E.O. Wilson (who recently gave a lecture here in town that I attended) has suggested that we need a more multidisciplinary approach to problem solving (teams consisting of diverse disciplines like economists, engineers, biologists, sociologists, etc) in our complex modern world. If we are going to  extract biomass from forests to make electricity we should be consulting with biologists who can give guidance to avoid the degradation of forest ecosystems. Designers of wind farms might want to talk to ornithologists before building in raptor migration corridors.

Several years ago I arrived at my forest property to find the adjacent land being logged. I don’t have a problem with sustainable use of a natural resource like wood. A clear cut that gets replanted can be preferable to a clearing caused by a forest fire. Like a forest fire, clear cuts let the sunshine in, creating a burst of biodiversity until the trees shade everything out again, hogging up all of the energy for themselves. Logging done right, can be a win-win situation.

The trees didn’t seem big enough for lumber. I later learned they were used for paper pulp. In the future it might be for energy of one kind or another (in addition to paper pulp and lumber). After taking the trees, a bulldozer scraped up all of the branches (slash) into three large piles. Gasoline was poured on them and set on fire.

I was curious why they did it and found a few old studies on the internet that suggested they might be wasting their time and money. They might have been better off just leaving the slash in place to improve soil moisture and nutrients, as well as provide habitat for the termites, rodents, lizards, salamanders, and everything else up the food chain that thrives in the presence of decaying wood. The next best option would be to use it for energy to offset a fossil fuel, although if it were profitable to do that, it would probably already be done.

• What are the chances that electric vehicles will be more than a boutique item, and will make up a noticeable portion of cars on the road by 2020?
• Do you agree with the recent report from the Natural Resources Defense Council (NRDC) that building the Keystone Pipeline will raise gasoline prices?

I will make one additional comment to what I said about electric cars in the video. Even if we have adoption of electric cars in the U.S. at the most aggressive pace that has been projected, I don’t believe there will be a measurable impact on atmospheric carbon dioxide concentrations for decades. After all, despite international agreements like the Kyoto Protocol, growth in atmospheric carbon dioxide is accelerating:

Figure 1. Atmospheric CO2 concentrations at Mauna Loa Observatory

The reason for this — as has been discussed here on several occasions — is that global carbon dioxide emissions are presently being driven by developing countries. If 10% of drivers in developed countries switch to electric cars it may help the energy security of those countries, but we should not harbor the illusion that this will do anything to combat climate change.

Readers who have specific questions can send them to ask [at] consumerenergyreport [dot] com or leave the question after this post (at the original source). Consider subscribing to our YouTube channel where you’ll be able to view past and future videos.

Link to Original Article: Electric Cars & Keystone Impact on Gas Prices — R-Squared Energy TV Ep. 23

By Robert Rapier

A couple of months ago, Robert Rapier, Sam Avro, and I had an interesting debate about the resource curse in the context of a Tom Friedman column about how countries that aren’t blessed with natural resources succeed because they are forced to invest in their people. I believe, as my post (Oil – Easy to Produce, but Not Easy to Buy) said, that countries blessed with natural resources like oil “don’t have to learn how to build factories” because they can sell oil to the world instead. Robert and Sam cited countries like Norway, the U.S., and the U.K. as examples of countries that have thrived even with resources.

The new edition of The New York Review of Books features an article, “What Makes Countries Rich or Poor?” written by Jared Diamond that is a review of Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson. This is another book to add to my ever-growing list of ‘must-reads’ – but Diamond’s review gave some interesting points that are very relevant to our previous discussion about the resources curse and what causes countries to grow or fail. The truth, as shown by the article, is complicated: there are many determinants to growth, and  it is difficult to separate out individual causes.

What Determines Growth: Geography or Institutions Built by Society?

Diamond, the author of Guns, Germs, and Steel and Collapse: How Societies Choose to Fail or Succeed, is probably the leading voice, along with economist Jeffrey Sachs, of the school that argues that countries are most affected by their geography. Essentially, they argue that tropical countries are cursed by their location. This “Geography is Destiny” school argues that tropical countries, especially those in Central and West Africa, are undone by a combination of poor soil quality, lack of access to world markets (few good ports or navigable rivers), and endemic disease that makes it virtually impossible for them to sustainably grow out of poverty.

On the other hand, the authors Acemoglu and Robinson, along with economist William Easterly, are leaders in what could be called the “Institutional” theory of growth. They argue that it is the governments and institutions that our societies create which determines how successful a society becomes. Essentially, it’s our government, not our environment that decides our wealth over the long term.

I would recommend reading Diamond’s article in its entirety, as he does an excellent job of showing the differences in opinion between the two sides, without falling into pointless argument (something Easterly and Sachs are unable to do with each other). His article does show some interesting debate about the “resources curse” which Robert and I debated.

The ‘Resources Curse’

Acemoglu and Robinson’s book argues that resources like oil, diamonds, or minerals ironically make endowed countries end up worse-off than countries with no natural resources. Diamond writes: “the result of the many ways in which national dependence on certain types of natural resources (like diamonds and oil) tends to promote bad institutions, such as corruption, civil wars, inflation, and neglect of education.”

They note that forward-thinking countries like Norway, Botswana, or Trinidad and Tobago have avoided these problems by investing the proceeds in separate accounts marked for economic development or education. The key part, however, that they note is that the very nature of their institutions means that they wanted to share the proceeds of the country broadly. In other words, because they had strong institutions, they have been able to avoid the resource curse. Diamond specifically identifies that the U.S. does not count for the resources curse because of how large and diverse the economy is; oil production is too small relative to total production to cause a ‘resource curse’.

This argument is relevant today because we are drilling for oil and mining for minerals in more remote countries and environments than ever before. Where drilling used to be in established areas, like Texas, Saudi Arabia, and Russia, it is now moving to offshore Brazil, the Arctic, and Mozambique. Whether the institutional capacities of these countries and regions are sufficient to avoid the resource curse will be one of the deciding factors in which countries thrive in the 21^st Century.

I wanted to take the opportunity with this inaugural post to introduce myself and provide you — the reader — a brief sense of where I am coming from and what you can expect to see here on Choke Points.

First a little about myself. I am a national security and foreign policy analyst in Washington, working largely at the crossroads of science, technology and national security policy. My interests in technology and security policy has given me an opportunity to work on a broad range of issues — from cyber security to the impact of climate change on the U.S. Armed Forces. For the most part, though, my particular focus has been on natural resources and security (energy and climate change in particular), first at the Woodrow Wilson International Center for Scholars, and now at the Center for a New American Security (CNAS), a non-partisan national security and defense policy think tank.

It is worth noting too that although I have applied this functional research area to analyze resource issues in a few regions around the world (Africa and the Middle East, for example), you’ll notice from my writings that my particular regional focus is the Asia Pacific. My fascination with this region has been influenced largely by the year I spent living in Auckland, New Zealand where I was on exchange as an undergraduate student at the University of Auckland. Although New Zealand seems remote from the rest of the Asia Pacific (and it is), culturally the country is well connected with the rest of Asia, countering what would otherwise be a real feeling of isolationism from being so deep in the South Pacific. Moreover, the international affairs program at the University of Auckland keeps a finger on the pulse of everything going on in the Asia Pacific.

Finally, in my spare time you can either find me at Georgetown University, where I am deep into my masters program at the Walsh School of Foreign Service, in the stands at Nationals Stadium or plying the Mount Vernon Trail on my road bike.

National Security Implications of Resource Consumption

I hope that Choke Points will be a bit of a departure from the other commentary you are used to reading on Consumer Energy Report, specifically through my discussion of natural resources broadly and their connection to national security and foreign policy.

A disclaimer: the commentary you’ll read from me will almost never focus on domestic policy. Andrew, Robert and others have a comparative advantage in understanding and explaining the nuances of domestic policy much better than I can. To the extent that I focus on domestic policy, it will be through suggested policy recommendations that Congress should enact to enhance our national security and foreign policy agenda.

For more than three years at CNAS I have worked on what we call “Natural Security,” exploring the broad range of natural resource trends and how these trends interact with U.S. national security and foreign policy interests. One of the things you’ll notice in my posts is an effort to connect resource trends with each other and their implications for U.S. national security and foreign policy. You’ll see many mentions of water, strategic minerals, and fisheries, and how these resources may be directly or indirectly linked with energy and climate change issues.

Take for example some previous work I have done on the South China Sea where I have explored how China’s thirst for water in the Mekong Delta has contributed to uneasiness over energy resources in the South China Sea region. China’s unilateral dam construction on the Mekong River has exacerbated concerns among downstream neighbors (particularly Vietnam) that China will exploit the region’s natural resources with little regard for others’ concerns. Consequently, when it comes to the potentially hydrocarbon rich South China Sea, Vietnam and others cannot credibly believe that China won’t exploit offshore oil and natural gas reserves in contested waters given that its past record rings of resource nationalism. As a result, diplomacy becomes more difficult to craft, tilting the balance of action away from cooperation. This is a challenge for U.S. policymakers charged with diffusing tensions in the region. (Read more in “Chapter 5: The Role of Natural Resources in the South China Sea” in Cooperation From Strength: The United States, China and the South China Sea.)

Why “Choke Points?”

Finally, a note about the blog title: Choke Points. Yes, it is in part a play on some of my interests on maritime issues, like strategic energy choke points such as the Straits of Hormuz and Malacca. But more than that, it is a commentary on the state of thinking about natural resource issues in national security and foreign policy making. In the several years I have been working in Washington I have come to find that resource issues are a strategic choke point in our national security policymaking. We have come a long way, to be sure, but the U.S. government has not yet fully thought about how resource issues affect our broader range of national interests. In fact, in my experience resource issues only arise in security conversations on an ad hoc basis. We can do better. Natural resource issues — energy and climate change in particular — need to be more routinely integrated into the broad range of national security planning documents — from the National Security Strategy to the Guidance on the Employment of Forces (used by U.S. Geographic Combatant Commanders), as well as security planning exercises, such as war games and foresight exercises.

Resource issues can no longer be a choke point in our national security and foreign policy planning. Unless the U.S. government continually examines natural resource issues through a security and foreign policy lens, questions will be asked and go unanswered, with dangerous consequences for the country. Could water shortages undermine stability in Iraq? Could a severe natural disaster reverse Myanmar’s political progress? Could India’s foray into the South China Sea for energy resources provoke confrontation with China? These are the types of questions we need to be exploring; and it’s these issues I seek to raise here on Choke Points.

I look forward to your feedback along the way and hope this will be an interactive exchange. I by no means have all the answers and expect you the readers to help me better understand these complex issues where you can.

Imagine that you were considering buying a home. However, let’s say your income is inclined to wild swings and the mortgage interest deduction is only approved on a year by year basis. Perhaps it is allowed to expire on occasion. In a situation like this, you would be wise to be very conservative with your purchase, or to even forego the purchase altogether.

This is analogous to the way energy companies plan and execute projects. Decisions hinge on the economics of the project. These projects are large capital expenditures and they only pay out over many years. Thus, when considering the economics of a project, it is important to have a stable environment around regulations and tax policies. Failure on these two items makes for dysfunctional energy policy.

Below are three recent examples of an unstable environment that can result in projects that will be either delayed or cancelled because  of the uncertainty this causes for project economics.

Case 1: The Production Tax Credit (PTC)

The Renewable Electricity Production Tax Credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by renewable energy resources such as wind, biomass, geothermal, landfill gas, and hydropower. Solar power is eligible for various subsidies, but is not currently eligible for the PTC.

The PTC was originally established by the Energy Policy Act of 1992 to incentivize renewable energy technologies for power production. Since it was first established, the credit has lapsed on several occasions only to be later extended — generally in periods of only one or two years at a time.

Congress is once again debating an extension of the PTC, set to expire again at the end of 2012. The constant political posturing over the PTC creates uncertainty for renewable energy developers. If we as a nation believe that we should encourage production of renewable electricity (and I do believe we should), these extensions of one or two years at a time are not helpful.

On the other hand, there are technologies that may never be competitive and that will need subsidies forever to survive, and that is not a prescription for success either. So a reasonable compromise — in my view — is to extend the PTC for a long period of time but reduce it over time. The current credit is 2.2 cents/kilowatt-hour for power derived from wind and geothermal, as well as for some biomass power plants. The credit is 1.1 cents/kilowatt-hour for some of the other options like power from municipal solid waste.

One might envision a 10-year extension in which the credits drop by 10% each year. Through a combination of economies of scale and improving technology, the economics should improve over time. If they do not, then opponents of these subsidies will have some assurance that we will not subsidize uneconomical options forever.

Case 2: End Polluter Welfare Act

Senator Bernie Sanders, an Independent from Vermont, has cointroduced legislation with Minnesota Democratic Congressman Keith Ellison called the End Polluter Welfare Act. The legislation is aimed at domestic U.S. oil companies, and with a title like that is there any wonder why our level of discourse on energy is so dysfunctional?

Senator Sanders does have an agenda, but it isn’t based on being informed on energy matters. He has made highly inflammatory comments on the Senate floor about ExxonMobil which PolitiFact.com deemed “false” after fact-checking his statements. He promoted misinformation on the Senate floor, and that misinformation has been repeated endlessly. So with this kind of misinformation running rampant (and it certainly isn’t just him) among our elected officials, it should be no surprise that we get ignorance-based legislation.

Senator Sanders lists the “welfare” he proposes to eliminate on his website. I would be willing to make a bet that Senator Sanders knows neither the purpose of the tax incentives he proposes to eliminate, nor the projected impact from doing so. I am not going to go through them here; you can refer to some of my previous columns (here, here, or here).

The biggest problem with the legislation is that it is not conducive to U.S. energy security. It is legislation that is politically driven, and if oil prices decline it is a prescription for a rapid decline in domestic drilling. In other words, it isn’t sensible long-term energy policy.

There are ways to capture more revenue from oil companies when oil prices are rising, and I will detail that in a future column. My proposal would actually capture more revenue than Senator Sanders’ proposal in an environment of rising oil prices, but would not have the same chilling impact if prices fall.

Case 3: Navy Purchases of Biofuels Curtailed

One of the top priorities of Navy Secretary Ray Mabus has been to aggressively pursue biofuels for Navy ships and planes. The Navy’s goals are summarized in a 2010 interview that I conducted with Tom Hicks, who is the Deputy Assistant Secretary to the Navy (Energy). In part, Mr. Hicks said:

“So what we are saying is that by 2012, to test the fleet and do the local ops that I mentioned with the Great Green Fleet, we need 8,000 barrels of biofuel. To deploy that in 2016, we need 80,000 barrels. Those are certainly quantities that – we have talked to industry – and they will have no problem with delivering. By 2020, we go from 8,000 to 80,000 to 8 million barrels, is what our need is to meet that goal of 50% alternative fuel. So if we were to sit passively back and not send out the demand signal, perhaps we would have a different outcome. We choose a leadership position, and part of that position is sending out a strong demand signal to the market, that if you can deliver this; if you establish this; if you can meet it at a competitive cost long-term, then this is something we are going to commit to.”

In support of these objectives the Navy has made major purchase over the past few years of biofuels made from various feedstocks, including algae and camelina. However, the prices paid were well above the price of petroleum-derived fuel, and last week the House Armed Services Committee voted to put a stop to the practice — once more marking an abrupt change in energy policy.

Again, whether you agree or disagree with the Navy’s commitment to purchase biofuel, here is another example of changing legislation that can totally stunt the development of advanced biofuels. If you are an opponent, you may think this is a fine idea, but there has to be a better way.

The biggest problem with the Navy case is that the amounts paid for the fuel were 4 or 10 or even 100 times more than the price paid for petroleum-derived fuel. Further, the prices paid were not transparent. The fuel contracts frequently contained money for research which made it difficult to determine exactly how much was paid for the fuel. I think it was fairly obvious that this sort of practice would eventually be stopped, but as in the case of the PTC it would have probably been politically feasible to provide long-term incentives that phase out over a period of 10 years or so.

Conclusions

Excerpting from my book:

“A sound energy policy should take into account the supply side, the demand side, and the possibility that projections will be wrong on one or both counts. Energy policy decisions must also factor in the impact on current and future generations, and they should be capable of weathering changing political climates.”

In order to develop long-term alternatives to oil (or as in the previous example, to develop our domestic oil), it is important that the rules don’t change every 2 to 4 years. Energy projects span much longer than election cycles, and if energy policy can’t withstand changing political climates the result is paralysis.

I believe the best possibility of passing energy legislation that is stable for energy producers, yet palatable to both major political parties is to build in mechanisms that either phase out subsidies over time, or that automatically change tax incentives based on the price of oil. However, even then there is nothing to prevent the next election from ushering in new leaders who will completely overturn existing energy policies.

Thus, the real reason we have dysfunctional energy policies is that we elect dysfunctional leaders. We just have to figure out ways of working around them.

Link to Original Article: If We Only Had an Energy Policy

By Robert Rapier

This article was written very poorly. At first read, it would appear that the 1,000 watt system costs $1,099.95, but going over to Amazon, that is just the price of one panel whose rating is 240 watts.

At about $4.58/watt, these panels will not produce electricity to pay for the finance charges alone. You will not be able to recover your investment on this, as the panels deteriorate through time.

If the 1,000 watt system costs $1,099.95, it would truly be disruptive as it will be feasible. But no, this solar PV will not cut it, still too expensive. If they can just sell these to about $2/watt, then it would be very worthwhile, given that you will mount these yourself.

On the other hand, I think this concept has potential (no pun intended). I bought a cheap solar inverter last year similar to the one in the above article just to experiment with. You connect one end to a solar panel and plug the other end into a wall outlet. The device converts your solar panel’s low voltage direct current into high voltage alternating current. Because the voltage (electric potential) from the inverter creates an electric version of back pressure against the voltage from the power company, it will reduce the amount of power coming into your house from the power line, which will slow down your electric meter, reducing your electric bill.

Modern homes tend to have significant phantom loads (appliances that draw a small amount of current even when you turn them off or when not in use): computers on standby, DVRs, televisions, motion sensors, the clock in your microwave and stove, tuners, routers, furnace, thermostat, chargers, and on and on.

Not many people have a thousand watts of phantom load so purchasing a thousand watt system would be a waste unless you plan to run things like the dishwasher, and clothes dryer etc. in sequence the whole time the sun is shining.

These inverters are intended to supplement your house power grid, not to spin your electric meter backwards. They will not send power (Volts times Amps) to your house wiring if there is no voltage coming to your house from the power company. This is to protect electricians who may be working on wiring inside or outside your house when the power is off. They of course, also won’t reduce phantom loads when the sun isn’t shining.

The inverter I purchased off Amazon cost about $100. It isn’t UL listed so I wouldn’t want to place it anywhere that might start a fire if it blew up. The one mentioned in the above article is, in theory, UL listed. I was testing one out just last week in my drive way. I had it plugged into a Kill-A-Watt to see how much power it was supplying for a given solar panel angle. A neighbor walking by asked how much it was producing. When I said “About 35 watts,” he suggested it would never pay for itself, and he was right. But then again, when did granite counter tops ever pay for themselves, or produce any power for that matter? A system like this could be viewed as a high-end appliance to reduce phantom loads.

I’m not recommending that people run out and purchase these because they are of questionable quality at this stage of their development, and I’m also not sure of their legality. I can envision a day when systems like this that cost less than a $ 1,000 might be (as insulation and double pane windows already are) required by building codes in sunny climates to reduce the impact of the significant and growing phantom loads. And who knows, if the price gets low enough, builders and home owners may start installing them to show off to neighbors.

Readers who have specific questions can send them to ask [at] consumerenergyreport [dot] com or leave the question after this post (at the original source). Consider subscribing to our YouTube channel where you’ll be able to view past and future videos.

Link to Original Article: The Most Important Problem in Renewable Energy — R-Squared Energy TV Ep. 22

By Robert Rapier

A recent study published in the subscription only Nature Climate Change (which I do not have a subscription for) found the price Americans are willing to pay to have 80 percent “clean” energy by 2035. Drum roll please  … $13 bucks a month.

The researchers went a step further and calculated that the cost would have to drop even further to overcome political barriers:

The researchers — Joseph E. Aldy, Matthew J. Kotchen and Anthony A. Leiserowitz — ran a what-if exercise and found the current level of public support insufficient to overcome entrenched opposition in Congress.

Majority rule does not really apply there, of course: getting anything controversial through the Senate, for example, requires 60 votes to break filibusters. With some number-crunching and assumptions about how preferences back home would influence the votes of lawmakers, the researchers found that the annual added cost per household of a clean energy policy would have to drop below $59 a year to pass the current Senate and below $48 a year to pass the current House.

Ignore for now that there is no consensus as to what constitutes a clean energy source. The survey also assumed that 80 percent “clean” energy was technologically and economically feasible, which is about as useful as asking people how much they would be willing to pay to vacation on Mars.

Their willingness to pay declined if nuclear or natural gas were included in the definition of clean. Not having access to the full study, and judging by the name of the journal, I am assuming that by clean, they meant sources that produce the least amount of greenhouse gases:

Justin Gillis of the New York Times interprets this to mean that …

If we are going to bother with it at all, the public seems to feel, we might as well go deep green.

Riiight …deep green, whatever that means. Almost all “deep green” energy today, by my definition, comes from the combustion of plant material and the damming of river ecosystems. Scaling either one up will exacerbate the extinction crisis. Read Will mega-dams destroy the Amazon? Then read Wildlife in the tropics plummets by over 60 percent and Greening the world with palm oil?

Over the last 20 years renewable energy in the U.S. has gone from 11% of our mix to 10%. From How wind power fits into our energy diet:

The Natural Resources Defense Council and the Sierra Club have recently joined forces to try to stop a solar project in California:

“…the Calico project covers 4,000 plus acres of important wildlife habitat in the Pisgah Valley, including key desert tortoise habitat.  Building this solar power plant would also threaten at least six other imperiled species such as burrowing owls, golden eagles, Mojave fringe-toed lizards, Nelson’s bighorn sheep and several rare plants.”

Photo courtesy of j03 via Flickr.

In the Arctic Sea, where there has been very little economic, social, or military activity, borders are not clearly defined and tested by international law. That is changing swiftly, as Shell prepares to move significant personnel and drilling equipment to the Chukchi and Beaufort Seas north of Alaska this summer for the first time. Other countries to are joining a “Race for the Arctic“ as countries and companies seek access to newly available oil and gas. As countries compete for these resources, the U.S. needs to become a party to the UN Convention on the Law of the Sea in order to define American exclusive rights.

Under customary maritime law, the U.S. has access to its exclusive economic zone (EEZ) out to 200 nautical miles from shore. That means that the U.S. can allow, regulate, tax, or prohibit any economic activity in this area. The most obvious economic activities are offshore drilling and fishing. The EEZ is different from territorial waters in that the EEZ is considered international waters, but territorial waters — through which states must still allow ‘innocent passage’ of ships — are considered fully part of sovereign territory.

Under UNCLOS, the EEZ for resources on or under the seabed can be extended a further 150 nautical miles (for a total of 350 nautical miles from shore) if it can be proved that the continental shelf extends that far.

IISS' Map of the Overlapping Sovreignty Claims in the Arctic

In the Arctic, all the other littoral states — Canada, Denmark (for Greenland), Norway, Iceland, and Russia — have put their claim for extended seabed EEZs into the UNCLOS secretariat for the purposes of claiming the seabed rights to the undiscovered resources, but because the U.S. is not a party to UNCLOS, the U.S. has not submitted any claim. The map, provided in the IISS’ (my former employer) 2012 Military Balance, shows how some of those claims overlap. Because the U.S. has not ratified the Convention, American diplomats are not at the table when those territorial claims are arbitrated.

This past Wednesday, I attended a forum hosted by the Pew Charitable Trusts and the Atlantic Council which brought together some of the nation’s most important business and national security leaders to call for a ratification of the Law of the Sea. Secretary of Defense Panetta and Chairman of the Joint Chiefs Dempsey, former Senators Lott, Warner, and Hagel, and former Director of National Intelligence Negroponte all expressed their strong support for passage of the treaty. Pew has founded a group called the American Sovereignty Campaign (www.ratifythetreatynow.org) to call for a ratification of the UNCLOS in the Senate. Not surprisingly, two of the most supportive Senators are Alaska’s Senators Begich and Murkowski.

Ratification of the Law of the Sea Treaty is a tool to expand and confirm American sovereignty without resorting to military force. The Arctic Ocean is the region in which American sovereignty is most in doubt. The Navy and Coast Guard can unilaterally protect and extend American sovereignty in that region, but joining the UNCLOS would be a better way to confirm that sovereignty in law.

However, I did manage to recently finish Peter Tertzakian’s A Thousand Barrels a Second : The Coming Oil Break Point and the Challenges Facing an Energy Dependent World. This one had been on my bookshelf for a while (as opposed to the growing stack of books I have been sent to review), but it has been pretty high on my list of books to read.

The book was written in 2006, and the author made what turned out to be some very accurate predictions about the volatility and higher prices ahead in the oil markets. (Here is an interview with Jon Stewart shortly after the book was published). His writing style is different from mine, but many of the themes he wrote about are the same themes I write about: Growth in developing countries, loss of spare production capacity — we even both talked about the transition from whale oil to crude oil in our respective books. However, he went into much greater detail on that topic, and I found that to be one of the most enjoyable sections in the book. The author shows that even in the days of whale oil, producers were trying to establish cartels to control prices.

One very interesting issue he writes about is the rate at which energy substitutions have taken place throughout history. Moving from wood to coal took 75 years, which was the fastest substitution in history. Coal to oil took 100 years (but of course coal never went away; it just lost market share to oil). The point is that a transition away from oil is likely going to take far longer than many people believe. There is no historical precedent that shows that these transitions can occur quickly.

The author also says that over the past 100 years, there has only been one new large-scale energy platform introduced: Nuclear power. He says that there have been eight large-scale platforms (although he does not define “large-scale”) in the history of energy: Wood, whale oil and animal fat, coal, oil, natural gas, water (hydropower), and uranium. He acknowledges that several renewable technologies could be added to the list, but argues that their lack of scalability will make it difficult for them to make a fast, large-scale contribution to the global energy mix.

He describes four phases that a society goes through as they undergo energy transitions: 1). Complain and pay up; 2). Conserve and increase efficiency; 3). Adopt alternative energy sources; and 4). Make societal, business, and lifestyle changes. When the book was written in 2006, he argued that the world was still solidly in the “complain and pay” stage. During this stage politicians will tend toward gridlock and finger-pointing, as pursuit of real solutions and a movement away from the status quo is politically risky. We are still very much in this phase, as evidenced by the political posturing over energy issues, but we have made some progress in Phases 2 and 3. Some might argue that we are making progress in Phase 4, but I think the sort of changes he is talking about are far greater than what we have seen to date. I expect the sort of change he is talking about might involve (as an example) an end to affordable commercial airline flights.

The core message of the book is one that is very close to my heart, and that is that we need a good dose of pragmatism. Yes, we always have to make trade-offs in our energy options, but these trade-offs need to be carefully considered. We can all name many negatives from our oil dependence, but then we generally take for granted the many positive impacts that oil has on our lives. Because of this, we may pursue impractical solutions that will be quickly tossed aside if they can’t fill the role that petroleum currently fills. The image of an oil-covered bird is very powerful, but it may push us into trade-offs that endanger far more that just birds.

Generally when I read a book about energy, I find myself making little notes on points of disagreement. I was about 90% finished with this book before I finally started to find some significant points of disagreement, and those were about some of the specific details of how the author feels like the future is going to play out. On this particular point, he envisioned himself in the year 2017, after we had gone through some very painful readjustments with respect to our oil consumption, and that he was purchasing one of the first commercially available hydrogen cell vehicles. I just don’t think that’s going to happen, and certainly not by 2017. But that’s a minor point, and one that does not detract from the strength of this book.

In summary, this was a really great book that doesn’t take political sides, and a book that has thus far stood the test of time. Many of the author’s predictions from 2006 have taken place or are in the process of taking place. If you want to have a better view of how the future is likely to unfold with respect to energy, I think this book does an excellent job of laying that out.

Link to Original Article: Book Review: A Thousand Barrels a Second

By Robert Rapier