Energy Independence is a Dumb Idea but not Because We Will Run Out of Oil

Update: One more sentence has been added to Charlie Munger’s quote.

Over at the Farnam Street blog, Shane Parrish has a post titled “Energy Independence is a Terribly Stupid Idea.” I agree. But, apparently not for the same reasons that Farnam Shane Parrish or Berkshire Hathaway Vice-Chairman Charlie Munger does. (But, hey more people follow that blog than mine and there are lots of really good things said about the site; so I must be wrong.)

Parrish quotes Munger extensively from comments made at the Committee of 100 U.S.-China relations conference. Munger says,

In trying to get energy independence we would have destroyed our safety stock of oil within our own borders.

Oil and gas are absolutely certain to become incredibly short and very high-priced. And of course the United States has a problem and China has a worse problem….Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you’re going to need to feed your people and maintain your civilization.

Perhaps Munger is right. But, a bit of skepticism toward his cynicism might be in order.

Resources are not resources until humans decide that rock or that bit of goo can be used for something; the Stone Age did not end because people ran out of stones. I would agree that it is wiser to purchase something from somewhere cheaper than it is to get it locally. That’s not natural resource conservation that’s making your resources (your time and money) work smarter.

English: The cover of the second edition of Th...

I commented on the blog but it seems that the comment didn’t pass the spam filter possibly due to the high number of links provided. So I have provided my comment and the links for further reading are here:

The end of our resources has been foretold before. In 1865, the British economist, Stanley Jevons predicted the end of coal. In his book, The Coal Question, he wrote that Britain’s easy ride was over and soon coal, which, powered their industrial revolution, would be gone. It was “physically impossible” to continue. Therefore Britain needed to decide “between brief greatness and longer continued mediocrity.” William Gladstone, the Chancellor of the Exchequer, found Jevons’ argument so compelling he begged Parliament to pay down their national debt while they still could.
The ink had barely dried on Jevons’ book when the output of coal rose and the price fell. The first oil well was sunk in Pennsylvania six years later. Today, Britain still produces coal.

Some further reading:

Peak Everything?Reason Magazine
http://reason.com/archives/2010/04/27/peak-everything

Wrong about running out | The Rational Optimist
http://www.rationaloptimist.com/blog/wrong-about-running-out

The dash for shale oil will shake the world – Matt Ridley
http://rationaloptimist.com/blog/the-dash-for-shale-oil-will-shake-the-world.aspx

The Limits of The Limits to Growth – Reason Magazine
http://reason.com/archives/2012/04/18/the-limits-to-growth-40-year-update

Where’s the Peak for Oil Reserves? – The PERColator
http://percolatorblog.org/2011/05/04/wheres-the-peak-for-oil-reserves/

The R/P Ratio
http://sppiblog.org/news/the-rp-ratio

Political Peak Oil – Reason.com
http://reason.com/archives/2007/01/05/political-peak-oil

Peak Oil Panic – Reason.com
http://reason.com/archives/2006/05/05/peak-oil-panic/singlepage

Apocalypse Not: Here’s Why You Shouldn’t Worry About End Times | Wired Science | Wired.com
http://www.wired.com/wiredscience/2012/08/ff_apocalypsenot/

Everything you’ve heard about fossil fuels may be wrong – War Room – Salon.com
http://www.salon.com/news/politics/war_room/2011/05/31/linbd_fossil_fuels

New drilling method opens vast oil fields in US : PERC – The Property and Environment Research Center
http://www.perc.org/articles/article1336.php

U.S. Oil Output to Overtake Saudi Arabia’s by 2020 – Bloomberg
http://www.bloomberg.com/news/2012-11-12/u-s-to-overtake-saudi-arabia-s-oil-production-by-2020-iea-says.html

 

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Fried Green Sustainability

 

English: The cover of the second edition of Th...

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In the movie, Fried Green Tomatoes, Cathy Bates waits for a parking space only to have it taken by two female twenty-somethings who blow her off with, “Face it lady, we’re younger and faster.” She rams her tank of a car into their tinier VW convertible. Bates’ parting shot is, “Face it, girls. I’m older and I have more insurance.”

If one lives long enough, one can gain perspective from living and observing. It may boil down to “been there, done that, and I have more insurance.”

I was eighteen when the Apollo 11 astronauts walked on the moon and photographed an earthrise.

Their iconic photo taken from the moon, with the earth looking like a blue-green spaceship, galvanized my Boomer generation around the environmentalist cause.

That photo shows how finite the world is, and it sounds counter-intuitive to argue that anything on it is limitless. Resources and energy need to be conserved if we are to survive on this small orb spinning in the vastness of space, do they not?

What cannot be seen in that photo is the unlimited collective intelligence of the people that inhabit that amazingly beautiful place.

“The availability of almost everything a person could want or need has been going rapidly upwards for 200 years and erratically upwards for 10,000 years before that,” Matt Ridley points out in The Rational Optimist. “This generation of human beings has access to more calories, watts, lumen-hours, square feet, gigabytes, megahertz, light years, nanometres, bushels per acre, miles per gallon, food miles, air miles and, of course, cash than any that went before.”

The counter-argument says our resources are part of a zero-sum game, if we humans become better off, other species are worse off—this is the “Environmentalist’s Paradox.”

Bear with me; I’m going to argue that the trend Dr. Ridley extols will continue, and our non-renewable resources are nearly limitless. As a result, I am not a “live simply, so others can simply live” kind of guy. Not that I am against living simply or witty aphorisms, but that it is wide of the mark. To paraphrase P.J. O’Rourke, our resources are not like a pizza, if I eat too many slices you won’t have to eat the Domino’s box.

The end of our resources has been foretold before. In 1865, the British economist, Stanley Jevons predicted the end of coal. In his book, The Coal Question, he wrote that Britain’s easy ride was over and soon coal, which, powered their industrial revolution, would be gone. It was “physically impossible” to continue. Therefore Britain needed to decide “between brief greatness and longer continued mediocrity.” William Gladstone, the Chancellor of the Exchequer, found Jevons’ argument so compelling he begged Parliament to pay down their national debt while they still could.

The ink had barely dried on Jevons’ book when the output of coal rose and the price fell. The first oil well was sunk in Pennsylvania six years later. Today, Britain still produces coal.

Jevons assumed it was coal that was needed to fuel their industrial revolution, rather it was energy, and because the human mind knows no limits, there’s a lot of energy in the world. For instance, right now, in the United States, natural gas in shale deposits holds the promise of energy for another 250 years at present consumption levels. Each year, the world will “use about 450 exajoules (about 1250 billion kilowatt-hours of energy) of fossil fuel,” Matt Ridley wrote in the Times of London, “Total oil, gas and coal resources in the Earth’s crust are estimated at more than 570,000 exajoules.” In other words, we have over a millennium’s worth of energy left in just fossil fuels.

I may not change your mind to believe that the world will continue to have enough energy and resources. As the late Julian Simon said, “First, humanity’s condition will improve in just about every material way. Second, humans will continue to sit around complaining about everything getting worse.”

But for me, not only is the glass half-full, there’s evidence that it’s fuller than ever before and everyone will have more to drink soon. Think about that the next time you hear someone say, “Our current rate of consumption is unsustainable.”

Trust me; I’m older and have more insurance.

Footnotes


[ii] http://en.wikipedia.org/wiki/The_Coal_Question

[iii] According to “The Shale Gas Shock” by Ridley, “World energy consumption is less than 500 exajoules per year, equivalent to approximately 500 TCF (trillion cubic feet of natural gas). Thus recoverable shale gas resources of, say, 8,000 Tcf (i.e., 20-30% of in-place resources) would last at least a century if their consumption displaced half of conventional gas use (which is 23% of total energy use). In January 2011 the International Energy Agency raised its estimate of how long world gas reserves will actually last to quarter of a millennium.”

[iv] Ridley, Matt. Wrong about running out. http://www.rationaloptimist.com/blog/wrong-about-running-out

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