Betting the farm

President Bush had more to say about energy in SOTU 2007 compared to last but without the catch phrase, America is addicted to oil.

Extending hope and opportunity depends on a stable supply of energy that keeps America's economy running and America's environment clean. For too long our nation has been dependent on foreign oil. And this dependence leaves us more vulnerable to hostile regimes, and to terrorists -- who could cause huge disruptions of oil shipments, and raise the price of oil, and do great harm to our economy.

It's in our vital interest to diversify America's energy supply -- the way forward is through technology. We must continue changing the way America generates electric power, by even greater use of clean coal technology, solar and wind energy, and clean, safe nuclear power. (Applause.) We need to press on with battery research for plug-in and hybrid vehicles, and expand the use of clean diesel vehicles and biodiesel fuel. (Applause.) We must continue investing in new methods of producing ethanol -- (applause) -- using everything from wood chips to grasses, to agricultural wastes.

We made a lot of progress, thanks to good policies here in Washington and the strong response of the market. And now even more dramatic advances are within reach. Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we've done and reduce gasoline usage in the United States by 20 percent in the next 10 years. (Applause.) When we do that we will have cut our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East.

To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 -- and that is nearly five times the current target. (Applause.) At the same time, we need to reform and modernize fuel economy standards for cars the way we did for light trucks -- and conserve up to 8.5 billion more gallons of gasoline by 2017.

Achieving these ambitious goals will dramatically reduce our dependence on foreign oil, but it's not going to eliminate it. And so as we continue to diversify our fuel supply, we must step up domestic oil production in environmentally sensitive ways. (Applause.) And to further protect America against severe disruptions to our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve. (Applause.)

America is on the verge of technological breakthroughs that will enable us to live our lives less dependent on oil. And these technologies will help us be better stewards of the environment, and they will help us to confront the serious challenge of global climate change. (Applause.)

The White House expands on this theme with this web site.

We need a Manhattan project. What we're getting is smoke and mirrors.



An MSNBC editor John Schoen, whose articles I've reviewed before, comments on Mr. Bush's speech and its implications. He speaks of subsidies to the ethanol industry, as well as the following two items:

Higher prices for the natural gas — needed to generate heat to brew ethanol — has also gone up.

and

The administration is relying on another “safety value” — a technology to produce ethanol from the cellulose in corn stalks and other plants like switchgrass that can be produced more cheaply than corn. So far, this so-called “cellulosic” process is much more expensive than corn-based ethanol. Major research breakthroughs will be required to make it economically competitive.

The first point hints that much in the way of fossil fuels is needed for ethanol production. Heat for fermentation is only one of the energy inputs. See my earlier posts about EROEI, energy returned on energy invested.

The second point reflects a contradiction between claim and fact. Remember, Mr Bush claimed:

America is on the verge of technological breakthroughs

but Mr. Schoen points out that a process (from switchgrass cellulose) that is supposed to be cheaper (read: requiring fewer energy inputs) than corn, turns out to be "much more expensive".

An MSNBC blogger, Alan Boyle, explores the SOTU energy implications here from a more scientific viewpoint.

Worthy of note is the new Congress' 100 hours legislation on energy:

We will energize America by achieving energy independence, and we will begin by rolling back the multi-billion dollar subsidies for Big Oil.
H.R. 6, "Creating Long-Term Energy Alternatives for the Nation Act." passed 264-163, Jan. 18th, 2007

Does this sound credible?

MSNBC reports on a preliminary EIA report.

The analysis reflected a sharp change from the department's projections a year ago when it predicted oil prices in constant dollars _ not counting normal inflation _ would decline to $31 a barrel by 2025.

The report, issued Monday by the department's Energy Information Administration, now projects oil will cost an average $54 a barrel in 2025 and $57 a barrel in 2030 before inflation. Currently, crude oil prices have been hovering around $60 a barrel, briefly soaring as high as $70 earlier this year.

and

In the reference case—one of several cases included in AEO2006—the average world crude oil price continues to rise through 2006 and then declines to $46.90 per barrel in 2014 (2004 dollars) as new supplies enter the market. It then rises slowly to $54.08 per barrel in 2025.

and

In the AEO2006 reference case, world petroleum demand is projected to increase from about 82 million barrels per day in 2004 to 111 million barrels per day in 2025. The additional demand is expected to be met by increased oil production from both OPEC and non-OPEC nations.

What's changed in one year? Does EIA think its reference case is the most likely? Where will the additional supply come from exactly to satisfy continued current levels of use nevermind the projected future ones? What alternate cases will be discussed later, presumably in February? What kind of worst case scenario and what assumptions? See also Where on the Risk Continuum?

Republican Representative Roscoe Bartlett gave a one-hour special order speech on the floor of the House in which at one point he rejected the EIA numbers. Truly, it's laughable if it weren't so sad.

More Newspeak

In an MSNBC piece, John Schoen has all the answers, including the following:

an oil company is no different than, say, a gold mining company. The price of gold has little to do with how much it costs to find and produce it — it's set by supply and demand.

it takes years from the time you invest in looking for oil to the time you can pump it out of the ground. So even in places where there are still plenty of reserves (oil underground) like the Middle East, oil production (how much you get out of the ground per day) didn't grow fast enough to cover the growth in demand.

most domestic U.S. oil costs more, not less, to produce than Saudi oil. Our oilfields are much more “mature” — which is another way of saying the easy (i.e. cheap) oil has all been pumped

I'd say there is an inconsistency here: why remark about oil costs, if costs don't have much to do with price. There is a lot of evidence that the Saudi oil fields are mature. Mr. Schoen posits that growth will, in time, keep up with demand, given enough monetary incentive. Where, oh where, is the recognition that the earth is round and that oil is a finite expendable resource?

and again, remarkably,

By the early 2000s, just as investment in new oil production had slowed, demand for oil began taking off — especially in developing countries like China and India that have presided over booming economies. (Which is a good thing, by the way. If the Chinese weren't able to afford to buy billions of dollars of U.S. Treasury debt to make up for our budget deficit, we'd likely be looking at much higher U.S. interest rates — or worse. But that’s another answer for another day.)

Sounds Orwellian to me.

If that's not enough, try following Mr. Schoen's glib answers to the following serious question:

If, in fact, world oil production has peaked and there are (at best) twenty years worth of oil and gas reserves remaining we are facing cataclysmic change. We're not talking about the "inconvenience" of higher gasoline prices or the need to curtail emissions to arrest global climate change. We're talking about the end of life as we know it. There is no single aspect of our economy, our very lives that is not dependent on products and processes derived from oil and gas …
While "alternative" energy sources are available, they, too, are dependent on fossil fuels: photovoltaic cells and hydrogen fuel cell membranes are derived from petroleum based plastics. The sooner we acknowledge that our fossil fuel sources are finite and the day of reckoning is not that far away, the better our chances that some semblance of what we call human civilization will exist fifty years from now.
-- Ray S., Los Angeles

I don't fully agree with Ray's assumptions. For example, one might conclude from Ray's question that we have twenty years before the 'guage hits empty' (to use Mr. Schoen's words). The evidence shows that there will be reduced production each year after the peak. And there is plenty of evidence that the peak is upon us. Our society worships growth. Can we possibly handle contraction? The cataclysm could come sooner rather than later.

To counter gloom-and-doom, Mr. Schoen offers pie-in-the-sky:

Many, like Ray in Los Angeles, fear that coming oil shortages could bring “the end of life as we know it.” We agree. But that doesn’t have to be a bad thing.
post-oil life could end up being a much better one.

and

If the era of “cheap oil” is indeed over, we all have a lot of work to do. But here at the Answer Desk, we don’t believe that the game is over. There are a lot of very smart people out there working on solutions. As oil consumers, we all created this problem. The good news is that that means we all have the power to solve it.

It's not a game, Mr. Schoen, and aren't you the one with the answers? Why does our creating the problem imply that we have the power to solve it? Isn't there anyone at MSNBC who can see through such drivel?


Here's a Newsweek piece that purports to show how market forces are kicking in to advance alternate fuels. In it, the author states:

Add to that the fierce ongoing debate about "peak oil" and the declining viability of the Earth's oil supply.

Deliberate obfuscation or what?

MSNBC presents this collection of articles written by John Schoen and titled, After Oil: What to do when the oil runs out. [John Schoen is a senior producer at MSNBC who helped launch the site.] Among the articles, Mr. Schoen points to the recent urgency to develop hydrogen as an energy source but later says 'hydrogen is what’s known as a “secondary” energy source' and then 'almost all of the hydrogen produced today is made from natural gas, a fossil fuel that is already in short supply'. The truth is that hydrogen is not an energy source at all (unless used in nuclear fusion - another subject altogether), but merely a repository for energy, like batteries.

Another important example of imprecision is Mr. Schoen's article on alternative energy where finally acknowledges that ' Some researchers say that these biomass fuels require more for fossil energy to make than they produce

Further on the energy cost of energy produced, see this blog entry based on this article. Besides the environmental degredation:

In 2003, the biologist Jeffrey Dukes calculated that the fossil fuels we burn in one year were made from organic matter “containing 44×10 to the 18 grams of carbon, which is more than 400 times the net primary productivity of the planet’s current biota.”(1) In plain English, this means that every year we use four centuries’ worth of plants and animals.

In another article , Mr. Schoen refers to the role of efficiency as breathlessly propounded by Amory Lovins of the Rocky Mountain Institute. Mr. Schoen includes a caveat: 'some' assert that 'the low-hanging fruit of energy efficiency has already been picked'.

Scientific American in its September theme issue, Crossroads for Planet Earth, published an article by Mr. Lovins entitled, More Profit with Less Carbon. Scientific American could have done much better where the fate of people (and science) on the Earth is concerned.

• The article regards climate rather than oil depletion as the main problem. There's no reference to Scientific American's important March 1998 article, The End of Cheap Oil.
• Mr. Lovins' arguments are hollow and unconvincing. As Vice-president Cheney has recently pointed out: we're twice as efficient as we were X number of years ago. So why then are we using twice as much oil?
• Mr. Lovins' article doesn't square with another article in the issue, Economics in a Full World: Society can no longer safely pretend the global economy operates within a limitless ecosystem. (See also this sidebar from that article.)
  

Scientific American's September issue is subtitled, 'The human race is at a unique turning point. Will we choose to create the best of all possible worlds?' This is reminiscent of Jared Diamond's book title, Collapse: How Societies Choose to Fail or Succeed. What choices do we really have?

Are higher oil prices good for you?

Robert Samuelson on MSNBC/Newsweek stated a month ago:

What this country needs is $4-a-gallon gasoline or, maybe, $5. We don't need it today, but we do need it over the next seven to 10 years via a steadily rising oil tax.

Would that market prices (even without the gas tax) were so low a year from now.

Mr. Samuelson cites our negligence of the Strategic Petroleum Reserve (SPR) as emblematic of the problem:

The SPR languished. In 1992, it had oil equal to 83 days of imports; by 2000, that was only 52 days.

How farsighted we were back then compared to now, right?

The signs abound

MSNBC often has accessible articles related to Peak Oil. Here's one that describes the effects of high oil prices and another predicting higher prices yet.

Here, another blogger points to the scary data on the producer's side.