185. SHOULD WE MITIGATE EARLY BECAUSE THE MARKET IS MYOPIC?
In the comments we were discussing early mitigation. Anon wrote:
Roland, from your remarks I assume you live in the inner urban area of Sydney? Do you think that the scenario you describe will be practical for the satellite areas of Sydney... say western suburbs, central coast etc.? Many people live in areas where walking to shops etc. is not possible. [...]To this I replied:
I believe that a serious campaign must be launched immediately in Sydney to extend and consolidate public transport based on PO awareness. We can drop the doom histrionics and stick with the certain transport crisis, this is exactly the message Kjell Akelett described to me over a beer here in Sydney a couple of weekends ago. I also agree with Bob Hirsch, measures must be implemented BEFORE peak, a market based solution will be devastating.
anon, there is a risk here that Hirsch himself points out -- the risk of mitigating too early (see 2. and 15. in Appendix VI of the Hirsch report). For example, what if you build a new mass transit system to service the outskirts of Sydney, but nobody uses it for years and years because the price of oil doesn't rise enough to justify switching? It's the risk of wasting a big pile of money (private or public) on a fiasco people won't use. That's what happened with Jimmy Carter's "synfuels" program in the 70s and 80s. It turned out to be a porkfest where the oil companies burned through billions of dollars of taxpayer money and produced nothing of any value.I think people are still greatly underestimating the main risk of early mitigation: unrestrained pork. For example, consider this ironic development:
In Spain, Manuel Perez Becerra, secretary general of the Andalusian Beet Growers' Association, said that with current technology more energy is required to produce a litre of alcohol from beet than can be extracted from it once made.What Mr. Becerra is saying is this: the EROEI of beet sugar ethanol is less than 1, therefore his industry needs taxpayer money. Clearly this is peak oil heresy of the rankest sort. If a process returns less energy than it consumes, then (according to peak oil theory) it shouldn't be done at all, let alone be subsidized by the government. But the funny part is that Mr. Becerra will fight back with peak oil theory. We can't wait for the market to act because it will be too late. We need to start mitigating the inevitable liquid fuels crisis now. That's why my industry needs your tax money. Better safe than sorry.
Without tax breaks or subsidies of some sort it will not be viable to produce ethanol from sugar beet, he added.Source
The problem is this: If you step outside the market framework, you are talking about a big pile of taxpayer money, and all the snake oil salemen and subsidy feeders lining up to get a piece. Who get's the money? The corn ethanol lobby? The beet lobby? The coal lobby? The refining lobby?
You could argue that refiners aren't investing to expand refinery capacity because they're all waiting for a handout. All they have to do is sit on their butts, watch rising gas prices put the squeeze on, and keep stressing that they really can't get the job done without assistance from the government:
Bob Slaughter, the president of the National Petrochemical and Refiners Association, told a House committee last week that Congress could expand tax incentives included in the energy bill as a way to encourage growth of the refining industry.SourceIf the government is going to provide the funds because the market is too myopic, who will decide which projects get the funds? And how will they decide? I'd be interested in hearing serious answers to those questions.
-- by JD
posted by JD @ 6:00 PM
22 comments
22 Comments:
"What Mr. Becerra is saying is this: the EROEI of beet sugar ethanol is less than 1, therefore his industry needs taxpayer money. Clearly this is peak oil heresy of the rankest sort."
I don't think that this doomsaying is a postive turn of events. And suggesting that the BIG GOVERNEMTN can bail us out is an insult. I think that beets are here to stay.
I don't agree. EROEI is not a measure of inherent beet energy. There are probably several memes that would reduce this input into its constituent components and prove once and for all that the resulting output is positive.
I agree with everything above. I think more time needs to be spent discussing political tactics i.e. how can the current system be manipulated to make some of these things happen. There is a little bit of this out there already. We should be focussing on creating a drumbeat focussed on one idea - energy security. The Bush propaganda machine on terrorism and Iraq will help this. The daily news cycle of suicide bombings will support it. Why are you placing your future in the hands of the Saudi royal family? What happens if a Bin Laden clone stages a coup? The only way to get the masses to move is through fear, that's why Bush used WMD has his primary propaganda.
It's fine to say we need to change zoning laws and stop supporting the highway system. You have zero chance of accomplishing this against the rich entrenched interesting protecting these subsidies and programs. We need a realistic strategy.
By the way, I think the most immediate need is for a gas tax which pegs gas at say $3 a gallon, independent of market fluctuations (works as long as market price stays under $3 dollars).
If peak oilers want to be effective they have to organize and focus. I say focus on an energy security scare campaign for an increased gasoline tax.
Cheers, Chris L. I couldn't have put it better myself. While I think it's important to deal with both supply and demand sides of the energy equation, I think that a disproportionate amount of effort and money has been devoted to the former. It seems to be that there are lots of relatively easy ways to drastically reduce demand, while increasing supply is quite difficult. Unfortunately, this comes down to who is being considered in the decision making process: it's big business, and big business can't easily benefit from decreased demand as easily as they can from increased supply.
What if they decided to unsubsidize gas in the US, take the tax component out (so we pay less taxes) and put the full brunt of the externalities of gasoline into the price per gallon?
Meh I'm just thinking, I think 3 things need to be done when facing the peak oil issue.
1 - PERSONAL conservation: This is not pointless, you save money, get more excercise, and generally feel like a better person (whether or not it's warrented). All things considered if you can figure out how to live without your car (this doesn't mean you have to stop using it for the odd long trip etc, just figure out how to get down the essentials of your life without it, eg getting groceries, going to work, etc) you will do no worse than 99% of the rest of your country when peak finally arrives. Whether or not it will mean you get to keep your job while the entire economic system crumbles and people start eating each other is another matter best left to psychic phone line operators and conspiracy theorists.
1 - OTHER PEOPLE'S CONSERVATION: encourage your neighbors to conserve, I laugh when my neighbors complain about high NG costs when they waste it so readily. Inform them what you do differently. You won't save the world, but you're neighbors will appreciate it. Write your congressman about the issue, don't cite LATOC or they'll end up spewing a bunch of bad "facts" (such as the precious metal requirement of a hydrogen fuel cell requiring all the platinum on earth, or the suggestion that oil = food, when NG is used for fertilizer and coal can be). I'd send them the Hirsh report and a few other sources, still negative but negativity will spur action hopefully?
3 - MITIGATION: You can't do anything about this, showing your support by riding the bus is about all you can do as well as including mitigation techniques in your letter to your congressman. We won't see any serious mitigation until the first few oil shocks, whether that is good or bad is going to be up to history.
this thing needs an edit button
Well, some people think France is better prepared for PO because its nuclear power.
Nuclear power in France was started by and belongs to the French State.
I fact, which company would start to build a nuclear plant if the government didn´t back up its efforts?
"SHOULD WE MITIGATE EARLY BECAUSE THE MARKET IS MYOPIC?"
Ha ha ha. According to the Hirsh report (commissioned and paid for by your Department of Energy) we are too late. This type of doomeristic meme is sickening. I just wonder whatever happened to an open marketplace of free ideas in a healthy economic paradign of positive feedback? There is no way in hell that we need Aunt Fuddie Sammie meddling in our business! Just as soon as the oil runs out all sorts of imaginative enterprises will spring up and come to bat that will make the future as exciting as yesterday
I was the original anon that inspired this subject...
Robert L. Hirsch actually had this to say on the subject: "It is possible that peaking may not occur for a decade or more, but it is also possible that peaking may be occurring right now. We will not know for certain until after the fact. The world is thus faced with a daunting risk management problem. On the one hand, if peaking is decades away, massive mitigation initiated soon would be premature. On the other hand, if peaking is imminent, failure to quickly initiate mitigation will impose large nearterm economic and social costs on the world. The two risks are asymmetric:
• Mitigation initiated prematurely would result in a relatively modest misallocation of resources.
• Failure to initiate timely mitigation with an appropriate lead-time is certain to result in very severe economic consequences."
JD, can you elaborate on why you think this is incorrect?
The tools to implement and then market public transport infrastructure are waiting...
Chris L, when somebody such as Mr Hirsch has to prepare a report on such a contentious subject as peak oil, the politics of the situation will necessitate a very careful "establishment" friendly framework... ya catchin' my drift... I'll give you another example, take a look at the way the IEA shifted its position on peak oil recently. They went from a "she'll be right mate" standing to one that admitted peak oil, BUT they chose a timeline scenario that leaves the problem outside of the political timespan of current bureaucrats and elected officals. I'm guessing Hirsch et al. had political concerns on mind when they were preparing the report. The oil and motor industry lobbies spring to mind...
Address it for the interim within the context of a hedging stategy. For example, energy utilities buying land for perspective future nuclear plants. Don't build the plant, but take care of the siting, certification, NIMBY, etc. issues a priori. The point is to maintain as much flexibility as possible. How much? That depends on an analysis of the possible future scenario and their potential costs/payoffs. This is the Real Options paradigm and it is gaining ground in system/policy design.
Peaking will happen within the next 80 years and not before. Revolutionary progress just announced reveals that the supply side will be augmented by brand new technology. Those neglected over-viscous residual oil fields will be harvested after all, those shale oil and oil sands reserves will be harvested efficiently and ecologically after all. This is very bad news for doomerheads but the world is not made for them.
Long before 80 years we will kneed those regulated over-viscious resident oil fields to be harvested but won't be able to because of BIG GOVERNMENT on our backs. Then we can grow and harvest shale oil and oil sands trees as much as we need for things to be just fine, thankyou.
" Those neglected over-viscous residual oil fields will be harvested after all, those shale oil and oil sands reserves will be harvested efficiently and ecologically after all."
Absolute unmitigated rubbish. The problem of peaking is that NEW fields must be constantly brought online to OFFSET depletion in existing fields that are post peak. It is a very simple concept yet surprisingly few people really get it.
What is this 'revolutionary progress' in technology...
if you're talking about the new in-situ processes, you're dreaming. Even the most optimistic forecasts for these technologies show they will not produce enough oil to offset even current depletion rates (around 4mbd, I believe).
Oil sands, oil shale are extremely dubious mitigation strategies. The price of recovering fuel from these sources will rise with the price of oil and NG. EOR (enhanced oil recovery) will not effect the timing of the world peak, It is a post peak mitigation strategy because it does not prevent falling production, it just extends the ultimate that can be recovered.
Type III depletion can only be counteracted by NEW OIL REGIONS. We are not finding them!
Note: the previous is in no way meant to be advocating doomerish sentiment or hysterical chickenlittleism.
The two risks are asymmetric:
• Mitigation initiated prematurely would result in a relatively modest misallocation of resources.
• Failure to initiate timely mitigation with an appropriate lead-time is certain to result in very severe economic consequences."
JD, can you elaborate on why you think this is incorrect?
The problem is not whether the point is correct or incorrect. The problem is that, if we assume Hirsch is correct, then you are giving a blank check to entrenched pork interests.
For example, Mr. Becerra will surely love Hirsch's argument: Providing subsidies to the beet industry will, at worst, be a minor misallocation of funds, and is certainly preferable to not providing those subsidies because the risks of not helping the beet industry are so much greater.
Chris L paints a good picture of where subsidies should go, but I am damn sure that that's not where they are going to go. They are going to go to people like Mr. Becerra. So isn't it more productive to oppose Hirsch's logic? At least that way my tax money won't go to propping up the automobile culture which I don't participate in.
IMO, severe economic dislocations are part of the solution. If you agree with Hirsch that severe economic problems must be avoided at all costs, then you're playing into the hands of the status quo. We have to continue car culture because the economy is dependent on it. We have to drill ANWR (for example) because the economy demands it etc.
I think oil dependence is an addiction, and there is no way we are going to kick it without withdrawal symptoms. If avoiding pain is the top priority, quitting is impossible. Economic dislocations are something we should welcome -- as the first step toward healing. It's a little like the last tree on Easter Island. Should we cut it down? Well, we pretty much have to if we want to avoid severe economic consequences, because the economy of the island is based on Moai, and we need to use trees to erect and move Moai. Do you see where I'm coming from?
Address it for the interim within the context of a hedging stategy.
Hedging is a great idea, but are we talking about private sector hedging, or hedging with public money? If we're talking about private sector hedging, do the electrical utilities have enough money to invest for both the usual infrastructure, and the just-in-case infrastructure? If we're talking about hedging with public money, then who decides where that money goes? The oil/automobile industry is gigantic, well-funded, and deeply entrenched in the subsidy process. They're not going to support subsidies for the electric industry. That might just be a trojan horse, to promote trains/EVs and threaten their market stranglehold.
Here's the key question: If you support early subsidies, how are you going to stop the status quo (oil, cars, refiners etc.) from sucking all the subsidies down? People love their cars, and the people doling out the subsidies (politicians) will, of necessity, cater to that. It's like political ju-jitsu. If you loudly support early government intervention, your opponent (the oil/car lobby, Dick Cheney etc.) will pick up your rhetoric, and us it against you. "We need subsidies, or else we will be facing economic chaos. One out of six jobs in this country depends on the auto industry."
"The problem is that, if we assume Hirsch is correct, then you are giving a blank check to entrenched pork interests."
So by your reasoning then, if we assume Newton is correct the we are giving a blank check to entrenched apple interests? And if we we assume Einstein is correct then we are giving a blank check to entrenched light bulb interests?
Excuse me! But I don't see how sleeping with dogs automatically means we are going to get chiggers. Some of us dust regularly with flea powder.
JD you said, "Economic dislocations are something we should welcome -- as the first step toward healing. It's a little like the last tree on Easter Island. Should we cut it down? Well, we pretty much have to if we want to avoid severe economic consequences, because the economy of the island is based on Moai, and we need to use trees to erect and move Moai. Do you see where I'm coming from?"
Yeah I see where you are coming from. You sound just like any heartless economist who would trivialize depression, economic dislocations and other human pain as "demand destruction." Well from your obvious ivory tower I can see why.
You sound just like any heartless economist who would trivialize depression, economic dislocations and other human pain as "demand destruction."
If you want to subsidize the auto/road/oil/CTL/GTL business, and the whole chain of bottom feeders dependent on it, do it with your tax money, not mine. I don't drive. In fact, you car driving folks owe me money, because you're stinking up the air I breathe.
Here's an idea: internalize the externality. Connect the tail pipe directly to the inside of the car. You fart it out, you breathe it.
JD, I get where you are coming from...
The solutions to peak oil and environmental problems have-as you and Chris L mentioned- massive entrenched vested interests to overcome.
I also agree with you guys on mitigation. Although the Hirsch Report appears to focus on supply side solutions, it states that demand side solutions must also play a role. This leaves open a political target that sensible peakniks like yourselves must attack.
However, early government driven demand reduction solutions will be a necessity. Let the market punish heavy users, but create a solution with mass transit at the same time. Perth is a good example of a city implementing demand reduction strategies both for fuel and water use.
PO is a political and economic battle. I agree that crises are inevitable in the renewal process. How else can the existing vested interests be attacked?
You sound just like any heartless economist who would trivialize depression, economic dislocations and other human pain as "demand destruction."
The alternative is greater pain. We're going to have to go into withdrawal SOMETIME.
wow JD does not drive. But someone drives your food to you. Or do you grow your own? Nah. Much too doomeristic
so what is with the magic letters that we have to type in. Are they some kind of security code?
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