Jim Kingsdale has a post up that includes a longish piece by the financial deity Peter Lynch on the cost of energy. Please go read the whole thing, but let me present just a few snippets to entice you to do so:

In my opinion, “Energy” is the number one problem facing the U.S and the world as we move forward into the 21st century. In fact, I think that it may be the greatest problem that mankind has ever faced. All the other “problems” we hear about on the evening news – health care, social security, housing crisis, credit crunch etc. are ALL “small change” compared to the looming worldwide energy crisis. The problem facing us is so large that I am really beginning to believe that people, as well as, governments are simply in mass denial and refuse to believe the magnitude of the approaching problem. Keep in mind that reasonably priced, available energy is what gave birth to our mighty industrial revolution and is what separates the U.S. and the rest of the developed world from becoming third world countries.

This is a problem that CANNOT be ignored and must be addressed rapidly, with a detailed long term plan that MUST be based upon a comprehensive accurate evaluation and assessment. There is still time to move forward, but time is running out and we have to stop with the politics as usual and start to focus on what we ALL need to do for the common good.

What is the price you pay to purchase a gallon of gasoline for your car? Depending on what part of the country you live in, it is probably between $4.00 and $4.50 per gallon.

But what is the “real cost” of that gasoline? Does it count ALL of the direct AND indirect costs to the consumer, society and the nation of our continued and insane dependence on fossil fuels?

I think not.

Everyone knows the posted price, but very few realize or stop to think about the true costs. There are a number of “hidden” costs that most of us do not realize. It may not be obvious but we are quietly paying these additional costs every day. These additional indirect costs actually make the “real” cost of the gasoline and all other fossil fuel related items many times higher than it seems at first glance.

Unfortunately our government does not utilize all of the necessary cost components in order to arrive at an accurate “true cost” number. As a result, they are using a faulty equation, which, of course, will result, EVERY SINGLE TIME, in an incorrect answer and subsequently a fault ridden policy that is based upon error after error.

Some of these costs and associated penalties:

• Health Related Costs
• Air Pollution
• Water and Land Pollution
• Thermal Pollution
• Macro Economic Costs
• National Security
• Global Warming

[Lynch then addresses each item in the above list.]

We can lower our healthcare costs, reduce our air, water and thermal pollution, develop a more stable economy, create an enormous number of U.S. based jobs and become a far more secure nation if we just begin this inevitable process of evolution toward renewable energy sources - solar, wind, biomass, ocean power, energy efficiency and conservation.

We need to educate the American people about the real truth of the current situation and then apply, what has always been America’s greatest “assets” - technical ingenuity, creative innovation and our “can do” attitude.

Now you can see what the “real costs” of our addiction to fossil fuels are. We need to be preemptive and undertake this NOW, before we find ourselves in the midst of a worst-case scenario.

Please go read it all.

I’ve argued perhaps a billion or so times on this site that we need a wide range of actions to deal with our looming energy and environmental issues. We can’t rely on just a grass roots movement or just government action or just leave it all to “the free market”. We need them all, which means we have to be smart about how we combine their costs and benefits; we’re quickly running out of time for stupid or half-hearted measures.

Part of our action has to be expressing our collective will through elected officials, i.e. government action. The nastiest reality of all is that while some people will do what’s right on energy and environmental issues simply because they know it’s the right thing or they get satisfaction because doing it proves their moral superiority, not nearly enough people will act that way. For every member of the Sierra Club or Greenpeace (or regular reader of this site, frankly), there are many more Americans who want nothing more than the cheapest out-of-pocket expense for energy possible, and they reject everything else as a plot by the New World Order or environuts or (gasp!) Al Gore to take over their lives.[1]

Therefore, we need voters and consumers to educate and activate themselves, and force politicians seeking their support as well as corporations seeking their money, to adopt a longer planning horizon and a more enlightened approach and do the right thing.[2]

We also need people to make the myriad of changes I’ve been screaming about on this site for years, like using compact fluorescent bulbs, driving fewer miles, hunting down and killing electricity vampires[3], improving the insulation of their homes, using as little space heating or cooling as possible, etc.

And above all, Lynch is right: We need to do those things now.

(Lest anyone miss the enormous, neon sign hanging over this discussion, let me point to it explicitly: About four years ago when I started this web site and project, I chose the name “The Cost of Energy” precisely because I wanted people to adopt a more expansive and encompassing mindset and consider all the costs of our energy use, not just the immediate and obvious ones measured in cash flow.)

[1] And for the life of me, I have never figured out why the people who say such inane things believe for a moment that other people would want control of their lives. That’s a stupefyingly weird alloy of paranoia and egomania.

[2] For those of you who just laughed at the planning horizon and enlightened approach stuff, answer me this: How much better off would Ford, GM, and Chrysler be today if they challenged Toyota and Honda in developing hybrid vehicles in the 1990’s instead of dismissing it? For that matter, how much healthier would they be, and how many fewer people would they be laying off directly and indirectly, if they had simply put more emphasis on smaller, more efficient vehicles instead of binging on trucks for years, like an unsupervised kid in a candy store? It’s easy to be smug and make fun of calls for the kind of change in corporate boardrooms that I think we need, at least until corporations are greedy and willfully ignorant and then reality bites them on the ass. Then everyone starts wailing about “could GM really declare bankruptcy???” instead of treating this as a huge and very painful object lesson in how companies should be run.

[3] These are all those little things around your home that suck a little (or a lot of) electricity all the time, even when they’re not being used. Do you really need to have your cable modem and router turned on all the time? Do you need to leave your PC on 24/7, even though Windows doesn’t boot so much as it gestates? Walk through your house and do a quick inventory of what’s plugged in, and how often you really use it, and I’m willing to bet you’ll find a good $5 of monthly electricity you can painlessly eliminate. And if that’s too much trouble, then please send me that $5/month (PayPal to lougrinzo [at sign] rochester.rr.com), as I need it to keep this project afloat.

rjacobsen0 pointed out over on the discussion board (post) that one of the 14 candidate questions in Science Debate 2008 is right in our wheelhouse:

3. Energy. Many policymakers and scientists say energy security and sustainability are major problems facing the United States this century. What policies would you support to meet demand for energy while ensuring an economically and environmentally sustainable future?

While I have serious reservations about our chances of getting a meaningful response to that question from presidential and Congressional candidates, I wholeheartedly support the effort.

Just to be clear, by “meaningful answer” I mean one that’s informed, BS- and (relatively) pander-free, and avoids nonsense like saying the US has to “achieve energy independence”. I know that’s an unreasonably high standard to hold almost any politician to, but an energy geek can dream, can’t he?

Bill McKibben, one of Those Who Must Be Read, in my opinion, has a thoughtful, moving piece up at Orion Magazine’s site, “When Words Fail” (emphasis added):

I almost never write about writing—in my aesthetic, the writing should disappear, the thought linger. But the longer I’ve spent working on global warming—the greatest challenge humans have ever faced—the more I’ve come to see it as essentially a literary problem. A technological and scientific challenge, yes; an economic quandary, yes; a political dilemma, surely. But centrally? A crisis in metaphor, in analogy, in understanding. We haven’t come up with words big enough to communicate the magnitude of what we’re doing. How do you say: the world you know today, the world you were born into, the world that has remained essentially the same for all of human civilization, that has birthed every play and poem and novel and essay, every painting and photograph, every invention and economy, every spiritual system (and every turn of phrase) is about to be . . . something so different? Somehow “global warming” barely hints at it. The same goes for any of the other locutions, including “climate chaos.” And if we do come up with adequate words in one culture, they won’t necessarily translate into all the other languages whose speakers must collaborate to somehow solve this problem.

…

In a PowerPoint presentation [James Hansen] gave at the American Geophysical Union meeting in San Francisco last December, he named a number: 350 parts per million carbon dioxide. That, he said, was the absolute upper bound of anything like safety—above it and the planet would be unraveling. Is unraveling, because we’re already at 385 parts per million. And so it’s a daring number, a politically unwelcome one. It means, in shorthand, that this generation of people—politicians especially—can’t pass the problem down to their successors. We’re like patients who’ve been to the doctor and found out that our cholesterol is too high. We’re in the danger zone. Time to cut back now, and hope that we do it fast enough so we don’t have a stroke in the meantime. So that Greenland doesn’t melt in the meantime and raise the ocean twenty-five feet.

…

But a number works. And this is a good one. Arcane, yes—parts per million CO2 in the atmosphere. But at least it means the same thing in every tongue, and it even bridges the gap between English and metric. And so we secured the all-important URL: 350.org. (Easier said than done.) And we settled on our mission: To tattoo that number into every human brain. To make every person on Planet Earth aware of it, in the same way that most of them know the length of a soccer field (even though they call it a football pitch or a voetbal gebied). If we are able to make that happen, then the negotiations now under way, and due to conclude in Copenhagen in December of 2009, will be pulled as if by a kind of rough and opaque magic toward that goal. It will become the definition of success or of failure. It will set the climate for talking about climate.

This basic issue: How do you get the enormity of the problems we’re facing, including global warming and peak oil, across to enough people and at a sufficiently visceral level that they realize “this time it’s different”, is one that I, also, wrestle with constantly. We’ve all grown jaded over the years, those of us over about the age of 30, and most would say with good reason. We’ve all seen countless examples of Really Serious Problems hyped to death in the media and by people selling books or with some other, less obvious agenda, only to see those world-changing threats turn out to be wrong (i.e. the problem never really was a problem) or self-correcting or easily solved with a minor public policy adjustment or solved with a big, concentrated effort that didn’t hurt us (Y2k, anyone?). We’re lucky enough, most of us and most of the time, that a high percentage of the horror stories about the monsters under our beds dissolved into nothing more than harmless noise in our mental bandwidth that dissipates after a while, leaving us to go about our lives.

Another factor is the defense mechanism of proximity. You hear a news report of a bad chain reaction accident on a fog-obscured highway that you drive several times a week, and you have the typical human reaction–you’re sorry to hear about those 35 drivers, and you feel a momentary twinge of sympathy for the three people who died and the couple of dozen who were sent to various local hospitals. But just as quickly you move on to the next story or some errand you have to run, at least until you find out later that day that a good friend was in that accident and had to be cut out of the twisted shell of his totaled car and air lifted to a hospital, where he’s still in guarded condition. You’re suddenly focused on the house painting party he had planned to host this weekend, and how you and some other friends were planning to play a trick on him by bringing a can of paint in a conspicuously wrong color and telling him one of the rooms had been finished in that color. It’s no longer a two-minute local news item but a personal tragedy; you’re gripped by the nearness of the accident, the “there but for the grace of God go I” mix of genuine sorrow that such a good person was so seriously and needlessly injured, and embarrassed thankfulness that it wasn’t someone even closer to you, or you yourself struck by this random tragedy.

And right now, as you read this, you’re wondering about these specific details–is this just a fabricated example or did this really happen? You’re balanced on the razor’s edge between dismissing the story or surrendering to even momentary emotional investment; does Lou have a close friend clinging to life? Is he callous enough to use it as an example on his web site?

The answer is another question: Why does it matter? Why do you care any more or less about highway safety or how safely you drive depending on whether you know someone who was injured in an accident? Why does it have to be “personal” for us to care? Why do so many people assume that only parents care enough about humanity’s future to try to reverse our behaviors that exacerbate the effects of global warming and peak oil? Isn’t it enough to say that all the children of the world belong to all of us, whether or not they share our DNA?

Will the 350.org campaign be successful at breaking the conceptual logjam and globalizing our world view enough that many more of us “get” it? I don’t know, but it’s certainly worth the effort to find out.

Joe Romm touched on a critical point in a post at Climate Progress this morning, “Is 450 ppm politically possible? Part 6: What the Boxer-Lieberman-Warner bill debate tells us”:

Equally important, conservatives now have a very potent political issue to beat back advocates of an economy-wide cap & trade system — high gasoline prices. And gasoline prices are probably going to be much higher over the next few years (see “Must read CIBC report: $7 gas by 2010, 10 million cars off the road, 1970s style GDP growth“). That is one reason I would leave transportation out of an economy-wide cap & trade, but that will be the subject of another post.

As I said on CP in response to that post, this is one of the things I feared the most, that our sense of urgency about GW and the pain of higher oil prices would arrive simultaneously and cause policy paralysis. If we’re not at that point as one might conclude from many of the examples Joe cites in his post, we’re way too close (and getting close) for comfort.

This is a big deal because of the way large groups of people, most notably Americans in this shiny, happy 21st century, deal with major crises. We have a terribly hard time dealing more than one Big Conceptual Issue at a time, and both global warming and peak oil certainly qualify as BCI’s. Even worse is how hard it can be to get us to focus on action now to avert a catastrophic, but not yet present, Issue 2 when Issue 1 is not just big and scary, but hitting us hard in our weekly finances right now.[1]

On top of this foundation of psychological weirdness is everyone’s favorite nasty detail: Perception is reality. Most notably for our purposes GW and PO have taken very different paths through the obstacle course that is public perception space, paths that I suspect virtually no one would have predicted 10 years ago.

Global warming made the leap from science geek and enviro issue to a widely recognized, and even largely accepted, mainstream concept thanks almost entire to An Inconvenient Truth. Yes, many other people have been shouting about this topic for a long time, including some people I respect greatly, like Bill McKibben and James Hansen, plus we’ve seen tireless contributions to this effort from organizations like the NRDC and Greenpeace. And all this happened before the people who were educated and/or convinced were directly affected by global warming. Sure, Uncle Al and others had some compelling imagery to work with–stranded polar bears, disappearing glaciers, US state-size chucks of Antarctica breaking off, implications of more and stronger hurricanes–but the considerable conceptual progress we’ve seen has all been at a distance, with the consequences removed, in both space and time, from those people undergoing a shift in the world view.

Peak oil is a nearly opposite situation. The effects are being felt right here, right now, and in ways that mainstream consumers and voters can’t ignore. So surely people would be clamoring for information about peak oil, and then pressuring their politicians to take appropriate action, right? Of course that hasn’t happened; we have no Al Gore, with or without his nifty presentation and movie, and we have endless debate about What’s Really Causing High Oil Prices, which only feeds the populist streak in Americans as well as our DNA-level belief in infinity. We can’t be running out of cheap oil! There’s plenty of it in the ground! It’s just OPEC or Exxon or Bush or the New World Order or Speculators screwing us again!

Public perception seems to have solidified. The mainstream public sees global warming as a real problem we’ll just have to ignore for now while we get those oil prices down. Peak oil isn’t even on their radar screen, and to the extent people have even heard of it nearly all of them are convinced it’s nothing more than just another of those Internet-fueled conspiracy theories.[2] I’ve said for a long time that peak oil needed our own equivalent of Al Gore, but I think it’s too late for anyone to fill that role.

The biggest problem here is not the disparity of perception about global warming vs. peak oil, but how those two things interact, as Joe Romm pointed out. People are so squeezed by higher energy prices that they’re demanding their elected representatives Do Something Right Now, and I pity the politician who supports a policy that his or her opponent can paint as being a new tax, no matter how well thought out and necessary the policy might be.

What a startling chain reaction. We become global warming aware, but then peak oil keeps us from taking serious action on global warming, and that budding awareness of global warming is at least partly to blame for our inability to deal with peak oil (that “only one crisis at a time” thing).

How do we break that cycle and shun our comfort zone and deal with these twin problems in realistic terms? How much can we expect mainstream consumers and voters to change and pressure their elected representatives? Or is the answer simply to hope that we elect people who know what’s going on, haven’t been bought by special interests, and are willing to do unpopular things that are in everyone’s long-term best interest? I don’t know, and that’s a mix of questions I’m thinking about more than ever not just in connection with my writing here, but also in my current book project, where I’m currently deciding how much of a “crash course in energy analysis” I should include as an explicit section.

[1] This is not to say that I think American consumers are being selfish or too wrapped up in their personal finances. If anything, more attention and careful planning on that front would have helped lessen the impact of the current mess.

[2] The fact that so many people think peak oil is a conspiracy theory and that the “real” explanation is one of their quarter-baked fantasies about a New World Order or oil companies ruling the world (i.e. keeping 100MPG cars off the road), surely deserves to be a first-ballot entry into the Irony Hall of Fame. And yes, I blame both the Cornucopians and the Apocalypticons for much of this mess. One camp is telling us there’s no underlying problem, which leaves people to conclude it’s someone just screwing us again, while the other is so overblown with their rhetoric that they’re too easily characterized as being another clueless, harmless, and ignorable Internet cult.

The Independent has an article about global warming in today’s edition that raises some very disturbing questions. Exclusive: No ice at the North Pole:

It seems unthinkable, but for the first time in human history, ice is on course to disappear entirely from the North Pole this year.

The disappearance of the Arctic sea ice, making it possible to reach the Pole sailing in a boat through open water, would be one of the most dramatic – and worrying – examples of the impact of global warming on the planet. Scientists say the ice at 90 degrees north may well have melted away by the summer.

“From the viewpoint of science, the North Pole is just another point on the globe, but symbolically it is hugely important. There is supposed to be ice at the North Pole, not open water,” said Mark Serreze of the US National Snow and Ice Data Centre in Colorado.

…

Seasoned polar scientists believe the chances of a totally ice free North Pole this summer are greater than 50:50 because the normally thick ice formed over many years at the Pole has been blown away and replaced by huge swathes of thinner ice formed over a single year.

This one-year ice is highly vulnerable to melting during the summer months and satellite data coming in over recent weeks shows that the rate of melting is faster than last year, when there was an all-time record loss of summer sea ice at the Arctic.

…

The polar regions are experiencing the most dramatic increase in average temperatures due to global warming and scientists fear that as more sea ice is lost, the darker, open ocean will absorb more heat and raise local temperatures even further. Professor Peter Wadhams of Cambridge University, who was one of the first civilian scientists to sail underneath the Arctic sea ice in a Royal Navy submarine, said that the conditions are ripe for an unprecedented melting of the ice at the North Pole.

…

There are other indications that the Arctic sea ice is showing signs of breaking up. Scientists at the Nasa Goddard Space Flight Centre said that the North Water ‘polynya’ – an expanse of open water surrounded on all sides by ice – that normally forms near Alaska and Banks Island off the Canadian coast, is much larger than normal. Polynyas absorb heat from the sun and eat away at the edge of the sea ice.

Assuming a blue Arctic happens this summer or within the next few years (which seems inevitable), those disturbing questions are:

First, what does this imply about the current and future state of global warming? As the article above mentions, one of the critical feedbacks is the “albedo flip”, in which highly reflective ice and snow is replaced by much darker open water (or on land, by soil and vegetation). If we’re entering a time when the Arctic Ocean is converted into a vast solar collector for even a small portion of every year, all the additional heat absorbed would add significantly to the warming that’s already happening.

Second, what does this say about our ability to assess the world’s climate in a time of rapid change? It wasn’t long ago that scientists thought the Arctic wouldn’t see an ice-free summer within decades, but the estimates of when that will happen have been repeatedly reeled in as more data about actual melting and the condition of the ice, etc., have accumulated. This is not to criticize climate scientists in any way. Even without the sharp kick that a higher atmospheric CO2 concentration has delivered to the global climate system, they had a more than sufficiently challenging job. The simple fact is that for decades humanity hasn’t spent enough resources on understanding and modeling the world’s climate–at least not enough to assess the current situation and make useful predictions. Perhaps the biggest single error we’ve made in this area is the meta-mistake of misjudging the importance of climate science itself.

Third, how will we respond to a blue Arctic? I would like to give in to my optimistic streak and think that this would be The Event, the mental tipping point that once and for all made the urgency of the situation clear to a large majority of people in the developed and rapidly developing nations, including policymakers.[1] How could such a shocking and immense sign fail to get and hold our attention, and then spur us to take meaningful action? The answer is all around us. We’re surrounded by far too many deniers, fueled by ideological and/or financial incentives, and people who are so overwhelmed with the details of their lives or are simply so apathetic that they just don’t care about anything that isn’t impacting them this very minute.

My prediction is that when we see a blue Arctic, we’ll have a flurry of reports in all the major broadcast and print media. People will blog about it until their fingers bleed and their vision grows blurry. For every person claiming that we’ve reached a critical point in the effects we’re having on the planet, we’ll have at least one more telling us how wonderful this is because, for example, we can now ship goods across the top of the world cheaper, at least during the summer. In particular, I expect some media outlets to reach new heights of absurdity in their practice of the faux balance technique–you can’t have Al Gore or someone from Greenpeace or the NRDC or whomever from the left/enviro camp without “balancing” that person with James Inhofe or someone from one of the right-wing think tanks. Expect to see and hear heavy use of “But some experts think otherwise…”.

In short, I’m not at all optimistic about the answer to this third question, and I think we’ll simply turn a blue Arctic into yet another debating exercise and de facto “victory” for the delayers and deniers. Given the long lead time involved in making major changes to reduce CO2 emissions and the even longer time needed to bring down atmospheric CO2 levels, that may be a delay we can’t afford.

[1] Just to be clear, for a long time I wondered what the mental tipping point would be, and assumed it would be a blue Arctic or something much sooner, as I assumed the projections I’d read were right and a blue Arctic was decades away. I now think it will have to be something far worse, like rapidly rising sea levels starting to swamp major coastal cities, or a hurricane hitting New York City and some widely respected climate scientist or organization saying that such events will be more common as the atmosphere continues to warm.

Read the article Rising seas threaten west Antarctic, and it’s all but impossible to think, yet again, of all the chances to take serious, desperately needed action on CO2 emissions that we’ve thrown away over the last twenty years. What could trigger such a bout of depressing navel staring? Try this:

There’s a ‘big gorilla hiding the closet’ whose collapse could have a dramatic effect on sea levels, according to Australian researchers.

Dr Bradley Opdyke, a paleoceanographer from the Australia National University (ANU) believes the West Antarctic Ice Sheet (WAIS) could partially collapse within 20 years, resulting in a dramatic jump in sea levels.

His talk on glacial cycles and the WAIS was presented earlier this month at the Imagining the real: life on a greenhouse earth conference held in Canberra.

“The 900-pound gorilla hiding in the closet is Antarctica. We have evidence that it is not a stable beast,” Opdyke says.

He says the WAIS is inherently unstable, and the current rate of sea level rise is placing it at risk.

“It is pinned on the spines of a few mountains, with ice sheets draped off them,” Opdyke says. “If sea level rise unpins these sheets, it is plausible that there will be dramatic ice collapse in the West Antarctic.”

See the article for the facts behind that conclusion that the WAIS “is not a stable beast.”

And why 20 years? As many of you probably know, Monday was the 20th anniversary of the now-famous testimony by James Hansen before a US Senate committee which happened to include a Senator from Tennessee named Al Gore.[1]

Hansen gave a talk on Monday, Global Warming Twenty Years Later: Tipping Points Near [4 page PDF] to the National Press Club, which began:

My presentation today is exactly 20 years after my 23 June 1988 testimony to Congress, which alerted the public that global warming was underway. There are striking similarities between then and now, but one big difference.

Again a wide gap has developed between what is understood about global warming by the relevant scientific community and what is known by policymakers and the public. Now, as then, frank assessment of scientific data yields conclusions that are shocking to the body politic. Now, as then, I can assert that these conclusions have a certainty exceeding 99 percent.

The difference is that now we have used up all slack in the schedule for actions needed to defuse the global warming time bomb. The next President and Congress must define a course next year in which the United States exerts leadership commensurate with our responsibility for the present dangerous situation.

Otherwise it will become impractical to constrain atmospheric carbon dioxide, the greenhouse gas produced in burning fossil fuels, to a level that prevents the climate system from passing tipping points that lead to disastrous climate changes that spiral dynamically out of humanity’s control.

Changes needed to preserve creation, the planet on which civilization developed, are clear. But the changes have been blocked by special interests, focused on short-term profits, who hold sway in Washington and other capitals.

I argue that a path yielding energy independence and a healthier environment is, barely, still possible. It requires a transformative change of direction in Washington in the next year.

A bit later on:

Climate can reach points such that amplifying feedbacks spur large rapid changes. Arctic sea ice is a current example. Global warming initiated sea ice melt, exposing darker ocean that absorbs more sunlight, melting more ice. As a result, without any additional greenhouse gases, the Arctic soon will be ice-free in the summer.

More ominous tipping points loom. West Antarctic and Greenland ice sheets are vulnerable to even small additional warming. These two-mile-thick behemoths respond slowly at first, but if disintegration gets well underway it will become unstoppable. Debate among scientists is only about how much sea level would rise by a given date. In my opinion, if emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. No stable shoreline would be reestablished in any time frame that humanity can conceive.

…

The disturbing conclusion, documented in a paper I have written with several of the world’s leading climate experts, is that the safe level of atmospheric carbon dioxide is no more than 350 ppm (parts per million) and it may be less. Carbon dioxide amount is already 385 ppm and rising about 2 ppm per year. Stunning corollary: the oft-stated goal to keep global warming less than two degrees Celsius (3.6 degrees Fahrenheit) is a recipe for global disaster, not salvation.

These conclusions are based on paleoclimate data showing how the Earth responded to past levels of greenhouse gases and on observations showing how the world is responding to today’s carbon dioxide amount. The consequences of continued increase of greenhouse gases extend far beyond extermination of species and future sea level rise.

Arid subtropical climate zones are expanding poleward. Already an average expansion of about 250 miles has occurred, affecting the southern United States, the Mediterranean region, Australia and southern Africa. Forest fires and drying-up of lakes will increase further unless carbon dioxide growth is halted and reversed.

Mountain glaciers are the source of fresh water for hundreds of millions of people. These glaciers are receding world-wide, in the Himalayas, Andes and Rocky Mountains. They will disappear, leaving their rivers as trickles in late summer and fall, unless the growth of carbon dioxide is reversed.

Coral reefs, the rainforest of the ocean, are home for one-third of the species in the sea. Coral reefs are under stress for several reasons, including warming of the ocean, but especially because of ocean acidification, a direct effect of added carbon dioxide. Ocean life dependent on carbonate shells and skeletons is threatened by dissolution as the ocean becomes more acid.

Such phenomena, including the instability of Arctic sea ice and the great ice sheets at today’s carbon dioxide amount, show that we have already gone too far. We must draw down atmospheric carbon dioxide to preserve the planet we know. A level of no more than 350 ppm is still feasible, with the help of reforestation and improved agricultural practices, but just barely – time is running out.

Hansen then talks about public policy, and taxing carbon, but with the stipulation that 100% of the money is refunded to taxpayers, thereby giving everyone a strong financial incentive to use less fossil fuel. (I’m still pondering this one, and don’t have a strong opinion yet.) He also mentions the need for a vastly better electricity grid to better support decentralized renewable energy sources, something I couldn’t agree with more.

You can also see some “related” presentation slides [44 page, 2.9MB PDF] and his web site. I strongly recommend the presentation, as it provides some technical background on CO2 levels, what’s happening to Greenland, etc.

So, what is the point here? Sadly, it’s not merely a matter of having lost time, so that when we do finally get off our collective asses and start working to reduce CO2 emissions it will cost a bit more. Like that other monster under our bed that’s growling ever louder, peak oil, we’ve delayed to the point where the remedies will be exceedingly, and needlessly painful. Ask the coal plant operators how they will deal with CO2 emissions restrictions/taxes, or the airlines and car companies and mainstream consumers how they’re dealing with $136/barrel oil. All indications are that over the next 5 to 10 years those situations will get far worse as the price of oil continues to rise and our awareness of the urgency of global warming grows.

The saddest part of this quickly compounding mess is that the people who will have to do nearly all of the heavy lifting are today’s children and those yet to be born. Those of us who are today adults, and those who came before us over the last two hundred years, have built a world that includes many genuine wonders, but at a horrific price; the accumulated cost of our energy use has been far higher than all but a tiny sliver of the general population realize. By ignoring the warnings of people like James Hansen, Al Gore, Bill McKibben, Ross Gelbspan, and many others over the last 20 years, we’ve thrown away the opportunity of that generation and forced the next few generations to live with a nearly suffocating burden.

None of us should consider giving up, though. There’s still plenty of time for us to help ourselves and our children[2], to begin the process of stepping back from the brink. We can educate ourselves and each other, make more enlightened decisions about the myriad of goods and services we consume, and become more active in politics at all levels to force our elected representatives to do the right things. It’s time for us to turn our backs on the easy myopia and willful ignorance of deniers, recognize the breadth and depth and urgency of these problems, and act like responsible, compassionate adults.

[1] This is not to imply that this hearing is what turned Al Gore green; he saw the light long before 1988.

[2] And yes, they’re all our children, whether or not they share our DNA.

In the endless war of words over whether it’s a war about oil (meaning the current war in Iraq, not the prior war in Iraq), people sometimes bring up the issue of what US Vice President Dick Cheney said in a public appearance in 1999, what it implies about his knowledge of peak oil, etc. The speech was at the London Institute of Petroleum, on November 15 of that year.

You can find the entire text (with an annoying lack of paragraph breaks) here.

Quoting the most often quoted portion from that source, Cheney said:

From the standpoint of the oil industry obviously and I’ll talk a little later on about gas, but obviously for over a hundred years we as an industry have had to deal with the pesky problem that once you find oil and pump it out of the ground you’ve got to turn around and find more or go out of business. Producing oil is obviously a self-depleting activity. Every year you’ve got to find and develop reserves equal to your output just to stand still, just to stay even. This is true for companies as well in the broader economic sense as it is for the world. A new merged company like Exxon-Mobil will have to secure over a billion and a half barrels of new oil equivalent reserves every year just to replace existing production. It’s like making one hundred per cent interest discovery in another major field of some five hundred million barrels equivalent every four months or finding two Hibernias a year. For the world as a whole, oil companies are expected to keep finding and developing enough oil to offset our seventy one million plus barrel a day of oil depletion, but also to meet new demand. By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously controlling about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow.

One of “the” people in the peak oil community is Kjell Aleklett of Uppsala University and President of the Association for the Study of Peak Oil. His highly recommended discussion of this Cheney speech is Dick Cheney, Peak Oil and the Final Count Down [7 page PDF].

Even though I remain convinced that in one form or another both the 1991 Gulf War and the current war in Iraq (which seems to not yet have earned an official name, strangely enough) were “about oil”, this Cheney speech proves nothing. OK, it proves he knew enough about the importance of oil and the realities of the oil business, not to mention the brutal facts that apply to a non-renewable resource (such as it not lasting forever, production inevitably peaking, etc.), to be an executive in a big oil company like Halliburton, but is this really news? In 2008, who among us over the age of about 10 needs further evidence about Dick Cheney’s, shall we say, aggressive pursuit of his goals?

For those who missed it, my most recent take on this whole war for oil question is Thinking the unthinkable.

Here we go again–another article about economists measuring uncomfortable things like the value of human life in trying to figure out what our policy priorities should be. This time around, I have more than the usual objection to what my fellow economists have cooked up.

The article is Fixing the world — by the numbers:

Cutting our carbon emissions to reduce global warming? Not a top priority.

Combating terrorism? Not even on the list of priorities.

Zinc distribution, making school cheaper, and preventing heart attacks? Much more important on a global scale.

If the world decided to fund such efforts, the benefits we’d see would be far greater than what we put into climate change and terrorism, which are central to the anxieties of the First World, and dominate its media coverage.

At least, that’s according to some of the world’s greatest economic minds.

The scholars, including Nobel laureates, are part of an exercise in practicality called the Copenhagen Consensus. They’ve ranked 30 solutions to world policy challenges according to the strict criteria that economics provides: costs versus benefits.

While that might seem like a cold instrument to wield, bereft of human emotion, economists say it’s extremely rational and provides an unencumbered view of just what will give us the biggest bang for the buck.

…

After all, the reality is that not everything can be funded. Choices must be made. The Consensus hypothesizes the spending of $75 billion over four years on solutions for those choices.

What would these experts do first with the money? After listening to Horton’s passionate arguments at the Consensus conference, which wrapped up at the end of May, the panel agreed that providing zinc, along with vitamin A, to children who lack them in the developing world, should be the highest priority.

…

Spending just $60 million per year on this program would yield more than $1 billion in economic benefits, Horton argues, in the form of better health, fewer deaths and increased future earnings. Put another way, for each dollar spent on this solution, we’d get $17 back.

…

Benefit-cost analyses, free from emotion, can also lead to some controversial results.

For instance, the Nobel panel didn’t place solutions to terrorism on their list at all. Economists say the costs incurred in trying to stop terrorists are simply far higher than the benefits.

Another issue that is top of mind for many is global warming. But not for economists. Here again, the costs to mitigate climate change outweigh the benefits. Besides, those benefits won’t be accrued until well into the future, a strike against any solution.

“Think about it rationally,” Horton says. “Because our impacts on the environment are so slow to occur, many of us aren’t as avid about undertaking them as we ought to be.”

The panel ranked it at the bottom of the list.

Chris Green, who teaches a course on the economics of climate change at McGill University, has warned in his work that tackling climate change will be much more costly than most of us think.

Green, who participated in the Consensus, says that while climate change is an extremely serious long-term problem, “My view is that we don’t have the means to deal with it, in any meaningful way, without major technology breakthroughs.” He wants to see an “energy technology race” started.

The panel agreed, and placed the development of low-carbon technologies, whatever they may be, at number 14 on the list.

Economists know that their work can appear as nothing more than cold calculations. Even Green concedes, “I’m not sure you want to frame policy directly on” benefit-cost ratios. And Jha warns of listening to expert panels. “They’re only right half the time,” he cautions.

If anything, the Copenhagen Consensus exercise helps us think differently about the problems of the world: That is, what we may think is important may not have the biggest impact on its most vulnerable people.

The article, which I suggest you read in its entirety, also points out other health- and education-related efforts they recommended.

OK, let me deconstruct this just a bit, taking things in (generally) increasing order of friction-causing potential:

• The basic idea of cost-benefit analysis is sound, and is the only rational way to approach these issues. We have limited resources and we need to figure out how best to use them–that’s the textbook definition of economics.
• When you’re talking about human life, things get very uncomfortable very quickly. People go nuts about assigning a monetary figure to a human life, but there is no other choice. We have to measure the cost of the broad palette of steps we must choose from as well as the benefits. That means we have to use a common unit. So whether we measure things in terms of money or some fabricated unit (which then requires us to convert the money costs of things like public policies into quatloos or whatever we arbitrarily decide to use), we’re still measuring human life. It’s extremely distasteful, and economists don’t like it any more than anyone else; we’re just used to thinking in such terms.
• Even more problematic is measuring human life in the future. How much are you willing to pay today to make a better life for people who won’t even be born in the next 25 or 50 or 100 years?
• The basic conclusion of the economists in this article, that global warming isn’t a high priority, is riddled with assumptions that I think are wildly incorrect and serve as a perfect example of how easily such exercises can turn in unintentional GIGO (garbage in, garbage out) demonstrations.

A quick aside: I can almost bet my keyboard that Joe Romm will jump all over the assertion that we need major technological breakthroughs to deal with global warming. Joe has pointed out many times over on Climate Progress that the number one hurdle in the short to mid term is policy, not technology. I agree, even if I don’t match his intensity in hammering the point home.

Back to those assumptions. Clearly they are assuming that either [1] global warming “won’t be that bad”, or [2] if it is, we can delay action now and fix it later. Anyone who thinks inaction on global warming won’t be a catastrophe just isn’t paying attention and should be ignored. I strongly suspect that the economists involved believe global warming will be bad, but that we can deal with it later and spend resources on more immediate problems now. This is a horrible misreading of the situation, in my opinion, since it completely ignores the mounting evidence that not only is global warming progressing much quicker than any science-based assessment predicted, but we could well be at or beyond the atmospheric CO2 concentration needed to trigger reinforcing feedbacks–the tipping point that leads to a runaway effect that we can’t stop.

Even if you don’t think we’re flirting with a runaway disaster, something that I believe no one knows with absolute certainty, despite the growing evidence, it’s even more likely that if we delay action now and it’s still possible to fix this mess later it will likely be far more expensive than if we start now (or started when Al Gore and others started screaming about this, roughly 20 years ago). We will have to take more drastic measures, some with a higher risk of going horribly wrong (i.e. almost any of the geoengineering proposals), and we will have to spend far more to mitigate the growing effects of global warming.

Finally, let me make a public request: Those of you, including many in the peak oil community, who like to treat all economists like your personal punching bags, please stop it and grow up. Lumping everyone into one narrow, negative stereotype like that is something we all should have been taught not to do in childhood. (Do I really have to trot out some cringe-inducing examples of racial, ethnic, religious, and gender stereotyping to make my point?) If nothing else, remember that there are economists out here–including your host on this site–who understand at the DNA level what global warming and peak oil mean, and we’re doing our best to fight the good fight.

And for those who don’t know the background of “dismal science”…

The dismal science is a derogatory alternative name for economics devised by the Victorian historian Thomas Carlyle in the 19th century. The term is an inversion of the phrase “gay science,” meaning “life-enhancing knowledge.” This was a familiar expression at the time, and was later adopted as the title of a book by Nietzsche (see The Gay Science).

It is often stated that Carlyle gave economics the nickname “dismal science” as a response to the late 18th century writings of The Reverend Thomas Robert Malthus, who grimly predicted that starvation would result as projected population growth exceeded the rate of increase in the food supply. Carlyle did indeed use the word ‘dismal’ in relation to Malthus’ theory in his essay Chartism (1839):

“The controversies on Malthus and the ‘Population Principle’, ‘Preventative Check’ and so forth, with which the public ear has been deafened for a long while, are indeed sufficiently mournful. Dreary, stolid, dismal, without hope for this world or the next, is all that of the preventative check and the denial of the preventative check.”

However the full phrase “dismal science” first occurs in Carlyle’s 1849 tract entitled Occasional Discourse on the Negro Question, in which he was arguing for the reintroduction of slavery as a means to regulate the labor market in the West Indies:

“Not a ‘gay science,’ I should say, like some we have heard of; no, a dreary, desolate and, indeed, quite abject and distressing one; what we might call, by way of eminence, the dismal science”

Developing a deliberately paradoxical position, Carlyle argued that slavery was actually morally superior to the market forces of supply and demand promoted by economists, since, in his view, the freeing up of the labor market by the liberation of slaves had actually led to a moral and economic decline in the lives of the former slaves themselves.

Carlyle’s view was attacked by John Stuart Mill and other liberal economists.

So the next time you want to deride economists, please remember that it was an historian who coined the term while arguing in favor of slavery.

Michael T. Klare, did a 45-minute interview with Jim Puplava and the Financial Sense Newshour, and you should go listen to it.

Klare is the author of several books on the international ramifications of resource competition, most recently Rising Powers, Shrinking Planet: The New Geopolitics of Energy. In this interview he talks with the host, Jim Puplava, about a lot of resource issues, most related to the growing consumer class in China and India, with a particular emphasis on oil.

The interview is the second hour from the June 21, 2008 edition, and you can download or stream the interview in various ways, or just get it here [12MB mp3].

So, we now see that there’s about to be one heck of an oil deal between some US companies and Iraq (emphasis added):

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry.

Anyone care to guess whether the US will wind up building and staffing the oft-discussed world’s largest embassy in Iraq, along with those “permanent” military bases, regardless of who wins the upcoming presidential election?

Surely this is all just some sort of wacky, leftist fantasy, right? I mean, there’s no chance that the US, with an executive branch headed by oil men and members of the Project for a New American Century (i.e. the neocons), could have looked at the world oil situation and said, “It will cost a lot in blood, money and international prestige, but we have no choice but to keep someone else from monopolizing that oil (and natural gas).” If that were the case, then surely some reputable news outlet would have had the courage to say something like this, even months before the war began (emphasis added):

The American campaign to overthrow Iraqi President Saddam Hussein, even as al-Qaida’s terrorism thrives around the world and the national economy falters, has many people in America and abroad asking: What’s really motivating Washington to take on Saddam? His record of perfidy and willingness to inflict damage beyond his borders is a matter of record. For many, particularly in post-9/11 America, that is argument enough. But others believe that Saddam and his lust for ever more powerful weaponry is only part of the story. Largely missing from the debate is a simple fact: Iraq sits atop the world’s second-largest reserves of oil — a resource that translates into hundreds of billions of dollars and enormous economic power.

Within America, street protests accusing the administration of yearning to launch an “oil war” occur occasionally, but they pale in comparison to the vehemence of that charge in foreign capitals and newspapers. In European and Asian capitals, and in the restive Muslim world in particular, an “imperialistic quest for oil,” as Saddam himself frames it, is taken by many to be the ultimate goal of American policy toward Iraq. Even friendly Arab nations see it so. Al Ahram, the government-controlled newspaper of record in Egypt, led its editorial page recently with a piece by Palestinian-American Professor Edward Said, who wrote:

“Second to Saudi Arabia, Iraq has the largest oil reserves on earth, and the roughly 1.1 trillion dollars worth of oil — much of it already committed by Saddam to Russia, France and a few other countries … is a crucial aim of U.S. strategy.”

…

No reputable analyst denies the windfall that might result for Western energy firms and the economies they power from an extended American occupation of Iraq. While Iraq’s political landscape is complex and potentially explosive, many see a post-Saddam Iraq as an opportunity to ensure that Iraq’s vast potential as an oil supplier, long retarded by Saddam’s aggression and U.N. sanctions, can be used to stabilize or even lower world oil prices for decades to come.

“It is not necessarily easy, but the scenario exists whereby Britain and the United States, by handling Iraq’s oil resources a certain way, could carve out the ultimate ‘strategic petroleum reserve,’ ” says Dr. F.J. Chalabi, a former Iraqi deputy oil minister who left in 1976 and now runs an energy consulting firm in London. “It is certainly feasible.”

Such speculation about long-term American motives is bolstered by the deep ties between senior Bush administration officials, including the president and vice president, and the energy industry.

Among the facts that raise eyebrows:

The president, vice president and national security adviser all claim a stunning pedigree. Bush is a former director of Harken Energy Corp.; Cheney served as chief executive officer of Halliburton Energy Services Corp.; and National Security Council Director Condoleezza Rice served on the board of directors of Chevron, which later named a super-tanker after her.

Financial disclosure forms reviewed by the Center for Public Integrity, a non-partisan watchdog group, report that the top 100 officials in the Bush administration have the majority of their personal investments, almost $150 million, in the traditional energy and natural resource sectors. For instance, Rice holds $225,000 worth of Chevron stock in a blind trust.

Cheney’s commission on energy policy, which submitted a report last year recommending that the United States “conduct an immediate policy review toward Iraq” that includes “military … assessments.”

Added to all this is a key geo-political fact of the post 9/11 world: America’s deep displeasure with Saudi Arabia, currently America’s largest oil supplier in the Middle East and the nation that, by and large, controls the world’s oil markets through its own enormous reserves and its lock on the internal politics of the oil cartel, OPEC — the Organization of Petroleum Exporting Countries.

Oh wait–someone did. That long quote is from the MSNBC article Oil after Saddam: All bets are in, published November 7, 2002, just over 4 months before the war started. Follow the link for even more detail, and see this page for links to all 5 articles in the series.

So, which is it? Did the US go to war to enrich the oil companies? Or did we do it because Bush and Cheney saw peak oil and the growing oil appetites of China and India looming far too soon for a comfortable transition away from oil, and took the only steps they could see to ensure a supply of oil to the US? (And let me remind everyone yet again of Matt Simmons’ exchange with Bush, in which Simmons asked him what he thought of his (Simmons’) writings and speeches about peak oil, and Bush told him to keep doing it.) Who said there has to be only one reason? Why isn’t it possible that Bush and Cheney saw a “need” to do the unthinkable to Save The Country, and if it meant vast profits for their friends in the oil business, well, that was just a bonus?

And couldn’t this be what Bush is referring to when he talks about being judged kindly by history? Could he really be saying, “Once peak oil has the world by the short hairs, Americans will be thankful I started this war and kept the Chinese from monopolizing Iraq’s oil”?

It’s all too plausible, even for someone like me who deeply believed that the country he loves and has lived his entire life in could never do such a thing. Where are those WMD’s, anyway?[1] Where are the infamous unmanned drones that US Senators were told could reach the US to deliver WMD’s? Why should we think that a country that had no role in the War on Terrorism in 2003 had to be invaded and all but destroyed? As the official reasons for this invasion dissolve, one by one, we’re left with the following inescapable facts:

• The US went to war over oil in this region in 1991. Surely you don’t think the First Gulf War was over fig exports, right?
• The US started a war in 2003 with Iraq, a country that was no threat to us.
• The costs of the war will be many, many thousands of lives lost or irreparably harmed, plus trillions of dollars in the long run, once the US rebuilds its worn-down military and takes care of its wounded for the rest of their lives.
• The US shows no signs of leaving Iraq, regardless of how the November elections turn out. (Who here thinks that we’ll completely withdraw our military forces and leave civilian oil workers in the middle of that mess we’ve created?)
• Western oil companies are about to strike a no-bid, and likely extremely profitable, contract to extract Iraqi oil.
• If peak oil is coming very soon, it could make a huge difference in the US’ outlook to have access, even at very high market prices, to Iraq’s oil and natural gas.[2]

At some point, no matter how frightening or abhorrent or shameful or unthinkable reality is, whether it’s the imminent dangers of peak oil, global warming, and ocean acidification, or our own dawning awareness of the awful reasons for military action, we have to recognize that reality is utterly indifferent to our desires and preconceived notions.

[1] And lest anyone try to tell me the blame for the mysteriously missing WMD’s belongs to the US intelligence agencies, I respectfully suggest you do your homework first. As a start, try Googling “seymour hersh stovepiping” and see how the US intelligence apparatus was misused.

[2] Do not think, even for a second, that I’m in any way suggesting that this was the only course of action open to the US or that it was anywhere near being the best option.

I didn’t want this to be lost in the comments on my prior post about the Bush/McCain ANWR/OCS drilling nonsense, so I’m posting it as a standalone item.

Joe Romm pointed out over on Climate Progress that even drilling the heck out of the outer continental shelf won’t make any significant difference. In EIA bombshell: Offshore drilling “would not have a significant impact on domestic crude oil and natural gas production or prices before 2030″ he says:

The U.S. Energy Information Administration (EIA) recently did a detailed study of the likely outcome of offshore drilling for their Annual Energy Outlook 2007, “Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf (OCS).” The sobering conclusion:

The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.

And the impact of the projected 7% (!) increase in lower-48 oil production that might result in 2030 thanks to opening the OCS is… wait for it…

…any impact on average wellhead prices is expected to be insignificant.

The picture for natural gas is no brighter, as the EIA page linked above says: “Similarly, lower 48 natural gas production is not projected to increase substantially by 2030 as a result of increased access to the OCS.”

If you want foolproof carbon capture and sequestration that doesn’t require any technological breakthroughs or the construction of miles-long pipelines, etc., try this: Leave as much of the fossil fuels in the ground as possible.

OK, now that Bush and McCain are making an issue out of opening up currently off-limits area to oil drilling, most notably offshore areas, it’s time for me to address this yet again.

There’s a lot of noise on this issue, and almost all of it ignores the peak oil factor. But first, let me dispense with some of said noise.

The right wingers claim that we should exploit our resources to push down oil prices. If we threw open the offshore areas to oil exploration and exploitation, it would take years, probably 6 or 7 at a bare minimum and likely longer, for any of that oil to reach the market. Not for it to reach the maximum flow, but for the first trickle of black gold to be turned into a usable commercial product. And even then the amount of oil reaching the market will likely result in a minor reduction of oil prices. That’s compared to what they would be years from now without this additional drilling, not compared to current prices; even with this new drilling we could still see prices well above $130/barrel by then, especially if we’re on track for a near-term peak in 2011/2012. So any notion that this oil will return us to cheap prices is ridiculous, although it could be the difference between painfully high and catastrophically high oil prices.

The lefties claim that there will be damage to environmentally sensitive areas. This is no doubt true, in a purely probabilistic sense–there will be at least some damage in some areas–but no one can be sure how bad it will be. They’re also claiming that the oil companies have huge areas of federal lands and offshore areas open to drilling that aren’t being exploited. While I suspect that this is literally true, I’d also guess that at least some of that area is being assessed and explored, but not actually drilled right now, and some has been assessed and determined to be not worth drilling.

So where does this leave us, and what should the US do?

The short answer is that we are once again facing the challenge of cutting through the interminable political noise to find the underlying signal.

The longer answer is bit complicated.

The longer we leave that oil in the ground, the better, as it means less CO2 in the air and more of an incentive (yes, via higher prices and economic pain) to transition away from oil. It also means more oil we can tap if things get truly desperate post peak. But wait, if it takes at least 6 years to develop these oil reserves, then shouldn’t we be starting the process now, when some people (like me) claim that the peak is only 3 or 4 years away? No, because we’re not going to hit a brick wall the day after peak oil is reached. We’ve been on a production plateau for several years already, and higher prices are providing a significant incentive to use less oil in national economies around the world. But to be blunt, we haven’t been truly tested yet by higher prices, and we still have a hell of a lot of low-hanging conservation fruit waiting to be plucked. (For one take from a mainstream economist on how high oil prices could go in the short run, see $7 US gasoline in four years.)

My long-standing prediction is that we will surely drill for that oil (and natural gas), as well as reserves just about anywhere on the planet we can find and extract them. I don’t see a politically viable path for the US and the world to transition away from oil (and natural gas) consumption quickly enough to avert vastly higher prices and economic pain. The demands from consumers for policymakers to “do something” will overwhelm everything, including the widely recognized, desperate need to reduce CO2 emissions.

As the dual problems of global warming and peak oil become so pressing that even US politicians can no longer ignore them, they, and all Americans, will face a daunting series of public policy questions. In one way or another, all the questions raised by the need to rein in CO2 emissions and accelerate our transition away from oil as a primary energy source share one thing in common: An implicit decision about the “proper” roles of government and free markets in achieving these goals. It’s quickly becoming clear that the first of these painfully difficult decision points is already upon us, namely: What can and should the US government do about the imploding airline sector?

This is the question posed by the report “Oil Prices and the Looming U.S. Aviation
Industry Catastrophe: A Hole In The Transport Grid”[8-page, 94KB PDF], written by the Business Travel Coalition and AirlineForecasts, LLC. The report paints an stark picture, by any measure, as summarized in the press release (emphasis added):

At current oil prices, several large and small U.S. airlines will default on their obligations to creditors beginning at the end of 2008 and early 2009, according to a study issued today by AirlineForecasts, LLC and the Business Travel Coalition. The study shows that $130/barrel oil prices will increase yearly airline costs by $30 billion, while airlines will be able to generate only $4 billion in fare increases and incremental fees. The implication of this alarming trend is that several large and small airlines will ultimately end up in bankruptcy, and of those, some will be forced to liquidate.

…

“If oil prices stay anywhere near $130/barrel, all major legacy airlines will be in default on various debt covenants by the end of 2008 or early 2009,” the study conducted by AirlineForecasts for BTC states. “U.S. commercial aviation is in full blown crisis and heading toward a catastrophe.”

“Airlines are the primary source of inter-city transportation, critical to national and local economic development, the flow of human capital, movement of just-in-time parts for manufacturing, perishable food and other goods critical to our economy,” the study says. “With airlines gravely threatened, so is our economic well-being.”

Findings:

* The top 10 U.S. airlines will spend almost $25 billion in higher fuel costs this year over last year when jet fuel averaged $2.11 per gallon. Fuel hedge benefits could offset $5 to $6 billion of the increased fuel costs.

…

* Industry fares will have to increase at least 20% - across the board and on average - just to cover the dramatic gap-up in fuel costs from 2007. This is not possible given the level of uneconomic seat capacity in the system today.

* The upshot of higher fares is less traffic, and given a reasonable estimate of price elasticity, the industry will eventually be forced to shrink its seat capacity by 15% to 20%. However, there is no guarantee that a transition to a smaller, more expensive (for the consumer) airline industry would be successful and sustainable.

* Airlines have the ability to raise some cash, and moreover, suppliers such as aircraft manufacturers, leasing companies and travel management companies will have an incentive to support large airlines that provide a stream of value. Nevertheless, without a swift reduction in the price of fuel, the industry is headed toward a massive failure that will result in more bankruptcies, including liquidations.

“The U.S. airlines, and those who depend on them, are watching with growing alarm as their cash reserves fall precipitously toward zero as the price of oil, already at unsustainable levels, continuously spikes into uncharted territory,” the study says. “These airlines have never faced a darker future.”

“Brand name legacy carriers that we and American communities from coast to coast have depended upon for decades to provide us with affordable, frequent air service are running out of cash, and therefore, toward a date with bankruptcy and liquidation,” the report warns.

“Airlines can attempt to radically shrink the industry,” the study states. “But given the competitive situation they face, it’s highly unlikely that they will have the ability to reduce capacity to levels that will allow all of them to survive. Instead, absent direct policy intervention, the likelihood is several airlines will fail.”

“Stabilizing this ailing industry must become a national policy priority,” the report states. “Many Members of Congress, federal regulatory officials, state legislators and Governors have yet to fully appreciate the devastating impact an oil-crippled airline industry will wreak on our culture and our national and local economies.”

The report itself says (pages seven and eight):

To fully grasp the gravity of the current situation, it’s useful to reference some historic context. During the airline industry cyclical downturn in the early 1990s, the industry lost a cumulative $12 billion between the fourth quarter of 1990 and the first quarter of 1993. What followed were 6 years of profits
sufficient for airlines to repair damaged balance sheets. (US Airways even repurchased $2 billion of its stock.)

The most recent downturn in 2000 lasted until 2006 and reported net losses were over $44 billion. The industry only had one year of profitability, in 2007, at less than $4 billion, to begin the balance sheet repair work before it was plunged into deep losses again in 2008. Importantly, during this most recent downturn, significant costs were taken out of the industry, and for many airlines, virtually all assets were mortgaged. Most airlines have little flexibility now as they face both a slowing economy and record-setting jet fuel prices.

…

A catastrophic result for U.S. airlines can be averted if policymakers, particularly in the White House and Congress, step up purposefully to address this monumental challenge. There is still time to make a difference. This is important not only for airlines and their passengers, but also for every business that uses oil products.

In the weeks ahead, BTC will work with its allies to bring forward to Congress and the Administration some specific proposals that will help address the near and long-term implications of the aviation fuel crisis.

We urgently need a new energy policy that will give the airlines a fighting chance to survive and recover — and serve all members of the traveling public for many years to come.

Even if you want to apply a fudge factor to these claims–it’s a business sector claiming times are tough and asking for government help, not a condition that historically tends to result in understatement–it’s hard not to agree with the conclusions of this paper. We’ve already seen several airlines increasing fees, retiring less fuel efficient airplanes, laying off workers, and even flying slower. As I’ve pointed out in some detail (e.g. Airlines, Apocalypticons, and the rest of us), the essential problem is that airlines have no where to turn; they’re tied to the cost of jet fuel, with no substitutes in sight.

So, if you wake up tomorrow morning and find out you’re the US president (with far more time in office remaining than George Bush) or the Senate Majority Leader or Speaker of the House, say, what policy fixes for this quickly unfolding mess would you propose?[1] I’m not talking about blue sky, magic wand notion that we can talk about on a blog and then blithely ignore, but real world, honest-to-Orville-and-Wilbur solutions that must (1) pass through the legislative process intact, (2) actually address the problem to an acceptable degree, and (3) do so at an acceptable cost to the taxpayer at a time when the US Treasury is geysering red ink and the US has an astronomically high national debt.

The first step, clearly, is to define what “acceptable” in (2) above means. Do you try to save all airlines over a certain size? Or do you determine a minimal size for the overall airline sector and try to save just enough carriers to meet that level of service (meaning coverage and number of flights), regardless of which companies that means saving or throwing to the wolves of the marketplace? My gut feeling is that the latter is the best approach, since our goal is to save the country from the pain of an airline sector collapse, not save individual companies.

Once we have some sort of metric for “acceptable”, then what do we do? I think the only viable approaches are to subsidize tickets or subsidize fuel costs. Subsidizing tickets would quickly turn into a infinite mess, I suspect, as the sheer volume of tickets and the resulting logistics would outstrip the government’s management skills, especially in the short run. If we were to subsidize fuel, however, it would be orders of magnitude simpler to administrate and adjust the program, and we would be directly addressing the problem: Fuel costs.

So, we decide to subsidize all airlines to a set fuel cost. What’s the magic number, and how much does it cost? The above report has a table (page 5) that provides various oil prices and their effects on the airline industry. This table says oil at $130/barrel equates to jet fuel at $3.80/gallon, and $100 oil translates to jet fuel at $3.10/gallon. For the sake of example, assume we’re aiming for the $100/barrel oil, $3.10/gallon fuel price point, although I’m not sure that the airlines would agree that this is enough help.

The US uses about 1.6 million barrels of jet fuel/day, or 67.2 million gallons/day, according to the current TWIP report, and oil is just a bit over $130/barrel. So we’re talking about the government underwriting 70 cents of ever gallon of jet fuel, at a daily cost of about $47 million, which is $17.1 billion/year. Given that the US is spending about $12 billion every month in Iraq, an endeavor which should end sometime within the life of at least some people reading this, this doesn’t seem too bad.

There are some very serious issues here, obviously:

• How long do you subsidize jet fuel? Until oil prices come down on their own? Lots of luck on that front. Until airlines shrink enough that they can survive without subsidies, i.e. the conversion to a boutique industry that serves only the wealthy? That’s what we’re trying to avoid in the first place, so that’s out of the question unless your goal is merely to slow the collapse of the airlines enough to let the rest of the economy adjust and soften the shock.
• Lower fuel prices means you’ll have more people flying than if you hadn’t created the subsidies, so that means more oil diverted to jet fuel and less to gasoline, diesel fuel, and home heating oil, as well as more CO2 emissions that we have to deal with as part of that other growling monster under our bed.
• How do you pay for the subsidies? Do you generate some other revenue stream–windfall profits tax on oil companies, anyone?–or do you simply pile it on the mountain that is our yearly deficit?
• What do you do if the crazy people on the Internet, like, well, me, are right and we hit peak oil in just a few years and oil becomes much more expensive, pushing up the cost of your subsidies? Do you maintain your commitment to subsidize jet fuel at $X/gallon, or is your commitment to subsidize by Y cents per gallon? Even if you stick to the Y cents/gallon formula, how many other, equally dire demands on the government will materialize once we get into the age of truly expensive oil?

I often say that one of the things I’m thankful for on a daily basis when I wake up is that I’m not the president of the US, and this airline situation is a prime example why that observation is less amusing on some days than others. In light of the range of current and developing issues facing the US, all industrialized countries, and essentially the entire human race, I honestly have no idea what I would do about this.

See also:

• Airlines, Apocalypticons, and the rest of us
• Airline Armageddon
• Aviation articles on the TCOE discussion board

[1] I’m assuming that you agree that this is a very big problem that should be addressed if at all possible. If you think it’s either not a problem for the country to have the airline sector implode, or you think we should just let it “sort itself out” as the free marketeers like to say, then consider the rest of this post as an exercise in fantasy.

Global Cooling-Wanna Bet?:

Global cooling appears to be the “flavour of the month”. First, a rather misguided media discussion erupted on whether global warming had stopped, based on the observed temperatures of the past 8 years or so (see our post). Now, an entirely new discussion is capturing the imagination, based on a group of scientists from Germany predicting a pause in global warming last week in the journal Nature (Keenlyside et al. 2008).

Specifically, they make two forecasts for global temperature, as discussed in the last paragraphs of their paper and shown in their Figure 4 (see below). The first forecast concerns the time interval 2000-2010, while the second concerns the interval 2005-2015 (*). For these two 10-year averages, the authors make the following prediction:

“… the initialised prediction indicates a slight cooling relative to 1994-2004 conditions”

…

We think not – and we are prepared to bet serious money on this. We have double-checked with the authors: they say they really mean this as a serious forecast, not just as a methodological experiment. If the authors of the paper really believe that their forecast has a greater than 50% chance of being correct, then they should accept our offer of a bet; it should be easy money for them. If they do not accept our bet, then we must question how much faith they really have in their own forecast.

The bet we propose is very simple and concerns the specific global prediction in their Nature article. If the average temperature 2000-2010 (their first forecast) really turns out to be lower or equal to the average temperature 1994-2004 (*), we will pay them € 2500. If it turns out to be warmer, they pay us € 2500. This bet will be decided by the end of 2010. We offer the same for their second forecast: If 2005-2015 (*) turns out to be colder or equal compared to 1994-2004 (*), we will pay them € 2500 – if it turns out to be warmer, they pay us the same. The basis for the temperature comparison will be the HadCRUT3 global mean surface temperature data set used by the authors in their paper.

Here we go again–another one of these public bets among energy or environmental science geeks.

Seriously, am I the only one who’s becomes very tired of these?