The Two That Cannot Be Separated
Jul. 9th, 2013 05:23 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peristaltorRecently I read an interesting LJ rundown on the various problems with the new technologies that have flooded the markets with new oil-ish and gaseous energy supplies. Long-time readers are probably familiar with my obsession with energy issues, as well as my more recent diving into economic and monetary thing-a-ma-bobs. Here's a recap for those that have wondered why the two seemingly divergent topics have occupied my reading and mulling: The two are not at all divergent issues.
A recent article in Atlantic Magazine asks a simple question: "What if we never run out of oil?" While not being convinced if this is indeed the right question to ask, I read the article. It's a well-written account of our energy use history by Charles C. Mann, author of the 1491 and 1493 books I enjoyed so much. I'll let you peruse the article yourself for the most part; what I quote from it will only scratch the surface.
What got me and quite a few others gobsmacked, though, was not Mann's article, but the cover Atlantic chose to push it:
That subtitle at the lower right-most corner proves the scariest to me. Yes, Mann's article does deal with the new hydraulic fracturing processes reaping new bounties of natural gas and shale oil. Yes, it seems the US is well-situated to enjoy this bounty, perhaps more than other nations without the resource base we enjoy. But Mann's article also describes the downsides to this, the "scary to the planet" part, in much greater detail.
Briefly:
It's that bugaboo climate change. Mann cites a few ways to delay the inevitable build-up of greenhouse gasses—managing to ignore my favorites—but should these new carbon fuels burn, the problem might be unstoppable.
Which is a real problem, since, as I hinted in the title, burning carbon fuel is almost exclusively what fuels our modern economies. Back to Mann:
To understand why this is, one must first recognize that, search as you might for alternatives, there are precious few alternatives to fossil fuels we can actually use that remain affordable.
Here I'd like to share a chart that I doubt anyone has seen before, simply because it was made by my request. I have been interested in Doug Short's charts for some time now, most recently here. I emailed him and asked if there were some way to modify his graph: ". . . what if you slaved the price of gas to the rate of inflation. . . ?" To my surprise, he did.
We see here a comparison to the overall rate of inflation (the Consumer Price Index) with gasoline removed from the mix and shown separately. Mr. Short's conclusions to me were pretty dismissive of a correlation between the two. But the more I stared at this graph, the more I wasn't so sure.
Bear with me. Where ever on these graphs you find the price of gas riding below the CPI, you find mostly to be periods of growth in the economy. Where ever you find sharp spikes in gas prices you find a recession (1974 OPEC embargo, 1979 Iranian revolution and later Iran-Iraq war, 1992 First Gulf War) or a serious problem in other areas of the economy (Tech Bubble run-up from about '98 on; the housing bubble during the same period until 2008) which inflated the money supply enough to allow growth in both fuel prices and the bubble area.
Gas drives more than just the economy, as Mann quotes Smil. Gas's energy literally drives almost every other economic transaction possible. It drives the economy's complexity, which grows the longer the fuel supply allows for relatively low fuel prices. (I'm right now diving into complexity theorists explain this connection between the available energy and the available complexity any given system might achieve, so again, I beg your forbearance for my simplistic explanation.)
Key to any economic ecosystem is the basal energy level, that is how low can it run without crapping out completely. When an economy starts burning fuel, it does so slowly; older means of production reign until the fuel supply is guaranteed. According to one source, it takes on average 40 years for a fuel supply to be adopted. (Erik Brynjolfsson and Andrew McAfee, Race Against the Machine, Digital Frontier Press, 2011.) Once adopted, though, it changes the former practices all but permanently.
Extra fuel in the short term allows people flexibility. More food, extra trips, more business expansion. These activities in turn spur growth in other areas of the economy (restaurants, vacation attractions, road and highway repair, car sales, deliveries; the list is long).
Prolong the low fuel prices and the changes to the society become more than temporary, branching out into more permanent distant housing, less energy efficient cars, boats, factory expansions, what have you. Importantly, the basal fuel level increases; it takes more fuel to keep the newer economy, the one more dependent on this new fuel, going.
Therefore, when the fuel supply constricts, the economy reverts toward its new basal level. The boats stay parked in marinas or on trailers, the SUV gets parked and the sedan driven to work, factories cut back. Prolong this constriction, and the participants make more permanent decisions. People downsize their cars, insulate their homes, take fewer trips. All but the most efficient factories close. And in this process people drive either more or less, depending upon the fuel supply's relationship with the price of other consumables.
Were that second graph smoothed as the first is, you would see the more or less perfect correlation Smil noted above.
And that realization can be scary.
It's a scary thought for people who want our societies to improve, which is most of us. Those of us who have both heard of M. King Hubbert and looked into his work enough to know how right he was face a bit of cold water dashed on our future expectations, and oil company executives are no exception. More from Mann:
In 1970 ". . . Hubbert’s prediction proved to be correct." One of Hubbert's biggest and most vocal opponents was "Vincent E. McKelvey, a long-serving geologist at USGS who would become its director in 1971." McKelvey fought Hubbert's conclusions even after it became clear that they were correct; he was finally pushed out of office by Pres. Carter. Which leads to an observation Mann made I thought worth noting here. When it comes to how rosy our oil supply future might be:
Social scientists. You know . . . like economists, the guys and gals who largely missed the largest economic crisis of the past century.
And, very importantly, who largely ignore energy's contribution to our economies.
I've been researching the few economists who do wrap energy into economics. It is because of this last economic crash that I went on this, well, Crash Course. Sadly, the bulk of the economics profession has yet to accept energy-dependent economics, choosing instead to ignore reality and charge ahead, creating an entrenched body of work they defend vigilantly with piles of precedent and papers. "State a moral case to a ploughman and a professor," Thomas Jefferson wrote. "The former will decide it as well and often better than the latter because he has not been led astray by artificial rules."
Which leads us to the Atlantic cover. Even Mann's suggestion that we might not have unlimited supplies of energy must have panicked someone in the head office. Either that, or the Shell Petroleum ad alongside the online version of his article might point to a disconnect between a purely editorial decision and, shall we say, a more rosy picture of our world's future forced upon the Atlantic editors by more mundane concerns, like magazine funding. I took a screenshot of one deliciously coincidental pairing of that ad and another of the issue's articles that appeared below it—an article dealing probably altogether separate topic and in no way, I'm quite certain, on the kind of propaganda dissemination opportunities sponsorship allows:
Do tell, Mr. Resnick, do tell.
X-Posted to![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-community.gif)
talk_politics.
A recent article in Atlantic Magazine asks a simple question: "What if we never run out of oil?" While not being convinced if this is indeed the right question to ask, I read the article. It's a well-written account of our energy use history by Charles C. Mann, author of the 1491 and 1493 books I enjoyed so much. I'll let you peruse the article yourself for the most part; what I quote from it will only scratch the surface.
What got me and quite a few others gobsmacked, though, was not Mann's article, but the cover Atlantic chose to push it:
That subtitle at the lower right-most corner proves the scariest to me. Yes, Mann's article does deal with the new hydraulic fracturing processes reaping new bounties of natural gas and shale oil. Yes, it seems the US is well-situated to enjoy this bounty, perhaps more than other nations without the resource base we enjoy. But Mann's article also describes the downsides to this, the "scary to the planet" part, in much greater detail.
Briefly:
Most oil specialists agree that humankind is naturally progressing toward a no-carbon energy future. Our species has already moved from wood to coal to oil to gas, each fuel burning cleaner than its predecessor. Wind, solar, and other renewables are obvious next steps. The problem, scientists say, is that climate change is happening too quickly. Instead of evolving over decades, as happened with the building of the electrical grid, the changeover to renewables has to occur now, faster than any change before.
It's that bugaboo climate change. Mann cites a few ways to delay the inevitable build-up of greenhouse gasses—managing to ignore my favorites—but should these new carbon fuels burn, the problem might be unstoppable.
Which is a real problem, since, as I hinted in the title, burning carbon fuel is almost exclusively what fuels our modern economies. Back to Mann:
Between 1900 and 2000, global energy consumption rose roughly 17-fold, the University of Manitoba environmental scientist Vaclav Smil has calculated, while economic output rose 16-fold—“as close a link as one may find in the unruly realm of economic affairs.” Petroleum has wreaked all kinds of social and environmental havoc, but a steady supply of oil and gas remains . . . central to the world’s economic well-being. . . .
To understand why this is, one must first recognize that, search as you might for alternatives, there are precious few alternatives to fossil fuels we can actually use that remain affordable.
Here I'd like to share a chart that I doubt anyone has seen before, simply because it was made by my request. I have been interested in Doug Short's charts for some time now, most recently here. I emailed him and asked if there were some way to modify his graph: ". . . what if you slaved the price of gas to the rate of inflation. . . ?" To my surprise, he did.
We see here a comparison to the overall rate of inflation (the Consumer Price Index) with gasoline removed from the mix and shown separately. Mr. Short's conclusions to me were pretty dismissive of a correlation between the two. But the more I stared at this graph, the more I wasn't so sure.
Bear with me. Where ever on these graphs you find the price of gas riding below the CPI, you find mostly to be periods of growth in the economy. Where ever you find sharp spikes in gas prices you find a recession (1974 OPEC embargo, 1979 Iranian revolution and later Iran-Iraq war, 1992 First Gulf War) or a serious problem in other areas of the economy (Tech Bubble run-up from about '98 on; the housing bubble during the same period until 2008) which inflated the money supply enough to allow growth in both fuel prices and the bubble area.
Gas drives more than just the economy, as Mann quotes Smil. Gas's energy literally drives almost every other economic transaction possible. It drives the economy's complexity, which grows the longer the fuel supply allows for relatively low fuel prices. (I'm right now diving into complexity theorists explain this connection between the available energy and the available complexity any given system might achieve, so again, I beg your forbearance for my simplistic explanation.)
Key to any economic ecosystem is the basal energy level, that is how low can it run without crapping out completely. When an economy starts burning fuel, it does so slowly; older means of production reign until the fuel supply is guaranteed. According to one source, it takes on average 40 years for a fuel supply to be adopted. (Erik Brynjolfsson and Andrew McAfee, Race Against the Machine, Digital Frontier Press, 2011.) Once adopted, though, it changes the former practices all but permanently.
Extra fuel in the short term allows people flexibility. More food, extra trips, more business expansion. These activities in turn spur growth in other areas of the economy (restaurants, vacation attractions, road and highway repair, car sales, deliveries; the list is long).
Prolong the low fuel prices and the changes to the society become more than temporary, branching out into more permanent distant housing, less energy efficient cars, boats, factory expansions, what have you. Importantly, the basal fuel level increases; it takes more fuel to keep the newer economy, the one more dependent on this new fuel, going.
Therefore, when the fuel supply constricts, the economy reverts toward its new basal level. The boats stay parked in marinas or on trailers, the SUV gets parked and the sedan driven to work, factories cut back. Prolong this constriction, and the participants make more permanent decisions. People downsize their cars, insulate their homes, take fewer trips. All but the most efficient factories close. And in this process people drive either more or less, depending upon the fuel supply's relationship with the price of other consumables.
Were that second graph smoothed as the first is, you would see the more or less perfect correlation Smil noted above.
And that realization can be scary.
It's a scary thought for people who want our societies to improve, which is most of us. Those of us who have both heard of M. King Hubbert and looked into his work enough to know how right he was face a bit of cold water dashed on our future expectations, and oil company executives are no exception. More from Mann:
Understanding this dependence, the oil industry was shaken by a speech in 1956 by M. King Hubbert, a prominent geophysicist at Shell Oil. When a company moves into a field, it grabs the easy, cheap oil first. Tapping the rest gets progressively more difficult and expensive. Eventually, Hubbert observed, conditions get so tough that production levels off—it peaks. After the peak, decline is unstoppable, the fall as ineluctable as the rise. Hubbert used his theory to predict that the crude-oil yield in the continental United States would flatten between 1965 and 1970. . .
In 1970 ". . . Hubbert’s prediction proved to be correct." One of Hubbert's biggest and most vocal opponents was "Vincent E. McKelvey, a long-serving geologist at USGS who would become its director in 1971." McKelvey fought Hubbert's conclusions even after it became clear that they were correct; he was finally pushed out of office by Pres. Carter. Which leads to an observation Mann made I thought worth noting here. When it comes to how rosy our oil supply future might be:
The argument has nonetheless continued, pessimists and optimists hammering at each other like Montagues and Capulets. Most of the Hubbertians are physical scientists; most of the McKelveyans, social scientists.
Social scientists. You know . . . like economists, the guys and gals who largely missed the largest economic crisis of the past century.
And, very importantly, who largely ignore energy's contribution to our economies.
I've been researching the few economists who do wrap energy into economics. It is because of this last economic crash that I went on this, well, Crash Course. Sadly, the bulk of the economics profession has yet to accept energy-dependent economics, choosing instead to ignore reality and charge ahead, creating an entrenched body of work they defend vigilantly with piles of precedent and papers. "State a moral case to a ploughman and a professor," Thomas Jefferson wrote. "The former will decide it as well and often better than the latter because he has not been led astray by artificial rules."
Which leads us to the Atlantic cover. Even Mann's suggestion that we might not have unlimited supplies of energy must have panicked someone in the head office. Either that, or the Shell Petroleum ad alongside the online version of his article might point to a disconnect between a purely editorial decision and, shall we say, a more rosy picture of our world's future forced upon the Atlantic editors by more mundane concerns, like magazine funding. I took a screenshot of one deliciously coincidental pairing of that ad and another of the issue's articles that appeared below it—an article dealing probably altogether separate topic and in no way, I'm quite certain, on the kind of propaganda dissemination opportunities sponsorship allows:
Do tell, Mr. Resnick, do tell.
X-Posted to
talk_politics.