers and the video testers and the…..
These better be pretty big guys.

Craig,

“Great prediction!! Now we have to stick around for 17 years to see if you are right!!”

Oh, I’m sorry Craig, are you not going to be staying on the planet for the next 17 years? (If you’re really old and expect to die at that point in time, my apologies).

AP,

“We are at the limit of production capacity. Demand is currently outstripping production.”

Hm, and yet somehow the US finds room to build crude oil reserves at a rate of 6 million barrels a month (that’s over the last 5 months). Also, many other major oil importing countries have been doing the same (I don’t have figures on those countries though).

“Even with new facilities OPEC is proposing, no one is saying the long-term forcast looks good. Especially with billions of new oil consumers in countries like China and India emerging.”

China and India (China moreso) are already beginning to hit full-stride in their oil consumption. Extreme growth for China should slow down starting from 2010.

“Globally, two barrels are already being pumped for every new barrel found.”

This doesn’t really mean much for the short-to-mid-term oil prices. Perhaps 50-60 years down the line this will matter, but those oil deposits are going to last a fairly long time.

“It’s a fact that US production hit it’s peak in 1970. And over the last couple years, every major oil company has revised its unrecovered reserves downward - some of them, multiple times.”

The oil companies want to encourage this inflation in oil prices. So, obviously they would do every bit they can to feed speculative fears surrounding oil prices.

“As sustained failure to meet demand makes it clear that we’re on the downside of Hubbert’s curve, the market will drive prices up.”

See, you’re still not getting it. The oil companies are holding out for the purpose of driving prices higher. This supposed lack of oil inflow is yet another thing fueling the speculative fears. At fair values, oil is worth about $40 a barrel right now (max). Perhaps we can get to $100 a barrel in 2010, but afterwards, the fifth wave of the oil bubble will have peaked and we should see a long term correction down to, as I said, $25.

If you still don’t believe me, I will have to throw more facts at you.

Facts would be great, Zeek. All you’re feeding us right now is a conspiracy theory. :)

The reasons prices are up is because China is the fastest growing user of oil in the world. Since they don’t have air standards and restrictions.

BTW My diesel happens to be a van. and a 4x4 quad cab pickup. The largest growing segment of the automotive market place is in trucks mainly diesel trucks.

The whole point to the biodiesel comment (real astm standards biodiesel) is that it is a soybean product and would have a twofold benefit to this country. Nearly everything moves about this country on a truck. So if you can supplant 10-15% of the fuel used with biodiesel you would start to have an impact on fuel prices. The american farmer would benefit because soybean prices would rise. That helps small town USA farmers spend money and lots of it. One thing I know is that I’m not whining about it I’m doing something about it are you! That’s for you detractors. Government is part of the problem!

“Hm, and yet somehow the US finds room to build crude oil reserves at a rate of 6 million barrels a month (that’s over the last 5 months).”

Zeek,

Just because we have reserves doesn’t mean we have the ability to process them. America hasn’t built a oil refinery in years and hasn’t upgraded one in quite a while either.

Hm, and yet somehow the US finds room to build crude oil reserves at a rate of 6 million barrels a month (that’s over the last 5 months).

Yeah, at a cost of tax payer dollars of between $40 and $51 per barrel. If Bush, et. al, believed prices would be dropping after summmer is gone, wouldn’t they have waited to finish topping up our oil reserves? Appears they don’t see the prices dropping either, since, Bush, et. al, are finding tax payer money a bit scarce these days given their bloated budgets and deficits.

Rocky,

“Just because we have reserves doesn’t mean we have the ability to process them. America hasn’t built a oil refinery in years and hasn’t upgraded one in quite a while either.”

That is quite inconsequential. The US can quite easily convert its crude oil reserves into usable oil at a rate fast enough to sustain the country.

Chris,

“The reasons prices are up is because China is the fastest growing user of oil in the world.”

That is only one component of the equation.

AP,

“Facts would be great, Zeek. All you’re feeding us right now is a conspiracy theory. :)”

Conspiracy? Bah! I’ll give you your facts…

At our current rate of stockpiling, the US will hit its reserve-level target around July of this year. So, after July that’s an instant reduction of 6 million barrels a month. So that’s a 10% cut on our consumption rate right there.

I suppose that the most important point to make here is that this is an oil bubble. There hasn’t been as significant a change in oil consumption as there has been a spike in prices (China does NOT make up 1/2 of the world’s oil consumption). Assuming we agree on that, the fith wave up for oil prices is not unreasonable but at the same time not sustainable. I would say, again, that by 2010 we will see oil prices begin to fall.

What I implied with my post about bicycles is that people who dont need cars are still driving them out of laziness.

If you are driving solo, carrying yourself and perhaps a briefcase worth of stuff to work, and traveling less than ten miles, then you can afford to ride a bike and wear a backpack. ten miles can be covered in about forty minutes if you are traveling at an average clip. sounds like a long time, but its really not.

Of course there are people who need to drive trucks in order to carry the tools they need to complete the job. they are completely justified.

My beef is with those people who demonstrate no such need yet refuse to take the bus, train, subway, or ride a bike simply because it is more convienient to drive.

“The fools that drive huge four-wheel drive vehicles (Hummers, Suburbans, etc.), that will never see off-road are the greatest problem.
Need has been replaced with want.”

Rocky, you are absolutely right, and that was the issue I was trying to address. Unfortunately, if the government tried to regulate the sale and use of excessive vehicles, the consumer rights groups and even the populace itself would rebel.

People have grown used to having whatever they want, fueling the need for vastly wasteful institutions that someday will need to be changed. The longer we wait, the more painful it will be.

So that’s a 10% cut on our consumption rate right there.

Except that Congress is going to raise the reserve from 700 million to 1 billion before then.

But you’re missing the point. Production of cheap, easily extracted oil will peak in the next few years - if it hasn’t already. Prices will go up because oil will become more scarce.

You see it as a ploy by the oil industry to make more money. I’m saying that there just isn’t enough oil in the world for all who want it - and there will be less and less oil as we slide down the far side of Hubbert’s curve.

“You see it as a ploy by the oil industry to make more money. I’m saying that there just isn’t enough oil in the world for all who want it”

I guess we’ll have to wait and see who’s right… Your Hubbert Curve vs. my Elliot wave. To the victor go the spoils :P

Zeek, Elliot’s wave may (or may not) be good for forecasting the stock market, but it certainly doesn’t apply to a commodity with a finite lifecycle. Cheap oil will run out, the stock market will forever wave.

AP, the Elliot wave works for any bubble market situation really… And I would say that this is currently an oil bubble… Shhhh!

Except that when it pops, that will be the end of cheap oil. The price will never significantly decrease. Oil prices will forever trend upward by whatever measure you want to apply as we come to the end of cheap oil.

Fathers and sons forever!