Free Markets, Free People


Energy Policy – “10 Inconvenient Truths”

Sometimes the little surprises life hands you are the most pleasant. While in Houston at the Offshore Technology Conference, my trip sponsored by API, I happened to meet another blogger who introduced himself to me as a “raging liberal”. In the course of three days and a few good beers, Chris Nelder and I had some very enjoyable and interesting conversations. And, interestingly, Chris and I agree on where the policy debate stands as it pertains to energy. Chris wrote an outstanding article detailing his observations about the current situation, and, for the most part, I agree completely with his well thought out assessment. Here is his list of “10 Inconvenient Truths” that he feels all policy makers must understand before they can effectively plan for the future:

1. We have extracted nearly all of the world’s easy, cheap oil and gas, and now we’re getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world’s oil and gas will be gone by the end of this century.

While I agree with Chris’s point about renewables, I’m not quite ready to buy into the idea that “most” of the world’s gas and oil will be gone by the end of the century, especially if we make progress developing cheap, renewable and clean alternatives. That’s not to say he might not be right, but I continue to look at the improvements in technology and the fact that the same sort of predictions have been made for decades and here we are. But on the main point of gearing up renewables, we agree completely. We must prepare for the possibility Chris is right and we need to do that now.

2. Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won’t come to market for 10 years or more. By that time, it probably won’t even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won’t make an ugly mess of the environment.

You see someone on the left here who has studied the problem, understands the processes used and has formed an opinion that is outside his side’s political mainstream. He understands that technology has advanced to the point that the oil and gas industry can drill for oil and gas safely and with a very small footprint. In fact, advances in sub sea technology are almost to the point where the entire process can be safely and productively located under the waves. So, in a “comprehensive” scheme, the left has got to drop its almost knee-jerk resistance to such drilling and understand it must be a part of an overall energy solution.

3. Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won’t even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world’s primary energy, and they will remain our primary fuels for a long time to come.

To believe “green fuels”/renewables are the immediate and total answer to today’s energy needs is to deny reality. We have to remember that there is going to be a growing energy gap as more and more nations come on-line in the first-world and demand more energy as a result. Oil, gas, nuclear and coal are going to play a large and significant part of bridging that gap even as we work to develop renewables. As a nation we cannot afford that sort of short-sighted thinking. It is critical that everyone understand that while the preference is for renewable, clean fuels, the reality is they’re still quite a ways off, while the energy demand continues to grow unabated and certainly with no concern for our personal energy preferences.

4. It will take many decades to reconfigure our transportation systems to run on electricity. It will take decades to fix our wasteful, leaky built environment so that it doesn’t need as much energy to begin with. None of the solutions will come quickly or easily.

Chris hits a critical point here which many of our political leaders seem to miss – the timeframe for doing what is only imagined and talked about today is not a few years or even a decade. It is a multi-decade project if we were to begin today and happen to have all the technology we need to accomplish it at hand now. Again the point to be made is, as a long term energy strategy, all methods of energy production must remain on the table and be exploited to meet the rising demand. The mix, of course, can vary. Forms of energy production should only taken off the table when there is a viable and proven alternative available and in production. This would seem to most to be common sense, but unfortunately it is mostly discussed now as an “either/or” proposition.

5. Neither renewables nor fossil fuels nor nuclear power alone can bring “energy independence.” Indeed, if independence means isolating ourselves from the rest of the world’s energy commerce, it might not even be desirable.

The whole “energy independence” nonsense is a populist political tool used by both sides for their own ends. Energy is a global commodity and will always, in some form or fashion, remain one – especially when we talk about oil and gas. On one side it is used as a political goad to tout the exclusive use of alternative and renewable fuels, while on the other it is used to demand more domestic drilling.

If there is a bottom-line to all of this, it is reflected in Chris’s number 6:

6. We must pursue all sources of energy immediately and aggressively if we hope to meet our future needs, and pitting one against another is counterproductive.

Unfortunately, pitting one agaist the other is so embedded in the talking points and rhetoric that it seems almost impossible to remove that from the “debate”, such that it is. And that was the point of my original post about this – because of the vested political positions on each side, the election driven short-sightedness of our politicians and the public ignorance about energy in general, there is no productive debate going on at this time. It’s two sides pushing a political agenda and talking past each other.

Instead, it is necessary to put aside the political rhetoric and formlate a long-range energy plan that addresses the needs of the country and it’s future energy demands realistically based on a mix of fuels available that will produce that energy as cleanly as possible for the technology (and fuels) available. There is nothing like that sort of a plan at this moment.

7. Nuclear power will not grow significantly in the next several decades, as nearly all of the existing reactors will need to be decommissioned within the next 20 years, and a new generation of reactors must be built to replace them. After we do that, a renaissance for next-generation nuclear energy may be a possibility but it will only happen after we have confronted the crises of peak oil and peak gas. It may produce no net reduction in emissions at all.

Chris’s point here is the right sees nuclear power as the panacea for our energy needs. Certainly had we not refused to approve any new nuclear power plants since the ’80s, that argument might have some legs. But as it stands, we’re looking only at maintaining the energy we’re producing with any new plants over the next 20 years as the old reactors are decommissioned. While the right is correct in its claim that we should have been pursuing nuclear power aggressively over the past decades, the fact remains we didn’t – that’s reality. Now we have to understand and accept what that means and make alternate plans. Nuclear is still a part of the mix, but perhaps not the large part the right had hoped it would be.

8. It is quite possible that even our best efforts on all fronts will not achieve the carbon emission targets we have set. Climate change must be confronted via a unified policy on emissions and energy supply, which is to say that in our zeal to control emissions, we must take care not to squelch the production of the oil and gas that constitutes the majority of our energy supply, at least until we have something to replace it. To do so could have unintended and paradoxical consequences, like impeding the manufacture of renewable energy devices, and contributing to tight supply situations that once again cause fossil fuel prices to skyrocket and further damage the economy. Rather than emphasizing the uncertainty on climate change data, and fomenting fear about the cost of mitigation, all sides must come together in a depoliticized dialogue strictly based on neutral scientific analysis.

This particular paragraph is one I could write on all day. Suffice it to say Chris and I may not agree about the whys and wherefores of “climate change”, but regardless, his analysis is spot on. Everyone wants clean air and clean water, regardless of their political outlook. Using that as common ground, both sides need to explore and settle on realistic means of achieving agreed upon emissions standards without crippling our economy or limiting our supply of fuel in the form of oil and gas. That doesn’t seem like too much to ask, but it certainly seems something which, to this point, the left and the right can’t seem to agree upon. Perhaps that’s because neither side can agree what constitutes “neutral scientific analysis”.

9. We should use accurate and unbiased models of the future growth and decline curves of all forms of energy for policymaking—models based on historical data, not faith. If the data says we’re likely to recover another 1.2 trillion barrels of oil worldwide and no more, then we should not assume that future drilling and technological progress will somehow turn that into 3 trillion barrels of recoverable oil.

It took us a century to recover the first trillion barrels of oil. The next (and some people believe it to be the last) trillion is going to cost more because it is harder to recover. It remains to be seen if that cost, which will lessen demand somewhat, is enough to offset the increasing demand for energy to the point that it will take another century to use this next trillion. That said, Chris’s point is correct. We shouldn’t assume what isn’t in evidence. On the other hand, we must continually update our data as technology advances and factor in reserves such advances make economically feasible to recover into our overall calculations as well.

10. Carbon emissions will soon come with a price. Drilling the remaining prospects for oil and gas will be expensive: From the decision to invest until first oil is produced, it can take 10 years and $100 million dollars to drill the first well in a new deepwater resource, using rigs that cost $1 million a day to run, and the production platform can cost as much as $5 billion. Deploying thousands of wind turbines and square miles of solar will be expensive, slow, and difficult. Replacing millions of inefficient internal combustion engine vehicles with electric and plug-in hybrids will be expensive. Rebuilding the nation’s rail system will be hugely expensive. In short, the good ol’ days of cheap electricity and gasoline are likely gone forever, and all the solutions going forward will be expensive.

Chris’s final fact is brutally honest. This is going to take decades and cost a lot of dollars. And what we can’t afford to do in the interim is cripple the economy that’s going to be tasked with producing those dollars. We’re not talking a few tweaks to an existing system. We’re talking about the same sort of change the internal combustion engine brought to the world upon it’s introduction.

So how do we make this conversation happen and put together a comprehensive energy policy that looks to the long term needs of this nation? Unfortunately I don’t know that answer. And with the rush to put something out there now that fits a certain political agenda, I’m concerned it won’t happen anytime soon. That could end up being economically catastrophic in a few short years as the cumulative impact of a lack of a long-term energy strategy begins to take effect.

~McQ

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17 Responses to Energy Policy – “10 Inconvenient Truths”

  • Green politics is expensive…VERY expensive.

    As long as someone else can be forced to pick up the initial tab, your average John Doe, doping out in front of ESPN and MTV, isn’t going to know what hit him until the bill comes due.

    Of course, that will be the fault of “Big Oil”.

  • Well, in the interests of brevity, here are my FIVE Inconvenient Truths:

    1.  We must have more energy

    2.  We cannot conserve our way to energy independence

    3.  We cannot rely on foreign sources for our energy

    4.  There is no way to produce energy that will not somehow, some way, impact the environment

    And the fifth and biggest Inconvenient Truth:

    5.  Liberals are the biggest problem to overcome if we are going to solve the looming energy crisis

    From blocking wind farms because they chop up birds (or spoil the view from the Kennedy mansion) to blocking oil exploration because of the bloody caribou to blocking nuke plants because of baseless fears about another Chernobyl to blocking dam construction because of salmon migration to the idiot belief in “global warming” to the idiot belief that we can have a modern, hi-tech society with 18th century levels of power consumption, libs simply DO NOT GET IT.

    Unless and until we stop listening to those morons, we’re not going to get anywhere.  We all know we’ve got a problem, but only some of us are interested in trying to fix it.

  • Tut tut .. we all know the “plan” is to suck the Middle East dry before harvesting the ANWR oil.

  • ‘Peak Oil’  Still defined in a variety of ways, depending on viewpoint.

    Recoverable Oil & Gas is defined by the continually changing Market.
    The Market continues to change based upon Price (Supply/Demand) &
    the ability to extract the resource.     Technology is continually changing.
    Peak Oil probably has not been reached.
    Peak Gas is a long way from being reached.

  • The most depressing thing about the last election was that every candidate agreed that we need energy independence.
    It really is one of the dumbest ideas we’ve seen in politics in a long time. No one in the entire world bothers with energy independence, even when they’re sitting on all the oil. It’s just too stupid and there’s absolutely no point, but all the major candidates endorsed it.

  • 5.  Liberals are the biggest problem to overcome if we are going to solve the looming energy crisis

    As energy prices increase, moderates will take note and they’ll vote with conservatives until we get what we need.

  • hhhmm lets see, Point 1, False, you can certainly spend a lot of time trying to count all the times experts predicted the end to plentiful fossil fuels. I suppose it will be true one day, not soon though.

    point 2. False, simply because we need the oil in ANWR andOCS is no reason that we will be able to get it. In case you haven’t noticed the crowd currently in charge in Washington are hostile to petroleum and natural gas. ANd the other party is not much better because the lack the fortitude to fight.

    Point 3.FAlse, Renewables will never be more than a small part of our answer for energy needs. Unless radical new technologies can be develped such as growing a plentiful and easy to harvest and refine fuel plant in the worlds desert areas. Of course that would still pit you against eviromentals.

    The only non fossil energy source that could be a major player is nuclear.

    point 4, ok finaly got one right

    popint 5. 6. & 7.  correct, it will take several different paths, they will all take time

    8. Yes, but it doesnt have to be this way. You just need to dump the Democrats

    9.  and 10, good luck with that

  • I’d feel a whole lot better about the stimulus if we put $100 billion NOW into nukes. We will do it sooner or later, but later is most likely.

    I’m not clear on how much time we have to dilly-dally around before our cities start to flicker and we discover that there isn’t a quick fix.

  • This was 1975 …

    Higgins: It’s simple economics. Today it’s oil, right? In ten or fifteen years, food. Plutonium. Maybe even sooner. Now, what do you think the people are gonna want us to do then?
    Joe Turner: Ask them?
    Higgins: Not now – then! Ask ‘em when they’re running out. Ask ‘em when there’s no heat in their homes and they’re cold. Ask ‘em when their engines stop. Ask ‘em when people who have never known hunger start going hungry. You wanna know something? They won’t want us to ask ‘em. They’ll just want us to get it for ‘em!

  • McQ, what is your take on Bob Zubrin’s theory that we can seriously erode our dependence on foreign oil by mandating that all cars be equipped with  flex-fuel engines to run on methanol?  I have yet to hear a persuasive effort to debunk Zubrin, and at least in his telling, methanol has the advantage of being a proven, practical fuel that can be implemented immediately with existing technology, as opposed to pie-in-the-sky electric car nonsense.  I’m no fan of mandates but it seems to have done the trick in Brazil, and flex fuel would appear to be the Occam’s Razor solution.

    • As I recall, methanol requires a number of additives in order to prevent engine corrosion. However it is a good fuel and one that should be certainly mix. Methanol is a pretty clean fuel. As for Brazil, I’m pretty sure they’re banking on ethanol, not methanol.

      • A quick question on the economics of alcohol. From everything I’ve read alcohol still requires more energy in than it can provide as a fuel. It isn’t an energy source of itself. Does the economics of this really make sense when you still require the energy input to make a fuel than you can get out?

        There is also the quandary of the water issue that goes with making it for most sources today. Does that also increase the cost/effectiveness of alcohol as a fuel?

        And with these issues, wouldn’t use of hydrogen as a fuel be a more practical and efficient solution. I do understand that cars don’t presently run with hydrogen, but they require changes to run on alcohol as well.

        Thanks for the article. Nice bit of discussion.

  • This post has been linked for the HOT5 Daily 5/13/2009, at The Unreligious Right

  •  We should use accurate and unbiased models of the future growth and decline curves of all forms of energy for policymaking—models based on historical data, not faith. If the data says we’re likely to recover another 1.2 trillion barrels of oil worldwide and no more, then we should not assume that future drilling and technological progress will somehow turn that into 3 trillion barrels of recoverable oil.

    Paul Erlich and Lester Brown agree with this one completely.  Julian Simon, on the other hand, not so much.  And, as I write this from my bunker in the midst of an America scarred by nuclear war, where starvation and plague run rampant and the total world population has been reduced to a handful of millions, I’ve got to wonder what Simon was thinking.  I mean, how can you deny that a “just the current numbers, Mam” approach is more accurate?