We all know that even in the United States the guarantee of free speech has limits. The Supreme Court long ago said that no one has the right to endanger his or her fellow citizens by, for instance, falsely yelling "fire" in a crowded theater. Such acts of speech are said to pose "a clear and present danger." James Hansen, perhaps the most respected climate scientist on the planet, thinks that the fossil fuel lobby and its disinformation campaign about global warming may pose a similar threat.
Hansen, speaking before the U. S. Congress last week, said that the CEOs of fossil fuel companies should be tried for "high crimes against humanity and nature." He said they deserve this fate because they know full well that continued burning of fossil fuels threatens the stability of the climate and with it civilization. Yet, they purposely confuse the public to forestall the day when limits will be placed on carbon emissions from such fuels.
(A later decision by the U. S. Supreme Court narrowed the test for prohibited speech to that which incites or is likely to incite "imminent lawless action," and so there is absolutely no danger that fossil fuel industry executives will ever be prosecuted for what is now legally regarded as protected political speech.)
Why does Hansen speak in such seemingly hyperbolic language? He does so because his own research suggests that the highest advisable level of carbon dioxide in the atmosphere is 350 ppm. The current level is already 383 ppm and growing by 2 ppm each year. We have passed a critical point in the global warming saga, and we must now retrace our steps. Hansen therefore believes we must actually find ways to reduce not the growth of emissions, but to reduce emissions altogether to a point that will allow greenhouse gas levels in the atmosphere to fall.
This he says must happen quickly, and the reductions must be drastic or we will face catastrophic consequences, ones that will become unstoppable long before they actually occur because of the delayed effects of carbon emissions. These consequences include worsening floods and droughts, much higher shorelines, massive extinction of species, possible rapid climate shifts in parts of the world, and other problems that will threaten the food, water and general well-being of all humanity.
But public discourse on global warming is being muddied. Here in the United States it is a matter of faith that the cure for faulty free speech is more free speech of the factually correct kind. It is the only response truly anticipated by the U. S. Constitution. There is unfortunately the slight problem that the fossil fuel industry has huge sums of money with which to pursue its freedom of speech in the media. There is another problem in the case of global warming, namely urgency.
For comparison let me offer a brief recap of an historically important issue in American history. It is a great injustice and disappointment that women did not obtain the right to vote after the Civil War along with freed male slaves. It was a disappointment because so many women had worked so hard for abolition. It took another half century of advocacy before they were finally granted that right. While no one should minimize the struggle for woman's suffrage in the United States, it was a struggle--however painful and filled with injustice--that could wait for the principles of free speech to be vindicated without endangering all of humanity. But the amplified free speech of the fossil fuel industry's disinformation campaign does indeed threaten all of humanity. And, the outcome of the struggle between the forces of change and reaction cannot wait 50 years to be resolved on the side of right. By then all the worst damage will be inevitable.
There are so many other issues which fit into this category as well: the depletion of fisheries; the destruction of soil; the peaking of oil; the catastrophic loss of biodiversity due to logging, modern industrial agriculture and urban development; the poisoning of the water, air and food supply with toxic chemicals; and the depletion of precious fresh water. Most of these issues are interlinked with global warming and with each other to one degree or another.
As the clock ticks down to tipping points for each of these problems, will the cherished principles of an open society be challenged? Will those principles continue to be used to delay or water down action and thereby threaten the lives and livelihoods of billions? Or will those principles be modified in some way that allows free speech, but limits the amplified kind that huge sums of money can buy in the modern media?
If we had 50 years to debate all these problems, I am certain that the side espousing sustainability would win. Given the urgency with which I believe we must address these issues, is it an acceptable outcome to be able to say "I told you so" at some future date as modern society crumbles in the face of these challenges?
I don't claim that the issue of free speech and the enemies of sustainability is an easy one for those of us who embrace the notion of an open society, that is, a society where no one is presumed to have a monopoly on truth and where we work together sometimes even through the violent clash of opinions to advance the search for truth. What the ecological and resource challenges we face now call into question is whether an open society is capable of making the kind of change we need to make as quickly as we need to make it.
One could argue that ours is not an open society, but rather one dominated by corporate power and that it is corporate power that must be reined in as part of the process of moving toward a sustainable society. But once again we are faced with the time problem. How long will it take for the normal processes of a nominally open society to bring corporate power to heel? 10, 20, 50 years?
The path for most people interested in creating a sustainable society is to start creating one. But will the powers which are working against such a society make those efforts moot? And, if that is the case, with so much at stake, is there a third way of addressing free speech that preserves the basic principles of an open and democratic society, but still allows for those who have the evidence and the logic on their side to prevail in time to avoid the worst?
So far, I have yet to find such a way that does not destroy the very open society I seek to preserve.
Sunday, June 29, 2008
Thursday, June 26, 2008
Move people, not metal
My latest column on Scitizen entitled "Move People, Not Metal" has now been posted. Here is the teaser:
Our current transportation system uses enormous amounts of energy primarily to move the weight of vehicles which transport passengers and freight. Bill James thinks we can improve transportation energy efficiency by an order of magnitude if we focus on moving the weight of passengers and freight instead of the weight of the vehicles that carry them....Read more
Sunday, June 22, 2008
Summer Solstice Break - No Post This Week, Common Dreams Accepts a Piece
I'm taking a short break from posting here and plan to post again Sunday, June 29. I expect my column on Scitizen to appear shortly and will provide a synopsis and link as I usually do. Also, yesterday Common Dreams accepted a slightly condensed and retitled version of what I posted here last week.
Sunday, June 15, 2008
Clever and deceptive: API's new ads
The high price of oil has given birth to a thousand solutions. They include such fantasies such as running cars on water and perpetual motion machines. And, they include sensible ideas for quickly cutting the consumption of oil and moving to electricity to power most of our transportation fleet. The American Petroleum Institute (API), the oil and gas industry's lobbying arm, has its own proposals, of course, and not surprisingly they include opening up protected public lands and U. S. coastal areas to drilling.
That API's ideas might be more appropriately grouped with fantasy solutions is illustrated by the organization's own recent television advertising campaign. The campaign includes four separate ads. Two of the ads offer a defense of oil industry profits. One touts the broad ownership of oil company shares by pension funds and implies that viewers' pensions might very well be benefitting from the superb financial performance of the energy industry. The other ad suggests that oil companies really don't make that much money when compared to other industries in America. This would presumably make oil companies poor investments for one's pension fund. But no matter, to avoid confusion the two commercials are probably never scheduled to run back to back.
The remaining two spots deal with the energy crisis. In one a professionally-dressed woman tells us that "we have substantial oil and natural gas resources right here," as she walks across a map of the lower 48 states. "Enough to power 60 million cars and heat 160 million households for 60 years," she continues. The reason for her optimism is that "with advanced technology and smart policies, together we can secure America's energy future."
It's hard to put footnotes into a 30-second spot though API had no trouble footnoting the U. S. Energy Information Agency and the International Energy Agency when it wanted to make the point that 45 percent more oil and gas will be needed by 2030. Let me propose some of my own footnotes. Here is the full text of the ad with my footnotes added below:
(2) Includes all offshore areas such as Cape Cod, Hilton Head, Miami Beach, the Gulf of Mexico and the California, Oregon and Washington coasts. Also included are all wilderness areas of Alaska (not pictured).
(3) 60 million cars sounds like a lot, but that represents only a fraction of the more than 250 million highway vehicles currently registered in the United States.
(4) The "60 years" claim is theoretical (and perhaps mere fantasy). See footnote 1. Also, powering cars and heating homes assumes that the highest and best use of oil and natural gas is to burn them notwithstanding their high value as feedstocks for thousands of chemicals and others products that are critical to the modern world.
(5) "Smart policies" is shorthand for opening up all public lands and offshore areas in the United States to drilling.
(6) This doesn't mean energy independence. The U. S. will still be importing more than half its oil by 2030 according to the U. S. Energy Information Administration. We won't really be secure.
That API's ideas might be more appropriately grouped with fantasy solutions is illustrated by the organization's own recent television advertising campaign. The campaign includes four separate ads. Two of the ads offer a defense of oil industry profits. One touts the broad ownership of oil company shares by pension funds and implies that viewers' pensions might very well be benefitting from the superb financial performance of the energy industry. The other ad suggests that oil companies really don't make that much money when compared to other industries in America. This would presumably make oil companies poor investments for one's pension fund. But no matter, to avoid confusion the two commercials are probably never scheduled to run back to back.
The remaining two spots deal with the energy crisis. In one a professionally-dressed woman tells us that "we have substantial oil and natural gas resources right here," as she walks across a map of the lower 48 states. "Enough to power 60 million cars and heat 160 million households for 60 years," she continues. The reason for her optimism is that "with advanced technology and smart policies, together we can secure America's energy future."
It's hard to put footnotes into a 30-second spot though API had no trouble footnoting the U. S. Energy Information Agency and the International Energy Agency when it wanted to make the point that 45 percent more oil and gas will be needed by 2030. Let me propose some of my own footnotes. Here is the full text of the ad with my footnotes added below:
Oil and natural gas powered the past. But the future? Fact is a growing world will require more, 45 percent more by 2030 along with greatly expanding alternatives. We have substantial oil and natural gas resources1 right here [NARRATOR STROLLS OVER MAP OF THE LOWER 48 STATES].2 Enough to power 60 million cars3 and heat 160 million households for 60 years.4 With advanced technology and smart policies,5 together we can secure America's energy future.6 Log on to learn more.(1) Only of fraction of those oil and natural gas resources are ever likely to be recovered for both economic and technical reasons. There is no guarantee that those that we do recover will come out at the rate we want them to.
(2) Includes all offshore areas such as Cape Cod, Hilton Head, Miami Beach, the Gulf of Mexico and the California, Oregon and Washington coasts. Also included are all wilderness areas of Alaska (not pictured).
(3) 60 million cars sounds like a lot, but that represents only a fraction of the more than 250 million highway vehicles currently registered in the United States.
(4) The "60 years" claim is theoretical (and perhaps mere fantasy). See footnote 1. Also, powering cars and heating homes assumes that the highest and best use of oil and natural gas is to burn them notwithstanding their high value as feedstocks for thousands of chemicals and others products that are critical to the modern world.
(5) "Smart policies" is shorthand for opening up all public lands and offshore areas in the United States to drilling.
(6) This doesn't mean energy independence. The U. S. will still be importing more than half its oil by 2030 according to the U. S. Energy Information Administration. We won't really be secure.
In fact, by suggesting that domestic oil resources could power 60 million cars, API is admitting that energy independence is a false hope even as they confuse viewers with the notion that we Americans will be more secure.
Of course, if all my footnotes were required, say, in the manner of warning messages included in prescription drug ads, viewers might be just as queasy about API's plan for America's energy future as they ought to be about some of the drugs they see advertised on television.
What might make viewers even more queasy is a second API ad which claims that we get two-thirds of our oil and natural gas from North America. This is a rough but reasonable estimate of the heat value of the oil and natural gas combined. But, once again we find ourselves watching API's spokeswoman walking across a map of the lower 48 states as she delivers her message. Perhaps Canada and Mexico from whom we import significant quantities natural gas and oil are too large to represent on the map. Or perhaps it would be a little impolitic to treat Canadian and Mexican oil and natural gas as if it belonged to the United States. Better to leave both countries off the map and hope that nobody notices. People might begin to think inconvenient thoughts such as, "Why should the Canadians and the Mexicans simply sell us all the oil and natural gas we want? Maybe they'll need it for themselves. Oh, and by the way, didn't I hear that Mexico's oil production is declining and Canada's natural gas production is flat?"
Those who ignore the borders between Canada and the United States and the United States and Mexico must not like the inconvenient facts of sovereignty. Jerome a Paris, writing on The Oil Drum: Europe put it this way in a recent article:
One is to think that political obstacles are minor, i.e., that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even U.S. politicians) to open their door or the spigot. This perpetuates the narrative that other countries [on] the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary.
Two years ago some readers balked at my idea that the United States and Canada could enter a period of bitter tension (although probably not open conflict) as energy resources, especially natural gas, become scarce in North America. But can such an idea be far from the mark when API is telling us that we can get whatever energy resources we want from Canada and Mexico?
One of the most important facts which API omits from its television ads, but does mention obliquely in a policy piece on its website is that the vast majority of the resources to which they refer are "undiscovered." The group isn't even talking about known deposits waiting to be assessed for their potential. API states that "federal lands hold an estimated 656 trillion cubic feet of recoverable natural gas" and "an estimated 112 billion barrels of recoverable oil." This probably refers to what the government calls technically recoverable. Rocks from the Moon are technically recoverable, but they are very expensive and difficult to get. And so, none of this tells us whether this undiscovered, technically recoverable oil and gas will ever be found and tapped.
There is likely to be some economically recoverable oil and natural gas on federal lands. But is it wise to make public policy on such an important issue as energy based on estimates of oil and natural gas that have yet to be discovered? The Bakken Formation in North Dakota, Montana and Saskatchewan has been touted as having 3 to 4 billion barrels of technically recoverable oil reserves. But it seems doubtful that we will ever get that much oil out of it. And, even if we did, it is worth remembering that at the current rate of consumption, these barrels would last the world somewhere between 36 and 48 days (12 days for each billion barrels).
In this environment of high oil and natural gas prices, those who have a vested interest in drilling will naturally lobby for the right to do so. This really shouldn't strike anyone as strange. What we should not do is base our energy policy on the outlandish pronouncements of industry players about the success they expect.
Sunday, June 08, 2008
Tinkering our way to sustainability
When we think about the scope of the ecological challenges we face--peak oil, climate change, soil degradation, water depletion and species loss--we often think of responses big enough to match them. We might ponder large, national or international crash programs for the deployment of alternative energy; for the conservation of energy, water and habitat; and for the spread of organic agriculture and gardening. We might also think of a global agreement to slash greenhouse gas emissions deeply and quickly. But, the larger the responses one imagines, the more improbable their implementation seems. Governments are moving only slowly or sometimes not at all in the direction of sustainability though some corporate efforts are moving much faster.
In an age of gigantic government and corporate research projects, it is easy to lose sight of the fact that the majority of human technical and even social progress has been made through trial and error, in other words, through tinkering. Unfortunately, tinkering has been given a bad name by the dictionary. "To tinker" is variously defined as 1) "to busy oneself with a thing without useful results," 2) "to work unskillfully or clumsily at anything," and 3) "to repair in an unskillful, clumsy, or makeshift way." But there is a more neutral definition as well: "To make unskilled or experimental efforts at repair."
It is tinkering of the last sort, some of it highly skilled actually, that was much on display at the International Conference on Peak Oil and Climate Change held recently in Grand Rapids, Michigan. A few examples will serve to illustrate:
In an age of gigantic government and corporate research projects, it is easy to lose sight of the fact that the majority of human technical and even social progress has been made through trial and error, in other words, through tinkering. Unfortunately, tinkering has been given a bad name by the dictionary. "To tinker" is variously defined as 1) "to busy oneself with a thing without useful results," 2) "to work unskillfully or clumsily at anything," and 3) "to repair in an unskillful, clumsy, or makeshift way." But there is a more neutral definition as well: "To make unskilled or experimental efforts at repair."
It is tinkering of the last sort, some of it highly skilled actually, that was much on display at the International Conference on Peak Oil and Climate Change held recently in Grand Rapids, Michigan. A few examples will serve to illustrate:
- An Internet-based system called Bright Neighbor designed by Portland, Oregon resident Randy White allows people living in a neighborhood, village or town to coordinate simple things such as ridesharing or tool lending and more complex tasks such as planting a community or individual garden.
- A system of public transportation referred to as JPods seems to take its inspiration from both the gondola and the monorail and could create a cheap alternative to building light rail lines. In addition, JPods can be designed to run on solar power generated by panels mounted above the overhead track. JPods founder Bill James says he is close to lining up the financing for the first JPod system at the Mall of America in Bloomington, Minnesota.
- Permaculture and urban gardening are already well-established practices. But the idea of turning every large suburban lawn into a permaculture garden and many of the empty spaces and backyards in cities into urban gardens is a task that has barely begun. It has the potential, however, to provide a huge increase in the world's food supply in ways that are healthy for people and soil and also easy on the climate since transportation needs are minimized.
- Community currencies, which only circulate locally, offer an opportunity to keep money flowing within the community where it is earned. That benefits all who live there. Such a currency also offers a method of exchange the value of which is not determined by international currency traders, but by the hard work and ingenuity of community residents.
None of these ideas by themselves will create a sustainable society. But each can be tested and adapted to the locale where the testing takes place. Allowing everyone who wants to to become an experiment station speeds greatly the adoption of new practices and technologies. In this way, such tinkering may work better and faster than any grand government plan to spread sustainable practices and technology. The secret weapon, of course, is modern communications, especially the Internet. The success or failure of promising sustainability projects can be transmitted almost instantly across the world, and the details for implementing new practices can move just as fast.
It's likely the scale for most successful sustainability ideas will be no larger than that of the town or region. This explains why tinkering could be a more successful sustainability strategy than any centralized research. If thousands of minds toiling under a variety of conditions in many places are working on a problem, it just might get solved faster and more satisfactorily than if several hundred or thousand are working on it at a research institute or corporate research department away from where it will be implemented.
Still, it is hard to see how a problem such as global warming might be tackled without broad international efforts and regulation. The tinkerer might be able to come up with ways for making deep reductions in carbon emissions affordably. But, he or she won't have any market for those methods without government regulations forcing the curtailment of greenhouse gas emissions. Who is going to put up wind generators and solar panels at the rate necessary to displace fossil fuel plants unless the government makes it profitable and perhaps even mandatory to do so?
While we struggle to create a political climate more friendly to sustainability practices in the face of lethargic and often unresponsive political systems, it is the tinkerers who have stolen the march and are rapidly creating the needed platforms for social, economic, technical and even political progress. Let a thousand flowers bloom. One second thought, why not millions.
Sunday, June 01, 2008
The end of money?
It is a commonplace among hard money advocates that the U. S. dollar and all other fiat currencies are doomed to become worthless. History seems to be on their side. There is a long list of currencies based on nothing other than the say-so of a government that have indeed become worthless or near worthless. Perhaps the most often cited example is that of the mark during the great German hyperinflation. From the beginning of 1922 until the currency was replaced in November 1923 inflation was nearly 2 trillion percent.
Many Latin American currencies suffered similar fates during the latter half of 20th century. Bolivia's inflation rate peaked at 11,750 percent in 1985. Peru's topped out in 1990 at almost 7,500 percent. Brazil's hyperinflation reached nearly 3,000 percent in the same year.
Today's poster child for hyperinflation is Zimbabwe where the inflation rate is a moving target last calculated by independent analysts to be running at 1 million percent annually. Oddly, Zimbabwe's stock market was the best performing stock market in the world in 2007 on a percentage basis. And, therein lies an important story, one that tells us what people do when they begin to lose faith in the currency of their country.
In this case, one of the few options beyond bank deposits available to Zimbabweans with savings is the stock market. Controls on exchanging the local currency for foreign currency have made it exceedingly difficult for most people to move much of their savings or current paychecks into more stable currencies. With the stock market practically the only outlet for those with savings, Zimbabweans pushed up stocks by more than 300,000 percent in 2007, handily beating inflation of 24,000 percent. The point is that it didn't pay to keep cash in the bank or anywhere else for that matter. The stock market at least offered the opportunity to invest in businesses with tangible assets that appreciate with inflation.
On the North American continent another currency is thought by some to be threatened by a similar kind of spiral. The woes of the U. S. dollar are well-known: persistent high trade deficits, high government deficits, and expansive monetary policy amidst a crash in housing prices. Add to this the possibility of a derivatives-driven financial crisis that might engulf the entire world economy. One economist believes the situation is so bad that a hyperinflation could visit the United States as early as 2010.
The first signs of worry at the political level have come in an indirect way. Congressional leaders have been pointing the finger at speculators for rising commodity prices, especially oil. Sen. Joe Lieberman has proposed legislation that would limit what large institutional investors can put into the commodities markets.
Before we go any further, it is worth examining why those investors are moving so heavily into the commodities markets. First, there is the ongoing robust demand for commodities of all types, but especially metals, grain and oil and the apparent strain on supply. Fundamental factors are driving up prices, and rising prices attract speculation. Second, there is the pleasant fact that there is no president of copper or wheat or pork bellies. This stands in stark contrast to publicly traded companies whose top managers have all too often in recent years deceived and defrauded their investors. Those holding commodity investments are in most cases only taking the risk that the price of those commodities will go down (or up, if they invest on the short side). Outright fraud in the heavily regulated commodities futures markets is exceedingly rare and difficult to bring off. Third--and this is the most salient point for this discussion--most commodities are denominated in U. S. dollars. When the dollar declines in value against other currencies, commodities generally move up.
At the margin, institutional investors are voting with their money against the U. S. dollar and perhaps against currencies in general. Here it is worth noting the presumed purposes of a currency. First, as everyone knows, currency is a medium of exchange. It's easier and more convenient to use currency for exchange purposes than to try to barter for everything. Second, currency often serves as a store of value. While we wait to decide what to buy with our money, we usually put it in the bank where it earns interest. Sometimes we put it in for a long time in the form of a retirement account or a college savings plan. It is this second function of currency which is being called into question, not just in the United States, but worldwide, for the so-called speculation in commodities is now a worldwide phenomenon.
Governments naturally fear any loss of faith in their currencies. But rather than address the reasons behind that loss of faith, they typically focus on making it more difficult to move money out of one's home currency. That's because it is the easier of the two tasks. Hence, Mr. Lieberman's proposal. The proposal would make it more difficult for large institutional investors to move out of their home currency, in this case, the U. S. dollar, and into commodities.
While the U. S. imposes few restrictions now on the movement of money in and out of the country, the restrictions that are in place are usually defended as necessary for tracing money related to illegal drug and money laundering schemes or to terrorism. That's how Canadian officials are portraying their investigation into websites that allow individuals and companies to turn cash into "electronic" gold that can be used to pay those accepting payments in gold. There are legitimate reasons why governments want to know who transfers money where. But it seems all too likely that those legitimate reasons will be used as cover to extend restrictions on financial transfers out of one's home currency as more and more people attempt to protect their savings.
All of this would be of little import were the world about to return to an environment of low commodity prices, fiscal probity by governments and households, and noninflationary economic growth. Under such circumstances people would have little reason to flee their own currencies. But the trajectory of the world seems decidedly in the opposite direction. And, the focus on oil as a store of value by investment managers may only be the beginning.
The tremendous demand for basic materials needed by growing Asian countries continues to levitate prices of metals such as copper and zinc; foodstuffs such as soybeans and corn; and oil, of course. Oil prices may subside from their recent highs, but it seems unlikely that they will fall to levels even remotely close to those experienced at the beginning of this decade. Moreover, governments and their central banks seem determined to keep their economies growing with expansionist monetary and fiscal policies. More debt-funded spending and more money printing are the order of the day.
What frightens policymakers more than institutional investment managers moving money into commodities is the possibility that average citizens may attempt to flee their own currency. The avenues open to them, however, are considerably more narrow. Certainly, those who have brokerage accounts can call their brokers and ask that their money be shifted into commodity investments. But that is a small subset of the world. The rest of the population is left with turning their ready cash or small savings accounts into real things: jewelry, coins, precious metals, even sides of beef for storage in the deep freezer. But this part of the population usually doesn't realize what is happening to them until the cost-of-living has been rising for some time, and so they are the most vulnerable segment of society. When they do realize what is happening, their collective rush to the exits is so large that it can create a very high rate of inflation and even hyperinflation as real things are bid up and money is spent as quickly as it is earned.
By themselves high prices for energy, food and other essentials do not wreck a currency. But they do lower the standard of living for everyone except those whose incomes are directly tied to profits in the relevant sectors of the economy. What could wreck the world's currencies is a desire to offset the effects of the ever-tightening noose of resource scarcity caused by the approach of peak oil, the march of climate change, and the rapid industrialization of the Far East. The desire to offset these effects is already expressing itself through easy money policies and the financing of government expenditures through borrowing rather than taxation. As scarcities build, the temptation will be ever greater for governments to go down the path of high inflation. None of them will intend, of course, to cause hyperinflation. But it will be an ever-present danger.
Some say that if the U. S. dollar crashes and brings with it a hyperinflation, this will be the end of money as we know it. A few predict that the phenomenon will eventually be worldwide and result from the economic effects of peak oil and climate change. Even if these scenarios do occur, I doubt that it will be the end of money as we know it. The convenience of electronic payments and paper money are too great for people to give up. Even the poor Germans of the 1920s didn't want to give up that convenience. When the German government announced the introduction of a new currency to replace the worthless mark, people accepted it and used it right away.
Perhaps what will be different this time is that while most people will want the convenience that paper money and electronic payments provide, fewer of them will trust money as a store of value. What that means for individual commodities is anybody's guess. But, unless 1) we are miraculously delivered into a time of plenty by huge, unexpected discoveries of the basic building blocks of civilization or 2) people suddenly en masse embrace an abstemious lifestyle (or are forced to embrace it by a depression), it seems possible that one time-honored role of money, that is, as a store of value, will disappear for an extended period as the world comes to grips with resource limits that are only now beginning to convulse our societies.
Many Latin American currencies suffered similar fates during the latter half of 20th century. Bolivia's inflation rate peaked at 11,750 percent in 1985. Peru's topped out in 1990 at almost 7,500 percent. Brazil's hyperinflation reached nearly 3,000 percent in the same year.
Today's poster child for hyperinflation is Zimbabwe where the inflation rate is a moving target last calculated by independent analysts to be running at 1 million percent annually. Oddly, Zimbabwe's stock market was the best performing stock market in the world in 2007 on a percentage basis. And, therein lies an important story, one that tells us what people do when they begin to lose faith in the currency of their country.
In this case, one of the few options beyond bank deposits available to Zimbabweans with savings is the stock market. Controls on exchanging the local currency for foreign currency have made it exceedingly difficult for most people to move much of their savings or current paychecks into more stable currencies. With the stock market practically the only outlet for those with savings, Zimbabweans pushed up stocks by more than 300,000 percent in 2007, handily beating inflation of 24,000 percent. The point is that it didn't pay to keep cash in the bank or anywhere else for that matter. The stock market at least offered the opportunity to invest in businesses with tangible assets that appreciate with inflation.
On the North American continent another currency is thought by some to be threatened by a similar kind of spiral. The woes of the U. S. dollar are well-known: persistent high trade deficits, high government deficits, and expansive monetary policy amidst a crash in housing prices. Add to this the possibility of a derivatives-driven financial crisis that might engulf the entire world economy. One economist believes the situation is so bad that a hyperinflation could visit the United States as early as 2010.
The first signs of worry at the political level have come in an indirect way. Congressional leaders have been pointing the finger at speculators for rising commodity prices, especially oil. Sen. Joe Lieberman has proposed legislation that would limit what large institutional investors can put into the commodities markets.
Before we go any further, it is worth examining why those investors are moving so heavily into the commodities markets. First, there is the ongoing robust demand for commodities of all types, but especially metals, grain and oil and the apparent strain on supply. Fundamental factors are driving up prices, and rising prices attract speculation. Second, there is the pleasant fact that there is no president of copper or wheat or pork bellies. This stands in stark contrast to publicly traded companies whose top managers have all too often in recent years deceived and defrauded their investors. Those holding commodity investments are in most cases only taking the risk that the price of those commodities will go down (or up, if they invest on the short side). Outright fraud in the heavily regulated commodities futures markets is exceedingly rare and difficult to bring off. Third--and this is the most salient point for this discussion--most commodities are denominated in U. S. dollars. When the dollar declines in value against other currencies, commodities generally move up.
At the margin, institutional investors are voting with their money against the U. S. dollar and perhaps against currencies in general. Here it is worth noting the presumed purposes of a currency. First, as everyone knows, currency is a medium of exchange. It's easier and more convenient to use currency for exchange purposes than to try to barter for everything. Second, currency often serves as a store of value. While we wait to decide what to buy with our money, we usually put it in the bank where it earns interest. Sometimes we put it in for a long time in the form of a retirement account or a college savings plan. It is this second function of currency which is being called into question, not just in the United States, but worldwide, for the so-called speculation in commodities is now a worldwide phenomenon.
Governments naturally fear any loss of faith in their currencies. But rather than address the reasons behind that loss of faith, they typically focus on making it more difficult to move money out of one's home currency. That's because it is the easier of the two tasks. Hence, Mr. Lieberman's proposal. The proposal would make it more difficult for large institutional investors to move out of their home currency, in this case, the U. S. dollar, and into commodities.
While the U. S. imposes few restrictions now on the movement of money in and out of the country, the restrictions that are in place are usually defended as necessary for tracing money related to illegal drug and money laundering schemes or to terrorism. That's how Canadian officials are portraying their investigation into websites that allow individuals and companies to turn cash into "electronic" gold that can be used to pay those accepting payments in gold. There are legitimate reasons why governments want to know who transfers money where. But it seems all too likely that those legitimate reasons will be used as cover to extend restrictions on financial transfers out of one's home currency as more and more people attempt to protect their savings.
All of this would be of little import were the world about to return to an environment of low commodity prices, fiscal probity by governments and households, and noninflationary economic growth. Under such circumstances people would have little reason to flee their own currencies. But the trajectory of the world seems decidedly in the opposite direction. And, the focus on oil as a store of value by investment managers may only be the beginning.
The tremendous demand for basic materials needed by growing Asian countries continues to levitate prices of metals such as copper and zinc; foodstuffs such as soybeans and corn; and oil, of course. Oil prices may subside from their recent highs, but it seems unlikely that they will fall to levels even remotely close to those experienced at the beginning of this decade. Moreover, governments and their central banks seem determined to keep their economies growing with expansionist monetary and fiscal policies. More debt-funded spending and more money printing are the order of the day.
What frightens policymakers more than institutional investment managers moving money into commodities is the possibility that average citizens may attempt to flee their own currency. The avenues open to them, however, are considerably more narrow. Certainly, those who have brokerage accounts can call their brokers and ask that their money be shifted into commodity investments. But that is a small subset of the world. The rest of the population is left with turning their ready cash or small savings accounts into real things: jewelry, coins, precious metals, even sides of beef for storage in the deep freezer. But this part of the population usually doesn't realize what is happening to them until the cost-of-living has been rising for some time, and so they are the most vulnerable segment of society. When they do realize what is happening, their collective rush to the exits is so large that it can create a very high rate of inflation and even hyperinflation as real things are bid up and money is spent as quickly as it is earned.
By themselves high prices for energy, food and other essentials do not wreck a currency. But they do lower the standard of living for everyone except those whose incomes are directly tied to profits in the relevant sectors of the economy. What could wreck the world's currencies is a desire to offset the effects of the ever-tightening noose of resource scarcity caused by the approach of peak oil, the march of climate change, and the rapid industrialization of the Far East. The desire to offset these effects is already expressing itself through easy money policies and the financing of government expenditures through borrowing rather than taxation. As scarcities build, the temptation will be ever greater for governments to go down the path of high inflation. None of them will intend, of course, to cause hyperinflation. But it will be an ever-present danger.
Some say that if the U. S. dollar crashes and brings with it a hyperinflation, this will be the end of money as we know it. A few predict that the phenomenon will eventually be worldwide and result from the economic effects of peak oil and climate change. Even if these scenarios do occur, I doubt that it will be the end of money as we know it. The convenience of electronic payments and paper money are too great for people to give up. Even the poor Germans of the 1920s didn't want to give up that convenience. When the German government announced the introduction of a new currency to replace the worthless mark, people accepted it and used it right away.
Perhaps what will be different this time is that while most people will want the convenience that paper money and electronic payments provide, fewer of them will trust money as a store of value. What that means for individual commodities is anybody's guess. But, unless 1) we are miraculously delivered into a time of plenty by huge, unexpected discoveries of the basic building blocks of civilization or 2) people suddenly en masse embrace an abstemious lifestyle (or are forced to embrace it by a depression), it seems possible that one time-honored role of money, that is, as a store of value, will disappear for an extended period as the world comes to grips with resource limits that are only now beginning to convulse our societies.
Sunday, May 25, 2008
Will the rate-of-conversion problem derail alternative energy?
My latest column on Scitizen entitled "Will the rate-of-conversion problem derail alternative energy?" has now been posted. Here is the teaser:
Many alternative energy advocates claim that it is possible to replace our fossil fuel economy with one that runs on a combination of nuclear power and renewable energy from the wind, the sun and the farm. Credible scientific estimates suggest that they are right. However, those advocates often fail to consider one critical issue that could derail their plans, the rate-of-conversion problem. How long will it take to make such a transition? And, more importantly, how long do we have?....Read more
Above ground factors: The propaganda tool of choice
So many annoying things have been said recently about high oil prices that it would be hard to rate which one is the most annoying. Could the winner be found in statements made by members of Congress while they were busy vilifying major oil company executives during recent hearings? Could it be found among the predictable responses from those executives which emphasized opening more public lands and offshore areas to oil drilling? Perhaps speculators should be blamed, or better yet, a conspiracy of speculators. There is, of course, the staple argument that the fall of the dollar is driving oil prices higher even though the dollar's decline--about 12 percent in the last year--doesn't even come close to approximating oil's rise of more than 100 percent.
My nominee for most annoying thing said about high oil prices is the catch-all phrase which incorporates the ones listed above, namely, that high prices are due to "above-ground factors." Certainly, the poor state of the world's oil infrastructure is partly to blame. And, the lack of investment in new capacity by major oil exporters such as Iran, Venezuela and Mexico is another problem.
But the oil infrastructure of the world is by definition both an above-ground and below-ground system. And, so by definition the level of oil production is influenced by technological developments, war, civil unrest, energy policy, investment decisions and a host of other human actions. But simply saying above-ground factors are limiting oil production is not the equivalent of having a magic wand that will 1) make all of these factors disappear, 2) prevent a peak in world oil production from coming earlier because of them, or 3) prevent the debilitating effects on world society that would result from a peak, whether blamed on above-ground factors or not.
So, what's motivating the frequent refrain that were it not for unfavorable above-ground factors, the world would continue to be awash in oil for many decades? Perhaps the most explicit pronouncements about above-ground factors come from Cambridge Energy Research Associates (CERA), the worldwide energy consulting firm. An example would be a 2006 press release from CERA entitled "Peak Oil Theory--'World Running Out of Oil Soon'--Is Faulty; Could Distort Policy & Energy Debate."
What is not obvious from this release is CERA's motivation for wanting to warn the world about "faulty" peak oil analysis. The release states that "the 'peak oil' argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future." In what way and for what purpose the peak oil argument might distort policy, the release does not say. But CERA's words demonstrate that stating that above-ground factors are limiting oil supply is not merely an observation. Rather, it is part of a propaganda strategy supporting a policy agenda which almost certainly reflects the views of CERA's clients, many of whom are major oil producers.
What is that policy agenda? Here is what the release says:
My nominee for most annoying thing said about high oil prices is the catch-all phrase which incorporates the ones listed above, namely, that high prices are due to "above-ground factors." Certainly, the poor state of the world's oil infrastructure is partly to blame. And, the lack of investment in new capacity by major oil exporters such as Iran, Venezuela and Mexico is another problem.
But the oil infrastructure of the world is by definition both an above-ground and below-ground system. And, so by definition the level of oil production is influenced by technological developments, war, civil unrest, energy policy, investment decisions and a host of other human actions. But simply saying above-ground factors are limiting oil production is not the equivalent of having a magic wand that will 1) make all of these factors disappear, 2) prevent a peak in world oil production from coming earlier because of them, or 3) prevent the debilitating effects on world society that would result from a peak, whether blamed on above-ground factors or not.
So, what's motivating the frequent refrain that were it not for unfavorable above-ground factors, the world would continue to be awash in oil for many decades? Perhaps the most explicit pronouncements about above-ground factors come from Cambridge Energy Research Associates (CERA), the worldwide energy consulting firm. An example would be a 2006 press release from CERA entitled "Peak Oil Theory--'World Running Out of Oil Soon'--Is Faulty; Could Distort Policy & Energy Debate."
What is not obvious from this release is CERA's motivation for wanting to warn the world about "faulty" peak oil analysis. The release states that "the 'peak oil' argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future." In what way and for what purpose the peak oil argument might distort policy, the release does not say. But CERA's words demonstrate that stating that above-ground factors are limiting oil supply is not merely an observation. Rather, it is part of a propaganda strategy supporting a policy agenda which almost certainly reflects the views of CERA's clients, many of whom are major oil producers.
What is that policy agenda? Here is what the release says:
It is likely that the situation [i.e., limits on oil production] will unfold in slow motion and that there are a number of decades to prepare for the start of the undulating plateau [rather than a sharp peak]. This means that there is time to consider the best way to develop viable energy alternatives that would eventually provide the bulk of our transport energy needs and ensure that there is a useable production stream of conventional crude for some time to come....
The last sentence may require translation. CERA is essentially saying that because it believes that oil supplies can continue to rise to meet demand (provided above-ground factors don't interfere), the world ought to continue to power itself using oil. Not surprisingly, this would be the preferred course for many of CERA's clients who have large, existing inventories of oil in the ground which they want to be able to sell over the coming decades. However, why such a course would be particularly advantageous for the consumers of oil is not addressed.
Also behind CERA's above-ground-factors argument is a disdain for anything other than market solutions. CERA's chairman, Daniel Yergin, is author of "The Commanding Heights: The Battle for the World Economy," a paean to free-market capitalism and a critique of government intervention into the economy. The above-ground-factors argument, of course, makes liberal reference to government regulation, taxation and energy policy as obstacles to the greater flow of oil.
Finally, the above-ground-factors argument allows CERA to explain current high oil prices while making the case that these prices don't have to remain high. This is a crucial element of the argument. If the expectation that prices will remain high becomes entrenched, an analysis of their cause will do little to persuade energy users not to begin a transition away from oil.
CERA suggests that its view of future oil production--namely, a continuing rise in production into the 2030s with a decades-long plateau to follow--ought to be adopted because:
Corporations, governments, and other groups, including nongovernmental organizations, need to have a coherent description of how and when the undulating plateau will evolve so that rational policy and investment choices can be made....
Apparently, there is only one rational forecast (CERA's) and only one rational response, namely, to continue to burn oil for decades to come. How convenient for CERA's clients!
By inference then, warnings about a near-term oil peak could "distort" public policy and corporate decision-making by encouraging both government and business to move away from oil as an energy source. Both geologic constraints and above-ground factors such as instability in the Middle East (where most of the remaining oil lies); low investment in oil production in such oil-exporting countries as Iran, Russia, Venezuela and Mexico; limitation of production in Saudi Arabia; and civil unrest in Nigeria might lead oil-consuming nations to embrace government programs and subsidies for energy conservation and the deployment of alternative energy sources. Despite what CERA believes, wouldn't these policy choices actually be the rational ones given all the uncertainties surrounding future oil supplies?
Perhaps what CERA and many other members of the above-ground-factors chorus are really thinking is something like this: "If only the whole world would cooperate with our free-market ideology, then the producers of oil and other fossil fuels would have ample time to sell off their existing and anticipated future inventories of such fuels." It is this kind of thinking that simultaneously ignores the climate change implications of burning the earth's existing inventory of hydrocarbons and downplays the geologic constraints on oil and other fossil fuel supplies.
The agenda behind the above-ground factors argument is often obscured by vague and misleading language like that found in the CERA press release cited above. What propagators of this message seemingly hope to accomplish is a sort of paralysis among policymakers designed to head off any serious conservation measures or transition to a renewable energy economy. These propagators know that the above-ground-factors message plays into our desire for continuity in our lives and also into the widely, if unconsciously, held cornucopian belief that the natural world will give us whatever we want, if only we will let it. As long as energy stringency can be blamed on anything but geologic constraints and as long as above-ground constraints can be made to sound temporary, those spewing this message may succeed at achieving public policy paralysis.
On the other hand, if policymakers, businesses and the public can be convinced that geologic constraints are real and that above-ground problems may very well be ongoing, then it may be possible for the world to move more quickly toward fossil fuel alternatives. To start that journey, however, all three groups need to break through the paralyzing propaganda now surrounding the above-ground-factors argument so that they can see clearly the real risks we face in energy.
Essentially, the above-ground-factors crowd is saying that it is premature to begin a wholesale restructuring of society to run on renewable energy. But the only people who would really be hurt if the world completes such an energy transition before it absolutely has to are the purveyors of fossil fuels and the consultants they hire.
Sunday, May 18, 2008
Stop me before I fill up again!
It is a supreme irony that a wealthy Bedouin should be playing the role of a tough-love drug counselor to the world's oil-addicted consumers even as he continues to be the globe's biggest pusher. It was not the intention of Saudi Arabia's King Abdullah to take on such a role, but merely the bizarre consequence of his consent to plans by his oil minister to limit the country's oil production to no more than about 12.5 million barrels per day from 2009 onward.
It's a move that should have been on the front page of every newspaper and that should have led every news broadcast the day it was announced. The world's largest exporter, an exporter that every major oil-consuming nation had been counting on to boost production to at least 15 million barrels per day over time, had just told the world that it wasn't likely to get what it wanted. Since most of the public still has no inkling that we are approaching the peak in world oil production, the announcement came and went with little notice.
The U. S. Energy Information Agency still projects 16.4 million barrels per day of production for Saudi Arabia by 2030, though it had projected 23.8 million barrels per day in 2025 as recently as 2003. Expectations have come down to match reality, but perhaps not by quite enough.
The king's ostensible reason for the move was that he wanted to leave some oil in the ground for the benefit of future generations. It is a move long anticipated by resource economist Douglas Reynolds who told me in 2004 that government-controlled oil companies such as Saudi Aramco would increasingly see little point in generating oil revenues beyond their immediate needs for funding defense and social programs.
In Russia where production unexpectedly declined in the past year, the Putin government has been levying exorbitant taxes on oil extraction--in some cases in excess of 80 percent. The effect has been to slow extraction and save the oil for a later time. Whether the Putin government intended to do this, we cannot know for sure. But taxation is an easy way to accomplish such an objective where the government does not have direct control of all oil resources.
The practical effect of such policies by the world's two largest oil producers is to bring the peak in world oil production closer. But with supplies being held back for later development, the downslope on the production curve should be much more gradual than many expect, according to Reynolds. That suggests that our withdrawal symptoms may not be overwhelmingly severe as the oil economy wanes, possibly giving us a bit more time to adjust to a lower energy world and to find alternatives to oil. Once again the accidental drug counselors in Russia and Saudi Arabia are doing us a favor even if we don't appreciate it now. (If they were my parents, they would be telling me that I'll be thanking them for this when I get older.)
But the ranks of the accidental drug counselors don't end there. The lack of investment in Venezuela and Iran has limited production in both countries. This is true even though Venezuela is thought to have heavy oil deposits which rival the deposits of Canada's tar sands. Of course, it didn't help that the country's president, Hugo Chavez, essentially chased away private investment when he unilaterally altered contracts with major international oil companies. Beyond this, both countries have made spending on various social programs and subsidies a priority.
There is also the trouble in Mexico whose government-owned oil company, PEMEX, supplies about 37% of government revenues. The constant call on PEMEX's profits has led to severe underinvestment in oil production. And now, as production falls rapidly in Mexico's largest field, Cantarell, there is little other new production to replace that lost production.
The fear, of course, is that this lack of investment and self-imposed limitation on production will lead to a huge crisis in the not-too-distant future. I would contend that the crisis would come in time anyway and that our current path actually offers some hope that oil production will not collapse as we make our way through a very difficult energy transition. Such a path actually seems somewhat better than having cheap, plentiful supplies now that lull us into complacency for a while longer after which we might face a rapid decline in oil production. (Economists generally believe that this could not happen because prices would forecast shortages and adjust markets accordingly. For an explanation about why mineral markets do not forecast future supplies correctly, see my piece from 2004 entitled "Faith-based economics II: The case of oil's sudden scarcity.")
Also acting as a drag on current and future oil production is the lack of investment in the oil and gas infrastructure generally. Two years ago the International Energy Agency called for more than $20 trillion to be invested in the world's energy infrastructure through 2030 with about $3 trillion of that devoted to oil and gas infrastructure. Energy investment banker Matthew Simmons, who has been traveling the globe sounding the alarm about peak oil, recently produced a rather grim assessment of the state of the world's oil and gas infrastructure. He says the worst case scenario is a drop of 10 to 20 percent in oil production by 2013.
The geologic limits to oil production are now converging with economic and political constraints to bring energy stringency to the planet sooner than many had anticipated. No one, of course, knows for sure whether the scenario I suggest above is actually starting to play out. It's always possible that we could face steep production declines soon. But it's also possible that production could actually climb modestly or at least plateau after an initial drop as prices finally provide the needed incentive to invest in new capacity in those oil exporting nations that have been lagging in that investment to date. In addition, the oil that has been held back by such countries as Russia and Saudi Arabia would start to flow tending to keep production level for a time.
These latest developments should serve to remind us that we need to learn to set limits on ourselves if we expect to make it through the emerging energy transition. The fact that some inadvertent tough love from some unlikely characters is doing the job for us now strikes me as not being as bad as it seems.
It's a move that should have been on the front page of every newspaper and that should have led every news broadcast the day it was announced. The world's largest exporter, an exporter that every major oil-consuming nation had been counting on to boost production to at least 15 million barrels per day over time, had just told the world that it wasn't likely to get what it wanted. Since most of the public still has no inkling that we are approaching the peak in world oil production, the announcement came and went with little notice.
The U. S. Energy Information Agency still projects 16.4 million barrels per day of production for Saudi Arabia by 2030, though it had projected 23.8 million barrels per day in 2025 as recently as 2003. Expectations have come down to match reality, but perhaps not by quite enough.
The king's ostensible reason for the move was that he wanted to leave some oil in the ground for the benefit of future generations. It is a move long anticipated by resource economist Douglas Reynolds who told me in 2004 that government-controlled oil companies such as Saudi Aramco would increasingly see little point in generating oil revenues beyond their immediate needs for funding defense and social programs.
In Russia where production unexpectedly declined in the past year, the Putin government has been levying exorbitant taxes on oil extraction--in some cases in excess of 80 percent. The effect has been to slow extraction and save the oil for a later time. Whether the Putin government intended to do this, we cannot know for sure. But taxation is an easy way to accomplish such an objective where the government does not have direct control of all oil resources.
The practical effect of such policies by the world's two largest oil producers is to bring the peak in world oil production closer. But with supplies being held back for later development, the downslope on the production curve should be much more gradual than many expect, according to Reynolds. That suggests that our withdrawal symptoms may not be overwhelmingly severe as the oil economy wanes, possibly giving us a bit more time to adjust to a lower energy world and to find alternatives to oil. Once again the accidental drug counselors in Russia and Saudi Arabia are doing us a favor even if we don't appreciate it now. (If they were my parents, they would be telling me that I'll be thanking them for this when I get older.)
But the ranks of the accidental drug counselors don't end there. The lack of investment in Venezuela and Iran has limited production in both countries. This is true even though Venezuela is thought to have heavy oil deposits which rival the deposits of Canada's tar sands. Of course, it didn't help that the country's president, Hugo Chavez, essentially chased away private investment when he unilaterally altered contracts with major international oil companies. Beyond this, both countries have made spending on various social programs and subsidies a priority.
There is also the trouble in Mexico whose government-owned oil company, PEMEX, supplies about 37% of government revenues. The constant call on PEMEX's profits has led to severe underinvestment in oil production. And now, as production falls rapidly in Mexico's largest field, Cantarell, there is little other new production to replace that lost production.
The fear, of course, is that this lack of investment and self-imposed limitation on production will lead to a huge crisis in the not-too-distant future. I would contend that the crisis would come in time anyway and that our current path actually offers some hope that oil production will not collapse as we make our way through a very difficult energy transition. Such a path actually seems somewhat better than having cheap, plentiful supplies now that lull us into complacency for a while longer after which we might face a rapid decline in oil production. (Economists generally believe that this could not happen because prices would forecast shortages and adjust markets accordingly. For an explanation about why mineral markets do not forecast future supplies correctly, see my piece from 2004 entitled "Faith-based economics II: The case of oil's sudden scarcity.")
Also acting as a drag on current and future oil production is the lack of investment in the oil and gas infrastructure generally. Two years ago the International Energy Agency called for more than $20 trillion to be invested in the world's energy infrastructure through 2030 with about $3 trillion of that devoted to oil and gas infrastructure. Energy investment banker Matthew Simmons, who has been traveling the globe sounding the alarm about peak oil, recently produced a rather grim assessment of the state of the world's oil and gas infrastructure. He says the worst case scenario is a drop of 10 to 20 percent in oil production by 2013.
The geologic limits to oil production are now converging with economic and political constraints to bring energy stringency to the planet sooner than many had anticipated. No one, of course, knows for sure whether the scenario I suggest above is actually starting to play out. It's always possible that we could face steep production declines soon. But it's also possible that production could actually climb modestly or at least plateau after an initial drop as prices finally provide the needed incentive to invest in new capacity in those oil exporting nations that have been lagging in that investment to date. In addition, the oil that has been held back by such countries as Russia and Saudi Arabia would start to flow tending to keep production level for a time.
These latest developments should serve to remind us that we need to learn to set limits on ourselves if we expect to make it through the emerging energy transition. The fact that some inadvertent tough love from some unlikely characters is doing the job for us now strikes me as not being as bad as it seems.
Sunday, May 11, 2008
What we don't know (A response to John Michael Greer)
John Michael Greer is as intelligent a voice on the issues of peak oil and sustainability as one can find. His recent piece entitled "Not The End of World" displays his broad reading in history and his deep understanding of culture. And, while history is an excellent source for understanding human nature and the natural world, it doesn't have the predictive power which he attributes to it.
In many ways history can tell us what to expect from people when they face circumstances similar to those observed in the past. But, it cannot tell us what to expect from events which are the result of far more decisions by people and far more changes in the natural world than any individual or even any group can observe or analyze.
First let me say that I too imagine that we will experience a stair-step decline in the functioning of global societies as our energy supplies recede. Greer is quite correct that historically humans have met resource declines with struggles to adapt, and that these efforts have changed the dynamics of the decline.
But I think he is too dismissive of those who worry about a rapid, steep decline. Greer takes the catastrophists to task because of their linear thinking: high prices and short supply today mean only ever higher prices and ever smaller supply of everything tomorrow and tomorrow in a straight line. The implication is that this will lead to the rapid destabilization of modern society. But, he is correct that historically, complex societies and their markets tend to take nonlinear courses. What he omits is that nonlinear systems can sometimes turn abruptly and steeply downward.
In truth, no one can know what the future holds because there are too many unknowns. We don't know how much oil is left? We don't know how much will be extracted and at what rate? We don't know when the peak in oil production will occur? And we don't know how severe the decline from the peak will be? We don't know how quickly alternatives will be found and deployed and whether they will give us anything near the energy that oil currently does? We have guesses, some optimistic, some pessimistic. But we don't have any certainty. (Of course, similar questions are being asked about natural gas, coal and uranium as well.)
I think the more important question to ask is this: What can we reasonably prepare for? A nearby oil peak followed by a swift and catastrophic decline in oil production might very well mean a quick end to industrial civilization. And, a very chaotic and nasty end it might be. But as a friend of mine recently asked, "How can you prepare for the end of civilization?" He didn't think anyone could. Our lives are too tightly intertwined. We will either overcome the energy and environmental challenges we face together or we will all go down together.
(I suppose one could become a survivalist and with expert knowledge of plants and animals live in the forest. But how many could actually do this? And, even if all us knew how, we would quickly deplete those forests and other sources of food as well.)
I think what we can reasonably prepare for is something that provides some semblance of continuity. We can prepare for a society that retains its basic functions: agriculture, mining, manufacturing, transport, and at least a modest technical base, especially the electrical grid. We can focus on those things which will be critical to our survival and let go of those things which we won't be able to save. (See my previous piece, "Triage for the Post-Peak Oil Age.")
While we cannot be sure what the future holds, I agree with Greer that we musn't be too hasty in assuming that we are now headed for the swift demise modern civilization. I'm not sure how we could prepare for it anyway. But it may be useful for each of us to dwell on the worst scenario for a bit as a picture of what might ultimately come to pass if we don't act decisively and resolutely now.
In many ways history can tell us what to expect from people when they face circumstances similar to those observed in the past. But, it cannot tell us what to expect from events which are the result of far more decisions by people and far more changes in the natural world than any individual or even any group can observe or analyze.
First let me say that I too imagine that we will experience a stair-step decline in the functioning of global societies as our energy supplies recede. Greer is quite correct that historically humans have met resource declines with struggles to adapt, and that these efforts have changed the dynamics of the decline.
But I think he is too dismissive of those who worry about a rapid, steep decline. Greer takes the catastrophists to task because of their linear thinking: high prices and short supply today mean only ever higher prices and ever smaller supply of everything tomorrow and tomorrow in a straight line. The implication is that this will lead to the rapid destabilization of modern society. But, he is correct that historically, complex societies and their markets tend to take nonlinear courses. What he omits is that nonlinear systems can sometimes turn abruptly and steeply downward.
In truth, no one can know what the future holds because there are too many unknowns. We don't know how much oil is left? We don't know how much will be extracted and at what rate? We don't know when the peak in oil production will occur? And we don't know how severe the decline from the peak will be? We don't know how quickly alternatives will be found and deployed and whether they will give us anything near the energy that oil currently does? We have guesses, some optimistic, some pessimistic. But we don't have any certainty. (Of course, similar questions are being asked about natural gas, coal and uranium as well.)
I think the more important question to ask is this: What can we reasonably prepare for? A nearby oil peak followed by a swift and catastrophic decline in oil production might very well mean a quick end to industrial civilization. And, a very chaotic and nasty end it might be. But as a friend of mine recently asked, "How can you prepare for the end of civilization?" He didn't think anyone could. Our lives are too tightly intertwined. We will either overcome the energy and environmental challenges we face together or we will all go down together.
(I suppose one could become a survivalist and with expert knowledge of plants and animals live in the forest. But how many could actually do this? And, even if all us knew how, we would quickly deplete those forests and other sources of food as well.)
I think what we can reasonably prepare for is something that provides some semblance of continuity. We can prepare for a society that retains its basic functions: agriculture, mining, manufacturing, transport, and at least a modest technical base, especially the electrical grid. We can focus on those things which will be critical to our survival and let go of those things which we won't be able to save. (See my previous piece, "Triage for the Post-Peak Oil Age.")
While we cannot be sure what the future holds, I agree with Greer that we musn't be too hasty in assuming that we are now headed for the swift demise modern civilization. I'm not sure how we could prepare for it anyway. But it may be useful for each of us to dwell on the worst scenario for a bit as a picture of what might ultimately come to pass if we don't act decisively and resolutely now.
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