Why fixing energy policy is so difficult

Everyone would like to fix the US energy policy, but doing so is almost impossible, in my view, primarily because we need to be planning for a much bigger change than most people can even imagine.

It seems to me that our international financial system is at this point, inching closer and closer to collapse. It needs growth to operate. Now that world oil supplies are virtually flat (and China and India and oil exporters are getting more of the oil), the financial system can’t get enough growth momentum. The US has applied various sleight of hand techniques to try to cover this problem (see my post What’s Behind US Budget Problems?), but at some time in the not too distant future, the techniques are going to stop working, and there is going to be a major financial crash, with debt defaults. This could happen when QE2 ends, or maybe QE3, QE4, or QE5. The timing may vary by country, with some countries holding out for a while longer.

The reason I point this out is because after such a crash, as far as I can see, everything is going to go downhill quickly. This is a graph of my view of one such scenario of oil supplies, if a country that imports all its oil undergoes such a collapse:

Figure 1. Type of drop in oil consumption that could occur, if a country gets shut out from buying oil because of debt problems.

The point is that the oil consumption goes down very quickly, not over a period of many years, because the decline in supply is determined by something quite different from what oil is in the ground–it is determined by ability to pay for the oil. A potential buyer can be cut off very quickly, if its credit is no good. We have gotten used to the idea of being able to keep running a tab, but at some point, this whole process is likely to come to a halt–something that can’t go on forever, won’t. Some international trade may continue, especially when a country has goods to trade for oil (rather than an IOU), but the level of free trade we have now can’t be expected to continue indefinitely.

The problem I see with a collapse scenario is that a plan that uses less oil and tries to make it go farther really isn’t helpful. Thus, a gas tax, or cap-and-trade, or fuel-efficient cars, or more fossil fuel extenders like wind and solar PV really aren’t helpful. Instead, we need to put our effort into figuring out how we would get along without fossil fuels and nuclear, rather than get along with less. Arguably, we may have some supply for a while, but if we do, we need to use it to help with the transition, not to expect such supply to continue forever. This is the big problem I have with energy policies and transition plans–they assume we are planning for a slow decline, when it is likely that we will not have such a decline.

In the case of an oil producer rather than an oil importer, perhaps the situation is better, but even here, there is a question of how much will continue to be produced, if there is major political upheaval. We know that the USSR broke up at the time of its collapse. There would seem to be a substantial chance of that happening elsewhere.

Everyone would like to add new and more complex systems to help–for example, more wind with upgraded transmission systems, smart grids, and electric cars. As nice as these might seem, the new systems become more and more complex, and more dependent on everything working together exactly correctly. As we lose ability to import spare parts, they will become very difficult to maintain, and will likely collapse within a few years. While they seem appealing, I don’t think they will add very much for very long.

Moving to a new system will require a lot of other changes:

1. A different financial system, that is not dependent on debt and growth.
2. More even distribution of incomes. With much less wealth, it won’t make sense for a few to have such a disproportionate share.
3. More even distribution of land. Without fossil fuels, it will not be possible to farm nearly as large plots. This also goes with more even distribution of wealth.

Changes such as these would be very difficult to make within our current structure. But without making such changes as well, it is hard to see that the new system would work.

In a post a while ago, I explained some of the things that seem to me to need to be done. I called the post, What President Obama Should Have Said Regarding Energy Policy. I don’t know that there is a real way that we can make major changes, without actually hitting a financial wall first. Perhaps a few people can work on such changes, and implement their own local versions of them.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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70 Responses to Why fixing energy policy is so difficult

  1. Owen says:

    I don’t know what is wrong with the software here. Reply links seem to get shut off of threads.

    Nuclear winter was completely discredited just before Sagan died. He injected his political positions into scholarly evaluation of evidence. The data said that the entire combined US and Soviet inventories of nuclear weapons of the late 1980s would not be sufficient to elevate dust particles to the altitudes necessary for long durations aloft at a level of density (remember, as altitude increases the surface area of the spheroid shell geometrically becomes more and more enormous sterradian-wise) necessary to create the winter effects. He lived long enough for his peers to castigate him for that.

    And let me point out that the inventories in the 1980s were much larger than today. Far fewer now, and many of those are targetted as airburts, with no dust elevating potential.

    Wringing hands at the horror of it all is inevitable, but inaccurate data has no place in the evaluation.

    • marty says:

      owen, the climate models that they now use are very different then the ones, they used in the 80’s. You’ll also notice I said “cities” which is different than the targetting of the 80’s. A scenario in current usage is a pakistan/india conflagaration, they have sufficient nukes, and sufficient burnable materials in the cities to put the midwest below freezing for 2+ years.

      The key is the burnable materials of the cities.

      • Owen says:

        I will look into this. The operative parameters in the modeling that discredited nuclear winter was the requirement for dust at altitude. Ground burning ash settles. It isn’t in the air long enough to cool anything.

        I’m pretty sure the early 90s military studies of the smoke from the oil wells sat afire by Hussein confirmed the nuclear winter rebuttal studies. There was a mistaken application of English to the photos. “Dispersion”. The plumes “dispersed” with distance from the fire. That proved untrue or unlikely. The material settles.

        It’s a valid topic, though, but there just is no question at all that decades of horror filled literature has hugely corrupted dispassionate thought about nuclear weapons. The blast radii are only a few miles. A 50 kiloton device in Los Angeles does not kill the entire US population, even with prevailing westerlies. In fact, it’s popular to sensationalize cancer deaths from radiation, but it’s valid to evaluate or phrase all that as “a very few years of life expectancy lost” rather than “killed”.

        Case in point, Mr. Tsutomu Yamaguchi. He is the only man recognized as having survived both the Hiroshima and Nagasaki bombings. He lived in Nagasaki and was in Hiroshima on business when it got nuked. He was treated for wounds and returned home on a train just in time to get nuked there. He died in 2010 of stomach cancer at the age of 93.

        • marty says:

          i agreed that things were very overstated in the past, i remember the UDel paper that I read as a reasonable peer reviewed analysis. I think though that point source (even if a lot of them) scenario with the IRAQ wells does not equate to the square miles of fires with a super heated initial plume followed by the fire storm of consumption of all the materials and people in greater metro Bombay and all the other cities.

  2. Ikonoclast says:

    Views on our future course seem to fall into the following categories;

    1. Endless Growth and Business as usual (Or “She’ll be right, mate.” in Aussie slang.)
    2. Limits exist but they are not near and we can adjust in time.
    3. Limits are near but we can adjust by reducing wasteful consumption.
    4. Limits are near (or here) and we will adjust albeit with great difficulty.
    5. Limits are here and a decline or crash is inevitable.

    I probably belong to group 5 but I do not see a global crash happening as precipitously as Gail appears to see it happening. Some poorly placed countries or regions may however collapse precipitously. I suspect that a long grinding decline of about 20 to 40 years will be the case. However, if conflict breaks out (which I admit is quite likely) then the global decline will be much more precipitous.

    If humanity reaches the year 2100 with about 1 to 2 billion people alive and living a passable existence in a world and climate not completely wrecked… then I think that is about the best outcome we could hope for.

    • Bicycle Dave says:

      Hi Ikonoclast,

      Your categories seem reasonable and I tend to agree with your conclusion. And, I can assure you that my agreement plus a $5 bill is guaranteed to get you a good cup of coffee at Starbucks. However, (there is always a “however” here 🙂 what is the evidence for a 20-40 year descent?

      Barring some catastrophic natural event (monster volcano), pandemic, WWIII, etc. what are the most likely scenarios to support this prediction?

      Gail makes the argument that instability of global, debt-based, fiat monetary systems could greatly escalate the unraveling of commerce and lead to depression era consequences – or worse. Others, like Greer, foresee the descent taking nearly a 100 years.

      The time-range for collapse that Gail suggests does not seem to allow for some level of ingenuity/inventiveness – at least in reaction to the first signs of imminent collapse. But, I’d be hard pressed to debate this point.

      I think authors like Greer (who see longer time frames) make flawed comparisons to previous breakdowns of civilizations – this is the first time humanity has been faced with the current scope of population and resource issues.

      So, if 10 years is too soon and 100 years is not likely – then, how do we support 20-40 years except by this rather weak process of elimination?

      It would be interesting to see a very comprehensive computer model that took into consideration all the known macro variables that could influence collapse scenarios – with the ability to tweak the values of the variables. I’m not suggesting a magical crystal ball, but just something to get into the ballpark. It seems like this would be more useful than a lot of the speculation that most of us like to engage in. Maybe someone has done this?

      • Jan Steinman says:

        It would be interesting to see a very comprehensive computer model that took into consideration all the known macro variables that could influence collapse scenarios – with the ability to tweak the values of the variables. I’m not suggesting a magical crystal ball, but just something to get into the ballpark. It seems like this would be more useful than a lot of the speculation that most of us like to engage in. Maybe someone has done this?

        Are you aware of the WORLD3 model, used in the Club of Rome report, “Limits to Growth?”

        Dana Meadows reprised the model in ~1992 in the follow-up book, “Beyond the Limits,” and came up with the same conclusions.

        They used to distribute the FORTRAN code freely. Don’t know the current status.

        They made multiple runs with different tweaks, but I think they mostly put a crash before 2030.

        • Ed Pell says:

          There is a free simulation program Vensim PLE that includes a copy of the World3 model as one of their examples. It works fine.

          If you look at the World3 model it turns out to be simple. There are only four output “industrial output”, “service output”, “food output”, “number of people”. If one wants to make a version with say three regions “developed” (US, EU, Japan), “developing” (India, China, Russia) and “The Rest”. You have to decide how these four output flow between the three regions. What equation to use to control them.

          Also missing is “renewable resources” which do exist and are used and would moderate the population decline for steady state at least a little.

          • One thing missing in the models is the health of the financial system. If you start having declines in output, and there is debt (which is not modeled), it seems like there will be increasing debt defaults, and ultimately the system will fail. Also, we now use debt for capital. Once there are financing problems, it seems like there will be serious difficulties getting capital for investing in anything.

        • weaseldog says:

          Ed, what renewables are you referring to? Are you referring to renewables that don’t rely on fossil fuel powered industrial civilization, or those that require it?

        • weaseldog says:

          I think that the financial reasons that Gail outlines, will be feeding back into the energy industry.

          Because our hunger for consumption will keep increasingly exponentially while our supplies dwindle exponentially renewables are going to see cascading failures.

          Trees aren’t as renewable as you might think. The Romans denuded the countryside for hundreds of miles, where old growth forests fill with towering oaks used to stand.

          Once the world population is down to 500 million, then I think things will start getting better.

        • Jan Steinman says:

          weaseldog wrote “Trees aren’t as renewable as you might think.”

          The difference is that trees can be renewable, unlike anything we dig or pump from the ground.

          I agree that it is a slippery slope. The Romans are but one example. Before them, the Greeks and Phoenicians decimated their forests to make war ships. Meanwhile, the British Isles were denuded, and sheep were introduced, which to this day is suppressing forest growth, which I’m sure they’ll regret. And we all know about Easter Island.

          Our rule-of-thumb is “one cord per acre per year” is a sustainable yield for most temperate forests.

      • marty says:

        While 1st world collapse might not be as easily seen possibly third world might. South Africa’s economic neighbors: swaziland, mozambique, namibia, botswana are having problems to the extent that they relied on cheap imported food, American charities, investments, and SA economic integration and props.

        According to the USDA predictions from December, the US would end up with 17 days of corn inventory in september assuming bumper crops of wheat and corn. Looking at the Texas and Oklahoma winter wheat crops (18% of the US) they are gone due to extreme drought, and from pennsylvania to the red river valley you have a three week delay so far in planting spring wheat, and a little less for soybeans and corn. No one around me has those crops in the ground, and with another week of rain forecast, i’m two weeks out from planting (minimally).

        I suspect starvation will grow dramatically in Swaziland this year, and potentially trigger a revolution, there are other places like this. Without starvation there have been statements about the ME revolutions having a food factor.

        Now consider Mexico, NAFTA killed their maize farmers, their cash flow is dieing from trailing off of their oil pumping, and they are running a drug insurgency there. I just advised for the closing of a facility that had been a major American investment for decades just south of Brownsville due to anarchy (marines in fire fights with local cartel irregular forces).

        Mexico is a near failed state (NA’s pakistan), more expensive food and fuel is not going to make it less so. How that affects Arizona, Texas, and New Mexico is a whole other discussion.

  3. Martin Gugino says:

    The link, at the end of the article, to “What President Obama…” has an extra “//http” at the end. Easy enough to fix in the address bar if one notices it, but you might want to correct that.

  4. Ed Pell says:

    Gail, yes the financial sector needs to be added. Weaseldog, I mean renewables like hydro power, trees for building material and firewood, and any good EROEI things like CSP and bad EROEI things like PV and wind turbines. I think it does include some soil renewal and pollution processing already.

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  6. Ed Pell says:

    Back to the original topic. It is so hard to make good energy policy because it costs so much to build a new energy system. At a time when the US has little industrial base. True we do produce a majority of the worlds financial (debt) products but it is hard to translate that into steel and turbines. On a PPP basis the US is already smaller than China when it comes to industrial production. So I expect China will have an easier time of designing and implementing an energy policy. Likewise for Dubai.

  7. santaluciae says:

    As you are going to Spain soon take a good look around and remember that Spain imports all of its oil, gas and coal.
    And it is ruined, with 21.3% unemployment.
    So it is a perfect example of your graph.
    mazama has a good graph of Spain’s imports of oil, so if it drops way below the figure for 1985 and by so near a date as 2014 disaster and perhaps civil war is at hand.

    • I really made my graph, in preparation for my trip to Spain, as you say. I don’t know about civil war. When there is not enough to go around, fighting is more likely to be a problem.

    • So, Gail’s graph applies to nations that do not have appreciable endemic oil supplies, and so are reliant on imports for most of their needs.

      I got to thinking, okay which are these nations?

      On my (very rough) guessimetry, approximately 20 nations currently have a surfeit of supply over demand and so are net exporters, at least for the time being.

      Perhaps another 20 nations may be in a position to currently produce most of their demand from endemic oil sources.

      Okay, that’s 40 nations accounted for out of a total of 200 nations.

      If those rough sums are correct that leaves about 160 nations that are very reliant on imported oil supplies. Some of these may be lucky to possess strategic resources and so may be able to wangle an oil trade benefit even in a supply constraint situation. But that still leaves the majority of nations having a very bleak prognosis, including some big economies, like Spain and Japan.

      Here in Australia we are so fossil fuel rich that the prevailing sentiment is that we can hold out for a very long time, through fuel switching and so forth. But I wonder what happens when, say, 50 nations go through the floor, like Greece and Ireland and Portugal have done.

      Conversely, can the 40 or so lucky nations manage to maintain a closed loop viable economy whilst dozens of poor countries go into collapse? My limited economic expertise intuits that it is not possible. There must be a certain tipping point such that when 50 dominoes fall a chain reaction takes them all out. I may be wrong on that count but I do think we need to think systemically of a global system, precariously held together, rather than think about the opportunities and prognoses applying to any one individual nation.

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  9. Gail,
    It is a fact that conventional oil has peaked, that ecological degradation will continue and that a major financial world crisis is a matter of time.
    But even when all the above take place, and they would, I do not see how that would lead to a total collapse to the extent that , say the US, would consume zero oil as per your graph. The US does supply afterall almost half of its oil needs and could possibly supply more.

    • weaseldog says:

      In 2009, it looks like the USA produced about 28% of the oil it uses.

      18.69 million bbl/day

      5.361 million bbl/day

      You’re assuming that Americans can buy the oil produced in the USA if they have no money. The oil in the USA doesn’t belong to Americans. It belongs to international oil corporations.

      Another scenario is that under austerity measures, the US is required to export all of it’s oil to cover it’s debts.

      Things can change. The US could nationalize it’s oil industry. But Americans will be rallied by the media to fight this, as it would be advertised to be socialism.

      • I think you really have to compare consumption to total liquids production, not oil production–since it includes biofuels and propane and other things that we don’t consider oil. On that basis, the US produces close to half of what it consumes.

        We don’t have a calculation on an energy equivalent basis. That is probably somewhere in between. We produce a disproportionate share of the low-energy stuff. Some of what we take credit for is the expansion in volume that occurs when we refine other people’s oil in this country. If the imports go away, so does the refinery volume.

      • marty says:

        There are steps before out and out nationalization. For instance the Russian closing the exportation of wheat. One consequence was that it lowered the price of the wheat in Russia due to less bidders, it also discouraged farmers for planting as much wheat as the previous year…..

    • I intended my graph to be for a country that imports all of its oil. The US might do better.

      If there is a problem with paying employees (because of the collapsed financial system), or with obtaining replacement parts, I could see oil production could go down pretty quickly in this country too.

      The point is that we can’t count on our supply being equal to the slow decline in oil production. It could be quite a bit faster.

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