Tuesday, March 29, 2005

This man is certifiably nuts: James Howard Kunstler

OK, I'm not generally one of those extremist bloggers. I prefer reasoned arguments and looking at all sides as objectively as possible. But every once in a while, I come across something so outrageous, it simply must be mocked.

The writings of James Howard Kunstler, author of "The Long Emergency", fall in that category. His Rolling Stone piece (partial abstract here) is so off the charts as to be comical (warning: don't read it where laughing out loud might draw unwanted attention from co-workers... ;-) In a nutshell, he believes energy costs will go so high it will drive us back to some sort of labor-intensive agrarian society with Mad Max/Road Warrior overtones as we duke it out for the last drops of oil.

Three very simple data points completely undermine his argument, but this hasn't stopped him from getting huge amounts of press. He bases everything on Peak Oil Theory, which has also gotten a lot of press lately, and argues that we're about to reach peak global oil production. Declines from there, matched with ever-growing demand (esp. from China and India), will lead to out-of-control energy costs. Even if Peak Oil Theory is correct - and there is a lot of argument on that point - there are three reasons his extrapolations are absurd:
  1. A huge number of oil alternatives get economically viable at $25-$50/barrel: tar sands, liquefied coal, biomass, and oil shale (Business Week graphic). This puts an effective long-term cap on oil prices right about where we are right now: $50-60/barrel (of course, there may be short-term spikes above that until alternative energy capital investment ramps up). A quote on just one of those alternatives, oil shale, from a recent Wall Street Journal article:
    "With an estimated two trillion barrels of shale oil under American soil -- roughly 60% of the world's known deposits -- successful development would, at least on paper, begin to change the international oil business. The U.S. would become the world's single biggest oil source, far surpassing Saudi Arabia's proven reserves of 261 billion barrels."
  2. The Europeans, because of high taxes, have gas costs almost four times ours, yet they are still suburbanizing - they're just doing it with tiny high-mileage cars instead of massive trucks and SUVs. Sure, we'll probably start moving to more fuel efficient vehicles, but the argument that the suburbs and global supply chains are doomed is just plain loony.
  3. If there are temporary shortages, they won't be here. Oil is a global free market (Well, mostly - OPEC is a powerful cartel in theory, but pretty weak in reality. None of their governments can afford to take much of their oil off the market for long, even if they wanted to for some twisted reason.) The US has the highest GDP per capita by far of any major country on the planet (we're not talking about Luxembourg, Norway, or Monaco here folks). No matter what the price of oil is, we can afford it more than anyone else, and that especially applies to China and India.

Yes, one day we will move beyond oil for our energy needs. But it will be because a better and cheaper technology comes along, not because oil runs out. As a recent Economist article quoted, “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”

My own prediction? I don't have a lot of faith in the technological and economic viability of hydrogen. In about a decade or so, I think we'll see next generation hybrids that plug-in at night and go 60+ miles on the battery charge the next day - only using the gas engine when they go beyond that range. This will eliminate the vast majority of gasoline usage. (This ties into my theme that Houston needs to invest aggressively in education, infrastructure, amenities, and economic diversification while the dominant energy-side of our economic base is doing well - or we'll end up like a Rust Belt city one day.)

I think the Rolling Stone piece reaches its wacked-out crescendo with this paragraph:

"The process of readjustment is apt to be disorderly and improvisational. Food production will necessarily be much more labor-intensive than it has been for decades. We can anticipate the re-formation of a native-born American farm-laboring class. It will be composed largely of the aforementioned economic losers who had to relinquish their grip on the American dream. These masses of disentitled people may enter into quasi-feudal social relations with those who own land in exchange for food and physical security. But their sense of grievance will remain fresh, and if mistreated they may simply seize that land."

Will someone please buy this man an isolated plot of remote farmland (ideally with no communications to the rest of the world), a feudal title (maybe "Grand Duke of Fantasyland"?), plus a horse and a plow - and ship him there? Please?

19 Comments:

At 9:15 PM, March 29, 2005, Anonymous Richard R. Johnson said...

The following event at Rice University's Baker Institute relates directly to this topic:

03/24/2005


CEO Lovins to present oil plan for future

BY B.J. ALMOND
Rice News staff

Amory Lovins has a plan for how the United States can eliminate oil use within a few decades.

Co-founder and Chief Executive Officer of Rocky Mountain Institute (RMI), Lovins will present his plan at the James A. Baker III Institute for Public Policy at 5 p.m. March 30 when he discusses his most recent book, “Winning the Oil Endgame: Innovation for Profits, Jobs and Security.”

The plan outlines how American industry can restore competitiveness and increase profits by mobilizing modern technologies and business strategies to displace oil more cheaply than buying it.

Lovins figures that at an average cost of $12 per barrel (in 2000 dollars), the United States can save half its oil usage through efficiency, tapping the enabling technology of ultra-light vehicle design..

Lovins believes that through a combination of new efficient technologies in the transportation and electricity sectors and the development of an innovative domestic biofuels industry, by 2015 the United States can save more oil than it gets from the Persian Gulf; by 2025 the United States can use less oil than in 1970; by 2040 it can avoid importing oil, and by 2050 use no oil at all.

Lovins noted that his business-for-profit approach differs from previous attempts to force oil savings through government policy.

“Our recommendations are market-based, innovation-driven without mandates, and designed to support, not distort, business logic,” he said in a news release. “They’re self-financing and would cause the federal deficit to go down, not up.”

The peer-reviewed RMI study on which Lovins’ book is based was funded by the Pentagon, foundations and private donors.

The report is available at www.oilendgame.com. RMI, located in Old Snowmass, Colo., is an independent, entrepreneurial, nonprofit research and consulting organization.

Lovins will sign copies of his book after his talk at the Baker Institute. Rice students, faculty and staff who want to attend the program should R.S.V.P. to BIPPRSVP@rice.edu.

 
At 5:48 PM, April 01, 2005, Anonymous Anonymous said...

You're not alone - Kunstler is a whack job looking to sell books and subsidize cities and new urbanism. His cultish zealots love him and pretty much everyone knows he's clueless.

 
At 10:12 AM, April 02, 2005, Anonymous Anonymous said...

A few questions raised by your responses to Kunstler...

1. If shale were finanically practical at $25/barrel, where's the production ramp-up? Shouldn;t their be a big project in Wyoming right now? Where's the natural gas going to come from to supply the separation process? What effect would that have on the other users of natural gas? What's the difference in quality between oil from shale and sweet light crude? Shale oil projects remain "on paper"; perhaps we can run cars on paper shredder output.
2. Only a portion of suburbanization in Europe is auto dependent. What level of infrastructure investment would be needed in the US to facilitate European style sprawl? Where would the money come from?
3. What relationship does average per-capita GDP have with the total national capability to secure oil on a global market? Sure, rich Americans will be able to buy oil at any price; what about everybody else? Are China and India not credible competitors on the global oil market? What effect does growing Chinese total GDP have on the market for all commodities? Bought cement or steel lately?

 
At 11:26 AM, April 02, 2005, Blogger Tory Gattis said...

1. Oil shale experiments are happening (and there's already a pretty big ramp up happening in tar sands). Major capital investments will happen when companies are sure they will get a return on their investment, i.e. they're positive OPEC can't open the taps and drop oil back to $10-20 a barrel, which would wipe them out. And to your other point, any process that generates usable energy can feed a portion of the output back into the process to handle more inputs - so natural gas isn't really an issue. That part of the equation is already factored into the $25-50/barrel break-even price.

2. America clearly has more auto-dependent sprawl than Europe - the simple point was that high gas prices don't stop it. If by "European style sprawl", you mean massive rail investments to the core, I have no idea where that kind of infrastructure money would come from.

3. The simple point is that, on the margin, we can afford it better than they can. When supply is constrained, prices go up until marginal demand/buyers drop out. Those marginal buyers are typically the ones less able to afford it. Cement and steel are great examples: Chinese demand has raised prices, but you don't hear about an unaffordable construction crisis in America, because we can afford it. I'll bet the rest of Asia, Africa, and Latin America aren't too happy about it though. History of commodities shows that new suppliers or substitutes will rush in to fill the gap and lower prices back down (and that includes oil and gas substitutes).

 
At 10:16 PM, April 02, 2005, Anonymous Richard R. Johnson said...

Your third point gave me a bit of heartburn. I took it to mean that because we can afford a commodity as prices escalate whereas other countries can not, they will experience the shortage and not us because we still have the cash to buy. While there is some truth in that, I think there is also some fiction. We buy our oil from some pretty unstable regimes, and they could just suddenly decide not to sell to us. This in fact happened in 1973-74. I think this is certainly within the realm of possibility for Venezuela - their leader is increasingly at odds with the US. Your position depends on the system being rational...

 
At 10:17 AM, April 03, 2005, Anonymous Anonymous said...

1. There is no perpetual-energy machine. Tar sand and shale require copious amount of natural gas. They also produce large volumes of co2 and other waste products. By one estimate, the waste water pond of a full scale oil sands project would rival one of the great lakes. Australia's shale project recently shut down over such concerns. To supply Canada's tar sand projects, new gas pipelines are being designed through remote regions of the country, and they are nowhere near a done deal.
2. "American style" sprawl is predicated on cheap oil. The majority of people moving to the farthest reaches of the city are trying to substitute commuting costs for land costs. This is different from Europe, where those moving furthest out have the financial means to support the higher transport prices.
3. I don't think there's a consensus that building cost increases due to commodity price hikes over the last year are inconsequential. Many economists seem to live in a world without limits. Our world, in contrast, appears to have some. Adjusting to these limits will not be painless, and that seems to be Kunstler's point. To not prepare for the pain is like refusing to dodge a sucker punch on the premise that, in theory, the sucker punch shouldn't be happening.

 
At 8:03 PM, April 04, 2005, Anonymous Anonymous said...

If there is any energy "panacea" it is probably the idea of "pluggable" hybrid cars, e.g., hybrids with a few extra batteries to allow one to drive up to 30-40 miles on a charge overnight or during the day from the electric plug in your garage or workplace parking space. Since most people--even in freeway-mad Houston drive less than 40 miles per day, methinks it would work, in principle, reducing personal vehicle usage by 80%-85%.

The kicker is simple, however.

Currently, America's annual trade deficit with China ALONE is several hundred billion per year. And with a run-up in oil prices much more than where they are now (4/4/05), then at some point soon the dollar will tumble even more, say to where the Euro is valued at $2.00 rather than the $1.35 it is at present. When this happens, watch a rather sudden, massive decline in American living standards, e.g., oil is valued in Euros rather than dollars, interest rates skyrocket, the housing market bubble finally bursts, and so forth.

Under such circumstances, I seriously doubt America could easily afford to replace its 200-million vehicle fleet with "pluggable" hybrids at $20k-$30k each. That's a rolling stock replacement "nut" of $4 to $5 TRILLION dollars, folks, out of the hides of American consumers. Over 15-20 years as the vehicle fleet is regularly replaced this would be feasible, but NOT in the five or so years we need it to occur. On this score, that "loon" James Howard Kunstler is increasingly looking quite prescient.

 
At 9:27 PM, April 04, 2005, Blogger Tory Gattis said...

I think we all agree there will be pain. Some of us, like myself, believe basic economics and the laws of supply, demand, and substitutes will do their job and find the "least pain" adjustment path. Kunstler is trying to incite some sort of crazed panic response which is almost certain to cause far more suffering (esp. among the poor) than letting capitalist economics naturally work out the problem.

Let's get a little perspective here folks. Average driving of about 12,000 miles a year at 20mpg is 600 gallons/year. At $2/gallon, that's $1,200/year. If oil doubles in the short-run (which are the highest predictions - about $100/barrel), that's another $1,200/year. For perspective, average per capita US GDP is ~$38K/year.
Painful?
Yes.
Potential recession?
Definitely possible.
Difficult adjustments?
Absolutely.
Crash program to replace our vehicle fleet with hybrids to double mileage and save that $1,200/year?
Unlikely. (although automakers will certainly adjust as quickly as they can, just as they did in the 70s)

Crisis that ends our way of life?
Not gonna happen.

 
At 10:38 PM, April 04, 2005, Anonymous Anonymous said...

1. Shale and tar sands (and "heavy" oil) require a chemical input of natural gas in addition to a natural gas energy input. Shale and tar sands are high-carbon and need the hydrogen from natural gas to be liquified and to be useful for making gasoline.

Please note that North America does not have a lot of spare natural gas capacity right now. Will it be enough to exploit all of the oil shale and tar sands, or will we use it all to generate electricity and make hydrogen for our "hydrogen economy?" Time will tell.

Also, shale and tar sands need to be mined and processed in a way that crude oil does not. This reduces the ratio of energy produced to energy used in comparison to light sweet crude. I'm no economist, but wouldn't using more expensive oil to produce more expensive oil lead to really expensive oil?

2. Those crazy Europeans use their fuel taxes to fund transit, making their sprawl affordable. We do pretty much the opposite, and we, for the most part, are in hoc up to our eyeballs.

3. Speaking of debt, we can afford to buy as much oil as we want. As long as the rest of the world (mostly Asia) continues to lend us the money to do so. Funny though, how our trade deficit continues to grow out of control as the price of petroleum goes up. Consider also that we import 60 percent of our oil now, and that percentage is growing steadily.

I don't share your optimism, Tory. It's sort of like having no money in your checking account and still thinking you can write out checks because you have some blank ones left in your checkbook.

Does Jim Kunstler exaggerate? Does he make wild predictions about the future? Does he want to sell books?

Yes to all three. Like any of us, I'm sure he wants to make a living, but beyond that I think he wants to draw attention to something that has the potential to be an enormous problem. I think he underestimates human resiliency and inginutiy, but frankly, his guess is as good as anybody's.

Is Kunstler the only person who thinks our energy policies will get us in trouble? Is he nuts? Will America be recognizable in 25 years?

No, no, and who knows? Perhaps Tory should check out Ken Deffeyes' new book, Beyond Oil: the View from Hubbert's Peak if he wants a more balanced look at our energy situation. Thing is, even Ken writes that "[b]usiness as usual is not in the cards. [...] Whether we like it or not, there will be major rearrangements in the world economy."

Does Tory understand complex energy and economic systems nearly as well as he thinks he does?

Not hardly.

"Being right too soon is socially unacceptible."
[Robert A. Heinlein]

 
At 11:22 PM, April 04, 2005, Anonymous Richard R. Johnson said...

RE: "Crash program to replace our vehicle fleet with hybrids to double mileage and save that $1,200/year? Unlikely"...

The crash program might come from an outside competitor leapfrogging our technology with a super-efficient car priced at only a few thousand dollars a pop that otherwise "looks and quacks like a duck" as one might say. China plans to become the third largest auto manufacturer in the world by 2010, and Chinese vehicles are expected to hit our shores en masse in January 2007. The Chinese government recently enacted fuel efficiency standards that are already more strict than ours, and these are set to become even stricter in 2008. Is this just a new competitor, or a will their vehicles prove to be the disruptive technology that will up-end our big three automakers? By not acting quick enough, will our automakers doom the industry, and trigger a massive recession in the process? These are the sorts of issues that the Pentagon is taking a hard look at with Amory Lovins. As Amory said in his lecture at Rice (and I paraphrase), "my question for the big three automakers is are you willing to bet your entire company that I'm completely wrong?"

 
At 12:42 AM, April 05, 2005, Anonymous Anonymous said...

Let's get a little perspective here folks. Average driving of about 12,000 miles a year at 20mpg is 600 gallons/year. At $2/gallon, that's $1,200/year. If oil doubles in the short-run (which are the highest predictions - about $100/barrel), that's another $1,200/year. For perspective, average per capita US GDP is ~$38K/year.

So you think that personal automobile use is the ONLY use of petroleum with an ecomomic effect in the United States, then?

 
At 2:47 PM, April 05, 2005, Blogger Tory Gattis said...

No, just the primary one. Just trying to create a little perspective.

I totally agree on the Big 3 needing to invest more in fuel efficiency. They're setting themselves up for bankruptcy and even possible liquidation.

Minds with a much deeper technical understanding than I have come to similar conclusions:

"The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy"

Amazon: http://tinyurl.com/6xbzc
Business Week review:
http://tinyurl.com/6zjbp
Washington Times review:
http://tinyurl.com/3wzfb

 
At 4:26 PM, April 05, 2005, Blogger Tory Gattis said...

New comments by Alan Greenspan from a Forbes article:

"Speaking via satellite to the National Petrochemical and Refiners Association meeting in San Antonio, Tex., Greenspan said the prices are stressing energy markets in ways unseen in a generation. But before people and governments resort to regulatory clampdowns that could "distort or stifle the meaningful functioning of our markets," the chairman cautioned, they ought to let natural market forces straighten out the tangled skein--starting with conservation by businesses and consumers. Then, Phase Two: Greater exploration by energy firms. The one-two combo should get prices back in hand, he said. As to angst over the current fuel costs, Greenspan urged listeners to look on the bright side: He said higher prices will not only further new exploration, but also stimulate research and development to "unlock new approaches to energy production and use, that we can now only scarcely envision."

http://tinyurl.com/6xttf

 
At 8:24 PM, April 09, 2005, Anonymous Anonymous said...

"No, just the primary one. Just trying to create a little perspective."

Actually not Tony. A quick check at bp.com will give you some solid data to work from. From memory total carbon energy gets used roughly three equal ways; transport, manufacturing and agriculture. Of the transport segment, private cars are less than 1/2 of that, so in round terms about 15% of the total carbon energy input.

The other thing you really need to bone up on before making comments about energy supply is ROEI, Return On Energy Invested. This is the critical weakness of almost all known and pratical alternatives to oil; their total energy return is either negative, or nowhere near as good as oil has been historically.

The simple observation I make is that far too many people like you lash out against rational warnings with "this man is certifiably nuts" shoot the messenger type responses. It really is a dead giveaway.

 
At 9:24 AM, April 10, 2005, Anonymous Anonymous said...

Conservative Congressman Roscoe Bartlett gave a presentation to congress on peak oil. This can be accessed at

http://www.energybulletin.net/5080.html

Also, the DOE released a report on Peak Oil in February. The full report has been posted here:

www.hilltoplancers.org/stories/hirsch0502.pdf

 
At 3:49 PM, April 10, 2005, Blogger Tory Gattis said...

-We're not looking at "total carbon energy" - we're looking at oil. Coal is not in danger of running out anytime soon.

-I'm assuming ROEI is already taken into account when they say "oil sands are economic at $25/barrel". Considering the Saudis can pump oil for a few dollars a barrel, that is significantly more expensive, but perfectly economic at today's prices.

-I am not lashing out at a "rational warning", but an extremely irrational one designed to provoke a panic. Absolutely, there are economic, political, technological, and environmental issues around energy and specifically oil that need to be addressed, but the hysterical ravings of Kunstler actually cause more harm than good. It's actually the same problem environmentalism has: when they scream "the sky is falling" all the time, they lose credibility and it reflects badly on some very worthwhile goals. People smell the overhype and then choose to ignore the whole issue.

 
At 7:09 PM, April 12, 2005, Anonymous Anonymous said...

A major difficulty in providing any sort of warning about the human ecological condition is our lack of perspective. We seem to think that if a forewarned problem does not materialize in a day, week, year, then the person must have been a Chicken Little.

How would we react, though, if someone was confident that we were collectively heading for a cliff but waited until the moment of impact to point it out to the rest of us? Sure, we'd all finally agree at that time that there's a problem, but it would be too late to do anything about it.

These are ends on a spectrum between "too early" and "too late"; how can we know where we're at?

Maybe it's still the time for timid warnings and reservation (improve efficiency, try not to abandon public transit systems, make sure your solution is equitable, etc.). How's that going, by the way?

 
At 12:45 PM, May 15, 2008, Anonymous Anonymous said...

Tar sands and shale oil are not even remotely worth it. But it's not because of the money but because of the lack of technology.

Here's the difference:

Current technology for a typical Texas oil well is such that the machinery and the infrastructure expend 1 gallon of oil to bring 30 gallons out of the ground. That's a beautiful ratio of 30-to-1.

But extracting the oil from shale is such an intensive operation that it expends 1 gallon of oil to eek 1.5 gallons from the rocks. That's a frighteningly wasteful ratio of 1.5-to-1.

Do you REALLY want us to fritter away that much of our existing oil just to get a net return of so little?

 
At 1:39 PM, May 15, 2008, Blogger Tory Gattis said...

I personally know some people involved with both. They are energy intensive extraction processes, but that energy could come from wind, geothermal, or nuclear, not just the oil itself. And, regardless of energy source, it is extremely economically viable at current oil prices.

 

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