And it begins...the government says (more deeply this time, and with feeling): 'CONSERVE!'
Posted by Prof. Goose on October 3, 2005 - 1:40am
Topic: Demand/Consumption
Tags: gas prices, hurricane katrina, hurricane rita, natural gas, oil, peak oil [list all tags]
(entire article under the fold)
Gas prices may last six months
By James R. Healey, USA TODAY
The nation's energy chief says it will take six months for U.S. energy production and prices to return to pre-hurricane levels, and he hints at energy shortages in the interim.That's the most blunt and pessimistic estimate yet of how long the energy disruptions caused by hurricanes Katrina and Rita will affect the USA. But it could help Energy Secretary Samuel Bodman sell Americans on a conservation campaign he plans to detail Monday.
"How long before we return to normal? It's hard to know, because we have not yet got an assessment" of damage from Rita, Bodman said in an interview with USA TODAY on Friday. He said it will be two to three weeks before the assessment is done.
"We're going to go through a very challenging time the next six months, is my guess," Bodman said. "Most of us have viewed energy availability as a kind of right of citizenship," he said, and might have to rethink that as refineries are restarted, pipelines repaired and natural gas processing resumed. "Both in terms of gasoline availability and (prices of) natural gas and heating oil, we're going to have some problems."
Hurricane Katrina swept the Gulf of Mexico and hit shore near New Orleans on Aug. 29. Rita followed Sept. 24, hitting the Texas coast west of Katrina's landfall. The two storms temporarily closed all Gulf oil operations and most natural gas operations, according to the U.S. Minerals Management Service.
Only 2% of Gulf oil production had resumed by the weekend, MMS reported, and 21% of natural gas production. The Gulf supplies 29% of U.S.-produced oil and 19% of U.S.-sourced natural gas.
The nationwide average for unleaded regular gasoline is $2.92, AAA said Sunday. That's up about 30 cents from before Katrina hit.
Gasoline supplies are being supplemented by increased shipments from overseas. But natural gas, the heating fuel for most Americans, can't easily be shipped. Industry and government forecasts say that tight gas supplies could result in heating bills nearly doubling.
Keeping prices down "could be challenging if we get exceptionally cold weather," warns Paula Reynolds, CEO of big gas supplier AGL Resources. That could use up the cheaper gas that utilities have in storage and require them to replace it with today's high-price natural gas, passing the increase to users.
The government conservation plan will ask Americans to turn off lights, change thermostat settings, drive slower, insulate homes and take other steps.
Mao Zedong used to tell the Chinese people to just hang in there for another Five Year Plan. And five Five Year Plans later, just one more. Always one more.
It's a crock.
Worldwide oil demand has permanently exceeded supply. Whether that is Peak Oil or not is moot.
What it is -- is the very livin' end of Cheap Oil. It will never be cheap again. Ever.
Six months or six years or sixty years won't see anything other than increasing scarcity, and higher prices.
Any fuel conserved by Americans will be burned by the American military's tanks, carriers and planes in order to get more fuel by force from other nations.
Arr. Welcome to pirate America. Raise a black flag, ye swarthy scum. Thee's oil a waitin' overseas.
"Supply will be up and prices will come down in six months" will join "Yes, I'll respect you in the morning" as a meaningless promise.
Soon, as a temporary fix of course, look for a 55mph limit on highways and solar hot water to be re-installed on the White House roof.
This should be the quote of the day!
The value of the oil rigs is greater than the insurance because the insurance was written when the price of oil was much lower than it is now, and rigs are far more valuable when the oil is more valuable.
The only way the value of the rigs would go down is if the oil companies expected that the price of oil would go down in the future, when the oil would be produced by the oil rigs. IE, that the oil company executives do not believe in peak oil.
FWIW, Kateri Callahan, president of the Alliance to Save Energy, was on E&E TV again last week (webcast):
http://www.eande.tv/main/?date=092905
There is an interesting article in the WaPo this morning about attitudes about gasoline around the world. I used to think it was only the U.S. where we were such idiots about the stuff, but the addiction is causing unrest around the world:
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/02/AR2005100201315.html
Of particular interest is the number of countries where the price to the consumer is subsidized - in the long run this is untenable and can lead to the governments bankrupting themselves, but the alternative of raising prices to market levels leads to civil unrest.
The article notes some countries impose hefty taxes that help the state budget. They are under pressure to scale them back to make gas more affordable. Other countries subsidize gas and are getting their budgets hit hard.
People in oil exporting countries seem especially pissed because they expect plentiful oil within the country would translate to (perpetually?) cheap gas. The article doesn't make the point explicitly, but anger is directed not just at government but ultimately globalization and the largest consumers.
everyone should know about bugmenot. Works with most sites that require registration. I forget how I found out about it, but it is really useful.
I think he's on to something. If the intensity of hurricanes are indeed increasing because of global warming and if most of the current GOMEX infrastructure was built for hurricanes of much less strength than Katrina or Rita, I doubt that deep water drilling in the Gulf would be possible, both in real terms and in economic terms.
So, we not only lost New Orleans but we lost the upper bands of deep water oil that are found on all of those Hubbert curve graphs. I don't really know how much of that curve is GOMEX oil but aren't other deep water expeditions also having trouble because of oceanic activity that could be related to global warming - typhoons and such in the southeastern Pacific?
The issue is when oil gets so expensive, and we have enough alternative technology and infrastructure in place, that we simply stop using oil for most purposes.
We are looking at a nightmare of a train wreck and we want to believe it's not really happening - emotionally speaking - no matter what our thinking parts may tell us. Therefore, as soon as the coming killer recession causes oil to temporarily drop below $35 a barrel, pundits will rush in and start crowing "I told you so,", the Greenspan proxy will cut interest rates, the economy will come out of a nose dive, the situation will improve (comparatively though not absolutely) and Americans will breathe a big sigh of relief. Oil will inevitably start rising again and we will repeat the sequence, each time economically peaking at a lower level.
European humankind faced an energy crisis in the 16th century - it was deforestation that time. I don't know what the "peak wood" curve looks like but I do know that people could view their diminishing forests and see the problem. That's a really different situation than trying to see oil 12 thousand feet down. A normal person could make an assessment.
And coal entered stage left. Like oil, the first coal seams were easy to mine. They didn't require much in the way of capital investment.
What I'm saying, in a long-winded way, is that what we face now is unique and cannot be compared to what seem to be similar historical moments. Mostly because of inelasticity, and sheer size of the problem. 16th century Europe was not an integrated economy in today's sense.
At some point quite soon now I think the sensible thing to do is simple acknowledge that we're screwed double time. Number nerdism, scientific thinking and long contemplative chin pulls aren't going to save the day. What's coming is far too turbulent to predict further than to say most of us aren't going to like it one bit. I strongly doubt that many fortunes will be made in biofuel. Some, no doubt, but not like the fortunes made in petroleum.
Rejoice in the day, insomuch as possible. We have been privileged to live in a unique period of human history that probably won't be repeated. We have lived like gods we an entourage of 50 or more mechanical slaves to do our wished with no complaints.
All things come to an end. Look around in wonder.
No, I'm not religious.
I would suggest Collapse by Jared Diamond (author of Guns, Germs and Steel) if you want a good view of a society that looked into the abyss of resource depletion and took the steps necessary to save themselves. He covers the near miss of medieval Japan in great detail.
The big question, the unanswerable question, is does this happen long before we are ready for it, or not...
Meanwhile, the latest MMS report shows a slight improvement - Friday's numbers were 97.85% oil / 79.41% NG for comparison.
Do you think anyone planned for seeing what ultimately will be 10 - 15% of GOM oil output curtailed this year, it not more?
We need to turn this argument around. We can do the same with less if we invest heavily in more energy efficient infrastructure - water freight, rail, dense & mixed use housing, green buildings, energy efficient cars/appliances as well as a whole host of lifestyle decisions about how we entertain ourselves, how we commute, take vacations, how we eat, etc. We will only consider it sacrifice if we cling too much to inefficient infrastructures and lifestyles that will increasingly become extremely expensive to sustain at current levels.
I am in 100% agreement with you. Most people I talk to can't comprehend the difference between saving energy by applying more efficient technology to do the same job vs just doing less. Not all transportation has the same efficiency. Not all building designs are equally efficient. We need a national drive for energy efficiency now. This will reduce consumption of petroleaum now and maybe get us so efficient in the future that we can substitute some less energy dense alternative.
All the arguments to date say we can't substitute any alternative energy for diesel/gasoline because there isn't enough energy density in those approaches. I agree, if we assume current transportation technology. The civilization saving question is how do we move the same mass of goods in essentially the same time frame using 30-40 less energy? That might (still a big might) get us onto more renewable fuels or at the very least stretch our fossils until the next technological stair step innovation.
But if we don't start now the whole system just might grind to a halt in the near future. Oh, and lest people think this is a free lunch we all will all need to do some sacrificing and cut back on wasteful luxuries. I personally believe some luxuries are not energy wasteful. A week canoeing in the boundary waters comes to mind!
This process does not avoid the end of the oil age, just puts it off long enough for us to get our act together. As a first time post I have to say I enjoy this site tremendously and appreciate its wealth of information.
My impression is that windmill generators and solar water heaters make economic sense, but most "green" technology doesn't. I don't know at what point home insulation reaches a diminishing return.
But, you say, wait until oil hits $200 a barrel!
But, I reply, how much of the high cost of the technologies is from the energy it takes to build them? Enough to indicate that their EROEI is poor, maybe even less than 1? Of course it depends on the technology. And if energy is under-priced today, it may be a good investment to buy equipment that will become more valuable later... but if its construction uses more energy than it creates or saves later, it still wouldn't be good conservation.
Chris
The other infrastructure needs a market to develop, but I can imagine some very high EROEI returns on new small scale port facilities scattered around the country's rivers and coastal areas, more freight railroads, more mass transit. Agree that hybrids are only a marginal return if you are junking a new car, but if you buy a hybrid instead of an SUV, then that's just one less SUV on the road and that will pay dividends in the future. But this will take a long time given the size of the auto fleet here - 200m cars.
Six and a half billion people who all want to drive cars and have an industrialized lifestyle is the core of the problem.
I guess from an ecological point of view it's the tragedy of the commons taken to a global level.
If you take cost as an estimate of energy use, then the car with the lower cost of ownership will likely be better, even if it gets lower mileage.
Of course, hybrid technology is new enough that much of the cost is probably paying for its development. That shouldn't count against the environmental tradeoff.
So I don't know which is better.
And there is a clear difference between efficiency and conservation. Efficiency = doing the same task with less energy - getting 40 instead of 20 mpg, for example. Curtailment is doing less to save energy - not taking a trip, or turning the T-stat down 5 degrees. Both result in Conservation of resources. Until, that is Jeavon's Paradox kicks in... We need both efficiency and curtailment with mechanisms to control Jeavon's Paradox to the greatest extent possible.
It would be interesting to explore the use of mandatory instruments that give drivers real-time feedback in fuel consumption (beyond the fuel gauge and speedometer). If you could see your wallet emptying everytime you step on the gas, maybe more people would voluntarily slow down.
I'm just dumbfounded watching people drive like maniacs, with jackrabbit starts and 80mph highway speeds, and then wait in line to save $0.10 on a gallon of gas. Personally, I'd rather drive a little slower and spend the extra buck to fill up without a wait.
You're correct that the affluent will be affected less, but I believe it would still be worthwhile. It's not a silver bullet, but nothing is with energy.
http://money.cnn.com/2005/10/03/news/economy/gasprices_bodman/index.htm
So it is 6 months of problems, not including hurricaine disruptions....
Elsewhere
http://www.thestreet.com/_tscana/comment/chrisedmonds/10245320_2.html
http://www.becker-posner-blog.com/archives/2005/10/is_population_g_1.html
Try this posting by a Nobel Laureate:
http://cohesion.rice.edu/NaturalSciences/Smalley/emplibrary/120204%20MRS%20Boston.pdf
This is called a "false choice" in the study of mental manipulations. No. There can be many sides.
Moreover, the manipulation attempts to present the sides of the debate as deserving equal credibility irrespective of what is being debated. It sounds "fair", but it is wrong headed.
The proposition about equally balanced sides can be easily disproved with hypotheticals that test the proposition. Example: a 3 year old child is "debating" a 30 year old mathematician. The child says 2+2=5. The mathematician says, no. Are there 2 equally balanced sides to this "debate"? No.
As for the mathematically ungifted, econo-geniuses at your Becker-Posner site: wake up. The Earth is round. It has a finite volume: V=4/3 pi*R^3. "Matter" consumes volume. Malthus was right. The finite surface area and volume of the planet cannot support an infinite number of resource-consuming critters. We will not be the first "intelligent" species to die-off due to over-shoot. Sorry.
People in the know understand that the "Nobel Prize" is a politically bestowed title. Quite often, the wrong person is awarded the prize because of his or her political connections and because of cronyism (sp?). I am less than impressed by the "noble" title.
IMHO, economics is mostly a "religion" rather than a science. Economists too often filter out all the objective observations that disprove each of their theories. Example: New Orleans 2005. Why did free-thinking "rational" humans invest their scarce resources into building a city on the edge of hurricane alley despite the fact that scientists have for over 30 years warned that this is a recipe for disaster? Where is your free markets now, momma? Never mind. The human brain easily denies that which does not fit the religiously adopted model.