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Sunday, 21 October 2007

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Is that all?

Here in the UK, at current exchange rates and using an average selling price, we're currently paying $7.60 per US gallon. I frequently pay £60 (That's over $120) to fill up - but then, I do drive a big ol' American car.

Mike, I'll say something nasty, but keep in mind that I see international politics pretty much as planetary gravity forces, highly independant of the desires of the ones involved. A lot of people outside your country will suffer a lot more for your need for cheap oil than you will. Unless, as you seem to be asking for, a huge technological and mental reconversion takes place.
What your country does matters to a lot more people than just US citizens, and that's just a fact.
But I have a pessimistic feeling about all this, I really don't think any country can really change it's citizen's demands for wellbeing. That's the big issue, in this particular example demanding cheaper fuel will press your government to take specific measures. And no matter what everybody says about what should be done, the silent pressure every citizen applies by demanding what they consider basic needs to remain accessible is what sets the direction of politics.

Well, as you say in your text, for us European people, thinking of petrol prices and comparing with prices in USA simply make us go wild.
Petrol is going about $6.00 per gallon (≈1.2 €/litre) and we are trying for a long time to avoid spending so much on it.
To me, it makes all the sense listening someone from that side of the Atlantic sea writing something as you just did.
Unfortunately your opinion seems to be far from being the common sense over there. Even you, being conscious of what will be the future petrol cost, seem to be waiting until petrol cost becomes so high that insulation cost will have economic return.
For most of us, on this side of the sea, it’s not the return of investment it is simply the need to preserve natural resources that is leading us to use better isolation, smaller and more efficient motors, smaller cars and so on.
I would like to see the same happening in all developed countries around the world.

I am enraged! Hooo is this Michael Johnston feller to tell me to stay home and watch a baseball game? My wife would kill me if I turned the football game off!

Then the sermon has a sentence that I believe to be a damned lie..."Summer before last, I paid $30 for a tank of petrol for the first time in my 50 years". Certain am I that any sharp-eyed reader that has been half awake will catch the false statement.
(hint: how many months has it been since his 50th birthday?..this is only for those of you that are totally asleep.) Watch as you see some squirming editorial crap that says that since he was already 50 when he wrote this heresy it was not false doctrine.

I stopped reading right there an I am considering writing a letter to the editor.

Very good, Mike. Much like reading a column by Thomas Friedman in the NY Times. More people need to be saying what you are saying, especially our politicians in Washington. And when will we get to buy the fuel savings cars that populate European highways? Even our smaller sized SUVs deliver gas mileage that is no better than my 2001 Vovlvo V70 with its high pressure turbo charged 240hp engine, and my 2000 Volvo C70 on a 2400 trip last month (to Wisconsin) used gas at the rate of 30.5 mpg. New cars should be doing much better. Corn based E85 is not the real answer, only a political response. We must ignore our VP and conserve, which we did after the oil embargo of the 70s. Every little step in conservation will add up in nation of our size.

Micheal:

While I don't disagree with your premise, you need to watch your supporting material. A gas price of US$3.09 a gallon actually isn't the highest gas has been in the US, adjusted for inflation. Indeed, US$90 a barrel isn't the highest we've been charged by Saudi Arabia (or whoever the barrel came from this week) for gas, adjusted for inflation.

Gas went ballistic in price the first time due to the US reaching what's called "peak" (the point where you've taken half of what you can out of the ground). That's because we could no longer boost production to control prices and were then at the whim of a foreign producer. Since that first oil crisis, Saudi Arabia has had the ability to control price by production releases, and has generally done so. But they've either reached peak or are slightly past, and will (have) lost that ability to control prices soon.

But the basic point is correct. First, oil won't be as cheap in the future (and the $9 a gallon price is going to come sooner than you think), and once its price does go higher it's going to push demand into other areas (the one we all worry about is coal, of which the US has far more than it needs for the foreseeable future). If oil goes up enough, it becomes cheaper to heat your house via other methods, like electric generated by wind, coal, nuclear, whatever. So what happens is that you have one of those disruption points (like film->digital to bring it back to point ;~).

FWIW, the Silicon Valley VC community has already made the switch. They ARE anticipating $9 gallon oil, and their bet is that this makes us switch away from oil.

I have had the same thoughts. Everyone has stories from the grandparents about how cheap things were when they were a kid. You never here a story from someone older than you that states "Gee, kid, back in my day we paid more for that than you do." Prices go up, very rarely do they come down. A young person buying a home today should ask him/herself if they could afford the house in 20 years. If only there was a way to get consumers to ask for more insulation, solar power, efficient light bulbs and other green items.

OK Mike I did the maths (yes I know you call it math).
Here in the UK where we now buy our petrol (gas) in Litres (Liters), and anyway our Imperial Gallon was a different size to your US Gallon, the current price equates to $7.78 per gallon.... so we are not so far off your predictions already.

Cheers, Robin

Well spoken.

Thoughts like this make me consider rather or not I really should replace my 95 miata with a new one. It's prettier, it's newer, but it gets about the same gas mileage. I'll probably go with the 2009 0r 2010 Prius when it gets a remodel.

I just moved downtown (Indianapolis) and have managed to save an estimated $20 a week on gas thanks to the proximity of groceries, work, and entertainment. But now my rent is $900 a month instead of $600.

My entire extended family insists on living in the suburbs, it's a 20minute drive for me to visit any of them, once we're there, if we want to go do anything it's another 20 minute drive to the nearest entertainment or decent restaurant. The whole structure is ridiculous. They all have retention ponds, thank god for that...

I think part of the problem is the US was built to take advantage of vast spaces and excess. When you're dealing with a finite resource controlling the traversing of all those vast spaces... you're in trouble.

My house is vintage 1927 with 1050 feet on two levels, and costs about the same to heat as yours, Mike. My only consolation is that in a few years we'll be subtropical and I won't have to worry about heat. C'mon global warming!!

Mike, here's a little advice for heating your house in the cold months.

Heat the basement.

Let the warm basement air rise up through the rest of the house.

You will discover that your feet are warmer. And when your tootsies are warm, the rest of you feels more comfy.

You also might find this is surprisingly economical.

The natural below-grade temperature in our part of the world (I live in Michigan) is about 55 degrees F. Bringing the basement temp up top a balmy 70 degrees means raising the temp only 15 degrees above ambient.

Compare this to upstairs, where the outside ambient is, let's say, 20 degrees F during much of winter. Heating the house to 70 degrees then means overcoming a deficit of 50 deghrees F. That will take a lot of BTUs. And money.

I learned this trick 30 years ago, when we moved into our new house (new to us). The house is a single-story ranch style, with basement (like yours). The previous owner had set up the basement as a separate heating zone with its own thermostat. In the interest of economy, during the first winter we turned the basement stat down as far as it would go.

The result was cold feet and general discomfort upstairs.

Next winter we started heating the basement because I had set up a darkroom there.

Surprise! Upstairs stayed warmer, we were a lot more comfortable generally, and the heating (gas) bills were the same or lower. We've heated the basement ever since -- keeping the thermostat steady at that 70 F, while raising the upstairs stats to about 68 during the day and lowering them to about 60 at night.

I don't know what to do about $9 a gallon gasoline. Some of the adjustments will be obvious. But I suspect other effective ways of adapting to that situation will be subtle. It will pay to maintain an open mind, and to think very carefully about what we actually are doing in efforts to economize on fuel consumption.

DB

It may be a shock, but the USA will learn to adjust the same way the rest of the world did. There isn't likely to be a choice in the long run anyway.

As you mentioned gas and diesel already costs the equivalent of $10 a gallon here in the UK now. So people are switching to smaller diesel cars, they cost a bit more but are a lot more economical (and faster suprisingly). I just bought one myself that does 55mpg average, thats good but nothing special by Europe standards. The same way though my house was built in 1801 its double glazed and stuffed with insulation. Most other older houses are too, and it need not be obvious or intrusive. There are plenty of options to compensate for high price energy, just that unfotunately most of them are damn near as expensive!

Thanks for an excellent "sermon" reminding us that gas price is indeed "low" (and even ridiculously low, as far as North America is concerned).

It will likely stay that way as long as gas prices only reflect costs of extraction and distribution, and not, in actual fact, "production" of the stuff, let alone environmental cleanup after extraction.

Another excellent point wrt the appalling state of housing insulation in North America. A well designed house should need essentially no energy to heat up above 0 Celsius, but it is unfortunately cheaper to build crap that wastes energy.

FWIW, According to the Department of Energy [1], gasoline cost 31 cents per gallon in 1957. According to the Federal Reserve [2], 31 1957 cents in 2007 dollars would be $2.28, based on the change in the Consumer Price Index since that time. Again according to DOE [3], while gas prices have spiked over $3, the average price over the past year has been closer to $2.75 or so. This, then, would represent about a 20% real increase in gasoline prices over the past fifty years. I expect that home heating fuel has had a similar history. One more DOE chart [4] shows that heating fuel prices were almost completely flat through the entirety of the 1990s, whereas the Fed's CPI calculator shows that other prices went up by about 26% during the same time period. So I think our problem with the increasing fuel prices has been more a result of them changing rapidly and out of sync with the changes in other consumer prices than any real, order-of-magnitude change in prices over a baby boomer's lifetime. And, I'm thinking that the owners of your leaky house in the late 1950s probably hated paying their heating bill every bit as much as you do.

Nevertheless, I do not disagree with your caution that we should prepare for ever higher prices for fossil fuels. As the data I've linked to show, we are seeing real price increases, especially in the last few years, and given global realities, we should expect more. As a neighbor of mine said, we will never run out of gasoline, because the last gallon will be so expensive that no one will be able to afford to use it.

I will also say that I agree (if I understand you correctly) that rising prices for fossil fuels is a good thing, because the higher they go, the more attractive the alternatives start to look. Not, of course, that there are no problems with any of the alternatives. Corn-based ethanol is leading to higher food prices and greater problems with nutrient-rich runoff. Wind farms can kill birds. Hydrogen fuel cells are an energy storage technology, not an alternative fuel (you need energy to produce the hydrogen). Solar and Nuclear also have their downsides.

In the short term, yes, fuel prices are going up. In the medium term, we'll probably see ever more use of alternative sources and things like electric cars that are charged off the grid. In the long term, our ever-growing energy addiction -- to the extent that we can't break it -- will probably be the thing that does us in as a society and possibly even as a species.

[1] http://www1.eere.energy.gov/vehiclesandfuels/facts/2006_fcvt_fotw426.html
[2] http://www.minneapolisfed.org/research/data/us/calc/
[3] http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html
[4] http://www.eia.doe.gov/neic/brochure/heatingoil2006/index.html

Mike:
Back in 2002, the Sierra Club published a brief article on the "real" cost of gas (a portion of which is still online at http://sierraclub.org/sierra/200203/lol4.asp). While the figures are certainly outdated, and the methodology should be subject to further scrutiny, it does attempt to calculate the true costs of gasoline, which includes the cost of maintaining a military presence in the Middle East.
Paul

In 1980 or so, I was working as a newspaper columnist and wrote several columns like yours, because gas was pushing $2 a gallon, and I was alarmed. I was taken aside by a business guy who told me I was over-alarmed.

Oil, it seems, costs well under $10 a barrel to pump out of the ground and deliver to North America. Everything else, essentially, is tax imposed by OPEC, on behalf of its members, and profit for the oil companies. The business guy told me that OPEC didn't want to put themselves out of business (or encourage "green" fuels, or alternative fuels); they simply wanted to squeeze as much money out of the oil as they could, without pushing its customers to find other sources. So, he said, gas prices would stabilize. I thought he was nuts. He was right, I was wrong. The last thing OPEC wants is for Mike to buy a wood-burning stove; what they really want is for him to pay every last nickel he can afford for oil; and if he goes broke, well, tough shit.

As the governor of Montana has pointed out a number of times, the US has some of the largest coal reserves on earth -- and coal can be turned into oil, through a well-documented and widely known process (which currently provides South Africa with all of its oil) at about $50 a barrel. Then why aren't we doing it? Because the plant infrastructure would cost billions, and OPEC could, at any time, lower the price of oil to $45 a barrel and make that investment worthless. So, we're not doing it.

All of this could be obviated if the US had any kind of rational oil policy. But it doesn't, because Congress is so thoroughly corrupt, and so deeply in the pockets of various special interests, that nothing will be done until there's a crisis and perhaps even a depression. $3 oil isn't a crisis.

The Europeans who are distressed at the costs of their petrol should perhaps check to see what portion of that is tax -- and local tax at that, designed to drive them (for good reason) into smaller, more efficient cars.

If the US wanted a rational oil policy, which would stabilize prices, it could create a crash program to build coal-to-oil refineries; encourage more efficent production of ethanol; push for safe nuclear (IIRC, about a third of all petroleum use in the US is for electrical generation); and limit by law or tax the size of car engines (this could be done in several different ways.)

I saw a perfectly nice Audi driving along the highway today that had a 2.0 on the trunk hood, which I assume meant that it had a 2 liter engine -- and it was making a nice 70 mph with four people inside. It makes a five liter engine in a passenger car look ridiculous.

I personally like large fast cars; but my last trade took me from a 4.7 liter engine to a Japanese hybrid, because I thought 14 mpg, even though I can afford it, has become somewhat immoral, given what CO2 is doing to the planet.

With all of that, the current price of gasoline doesn't have so much to do with scarcity as it does with pricing power.

JC

If you look at a chart spanning say 5,000 years before today to 5,000 years after today, you will be surprised to see what an anomaly our dependence on fossil fuels really is. You get a peak starting about 150 years ago, and spanning maybe then the next 150 years. Fossil fuel as energy will have any significance for maybe 300 years in a 6000 year span of humanity's history. Before and after it was or will be something else.

Fossil fuel prices will continue to increase, and it is up to the individual to take self-protective steps to reduce the impact of this accelerating cost increase.

If you want to think long term and save money, look in terms of 5 year paybacks. If you take TODAY's energy prices, and calculate the cost savings over a period of 5 years by investing the money now, if you start saving money in year six it is well worth the investment. So for example, if you spend $1000 adding new insulation to the attic, but it will save you $1200 in fuel costs by year six, you will not only have recovered your investment but start 'making' money. Same thing for major appliances... a very efficient refrigerator may cost an extra $300, but it will save $500 by year five, so you are $200 ahead.

I have no sympathy for people that cry about high energy costs, while keeping their house heated to 75 degrees, and driving their Ford Expedition 2 miles to a Starbucks for a simple cup of coffee. People are free to spend their money any way they want to, but please shutup if you are doing nothing to keep your energy costs as low as they can be, all along moaning about high energy prices. Oh, and by the way... have you considered wearing a sweater if you are just a little cold?

Try watching a doco called "Crude" by the Australian Broadcasting Corporation. Here's a précis

"Description
From the food on our tables to the fuel in our cars, crude oil seeps invisibly into almost every part of our modern lives. It is the energy source and raw material that drives transport and the economy. Yet many of us have little idea of the incredible journey it has made to reach our petrol tanks and plastic bags.

Coming in the wake of rising global concerns about the continued supply of oil, and increasingly weird weather patterns, Crude spans 160 million years of the Earth's history to reveal the story of oil; from its birth deep in the dinosaur-inhabited past, to its ascendancy as the indispensable ingredient of modern life.

Filmed on location in 11 countries across five continents, the program's award-winning Australian filmmaker Richard Smith consults the leading international scientific experts to join the dots between geology and economy and provide the big-picture view of oil.

Crude takes a step back from the day to day news to illuminate the Earth's extraordinary carbon cycle and the role of oil in our impending climate crisis. Nearly seven billion people have come to depend on this resource, yet the Oil Age that began less than a century and a half ago, could be over in our lifetimes."

The ISBN / Catalogue Number: R-107468-9

There is also a book of the programme written by Sonia Shah.

Just a small suggestion from a diesel running brit based in Belgium - When modern diesels start to arrive in the US next year, please consider them - they really do make a difference in the short term.

The other little thing is that US states, starting with California, should tax cars based on their emissions or engine size with near exponential increases as size rises linearly like here in Belgium. It shocked me when I visited some friends in the US that they had three cars for two drivers, two of which were 5.0 litres and the other a SUV!

Well, another eager post form France to tell here we're about 7$ per gallon... but here, bridges seem to collapse more seldom - our oil taxes are imho linked to road building and maintenance.

Past that, think of your avantages in the US : how much more healthier you will be, having to bike 10 miles to get your peanut butter, and 40 miles to the restaurant (NB : with the 20 miles back ride, you won't hesitate any more when proposed the foie gras as starter AND Tournedos Rossini as main meal ;o)!
With my grocery at my door, I'll get fat much quicker than you.

And about your houses, well, you may also ending burning more calories in your body, instead of fuel in your furnace.

Here in France, good insulation is now quite normal (check first for double or triple glass or windows, and reduce air leaks, then check the roof insulation, then dedicace a few more square feet to wall insulation).
The big trend with new houses is on the "sustainable heating" side :
- secondary solar water-heating (may be quite usable at 43°N if it's sunny enough), - more efficient furnaces, or wood-burnings ones,
- earth cooling tubes for air conditioning...

And just THINK of the wonderful bike lanes network we'll have when there will be no more cars able to drive on highways ;o)))!

A quick note for those comparing inflation adjusted prices. An increase in fuel prices, always increases inflation. A reliance on fossil fuels means increased inflation over time, and yet when people look back and inflation adjust old fuel prices, it never looks that bad.

That's not to say that fossil fuels didn't fuel a huge increase in economic growth. They did, and with it the increase in spending power. But as peak oil limits are reached, and newer sources requiring more effort to extract become the norm, those fuel prices will soar, and inflation with it, and that spending power will fall rapidly.

You can make a huge difference in your house. Blow in insulation, or use foam. Blown in insualtion isn't as good as foam, but it's a fraction of the cost. Then you can get a thermal infrared scan (far infrared, as opposed to the near-infrared I use for some of my black and white photography) to see what remaining vulnerabilities there are. I bought a tiny 1810 cape in New Hampshire a few years ago and did all this stuff. Because of various quirks of the house, it wasn't as simple as it could have been. I needed to use both blown-in and foam, and the thermal scan showed a weird gap between two sections of the house that was a huge heat loss. If it wasn't so old and so strange it could have been a lot cheaper and easier, but in the end it was less than $2500.

Then I put in a wood stove and some other point-sources of heat, so we can be comfortable in spots where we hang out without using the central heat. Of course over the last centuries wood stoves have been used in here, but when I moved in the chimneys were shot and there was only a furnace. Modern wood stoves are more efficient than their counterparts of old. Wood is cheaper than oil in many places, and it's relatively carbon neutral. But more signifigantly, a point source of heat provides greater comfort in that area while allowing one to turn the thermostat off.

Amazingly, even the current federal government is offering tax incentives for insulating. There may be other low-income assistance programs by state. I know my neighboring state, Vermont, has such programs.

This house has been consuming massive amounts of energy for almost 200 years, but no longer. Also we're much more comfortable. One of the good things about human beings is our adaptability. We can change things.

I think the point of your essay is reasonable, except that you can change your 1957 house into a 2007 house, energy-wise. Maybe not really as good as new impeccable construction. But don't just write; do something. You're right about car-road-suburb based America, but as we need to change, it's possible we'll be smart enough to do it. Or maybe not.

Oh dear, I feel a soapbox coming on ...

Its not the price of fuel that worries me, its the way green issues are selectively manipulated by government to suit their own ends. Two examples:

A couple of months ago, a friend wanted to travel from Southampton to Edinburgh with 2 children. Being of a frugal nature, he compared carefully the various methods of getting there. The cheapest? Flying. 2nd was driving and most expensive (by a long way) was rail. Something is wrong with "the system" when the most energy effective means of travel is the most expensive, and the least is the cheapest! (Note: the government collects a hefty airport tax on every flight. There is no tax on rail travel).

Digital radios - currently these are being heavily promoted in the UK, especially by the BBC. Yes, there is an improvement in sound quality (though like CDs and records, its not that clear cut). But what is NEVER mentioned is the difference in energy use - try running a DAB radio on batteries and see how long it lasts. Why isn't there an "energy tax" on digital radios? Perhaps so frequencies can be cleared to be resold at enormous profit to commercial concerns?

Back to the point - the price you pay at the pump has little to do with supply and demand - it is to do with what government and industry think they can get away with. The global warming scenario is a gift - its a way of making tax collection and profit making look virtuous - "its for the good of the planet". If that's the case, why isn't the money raised used to massively subsidise
pubic transport ... why (where I live) is land being sacrificed to widening motorways when the only reason many people drive to work is the lack of a reliable, affordable, rail system?

Cheers,

Colin

Some "interesting" comments on the dynamics of oil markets but I won't get into that.

There are a couple of basic problems with energy use: the producing nations tend to tax at the point of production, reducing the incentive to invest in production. The user nations (esp. US) tend to limit tax at point of consumption, thus encouraging use. Really it all ought to be about face.

The other problem is to do with use of energy. "Dense" sources (nuclear, coal) are most efficient in large-scale use. Gas can be just as efficient in home use as in a power station. however, there is still a push to oil and gas fired power because they are "cleaner".

I see little mention of the basics of energy in any "green" discussion. At the very root hydrocarbon + oxygen is going to be turned into carbon-dioxide + water. the less steps we take to do so, the more efficient overall. Coal to liquids, hydrogen production etc is not (and can never be) more efficient overall than efficient burning of the raw material.

As an individual, if you want to have a real impact on the environment - go into industry (any one but nest be the big, dirty stuff) and work on fuel efficiency of large processes.

An aspect of stretched out suburbs that doesn't get much mention is its relationship to aging populations. When you get old and can't drive anymore either because you don't want to own a car anymore or can't afford to, how are you going to get your groceries when the store is 10 miles away and there are no convenient buses? This was a major consideration for my mother when she was looking for a condo to move to.

When you step back and look at the bigger picture, it beccomes clear to me that what is at the root of all these issues is that the development of our infrastructure was not based on the the needs of the people who use them, but rather for the convenience (easy profit) of the suppliers. Housing developers love flat pasture land; it's really cheap to build neighbourhoods on. In Canada, there are major oil development projects going on in Alberta and Newfoundland. In both places, the oil companies are demanding tax concessions as attractions. Think about that: they want taxpayers have to provide subsidies to OIL COMPANIES or they won't come dig up OUR oil, and there are large numbers of people, in government and out, who fall for this.

We bought the spin, hook, line and sinker.

Well Good Morning Mike!!

I can offer a couple of thoughts. Now that the Midwest is facing a winter of very high heating bills to go with your high gas prices, things will have to evolve. Big oil is enormously profitable as it is. Although there is no conspiracy against alternative energy, there is a lack of desire for change built into the system, from the oil importers all the way down to the distributors and gas stations...and to the consumers who haven't changed their habits.

Electric vehicles, nuclear and wind generation are all economically feasible right NOW! Don't worry. Things will sort themselves out.

Thomas L. Friedman's column in yesterday's Times adds another thing to consider:

http://tinyurl.com/2jlccf

His basic point is no matter what you can do individually to conserve, it's nothing compared to what government can do through taxation, incentives, and energy policy. So it really does matter who is elected in the USA.

I feel very lucky that my wife and I each work less than two miles from our house, and we have the basic suppliers (grocery stores, coffeeshops, small restaurants) within a mile or two. And that's in the American suburbs, so it can be done if one is careful.

Mike:
Your 'sermon' on oil hits on something that nobody wants to talk about except to complain about gas pump prices. I for one am glad you bring the subject up.

It is too damned easy to lay the blame on Big Oil or point at someone else while ignoring the really scary fundamental problems. We really are running out of oil while wasting it at unprecedented rates. Sadly our society and cities are structured in such a way that few can [or would if they could] not drive today.

I could go on and on but the following article does that better than I could. The second page goes into all of the stopgap attempts at solutions. They sound nice and will make some people a lot of money but ultimately aren't going to do much.

http://www.lifeaftertheoilcrash.net/

Scary stuff.

Lest you think I'm some sort of enviroterrorist, I'm not. I can waste oil with the best of them although I do try in my small way to be aware of when and what I'm wasting.

I love your blog and thanks for the oil article.

P

Borrowed my folks Saab SUV this weekend.......$52 for 3/4 tank of gas.....

That will be cheap in 5 years.

viva la bicyclette (single speed or not) ;-)

if you have the time to read a lengthy article, this is a pretty good one (it starts right on the first page and there is a link to the second page at the bottom):

http://www.lifeaftertheoilcrash.net/

Whenever the price of oil and gas gets past a certain point, American conservatives (who ironically are these days typically anti-conservation) start banging the drum for oil drilling in the Arctic National Wildlife Refuge. One thing I have never understood about their reasoning, the effects on wildlife aside, is that if this putative pool of oil is valuable now, it will be even more valuable in the future. So why drill it today when you can leave it in the ground until it is really, really valuable -- say, after the oil in Saudia Arabia runs out? It's like robbing your savings account to support your current lifestyle when you could instead cut back back on spending and leave the money in the bank to accumulate interest for retirement.

I'm cheering from my seat to see this discussion happening on a blog ostensibly about photography. It's a discussion we need to be having a lot more frequently, and in a lot more places. Much has already been said, but for those who'd like to learn more about this I'll recommend a few resources:

Anything written by Richard Heinberg (especially his latest three books), who is in my opinion, the most objective and clear voice out ther on this subject:

http://www.richardheinberg.com/books

I would highly recommend reading Heinberg's "museletters", which are available on his website for free here:

http://www.richardheinberg.com/museletter/archived/2007

The book "Collapse", by Jared Diamond.

"The Long Emergency", by James Howard Kunstler (a bit more provocative, but a fun read)

"Overshoot", by William Catton

And check out these websites:

http://www.postcarbon.org/
http://www.energybulletin.net/
http://www.theoildrum.com/
http://www.transitionculture.org/
http://www.lifeaftertheoilcrash.net/

A number of states including Minnesota (don't know about Wisconsin) do assess conservation charges on electricity and natural gas utility bills and reinvest the money to help consumers upgrade their homes. If you have regulated utilities you can demand that they create resource plans which put efficiency before supply, investing customer money to help customers use less energy.

I'm taking advantage of the Connecticut program to assess my house for leaks, weatherize and get money off of insulation. If your state lacks this type of program, it's worth demanding- efficiency is far cheaper than obtaining additional supply (here between 1/3 and 1/8th the cost!)

As per my above post, this is especially timely and essential reading:

http://www.richardheinberg.com/museletter/185

I'm fortunate in that I live within walking distance of a couple of large shopping areas, so on the weekends I walk as much and drive as little as possible. I do it mainly for exercise, but saving gas and wear on the cars is an incentive as well.

A few comments:

1 - The price of oil/gas is the same all over the world. What the consumer pays in a specific market depends very much on the government taxes added to the real cost of fuel, levied to pay for inefficient/bloated government bureaucracies delivering low quality services (I would not like to be gravely ill in Europe if my coverage was the nationalized health services). Assuming a $9/gallon in the US is driven by higher taxes, that would be bad policy. The US economy would suffer AND the world economy would suffer, perhaps even more, as a result of the decline of the US economy. BTW... fuel taxes in Europe have not increased the European standard of living as far as I have observed.

2 - Should the raw oil price continue to increase, for market reasons, there will be fuel substitutes. The gas sold in the US already has as a minimum of 10% alcohol content and that is rising. New, far more efficient production sources of ethanol are in the works, and if anything the cost of gas will go down and for good reason - market reasons.

3 - The sky is not falling and the planet's energy future is bright. And it will be the US, as usual, which will lead the transformation. Unfortunately, the rest of the world bitches about it, does nothing, and legislates by lowering the standard of living for the vast majority of their citizens. Simply pathetic.

OK, I've got one word for all you people's comments......are you listening? Good! Atomic Cars. No, really, atomic cars. Think about it, Russia not only has tons of old LTM cameras but since reducing their nuclear stockpile of bombs they have an excess of plutonium. Now all we gotta do is have Halliburton buddy up to Vlad boy and make a deal. Oh I can see it now, pull out the rods and let her rip. Well maybe some sort of limit device, you know, like the speed governor on a regular engine. But I'll bet you would have to load the core on that baby only once every 3 to 5 years. The waste might be a bit tricky but what hey, I can't even dump my old oil down the sewer anymore so how much worse could it be.

"The price of oil/gas is the same all over the world. What the consumer pays in a specific market depends very much on the government taxes added to the real cost of fuel, levied to pay for inefficient/bloated government bureaucracies delivering low quality services "

This is not necessarily true. Crude oil may be priced globally, but there are significant local differences in natural gas prices due to local supply constraints, for instance in addition to taxation.

"New, far more efficient production sources of ethanol are in the works, and if anything the cost of gas will go down and for good reason - market reasons."

Of course if global demand is growing (and it is!) then prices will only decrease if it is in the financial interest of suppliers to enable supply to outstrip demand (cartels are formed to control supply) and if this production can overcome upward price pressure from decreasing stocks of fossil fuels. It's naive to think that today's stores of fossil fuels will last forever with rising demand or that land-intensive crops will subsitute for them one for one at the same or cheaper cost.

I've put my money where my mouth is and drive a fuel-efficient car, but if you truly believe fossil fuels are abundant fuel will be cheaper and there will not be a price on carbon, feel free to bet the other way.
We can put your fuel taxes towards affordable public transit.

A. Dias wrote "The sky is not falling and the planet's energy future is bright. And it will be the US, as usual, which will lead the transformation. Unfortunately, the rest of the world bitches about it, does nothing, and legislates by lowering the standard of living for the vast majority of their citizens. Simply pathetic."

Its these sorts of comments that make America really hard to take. According to UN figures the US comprises less than 10% of the worlds population yet consumes 60% of the worlds resources. We have had the startling revelation in Australia that the war in Iraq was about securing energy resources for the US. So the US has shown that it is prepared to "solve" its energy problem by following an aggressive foreign policy, refusal to sign agreements such as Kyoto, and an unwillingness to alter anything if their perceived standards of living are going to be effected.

If our consumption continues unabated in 100 years time people are going to wonder why we did nothing. While we have people who think there is nothing wrong with jumping into a 5L V8 and driving 1/2 a mile to the shops for a paper the future is bleak. If through taxation, financial incentives and education we can cut consumption by just 10% the future is hopeful. Jingoistic chest thumping just isn't going to solve this problem.

Dear Folks,

I'm hugely impressed by the thoughtful discussion in this thread, so I don't wish this to sound like I'm raining upon anyone's parade.

Attempting to calculate energy costs in constant dollars is fraught with peril and inaccuracy. There are (at least) two major, counterforcing errors:

- CPI is well understood to underestimate the real increase in the cost of living. How much it does so is highly variable from year to year, but something in the range of 1% is not implausible. Over a decade's time, the error is not severe. Compounded over 50 years, it means your official "constant" dollar can be worth 50-100% more than the real one.

- As Dion pointed out, increased energy costs get factored into inflation. That makes the official "constant" dollar worth less than an energy-decoupled "constant" dollar.

It would be lovely if these two sources of error simply balanced out. I'd not bet on it, if I were you.

Let me propose a different metric that might have more bearing on this particular discussion: the ratio of the cost of fuel to the median (not mean) wage-earner's (not household's) annual (not hourly) income. In udda woids -- what fraction of your available dollars get spent on a gallon of fuel.

I don't know how that ratio changes over time. If someone here does, I'd be interested in the answers.

pax / Ctein

Ctein,

You may have hit the nail on the head, I think, in your approach to the issue. Getting the data you want is not that difficult, I don't believe. At least here in Canada, Statistics Canada provides all kinds of data that if not readily accessible on the web is certainly in librairies all over the place. Even if the data is a few years' old, it will still be useful info to have.

I can't help but feel that the reason we (developed nations) use a lot of fossil fuels (or products requiring fossil fule usage) is basically because it's damn cheap, all the whining aside. If oil was really expensive, that is if it really hurt to buy it, people would not be buying 3-ton SUVs to go to malls with and there would not be a booming business in high-powered speed boats, ATVs, and snowmobiles. Very few of those items are bought for reasons of necessity.

When gasoline hits $10 per gallon, society will not collapse. People may just refrain from riding ATVs all over the Rockies for hours on end and may stop using AWD Hummers to buy groceries. Not that many years ago, nobody was doing those things anyway. They are not rights guaranteed in anyone's constitution.

I can relate it to my own experience. I spend about $200 per month on gasoline for my car. Once my wife retires and I won't need to drop her off at work anymore, that will drop to $100 per month. Compared to everything else I spend money on, that's chicken feed. And it's always been chicken feed. If the price DOUBLED, it would still be chicken feed. Trouble is we are whiners, and if our lives change a little bit, we act as if some basic right has been removed.

Funny how proud we are to charge high rates for goods and services when we sell them, but it really bothers us when we have to pay for them.

The question is always whether the retail price reflects the true cost of the resource. We are able to ignore the true long-term costs of a lot of such development because we choose to. From the oil corporations point of view, leaving thousands of square miles of tar sands land denuded and spoiled forever does not cost them anything. The reason is that we (the people) have chosen not to charge ourselves for that cost. We could have chosen to, and better but more costly techniques could have been used to extract that oil, resulting in higher prices at the pump. But we (all of us) chose not to pay that cost. The real costs were never hidden from anyone; photographers have been recorded the spoiled countryside for a while now; we just all chose not to look.

A lot of people complain about clear-cut forest practices. But nobody wants to pay $100 for a 2x4 or $100 for a ream of photo paper to stick in the inkjet.

If I get a moment in the day or two, I'll try and get some gasoline cost data here in Canada, but things may get hectic here at work.

Robert, I could argue the points you made, or you could just read one of the articles that I and a few other people linked to in these comments.

(I think this website covers the most ground and really puts things into perspective: http://www.lifeaftertheoilcrash.net)

The fact is that while 'energy' makes up only about 1/10 of the world GDP, without it the other 9/10 wouldn't exist. Also, the only reason we can support almost 7 billion people on this planet is because of fossile fuels, which have fueled the economic growth of the past 200 years or so. It's not just about not riding that ATV anymore or paying a little more for this or that.

It is nice to see comments from TOP readers that have such a sophisticated understanding of peak energy. It is important to remember that oil and natural gas are not just transportation and heating fuels. Petrochemicals undergird conventional agriculture (fertilizers, herbicides), medicines, consumer goods--- pretty much everything in modern life. When oil is north of $200 per barrel, everything will cost more.

I encourage you all to listen to the brief, simple, and illuminating interview conducted by Dr. Michio Kaku for his Explorations program with Dr. David Goodstein of CalTech about the future of oil and oil alternatives at this URL:

http://www.kpfa.org/archives/index.php?arch=12193

If this makes you curious for more, check out the following books:

Out of Gas, by David Goodstein -> nice introduction to peak oil and a fascinating analysis of alternatives to oil.

Beyond Oil, by Kenneth S. Deffeyes -> a wonderful book by the old oil-hound and Princeton professor explains the origin of oil, the data and methodology for calculating the peak oil production date, and the utility of alternate fuels.

If you do not want to read books, check out these videos:

A Crude Awakening: The Oil Crash

The End of Suburbia

Oil production will soon begin declining forever and our society will pay a high price for squandering our cheap oil resources and for our lack of planning for our expensive energy future. The confluence of our inaction on energy and inaction on global warming (see the excellent Hell and High Water by Joseph Romm) will make life very hard for our kids.

Nars,

I understand your point. I was not trying to argue that we don't have a problem (we have a big one), I was trying to address (badly maybe) that the sound bite method of addressing the issue, which is to panic at a few cents increase in the price of gas at the pump, is at best pathetic, at worst a cynical way to hide the truth.

I think we encourage ourselves to waste our fossil fuels in silly ways because we price them so low. We can do so only by hiding real costs. The corporations externalize the costs, but that's an illusion in the grand scheme of things. We will all pay the true price, one way or another.

Mike, I agree with your sentiments 100%.

People tend to think in terms of cars and personal transportation, but the issue is much, much deeper than that. It's true that when you buy something, you drive there in your gasoline powered car, but the thing you're buying got there in a truck powered by a diesel engine. When the cost of fuel goes up, as it must inevitably do, the cost of everything you buy will go up: food, clothes, computers, even cameras!

Put another way, all of us are going to suffer a drop in our standard of living. We are all going to become a little more poor.

A minor aside regarding the comments on diesel engines. Diesel engines are more efficient, and in Europe most of the best engines and cars are diesel. There are two major barriers to entry in the US:

1) Diesels cost more because of the complexity of the injection system, and the low cost of US fuel makes the payback time 200k+ miles.

2) The US tends to be very concerned about NOx (to prevent smog) whereas Europe is very concerned about CO2. Gasoline engines are much better at NOx, diesels are much better at CO2 (fuel economy).

Finally, I have read from several different sources now that the world production of oil has peaked this year (2007).

That's a complex statement, but the basic idea remains the same. There's lots of hydrocarbons in the world; we are, however, running out of the cheap ones. None too soon, and maybe much too late, given the alarming trends in global warming.

WE are now paying nearer to 12 dollars a barrel [do you mean gallon? --Ed.] for our petrol (Gas?) in the U.K. On top of this our government is still piling on taxes disguised as "green" levies. I think I shall have to walk everywhere soon.

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