Monday, May 01, 2006

Peak Oil—Nature’s Own WMD? Part VI

“World production is at or near its peak and current world demand exceeds the supply. Saudi Arabia is considered the bellwether nation for oil production and has not increased production since April 2003. After peak production, supply no longer meets demand, and prices and competition increase. The proved reserve lifetime for world oil is about 42 years, most of this at a declining availability. Our current throw-away nuclear cycle will consume the world reserve of low-cost uranium in about 20 years. Unless we dramatically change our consumption practices, the earth’s finite resources of petroleum and natural gas will become depleted in this century.” [Dick Cheney, take note. The emphasis is on consumption, not production.]

Does this sound familiar? It is the essence of this series of articles on Peak Oil and is a quote taken from one of the only known official U.S. government documents admitting to the implications we face from Peak Oil. It comes from a report commissioned by the U.S. Army Corps of Engineers, one that apparently was deliberately withheld from public scrutiny for six months (Does that sound familiar?), and finally made public when its release was demanded by Congressman Roscoe Bartlett (R-MD). (Note the party affiliation.)

One of the conclusions in the Army report was, “We must act now to develop the technology and infrastructure necessary to transition to other energy sources and energy efficient technologies.” That however, is easier said than done—plus the fact that it’s getting a bit late in the game to make any attempts to mitigate the problem without the government pouring in a ton of money (that we don’t have) and a huge all-out “Manhattan Project” type of effort.

However, there are other ways for the government to intervene that could prove as, or even more effective. Which brings us to this statement: “Suppose a politician promised to reveal the details of a simple proposal that would, if adopted, produce hundreds of billions of dollars in savings for American consumers, significant reductions in traffic congestion, major improvements in urban air quality, large reductions in greenhouse gas emissions, and substantially reduced dependence on Middle East oil. The politician also promised that the plan would require no net cash outlays from American families, no additional regulations, and no expansion of the bureaucracy.”

In fact, this was a supposition framed in an op-ed piece in The New York Times by Robert Frank, an economist at the Johnson School of Economics at Cornell University, co-author of Principles of Economics with Ben Bernanke (who just replaced Alan Greenspan as head of the Federal Reserve). Does it sound too good to be true? Yet, Frank suggests that such a policy “would deliver precisely the outcomes described and could be enacted by Congress tomorrow—namely a $2/gallon tax on gasoline with proceeds that would be refunded to American families in reduced payroll taxes.” He points out that the experience of the 1970’s proves that consumers respond to higher gasoline taxes not just by buying more efficient cars, but also by taking fewer trips, forming carpools, and moving closer to work. It would also intensify the race to bring new fuel-efficient vehicles to market and would reduce consumption by more than 15 percent in the short run and by 60 percent in the long run. Incidentally, even with a $2/gallon tax, gasoline prices would still be cheaper by $1/gallon than those in Europe and England where taxes are even higher.

While this, a gasoline tax, is probably the quickest way to bring about a dramatic and radical change in public attitude and activities related to oil conservation—a strategy that is viewed as anathema by politicians—there are several ironies associated with the normal politician’s dread to even mention the “gas tax” phrase [although John Kerry had the courage to do so]. The most recent is a New York Times/CBS News poll conducted the end of February. Of the 1,018 adults polled, 85 percent opposed an increase in the federal gasoline tax, suggesting that politicians have good reason to avoid such a seemingly unpopular measure. However, when asked if they would support an increase in the tax (currently 18.4 cents per gallon, an amount that has remained the same since 1993), 55 percent said they would if that would help reduce gasoline consumption and less global warming. Another irony, only 24 percent said they would support a tax increase of that nature if the new revenue went to fight terrorism.

One additional irony is that while most mainstream economists actually favor a gasoline tax, there are even some (admittedly) right wing individuals who do so as well. The biggest surprise is the obsessively anti-tax crusader Grover Norquist, also the conservative Nobel Laureate Gary S. Becker, and Bush’s former chief economist N. Gregory Mankiw.

In his most recent testimony that took place before the U.S. Senate Committee on Energy on March 8, 2006, James Woolsey, the former CIA Director who has become an expert on the subject of Peak Oil, made a presentation that was a most concise and complete description of possible mitigation solutions to the development of oil renewables that are now available, and they are repeated in bold below.

Biomass ethanol: Many consider this to be the primary solution to the problem of Peak Oil—to plant and process millions of acres of corn, sugar, switch grass, or other cellusosic materials with the objective of replacing 85 percent of gasoline in automotive fuel mixtures. That’s what Brazil did, but unlike us, that country was smart enough to start the program in 1975, 26 years ago. As a result, every car there rides on all ethanol or is a Flexible Fuel Vehicle using an 85 percent ethanol/15 percent gasoline blend.

Can we accomplish what Brazil has done so successfully? Bill Gates seems to think so since last month, he invested $84 million in Pacific Ethanol, a company that intends to build several ethanol processing plants in the West Coast. Although the price of ethanol is in the $2.50/gallon range now, it is estimated the cost will eventually drop to 67-77 cents per gallon. A similar concept using vegetable oils such as rapeseed and soy beans can produce Biodiesel at a potential average cost in that same range. Another possibility goes back to World War II. Running out of fuel, Germany developed a process that gasified coal into diesel oil. Still another is what the Middle-east country Qutar is doing—it has begun a large scale natural gas-to-diesel production facility.

The existence of tar sands in the Alberta province of Canada has turned that area into a modern gold-rush phenomenon. Although only a portion of the one to two billion barrels of estimated oil there is extractable (at an enormous environmental cost), this will undoubtedly be a major source to the U.S. in the immediate future. The same can be said of the oil shales in the western U.S. While oil is extremely costly to extract from both these sources, with oil prices climbing towards the $100 a barrel range, the profit incentive will prevail.

There are several ways to improve automotive mileage efficiencies. One is to promote and produce more diesel oil vehicles since they have substantial mileage advantages over gasoline fueled internal combustion engines. That’s one reason the average fuel mileage in Europe is 42 miles per gallon and only 24 miles per gallon in the U.S. It is interesting to note that mileage has not improved at all in the U.S. since 1981. Consumers have been reluctant to sacrifice power and size (weight) for efficient, high mileage vehicles; nor are government officials and Congress blameless, since leadership and the courage to mandate higher mileage requirements have been absent from the agendas of both parties. Remember 55 miles per hour maximums? Why can’t that be reinstated?

While President Bush has been promoting the concept of hydrogen fuel cell technology as a means of reducing the price of gasoline, this is a totally misleading objective. It is acknowledged that the implementation of a hydrogen fuel cell initiative is extremely desirable, however experts conclude that it will be several decades before this can be brought to fruition. In fact, the President himself has called for a target date of 2030, for full implementation.

By now, every American is familiar with the benefits attributed to the Hybrid Electric Vehicle, using a combination of battery power and gasoline as fuel. But a major key to mitigating the effects of Peak Oil will be the next generation termed “plug-in hybrids.” These vehicles will have the advantages, but not the disadvantages of existing hybrids. They will plug into any 100 volt electric outlet, drawing electricity at an off-peak rate at night that could result in a cost equivalent between 25-50 cents per gallon. Furthermore, with the ultimate full development of a relatively new type of lithium-ion or lithium-sulfur battery based on nanotechnology, not only will battery life be significantly extended but also 100-150 mile trips on battery power alone could be accomplished. Research and even prototype vehicles are proceeding at a rapid pace.

It has always been apparent that the less a vehicle weighs, the greater the fuel efficiency and mileage performance. To that end, there could be a paradigm shift in auto construction if Carbon Composite Construction, using inexpensive versions of the carbon fiber composition used for years in aircraft construction replaces the existing steel bodies of vehicles. It is claimed that this construction would also produce safer vehicles.

James Woolsey has defined the future of the plug-in hybrid in the following terms: “If even one of the above technologies is moved promptly into the market the reduction in oil dependence could be substantial. If several began to be successfully introduced into large-scale use, the reduction could be stunning. For example, a 50-mpg hybrid gasoline/electric vehicle, on the road today, if constructed from carbon composites would achieve around 100 mpg. If it were to operate on 85 percent cellulosic ethanol or a similar proportion of bio-diesel fuel, it would be achieving hundreds of miles per gallon of petroleum derived fuel. If it were a plug-in version operating on upgraded lithium batteries so that just 20-30 mile trips could be undertaken on its overnight charge before it began utilizing liquid fuel at all, it could be obtaining in the range of 1,000 mpg of petroleum.” That is not a typo—1,000 mpg.

While it is exciting and hopeful that the above factors could mitigate the effect of Peak Oil, how do we accelerate the actions necessary to implement these solutions? On March 17 th, 2006, U.S. Senators Barack Obama (D-IL) and Richard Lugar (R-IN) introduced bi-partisan comprehensive legislation that will use alternative fuel technologies to greatly decrease America’s dependence on foreign oil. While that’s encouraging, several bills have previously been introduced in both houses with little to show in terms of implementation. However, Barack Obama did say something quite relevant in the process. “The President was absolutely correct when he said America is addicted to oil, but we can’t continue to settle for piecemeal, bite sized solutions to our energy crisis. We need a national commitment to energy security. Now is the time for serious leadership to get us started down the path of energy independence.”

The key word here is “Leadership.” Missing completely is a voice with the authority, credibility, courage, and reputation for integrity that could convince the American public that a crisis is impending; that the American way of life is not only threatened, it could come to a sorry and sudden end; and sacrifices will have to be made. Most unfortunately, I must admit I am pessimistic about finding such a voice amongst today’s so-called “leaders”, especially our political leaders. Only someone with the stature of a Franklin D. Roosevelt or a John F. Kennedy could do it. Can you think of an individual with that distinction today?

In the meantime, the Peak Oil clock is ticking…ticking…ticking.


At 10:55 AM, Anonymous Anonymous said...


Most interesting, informative and timely and appreciated.

Thank you.

At 5:49 PM, Anonymous Anonymous said...


If you've not seen 'Who Killed the Electric Car' - please do, given your thorough postings on this topic, I think you would very much enjoy the documentary. The relationships it draws between political lack of will or bending of will, and the economic drivers of today's oil and automobile industry, as well as their long-standing histories, dovetails significantly with your writings.

At 8:16 PM, Blogger NHB said...


This is a link that you would definitely appreciate -- it shows subsidies/direct payments to corn producers by state...

not too far to leap to see how Reps/Senators vote on the Farm Bill:

Farm Subsidies


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