Alternative Energy—Our Only Alternative—Part I

Anyone with a sense of history would have to conclude that the 20 th Century was the century of oil. Without oil the world’s powerful move to industrialization would not have been possible; oil provided the fuel for wars, literally and figuratively; empires were built on oil; oil (at least cheap oil) was the primary commodity that propelled the United States into its position as the economic powerhouse of the world; and global geopolitics were drastically impacted as energy sources became scarce. However, oil has also created a challenge: despite the progress it embodied, it has also triggered that law known as “unintended consequences.”

It is no secret that the world, and especially the United States, has fallen into an “oil addiction” trap—the consequences of that dilemma are proving to be significant, to say the least. The average American uses more than twice the amount of oil than the average European—26 barrels to 12 barrels annually; we have 5 percent of the word’s population and consume 25 percent of the world’s oil. As China and India grow their economies, and a large middle class emerges, within a generation, 80 million (some predict 140 million) more cars will be on the world’s roads, meaning more demand for oil. In addition, the world’s population is expected to increase by over 40 percent, from over 6.5 billion today, to some 9.2 billion by 2050—again, significantly more oil will be required to support that number. According to an official Shell Oil statement, by 2025, “demand for oil will be somewhere between 100-120 million barrels per day [25 percent to 50 percent] more than the just over 85 million barrels at the present time.” While demand for oil will escalate dramatically, oil supplies are dwindling.

None of the above takes into account the very real threat of the impact that “peak oil” will have when it occurs (if it has not already transpired it will eventually). For those that might still question the validity of the Peak Oil concept, consider these statements by Sada al-Husseni, former executive vice-president and head of exploration and production at Saudi Aramco, the Saudi oil company: “We are already three years into level production [of some 85 million barrels of oil per day, just equaling demand.] As long as demand continues to grow, oil prices can only go up. The reason is, in some countries, production is going down [Peak Oil], and we are not discovering any more of those huge oil wells that we used to discover in the Fifties and Sixties.” And you thought we had heard the last of Peak Oil.

As our Saudi “friend” implies above, additional unintended consequences have resulted from the widening gap between the growing demand for oil and the inability to discover adequate replacements. In mid-1960, on a worldwide basis, 48 billion new barrels of oil were discovered, but only 12 billion barrels were consumed that year. That obviously resulted in the prevalence of very cheap oil. Twenty years ago, in 1988, an equal number, 23 billion barrels of oil were both discovered and consumed. In 2005, only 5 to 6 billion barrels were found, yet consumption had risen to 30 billion barrels. Is it any wonder that we are on the cusp of $100 dollar barrel oil?

Now, let’s not go into delusional mode. It should be self evident that Planet Earth has a number of serious problems. We have wars, global warming, a possible worldwide recession (if the U.S. goes, so goes the rest of the world), the probability of impending Peak Oil, water shortages—how much worse can it get? In addition, the phrase “alternative energy,” is defined in a manner completely the reverse of what it should be in an ideal world. I have no wish to denigrate the academic superiority of our valued dictionary sources, but consider the characterization of that term as supplied by MSN Encarta: “a naturally generated energy source: any form of energy obtained from the Sun, wind, waves, or another natural renewable source, in contrast to energy generated from fossil fuels.” I suggest we suspend reality for the moment, reverse the definition, and contemplate the kinder, gentler, safer world we would inhabit if energy generated from fossil fuels was considered to be our planet’s alternative energy source, and naturally generated (alternative) energy sources were so ubiquitous as to be thought of as traditional.

As if the supply/demand equation wasn’t troubling enough, the Law of Unintended Consequences (or is this one Murphy’s Law?) deals another blow. As pointed out recently in an editorial in U.S. New & World Report, “After World War II, the oil world was dominated by the ‘Seven Sisters’ a name given to the oil companies controlling Middle East oil.” Only four of the seven have survived—Chevron, British Petroleum, Exxon Mobil, and Royal Dutch Shell. Instead of dominating the industry as in the past, these four today control only about 10 percent of oil output, and hold just 3 percent of the reserves.

These four remaining “Sisters” are now overwhelmed by what U.S. News terms the “Seven Brothers,” dubbing them the “rule makers,” the international oil companies that are the “rule takers.” The “Brothers” are composed of seven state owned national companies: Saudi Arabia’s Aramco, Russia’s Gazprom, CNPC of China, NIOC of Iran, Venezuela’s PDVSA, Brazil’s Petrobras, and Petronas of Malaysia. The United States has unwittingly allowed itself to become dependent for its very existence on several of these patently unfriendly regimes whose interests are inimical to our own. This obviously exposes us to potentially debilitating oil shocks.

See if you can guess who made the following opening remarks in a televised speech: “Tonight I want to have an unpleasant talk with you about a problem unprecedented in our history. With the exception of preventing war, this is the greatest challenge our county will face during our lifetime. The energy crisis has not yet overwhelmed us, but it will if we don’t act quickly. It is a problem we will not solve in the next few years, and it is likely to get progressively worse through the rest of the century. We must not be selfish or timid if we hope to have a decent world for our children and grandchildren.” The speaker then continued, “Our decision about energy will test the character of the American people and the ability of the President and the Congress to govern. This difficult effort will be the ‘moral equivalent of war’—except that we will be uniting our efforts to build and not destroy.”

This could (and probably should) have been President Bush speaking last night—but it wasn’t. This is part of a speech given on April 18 th, 1977 by Jimmy Carter. While most prescient and all too accurate, it is also an indictment, as is referenced in the speech, “of the ability of the President and the Congress to govern.”

Every president in the intervening 31 years has promised oil independence, yet we are more dependent on foreign oil today than we were when Jimmy Carter was in office. No president, or Congress for that matter, has been forthright enough to proclaim that Americans, as well as American businesses, must not only change their ways, but must also sacrifice old habits if we are to rid ourselves of foreign oil.

But oil is only one part of the energy problem equation. Ironically, the other major contributor to the energy quandary is a cheap, readily available energy source that can be plucked right out of U.S. soil—coal. While oil is the primary energy source for transportation purposes, and many electric power plants use natural gas, electric power needs are fed primarily by coal. Therein lies what has become known as the coal conundrum—another leg of the Law of Unintended Consequences.

About 64 percent of the world’s electric power requirements are fueled by coal—in the U.S. that number is more than 50 percent. The U.S. has more coal reserves than any other single country in the world, and one fourth of all the known coal in the world is located in the U.S. Compared to any other fuel source but one—nuclear—coal is by far the cheapest. Cheap coal equals cheap electricity, yet coal produces more CO2 emissions per kilowatt-hour of electricity than any other fossil fuel.

CO2 is responsible for more than 82 percent of U.S. greenhouse gases, and as the dirtiest fossil fuel, coal releases about 40 percent of the country’s CO2 adding significantly to global warming. Therein lies the conundrum—should the availability of cheap and abundant electricity based on coal trump the dangers of global warming, or is the future environmental health of the planet more important?

A new book by Michael Shnayerson titled Coal Riverprovides a scathing denunciation of a small slice of the problem, the devastation wrought, and the political corruption involved in the coal mining enterprises in West Virginia. The opening paragraph of the New York Times book review sums it up as follows: “Someday there will be a museum dedicated to all the dirty elements dragged out of the earth to keep us warm and spin our generators. See there, son, a grizzled Gen Xer will say over a barrel of oil, that ancient gunk nearly enslaved us to 12 th-century theocrats in the Mideast. And check out those black nuggets — coal, a fossilized time bomb hauled out of the deepest holes in the earth and then belched back into the air as a planet smothering by product. Nearly killed us, the whole lot of it.”

Another detrimental factor resulting from the cheap price of coal is the current competitive relative cost disadvantage of alternative energy sources, despite the potential opportunities they might provide in reducing our reliance on foreign energy supplies and their ability to help reduce undesirable emissions. With the above background in mind, next month’s issue will address the major alternative energy choices, how they work, and their pros and cons.