JeffVail.net - Law, Energy, Geopolitics, and Organizational Theory

The Renewables Hump 7: Can We Transition?

2009-07-06T02:53:00.000-06:00

Last week, I argued that the "true" EROEI of solar and wind power is far lower than that commonly advertised--closer to 1:1 for solar (photovoltaics) and 4:1 for wind power. Additionally, these EROEI values don't account for the energy cost of the transmission, storage, and conversion to electric power that will be required in any large-scale transition to renewables. Where does that leave us? Does that mean the "transition" is dead in the water? I don't think so? But I also don't think this means that we can continue under the assumption that the EROEI of renewable technologies are high enough (if only we had political will, etc.) to facilitate the continuation of business as usual.

Simply put, we are presented with a series of unknowns. People may (and will) continue to claim that the "true" EROEI of renewable X is 20:1, 40:1, 100:1. We must recognize that we don't know these values to be true--they are probably sales pitches, and even if they are truly disinterested, they are guesses at best. Until we have a verifiable methodology to calculate an unbounded EROEI value for a technology (and price-estimated EROEI does not claim to be such a solution), we will continue to only guess. Others may argue that renewables are all less than 1:1, or less than some value higher than 1:1 required to keep our society afloat. They mary argue that we should abandon renewables investment entirely on these grounds, but this is also just a guess.

In light of this uncertainty, I think it is clear that we must take a highly conservative approach, and focus immediately on efficiency and conservation. One thing we can known for certain: the EROEI of conservation is more than 1:1! However, we must also recognize that efficiency and conservation alone cannot solve the root problem presented by a society and economic system predicated on perpetual growth.

I think this uncertainty is a compelling argument for shifting toward a non-hierarchal mode of civilization (as I suggested in The Problem of Growth) as a means to address this core problem of growth. However, I do not expect humanity to voluntarily and proactively make such a switch. I do, however think that there are tremendous opportunities for businesses, individuals, communities, and regions that successfully make such a switch (to what I have called "Rhizome," John Robb has called "Resilient Community," etc.).

Initially I had hoped to lay out an empirical analysis of our ability to transition to a renewables-driven society. In some senses, the analysis of our ability to transition at a given EROEI is very interesting. For example, at 3:1 EROEI returned over 30 years, what is timeline to transition 50% of our current energy use if we accept that it will be politically and economically impossible to divert more than 10% of global energy production into renewables investment? It was my plan to conclude this series by answering (with pretty graphs, no less!) several questions like this. However, I fear that such an exercise is largely meaningless: I have been unable to come up with a verifiable proxy for EROEI measurement, and without that I would only be addressing hypotheticals. Worse, questions that will be permanently hypothetical.

Instead, I am left with only a confirmed sense of uncertainty. Perhaps that uncertainty is itself valuable. If I have poked holes in (what I believe to be) the widespread assumption that we can surely transition to a renewables-driven economy if only we make the decision to do so, then perhaps this series has been of value. If I shift the discussion (even only in my own mind) toward what to do in light of this uncertainty, then I will feel that this has been worthwhile. It is in answer to this last question that I am most excited: I plan to focus more in the future on decentralized, networked, open-source, platform-based systems that we can use to simultaneously build resiliency, address this fundamental uncertainty, and address the problem of growth by reducing the hierarchal nature of our civilization.

It's also worth noting that there will be significant--though largely superficial--shift in the focus of this blog over the next several months. Increasingly, I will work to write posts about law, legal systems, and legal processes. While this will result in a reduced coverage of energy-related issues directly, it will still be the result of my core interest in systems, systems theory, and structural anthropology. I've been writing about energy for some time now as a result of my view that our energy problems are the most significant and visible symptom of these deeper, structural systems. I will write about law in the same light. In part this is due to my (interim) conclusion that the uncertainty surrounding the kind of precise numbers that would be required to make definitive energy decisions is insurmountable. In part, it is because law is my chosen profession, and I would like to increasingly merge this intellectual interest (systems theory and structural anthropology) into my vocation.

The Renewables Hump 6: EROEI of Solar and Wind

2009-06-29T10:30:00.000-06:00

As my brief pause from posting may have suggested, I'm struggling with how to best tackle the next step in this series. To recap, so far I've been discussing the "true" EROEI of renewable energy sources--meaning the measurement with no artificial boundary for accounting--and the need and challenges for calculating this figure. My plan was: 1) work through a few price-estimated EROEI calculations (at least one recent solar and one recent wind project); 2) show that these price-estimated EROEI figures are too low to support envisioned transitions to renewable energy sources; and then 3) argue that, while this method of calculating EROEI is itself suspect, until we come up with a better method for calculating boundaryless "true" EROEI, we must seriously scrutinize the viability of the predominant transition vision.

I've been having a difficult time figuring out how to best make this into a solid argument. My initial desire was to use a very numbers-driven approach. I never intended price-estimated-EROEI to provide some verifiable, "true" EROEI figure, however (it is intended more as a reality-check backstop), so I've been concerned with proceeding on such a numbers-driven approach with price-estimated EROEI as the foundation. To be honest, I was hoping that, in writing this series, I would arrive at some far more accurate and transparent means of calculating "true" EROEI. Unfortunately, the result has been the opposite--while I am still convinced of the value of price-estimated-EROEI as a reality check, its inherent flaws have been well highlighted by my own efforts to refine it, and especially by the very thoughtful comments that I've received.

Therefore, I now think it's best to embrace this fuzziness--to use the price-estimated-EROEI in its originally intended role of reality check. While I'm concerned that my critique of the "renewables transition" will now be more logic-driven and less hard numbers-driven, I am increasingly OK with this shift (a decision process which, in part, explains my lack of recent posting). I've arrived at this conclusion because a logic-driven approach actually seems more true to form: I've been arguing for some time that "true" EROEI is fundamentally impossible from a nuts-and-bolts accounting perspective. Instead, we must use proxies to measure emergent phenomena--such as market price--to estimate its value.

That said, here's my current plan: Below I'll outline my calculations of the price-estimated-EROEI of one recent solar project and one (less) recent wind project. Next week, I'll argue the impacts--and uncertainties--of these numbers on the viability of the "renewables transition." Following that, I'll address a number of ancillary issues: an analysis of the minimum EROEI for society (drawing on, but to some extent disagreeing with Hall's work on the same topic), a discussion of the carbon-impact of the "renewables transition," and I'll conclude with, hopefully, some general guidelines for going forward amidst this uncertainty.

Solar Example: Downtown LA Solar PV Installation: This 2009 installation is my example for price-estimated EROEI calculation. I think it's a good example (no example is perfect) for several reasons: at 1.2 MW, it's modest in size, but large enough to reap economies of scale; because it is installed on an existing roof space, there is no land cost associated with the installation (that, in some circumstances, could present acquisition costs or environmental compliance/impact statment costs not truly representative of net energy issues); because it is in California, where the average cost of electricity (and especially peaking "sunny day" electricity that solar provides) is higher, it will provide a more conservative estimate; because it is located in the downtown of a major metropolitan area it will not require significant transmission investment to provide a true measure, and is therefore also more conservative. Finally, there are good cost and output numbers available for the site.

Basic data: 1.2 MW array installed 2009 in Los Angeles, cost $16.5 million up front (ignoring rebates/tax credits/incentives), projected financial return of $550,000 per year. At the rough California rate of $.15 per KWh, that's about 4 GWh per year (conservative).

Price-Estimated-EROEI Calculation: The $16.5 million up-front is, at $0.09/KWh (here using national average, as there's no reason to think that manufacturers would use primarily California peaking power to build this system), an input of 183 GWh through installation (I'm ignoring the realtively small maintenance costs here, which will also make the figure more conservative). If we assume a life-span of 40 years, then the energy output of this system is 160 GWh. That's a price-estimated EROEI of 0.87:1.

Wind Example: I've had a more difficult time finding a recent wind project where good data (on both cost and actual, as opposed to nameplate, output) is available. As a result, I've chosen a 2000 Danish offshore wind project at Middelgrunden. While up-front expenses may be higher off-shore (making the resulting EROEI more accurate for offshore projects than on-shore), I think this is a relatively modern installation (2MW turbines). If readers have more current projects with full data, please provide in the comments--another point for investigation is whether the price-estimated-EROEI of solar and wind have been improving or if they are holding relatively stead.

Basic data: Cost of $60 million, annual energy ouput 85 GWh.

Price-Estimated-EROEI Calculation: At the US national average rate for electricity ($0.09/KWh), the $60 million up-front energy investment works out to 666 GWh. Using a life-span of 25 years (and assuming zero maintenance, grid, or storage investment, making the result artificially high), the energy output comes to 2125 GWH. That's a price-estimated-EROEI of 3.2:1.

I'll let everyone chew on these numbers--and the various issues surrounding how they were derived--for the week. If you have access to similar numbers for other solar or wind projects (or numbers for tidal or geothermal), please provide them in the comments and we'll see if we can generate more figures. Next week I'll discuss the impact--and uncertainty--of these calculations.

The Renewables Hump 5: Proxy EROEI Measurement

2009-06-15T02:21:00.001-06:00

Today's installment will address two of the potential proxies for calculating "true" EROEI (meaning a calculation with no artificial system boundary) for renewable energy sources. Last week's post discussed the price-estimated EROEI theory, and this week I'll discuss two additional potential proxies. Up front, it's important to note that, much like the price-estimated theory, these proxies have significant weaknesses. I don't think either is yet ready for use, but talking through them helps to better define the issues surrounding proxy-calculation of EROEI, and may result in readers figuring out how we CAN make ideas like these work...

Asymptote location model:

The first proxy I'll discuss is--for lack of a better name--the asymptote location model. I'll start by noting that I think this model is still too incomplete to be workable. I include it here because I think it may be fertile ground for someone to develop. Here's the basic concept: under traditional EROEI calculations, there is an artificial system boundary drawn at some point, and the result is an artificially high EROEI (because those energy inputs outside that artificial boundary are not counted). My theory starts with the assumption that, as that system boundary is expanded, the resulting EROEI will approach some theoretical "true" EROEI that lies at an infinite, but uncomputable, system boundary. This is a classic example of an asymptote. If we can plot the degree of system boundary expansion on the Y axis, and the resulting EROEI value on the X axis, then X will approach the true EROEI value as Y approaches infinity (unbounded EROEI calculation). This, in theory, will allow us to fit an equation to a few points (which can be calculated) and deduce the location of the asymptote that represents "true" EROEI without actually needing to perform the impossible calculation of the unbounded EROEI analysis. The problem, of course, is that while it's quite possible to fit that X-value (EROEI) into a meaningful scale, but the same can't quite so easily be said about the Y-value. What does a "5" on the Y-axis (degree of system boundary expansion) mean compared to a "10"? What is the scale? Unless an 8 is double a 4 is double a 2 in some meaningful sense, the equation fit to locate the asymptote will provide a meaningless result. Can we create a meaningful scale for the Y-axis? Maybe. It seems possible to use the number of steps of regression (as in 1=just the energy used at the plant and installation, 2= 1 plus the energy used to create everything in the plant/installation, etc.) as a scale, but this is just speculation. This might be fertile ground for someone looking to develop the field of EROEI analysis, but it's not ready for prime-time at this point. I'm very interested in any ideas readers may have about turning this rough idea into a workable proxy measurement.

Worker-year model:

Neil Howes sent me a a very interesting calculation for wind energy that used the ratio of worker-years involved in the wind industry to total US worker-years as a means to determine what portion of total US energy consumption was required as input to US-produced wind capacity. His EROEI measurement came out at over 100:1, and I think significantly overestimates the true ratio because, like most EROEI calculations, it artificially limited the system boundary quite severely (for example, it based its worker-year number on a DOE study that estimated the number of wind-energy jobs that may be created for a set amount of production--this didn't include all the supporting industry jobs that would be created in mining, transportation, marketing, finance, training, etc.). Additionally, I think that the brute-force methods for calculating EROEI (input/output and process analysis) necessarily represent an upper bound to the "true" EROEI--they accurately count energy output, and are universally low (to an unknown extent) on their accounting for energy input. As a result, any proxy that estimates higher than the brute-force approach must be reconsidered.

The far more significant inaccuracy is that this methodology assumes a uniformity of the very EROEI it attempts to measure. The measurement is only accurate IF every worker-year can act as a proxy for an equal amount of US annual energy consumption--it can't. Instead, some workers (and their associated industrial/commercial processes) represent far more energy than others. This lays bare the problem with this methodology: it would come back with the same energy input for 1000 worker-years on a 50:1 EROEI oil well as for 1000 worker-years on a 3:1 EROEI solar plant, even where the energy generation capacity of each is the same--the energy input is not necessarily the same. I would argue that the energy input could be seen as the same IF we took a boundary-less approach to attributing worker-years, but then we get back to our overarching accounting problem.

I think that these two proxy-methodologies outlined above both present some potential for development, but neither is yet ready for actual use. They both present novel approaches to the proxy-calculation of EROEI, but seem to me unacceptably ill-defined--both when compared to brute-force EROEI calculations and when compared to the price-estimated theory of proxy-EROEI calculation.

Going forward, I'll look at both solar and wind, and I'll present a survey of traditional EROEI calculations as well as proxy calculations based on the price-estimated model. If readers have any thoughts on other proxy-methodologies to use (or how to make the asymptote or worker-year methods work), please let me know.

Thoughts on Rick "Duncan" Strandlof

2009-06-11T18:20:00.000-06:00

A little current-affairs bit that seems worth interrupting my Renewables Hump series (still hope to get a new post in the series up Monday):

I was on vacation from June 4-10, and had the chance to read the paper edition of the New York Times cover to cover each day. I was amused to see an article on a Colorado veterans advocate named Rick Duncan (here's a CNN article with no pay-wall). Turns out that Mr. Duncan, actually Mr. Strandlof, was a fraud--albeit a very successful and high profile one.

About two months ago I had lunch with Mr. Strandlof and LtCol John Flerlage (running for Congress in Colorado's 6th district, and certainly not a fraud). Ducan/Strandlof set up the meeting with the intent that I help LtCol Flerlage develop his energy and energy geopolitics platform. While I didn't speak with Strandlof for more than a minute or two, he seemed very sincere and interested--the same qualities, I'm sure, that brought him to a position of influence in Colorado politics.

While I disagree with Strandlof's fraud, my only first-hand impression of him was that he was doing important work. I won't profess that I understand what was going on in his head--we have more than enough media personalities who will happily discuss that without any real insight. What I can say is this: as a veteran, and as someone who worked (though very briefly) with Strandlof, I don't feel in any way hurt by his actions. Other than my assumption that the veterans energy policy conference he was setting up won't materialize as a result of his lies, his brief legacy is more likely to be increased awareness of veterans issues--something I really can't argue with.

The Renewables Hump 4: EROEI Issues

2009-06-08T01:29:00.002-06:00

As discussed in the last post in this series, the energy return on energy invested in renewable sources of energy will be a critical measure of whether it is possible to transition on a large scale from a fossil-fuel powered economy, or whether a global "powerdown" is eventually inevitable. If EROEI, the net-energy ratio of a renewable energy source, is high--say 40:1--then it should be possible to rapidly transition our fossil-fuel driven economy to a renewable energy base, and to support ongoing economic growth that requires ever more energy. If this ratio, however, is low--say 4:1--then at a minimum a transition to renewable energy will be extremely challenging, and may be effectively impossible. As a result, the actual EROEI value of the various renewable energy options available to us is plainly critical. There are lots of measures, lots of studies, and lots of figures floated about for the EROEI value of solar photovoltaics, wind turbines, etc. There is not, however, a universally accepted methodology for calculating EROEI. In fact, I don't think it's a stretch to say that EROEI figures are more likely to be marketing copy intended to secure venture capital than the result of rigorous inquiry.

In my opinion, understanding the reality of our society's ability to transition to a renewable energy basis for our economy is one of, if not THE most important issue to be resolved. If this transition is a realistic possibility, then it should be our society's primary and immediate focus. In addition, improving our understanding of just how realistic such a societal transition is will help us understand the necessary rate of investment in renewables, as well as the nature and degree of the challenges to be accomplished. If it is not realistic, then we must not waste what little surplus energy we have on a fools errand. In addition, the present understanding that such a transition is unrealistic will allow us to both develop and focus on those societal options that are realistic. Given the importance of accurate EROEI calculations, this post will discuss the current methodology issues with EROEI calculation and make recommendations for proceeding.

There are two generally used methods for calculating EROEI: process-analysis and input-output analysis. Both basically boil down to a brute-force accounting of energy used in various component processes of producing a renewable energy source, with the key differences being how wide a net is cast in counting energy inputs. For example, is the diesel fuel required to deliver the turbine blades to the installation site accounted for? What about the energy required to build the truck, divided by the percentage of that truck's useful life used in that delivery? What about fraction of the energy required to build the machine tools used in the manufacture of that truck?

This highlights the problem main problem with current system boundary calculations: you can regress these energy inputs infinitely far (e.g. what about the energy used to grow the rice eaten by the merchant marine captain who piloted the ship that delivered the metal ores used in manufacturing the bolts that hold together the turbine tower), and it's fundamentally impossible to use a brute-force accounting methodology to account for all energy inputs. If one hopes to use such a brute force approach (as used in both process-analysis and input-output analysis methods of EROEI calculation), then one must draw an artificial boundary for what is counted, and what is not. Is it acceptable to artificially constrain the accounted system? Clearly any artificial system boundary results in an artificially high EROEI, but how artificially high? Does this long-tail of non-accounted-for system inputs make the resulting EROEI figure 1% too high? 10%? 100%? 10 times too high? It's easy to dismiss, but how do we know if we are completely ignoring these long-tail energy inputs? I think there's great cause for concern that our EROEI is significantly over-estimated. For example, in a paper by Prof. Cutler Cleveland and others, the EROEI of wind-power is assessed by looking at over 100 separate EROEI studies. These studies are broken down into process-analysis and input-output methodologies. Prof. Cleveland notes that process-analysis generally draws a tighter system boundary than input-output analysis--that is, it counts fewer inputs. In that survey, the process-analysis EROEI measurements for wind average 24:1, and the input-output measurements average 12:1. That's a 100% difference based on where the artificial system boundary is drawn. In light of that significant difference, how can we be sure that a truly inclusive system boundary wouldn't result in a further 100% (or more) decrease in the measured EROEI? The take-away here is that we simply can't trust the accuracy of currently available EROEI calculations. Further, it seems unreasonable to place any credence in any brute-force (e.g process-analysis or input-output analysis) approach to EROEI calculation.

How can we get around the accounting difficulties and arrive at an accurate EROEI calculation--a calculation that can do more than just provide a comparison between renewables, and can actually provide a self-contained assessment of whether a given technology can facilitate a societal energy-transition? Odum has proposed what he calls an "Emergy" measurement that intends to account for a true EROEI measurement. However, while Odum recognizes the importance of an inclusive calculation, Odum's methodology does nothing to address these accounting issues, and the end result is still a brute-force estimate that suffers from the same methodological failings as traditional EROEI calculations (even if it tends to arrive at lower EROEI figures).

Rather than a brute-force approach that literally attempts to count all the energy inputs, I think it will be necessary to use a proxy to calculate "true" EROEI. One methodology that I've proposed for this task is to use price as a proxy for EROEI. I'll discuss briefly the theory of how this would work, as well as the clear problems with this approach.

It always struck me as fishy that various EROEI claims (especially for wind) result in an energy payback time of less than a year. In other words, these figures suggest that it would only take a few months to pay back all the energy required to build a wind turbine, and then that wind turbine would go on generating electricity for decades more. Why, then, didn't we already transition the vast majority of our energy base to wind if it's so efficient? The answer is that the financial payback isn't nearly so rosy. What accounts for the difference between the rapid energy payback (only months) and the much longer financial payback (often an order of magnitude or more longer)? Intuitively, it seems that at least part of the answer is that the EROEI wasn't accounting for many inputs that were counted in the financial analysis. For example, the financial analysis accounted for the high salaries--derivatives of the long years of training--that must be paid to the engineers, the financiers, the technicians, the managers, the materials scientists, etc. that are involved in the production of a wind turbine. These long years of education certainly represent an energy input, but aren't accounted for in either process-analysis or input-output analysis EROEI calculations. Similarly, the cost of raw materials represents, at least in theory, the full spectrum of energy, machinery, personnel, and support systems needed to extract, refine, transport, and market it--a great deal of which lies outside the traditional artificial system boundaries drawn in traditional EROEI calculations. It seemed to me that the financial cost of a renewable was a better proxy for the energy inputs to that renewable than were any of the accepted EROEI calculation methodologies. This is the core of what I've called "price-estimated EROEI," which uses financial cost as a proxy for energy cost. The basic calculation assumes that the entire cost of a renewable is made up--eventually, if one regresses far enough--by energy, so divides that cost by an average energy cost to arrive at the energy input, and then compares that as a ratio to the amount of energy the renewable will produce over its lifetime. Not surprisingly, this form of calculation tends to produce a far lower EROEI than any of the accepted EROEI methodologies.

Of course, there are acknowledged flaws with this price-estimated EROEI methodology. Just to name a few, it's difficult to account for the differing values of the various types of input energies and the resulting output energy; there are market distortions, tax-incentive distortions, geopolitical distortions, etc. That said, I think this type of proxy calculation at least directly addresses the need to calculate a truly inclusive EROEI, and may well be much closer to the "truth" of the required energy inputs than any traditional methodology.

In the next two post I'll address two other potential methods for measuring "true" EROEI: asymptote location and worker-year calculation (as suggested by Neil Howes). Then, I'll look at the EROEI of wind power and solar power from both traditional and proxy methods of calculation.

The Renewables Hump 3: The Target

2009-06-01T03:12:00.000-06:00

In he last post in this series, I discussed the criticality of accurately measuring EROEI of potential alternative energy technologies. If the EROEI of a renewable energy is high enough, then a relatively small initial investment of energy can lead to the rapid scale-up of renewable generation by bootstrapping its own energy production to finance (in energy terms) its own growth. However, if EROEI is too low, then the amount of energy that society must invest to meet a renewable target would be so great as to be effectively impracticable (because it would cause sufficient energy price spikes as to threaten so much immediate economic damage as to be politically impossible).

Before proceeding with this discussion of EROEI, I thought it would be worth defining what this target for a renewable transition actually looks like:

First, it's important to recognize that there are a variety of possible targets. Some include: a general transition target (either total transition to renewables, or transition to some arbitrary %), a peak-oil mitigation target, a peak fossil-fuel mitigation target, and a climate change mitigation target. All have differences and similarities. Clearly, its one can define a "target" that is plainly achievable, as can one define a "target" that simply can't be done (e.g. 100% transition in 5 years). As such, the definition of "transition target" represents an easily manipulable variable in any discussion of renewables transition. If two people or organizations don't recognize the same target, they'll be constantly talking past each other in discussing renewables and the practicality of transition. While I certainly don't think that I'll be able to convince all parties to adopt a unified transition target in this blog post, I do plan to argue for a threshold target that, in my opinion, represents a minimum rate of transition to keep the "viridian vision" of a renewable future possible: a peak oil mitigation target.

So, it seems clear that a renewable energy transition will need to, at a minimum, replace the decline in oil production with renewable energy generation. I'll elaborate on why I draw this line in the sand below, but in brief the viridian vision (by which I mean a general continuation of our current neo-liberal, capitalist/market-socialist civilizational structure into the distant future by leveraging technological advances and a transition to a renewable energy base and "green" economic foundation) requires that we maintain generally the same level of present energy consumption into the foreseeable future.

Why this focus on the "viridian vision"? I think my personal biases are clear: I'm very skeptical about the practicality of viridian vision--to be more plain, I don't think it's realistic, and further I think it's the modern opiate of the masses when it comes to confronting current energy issues. That said, I think anyone who refuses to recognize that both 1) the viridian may be possible, and that 2) it may be fundamentally impossible is taking a faith-based and irrational position. I don't want anyone to accuse me of hiding the ball as this series progresses--my own studies to date suggest that the renewables transition necessary to fuel the viridian vision is most likely not realistic, and my purpose in this series is to build an argument to this effect. I'm not trying to be pessimistic. Rather, I'm trying to prevent a waste of effort, focus, and our limited (and dwindling) supply of surplus energy on an epochal folly. For lack of a better analogy, it's a bit like our childhood fantasies: at some point, the little league baseball player needs to give up on the dream of becoming a star professional athlete and focus on a more realistic plan for the future. Sure, for any given kid it's a possibility to become the next big star, but it would be folly to advise all of them to pursue that dream at all expense.

It's also important to point out the obvious, that there are significant differences between the energy produced by renewable technologies (that, for our purposes, produce electricity) and the energy lost by declining oil production. In general terms, in order to use the electric energy produced by renewables to replace oil, there will be an additional energy cost required to transition the energy-consuming infrastructure to utilize electricity rather than oil. This will increase the overall amount of energy required to affect this transition. For the time being, I'll ignore this additional cost--the result is that my estimates will be more conservative than an estimate that would account for these additional transition demands.

One key argument in favor of the viridian vision is that we can mitigate peak oil with increases in efficiency and energy conservation. These arguments generally don't, however, address how we're going to meet the energy demands of 1) a growing population, and 2) a huge third-world population that wants to live at Western standards of energy consumption. The more optimistic population estimates show the Earth's population peaking at 8.3 billion, and more pessimistic estimates show population peaks between 9 and 13 billion. It's important to point out that may population estimates reason that population will stabilize--and then decline--because of the effect of bringing the standard of living of the world's poor closer to Western standards. Will the energy pressures presented by population growth and efforts to improve living standards roughly balance out any improvements in efficiency and conservation? I think so. In fact, I think that this is overly optimistic, and that demographic pressures will more than eat up any energy savings from efficiency and conservation. For this reason, I think that we must increase renewable generation capacity at the same rate that oil production declines--we can't count on efficiency and conservation to make up any of this decline.

Additionally, any renewables transition that attempts to mitigate peak oil must cope with the disparity between effective ramp-up rates and effective oil decline rates. It's nothing more than a simple issue of math: if you use a post-peak decline rate of 5% for oil decline, then that works out to about 4.4 million barrels per day of decline per year, gradually decreasing over time. Conversely, because the current renewable generation base is so small (excluding hydropower, which can't be easily ramped up), even a 100% per year increase in renewable generation comes nowhere close to mitigating this 4.4 million barrel per day decline in the early years. At some point, a 100% annual increase in renewable generation overtakes the declining annual oil production decline figure, but there is a significant gap, especially if we are currently at or very near peak oil. For this reason, we can't necessarily look at the rate of increase of renewables generation over a 20 or 30 year window, because this long-term view alone may overlook a very significant energy gap. It's possible that this gap can be filled with fossil alternatives that are not yet at peak--specifically coal and gas--but that's probably the best we can expect from such fossil alternatives given that they are already experiencing significant EROEI declines (and cost increases) and that their climate consequences may be incompatible with the viridian vision...

All of these values--renewable generation, population growth, conservation, efficiency--are arbitrary decisions. There are simply too many variables to produce a single, agreed set of assumptions on which to base a target estimate. Here, my goal is simply to make my assumptions (and their rationale) clear so that others can question them and change them if they wish. Ultimately, I'll continue with this Renewables Hump series using this peak oil mitigation transition target outlined below. If others have alternative targets, it should be relatively simple to apply the remainder of this series to those different targets...

Numbers:

In looking at these figures, I'm choosing to ignore hydropower, which has a current generation capacity of approximately 800 GW. My rationale is that hydropower is largely location constrained, and is not scalable in the way that other renewables (especially wind and solar) are. For example, only about 10 GW of hydropower were added in 2008. Compare this to a rough doubling in wind generation capacity.

The world consumes roughly 500 Quads per year (Quadrillion BTUs) from all energy sources. Of this roughly 186 Quads come from oil consumption. If you accept a post-peak decline rate of 5% per year, then that represents a decline of 9.3 Quads per year. 9.3 Quads equates to roughly 102.3 GW-years, or 896,000 GWh. To round that off, let's call it 100 GW-years, or 900,000 GW-hours. That's how much new renewable generation must be added each year going forward. That's the transition target. How does that compare with current renewable generation rates?

The current global installed (nameplate) solar capacity is about 15 GW, including about 5.5 GW added in 2008. That works out to roughly 1 GW-year of solar generation capacity added in 2008. One EIA study estimates that, under an "aggressive" growth scenario, total all sources of solar power could displace a total of 22 Quads of fossil fuel consumption by 2050 (that's the total from present to 2050, to an annual rate). Clearly this rate of transition is woefully insufficient to mitigate peak oil.

At the end of 2008, global (nameplate) wind generation capacity was 121 GW. That works out to roughly 42 GW-years of total global wind generation, of which 35 GW, or about 12 GW-years of wind generation was added in 2008. Combining solar and wind, we added about 13 GW-years of renewable generation capacity in 2008. That's a bit over 10% of the rate at which we'll need to add new renewable capacity each year just to compensate for a 5% global oil production decline rate (not to mention future natural gas decline, coal decline, etc.). There are two take-aways from this: 1) the current rate at which we are increasing renewable energy generation is an order of magnitude lower than that necessary to mitigate peak oil, and 2) the amount of energy invested in renewable energy projects at present does not pose the kind of energy drain that will be presented by investment sufficient to mitigate peak oil.

On this last point, mitigating a decline of 4.4 million barrels of oil per day each year with new renewable generation capacity will impose a significant up-front energy cost. If the energy payback time is 1 year for the mitigating renewable source, and this represents a 90% increase in current renewable energy investment, then we need to invest the equivalent of an additional 3.96 million barrels of oil each day to facilitate the transition. That's like adding another half of China to global demand, and that 1-year payback time assumes an EROEI of 40:1 on a 40-year generating life. If the energy payback time is 2 years (or a 20:1 EROEI) then you can add another full China to global demand. If it's 10 years (an EROEi of 4:1), then go ahead and add 5 Chinas. You can see where this is going--getting an accurate measure of EROEI, and properly understanding the mechanics of scalability, are critical before we can determine if it's possible to mitigate peak oil with renewables...

The Renewables Hump 2: Digging Out of a Hole

2009-05-18T02:57:00.001-06:00

In the first post in this series, I introduced the general notion that renewable energy requires an up-front investment of energy, and that this may dramatically impact our ability to transition to a renewable-energy economy because the transition effort will initially exacerbate the very energy scarcity that is its impetus. Beyond this general notion that the transition to renewables first requires exacerbating our current energy scarcity, the time that it takes a renewable source of energy to return the up-front energy invested in it becomes especially critical. Here’s a quick example (for the simplicity of these examples, I'm assuming that 100% of energy requirement is up-front with no maintenance requirement):

Let’s say you want to transition 1 million Barrels of Oil Equivalent per year (mBOE/y) of current global energy to a renewable source this year. If this renewable source (a concentrating solar power plant, for example), has an EROEI of 20:1, and will generate for the full-power equivalent of 40 years, then it will take roughly 2 years for the solar plant to return the energy invested in it. Over the course of 40 years it will generate 40 mBOE, and it will take the equivalent of 2 mBOE of energy invested up-front to enter operation. While this return-on-investment seems excellent, this up front investment of 2 mBOE is still very significant—it is an increase in global energy consumption roughly equal to the decrease caused by the current economic crisis—but the reward of a mBOE of renewable generation capacity every year for the next 40 years seem well worth the price. With this kind of EROEI, a transition to a renewable energy economy seems feasible, and it may be possible to affect such a transition quite quickly.

What happens if the EROEI of that renewable is actually only 4:1? Now it takes 10 mBOE to bring this renewable capacity into operation, and you won’t pay this back for ten years. In the meantime, where are we going to find an extra 10 mBOE beyond what we currently need to fuel our economy? The answer is that, of course, we won’t. We’ll instead reallocate our existing energy supply, displacing the most highly elastic 10 mBOE in demand. Prices will spike. And this is only to create 1 mBOE of renewable capacity each year. That’s enough to compensate for a decline rate of about 1.2% in global oil production—far lower than most post-peak projections, and less than ½ of 1% of total global energy use. Of course, renewables with an EROEI below 4:1 would present an even less feasible scenario.

This is an extremely simplistic example intended only to introduce the problem (more detailed examples will follow), but it highlights two issues:

First, the type of net-energy barriers illustrated by these examples only become an issue when significant amounts of renewable capacity are in the pipeline at once. If we continue to bring insignificant amounts of renewable energy online each year (compared to what will be needed to affect a transition within a few decades, or to keep pace with fossil-energy descent), then the impact of the up-front energy investment will be similarly insignificant. This may seem like a tautology, but it explains one important point: this “renewables hump” is a novel issue lurking below the surface of current discussion precisely because we have not yet encountered it with current renewable energy projects—and we won’t until we begin a serious effort to transition to renewables. At that point, failure to understand this problem may be catastrophic.

Second, EROEI--how we measure it, and what its true value is for a given technology--is critical to the feasibility of any transition to renewable energy. If EROEI is high enough, then it is possible to rapidly transition to renewable energy sources and get ahead of the peak oil (and peak fossil fuels in general) decline curve, especially because renewables will soon be able to provide enough energy to bootstrap their own production to a significant degree. However, lower EROEI values will make transition increasingly challenging, and below some threshold a low net-energy value will render transition entirely impracticable.

In order to facilitate a transition of our civilization to renewable energy, renewables must offer more than a high EROEI ratio alone. Time to pay back energy invested also becomes critical, as does generation/production life after payback—these figures must be considered separately and in unison. Consider, for example, the difference between two renewable sources, both with an EROEI of 5:1, but one with a lifespan of 10 years and another with a lifespan of 50 years. The 10-year option may appear inferior, but it represents a payback time of only 2 years—this means that the renewable can begin to bootstrap the energy for its replacement at a much more rapid pace, making it far more scaleable from a net-energy perspective. Conversely, the 50-year option won’t pay back its initial investment for 10 years, making it much more difficult to scale rapidly enough to address time-critical issues such as peak oil without an increased (and likely impractical) up-front investment of energy. To consider the mechanics of transitioning to renewable energy, we must be aware of all these measures: EROEI ratio, payback time, production/generation lifespan.

Now that the problem has been more clearly defined, the future course of this series will make more sense. In the next post I will look at problems in EROEI measurement methodology, and discuss both the potential to address system-boundary issues and the challenges posed by our inability to precisely measure EROEI. In the following two posts, I will analyze the possible EROEI measures for current renewable energy options presented by solar and wind energy. I will also discuss the transition potential presented by these technologies. If I have time, I will also look at the EROEI for geothermal, tidal, nuclear (with a discussion of the issue that fission reactors are non-renewable, and that so-called "fast-breeder" reactors have yet to be proven), and biofuels. More likely, however, I will skip these later renewable options for the moment to continue with this series as a whole, and revisit them individually at a later date...

The Renewables Hump 1: Introduction

2009-05-11T02:16:00.001-06:00

This post is the first in a series on structural problems of transitioning to renewable energy. Broadly labeled “The Renewables Hump,” this series will address net energy, scalability, bootstrapping, and time-frame considerations involved in such a transition.

The requirement (and problem) of up-front investment.

To the extent that America (and the world in general) is concerned with energy scarcity at all, there is a pervasive belief that, over the coming decades, we will overcome these challenges by gradually transitioning to a renewable-energy economy. We know that fossil fuels won’t last forever. We know that it is possible to generate renewable energy from sources such as the sun, the wind, waves, and geothermal heat. And then, as a civilization, we tend make a huge leap, arriving at what has largely become an article of faith: we will transition to these renewables as the basis of our future civilization.

How?

How will we prioritize this transition among competing economic desires? How will we pay for it, both in terms of financing and the up-front energy cost of most renewables? How do our assumptions about the availability of fossil fuels going forward affect this transition? Does renewable energy technology provide sufficient net-energy returns to make this transition practical? How will this transition be organized and implemented?

There are many answers to these (often unasked) questions: the market will take care of it, government subsidies and incentives will pave the path, technology will improve, etc. These are all fine theories, but it is important that we must recognize them as exactly that: possible, not certain, outcomes. The purpose of this series is to examine the actual process of transition. Specifically, I hope to take a system-wide perspective to identify systemic choke-points and externalities that may result from efforts to take existing renewable energy programs and technologies—currently comprising only a very small portion of our civilization’s energy production—and scale them up to meet the majority of our global energy needs.

One focus will be on the systemic impacts and cascading effects of one simple reality: renewable energy sources tend to require an up-front investment of energy, and then pay-back that investment (plus, hopefully, a significant surplus) over a period of time.

Figure 1: A breakdown of the up-front, maintenance, and marginal cost of generating electricity from a variety of sources. This cost is a rough proxy for the amount of energy required at each stage.

The simple fact of the matter is that renewables, much more so than most fossil-fuel based modes of energy production, require primarily up-front investment (of both money and energy—to the extent that we should consider there to be any real difference between the two).

So what? Here’s the quick outline of why this matters: We are currently in a climate of energy scarcity, and this will likely get worse in the future. If you want to increase the amount of energy derived from renewable sources (and thereby help to ameliorate the energy scarcity), you need to first exacerbate that scarcity to use some of our available energy as an up-front investment in these new renewables.

It's also worth addressing one concern raised previously on this point by readers: the difference between electricity generation and the overall energy requirements of our civilization. Right now, electricity is only a portion of the total energy consumed by our civilization. And of that portion, the majority is generated by burning fossil fuels like coal, and, arguably, nuclear. However, the renewables that are generally seen as the key to our society's energy transition (solar, wind, tidal, geothermal) all produce electricity. This electricity can be used to substitute for liquid fuels consumption (either directly through electric motors and heating or indirectly through conversion to hydrogen, etc.). In a post-peak fossil fuel scenario, a continuation of our society's energy consumption can only be maintained by substituting for the declining production of fossil fuels (first oil, then gas, then coal and fissile-materials used in nuclear energy, probably roughly in that order). Shortfalls in fossil fuel production can be substituted with electricity (or a derivative such as hydrogen) or biofuels.

Biofuels have demonstrated very poor EROEI, have a nasty habit to conflict with food production, are highly susceptible to weather changes (whether or not caused by global warming), and appear highly dependent on soil fertility that is currently maintained by massive inputs of iNPK fertilizers that will themselves become a serious resource constraint in the future. The prospects for transitioning the majority of global energy use to a "sustainable" biofuels foundation are, in my opinion, unlikely at best, catastrophic at worst. However, I will address this option toward the end of this series.

Renewable electricity generation, however, shows more promise, at least superficially. Most serious policy discussions, environmental groups, and viridians (what's I've elsewhere called "Roddenberrys"--those who think the continuation of our current civilizational trajectory is possible through green technology) are counting on the use of renewable electricity generation to 1) replace fossil fuel derived electricity, and 2) provide a renewable, green source of energy to substitute for increasing portions of all other current energy consumption (e.g. liquid fuels). My main focus will be on examining the practicality of this path.

So, returning to the question posed above, because of the up-front investment required by renewable energy options, if you want to increase the amount of energy derived from renewable sources (and thereby help to ameliorate the energy scarcity), you need to first exacerbate that scarcity to use some of our available energy as an up-front investment in these new renewables. How much such investment, how much exacerbation of current energy scarcity, is practical? Whether or not this amount of additional energy draw is practical is largely a factor of how much is needed to affect any significant degree of transition within the necessary timeframe (e.g. to keep pace with fossil fuel decline rates). How much up-front energy investment is needed, I will show, is a factor of the true EROEI of these renewable technologies and the mechanics of net-energy scalability. Those will be the topics of the next several posts in this series...

Blog Plans

2009-05-04T02:32:00.000-06:00

Last week I wrote that the theme of this blog was to write about an improved set of operating instructions for human society. Rather than specifically reviewing my successes and failures in pursuing this goal, I'll outline my post plans for the coming year and briefly explain why I'll cover each topic. Hopefully a composite will emerge that outlines the future direction of this blog.

1. The Renewables Hump. In this series, I'll be discussing what I've referred to as the "bootstrapping problem" elsewhere. Briefly, it takes an up-front energy investment to build renewable energy generation capacity. It takes X amount of energy to build a 5 MW wind turbine, for example, and it will take Y years of that turbine in operation to pay back that up-front cost. So what? This means that we need a significant energy surplus to invest now if we hope to transition our fossil fuel economy to a renewable energy economy. There are two repercussions of this. First, the window of opportunity to make this transition is rapidly closing as we pass peak oil. Second, the true EROEI of renewable energy generation is critically important as a result. If the EROEI of photovoltaics, for example, is advertised as 15:1, but is actually 2:1 (I've argued in the past that it may be lower than 1:1), then the available transition window is dramatically smaller than we have been led to believe--possibly even closed. In my mind, we need to address this question immediately so that we can figure out if it's worth pursuing the promise of a green-tech future or if we need to instead pursue a more conservative, low-tech vision of the future...

2. The international law of polar resources. I anticipate this will become in increasingly important geopolitical flashpoint over the next decade: who owns arctic and antarctic oil and gas, what is the existing international law precedent, an what are the practical (political, economic, and military) realities of potential ownership disputes. It will also be an excellent platform to discuss the role of an evolving Nation-State system on future geopolitics.

3. Revisit my ongoing writing on energy geopolitics in light of the current economic recession and longer-term catabolic collapse. How will the current recession and longer term cycles impact my existing theory of geopolitical loops in oil production disruption?

4. Green capitalism and religion--is salvation delusion or distortion of an authentic message. I'm very concerned about the sales pitch of the "green" industry: we can all continue our business as usual if we just screw in a different light bulb, or if we wear organic cotton clothing. But there's clearly some authentic message in the "green movement." It strikes me that this is oddly analogous to the historical development of Christianity (and possibly other religions--I'm just beginning this line of thought): Read the actual words of Jesus, and then look at the actions of Christians, and especially Christian states. Listen to how a camel will more easily pass through the eye of a needle than a rich man will enter the kingdom of heaven--not exactly representative of Christianity's actions from a position of power. Seems to me quite a bit like the basic premise of sustainability and "green" economics compared to the "green capitalism" we see in practice...

5. Charting the solution space: I've written about this before, and won't belabor this here, but the process for optimal decision making in light of imperfect information and unknowable future outcomes will be critical. We can't know exactly how the future will unfold, but we can assign probabilities to certain divergent possibilities and devise an optimal strategy for proceeding in light of this uncertainty.

6. Three paths to sustainability: enlightenment, control, and erosion. It seems to me that we have three possible paths to a truly sustainable society. First, we can all act in an enlightened manner--true and universal voluntary sustainability. Is this possible? Second, if this goal of universal enlightened action is impractical (hmmm...), then we can achieve it through the imposition of top-down control. Do we want to live in this kind of a society (and do we have an alternative)? Third, we can fail to attain sustainability proactively, and the inevitable (?) result will be an erosion of our ecological support structure to the point where society collapses to a point where, even operating at maximal capacity, we will be operating at an involuntarily minimalist level of subsistence--which would quite likely also be "sustainable." Is there a fourth option?

7. Collapse surfing: lifeboats, monasteries, and pirates. In light of the (proposed?) reality (discussed in #6, above) that we likely won't be able to achieve voluntary, proactive, and "true" sustainability, what are the options for selective groups/sects/individuals to build sustainability? Can we realistically build "lifeboats"--exemplar communities that will help to pull others up to true sustainability when it becomes obvious to the masses that drastic action is necessary? Are we better off building "monasteries"--similar to lifeboats, but walled off from the profane world until such time as they can open their gates ad re-colonize the destroyed terrain around them? For what it's worth, "walled gardens" may be more appropriate--both in the computer architecture sense and the "Alamut" sense... What about pirates: piracy was a symptom of a "non-closed map" in the past, and will likely become one (in many conceptually-related modes) with increasing frequency in the future. I'm not specifically referring to Somalis or swashbucklers here, but rather opportunists of all stripes that exploit the growing "edge" in the map--especially the formerly (nearly) closed map of the Nation-State system.

8. Reviews. I may also write a series of reviews on the works of a few authors and theorists I've considered highly influential: Hakim Bey (reference the map discussions above), Aldous Huxley (consider "Brave New World" and "Island" as book ends to our future options), Robert Anton Wilson, Daniel Quinn, and--yes--even James Bond as Ian Fleming's alchemical tale of the struggle between genetic and memetic ontogeny in human civilization (that one may take a bit of explaining!).

Suggestions are always welcome...

System of Future Planning, Part II.

2009-04-27T01:42:00.000-06:00

My post from two weeks ago generated some excellent feedback, and unfortunately it came exactly at a time that I had to stop paying attention to this blog to focus solely on a trial. My apologies, but hopefully this post will get me back on track. In this post, I'll recap the major themes that I have discussed in the several years I have been writing here, and I will also directly address the comments from two weeks ago.

Major Themes:

1. System-analysis of our civilization, focusing on the core themes of Hierarchy and The Problem of Growth, and its symptoms of peak oil, energy geopolitics, and economic "wizardry."

2. Systems-theory in general, and specifically as it informs the inefficiencies of hierarchy, alternate modes of information processing and economic organization, and

2. Philosophy, specifically understanding human ontogeny (how the process of our evolution dictates our current physiological, neurological, and emotional processes) as an input into human systems and as the foundation for individual happiness and fulfillment.

2. Moving forward: addressing the two very separate goals of optimizing the functioning of human civilization and individual human functioning in light of the systems-analysis and human ontogeny "problems."

In reality, this is one unified theme: an attempt to create a set of instructions for operating humans, both as individuals and in groups of all sizes, in light of both internal and external constraints. I think it is inextricably linked to the traditional studies of history, politics, economics, biology, psychology, anthropology, mathematics (specifically game theory), and physics. But in my mind it is so much more than that. The goal is not to improve psychology or anthropology or any of these other discrete disciplines per se, but rather is specifically to generate a synthesis, a meta-theory for humanity. This is essentially the mission of philosophy, but I hesitate to accept the limitations commonly ascribed to philosophy. Perhaps, though, it is accurate to view this goal as similar to the very practical philosophical approaches of, say, Plato in The Republic (though, like Karl Popper, I disagree vehemently with Plato's conclusions...). Here is a case where, perhaps, John Zerzan's more extreme theory of language and symbols shows its strengths: any attempt to label this process, and my goals, is unacceptably limiting. Hopefully this brief explanation has been slightly clearer than mud! Next week I'll take a look at this goal and evaluate what, specifically, has been accomplished and what is left to be accomplished, and set forth a roadmap for what I will address in future posts. For now, though, I'll finish by responding to comments from last week:

Neven commented about the frustration that stems from realizing what could be done, but not yet being able to put these plans into practice. I share this frustration. I certainly don't live in a real-world hamlet economy that I have created for myself--far from it. I think it's important, however, to stress that I am not a "fast-crash" proponent. I fall generally into the "slow-crash" camp--the theory that our economic, political, and social systems will gradually degrade over the next several decades (and longer). I don't think it is necessary to have a self-sufficient farmlet immediately--though if this is something that 1) is realistic for you, and 2) will make you happy, then by all means it sounds like a wonderful plan. I think it is best to use an improved understanding of our civilization and its trajectory to influence every decision that we make in our day-to-day lives, but I don't think it's necessary to quit your job, sell your house, and become a neo-homesteader. Largely I think this because the network that such efforts need to succeed is not yet established. I think we're much better off gradually moving in these directions because this is something that we can potentially do as a group (e.g. everyone). Any "solution" that doesn't include mass transition is essentially a blueprint to build a fortress. That said, I'm not sure that mass transition is possible, and one of the gradual transitions that I am making is to put myself in the position to make a sudden transition when possible and if necessary...

Nick, I agree with your concern that virtual discussions of these topics is just not enough. When I am able to have lengthy discussions in person with large groups (such as at last year's ASPO conference), the payoff is amazing. This year's ASPO conference is in Denver in the Fall--worth considering if you can make the train trip/drive/flight/etc. It's also interesting to hear your observation that many rural communities are already moving in the direction of rhizome without using this as a conscious model. I think we'll see more of this as the global financial and energy systems continue to erode, become less reliable, or simply exact more transaction costs. But I do think that establishing self-sufficiency is something where we need to get out ahead of the curve--if we wait until we're forced to establish self-sufficiency, the results will be at a minimum "expensive," and potentially catastrophic. There are many excellent models for moving toward a higher degree of self-sufficiency (100% is certainly unrealistic and unnecessary in almost all instances). The Transition Towns movement is a great place to start--it has an excellent model for building momentum and consensus in existing towns without everyone understanding the gravity of the situation. Additionally, moving toward scale-free self-sufficiency is a complementary strategy: while 100% self-sufficiency at the individual level is nearly impossible (short of a hunter-gatherer mode of production which cannot support our population levels), I think we can realistically attempt to increase our individual self-sufficiency, our community self-sufficiency, and our regional self-sufficiency by a few percent per year. A good model might be increase personal self-sufficiency each year by 5%, and increase community and regional self-sufficiency each year by 1%?

Eadwacer suggests making more explicit connections between my theories and existing systems models--I agree, and hope to do that in the future.

Jeremy gaiasdaughter, and TH all suggest that, while the mainstream my ignore these issues, that doesn't make them any less important. I have often used the monastery in Dark Ages Europe as an example here: we need to develop individual and community solutions not because they will spread voluntarily at first, but because they will exist as proven solutions to transfer knowledge when people are actively searching for this. Additionally, this highlights how important it is that we not develop one solution, but that we develop many solutions, appropriate for many regions and sets of circumstances.

Lonnie adds that we need a new lexicon to discuss these concepts, and to counter preconceptions. I think that, more than just a new lexicon, we need extant examples of these ideas in action to show directly that they need not conform to any stereotype...

Finally, Theo wrote a well though out response on his blog. I agree with Theo that I have a pessimistic bias--specifically, that I don't think we can continue on our current course indefinitely, and that I foresee a gradual collapse over the next several decades. I disagree with Theo, though, to the extent that he interprets my writing as an unending pessimism--I specifically think that our current civilizational structure is not very compatible with our ontogeny, and that we are actually presented with a golden opportunity to re-cast civilization, post-collapse (or, more accurately, through the long process of collapse) into something that is more compatible with humans and the rest of our planet. While I commend efforts at green capitalism because I think they will ultimately soften and facilitate a transition, I disagree with Theo that green capitalism, or a green market-state system, can "save" us from the Problem of Growth. Turning briefly to Robert Anton Wilson, I understand how Theo sees me as opposed to the basic notion of Wilson's book, but I think I actually agree with the basic premise--simplistically, that humans as individuals can take control of ourselves and our environments with nearly unlimited potential if we properly understand ourselves and our environment--because I separate individual potential and prospects from those of our civilizational structure as a whole. I think Wilson and Leary's "Space Migration, Intelligence Increase, Life Extension" notion is an artifact of the time they were writing, but that the underlying goal was actually freedom, enlightenment, and fulfillment for individuals--something that I am actually very optimistic about in a rhizome future. To the extent that this is the "real" wealth to which Theo refers, I think the growth-based predicate for "green" capitalism and its failure to address the incompatibility between human ontogeny and hierarchal systems eliminates it as a solution--I think it is ultimately more a case of "greenwashing" as a systemic defense to internal threats to hierarchy, and one that I think will do nothing to make that system fundamentally sustainable...

A System of Future Planning.

2009-04-13T01:16:00.000-06:00

Unlike last week, this post is not about developing a model for decision making (more on that later), but rather my thoughts on the future of this blog. No giant changes in store, I’ve just been thinking about what to write about next, and part way through my thinking I decided it would be best to make this process itself into a post.

In part, that’s because, at a meta-level, the purpose of this blog is as a tool for my own use. This blog serves as a development platform for my own thinking—it forces me to keep thinking in order to meet my self-imposed weekly publishing schedule; it forces me to put my thinking in at least semi-coherent form; it allows me to get feedback from a very interesting, diverse, and intelligent group of people all over the world; and it gives me a platform to engage in dialogue with these and other groups of people in many different contexts (through The Oil Drum, at conferences, by discussions in blogs that I find through links to this site, etc.). All the while, I get at least the occasional feeling that I’m reciprocating by helping others with the same process of intellectual development with which they help me. That’s pretty amazing when you think about it—this is a process that was historically available to only a very select and lucky few who lived in the right place, at the right time, with the right friends: a few elites among medieval religious orders (which reminds me of the prayer "God, give me chastity and give me constancy, but please Lord don't give it to me quite yet), the “moveable feast” of Fin-de-Ciecle Paris, the RAW/Timothy Leary/Hakim Bey network (beginning to show signs of a dispersed and mobile network, but certainly not “open”), Aldous Huxley’s Los Angeles circle, etc. Today it’s available to anyone with access to the internet.

Which leads me to my thoughts on where this blog is going. This starts with what I want from this blog: discussion and exposition of ideas on topics that interest me 1) where I have something original to add and 2) that is important to many individuals if not humanity in general. I don’t want to be a news aggregator—many others are already doing that, and probably much better than I would. Commentary on news items, something I do engage in on occasion, is something I hope to do less of, though there’s a fine line between the analysis of a phenomenon as reflected in several news stories and simple news commentary. What I want to do is write stand-alone essays providing critical analysis from a systems-thinking perspective and provide novel system-oriented proposals for the future. This, of course, can be a bit difficult on a weekly basis, so I will probably increase the practice I’ve used frequently in the past of publishing a series over several weeks to cover a given idea. In the next post is a brief recap of some of the core analyses and proposals I’ve made so far, my thoughts on where these previous ideas need to go next, and in an interim conclusion, a post with a list of ideas I hope to explore in the future. I’m not writing this just to see my thoughts turned into words—there are two goals here: 1) in keeping with the intent of this blog to be a meta-tool for my own thinking, these post force me to compose my thoughts on this topic in a more coherent manner; and 2) to solicit feedback (either via email or in the comments, as usual) on these ideas.

However, before I delve into the details, there’s one more purpose of compiling these lists: to evaluate whether they have done anything, either for my self or for a broader community. I’ll comment more on this later, but have the ideas I’ve previously written about gained any traction? Have they moved me or others to take action that would not have been taken without these posts? Have they spurred anyone else to thoughts that have had an impact? And, of course, my future writing plans must be influenced by these answers. My goal, to the extent that this blog is a tool for my own thinking, is to impact my own life. I’m increasingly of the opinion that “we” as a society will not take the steps necessary to “solve” our problems, so is there any broader value to my writing, or am I just entertaining myself while shaping my own plans? Is there value in shaping the plans of others even though they will never constitute the mainstream or the power elite? Should I, in fact, with it no other way (as I tend to think)? What, specifically, is the broader value of this blog (which, it seems, must be one of my future topics…)?

Your thoughts are not just permitted (the comments are always open), but encouraged. If you have read this blog for one day or for years, I'd love to hear what you think of it, if it has been of value, if I'm drifting off course, and what that course should be. Or even if you just have topic suggestions. As always, I take comments and emails at jsvail@gmail.com and do my best to respond directly to all (though last week's 34 was a bit overwhelming, especially since I'm preparing for trial this week)...

Planning for the Future

2009-04-06T08:02:00.002-06:00

Predictions are difficult, especially when they're about the future.

There's an interesting new website up, Wrong Tomorrow, that strives to track and report on the predictions of various pundits and prognosticators. Turn out that my prediction that the Mexican state won't see 2012 is up for testing--though, highlighting one weakness of the site, it takes my prediction out of context, dropping the first half of my prediction that some form of state-shell may exist in Mexico for decades. I didn't intend my prediction to be inherently testable or not testable--perhaps in the future I will be more careful to conclude with an empirically testable prediction...

While predictions and record-keeping can be interesting, and can even serve an important purpose by highlighting the past inaccuracies of someone offering a new prediction, I'm more interested in the methodology of prediction. After all, each of us, every day, stakes our lives and our family's lives on our ability to predict the future. I talked briefly about my theory of prediction in my essay Hedging the Future Solution Space, which highlights that, while predictions may be fun, the more utilitarian approach (until I can figure out how to be 100% correct in predicting everything) is to outline the possibilities and then see how we can make choices today that will fare best regardless of the outcome. If you check the investment theory outlined in that article, it would have worked out quite well over the past 18 months. I only wish I had followed it more closely myself (I was leveraged long oil and short the S&P500, but excessively weighted in the former so that my gains in my S&P super-bear fund didn't cover my recent losses in oil--though I'm holding my 2011 crude oil calls because I still think there's a good chance of the price shooting up again).

So, over the next few weeks, this will be the focus of my posts: the development of a future modeling and decision-making methodology that will maximize outcomes in a very uncertain future. I'll be focusing on a decision-making system for the individual, but many of the principles will work equally well for Nation-States and Corporations. In my mind, the key difference between these actors is that it is always the individual (as opposed to the currently reigning politician or CEO who can just walk away) that ultimately must carry the bag for failure to integrate the need for resiliency into our decision making. Therefore a goal of my methodology will be to optimize future resiliency in the absence of perfect knowledge of the future outcome.

China's Quid Pro Quo

2009-03-30T09:00:00.000-06:00

China seems happy to support the dollar regime by buying up new US Treasury debt issues, provided they're allowed to use their dollars to acquire real wealth.

Here's an outline:

1. The expanded US spending requires someone to give the government dollars now in exchange for a promise by the government to pay them even more dollars in the future.

2. If enough people aren't willing to buy US Treasuries, then Treasury auctions will fail and the US government will run short of funds. The result could run from the mild (government needs to scale back spending plans a bit, or shift the maturity or return on their debt issues) to the extreme (perception of future inability to raise enough debt to pay off current debt leads to fears of a default, widespread selling of Treasuries, and a collapse in both the Dollar and the ability of the US government to fund even basic expenditures this year).

3. Aside from being the single largest purchaser of US Treasuries, China is also the single largest holder. They're a bit stuck between a rock and a hard place--stop risking more dollars on US debt and the value of their existing holdings may plummet, but keep buying it and they increase their exposure to dollars that may plummet in value regardless.

4. China also recognizes that it has a huge thirst for natural resources of all types, and that it will need to secure future supplies if it (here, the Chinese Communist Party) is to continue to deliver standard of living improvements to its citizens--the tacit trade-off the Communist Party makes for civil order.

5. One solution: keep supporting the US Treasury issues while spending as large a share of foreign currency reserves as possible on locking up large supplies of natural resources around the world. If the "West" permits this, then China will keep supporting the dollar regime as long as the dollars it already has can be used to buy "real" assets. If the West balks, then let one or two treasury auctions fail and see if their position changes. If not, then all those dollars China has in existing Treasury holdings aren't worth anything anyway, so there's no point in throwing good export revenues after bad future promises.

This appears to be exactly what China is doing. While there was stiff resistance to an earlier attempt to acquire UNOCAL (something the Chinese covet for its Burmese resource holdings), China seems to be trying again, first with attempts to acquire a larger share of Rio Tinto and OZ Minerals (the latter has already been blocked by the Australian government).

What will China target next? My guess is that there will be a concerted acquisition spree this Spring. If China targets outright ownership of various reserves through purchasing resources companies or exploration rights, especially in regions where China has greater ability to exert (present or future) military control, or where governments can be easily swayed to support Chinese rights, then that supports the argument that China is taking a mercantilist approach. South East Asia, Papua New Guinea, Indonesia, many African nations, and parts of South America (Venezuela, for example) are likely early targets.

Of course, even if the West permits these critical resources to be acquired by China through peaceful purchases, this only extends the debt-spending period for as long as China can still purchase attractive resources. At some point it is likely that 1) prime acquisition targets run out, or 2) the West catches on to this game and calls China's financing bluff. It's a bit like the advice given by Jon Voigt's character in "National Treasure": the US government's budget will remain intact as long as the status quo remains unchanged. As soon as China can't get anything of real value (in its perception) for its dollars, it no longer has any reason to support the dollar regime by diverting a significant portion of its economic product into Treasury holdings.

Something to keep an eye on over the next few months...

Toxic Asset Bailout

2009-03-23T15:29:00.004-06:00

Denninger has a very troubling concern about today's proposal to cleanse banks of toxic assets.

It works like this: Bank A pretends that it has $150 billion in reserves against which it is allowed to loan money. However, $100 billion of that are so-called "toxic assets"--Securitized mortgages backed by highly suspect Credit Default Swaps, for example. This $100 billion it claims to "have" in these mortgage holdings are actually worth about $20 billion on the open market, but it can't sell them for that because then it suddenly has only $70 billion in assets, which makes it over-leveraged on its existing loans, unable to make new loans, a target for an FDIC takeover, etc. But now, with the new cleanse program, it can form a new entity to bid on its own assets--a subsidiary that offers to pay $80 billion, say, for the $100 billion in securitized mortgages. The government, under the new plan, puts up a significant chunk of this money and guarantees the rest, so the bank's exposure in paying $80 billion for $20 billion in assets is actually only $5 billion or so. So the bank sells the assets for $80 billion, plans to write off the remaining $5 billion as a loss, and transfers the worthless mortgage-backed securities to the taxpayer...

Translation: disguised bail-out.

All of this is well and good (albeit potentially highly inflationary) until people stop buying US treasury debt. China claims that it will continue to buy US debt, but this will be yet another case of actions speaking louder than words...

Neo-Chiefdoms or Big-Men Networks?

2009-03-23T02:01:00.000-06:00

I recently discussed the potential for collapse of the Mexican Nation-State, and I’ve previously written about my view that the Nation-State system in general is fading. What will replace it? In general, I reject Philip Bobbitt’s hypothesis in “Shield of Achilles” that the Nation-State system will be replaced wholesale with a “Market-State” system. To be fair, however, he isn’t necessarily advocating that Nation-States will be replaced by Market-States in the way we flip a light switch. Rather, he is arguing that, for all the reasons the nation is no longer a viable constitutional basis for state power, the market may represent an alternative toward which states may--and some are already--transition toward. While I presented a more detailed critique of Bobbitt’s theory in my essay The New Map, recent turmoil in the markets, the rising violence in Mexico, and countless other events around the world suggest that the state--regardless of its constitutional basis--is slipping from its dominant role. I have little doubt that some vestige of the state will remain for the foreseeable future. However, in terms of geography, penetration, and time, the reach and control of the state will increasingly be limited. It will present voids in these various dimensions that will be filled by other power structures. And that’s the topic I plan to address in this post: what will fill the vacuum of state power?

In archaeology, the traditional progression of social order, from lower to higher complexity, is as follows: tribe, big-man group, chiefdom, proto-state, and state. While the lines between these designations are necessarily blurry, there is also a general increase in centralization and hierarchy as one moves from the less complex to the more complex. Do these archaeology terms provide any insight into the social organization of Nation-States post collapse, or of Nation-States that have transitioned to Market-States and abandoned the notion of a social contract? Perhaps--here are two contemporary examples:

In Mexico, the effective penetration of the state is rapidly retreating, and has been effectively replaced--at least in some areas, times, and roles--by the drug cartels. While consistently referred to as “drug-cartels” in the domestic and foreign press, that term doesn’t seem to do justice to their political platforms or business models any more than it suffices to call Goldman Sachs a “bank.” More accurately, these drug cartels could be described as diagonal chiefdoms. In the anthropological lexicon, “chiefdom” means an intermediately complex form of social organization that 1) exhibits ranked social order, but 2) does not control or extend institutionally into all aspects of social organization. The cartels are certainly ranked (making them more “complex” in the standard lexicon, than big-man groups), and they also exhibit a limited institutional reach (falling short of proto-state by largely ignoring any commitment to a social contract and delegating religion and spirituality to a non-integrated catholic church).

Conversely, I think the internet--specifically the “blogosphere” (a terrible term, but there you have it)--stands as an example of a “big-man group.” More precisely, it is a network of big-man groups that already occupy a diagonal beyond the exclusive control of the state. Big-man group is another anthropological term that requires defining: a non-hierarchal social structure structured by the influence of “big men” actors who gain their influence through success in a relevant endeavor--growing tubers in Melanesia, popularity in High School social systems, or visitor counts and links in the blogosphere, for example.

Why does it matter what organizational structure back-fills the retreating state? Consider these alternate structures in light of Hakim Bey’s concept of the “TAZ” (actually, his essays on periodic autonomous zone, permanent autonomous zone, or no-go zone may be more appropriate here) and Hardt & Negri’s “Diagonal”: these neo-chiefdoms and neo-big-men-groups are not exclusive in Cartesian space, but rather coexist--with the Market-State, and with each other. Within the Nation-State context this is often phrased “civil society,” but in a post-Nation-State world it will be much different. These Chiefdoms and Big-Men Groups will go beyond modern civil society and fill the vacuum of part of the role of the state--specifically, rather than a single state claiming a monopoly on the use of violence within a Cartesian space, multiple organizations, actors, and networks will claim some source of legitimacy in the use of violence.

Minimizing the oppressive use of violence is far more than a mere nicety--the difference between the minimally complex hierarchal structure (chiefdom) and the minimally complex non-hierarchal structure (big-men network) may be the difference between success or failure (especially from a median quality of life standpoint) in a post-Nation-State, post-Peak Oil civilization. Without the energy surpluses required to fuel a broad-based consumer society, and the related ability to impose a global “South” as a productive base, local feudal chiefdoms do not hold much promise for the median, especially after enough of the local surplus has been siphoned off to maintain the trappings befitting chiefly rank. Just ask the median Mexican in Sinaloa or Tijuana how well that system is working for them. Conversely, the overlapping big-men network represents the application of the blogosphere model to the primary economy. I’ve discussed the benefits of this type of model elsewhere--resiliency through decentralization, parallel innovation/information processing, the elimination of the information processing burden of a centralized hierarchy, the elimination of the need for political surplus that can no longer be sustained in a post-peak environment, etc.

Certainly any power vacuum left by a retreating state will be filled by some combination of both hierarchal and networked organizations. The lesson here--as undeveloped as my thinking out loud may be--seems to be that we must take the initiative to ensure that this vacuum is not filled by an inferior, hierarchal solution along the lines of a neo-chiefdom

Jon Stewart and the Fifth Estate

2009-03-13T10:37:00.006-06:00

I'm a bit surprised that Jon Stewart's "interview" of Jim Cramer hasn't garnered more attention. Many media outlets (with the notable absence of CNBC, which is pretending it didn't happen) have mentioned the existence of some "smack-down" between Stewart and Cramer, but few have give the content of the interview any analysis.

It was the most important piece of journalism of the financial crisis to date. Watch the whole interview from last night here. Notably--and this was the hidden theme of Stewart's criticism of Cramer and CNBC--it came from a self-professed "fake news show."

Maybe the Fourth Estate is hoping that, by giving the existence of this interview lip service, but pretending that it was only funny--rather than an indictment of the Fourth Estate itself--they could somehow marginalize Stewart's conclusions. If you haven't watched the interview, please do so. Then consider whether the main-stream press, regardless of which political market-segment they try to capture, can remain legitimate when it is fundamentally designed to opitimize profit, not distribute civilizationally-valuable and accurate information.

The unresolved question lingering around Stewart's interview is whether or not the problem we've encountered is "solveable," meaning that with proper regulation and reporting we can get back to business as usual and live in a world where investment returns are something more than, to quote Nassim Taleb, "money borrowed from destiny with a random payback time."

Regular readers will know that I think we're facing a phase-shift from perpetual growth to perpetual contraction, driven by diminishing energy supplies, ecological constraints, and diminishing returns on our investments in technology and other forms of complexity. Most people, I imagine, will refuse to accept this even if they realize that it is 100% true. What will this lead to? John Michael Greer has an excellent piece answering that question.

Mexico: A Collapse Update

2009-03-09T02:44:00.000-06:00

I’ve been predicting the collapse of the Mexican Nation-State since 2006. It turns out that was a bit premature. But with violence flaring, the potential for collapse in Mexico is once again in the headlines. Oil production continues to fall, border violence is up, and the government is preparing for a showdown with the drug cartels. I’ll argue below that the government will keep the wheels on through 2009, but that the Mexican state will collapse shortly thereafter, ushering in the beginning of the end of the Nation-State.

It’s been difficult to read a paper or watch the news recently without hearing about the growing troubles in Mexico. The US military’s Joint Forces Command issued their Joint Operating Environment 2008 report recently that listed Mexico and Pakistan as the most likely states to collapse in the immediate future (PDF, see p.35 for analysis of Mexico). Even 60 minutes ran a segment about the rising drug violence.

Of course, readers are probably already aware that a root cause of the problems in Mexico is the precipitous decline of Mexican oil production and an even faster decline in the level of oil exports. Add to that declining remittance incomes being sent home by migrant workers in America, declining tourist revenues, and lower revenue per barrel of oil exported, and the Mexican state is experiencing a severe financial crunch.

While the fiscal stability of the Mexican state is impacted by continually declining oil production and oil exports that are declining even faster, this impact is mitigated to some extent because PEMEX hedged the majority of its oil production through 2009 at roughly $70/barrel. Depending on the price of oil in 2010, Mexican oil revenues stand to drop off a cliff as PEMEX loses hedge coverage.

Does this mean the Mexican state is finished? The current crack-down by the Mexican military and federal police is, I think, best seen as a last-ditch effort to save the state. But it is also evidence that, by the very existence of this pitched battle, the state retains enough viability to pose a threat, and therefore to be targeted.

In military theory, pitched battles are only consciously joined by both sides when both have an incentive to risk the main body of their force—-either because they think they can win a decisive victory or because they are running out of the political, logistical, or economic ability to sustain their army in the field and must seek a decisive action while they can.

Clearly the drug cartels smell blood—-and tactics like forcing the resignation of the Juarez police chief by killing one or more police officers every 48 hours demonstrate their desire for a decisive engagement. Additionally, the motivation behind a recent truce among rival drug cartels may be to facilitate a joint offensive against the government.

In my opinion, the Mexican government is seeking a pitched battle for the second reason—with their oil hedges only in place through 2009, and with oil production, remittance income, and tourism dollars poised to continue a sharp decline, the state may not have much more than a year of financial viability in which to cripple the drug cartels.

While a pitched battle may be politically expedient for the state, I think the cartels are too widespread and deeply ingrained to be defeated militarily. Salvation for the Mexican state will require regaining the long-term ability to compete with the cartels as a provider of social order and economic activity—-something that cannot be gained on the battlefield. At a minimum, in order to finance its ongoing viability, the state needs significantly higher oil prices to increase export revenue or a rapid recovery in the US to generate an increase in remittance income. Given the current economic climate, the occurrence of both of these seems highly unlikely—-there is simply no way of knowing where the tipping point lies, whether either one of these factors, or both, can save the Mexican state from eventual collapse. And without a renewed fiscal foundation, the eventual collapse of the Mexican state seems inevitable…

Impacts of Increasing Instability in Mexico

First, the increasing instability in Mexico will have a significant impact on PEMEX’s ability to maintain the necessary levels of investment to minimize production declines. This creates a positive feedback-loop: faster declines mean more financial difficulties, more instability, and less investment, precipitating even faster declines. In 2009, PEMEX plans capital expenditures of roughly $20 Billion. Traditionally, due to laws that prevent foreign ownership of many categories of natural resources, PEMEX has relied on debt to finance capital expenditures. More recently, PEMEX has also been pushing for a reform to the Mexican oil law that would allow foreign companies an ownership stake in Mexican projects in exchange for investment. Regardless of whether PEMEX pursues debt or equity financing, instability in Mexico’s property rights regime—-certainly including the potential for governmental collapse—-will seriously hamper these efforts.

Certainly the impact of disintegration in Mexico will have an impact north of the border. There is already a clear spill-over in criminal activity in border states. At some point, the national security threat to the United States will bring calls for intervention—but are there any effective options? The sprawling yet dense cities and mountainous rural terrain of Northern Mexico should give any military planners pause, especially in light of recent American experiences in Afghanistan and Iraq. Some commentators have even suggested that Mexico, not Iraq or Russia or Afghanistan, will be the defining national security challenge of the Obama administration.

The potential impact on Mexican oil production seems clear. More superficially, the situation in Mexico gives commentators of all stripes something to worry about. The spill-over of drug violence seems to preoccupy most mainstream talking-heads, but a few commentators have traced these problems back to their roots—and see a much more troubling threat. Specifically, the troubles in Mexico are an early sign of the failure of the Nation-State model. I’ve written about this extensively, and my intent here is not to re-hash my critique of the Nation-State system: if you’re interested, here’s an academic paper on the topic. The key is that the trends pulling Mexico apart at the seams are ubiquitous—-Mexico is merely facing this perfect storm first. As the Nation-State dominos begin to tumble next--Pakistan perhaps, then Iraq, then Russia, then Italy, then China, then Indonesia, etc.—-the pressure on the rest will grow. And many of the most threatened states are also the most critical to global oil exports.

While I don’t think Mexico—in its current form—has many years left, I hope I’m wrong. It’s a beautiful country (especially if you can get outside the Americanized hotel zones), with a vibrant culture. It may even prosper in a post-peak world under some different form of social and political organization. And a token state-shell may last for decades (another global trend, I suspect)—after all, the cartels will probably be happy to delegate parts of the social contract to the “sovereign.” But, for all practical purposes, the Mexican state won’t survive to see 2012.

Towards a Scale-Free Energy Policy

2009-03-02T01:16:00.001-07:00

With gas and oil prices far below recent highs, and the nation’s attention turned to the “financial crisis,” energy policy is no longer in the political spotlight. But for a variety of reasons, such as the relentless march of depletion and the effect of low prices on investment in future oil and gas production and the development of renewable sources, there has never been a greater need for a bold new energy policy.

But energy policy is not the only crisis that we face. Far from it. More than a brilliant new political solution to our energy problems, what our civilization truly needs is to adopt a bold new process for developing political solutions in the first place. We need a process for developing political solutions that doesn’t depend on someone else to solve our problems for us, but that simultaneously allows people with more power to carry a commensurately larger share of the burden. We need a process for developing political solutions that increases systemic resiliency, rather than driving ever lower civilizational marginal returns on investments in hierarchal complexity. We need a process that leverages parallel information processing and develops locally-appropriate solutions, rather than clinging to the Nation-State fantasy that a single state solution can adequately serve a monolithic “nation.”

In short, we need to implement a system of scale-free design.

Scale-free design describes a process that operates similarly at any scale, at any level of organization, that is fractal in structure. It is neither grass-roots nor top-down, but rather consciously, simultaneously “all of the above.” More than that, rather than merely a collection of separate national, local, and individual programs, it strives to develop programs and practices that operate simultaneously at all these levels. A simple example would be the achievement of 25% energy self-sufficiency—that is, for individuals to produce 25% of their energy needs domestically, for communities to produce a further 25% of their energy needs locally, etc.

Scale-free policies provide all the benefits listed above. A scale-free energy policy does not reinforce a top-down structure of society, but rather builds resiliency by increasing self-sufficiency at all level and eliminating single points of system failure and the potential for cascading failures. For those who have read my writings on rhizome, it is a process that is fundamentally compatible with both our present political structure and with a rhizome alternative, and that can help to foster just such a “diagonal.” Rather than increasing the hierarchal nature of our civilization, it presents the potential to facilitate a more networked, peer-to-peer version of society—critical in an age of resource constraints because this at least reduces our structural need for perpetual growth. Additionally, scale-free processes abandon the antiquated, serial method of innovation and information processing favored by traditional politics (the “cathedral”) and instead leverage parallel processing, a “bazaar” of innovation. The result is that, rather than trying one solution until we can confirm that it fails to meet our diverse demands, we simultaneously develop thousands of solutions that are tuned to our many separate needs, and then share what works, what doesn’t, where, and why for the next iteration.

Scale-free energy policy promises all of these benefits. Such a policy will also focus on renewable sources and simple, vernacular technologies where possible. While renewable, carbon-neutral sources are not a strict requirement, any honest search for resilient solutions must avoid those “solutions” that actually do nothing more than shift the timing or mode of our crisis. Similarly, a solution cannot be truly scale-free, and does not provide the promised resiliency, if it does actually enhances an individual’s or community’s reliance on technologies or materials that it cannot itself produce. This is not an orthodoxy that individual solutions must not use metals they cannot mine and smelt themselves, as an extreme example, but rather suggests a guiding principle that simplicity—of materials, construction, operation, and repair—appropriate to the level of organization is yet another means of enhancing long-term resiliency.

This notion of scale-free design is applicable to many political problems: the fundamental structure of our economy, our system of law and norm-enforcement, our military tactics, etc. While I plan to elaborate on specifics of a scale-free energy policy in the near future, today I’ll briefly outline a pragmatic approach to this theory. A scale-free energy policy should, at a minimum, invoke simultaneous actions at the individual (household), community, regional, and national level. It should not focus exclusively on only conservation or generation at any of those levels, but instead realize that 1) generation (in whatever form) is necessary on every level, 2) conservation is similarly necessary, but 3) conservation must be approached with an understanding that picking the low-hanging fruit first (the highest elasticity demand) is counter-productive in that it actually reduces the overall systemic elasticity. These ends can be achieved through tax-breaks, direct subsidy or works programs, and (not to be neglected) simple explanation and coordination (public-private partnership, state-federal cooperation, etc.). More important than describing specific programs at this point (at least in a post intended to explain the scale-free design process) is the statement of a simple imperative: every action, at every level, should be conceived and executed within this scale-free framework. What that means is that people don’t need to wait for their government to get with the program: any level can independently implement a scale-free solution, part of which includes advocating its adoption at other levels…

Fractional Reserve Banking and Growth

2009-02-24T16:35:00.003-07:00

Very busy week (I guess I can't complain about having more work than I can easily deal with!). As a result, unfortunately, just another quick thought for this week's post (and a day late, at that):

I've just finished reviewing "Crisis of Civilizatoin," a new book by Nafeez Mossadeq Ahmed of the Institute for Policy Research and Development, a London-based think tank. It's an outstanding book, and one that I will review properly on this blog when published and available to the public. In the mean time, however, I want to briefly discuss a comment made by Mr. Ahmed on fractional-reserve banking.

For the past few weeks, I've been hinting that I'm going to return to the causes of our civilization's demand for perpetual growth (formerly discussed in The Problem of Growth). One element, that I hadn't properly considered before reading Mr. Ahmed's book, and that I must now consider more carefully, is the role of fractional-reserve banking.

Put simply, by lending out at interest more "money" than a bank has deposits, the bank creates a situation where significantly more money must be repaid than was borrowed. In order to generate this difference, the community is forced to put the money to growth-oriented tasks, rather than merely borrow money now and save to pay it back. So the firm that borrows money must use it to finance growth--in production, consumption, etc.--in order to generate the money necessary to pay back the principal plus interest. This is fairly straight-forward, of course, but the systemic result of the practice of fractional-reserve banking, when spread throughout society, is that society as a whole must grow in order to have enough incrase in "wealth" to be able to repay its lenders.

Wouldn't simple interest cause this same problem, without considering fractional-reserve banking? The discussion on the rationale behind the prohibition on usury is best left for another day, but the bottom line is that fractional-reserve banking is more than a mere escalation on the catalyst for growth caused by interest alone. Interest is, in theory, equal to the opportunity cost of the lender (as in, the value of what the lender could do with the money) plus the risk of non-payment. So if a lender lends at interest, they are not really creating a catalyst for growth by the act of lending, because it could have used that money for a growth-oriented purpose itself. In actuality, they are only redistributing capital to where it can work more effectivley, and facilitating economic efficiency. Fractional-reserve banking, on the other hand, allows the lender to create far more growth than he himself could have created by putting his own capital to use.

Food for thought for the time being, more on this in the near future...

Satellites & Feedback Loops

2009-02-17T07:58:00.004-07:00

A bit off topic for today, but unfortunately I don't have time this week to get back to the core topics of growth and hierarchy:

Most newspapers and news broadcasts carried a brief segment on last week's satellite collision. The interesting part of this story, from my perspective, is that the vast majority of the news coverage failed to even mention the existence of a positive feedback loop at work in "space junk."

With last week's collision, there are at least 2,000 new pieces of debris in orbit around the Earth--junk that will remain in orbit for decades, and that was not intentionally placed in safe orbits. The result: each of these 2,000 pieces is far more likely than planned satellites to be involved in another collission.

It's a bit like the classic grade school science film explaining fission: a gymnasium full of mousetraps with ping-pong balls positioned on top. You trip one mousetrap, and the ping-pong ball bounces about, triggering several more--a chain reaction begins as each fo these ping-pong balls, in turn, trigger several more traps, until the entire gymnasium is filled with a cloud of bouncing balls.

Earth is currently surrounded by a very sparse cloud of man-made objects. However, each of these is relatively large--in the event of a collission, each can break down into thousands of smaller objects still capable of destroying another spacecraft. With every collission--like what happened last week--a positive-feedback loop is reinforced. Impacts beget more impacts, until eventually this sparse cloud of large objects is a dense cloud of small objects. The potential result: low and medium-earth orbit satellites are no longer viable systems, and it is increasingly difficult to launch higher orbit satellites because they must still cross through this deadly cloud.

While I think the potential to eliminate every system that relies on satellites is very significant, I think it's more significant that our civilizational discourse is so ignorant of feedback loops that the topic simply isn't being discussed. We can live without satellites. Whether or not we can survive long without a basic and widespread awareness of systems theory remains an open question...

Mechanics of Future Oil Price Volatility (A Flubber Cobweb)

2009-02-09T02:59:00.000-07:00

I previously examined the interface between peaking oil supplies and oil price volatility as a predator-prey system. With the rapid drop in oil prices, it’s time to add another wrinkle to that story: widespread acceptance (psychosis?) about the stability of high oil prices acted as a damper on oil price volatility. Now that a collapse in oil prices is more than a mere theory, oil markets are poised for a long-term increase in price volatility.

The fundamental problem facing oil markets at present it this: while present supplies are sufficient to meet present weak demand, these sources of production face rapid decline. The current low oil prices are not sufficient to support the long term investment in future supplies, conservation, and consumption efficiency that will be necessary to mitigate the impact of this decline. Because of the time-lag between a sufficient price signal and oil reaching the market (or demand being reduced), and because of the impact of the recent price collapse on producer psychology, volatility will rapidly incrase as the market's price signal must make increasingly exaggerated moves to bring supply and demand into equillibrium.

Without ongoing investment to support present production levels, production decline rates will accelerate

Figure 1: This graph, from Merril Lynch, shows that reduced capital expenditure will have a sharp impact on field decline rates, but assumes this impact will diminish as our economy recovers and capital expenditure picks back up…

There are two key issues here:

1) The market’s price signals react over much shorter time-spans than new supplies or investments in conservation or efficiency can be brought to market. Depending on the specifics, it can take anywhere from 2 to 10+ years to bring a new oil-field into full production. Therefore, even when oil was at $147/barrel, oil producers couldn’t immediately realize profits from oil that would only cost $100/barrel to produce. The same is true with many efficiency and conservation measures—while the most elastic demand (e.g. Summer driving vacations) can be reduced rapidly, other conservation and efficiency efforts take much longer. Electrified rail takes years to fund and build out, and the gradual upgrade of the fuel efficiency of our vehicle fleet (or the replacement with electric vehicles) requires years of consistently high fuel prices or efficiency regulations that generally don’t take effect until several years in the future.

2) Our recent market experience—a rapid crash in prices—undermines efforts at long-term investments in supplies. At $150/barrel, oil companies were willing to invest billions in new projects that, several years in the future, would bring production on line at a cost of $50, $60, or even $80/barrel. Because of the time-value of money, and because our energy futures markets are incapable of economically hedging entire oil megaprojects a decade or more into the future, oil companies needed to leave a large price cushion. $150/barrel oil did not justify a ten-year lead time to produce oil that would cost $140/barrel, even under the assumption that oil would remain at $150/barrel. This cushion shrank some during the (relatively) steady increase in oil prices from 2001 – 2008, and oil companies’ willingness and ability to finance these projects increased. But now that the price of oil has crashed from $150 to $40/barrel, the prospect of a sudden drop in price is more than a mere possibility.

The result of this will be long-lasting: if oil prices again reach $150/barrel, there will be much greater reluctance to invest in long-range projects to produce oil at even $50 or $60/barrel. Similarly, the cost and availability of financing such projects has been dramatically reduced by the credit crunch. The result is that the more aggressive producers—those with the least cash and greatest incentive to take risks—are the least able to finance such projects. Those with the greatest ability to undertake such projects—select oil majors and many national oil companies—are also the most conservative and least willing to risk embarking on long-term, expensive production projects.

Continually Increasing Price Volatility

The principle results of this time-lag and shift in producer-psychology is that price signals must become increasingly over-exaggerated to create the desired market effect. The level of interest and willingness to invest in oil production that was spurred by 2008’s $100+ oil prices will not be regained if oil again hits $100 or $150—it may be necessary for oil prices to hit $200, $250, or more to provide an adequate incentive for oil companies to invest in oil with a $50+ cost per barrel.

And, even when the price level necessary to spur sufficient investment is reached, the resulting production will not come on line immediately. Instead, it will take several more years to reach the market. During this time-lag period between sufficient price signal and new oil reaching the market (or new demand being destroyed), prices will continue to move and push this market signal. If oil at $100/barrel is sufficient to incentivise investment in oil production to meet then-current demand, the market will continue to push the price signal past $100/barrel, especially as geological depletion continues to grind and the incentives for geopolitical disruption continue to rise.

As a result of the price rise during this time-lag, more production investment decisions will be made, and more demand will be destroyed, than was actually necessary to reach an equilibrium point. The result will be an inevitable overcorrection and price crash, restarting the price cycle. With each successive boom and crash cycle, the market psychology will become increasingly resistant to a given move in the price-signal, and the degree to which the price signal must move to create an equivalent market effect will increase. This will result in continually increasing price volatility as the market swings wildly to reconcile the ever moving targets with production and demand.

A Flubber Cobweb

The time-lag between market and fundamentals is exacerbated by inadequate futures markets and our own psychology. On a general level, this is a common process in economics, described by the cobweb model:

Figure 2: A classical economic “Cobweb Model” of supply and demand

This model shows a supply/demand spiral characteristic of a market searching for equilibrium in a steady-state environment—it is NOT characteristic of oil prices in a post-peak environment. Rather, once oil production has peaked, the spiral will work in the opposite direction with increasingly divergent P and Q brackets.

Under peak oil theory, Q must gerally decline, even if there is significant noise present. From a civilizational-perspective, I think there will be a great deal of information carried by what happens to P as Q approaches zero: If P1 and P3 diverge or generally trend higher as Q approaches zero, this may show a sign of fundamental economic strength in the face of peak oil—perhaps indicating that the realized EROEI of alternative energy supplies is sufficient to maintain a global-industrial economy. However, if P1 and P3 converge or generally trend lower as Q approaches zero, then I see this as the dimming of global-industrial system.

One important note: I don’t think that these values carry meaning when measured simply in absolute dollar values—inflation, deflation, and other currency games introduce too much distortion. Rather, I think a measure of the dollar price of oil as a percentage of median national and global incomes (in dollars) will carry much more meaning when measuring the divergence or convergence of P1 and P3 going forward.

Add in declining supply due to geological and geopolitical peak oil and increasing global population and oil price volatility will rapidly accelerate over the next decade.

Discussion Questions:

1. How will this system interact with the global economy (itself a key driver of demand and cyclic in nature)?

2. Will oil price volatility be primarily characterized by increasing spread between price highs and lows, by a shortening of the period between highs and lows, or by some combination of the two?

3. This article suggests that oil price volatility will continually increase. At the same time, I generally criticize other theories that argue for perpetual increase (in population, GDP, resource consumption, etc.). Clearly, at some point volatility must either (1) slow or decrease, or (2) reach a functional maximum at which point market signals are reduced to meaningless “trading noise” and the market function ceases to provide utility. Which result, and why? In the spirit of Kurzweil (link) or Moore’s Law (link), does this process lead inevitably to the end of markets? Half in jest, what if the causal mechanism of the Maya 2012 hypothesis (or insert your favorite apocalypse meme here) is simply global markets grinding to a halt as prices cease to carry meaning and we can’t find a way to reverse the complexification that caused this?

**In light of these three concluding questions, I hope that it is clear that I am not intending to argue some fundamental “truth” with regard to ever-increasing price volatility, but rather that I’m using that argument to set up the three concluding questions (which I consider much more interesting and important in the long-run).

Peak oil: a symptom, not a cause

2009-02-02T01:26:00.001-07:00

Is peak oil--the inexorable decline in global oil production--a cause of our troubles, or merely a symptom of a deeper cause? I think it's the latter.

What is the ultimate cause of our troubles? In my opinion, it is the hierarchal nature of our society. As I discussed in my essay, The Problem of Growth, a terrain consisting of competing hierarchal structure requires that these structures continually work to grow and intensify; the resulting symptom of a requirement for perpetual growth drives both our increasing consumption of non-renewable resources and our FIRE-bubble economy (Finance, Investment, and Real Estate); peak oil, in turn, is a symptom of our non-sustainable use of resources.

There is a temptation to say that the financial crisis has debunked peak oil theory, that the financial crisis delayed the peaking of oil production (or is somehow masking it), that the financial crisis was caused by peak oil, etc. In my opinion, it's much more accurate and informative to point out that both the financial crisis and peak oil are symptoms of a deeper cause, and that this cause--the fundamental structure of our society--is really what must be addressed. The corollary, of course, is that we can't solve the financial crisis or peak oil because they are symptoms, not causes. Instead, we must search for ways to address our fundamental mode of organization...

It's worth noting that some people disagree with my assertion that our civilization's drive for perpetual growth is caused by our hierarchal mode of organization. I'm not intending to defend this logical leap here (see The Problem of Growth for an initial explanation, but I fully admit the theory needs more work). Even if I'm wrong, that still doesn't make the financial crisis or peak oil causes in and of themselves--they are still the symptom of our civilization's drive for perpetual growth (whatever it's ultimate cause may be), and therefore they are the wrong level at which to attack the problems they cause.

First principles: we need to identify the cause to our problem before we can effectively address it (I'm avoiding "solve" here because that suggests some singular, univerally-agreed objective). Our civilization's drive to growth is, again, only a symptom. What is its cause? This, I think, is the key question confronting humanity at present. I may be right that it is our overemphasis of hierarchal structure--and I'll make that argument in more depth in the coming weeks. However, if I'm wrong, that doesn't change the principle that we must identify the root cause in order to rationally proceed...

2009 - Selfishness Disguised

2009-01-26T01:30:00.000-07:00

Last week I reviewed my predictions from 2008. Suffice to say that I didn't have a very good record. Now it's time for predictions for 2009. While my ego would like to be more accurate this year, in reality I'd like nothing better than to be wrong:

1. The economy will muddle along. We won't clearly "emerge" from our economic troubles, and we won't enter a true "crash" or depression either. There will be good signs (revival in the real estate market in some areas) and bad signs (unemployment will keep rising, it will become increasingly clear that some regions of the US will never regain their former glory). My overall prediction is based on my belief that our economy is facing two sets of challenges. The first set are truly fundamental: diminishing energy availability and the fact that our economy is predicated on an assumption of perpetual growth despite our residence on a finite planet. These, however, are not the source of our current troubles. The second set is the result of short-sighted hubris and greed: sub-prime mortgages, the belief that housing prices can perpetually rise faster than the general rate of economic growth, the belief that we can create real wealth out of thin air through the "magic" of complex financial derivatives, etc. These second set of mistakes created a bubble that popped (or, more accurately, is still rapidly deflating), and we're riding it on the way down. There is a critical distinction between these two sets of problems, however. Our economic engine, our fundamental blend of capitalism and fascism (what else do you call a controlling government-industrial interface?), will continue to grow and generate wealth (at least for some) until it collides with the fundamental problems in "Set 1." That means that it will deal with, and overcome, the problems presented by the second set. We'll realize the sources of our short-term problems and we'll fix the system. Then we'll get back to business and growth. Bottom line: the economic problems we're currently facing can and will be fixed. We probably won't turn things around in 2009, but we'll lay the groundwork for a recovery in 2010.

2. This 2010 recovery will, however, come just in time to collide with the more fundamental problems in "Set 1" that will have been gathering steam while we focus on fixing our short-term problems. This is the larger theme of 2009: we will be so focused on fixing our immediate problems that we will fail to effectively address our true, long-term problems. To make things worse, we'll be squandering our last, best opportunity to effectively, proactively deal with these fundamentals. We'll be squandering arguably an amount of surplus energy that simply won't be available in the future, energy that we could use now to build a truly sustainable infrastructure to provide energy and food for our planet. Instead, we'll use this energy to try to make sure we can keep driving our SUVs, keep moving up into larger houses filled with more trinkets, etc. I'm calling this "selfishness" because I can think of no more accurate term. Many people will argue that most people aren't aware of our long-term problems, so they can't be blamed for not acting to solve them. I think this is, at most, conscious ignorance. It's so much more fun, at least in the short-term, to squander our inheritance. This won't be a function of Obama and the Democrats or the Republicans--it is far more fundamental than that. It is far more ingrained than that--in the stories we tell ourselves about progress and in our faith in the continuation of the recent past perpetually into the future. I think we'll see just enough success in the short run--an economic recovery in 2010, a return to global growth and wealth, to destroy any chance (small to being with) that we may have had to make fundamental changes.

3. Oil prices. Most of my recent predictions have addressed the issue of oil prices, and this post won't disappoint. I don't think we'll regain the highs seen in 2008, but I think we'll spend a few months in the $30s and $40s and then end the year between $60 and $70/barrel. This will not be because of any recovery in demand, but rather because of a much more troubling decline in production caused by decreased investment due to low oil prices. We'll see many of the megaprojects, scheduled to come online over the next few years to stave off serious production declines, delayed indefinitely. While it won't make many (any) headlines in 2009, we'll lay the groundwork for precipitous production declines to hit just about the time we experience a last-gasp economic recovery in 2010-2013 (so, while it's far into the future, my prediction will be for a true spike in prices in the area of 2012).

4. Geopolitics: we'll continue a similarly selfish course of action in 2009. While I'd like to think the Obama administration will take a bit more far-sighted tack than his predecessor(s), I think Obama will be too fixated on trying to create an immediate economic recovery to expend any political capital on diplomacy. Hopefully I'll be wrong here, as well. What will this look like? It will mean continuing to support dictators, strong-men, and corrupt regimes in the name of near-term stability and security, and at the long-term expense of continually grieving the world's poor and oppressed. As I noted a few weeks ago, people don't hate America "because of our freedom," rather they hate us because we support their oppression in our own self-interest. We'll continue that trend in 2009. I'll go out on a limb and make at least one bold prediction here: Pakistan will succumb to another military coup, and Obama will take sides with the new military ruler in the name of expediency in the "War on Terror."

In addition, here are a few responses to an e-mail interview I gave last week that are essentially predictions for 2009 and beyond:

Q: According to you is the problem of Peak Oil (and the likely impacts of a decline in oil production) a top-priority for the US Department of Defence or is it just seen as an important issue but equal to others?

A: I don't think Peak Oil is really on the DoD's radar, especially not at the highest levels. I know that, within the DoD, there is widespread understanding of the problems that rising (and, more recently, volatile) oil prices create for budgeting, logistics, acquisitions, pre-positioning, etc. There is a lesser understanding of how and where Peak Oil will drive conflict--in my experience, most senior leadership understand that competition for energy resources will make oil exporting regions into conflict areas, but I think there is minimal awareness (at best) of the extent of these conflicts, of the positive feedback loops between geology and geopolitics, and about how declining oil revenues will weaken nation-state structures just as many export-reliant states are facing the peak of their domestic demographic crises.

Q: - As they say in the recent JOE 2008 report "The implications for future conflict are ominous", in this context, do you think the Department of Defence is preparing/planning (e.g. ways to secure oil transport, invasions of producing countries) for the crisis?

A: I think this quote from the JOE demonstrates that, at least within the think-tank side of the DoD, there is some understanding of the scope and scale of problems that Peak Oil will bring. However, there seems to be a widening gulf between this understanding (often isolated in policy and research organizations) and the operational and developmental policies being implemented on the operational side of the DoD. We seem to be stuck, operationally, in a Catch-22 situation. We're preparing to defend regimes against insurgencies and we're increasingly willing to compromise our proclaimed policy of "we support democracies" to achieve the ends of securing energy supplies; we're lamenting our inability to diffuse, at its most basic level, the motivation among "terrorist" groups to attack the US and the West in general; yet we seem incapable of understanding--at least at the senior operational and policy level--that it is our very policy of supporting exploitative regimes (to secure our energy supplies and economic hegemony) that drives the threat against those regimes, ad infinitum.

Q: How do you see major actors (USA, China, Russia, EU, OPEC) reacting to the crisis and oil shortages?

A: I think that, in light of recent US experience in Iraq and Afghanistan, you will see increasing support for non-democratically elected regimes (e.g. regimes that will barter access to energy supplies for third-country military and financial support to stay in power) and an increasing willingness to provoke proxy conflicts and support insurgencies to gain access to supplies otherwise locked down by another power. I don't think we'll see the wholesale occupation of oil producing countries (and even in Iraq I think we'll continue to see US forces drawdown), but I do think we'll see a growth in economic and military deals that can only be described as mercantilist. Unlike past, colonial mercantilism, I think the primary tool here will be long-term bilateral supply contacts paid for up front with regime aid. China, and to a lesser extent India are already doing this, but it will become more pronounced and will be joined by Europeans and America.

Q: Do you rather see an anarchic world or a world of alliances (e.g. NATO vs. Shanghai Cooperation Organisation)?

A: Near-term, I think we'll see a push for strategic aliances. Longer-term, I think the answer will depend on the broader state of the world economy. To the extent that states can fulfill their constitutional (small "c") obligations to their constituent nations, then they will be in a position to make the (wise) long-term investments in strategic partnerships. However, to the extent that states need to show immediate results to hold themselves together, they will sacrifice these long-term prospects for near-term gain achieved by abandoning (or double-crossing) their former allies. OPEC (and the nascent natural gas cartel) is a perfect example: as long as the Saudi monarchy, for example, can continue to buy off its citizens with handouts, then it will be able to hold together some kind of cartel to operate in its long-term best interest. However, to the extent that the Saudis have any true spare capacity, they will bring it online for short-term cash if they need to prop up their domestic spending to stay in power--alternately, they will damage their field geology by overproducing if they are short on cash. Same things is already looming in Venezuela, Mexico, etc. On the consuming-nation side, heavy lifters in NATO and the SCO will grow tired of pulling the weight for others and will be more likely to abandon their alliances if they see it to be in their self interest--and this will largely be determined by whether they have the luxury of looking to their long-term self interest or whether they must, by necessity, look for the quick fix.

Review of 2008 Predictions

2009-01-19T02:33:00.001-07:00

Well, it's 2009 and time for annual predictions. This post, however, will review my 2008 predictions.

If I had reviewed my oil price predictions in May of 2008, things would have looked great: I predicted that prices would solidly breack $100. After that, I failed to predict a "spike" (as it turned out, to roughly $147/barrel), or the subsequent crash in prices. This second failure was largely the result of my biggest failure in my 2008 predictions: I argued that we wouldn't have an economic crash, and that we wouldn't even enter a recession. I don't think it's possible to mince words here: I was wrong.

Ultimately, my confidence in the economy was due to my belief that we wouldn't see enough oil production decline in 2008 to really pull the rug out from under our economic fundamentals. And, at least to the extent that didn't happen, I was right. Where I was wrong was in my optimism that we'd be able to deal with the credit and financial troubles we were facing. I still stick to my underlying belief that our credit crisis--as a short term bubble caused by overly optimistic lending--is fundamentally fixable. By insisting on continuing to try to prolong the bubble, we eventually pushed it past a point of no return to where it popped. The far more intractible problem facing our economy--dependence on depleting fossil fuels and (the related) problem of being a growth-dependent economy confined to a finite planet--remain to cause havoc in the future, but they aren't the underlying cause of our current troubles. So now we're in a recession, and we're paying the price for living high on a bubble for the past few years. C'est la vie. What troubles me about this is that 1) we'll recover and ramp up consumption just in time for this to collide with a decline in energy production that will gather steam in the next few years, and 2) we'll be so fixed on solving our short-term problems over the next few years that we'll squander our best (last?) opportunity to proactively address the truly fundamental problems that we face. More on that, of course, next week when I make my predictions for 2009.

Were there any highlights, things that I got right in 2008? While it was a pretty dismal year for my predictions, I did get two things right. First, I predicted that it would be a slow year for Iran and Iraq, and that turned out to be the case. Second (and, admittedly, so vague that it shouldn't really get scored), I predicted that we'd continue to fail to take the tough steps necessary to deal with our most fundamental threats, and that we'd continue to push off a real accounting to later years and generations. I wish I could have reported that I was wrong there, too, but unfortunately I can't... Maybe I'll write a post about Hotelling's law and our ability to solve our problems within our existing political system. At least that's one prediction that I feel confident in being right about, even if my proof won't (hopefully) arrive in 2009.

Back from the holidays, and a bit of media

2009-01-12T02:37:00.000-07:00

I'm back from a bit of a holiday break. Two media links and a brief commentary on the Gaza conflict for today:

First, I recently appeared on the C-Realm podcast with KMO. We discussed hierarchy, energy, and the "Peter Principle."

Second, here's a video of my presentation at the 2008 ASPO-USA conference in Sacramento. You'll need to skip past the first presentation (though it's also worth watching) to get to my presentation on energy geopolitics.

Finally, a few thoughts on the Gaza conflict. I'm not going to talk about the actions of Israel or Hamas. Instead, I'm going to talk about the problems created by America's hypocritical support of Hosni Mubarak. Despite the consistent American talking point of "supporting democracy," the US has consistently supported Mubarak, a defacto dictator at the healm of a military-industrial oligarchy, as the leader of Egypt, the most populous Arab state. President George W. Bush resolutely supported Mubarak for his support in the "War on Terror. There has been (to my knowledge) no indication from the Obama camp that we will put any serious pressure on Mubarak for democratic reforms in Egypt, despite ongoing rhetoric about supporting democracy. Why? Because it has been, and will continue to be expedient in the short term to support an autocratic strong-man in Egypt.

A democratic Egypt will, at least for now, mean an Islamic fundamentalist Egypt--if truly free and fair elections were held today, the Muslim Brotherhood (a banned, grass-roots organization) would almost certainly win. We support Mubarak because he is a barrier against the spread of Islamic fundamentalism. Mubarak, however, is exacerbating the situation in Gaza because he views Hamas as an extension of the Muslim Brotherhood (they grew out of the same basic movement), and therefore views them as a threat to his rule. The US, by supporting what the "Arab street" (largely) correctly views as a series of thugs and dicatators bent on exploiting Arab poverty and sentiment for their own good, continues to draw the ire of Islamists. We like to say that "they hate our freedom" or some political drivel like that, but the simple truth is that they hate the way we have selfishly supported their exploitation by local dicatators and monarchies for nearly a century (and for over a century if we tack on our imperial predecessors).

Americas claim to stand for a set of very noble principles. Yet we seem to think that we can "win" a war on terror that started and continues due our our incessant pissing off of the vast majority of the Arab world. We don't have to bow to terrorists or surrender to stop pissing them off. In fact--shocking as this may be--we would likely find that if we just start acting on the very principles we espouse we would achieve the best resolution possible in the war on terror. The catch? It would take time, and it would appear to get worse before it gets better (oh, and it would undermine our remaining vestiges of economic imperialism to a certain extent).

This isn't much of a New Year's post (that will be coming soon--predictions and reviews of 2008 predictions), but this is the theme for 2009: we have the opportunity to make the hard choices that will hurt now and actually improve our long term situation, or we can continue to reach for the quick fix and make the ultimate, necessary accounting that much worse. Here's a preview for my 2009 predictions: we won't have the guts to make the difficult but correct choice.