How Much Wind? Yesterday the Department of Energy released a major study on the potential of wind power in the US, suggesting that by 2030 it could supply 20% of our electricity needs, at little incremental investment over and above what would be necessary anyway, to keep up with the growth of demand. This is an encouraging result for those who see renewable energy as a vital component of any effort to reduce greenhouse gas emissions and improve our energy security. While I can't possibly do justice to a 200-page report in a brief posting based on a quick skim-through, several interesting assumptions and observations leaped out at me. While they don't necessarily undermine the headline results, they serve to emphasize that the report is a finding of feasibility, not a forecast.

To an engineer, the wealth of data contained in a document such as this is irresistible. My first instinct was to dig out my calculator and start comparing the numbers to each other, and to current actual data. The report states that the quantity of wind power capacity required to supply 20% of US electricity demand in 2030 is 305,000 MW, or 305 GW. That reflects an 18-fold expansion of 2007 year-end wind capacity, for a compound annual growth rate of 14% over the next 22 years. Compared to an average growth rate of 36% over the last three years, that figure seems modest, but then it will get progressively harder to sustain double-digit growth as the installed base grows larger. But that's not the most interesting figure. That honor goes to the report's assumption of a 50% improvement in the capacity factor for wind--representing the ratio of actual output to nameplate capacity--from roughly 30% today to 45% by 2030.

Although I eventually found the support for that assumption in Chapter 2 of the study, I backed into it by comparing the 1,200 terawatt-hours (1.2 trillion kWh) of generation required to cover 20% of US demand in 2030 to the 305 GW of wind capacity. Although the study describes how this improvement could be achieved through a combination of advanced turbine technology, increased turbine size, and aggregation of the output of many turbines across a wide area, it goes beyond the capabilities of current turbines and what I have read of the experience of high-penetration European wind operations, such as Denmark. The reason this is important is that, if this significant improvement fails to materialize, then either a much higher level of wind installations will be required to supply 20% of US electricity in 2030, or the 305 GW proposed here would only deliver 800 terawatt-hours per year, or about 20% of 2006 demand.

Another interesting aspect of that 1,200 terawatt-hr figure is that it highlights the report's assumption of a 50% expansion in US electricity demand over the next 22 years. That works out to 1.8% per year, which seems reasonable based on past experience, but might not be compatible with efforts to reduce US greenhouse gas emissions significantly in the same period, unless it also assumes that a significant portion of new electricity demand will come from displacing petroleum from transportation via electric vehicles. The only mention of such substitution that I found in a full-document search was of plug-in hybrid cars as a potential outlet for off-peak wind generation. If 20% market penetration represents a practical upper bound, and electricity growth were only 1.1%/year, then maximum wind capacity in 2030 would be 258 GW, instead of 305 GW, still 15 times today's level.

The report also includes a set of wind power supply curves, showing the levelized cost of tapping all potential US onshore and offshore wind resources, ranging from 6 cents per kWh to over 14 cents. If I've interpreted it correctly, the incremental cost of the last land-based portion of that 305 GW in 2030 would be about 8 cents/kWh, while the offshore component would run between 10 and 11 cents, in current dollars and excluding the Production Tax Credit (PTC) that is currently up for renewal. This doesn't quite live up to the suggestion of some wind power advocates that it will be cheaper than coal, unless the coal power in question is from advanced generating plants with carbon capture and storage, or paying a substantial cost to emit CO2. At a minimum, the supply curve suggests that wind power will continue to need assistance on the order of the current 2 cent per kWh PTC, to penetrate beyond a small number of sites with the best economics.

The idea that wind power might someday supply a fifth of US electricity demand won't startle anyone who believes that the experience of Denmark could be translated to a much larger country. However, rather than viewing the DOE's "20% Wind Energy by 2030" study as confirmation of this notion, it should be recognized as a detailed scenario describing what would be necessary to reach that threshold. It spells out in considerable detail the improvements in wind turbine technology, transmission capacity, and load management that would be required. Much hard work remains to be done, to turn feasibility into practical possibility.

Labels: renewable energy, wind power, wind turbine

  ¶ 10:44 AM

  Half Full Senator McCain's remarks on climate change yesterday are drawing predictable responses from both sides of the issue. While environmentalists may see it as a collection of half-measures, climate skeptics, including the editors of the Wall Street Journal, regard it as a sellout to those same environmentalists. I'll leave it to others to analyze the Senator's remarks line by line, but I think it's worth a couple of observations that might otherwise be screened out by the partisan filters and instinctive discounting to which any presidential campaign speech is subjected. In particular, the Senator's proposals deserve to be scrutinized for how they align with the key criteria of a risk-based, cost-minimizing approach to addressing climate change. This should not, however, be construed as a political endorsement.

Start with some basic principles. If you accept that human emissions of greenhouse gases are the key driver of long-term climate change--and this is the basic conclusion of the vast body of peer-reviewed science analyzed and summarized by the Intergovernmental Panel on Climate Change (IPCC)--then any plan to address this problem must tackle those emissions head-on. With atmospheric concentrations of CO2 and other greenhouse gases well above pre-industrial levels and continuing to climb, it is no longer adequate to call for an eventual freeze in emissions. We must begin to roll them back and make deep cuts as soon as possible and practical. However, arguing at this point over whether US emissions in 2050 should be 60%, 70% or 80% below today's is a red herring. Any of these figures should be viewed as a placeholder, until we've actually begun and can see how the necessary technology is developing and being taken up. How well could we have determined our 2008 emissions in 1966?

The debate about the economic consequences of reducing emissions has barely begun, and it is already polarized. At one extreme are those who see these cuts as potentially crippling--a dead loss to the economy--particularly if the large developing countries do not follow the lead of the EU and US in this regard. Others suggest that cutting emissions will produce a veritable cornucopia of industry-seeding and job-creation, yielding high returns on our investment. While I hope the latter view proves correct, we can't bet the country on it. That means making sure that our approach to emissions puts a high priority on eliciting the most cost-effective reductions, and by definition those will come from outside the industrial sector, excluding energy-efficiency gains that will largely be self-financing. So we need to cast a wide net that includes reductions from agriculture and consumers, not just big companies. The cheaper the reductions, the more of them we can afford, and the sooner we will meet our targets. In my view, economy-wide cap and trade is the best way to make the necessary cuts at the lowest cost.

The third key aspect of a successful climate policy is that it must integrate internationally. The US is a big emitter, and we need to regain the leadership position we held on this issue when the original UN Framework Convention on Climate Change was signed at the Earth Summit in Rio de Janeiro in 1992. That means negotiating in good faith on the successor agreement to the Kyoto Protocol, and opening our doors to emissions offsets from other countries, provided they are truly additional and not incidental or illusory. But it also means ensuring that US businesses are not placed at a competitive disadvantage to companies in countries not subject to these requirements. We need to reduce emissions, not merely shift them offshore.

Senator McCain's speech matches up well on these three principles, as do the climate proposals of his Democratic opponents. They have another six months in which to debate the particulars and win over the American people on this critical issue. However, while his opponents are in the mainstream of their party on this issue, Senator McCain deserves some acknowledgement for going against the grain within his, dating back at least to his co-sponsorship in 2003 of a cap and trade bill with Senator Lieberman. This stance looks even riskier today, when the skeptics have gone beyond arguing against global warming to promote the notion of global cooling. His supporters must now reconcile that political courage with the apparent contradiction of his support for a summer gas-tax holiday that undermines the notion of taxing energy more, not less, to bring down emissions.

As I've noted previously, it is remarkable that out of two original fields of candidates that included such a broad spectrum of views on global warming, the three finalists--and thus the two parties' ultimate nominees--are not just expressing concern in the abstract, but have issued calls for concrete action to deal with climate change. This is a necessary precondition for a meaningful national debate on a set of measures that would permanently alter our economy, with implications for the entire world.

Labels: climate change, global warming

  ¶ 11:03 AM

  Bubble or No Bubble The controversy over the influence of speculation on oil prices is gaining momentum, spurring congressional hearings and a steady patter of op-eds, including Paul Krugman's column in today's New York Times. The idea that oil prices have been artificially elevated beyond a realistic, market-clearing level is of interest to more than just consumers. Biofuel producers have so far failed to reap the bonanza from high oil prices that they must have expected, because of steady increases in the price of grain, oilseeds and other inputs. A sudden oil-price collapse back to $60 or less could do many of them in, particularly with large increments of new capacity coming on later this year. Gauging the future price of their principal competition has become more challenging than ever, when the futures market has proved such an unreliable source of predictions.

Professor Krugman makes a solid argument that today's high oil prices exhibit few of the signs of past speculative bubbles, especially in regard to the level of oil inventories around the world. They don't reflect the degree of hoarding that would be expected, as speculators stored oil in anticipation of selling it at a higher price later. But while I agree with Dr. Krugman that assertions of an oil bubble going back several years owed a lot to wishful thinking, I wonder if he underestimates the influence of an oil futures market that didn't even exist during the energy crisis of the 1970s. This goes beyond the simple notion that a large, liquid market in oil futures allows investors to speculate on the future price of oil without having to take possession of it, and at a much lower carrying cost than if they had to pay for it all and lease a tank in which to store it. The connections between the physical market and futures market have become pervasive, and they tend to reinforce the upward pressure on prices from rising global demand and restrictions on access to resources.

Last December the noted oil expert Philip Verleger testified on oil prices before a joint hearing of two Senate committees. As part of his compelling argument concerning the disproportionate impact of the government's policy of putting additional sweet crude oil into the Strategic Petroleum Reserve, he described how a relatively obscure technique called "delta hedging" could reinforce an upward trend in the futures market. He used the example of Southwest Airlines buying call options on crude oil at a strike price of $51/bbl. through 2009. As the price of oil increased, the financial firms that sold these options to Southwest would have had to purchase increasing quantities of oil futures contracts, in order to manage their exposure, as the options got ever deeper "in the money." The higher the price of oil goes, the more oil futures the call option seller must buy to stay neutral, in a classic positive reinforcing loop pushing up the demand for oil futures, and thus their price. I wish I had noticed his testimony at the time, because Dr. Verleger accurately foresaw the market move past $100 to $120.

This example offers an important insight for those who are focusing on the role of speculation in oil prices. Rather than viewing speculation as the driver of a bubble along the lines of the Dot Com or recent housing bubbles, it makes more sense to view it as an amplifier inserted into the circuit that runs between the energy futures, options and derivatives markets and the markets for physical oil. As long as demand growth continues in spite of high prices--with modest reductions in US demand offset by growth in countries that insulate their consumers from high market prices--speculation will continue to amplify negative supply news and push the market to new heights. However, if new production or conservation suddenly began to overwhelm demand growth, producing a short-term surplus, that signal would be amplified just as effectively, unraveling speculation at a record pace. The "delta hedging" mechanism described above works in reverse, too.

That doesn't mean that alternative energy firms should be overly concerned that oil prices will drop below $60 per barrel and remain there indefinitely. While oil above $100 per barrel has failed to crush global demand, at least so far, oil below $60 would surely stimulate it. The long-term fundamentals remain strong, as oil heads for an effective ultimate limit on global output--whether that limit is 85 million barrels per day, 100 MBD, or even 120 MBD. It does, however, suggest the need for financial flexibility: balance sheets healthy enough to withstand a few quarters of low or negative margins and weak sales. More importantly the possibility of a temporary oil-price dip should not blind the management of these firms to a much larger emerging threat, the prospect that a perceived global food crisis will unravel support for the government subsidies and mandates that have been the principal engines of the industry's growth for the last two decades.

Labels: biofuel, ethanol, hedging, NYMEX, oil futures, options, speculation

  ¶ 11:34 AM

  The SPR Debate The ongoing oil price spike is attracting renewed attention to the government's policy of continuing to fill the Strategic Petroleum Reserve with extremely pricey oil, which I mentioned in Wednesday's posting. Members of Congress and various commentators are calling for a reassessment, as I've done since last October. We're also seeing suggestions such as the one in today's Wall Street Journal for ways to use the SPR not just as a hedge against catastrophic supply disruptions, but as a tool for managing oil prices. A new administration will take office in eight months, and energy is likely to be a key focus of its new policies. I can't imagine a better way to kick off a fresh look at the nation's energy problems than with a complete rethinking of the basis and design of our strategic oil inventories.

The op-ed in today's Journal applies a combination of common sense and questionable judgment to the problem. The author, the chief economist at a firm that supports independent financial planners, is right to point out that $120 oil is too dear to squirrel away against the low likelihood of a massive disruption in oil supplies, the likes of which we haven't seen since the SPR was created in the 1970s. Unfortunately, the rest of his proposal for reducing the scale of the SPR and using it to set a price ceiling for oil relies too much on economic theory and too little on the geopolitical and logistical realities of the situation in which we find ourselves. More importantly, it does not start with a fundamental reexamination of the challenges the SPR was intended to address, and how those have altered in the last three decades.

Consider that when the first barrel of oil went into the SPR's Gulf Coast storage caverns in 1977, the US was relatively self-sufficient in petroleum refining capacity. Crude oil imports accounted for only 45% of the supply to those refineries, compared to 66% last year. At the time, the West Coast was essentially autonomous in crude oil and refined products, with its refineries amply supplied by California's production, which would shortly peak at over one million barrels per day, along with the growing output from Alaska. Much has changed. In addition to importing much larger volumes of crude oil, our refinery capacity hasn't kept pace with demand, resulting in steadily growing imports of gasoline and gasoline blending components. And in the interim, oil production in Alaska and California has fallen into deep decline, requiring substantial crude and product imports into a maxed-out West Coast refining system.

So instead of a strategic reserve designed to provide a back-up supply of crude oil to Gulf Coast and Mid-continent refineries serving the entire US east of the Rockies, our needs have expanded to encompass oil and refined product imports on all three coasts. And with more of our domestic production shifting to the deep waters of the Outer Continental Shelf, the risks against which an SPR must insure us also include potential domestic supply disruptions. We saw that after hurricanes Katrina and Rita shut down much of our Gulf Coast production, and again when pipeline problems in 2006 idled half of the Alaskan North Slope field. These altered circumstances strongly suggest the need for a more diverse and dispersed SPR, perhaps modeled along the lines of the federal Northeast Heating Oil Reserve. Nor do I believe that the only practical model of such a reserve entails government ownership and custody of the hydrocarbons in question. Other countries achieve the same end with a requirement for oil companies to maintain mandatory minimum inventory levels, at no direct cost to taxpayers.

Unfortunately, the risks we face have also evolved in the last thirty years, and that must be factored into our understanding of the necessity and nature of an effective SPR. No one expects his house to burn down in a given year, but most of us still buy fire insurance, because the consequences of that low-probability event would be so disastrous. An SPR works the same way. While Mr. Anderson looks to the pattern of past SPR releases to suggest that as little as 120 million barrels of oil might be adequate to cover any likely contingency, it is all too easy to imagine low-probability/high-impact scenarios that would require the SPR to cover a sudden shortfall exceeding two million barrels per day for longer than a month or two, at a time when global spare production capacity has shrunk to virtually nothing, or sits on the wrong side of a bottleneck. Full-scale civil war in Iraq, conflict with Iran, revolution in Venezuela or Nigeria, or a terrorist attack on the oil export facilities at Ras Tanura would do the trick.

It is high time to re-think the Strategic Petroleum Reserve, more than three decades after it was conceived. Global patterns of oil supply and demand have changed enormously, and so have the patterns of oil use within the US. The nature of the risks that an SPR should insure against have changed, too. We need a vigorous debate on all this, infused with new ideas and new options made possible by technology that didn't even exist in the 1970s. But we also need to be clear about the scope of such a debate, which should not include managing day-to-day oil prices, adding layers of complexity to the problem and a host of unintended consequences into the global energy market. So by all means, let's stop filling it, until we figure out the kind of SPR we really need. In the meantime, we must resist the temptation to expend these reserves on rash schemes to control the price of a commodity of which we only produce 10% of the world's supply.

Labels: demand, oil imports, oil market, oil prices, spr, strategic petroleum reserve

  ¶ 11:17 AM

  Practical Remedies The price of oil has set consecutive record highs this week, with no end in sight. This energy crisis that has crept up on us over the last four years, doubling the historical average price of oil, doubling it again, and in the widely-reported view of Goldman Sachs heading for a third doubling, is now provoking a sense of panic. You can see this in the flurry of proposals for providing short-term relief from retail gasoline prices that have increased by nearly 60% in the last 18 months. But while most of these ideas would likely be either ineffective or counter-productive, there are a few options that could make a difference this year, without having to wait for infrastructure to be built, fleets to turn over, or new production to come on line.

In order to see what might work, we need to start with a clear understanding of what has driven prices well beyond most experts' expectations, including mine. Rising prices have failed to halt the steady growth of global demand, because many of the countries in which demand is increasing fastest insulate their consumers from the global energy market. Nor has $100+ oil stimulated a flood of new production, because too much of the world's resource base is locked up by nationalist or environmentally-inspired barriers. To make matters much worse, important suppliers such as Nigeria are under-producing due to unrest, while Mexico and Russia are allowing their output to slip because of domestic politics. Instead of giving in to our frustration at these seemingly intractable problems, we can still have a positive impact on them, if we focus our efforts intelligently.

The controversy over food vs. fuel is an example of how tangled this mess has become. Governors and Senators worried about food prices have asked for relief from the aggressive Renewable Fuel Standard put in place by last year's Energy Bill. As sensible as that may seem for addressing consumer-level inflation and an unfolding global food crisis, it could push oil even higher. The market expects a couple of billion gallons of additional ethanol this year, the equivalent of about 100,000 barrels per day of oil. Curtailing that would hardly help high oil prices. So what could we do?

Start with ethanol. For all its many faults, it is an effective oil extender, because most of the energy that goes into making it comes from natural gas, not oil. The most immediately helpful action Congress could take on this front is not a reduction in the ethanol mandate, but a temporary suspension of the $0.54 per gallon ethanol import tariff. That might even address both fuel and food costs, by allowing in more Brazilian ethanol and shutting down the least efficient US ethanol plants. As I've noted previously, dropping the tariff would effectively mean subsidizing foreign ethanol producers, because of the way our ethanol blenders' credit is doled out, but this would cost only a fraction of the lost revenue associated with a summer fuel tax holiday. The volumes involved are small, in oil terms, but with oil prices determined at the margin, every little bit helps.

There might also be more practical and productive uses of America's international influence than prosecuting OPEC for anti-competitive behavior. Instead of pleading with or pressuring Gulf oil producers to increase output, we might talk to them about ending retail subsidies and letting their domestic fuel prices rise to market levels. That would slow down some of the fastest demand growth rates in the world, which are starting to erode oil exports from the Middle East. And if we treated the problems in the Niger Delta with the same urgency we apply to other geopolitical crises, we might be able to mediate a solution that would bring most of the half-million barrels of Nigerian production shut in by rebel action back online. Recent signals from the rebels have suggested that possibility. That would have a salutary effect on the oil market, which has a terminal case of the jitters these days.

Then there's the Strategic Petroleum Reserve. With oil at $120/bbl., it has become an absolute "no-brainer" to stop filling it. Even better, this is one of the few measures that could be accomplished virtually overnight, and it is entirely within the President's power to do so. The switch by the government from buyer to seller--putting the barrels acquired under its most recent royalty-swap contracts back into the market--might not knock $10/bbl. off the oil price, but in combination with a requirement to suspend SPR additions until oil is back under $100/barrel--or better yet, $80--it could help cool off speculation.

Assuming these remedies would actually have the desired effect, we still face an important dilemma with regard to energy prices. As important as fuel price relief seems in an economy already battered by the housing slump and accompanying credit crisis, our goal can't be reducing gasoline and diesel fuel prices to a level that stimulates demand that can't be met without lighting a new fire under crude oil. Furthermore, with a new administration likely to institute climate change policies that will increase energy prices, either directly or indirectly, the chief objection to high oil prices within policy circles is not that they are too high, but that the revenue is going to the wrong people: producing countries and oil companies, rather than the US Treasury. Consumers see this matter quite differently, and until we resolve that divergence of aims, our actions are likely to be as disjointed as our politics on this matter are schizophrenic.

Labels: access to resources, climate change, ethanol, gasoline prices, oil prices, subsidy, tariff

  ¶ 11:26 AM

  False Dichotomy The fate of the renewable electricity production tax credit (PTC), which provides incentives for power generated from wind, solar, and other alternative energy sources, is apparently still in doubt. Last month the US Senate approved a one-year extension of the credit as an amendment to a housing bill, but the House of Representatives is balking at the provision's cost. Previous efforts to extend the credit and pay for it by revoking tax benefits for the oil industry failed. With oil companies earning record profits, the temptation to tax them to pay for alternative energy seems overwhelming, but it reflects a profound misunderstanding of the nature of our energy problems and the relative scale of the available solutions. We need more wind power and more oil, not one at the expense of the other.

To understand why taxing the oil industry to subsidize wind and solar power won't advance US energy security--never mind energy independence--consider the contribution of additional wind power to the US energy balance. In 2007 the US wind industry had a banner year, adding 5,244 MW of new wind capacity, expanding the installed wind power base by 45%. This represents an important increment of renewable energy that will help reduce our future greenhouse gas emissions. At an average capacity factor of 30%, the new wind turbines added last year will generate approximately 14 billion kilowatt-hours each year they are in operation. That's a substantial amount of electricity, though it represents only 0.3% of the 4 trillion kWh of electrical energy the US consumed in 2006. More relevant to the wind vs. oil competition created by Congress, however, the equivalent BTUs saved by that extra wind power (assuming it displaces gas-fired power generation) equate to only 63,000 barrels per day of oil--the output of a single medium-sized oil platform. If imposing higher taxes on US oil producers resulted in only one oil project being deferred or canceled, then the energy contribution of an entire year's worth of wind capacity additions would be negated.

When we prioritize our current energy challenges, the most urgent among them is the large volumes of high-priced oil we must import, in competition with the developing economies of Asia and the Middle East. This expands our trade deficit, drives inflation, and puts further pressure on the dollar, in a vicious cycle. We have many options for generating electricity, but few for producing transportation fuels, particularly with ethanol facing serious concerns about its competition with food--and emerging worries about its water consumption. Until we have large numbers of plug-in hybrid cars or other electric vehicles, electricity is not a substitute for oil in transportation. Nor is renewable energy our only option for reducing greenhouse gas emissions.

I'm not arguing that we should allow the PTC to expire. That would be a bad outcome for many reasons, not the least being the number of US jobs potentially at stake in a weakening economy. Instead, I am convinced that we need both a thriving renewable energy industry and a thriving domestic oil industry. Pitting one against the other is a terrible idea, if we really care about energy security and reducing the economic and geopolitical consequences of US oil imports. It creates a false dichotomy that owes everything to politics and nothing to a cold assessment of the facts. If the Congress cannot find $6 billion of earmarks that could be cut to fund the PTC for another year, without putting future US oil production at risk, then our problems are even bigger than they appear.

Labels: oil production, ptc, renewable energy, renewable energy credit, taxes, wind power

  ¶ 10:22 AM

  Going It Alone The quest for US energy independence might just be the biggest and most persistent bad idea in the last several decades of energy policy. I've been railing about this subject since I started this blog more than four years ago, and I have acquired a deep understanding of what it means to swim against a strong tide. A few years ago, pointing out the impracticality of energy independence was treated as a mild eccentricity; since then it has become a form of political incorrectness verging on heresy. I'm glad to have some company in this effort, from the author of a comprehensive examination of the subject, "Gusher of Lies," by Robert Bryce. It provides a useful counterpoint to a seemingly endless stream of books and articles extolling the virtues and relative ease of shaking off our oil habit and thumbing our noses at the global energy market. But while I agree wholeheartedly with the main thrust of Mr. Bryce's book, I feel obliged to mention a few quibbles.

The subtitle of "Gusher of Lies" provides a good sense of the author's perspective on America's energy problems. "The Dangerous Delusions of 'Energy Independence'" sets it at odds with many of the statements about energy that we've heard from candidates in the current election cycle. Among the strongest chapters in the book are those placing our desire for energy independence in the context of the long energy history of this country, and explaining why many common assumptions about the mechanisms for attaining independence--and its ultimate outcome--are either mistaken or unwarranted. That's particularly true concerning the Middle East, which would continue to hold most of the world's oil endowment--and thus remain of paramount strategic importance to the global energy economy--regardless of the level of US energy imports.

As I've pointed out here periodically, energy independence is unattainable for the US at an acceptable price through any strategy, technology, or combination of them currently available to us, nor is it especially desirable in a world that is increasingly interdependent for basic commodities, manufactured goods, financing, and to a growing degree, for services and intellectual capital. Mr. Bryce shares this perspective, and he demonstrates it in many pages of facts and figures, scrupulously referenced in 50 pages of footnotes. Among the many sacred cows he takes on, he scorns corn ethanol and expresses skepticism about the chances of large-scale reliance on cellulosic biofuels. Nor is he enamored of coal-to-liquids or wind power, which he regards as "the electricity sector's equivalent of ethanol." Whether you accept his arguments or not, they provide a useful opportunity to ponder the likelihood that a transition away from oil-based transportation fuels and their valuable byproducts will be arduous, protracted and expensive, while failing to deliver the utopia that many expect.

"Gusher of Lies" does a good job explaining why the vast scale of our energy consumption and the trends of history, economics and geology work against the prospect of reducing by very much our reliance on other countries for primary energy. Unfortunately, the author's apparent neutrality on the subject of climate change creates a bias for the status quo that leads him to underestimate the incentives for greatly expanding our use of renewable energy forms such as wind power. And while he describes in some detail the geopolitical shifts that are marginalizing the formerly-dominant publicly-traded oil & gas companies, I didn't sense much concern about the way that bilateral arrangements between national oil companies of producing and consuming countries are undermining the vitality of the global free market for energy on which he urges us to rely for our energy security. As a result, he misses an obvious role for productive involvement by the federal government in bolstering the efforts of publicly-traded companies to gain access to global resources locked up behind nationalistic barriers.
Two other quibbles:

• Although the principal messages of "Gusher of Lies" aren't tied to any particular political ideology, Mr. Bryce's digressions on the evils of neo-conservatism and the errors of certain well-known media pundits became tiresome and distracting, undermining his main focus.


• The last section offering potential solutions to our energy challenges that avoid the independence trap seemed a little light. That's a shame, because several of his suggestions, such as simplifying the current nightmare of conflicting gasoline formulations and creating a "superbattery prize" look beneficial and relatively uncontroversial, and could be accomplished with the stroke of a pen.

Don't let these minor shortcomings deter you from reading "Gusher of Lies." The higher oil prices go--and oil company profits with them--the greater the temptation to seek miracle cures for our energy problems. Mr. Bryce reminds us that as important as energy is, it does not stand apart from a national economy that is deeply connected to the rest of the world, any more than it can be divorced from the laws of thermodynamics. Nor should his informed skepticism be mistaken for cynicism or a sense of futility. His realistic portrayal of our energy situation is timely and important, dismissing widespread notions of quick-and-easy solutions and making a strong case that the current yearning for energy self-sufficiency, while understandable, is both unattainable and inconsistent with the basis of much of our post-World War II success. You can read the first chapter here.

Labels: access to resources, cellulosic ethanol, energy independence, energy policy, energy security, ethanol, oil imports, wind power

  ¶ 10:57 AM