Potato Famine events are likely by 2012, unavoidable by 2015. This article intends to define the choices we face, U.S. military risk assessment, failed assumptions of the oil-economy, EIA/IEA's failure to warn, and Thomas Edison's infrastructure guidence.
Over the past century, centrally planned highway infrastructure incrementally made oil the lifeblood of our economy. Infrastructure that mandates spending energy moving a ton to move a person at less than .005 times the efficiency freight rail. This poor efficiency and monolithic dependence on a single source of energy resulted in two civilization killers, Peak Oil and Climate Change.
The good news is we do not have an energy problem, we have a policy problem. We have 18 months to implement one of two choices. The consequences of that choice will play out over the next 20 years:
Change the lifeblood of our economy from oil to ingenuity. Return transportation and power infrastructures to free markets as was done with the communication infrastructure in 1984. Results:
Millions of jobs, vast innovation, better service at lower costs.
Cut transportation costs in half, increasing family disposable income by about $5,000 per year.
A CSX Railroad commercial notes: "Our trains move a ton of freight 423 miles on one gallon of fuel." So why do government planned passenger trains, buses and highways move a person at less than .5% efficiency (yes, .005) at 18-41 mpg? Next time you put $40 of gas in your car, consider that freight rail could move your mass the same distance for 20 cents. Personal transportation requires more flexibility than trains but innovation can easily deliver 120 mpg, cleaner, faster, safer and more affordable than a car.
An example of transportation innovation is the Personal Rapid Transit (PRT or PodCar) network at Morgantown, WV. It has delivered 110 million injury-free, oil-free passenger miles since going into service in 1975 as a solution to the 1973 Oil Embargo. Like a physical version of the Internet, this is a computer network that moves people on-demand.
Cling to central planned infrastructure. Result:
Between 2002 and 2006 as India and China purchased oil, world spare production capacity tightened. U.S. gasoline prices increased from $1.45 per gallon to $2.92 per gallon, decreasing disposable income per family by about $2,000 per year. As more and more families were forced to choose between paying for their commute or mortgage, foreclosures exposed poor banking and policy practices collapsing the banking system.
Deplete strength as politicians and bureaucrats waste taxpayer funds attempting to adapt the automobile to biofuels, electricity or hydrogen. Fuel is irrelevant, the problem is paying to move a ton to move a person in congested, accident prone traffic.
Unemployment will grow and housing values will drop until disposable income's ability to buy energy efficiency increases by at least $2,000 per family per year.
By 2012 the food system follows foreclosures, decreasing housing values, failed banking systems and unemployment into collapse. This could happen sooner if hurricanes hit oil areas or Iran misbehaves.
Choice 1 is very profitable and creates jobs. Choice 2 is a Malthusian Collapse, Olduvai Gorge, Limits to Growth, 85% die-off.
2012 Gasoline Outages
Inventory issues resulted in fuel outages across the Sourtheast US in 2008. Best case: By 2012 expect frequent national gasoline outages as oil production's spare capacity drops to zero. Gulf oil spill and drilling moratorium will shorten the event horizon. By 2015 the consequences will be severe.
When fuel outages occur at planting or harvest the consequences will be dramatic.
Risk Assessment, US Military
Joint Forces Command in the Joint Operating Environment 2010 (JOE-2010):
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."
"A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest."
"Energy production and distribution infrastructure must see significant new investment if energy demand is to be satisfied at a cost compatible with economic growth and prosperity."
"The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.
Forward by General James N Mattis
Geology, Slow and Certain
This crisis is not a surprise. It has been predicted for decades with decades to solve the problem. With no immediate danger, action could be pushed onto the future.
The geological fact of Peak Oil was theorized by Dr. Hubbert in 1956 and proven accurate in 1964 when new discoveries of oil peaked and in 1970 when U.S. oil production peaked.
Decades passed. World Crude Oil Production peaked in 2005 at 74 million barrels per day.
Peak Oil is about the size of the oil spigot. There is still plenty of oil; at least half the oil on the Earth is still there but in smaller pockets that are slower and more energy intensive to extract. Peak Oil forced the failure of assumptions on which oil-powered economies were built over the past century:
Assumption: Affordable energy. Energy at less than $30 per barrel of conventional crude oil (gas below $1.45 a gallon). Reality: oil at $75 per barrel, upwardly unstable.
Assumption: Net energy of 20:1. Reality: net energy of less than 10:1 on new oil developments.
Assumption: Debt can increase forever to buy and consume oil. Reality: risks of default and/or inflation at personal and government levels.
Assumption: Economic growth based on oil supply growth. Reality: crude oil production peaked at 74 mbd in 2005 and existing fields are depleting at 6.7% per year (IEA data).
Peak Oil crisis is understood by the key agencies responsible for reporting on energy, the EIA and IEA (Energy Information Administration and International Energy Agency). Heavily influenced by the oil industry, unwilling to face the facts, EIA and IEA have failed to warn policy makers, businesses and citizens about Peak Oil.
The EIA reporting on disposable Income's ability to buy energy (oil) stopped in 2004 (EIA link). With the modified graph in the upper right (added by the author) is the proverbial frog in a pot of cool water placed on a fire and the data showing the correlation between rising oil costs and foreclosures. Oil discovery and production curves are in the lower right (Note they have peaked).
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The EIA and IEA know about Peak Oil. The following left graph is from page 103 of IEA's 2009 World Energy Outlook. It shows the crisis in conventional crude oil in 2012 then fills in the gap between demand and production with wishful thinking that undefined sources, undefined technologies, deep sea wells and other innovations will fill in the gap between demand and production. The graph on the right, is the military's assessment that these projects are "Undefined".
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Wishful thinking forecasts errors that are spectacularly obvious in the following graphs. The left graph is the Dallas Federal Reserve's on EIA price forecasts relative to actual. On the right is ASPO's on EIA volume forecast relative to actual.
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The repeated forecasting errors can, at best, be interpreted as maliciously incompetent. The military sent soldiers into harm's way based on EIA and IEA forecasts; citizens, businesses and policy makers added debt and accepted risks. Families lost homes, investors lost money, soldiers lost lives. The Stockdale Paradox, facing the facts is essential . The JOE-2010 report is a positive step.
Life requires energy. As energy costs increase, quality of life decreases. As energy decreases, life decreases. IEA and EIA should report on disposable income's ability to buy energy as a metric (capitalized and socialized costs). They should state risks instead of hopes and publish their error rates with their forecasts.
Central Planning, the Cause of Inefficiency
Mobilizing to fight World War I, communications were monopolized, transportation and power infrastructures were socialized as "natural monopolies". Policy makers created agencies to manage infrastructure that implemented the great innovations of Ford, Edison, Bell and the Wright Brothers. Progress was made powered by fossil fuels with unintended consequences:
Transportation, power and communications stopped tinkering, failing/innovating.
A century of rotary telephones.
We have the same gas mileage as the Model-T.
Passenger light rail (government managed) operates at 41 passenger-miles per gallon.
Loss of thousands of miles of railroads as highways/oil subsidizes a monolithic answer to all ground transportation.
Potato famine potential with the monolithic dependence on a single source of energy outside our control.
Shift in the chemistry that balances climate.
Instead of capitalizing costs so free markets can work, governments socialize many costs of fossil fuels; fight wars to protect supply lines, oil spills, restoring potential energy for future generations. When governments could not afford these costs, they borrowed, swelling debts to unprecedented levels. Hidden, these socialized costs, make the use of solar energy seem expensive.
There is no energy problem as noted by Thomas Edison in 1910:
Some day some fellow will invent a way of concentrating and storing up sunshine to use instead of this old, absurd Prometheus scheme of fire. I'll do the trick myself if some one else doesn't get at it. Why, that is all there is about my work in electricity--you know, I never claimed to have invented electricity--that is a campaign lie--nail it!"
"Sunshine is spread out thin and so is electricity. Perhaps they are the same, but we will take that up later. Now the trick was, you see, to concentrate the juice and liberate it as you needed it. The old-fashioned way inaugurated by Jove, of letting it off in a clap of thunder, is dangerous, disconcerting and wasteful. It doesn't fetch up anywhere. My task was to subdivide the current and use it in a great number of little lights, and to do this I had to store it. And we haven't really found out how to store it yet and let it off real easy-like and cheap. Why, we have just begun to commence to get ready to find out about electricity. This scheme of combustion to get power makes me sick to think of--it is so wasteful. It is just the old, foolish Prometheus idea, and the father of Prometheus was a baboon."
"When we learn how to store electricity, we will cease being apes ourselves; until then we are tailless orangutans. You see, we should utilize natural forces and thus get all of our power. Sunshine is a form of energy, and the winds and the tides are manifestations of energy."
"Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property."
"There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...
Every hour of every day enough solar energy hits the Earth to power all human economies for a year. For all human history, except the last century, civilizations lived within a solar budget. Relative to 1910 we have vastly greater understanding of materials, technology and energy. If applied, these understanding can easily increase efficiency by 10x (ten times) and harvest enough energy from natural sources to power industrial economies.
But technology innovations have not been applied to power and transportation infrastructure. Central planning by governments prevents the transportation and energy versions of Steve Jobs, Bill Gates, Thomas Edison, Google, etc..., from building businesses. The first item on every bureaucracy checklist is "proven technology"; mandating only what is known, no innovation. We get better at "know-how" but do not change "know-what". Cars get prettier, but have the same gas mileage as the Model-T. Electric cars, and still move a ton to move a person.
In 1984, communications infrastructure returned to a free market. This resulted in millions of jobs, vast innovation, better service at lower costs. Return power and transportation infrastructures to free markets managed by performance standards and 85 cents of every dollar spent on oil will be converted to profits, jobs and sustainable infrastructure.
Action in the next 18 months will determine if the next 20 years are as innovative as communications has been in the last 25- or - civilization killers produce an 85% die-off. Oddly, the solution is local, live like most organisms on Earth, within a solar budget and become self-reliant.
Disclosure: Author is founder and shareholder in JPods, Inc. A solar powered PRT transportation company.