He starts by addressing the economics of the issue, talking about supply vs. demand and the Peak Oil phenomenon. All right on the mark.
I know environmentalists have been going on about peak oil since the 70′s, but it is bound to happen sooner or later. Note that doesn’t mean we’ll wake up one day to find the wells all dry. Just that we’ve drilled the most convenient wells first, and the price of oil will go up as the petroleum industry has to move on to lower grade wells, in less convenient places (ahem, Gulf of Mexico, ahem), at greater cost.He wrote this fairly early into what is now the Deepwater Horizon Saga but you can see what he's getting at. In fact, I would argue that unless government regulations about where and how we drill for oil change, especially in very deep waters we're going to have more Deepwater Horizons in our future and it's because we've already hit peak oil and are beginning to feel it. The Deepwater Horizon well is in 5000 feet of water. That's a mile under the surface of the ocean essentially. Do you think it was cheap for BP to drill that well? And do you think if there were easier wells for them to drill they'd drill them? Yeah. We've already tapped the easy stuff. Now it's just a question of watching as quality goes down and price goes up. We've already had a little taste when gas was $4 a gallon in the summer of 2008 and a simple google search of the terms "$4 a gallon gas" produce a number of predictions that we'll see it again before the summer is gone. In milder terms, we've already mentally adjusted to a shift. I paid $3.13/gallon yesterday on the West Coast and I know that $2.50 is pretty normal in places where the prices trend lower than the national average. I can remember when gas was $0.99/gallon as a kid and how everyone started freaking out when it was suddenly $1.05. Welcome to the soft slide into the long fall that is peak oil.
Anyway, back to the biofuels. Simple high school economics explains why, as gas gets more expensive and it's quality goes down, alternatives that we now consider a tad too expensive will increase their market share. In fact, they already are in a tangential sort of way with the popularity of the Toyota Prius and new entries into America's fleet of vehicles coming soon like the Nissan Leaf and the Chevy Volt (just priced at $41,000!) A number of different competitors exist including biodiesel, wind, solar, hell even nuclear is on the table. Suddenly that giant pile of radioactive goo left over doesn't look so bad.
Moreover, many of those technologies are expensive for ‘fixable’ reasons–there’s room for more R&D to make them cheaper or more efficient, they haven’t had the chance to get good economies-of-scale going (look at the price on electric cars). Oil and coal companies have benefited disproportionately from having the living shit subsidized out of them, but that could change. Not that I expect the US will stop kissing oil company ass any time soon, but if Monsanto or the Iowa Corn Growers Association decide they want to be move into the energy market, they may get the way paved for them.Yet another way to use the insane amount of corn grown in the midwest under federal subsidy. But farm subsidy reform and the food system are topics for another post.
He goes on to say, as I covered earlier up top, that the bust comes in if the economy does the same thing with new fuel sources that it did with the internet in the late 1990s. There IS an uncertainty about which of these new technologies will be what drives human power and innovation into the future. I'll grant that. I will however step aside for one moment and try and highlight one major difference between this and the .com bubble. While starting up an internet company requires capital it isn't physical in the way creating a company that builds thin-film solar cells or blades for an off-shore wind turbine are. I think that the physicality and the financial demands that are required to get in my be a hurdle that will help screen out all the "comp-sci dropouts with witty webaddresses", or at least a good number of them. Are their going to be businesses that fail as this industry emerges into its own, sure. But I'd like to think (and maybe I'm naive) that we'll figure this one out, if for no other reason than because we have to.
The real trick is that we an opportunity to set up a whole new industry here. Will we do it right, or will Bill Gates and Steve Jobs (metaphorically speaking) run the whole industry? We can just look at our government and see what happens when industry condenses to one or two major companies in an industry. You get crappy service and a high bill from AT&T and Verizon, it's all semantics which one you pick. You get screwed by the oil and gas industry no matter where the gas in your tank right now is BP or ExxonMobil. This is an opportunity we can't pass up. We MUST demand that this industry be built sustainably to create energy for us all instead of to create wealth for the very few.
And now we hit the crux of the matter.
...when I talk to non-scientists, including some really smart people about this issue, I hear a lot of variations on ‘Ok, so which one will it be? When the oil runs out, will we switch to ethanol? Will everything be solar powered? Who’s gonna win?’ The answer is, no one technology will replace the oil industry, ever. There’s no magic bullet. If oil and coal go way up in price, if consumers even ever start having to pay the full price of the mess they make, we’re not just going to swap one energy source for another and go on like nothing happened.
We need to get ready. Our lives are going to change whether we like it or not. If we don't prepare for it it just means that when they do, it'll be that much uglier. It means changing where and how we live, what sort of density we think is appropriate (hint: think Europe or China, not rural Idaho or suburban California), what, how, and how often we use our vehicles, where and how we buy our food, and what we do to make a living. The era of cheap, easy energy is over. We've used up what's on our planet. Now we get to figure it out.
Wow, I can see my house from here!
ReplyDeleteNo seriously, I am really flattered that you liked that post so much. And I think you've got a good point about the difference in assets between renewable energy startups and failed dot-commers--the now-defunct engineering startup I worked for left behind a small machine shop full of tools, and a good deal of industrial equipment that went back to the Ebay from whence it came. Most of the (probably hyperbolic) accounts I've seen of dot-com bankruptcies suggest those startups had a lot fewer tangible assets: some computers, some high-end office furniture, and the lease on a trendy space. Those that went under often spent a crap ton of money on executive pay, and trying to impress investors. (by contrast, from what little I know, most manufacturing start-ups have to buy their building, because setting up a factory is too big a hassle to risk a landlord deciding not to renew the lease)
The other big difference may be source of funding. The big oil companies have some research in-house, and there are a couple Very Rich People investing in biofuel start-ups as a combination philanthropy/slim chance to make a fucking shit ton of money strategy. But judging only from the little I've seen, (which is biased toward academic research) a huge portion of R&D money right now is coming from government grants. You still get the dynamic where they'll get a lot of failures for every success, but there's some serious oversight, and the government doesn't just cut a check to whoever has the best powerpoint pitch--they're far too cumbersome to make the kind of rapid-fire bad decisions that lead to bubbles. That'll only come once Wall Street decides its time to get on board.
Oh, and PS: I think I'm making this my new blogonym, since 1) it's a teeny bit more anonymous, and 2) no one else seems to be using it.