The American Scene

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Articles filed under Peak Oil

More on The Icarus Syndrome

I earlier linked to an article I have in the current Weekly Standard called The Icarus Syndrome. Not much of this post will make sense unless you’ve read it first.

In the article I made the point that the idea of the simple, low-to-the-ground society as more resilient to disaster seems, so far, to be a myth. A speculative extension of this idea that I didn’t think was appropriate to get into the magazine article is how to deal with the following objection: “OK, but how do we know that this will always continue to be true in the future?”

Icarus theorists argue that modern societies are unsustainable because they have some critical flaw that the Icarus theorist can see, but that the herd of sheep who get in their cars and drive to the office park every weekday morning can not. While specific theories can be rejected based on facts, the nagging feeling that we are all doomed can never be refuted by logic – one is always faced with the problem of induction. It can only be refuted by irrational faith in the future, which in practice usually means religious faith. Because unless we live in a providential universe, we are doomed.

Without providence, no matter how much our choices about lifestyle lower the odds of the annihilation of humanity in any given year or century, as the future rolls out toward infinity something is certain to happen eventually that will do the job. In the end, even the smartest hedging strategy will fail, and just as each individual dies, the human species will go extinct. It will be Game Over – not just for you and me, but for everybody, forever.

Confronting this realization tends to produce a variety of reactions: gloominess, craziness and denial, chief among them. It also tends to drive thoughtful people to attempt some sense of identification with something beyond the human species. Of course, in the physical universe this is a sucker’s game. As we race up the ladder of abstraction from humans to intelligent life to some notion of consciousness or whatever, we keep confronting the fact that everything, even all information, will eventually die when the universe either achieves heat death or implodes back into a point-mass. As physicists colloquially put the three laws of thermodynamics: you can’t win, you can’t break even and you can’t get out of the game.

But even if you believe that we live in such a universe, and further accept that pursuing economic and technological development would shorten the lifespan of the human species, it still doesn’t follow that we would purposely retard material development. I would rather humanity have 1,000 more generations of Shakespeare, city life and space exploration than for humans in the 100,000th generation to emerge from their huts near crystalline clear rivers and look up at the night sky wondering what all those pretty lights are.

You’re the best commenters on the Internet. What am I missing?

The Icarus Syndrome

I’ve written an article in the current edition of The Weekly Standard that tries to connect the current concerns over Peak Oil and Global Warming. A lot of the ideas will be familiar to regular readers of TAS, as they were first worked out here.

If anybody’s interested, I plan to do a post here extending some of the ideas implicit in the article.

Drilling in ANWR

We should do it for the money.

There’s a lot of oil in a very small part of a very big wilderness that 99.9% of Americans will never visit. There are, however, some reasons why making the decision to go get it is not likely to reduce prices people pay at the pump this summer. According to the Energy Information Administration (EIA), it would take about 10 years to get much oil flowing. It’s also not likely to be enough oil to dramatically change supply / demand (it would represent something like 0.5 – 1% of total global production for several years). Though it should be noted that at the time of peak ANWR production, around 2027, this would be equal to something like 10% of U.S. crude production, which is nothing to sneeze at, and comparable to various realistic cases for predicted energy production in this time period from some much-hyped alternative energy sources.

There’s an argument that just by signaling that we’re going to drill, we’d drive the oil market lower. There’s might be something to that, but such a prediction is highly speculative, both because the traders that set oil prices are aware of the size of U.S. conventional reserves, and because the market psychology arguments cut both ways – e.g., “Look, the U.S is committing to long-term dependence, and therefore demand will stay high”.

On the other hand, a very safe prediction is that it will be worth a lot of money to dig that oil up and burn it. The EIA estimates that there are about 2.6 billion barrels of oil in ANWR that could be expected to be extracted between 2018 and 2030. Even using the EIA’s long-term forecast for oil price – which is much lower than today’s price per barrel – that much oil would be worth about $200 billion. As an added bonus, that is almost a dollar-for-dollar reduction of the U.S. trade deficit. In the end, this is the rational argument to drill. America is a very wealthy country, but not so wealthy that we can afford to give up $200 billion as a potlatch.

Once again, as with cap-and-trade, McCain has thrown away a key part of the energy issue, which should be one of his strongest issues in this campaign. Public opinion is moving very rapidly in favor of drilling in ANWR, as you would expect given what’s happened to the price of gas over the past couple of years. According to Pew Research polling, just in the last 6 months there has been a 15-point swing in support. It is now a majority position. Imagine what could happen if a presidential candidate were actually arguing for it.

Oil: Are We In A Bubble?

Asks Megan McArdle. The short answer to this is that we don’t know.

Let’s start with some facts. A barrel of light, sweet crude oil today costs about $130 – $135, which is up 80% from the beginning of the year and is about 5 times the price in 2001. On an inflation-adjusted basis, this is higher than the previous modern peak, achieved in 1980, which would have been a little over $100 in today’s money. Because we’ve gotten a lot wealthier in the last 25 years, however, the percentage of GDP spent on oil and the numbers of days work required to buy a barrel of oil today are less than they were in 1980.

We don’t know if we’re in a bubble because we’re not sure what drove this increase.

It’s important to start by disaggregating the effects of the depreciating general value of the dollar versus the appreciation of the cost of oil. According to the Dallas Fed, as of early this year, the price of a barrel of oil would have been about 20% lower had the dollar held its 2001 value.

So, general inflation has been significant, but most of the rise has been created by other factors. What are they? A fantastic academic paper from a couple of months ago thoroughly reviews several non-mutually-exclusive candidates:

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Peak Oil Song

Rod Dreher writes:

I wish Reihan would write a song about peak oil hysteria. I mean, who doesn’t love “I’ve Been Burgled”? But look, even the classics get old.

Because Rod is a very good friend, I’ve just recorded my Peak Oil song, “Peak Oil Song.” Click the link at your own risk. Lyrics are below the fold.

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More Peak Oil

Mr. Patrick Deneen, Associate Professor of Government at Georgetown, blogged this in reaction to my post on peak oil:

A person named Jim Manzi over at NRO’s The Corner is quite irritated by Peak Oil “hysteria,“…

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Peak Oil Hysteria

Alerted by Jonah Goldberg, I read Patrick Deneen’s post about the “peak oil and global warming culture wars”. My reaction to the original post was basically that people losing sleep over peak oil should switch to decaf. I said:

Crude oil production will reach a maximum at some point in the future. I don’t know when that will happen, and the record of those who have tried to forecast this has not been very good over the past 70 years or so. When that happens, the price will probably rise. We will develop technological alternatives and find substitute fuels. It’s not time to start burying Krugerrands in the backyard.

Reactions immediately came from points left, right and proudly unclassifiable.

Mori Dinauer at The American Prospect said:

There’s plenty to mock in this … As you probably know, in 1956 a geologist with Shell Oil named M. King Hubbert made a forecast that oil production in the United States would peak sometime in the late 1960s or early 70s. Oil production in the United States did peak in 1970, so it isn’t really defensible to say that nobody knows when world oil production will peak. …

Hubbert did make this call. Dinauer fails to note, however, that in 1974 Hubbert also predicted that global oil production would peak in about 1995. Whoops. (There are good reasons why it’s more feasible to predict peak production in a very well-understood geography, such as the US, than for the world as a whole.)

You will not be shocked to learn that, in fact, lots of forecasts for peak oil have been made over the years. The U.S. Department of Energy (DOE) identified 36 such forecasts published between 1972 and 2004. I conducted a quick analysis of the forecast for peak oil over time (1):

Notice any pattern in this data? Roughly speaking, forecasts indicate that we are 20 – 30 years from peak oil today, just as forecasts generally indicated that we were 20 – 30 years from peak oil throughout the 1970s and 80s.

Unsurprisingly, the DOE has taken a serious look at this question. Their best guess (and they are rigorous enough to put a range of many decades on this) is that peak production will be reached sometime in the middle of this century . The International Energy Agency projects that production will continue to increase at least through 2030. So does OPEC.

Dinauer continues:

Oh, and since oil now costs over $120 a barrel, does that mean oil has peaked, Jim?

On an inflation-adjusted basis, this is almost exactly what oil cost in 1980 . Does that mean oil production peaked in 1980?

I’ll also note that while the world spent about 6% of its total economic output on oil in 1980, this is down to about 3.5% today. Maybe this is why I see no observable signs of the collapse of modern civilization resulting from the current run-up in oil prices.

Clark Stooksbury at The American Conservative had this to say:

So we will know when oil has peaked because prices will rise. Too bad he didn’t tell President Bush –it could have spared us the ugly sight of seeing the leader of the free world ‘debasing himself by begging our Saudi Masters to turn up the pumps.

I said that when oil production peaks, the price will probably rise. I didn’t say there are no other conditions under which prices will rise (see prior comments about 1980). So, no, we won’t “know when oil has peaked because prices will rise”. I also seem to recall other American presidents “begging our Saudi Masters to turn up the pumps” between the years 1973 and 1980, when oil production had not peaked. Having a supply chain that originates in unstable desert kingdoms is not the same thing as reaching peak oil.

James Poulos at Postmodern Conservative made the sensible observation that:

If I had to make a guess, sovereign state control over oil resources — call it ‘oil nationalism’ — will be a much bigger factor going forward whether we’re under peak oil conditions or not

Whether or not this increases as compared to today, sovereign control over oil resources is certainly a huge issue for the world.

1: Average of forecasts in any year for which there is one or more forecast. Excludes Ivanhoe 1994, since this only makes a projection for OPEC production. Uses the maximum point estimate for any study (2060) as the forecast for any study that projected “No visible peak” or “Beyond year X”.

( cross-posted at The Corner )