The Biggest Challenges
I know at times I seem like a shill for Tom Friedman at the NY Times. His piece last Sunday expanding on the "Geo-Green" strategy has had me thinking all week. First, it's a nice summary of a number of critical challenges facing the US and the world. Mainly, it throws down the gauntlet to the President, suggesting that he is ignoring (or mishandling) the single biggest challenge on our plate. Is the intersection of energy, environment, and geopolitics really the top problem we face? Bigger than terrorism or Social Security?

Part of me just wants to quibble with Friedman's proposed solutions, which I've tackled in previous blogs. I also wonder if I'm predisposed to agree with his diagnosis because it ties together the three issues I've spent my entire adult life working on. They cover an awful lot of ground, collectively accounting for a pretty large chunk of world affairs, especially when you include their economic consequences.

On balance, I think Mr. Friedman's assessment is right, at least from a long-term perspective. How we resolve the war on terrorism will have an enormous impact on the next decade or two, but how we deal will the inter-related problems of energy supply and demand and climate change--both of which are intimately connected to geopolitics--will affect global civilization for much longer. The underlying question concerns what will follow the Age of Oil (or Hydrocarbon Age, if you prefer.) Addressing this is about designing the pattern of the next century or so, and that has been done pretty haphazardly so far, considering the stakes.

If You Can't Beat 'Em...
There's a secondary debate with regard to climate change, simmering alongside the main show on whether or not it's happening and to what degree we (humans) are causing it. This other debate, which doesn't get nearly as much media coverage, concerns whether our focus should be on trying to prevent climate change or working on the means to adapt to it. You can view the latter as either contingency planning or pessimism that nothing currently on the table--including the Kyoto Treaty--will slow down climate change, let alone halt or reverse it.

I must admit I'm intrigued by adaptation, even though I have certainly not given up on efforts to slow down the process. For example, I was interested to see that the Swiss have announced a practical measure to retard one of the local effects of climate change: blanketing a glacier to keep it from melting away. If this works, perhaps it could be applied on a larger scale elsewhere, including Greenland, where scientists worry that melting glaciers could tip a delicate salinity balance and shift the Gulf Stream, with disastrous consequences for Northern Europe.

Other possible adaptation measures range from building dikes to slow the loss of coastland, to really large-scale "geo-engineering" that borrows ideas first considered for terraforming other planets, like Mars. This stuff is hugely controversial, partly because it involves projects with potentially enormous unanticipated consequences, and partly because it looks like defeatism on the main environmental agenda of reducing carbon emissions. It can also smack of some of the notions coming from the Greening Earth crowd, i.e. warming is good, and can we have some more, please?

I'd like to think the adaptation and prevention camps could be reconciled. There's a lot that can be done at relatively low cost--or even at a profit--to manage the problem in the way contemplated by the UN Framework Convention on Climate Change, the body behind Kyoto. But we can't put all our eggs in this basket; someone must be working on the things we'll need if warming proceeds faster, with consequences approaching the worst-case predictions. And like it or not, some serious science also needs to be done on the really big, last ditch measures required if we ended up in a "runaway greenhouse," however remote a possibility that might be. I hope we never have to make those choices, but if we do, I'd sure want to have some detailed options to choose from.

Powerful Waves
With the exception of nuclear power and the small quantity of geothermal energy we currently tap, essentially all of our present energy supply consists of some form of solar power. Wind power and photovoltaic cells tap current solar power, while fossil fuels represent solar energy stored over geologic time. With 71% of the earth's surface covered by oceans, which thus receive roughly the same percentage of the solar radiation hitting the earth, ocean energy ought to be a promising component of our future energy supply. This article from MIT's Technology Review highlights one avenue for achieving this, by tapping the power of the waves.

As the article suggests, wave power ought to be less controversial than offshore wind farms, the other main proposal for tapping ocean-based energy, though perhaps the former has simply escaped the notice of the groups that might oppose it. After all, it still represents a form of human interference in the ocean ecosystem, and it could affect shipping and fishing interests, depending on location.

The other issue raised here concerns whether the US government should fund more research in this area, given the apparently strong interest of other countries, including the UK. In the current fiscal environment, it makes sense to be selective about where we invest, as long as someone is pursuing this option. Once the technology gets closer to commerciality, we could provide the same kind of tax benefits currently enjoyed by wind power, which is probably ten to fifteen years ahead of wave power in its stage of technology development. The real advantage in wave power is probably in its application, rather than ownership of the patents.

Overall, the potential for wave power is so large that we should definitely monitor developments in this area closely and weigh them against our other alternatives. Meanwhile, there are other areas in which federal research funds can probably have more impact, including hydrogen and advanced nuclear technology.

Fuel Cell Motorcycle
Another item I missed while I was on vacation was the launch of a hydrogen fuel cell powered motorcycle in the UK. Setting aside some obvious concerns about cost (unspecified), limited range (60 mi.), and low power (6 kW = 8 HP), the thing looks great and could catch on based on sheer coolness alone. Criticizing it for lack of the usual motorcycle roar seems to miss the point, in my book. I doubt they're going to sell many of these to heavy-duty motocross types, anyway, but can't you imagine a fleet of sleek, fast, and quiet motorcycle couriers in cities like London?

I still can't resist picking on the name, though. Calling a fuel cell vehicle of any type "Emissions Neutral" demands a great deal more information about the hydrogen source. Some of the early H2 supply is likely to come from electrolysis of water, using electricity generated by whatever fuels the local grid, including coal. The rest is likely to come from the same place that most hydrogen does today: chemical reforming of natural gas, with definite emissions of greenhouse gases and local pollutants. Just because a vehicle emits only water from its tailpipe doesn't mean it is totally clean.

Despite this, I wish Intelligent Energy well with their nifty gizmo. It represents another small step on a very long pathway towards a possible hydrogen economy.

The Voice of Authority?
Today's New York Times Op-Ed page is a doozy. Under the overall caption of, "What Happens When the Oil Runs Out" (more apparent in print than in the electronic version) are three guest editorials on the subject. The first, by Kenneth Deffeyes, relates to an impending peak in oil production. The second, jointly written by the head of a non-governmental organization and a scientist at Lawrence Livermore Labs, suggests the use of other fossil fuels, coupled with carbon sequestration. The third, by Dr. Oliver Sacks, is a paean to hybrid cars. All three are interesting, but I want to focus on the peak oil question.

Dr. Deffeyes identifies himself as a colleague of King Hubbert, who pioneered the theories on "peak oil." Mr. Hubbert accurately predicted the 1970 peak of US production several decades earlier. However, the application of this approach to global oil production is problematic, because the actual amount of oil originally in place is not known. Estimates of this figure have been rising steadily since Mr. Deffeyes made his first predictions years ago. (See my posting of 9/22/04, for more information.)

Setting aside his arguments concerning the Arctic National Wildlife Refuge, I was startled to see Dr. Deffeyes boldly predict that the peak of world oil production is at hand, within the next couple of years. This is among the most aggressive predictions of this type that I've seen. In effect, he is suggesting that the current spike in oil prices, driven by the recent failure of new oil production to keep pace with the growth in demand in Asia and the US, is actually tied to a geological limitation on oil production. This is an irresponsible assertion.

The roots of the current problem are clearly economic and geopolitical, rather than geology-based. The countries with the most promising reserves of untapped oil are reluctant to invite foreign investors in to help develop these resources (see my posting of 12/15/04), and the companies with the greatest expertise and capital have been slow to reinvest (see my posting of 10/27/04). The result may well be a sustained period of market tightness until this logjam can be broken, but this is not indicative of a geological peak in production.

What to do when oil runs out is indeed an important question, but even if a peak were imminent, this would mean that production would plateau for some years and then gradually decline, rather than falling catastrophically. A peak is indeed somewhere ahead, but the track record of predictions in this area is such that we will not know we've reached it until we're on the other side of it. This could happen in five years or fifty. While suggesting it is close at hand makes for sensational headlines and may help drum up support for alternatives, it risks crying wolf prematurely and setting up a conservation-and-rebound response similar to what we saw after the 1970s oil shocks.

Tightening the Screws
The unfortunate explosion yesterday at BP's Texas City refinery is already sending ripples through the market. In addition to the tragic loss of life, the damage will impede gasoline production at one of the country's largest oil refineries. With oil markets already extremely tight and hanging on every news story, the immediate reaction will send prices higher, whether it should or not.

In the immediate aftermath, it's hard to ferret out exactly what happened. Reporters and first responders often don't know the difference between a crude still and a cat cracker, and companies tend to be slow in specifying details. In this case, the most detailed report I could find this morning suggests the explosion occurred in the refinery's 30,000 barrel per day catalytic isomerization unit, which upgrades light gasoline components to higher octane. This unit is less essential to running other parts of the plant than the catalytic reformers or catalytic crackers.

So what is the impact of this event, which will probably slow overall run rates and production from the whole refinery? Generally speaking, this should actually depress crude oil prices slightly, because less refinery capacity is available to turn crude into products. However, with overall refinery utilization running at about 90%, it's possible that other refiners could boost production a bit to make up the shortfall from BP. On balance, the impact on crude is probably neutral, though a nervous market will likely see it as an excuse to go higher.

Product inventories are a crucial factor in assessing the impact on gasoline prices, as discussed in my posting of March 10. Although total US gasoline stocks are 7 million barrels lower than a month ago, they remain at the high end of their seasonally-adjusted range. That means there's a reasonable buffer to allow refiners and traders to respond without creating a serious supply crunch. If repairs can't be effected quickly, the shortfall will have to be covered from imports. In that case, retail gasoline prices will eventually go up a by a little more than they would have anyway.

Whenever an incident like this occurs, it reminds us that refineries--no matter how well run--are dangerous places that subject flammable liquids and gases to extremes of temperature and pressure. The human toll of accidents like this is part of the cost of keeping our cars, trucks, buses and boats running. We should pause periodically and reflect on that.

Addendum - 1:00 PM EST
I just watched a live press conference on this event from Texas City. Normally, you'd expect the plant manager to be acting as the main company spokesman. In this case Lord Browne, BP's CEO, was on hand, saying all the right things and fielding questions. This is impressive crisis management, assuming he must have jumped on a plane in London right after hearing the news.

Lord Browne also confirmed that the explosion occurred in the Isomerization unit, which was being restarted following annual maintenance. Startup and shutdown are always the diciest times in refinery operations, and despite extra precautions and extra manpower--presumably the reason the casualties were so high on a unit that would normally have had an operating staff of maybe a half-dozen--accidents do happen. It will be interesting to see what the inquiry turns up.

What Does Mass Transit Cost?
I'm still catching up with articles published while I was on vacation. P.J. O'Rourke's ironic blast at mass transit funding from last Wednesday's Wall St. Journal is funny but also raises serious questions. Presumably, every one of the mass-transit projects he cites was approved on the basis of favorable economic analysis, but slicing and dicing the same numbers differently suggests they are massively wasteful of taxpayer money. Who is right?

I periodically ride MetroNorth from Connecticut into Manhattan. I always try to avoid peak commute hours, when the trains are packed. Yet despite steadily rising fares and constant calls for new subsidies, this system cannot seem to afford even proper routine maintenance, let alone provide for the replacement of seriously aging rolling stock. If MetroNorth and operators like them had to account for their results on a replacement-cost basis, instead of riding a legacy asset into the ground, the result would be a public scandal on a similar scale to those that have rocked the business world in recent years.

However, there are two obvious problems with viewing mass transit in purely economic terms. First, the consideration and comparison of alternatives gets incredibly complicated. Do you compare one mass-transit mode to another, such as buses, or is the real alternative more highway miles or lanes, or merely more congestion on existing highways? If so, how do you reckon the logistical and environmental impact of putting all those folks in cars, factoring in "diamond lanes" and other car-pooling incentives? How do telecommuting and e-meetings affect the demand for physical transportation? None of this is beyond analyzing, but as with any economic analysis, the choices and assumptions you make up front largely determine the outcome.

The other problem may be O'Rourke's real point. On economics alone, mass transit has probably been a loser for decades, even with all conceivable externalities included. But mass transit is as much about social values and choices as it is dollars. Without mass transit, what do those who can't drive or can't afford cars do, and how does that change society? And after all, isn't sitting in a train reading the paper or listening to your iPod a lot more pleasant than being honked at by impatient motorists trying to merge into bumper-to-bumper traffic?

These systems ought to be as efficient and well-thought-out as possible, but they're not just about cost. I suspect that the only way to get this balance totally right would be to build new towns and cities from the ground up, the way they do in Singapore.

Geo-Greens Against ANWR
Bless Tom Friedman of the New York Times for being willing to challenge conventional wisdom on the Middle East, China policy, and lots of other things. Unfortunately, his discussion of drilling in the Arctic National Wildlife Refuge on St. Patrick's Day rested on some pretty shaky assumptions, even if his source was Philip Verleger, Jr. As I understand the so-called Geo-Green argument against drilling, it boils down to, "Don't do it because we might find a lot of oil there."

Let's address a few of the errant assumptions:
1. Oil from ANWR will benefit China and Japan more than the US, because it is in the wrong place. Fortunately, the oil market is global, and putting a million barrels a day of new oil into it would dampen prices globally, whether the actual barrels go to San Francisco or Shanghai. However, if you consider the declining production profile of the Alaskan North Slope (see yesterday's posting) and the time lags involved in producing any discovery in ANWR, you have to see ANWR as backfill for the North Slope, rather than as incremental supply for the West Coast. In other words, it would likely create a longer, gentler plateau for overall Alaskan production, rather than a big spike in production. That means the beneficiaries would be the same folks that receive Alaskan North Slope oil, now.

2. Finding oil in ANWR would discourage conservation and promote more greenhouse emissions. Perhaps so, but no more than finding oil anywhere else. ANWR will not by itself bring back $20 oil, and it probably wouldn't be profitable at $20. Conservation and additional supply are not competitive; we need them both.

3. The US will still be vulnerable to Saudi Arabia and Venezuela. Certainly, but our energy strategy should focus on actively managing that vulnerability, not fantasizing about eliminating it anytime soon. A combination of supply enhancement and demand restraint could keep our import needs near the current level for decades, but they aren't going to drive them to zero without a technology breakthrough or a Depression.

Even though I support drilling in ANWR, I recognize that there are valid reasons not to. But in order for them to be considered on a level field, the alternatives should all include practical proposals for coming up with the equivalent amount of energy in new supply or new savings elsewhere. Simply saying "no" is a guarantee that our import dependency will keep growing.

Trading ANWR
With the Senate having narrowly approved drilling in a portion of the Arctic National Wildlife Refuge (ANWR), this issue has moved to the front burner for all parties concerned. I hear the same old canards about its insignificance to our energy needs, but no one is talking about what kind of quid pro quo might be possible, if ANWR were to be opened up for exploration.

Let's start with the canards. "It's only six months' worth of oil" is simply the wrong way to look at this, as I've explained previously. The best analogy is to the development of the Alaskan North Slope, which was also controversial in its day. The same insignificance argument might have been made about that field, which was originally thought to contain about 10 billion barrels of oil, comparable to current estimates for ANWR. From 1976, when oil started pumping, through 2000 the North Slope and nearby fields had produced 13.3 billion barrels--about 14% of all US oil production over this period--and was a key factor, along with the North Sea, in limiting OPEC's market power in the 1980s and 90s. Though now in decline, the North Slope area still produces nearly one million barrels per day.

No one seriously suggests that ANWR can give us energy independence, but even if its potential is only half that of the North Slope, this must still be reckoned as significant.

Turning to the kind of "practical environmentalism" I discussed in Friday's posting, the challenges of expanding global oil supplies to keep up with economic development in Asia, along with the timelags inherent in a transition to any other form of energy, make it very likely that ANWR's oil reserves will eventually be developed. If so, then environmentalists may never again have as much leverage as they do now to extract concessions in exchange for going along with opening up ANWR to limited drilling.

If that sounds cynical, consider that ANWR, however large and majestic, is only one small, remote corner of this vast country. Would getting something that benefits the entire nation or the world, such as a cap on US carbon emissions or tougher fuel economy standards, be worth conceding a bit on ANWR--with proper safeguards to ensure that the best technology is used? There's no easy way to evaluate such a tradeoff, but surely this would be a better outcome than having ANWR developed without any offsetting benefit, which I consider a very plausible scenario.

Resolving Environmentalism's Contradictions
After a week on the west coast, Nicholas Kristof's interesting New York Times op-ed on the demise of traditional environmentalism really resonated with me. He cites the argument of a widely discussed recent article on "The Death of Environmentalism" that suggests its traditional approach must give way to something entirely new, if it is to survive and be effective. Although Shellenberger's and Nordhaus's concerns revolve around overcoming the challenges posed by climate change, I have a different take on the problem. How can environmentalism succeed without reconciling itself with the aspirations of billions in the developed and developing world for a better material existence?

Perhaps this is an obvious concern for someone with my background. I spent more than 20 years working for a major, international oil company, Texaco, and yet I always considered myself an environmentalist--as did many of my colleagues. But while much of the formal "Environmental Movement" has set itself in opposition to development, or has at least been perceived as doing so, many practical environmentalists have focused their efforts on reducing the environmental impact of inevitable--and generally beneficial--economic development.

So while Messrs. Shellenberger and Nordhaus worry about how the world can prevent climate change, I worry just as much about how we can help China and India achieve something close to a Western level of development without wrecking the planet in numerous ways. Just as their growing economic mass is altering the orbits of other economies, their appetites and emissions are starting to influence the global environment.

Dealing with this problem in a positive way has the potential to create new markets, along with new perspectives, that can benefit the developed world, too. The ugly alternative is to consign these countries to some kind of Rousseau-esque happy primitivism, along with Africa and the rest of the developing world. That would be unconscionable and about as effective as King Canute's desire to hold back the tide.

Vacation Substitute
I'll be traveling for the next week or so--a chance to escape the snow!--and opportunities for blogging will be few and far between. As I usually do when I can plan for it, I've dredged up a few postings from the archives. If you didn't catch them the first time around, they should be worth a look.

Storage options for nuclear waste:
Yucca Mountain vs. Buying Time (11/16/04)

In defense of emissions trading to manage climate change:
Deliberately Obtuse? (12/13/04)

Is energy independence a worthy goal:
Energy Independence? (12/21/04)

How quickly could more efficient cars have an impact?
The Hidden Variable (1/17/05)

Self-Fulfilling Prophecy?
Crude oil prices have trended up for the last several weeks, but retail gasoline prices haven't kept pace. Several commentators, including one in USA Today, have predicted that pump prices could soon jump 24 cents per gallon to catch up with crude. While it's possible that pump prices have simply lagged crude prices by that much, it's equally likely that this story could create a self-fulfilling prophecy. To see why, you have to understand the relationship between inventory and demand.

The Energy Information Agency (EIA) of the US Department of Energy tracks week-to-week statistics for crude oil and petroleum product production, imports, exports and inventory. For example, the EIA shows current stocks of gasoline at 224 million barrels, 10% higher than a year ago and well above the typical range for this time of year. Inventories aren't this high because refiners produced unusual amounts of gasoline; they mirror the relatively weak demand that is typical in the winter months, currently running at 8.9 million barrels per day. (This may explain why prices haven't gone up in line with crude.)

But getting a handle on true demand is difficult, because no one is measuring how much gasoline we actually burn every day. Instead, the EIA looks at how much was produced or imported each week, and how much inventories went up or down. This still doesn't get at end-user demand, because the volumes leaving refineries and large distribution terminals reflect deliveries to local distributors, who watch sales at the gas stations they serve and adjust their own inventories in anticipation of rising or falling demand and prices.

Even the demand at service stations is distorted by a final level of inventory: the amount of gasoline sitting in our cars every day. It gets little attention, because it rarely changes in aggregate. Assuming every car in America has a fourteen gallon tank, usually half full, this hidden inventory amounts to 40 million barrels of gasoline, equal to 20% of the primary stocks the EIA measures. If consumers all decided to keep an extra 3 or 4 gallons in their tanks, apparent demand would increase by 10-20% for a few weeks and send a false demand signal to distributors.

So if we all go out and tank up because we think gas prices are about to jump 24 cents, are we making such an increase more or less likely?

Empire of Corn
Today's Wall Street Journal has a front-page story (subscription required) on the drive to expand ethanol capacity in the US Midwest. The article, which has a strong human-interest theme, reveals that the impetus for additional fuel ethanol production derives mostly from the economics of small farming communities and only incidentally from the nation's energy needs. In effect, ethanol is driven by values, not value.

Blending ethanol into gasoline has been controversial since it was first subsidized as part of the nation's response to the oil crisis of the 1970s. As I discussed at length last year, its production consumes more energy of other types (including oil and gas) than the ethanol returns when burned.
Turning food crops into fuel yields one of the poorest energy returns of the various biofuels alternatives, though this balance can be improved dramatically by using crop waste and advanced enzymes to make "lignocellulosic ethanol".

The Journal article paints a stark picture of declining Midwestern towns grasping for any means of preserving a way of life that goes back more than a century, investing in ethanol plants to try to eke more value out of their crops. The risks these small investors are taking on could bankrupt them if overexpansion creates an ethanol "bubble." While it's hard not to sympathize with family farmers, the reader is left wondering whether the billions of dollars in federal and state subsidies propping up the ethanol value chain might be better spent elsewhere, on programs with a bigger impact on clean air, energy security, or farm modernization.

Reserve Accounting
A comment on yesterday's blog raised the issue of petroleum reserve accounting, which has become highly contentious in the wake of Shell's problems and the publication of an industry-sponsored report calling on the SEC to change its reserve accounting procedures. While admitting that I am hardly an expert on this complex subject, I hope I can shed a little light on the basic issues involved.

The present system of reserve accounting revolves around two fundamental, investor-focused concerns. First, with oil and gas reserves seen as a key source of the future value of an energy company, investors need to know that a firm's stated reserves have a high probability of turning into actual oil and gas production in the future. Second, they need to know that company A and company B used comparable methods to calculate their reserves, so they can properly choose which equity to buy. These two concerns sound similar, but their implications are quite different.

For one thing, comparability does not require absolute accuracy in assessing the basis for future production, as long as this is done the same way for everyone. It also ignores subtler differences in the quality of reserves. All barrels are not equal: some firms have more heavy oil, which is less valuable and requires more processing, while others have more gas, needing more infrastructure to bring it to market. Despite these shortcomings, which require greater investor sophistication to sort out, I would still argue that comparability is the crucial concern for the stock market.

For public policy, however--and arguably from a management perspective--absolute accuracy is more important. Each company must see how its future production would fare under expected conditions of price and resource access, in order to know where to invest its exploration and production budget. For quite some time now, most of the annual additions to reserves shown by the major oil companies have not come from finding new fields, but from reassessing what their existing fields can economically produce in light of expected prices and available extraction technology. So as technology improves, reserves go up without finding a single new field. This has its limits, though, and new fields must be eventually be found, a process that is always unpredictable and sporadic, leading to "lumpy" reserves additions.

The above description doesn't convey the complexity involved in this issue. There seems to be as much art as science to reserve accounting, and the majority of knowledge about this arcane practice resides within these companies, not in the SEC. For this reason, the recommendations of the industry report published by Cambridge Energy Research Associates should be evaluated carefully and with an open mind. While it is true that the oil companies might benefit from more favorable rules on reserve accounting, they will benefit more from greater transparency and investor confidence in this area, and I think most of them understand this.

Spending the Windfall
Ever since oil prices popped up into the stratosphere last year, the market has wondered how the major oil companies would spend the resulting cash windfall. The answer so far has been fairly restrained: stock buybacks, balance sheet polishing, and little to no increases in exploration. Now ChevronTexaco has apparently thrown its hat in the ring in the chase for Unocal, in competition with one of China's state oil companies. It will be interesting to see if the resulting offer for Unocal is in cash, stock, or a blend.

Unocal looks like a good fit with ChevronTexaco's existing portfolio, and the California reformulated gasoline patent I highlighted in my posting of 1/7/05 should be much less of a concern in a domestic transaction such as this, though it could still draw regulatory attention. One of the more interesting angles concerns Unocal's controversial position in Burma. Would ChevronTexaco retain this, or divest it as Texaco did a few years ago?

Although a Chevron/Unocal transaction would make sense from a company perspective, it does not address the fundamental issue facing the industry today. The consolidations of the last decade have enhanced the size and profitability of the global energy companies, but they have not noticeably increased aggregate production. With reserve replacement slipping and the national oil companies preoccupied funding domestic social programs, the global oil industry will continue to struggle to meet the growing demand for petroleum products generated by the development of China and India.

Small, Warm Fusion
For all the interest in useful renewable energy technologies such as wind and solar power, nuclear fusion remains the ultimate "alternative energy", even as it remains a distant prospect. Although the "Cold Fusion" fiasco of 1989 gave the pursuit of small scale fusion a bad name, interesting work is going on in another bench-scale possibility, involving the collapse of bubbles in liquid. A colleague just forwarded the abstract of a peer-reviewed paper on this topic in one of the journals of The American Physical Society. The experimenters are directly addressing the concerns of other scientists who are questioning their earlier results.

The process in this case involves bombarding a bath of acetone and deuterium (heavy hydrogen) with sound waves and neutrons. The authors of the paper report finding evidence of nuclear reactions in the fluid--flashes of light, neutron emissions, and tritium (even heavier hydrogen)--that don't occur when they perform the same experiment on a bath containing only acetone.

This is pretty exciting stuff, even though Fleischman and Pons claimed similar evidence for their cold fusion experiments. As always, the proof rests on whether the results are repeatable, not just by the same team but by other researchers using their own apparatus, and if all extraneous influences, such as gamma rays from space, can be ruled out.

The implications for successful nuclear fusion at low temperatures and with fairly simple equipment would be profound, including all the benefits of large-scale fusion, plus the ability to provide them on a distributed basis without large central generating plants. This is a story I plan on following, with an appropriate degree of skepticism.

Hydrogen Distortion
It's unusual to run across an article that cites a long list of references yet contains an equally long list of errors of fact--or at least of connecting unrelated facts in a way that renders them erroneous. I just received one from a newsletter called EnergyPulse. The title was intriguing, "The Hydrogen Economy - Energy and Economic Black Hole," by Alice Friedemann. This article illustrates how rapidly we've gone from a general view of hydrogen as a perpetual-motion energy nirvana, to a realistic understanding of hydrogen as an energy carrier--not a source--and onward to a growing body of criticism seeing hydrogen as, in Ms. Friedemann's words, "an energy sink." This is a step too far, at least at this early stage.

Now, I certainly agree that you need a good reason for turning some other form of useful energy, be it natural gas, coal or electricity, into hydrogen, because of the energy losses inherent in any conversion process. But this categorically does not mean that sufficiently good reasons don't exist. In the case of the fuel cell cars and trucks currently under development, that reason is the high thermal efficiency of the fuel cell itself, which has the potential to more than compensate for lower efficiencies in other parts of its energy chain.

The fair and objective way to compare efficiencies is on a "well-to-wheels" basis that looks at the entire system of fuel delivery, conversion processes, and vehicle. This analysis looks at the original energy content of the fuel and the amount consumed in every step along the way, enabling direct comparison of a wide variety of energy systems. You can, for instance, compare the efficiency of a hybrid car running on gasoline refined from oil pumped in Kuwait and transported to the US by tanker versus a fuel cell car running on hydrogen extracted from natural gas produced in Louisiana and transported by pipeline to a chemical plant. A number of independent groups have done this for a variety of fuel and vehicle combinations, and the results are available on the internet.

Unfortunately, Ms. Friedemann seems to have selectively chosen the worst news from each separate step and created her own "woe-to-wheels" analysis. For example, she strings together the "efficiency" of a wind turbine with that of hydrogen generated by electrolysis to demonstrate how much energy is lost making hydrogen to run a car. But if the lost wind energy was never available to us in any other form, the whole concept of efficiency becomes meaningless, and the correct multiplier is 1, not 1/3. The article includes at least sixteen other errors of fact or interpretation, or suppositions stated as facts.

While I don't mean to belittle someone who apparently did a lot of research before writing a freelance article, I believe it is important to debunk this kind of pseudo-science, just as it is important to disabuse the public of the notion that hydrogen from the sky will solve all our energy problems. Hydrogen is no one's free lunch, but neither is it a pointless boondoggle. Instead, it is a promising potential pathway for introducing non-fossil-fuel energy into transportation modes currently dominated by petroleum products. It will take years and much effort before this pans out, if it ever does, but it is entirely premature to write it off today.

How Firm a Foundation?
While many factors have contributed to relative energy security for America since the oil crises of the 1970s, the foundation of this stability has been a free market and a diversified supply strategy focused on regional suppliers and away from the Persian Gulf. A pair of articles in the current Economist (subscription may be required) raise questions about the future reliability of two of the principal enablers of this diversification, Mexico and Venezuela.

Prior to the 1979 Iranian Revolution, the US imported roughly 8 million barrels per day (MBD) of crude oil, with two-thirds coming from OPEC and about a quarter of the total from the Persian Gulf. Last year, the volume of oil we bought from OPEC was about the same as in 1978, even though total imports have climbed to nearly 13 MBD. Persian Gulf imports are up about 10% from the late 70s, but still account for less than a fifth of the total.

If Mexico proves unable to increase its production to cover both its growing domestic market and the increased appetite north of the border, and if Venezuela accelerates its political shift from a "Bolivarian Revolution" to "Fidelism" (see my posting of 2/1/05) then even the current volumes we buy from these countries will be at risk. The consequence would be a rapid shift to dependence on imports from the Middle East, in direct competition with China and India.

The problem seems clear, but the solution is not. How much influence does NAFTA give the US in a Mexican political process rooted in sacred-cow nostalgia for a 1930s nationalization that is blocking needed foreign investment in the oil sector? Can we find a way to work with Venezuela's neighbors to contain Mr. Chavez's dogma, without returning the region to the instability it experienced a generation ago? And can we accomplish any of this while preoccupied with terrorism and the democratization of the Middle East? The alternative will require us to get serious about conservation.

Although it's unrealistic to imagine that the US can ever again be self-sufficient in petroleum, maintaining balance and diversity in our oil supplies is possible and desirable, even if our long-term goal is the creation of a non-oil-based economy. Preserving this balance in the face of new challenges, however, will require elevating its priority in our diplomacy and trade relations. That seems unlikely without a clearly articulated national energy policy.

Hybrids By The Hour
One of the biggest problems with introducing advanced technology vehicles such as those powered by fuel cells or hybrid drivetrains is overcoming natural consumer uncertainty about something so new and unproven. A new trend in green rental cars may help to lower this hurdle by making the initial alternative vehicle purchase period hours, instead of years.

My own first experience in an electric car amazed me. Nothing had prepared me for the acceleration, and I think I'd have bought one then and there if they had been more widely available and the infrastructure more convenient. On a smaller scale, I'd never have purchased satellite radio for my car without having first experienced it as a free option in several rental cars. After a couple of drives I was hooked to the point that when I recently went car shopping, there were no models on my list that didn't include satellite radio as an option.

Driving a biodiesel-powered car around Maui may sell on novelty value, but in the process customers will dispel some of their myths and preconceptions about these vehicles. While targeting rental fleets has traditionally been a high-volume, low-profit option for carmakers, they would be smart to use an entirely different set of criteria with regard to advanced technology cars. Rental car companies could be their best form of advertising and mass exposure.