Our Shifting Energy Diet

It's fairly easy to agree on the desirability of shifting our energy diet away from fossil fuels and toward more renewable or sustainable sources, but it's much harder to agree on the time scale involved. While recognizing the great potential of renewable energy technologies such as wind, solar and geothermal power, along with advanced, non-food-based biofuels, I am convinced that the transition will take much longer than many hope--longer than many will have patience for, in light of pressing concerns about energy security and the environment. When considering future shifts in our energy diet, it's instructive to review some of the changes we've already experienced, and how long they took. The graph below displays the relative contribution of America's main energy sources since 1949, based on data from the Energy Information Agency of the US Department of Energy.

This chart, which compares the proportional, rather than absolute contribution of each source as a percent of the total, shows that the US energy diet has experienced constant change over the last seven decades. Some of these changes have been dramatic, such as the erosion of coal's market share in the 1950s and '60s by oil and natural gas, while others, such as the resurgence of biomass-based energy since the 1970s are less dramatic but still noticeable. On the scale of this graph the non-biomass renewables that I've lumped together appear relatively steady, because the recent rapid growth of wind and solar energy has so far only compensated for a contemporaneous decline in hydropower output. I'd expect the growth of that green segment to be more obvious in a few years, though still not on the scale of nuclear power.

The chart also reminds us that however prominent a given energy source might have become during this period, none overwhelmed the others. We talk a great deal about oil's dominance, yet it never exceeded a 48% share of our energy diet, and it has recently fallen below 37%. In fact, you'd have to go all the way back to the 1920s to find an energy source with a market share above 60%, which coal still enjoyed during the early years of oil's rise as the combination of mass-produced cars and the big oil finds in East Texas and Oklahoma upended the US energy landscape. That's one reason I generally find forecasts of renewables capturing 80% of the energy market within a few decades to be improbable.

Perhaps the most relevant example for renewables of a disruptive energy technology capturing a significant share of the market is commercial nuclear power, which contributed just 0.1% of US energy in 1962. That's about what solar provides today. Yet even with a major push by utilities and government and broadly favorable market acceptance until after the Three Mile Island accident, it still took nuclear power 25 years to reach a 6% share of total US primary energy, and nearly 40 years to reach its current 8% or so. Today's renewables also face similar limits on their potential market penetration, albeit due to very different factors relating to intermittency and the high cost of energy storage.

What would it take for renewables to repeat the model of oil's success against coal? In the absence of a high carbon price or incentives on a level unlikely to be either politically feasible or affordable in the current environment, I believe it would require technologies that don't just reduce greenhouse gas emissions or local pollutants, but actually enable something new and very attractive to consumers and businesses, along the lines of the quantum leaps in mobility and other economic activity that oil made possible. Otherwise, their promoters should be prepared to play a long game, in much the same way that the conventional energy industry did when it was building its market post World War II. Do investors and policy makers have the patience that requires?

By the way The Energy Collective is offering a free virtual conference on November 30 on the subject of "How to Save A Planet on A Budget." The conference includes panel discussions and case studies moderated by Marc Gunther of Fortune magazine, Jesse Jenkins of the Breakthrough Institute, and Gernot Wagner, economist at the Environmental Defense Fund. To register click here.

I'd also like to wish my US readers a pleasant Thanksgiving weekend.

Fewer Choices Post-Fukushima?

Even before the resolution of the crisis at the Fukushima Daiichi reactor complex--a crisis that has diverted media attention from the much larger humanitarian crisis caused by last Friday's tsunami--its consequences for nuclear energy policy are rippling across the globe. It is extraordinarily premature to form conclusions about these events, although that didn't stop many from arriving at similarly hasty and under-informed conclusions in the case of last spring's Deepwater Horizon accident. Pervasive instant analysis promotes knee-jerk responses. If the nuclear renaissance that had already been slowed by the recession and financial crisis was struck a fatal blow last week, what could that mean for our energy choices in the years ahead?

Although I want to focus mainly on the potential consequences in the US, what has already transpired in Germany provides a cautionary tale. As reported Tuesday, seven nuclear power plants of similar vintage and/or design to the damaged quartet at Fukushima are being shut down, at least temporarily, as the German government reassesses its decision to extend the operating life of the country's 17 power reactors. Germany hasn't been comfortable with its nukes for some time, though I find it remarkable that 70% of the population is apparently concerned that an accident that required an epic earthquake and a tsunami to trigger could happen there, too. (The next time someone lectures you about German practicality, this would be a fine counter-example to trot out.) However odd that reaction might seem to me and others with an engineering/hard science bent, it's a reminder that nuclear risks are viewed differently than many others, perhaps because radiation is invisible and insidious in its effects. Even if the reactors are finally cooled down with no further incidents and no injuries beyond the plant personnel, who have taken great risks for the public good, we will tend to focus on how much worse the outcome could have been.

Yet shutting down those nuclear plants in Germany is not without consequences, either, as noted by the Breakthrough Institute. Germany's greenhouse gas emissions will inevitably increase, because the country is already adding renewable generation as fast as it can and must make up any shortfall from fossil fuels. After committing an estimated €120 billion ($167 billion) for solar power through 2011, based on the 20 years of feed-in tariff support existing installations will receive, Germany still gets just 2% of its annual generation from solar, compared to around 24% from nuclear. That's mainly because Germany is such an unsuitable location for solar.

What about the US? Nuclear power supplied almost 20% of the electricity generated here in 2010, compared to 45% for coal, nearly 24% for natural gas, 10% for all renewables, and less than 1% from oil. Any notion of replacing the contribution of nuclear power in the longer term would require careful consideration of the energy sources that might fill the gap--based on scale and growth potential--and what it would mean for efforts to cut greenhouse gas emissions by reducing the generation of electricity from coal, which accounted for 81% of the emissions from the electricity sector and 26% of all US emissions in 2009. As for replacing nuclear power in the short run, that's simply out of the question, unless we want to bring on a recession that would make 2009 look like a boom year.

It's not that it's impossible to imagine a US energy mix without nuclear. After all, that's what we had on a much smaller scale prior to the 1960s. We certainly have enough coal and natural gas to take up any slack, although I don't think that would be quite the desired solution of those who would be most eager for an end to nuclear power. For that matter, a combination of geothermal power and concentrated solar power (CSP), the former baseload and the latter at least dispatchable, could also fill the gap, although a geothermal build-out on that scale would provoke concerns about "induced seismicity", while CSP would be largely a regional solution or require lots of very long-distance, high voltage power lines that present massive NIMBY issues of their own. Wind power, which until last year was growing at around 40% annually, could provide 20% or more of the generating mix by 2030, but it can't substitute for nuclear's central role without far more cheap power storage than we can reasonably expect to have available by then. And while solar has great potential, especially as its cost falls, it's no better suited to delivering reliable 24/7 power than is wind, and it is starting from an even smaller level than wind's 2.3% of generation last year.

The likeliest replacement for nuclear power in the US would thus be a combination of sources similar to our current non-nuclear mix, comprised of about 55% coal, 30% gas and 15% renewables, with some help from efficiency. On the basis of the average emissions from these sources, making up for the loss of the 807 billion kilowatt-hours generated by nuclear last year would increase US greenhouse gas emissions by around 580 million tons of CO2-equivalent per year, or 10% of net US emissions in 2009. That would hardly be conducive to meeting our Copenhagen pledge to reduce emissions by 17% by 2020, but then in a non-nuclear world most such pledges would have to be considered null and void.

Barring a worst-case outcome in Japan, I don't expect a groundswell in the US if favor of abandoning nuclear power--not even for the 35 reactors of generally similar design to the ones at Fukushima. Despite that, the emissions figures I calculated above remain relevant. Without a concerted effort to build new power reactors in the next two decades, the US will be on a sure path to de-nuclearization, as 41 of the existing plants would reach the end of their lives and operating licenses--many after a full 60 years of operations--by the mid-2030s. That process could accelerate significantly if the facilities that are awaiting license extensions now face much tougher scrutiny and are turned down in significant numbers. In that case we could lose up to 10,000 MW of nuclear capacity by the end of this decade, generating roughly the same annual output as our entire current wind power capacity. There are some who are already working to make that happen, either openly or more subtly. In that context the story on MSNBC yesterday listing US nuclear reactors in order of earthquake risk was either a public service or fear-mongering, depending on your perspective.

Whether we back away from nuclear power all at once, as Germany seems poised to consider doing, or one plant at a time, the result would be much the same: increased emissions, costlier and less reliable power, at least in the near-to-medium term, and more strain on infrastructure. I still think we'll choose to include nuclear in our evolving future energy mix, particularly given the significant improvements in the technology since the Fukushima reactors were built, along with the development of new, smaller-scale nuclear power options. Yet I have to admit my confidence in that result has been shaken by the reaction to the events in Japan.

The Challenge of Scale

This morning's Wall St. Journal featured a front-page article on small-scale nuclear power, highlighting how reactors a tenth the size of current commercial designs could significantly reduce the financial risks associated with these mega-projects. This is one example of the need to think in new ways about scale when addressing our energy challenges. In his talk at this year's TED conference in Long Beach, Bill Gates offered another surprising perspective on scale: "All the batteries we make now could store less than 10 minutes of all the energy [in the world]," he said. Framed between those two examples is the basic proposition that while solving our energy problems may require breaking them down into more manageable pieces, they must still add up to mind-numbingly stupendous sums.

According to figures from the Energy Information Agency of the Department of Energy, in 2008 the US consumed 99.3 quads of primary energy--oil, gas, coal, nuclear power, hydropower, biomass and other renewables--down from 101.6 quads the year before. A quad is one quadrillion times the quantity of energy required to raise the temperature of a pound of water by one degree Fahrenheit, where a quadrillion is 1 followed by 15 zeroes (US definition.) Can you picture that? I can't. If I convert that consumption to barrels of oil equivalent at the rate of 5.8 million BTUs each, we get a value of just over 17 billion barrels--a much more familiar unit, especially when we divide by 365 to get 47 million barrels per day. Millions are much closer to something we can grasp, and if we are familiar with energy data we know that's equivalent to a little more than half the amount of oil produced globally every day. It's still hard to picture, though, until you work out that if it were all put in one place in outer space, it would form a spherical blob roughly 800 ft. in diameter--over half as tall as the Empire State Building--and that's every day.

By comparison the daily output of a 3 MW wind turbine, converted to its energy-equivalent of oil (assuming it backs out natural gas from a gas turbine power plant) would form a ball about 7 ft. across. It would take 1,400,000 such balls to fill the big sphere. Of course we can't really compare the output of 1.4 million wind turbines to the total amount of energy we use each day, for many reasons, though it's a handy reminder of just how big the challenge is, and why building nuclear reactors in increments of 125 MW each might be a smart way to finesse this gap.

A 125 MW reactor, if it operated with the same reliability that large nuclear plants have achieved, would produce as much power every day as 125 of those 3 MW wind turbines. And while we doubtless couldn't build these reactors as fast as wind turbines, I'll bet we could add nuclear power capacity faster in these increments than with 1,200-1,500 MW reactors, because of the advantages of being able to manufacture more of each facility in a factory, rather than constructing them on-site. Even if that translated into total project timelines only half as long as for large-scale nuclear plants of the kind for which the administration just awarded federal loan guarantees, that could be worth a lot to the utilities and merchant generating companies building them. It would greatly reduce project risks of the kind that can ruin the economics of big investments--delays, cost over-runs, accidents--and that give companies' bankers and shareholder chills. These aren't the kind of risks the government is offering to defray, by the way.

Of course that doesn't make small nuclear an either/or proposition vs. large-scale nuclear, any more than wind and solar are an either/or proposition vs. oil & gas platforms or big gas-fired power plants that can operate efficiently 24/7. There's room--and need--in our national energy economy for all of these, as our energy diet shifts from a heavy reliance on fossil fuels to a lighter, more sustainable diet in the future. At the same time, it's clear that we can't fill the gap exclusively with small-scale energy sources, without a sizable contribution from sources at least as big as these small reactors. "Drill, baby, drill" only captured one aspect of this concern. More accurately, our energy policy must deliver "scale, baby, scale."

The End of the World As We Know It?

The opinion section of the Sunday New York Times made for sobering reading this weekend. While the Times has hardly been a bastion of economic optimism of late, three op-eds stood out for their shared sense that we might be on the brink of truly wrenching change. Tom Friedman invoked an enviro-economic tipping point, citing one expert's prognosis of a "Great Disruption;" a best-selling author saw the risk of "economic cataclysm" in the bursting of Eastern Europe's foreign debt bubble; and another found parallels to the Austria-Hungary of 1913, one year before the war that ended at least three empires and mortally wounded a couple of others. But while the systemic unraveling of the past six months or so makes such possibilities likelier than they would have been just a few years ago, the odds still favor a much less drastic result than revolution or apocalypse. The enormous recent increase in the range of uncertainties we face lends added credibility to the direst scenarios. However, it's important to realize that these predictions are not certainties, unless our responses make them so. That applies to energy, as well.

When I think about the possible paths of energy supply and demand over the next few years, they depend much less on specific energy or environmental trends than on the future state of the economy. Forecasting oil prices has become meaningless without a clear view of growth, particularly in the US and China. Demand may have rebounded recently in the US, but the combination of a crippling financial crisis with a deep cyclical downturn has Americans questioning the future in ways that I haven't seen in decades, other than the immediate aftermath of 9/11. The tangible effects of what noted historian Niall Ferguson has dubbed the "Great Recession" serve to reinforce the hangover of millennial angst from the turn of the century, which manifested in the more extreme views of Y2K and more recently Peak Oil. Layer in the propensity of my own Baby Boom generation to see itself at the epicenter of great events, and the stage is set for receptiveness to the view that we stand on the brink of unprecedented, permanently life-altering change.

When I was involved in my first scenario planning project at Texaco, we came up with three remarkably insightful views of the future of the energy industry, at least two of which have remained relevant far longer than any of us could have guessed. They received wide distribution throughout the company and had the general support of many in upper management. However, that project also came up with the seeds of another scenario, a much darker view involving the rejection of globalization and a growing wave of anti-Americanism around the world. Although in some respects it was no less prescient--or challenging--than the other three scenarios, it went nowhere, because the context for exploring it didn't exist in 1997. The external consultants who guided us through the process advised us not to pursue it, or risk destroying the credibility of the entire effort. That was good advice, even in retrospect, and it served as a useful lesson about the way that assessments of the future interact with our views of the present and our experience of the past. They must also be grounded in reality.

That's certainly true for energy, today. However much we might consider our energy future to be in flux, our views of it must take into account the embedded dominance of fossil fuels in our energy systems. Given the scale of these systems, that dominance will still exist next year and the following year, no matter what policies are enacted in the US or elsewhere. This might all seem to be up for grabs, but that's really only true in the long term. I've believed for a long time that we are on the threshold of a revolution in the ways that we produce and use energy, and it has arguably already begun. But no matter what happens in the economy, short of a massive global collapse, this revolution cannot be completed overnight. It will take decades, and that is equally true of our response to man-made climate change, which took a century to create.

Whenever I watch the news or read the latest statistics about the economy, I worry about what next year might look like. The uncertainties are huge and daunting. But I also know that while the chances of a Great Depression-style collapse or a radical socio-enviro-political transformation have risen, the economic future is likelier to resemble the last few decades, minus the unsustainable levels of personal and institutional debt. In the same way, the energy transformation is likely to play out as a set of big, gradual shifts: away from coal and other carbon-intensive fuels and toward renewable energy and nuclear power, and away from liquid transportation fuels and towards the eventual electrification of most ground vehicles. These transitions will take time, and that means that, whatever their price, a decade from now there will still be electricity and natural gas for the appliances and devices you buy today, and there will still be fuel for the car you buy today. That's one set of uncertainties over which we shouldn't lose sleep.

Changing Our Energy Diet

Over the weekend I participated in a panel discussion on space-based solar power (SSP) at a space-development conference, for the second time in as many months. My presentation focused on what it would take for a new source such as SSP to find a place in our energy diet, which will be changing at the same time that the technology for producing power in space and sending it to markets here on earth develops. The audience of entrepreneurs and space professionals was quite engaged by the idea that SSP couldn't just be a space project; it had to be a viable energy project, too. These same challenges apply to any new energy technology with a long development period, including some that are much more established than SSP. But with politicians, pundits, and experts of all stripes telling us we must rapidly shed our addiction to fossil fuels, the inertia of our present energy diet remains the under-appreciated elephant in the room.

I began my brief remarks with a simple pie-chart showing US energy consumption for 2007, based on data from the Energy Information Agency of the US Department of Energy. As replicated below, it showed the breakdown of our primary energy supply--the raw energy going into power plants, factories, and oil refineries for further processing into fuels, electricity and materials, along with the contribution from nuclear power plants and those energy sources that produce electricity directly, such as hydroelectric dams, solar panels and wind turbines. Despite the recent, breathtakingly-fast growth of wind and solar, and the tremendous success of the nuclear industry at squeezing more output from its 104 existing reactors, the low-emission portion of our energy diet only accounts for 15% of our primary energy needs, and less than a third of our electricity demand, with 93% of that coming from mature hydropower and nuclear sources.

US Primary Energy Supply

As in a diet, not all calories are equal or interchangeable. The 39% of this diet supplied by oil cannot be replaced by renewable sources of electricity without a lengthy and dramatic change in our vehicle fleets, because oil accounts for less than 2% of our electricity generation, and there's very little of it left to displace from the power sector. Nuclear power and natural gas already accomplished that task over the last several decades. The much bigger challenge now is to shift the roughly 97% of transportation energy currently derived from oil to other sources--either electricity in the view of Al Gore, Dr. Andrew Grove and others, or natural gas, as suggested by T. Boone Pickens. But as we make that shift, we can't leave the portions of our economy that will still depend on oil high and dry. We must continue to provide enormous quantities of petroleum, even as we work aggressively to shrink its share of our diet and expand the portion supplied by sources that don't emit greenhouse gases or contribute to our trade deficit. It is fundamental to the nature of oil production that if you don't keep drilling, its supply quickly dwindles.

Tom Friedman's column in Sunday's New York Times drew a parallel between Mr. Gore's ten-year goal for ending our use of fossil fuels and President Kennedy's commitment to reach the moon in a decade. Unfortunately, this analogy breaks down once it gets past the R&D stage. I regard our accomplishment of landing two men on the moon 39 years ago yesterday as the pinnacle of the 20th century. It was a remarkable feat, requiring billions of dollars and hundreds of thousands of scientists, engineers, and support staff of every description, yet it ultimately only put 12 Americans on the lunar surface. We're talking about displacing 85% of the current energy diet of a nation of 300 million people that accounts for between a fifth and a quarter of global GDP. Doing that within a decade wouldn't just be moonshot-impressive; it would require a flat-out miracle.

Transition Time

The cover of this week's issue of The Economist is devoted to the future of energy, and to the proposition that large-scale change is "closer than you think." The magazine includes a 14-page special report providing a useful overview of the major technology options for replacing conventional sources of energy. Its editors are correct that it is now possible to imagine a world that relies much less on oil and coal than today's, and that the present demand-driven spike in energy prices and a generation's progress on alternative energy technology make that prospect much more realistic now than similar aspirations during the previous energy crisis. Unfortunately, the report is essentially mute on the crucial question of timing, thus avoiding the apparent paradox that the energy transformation eagerly anticipated by so many might require a significant further contribution from fossil fuels, in order to bring it to fruition.

I see two visions competing for share of mind with regard to energy: one paints a future world in which clean energy is plentiful and cheap enough to support sustained global economic growth, while in the other the urgency of dealing with climate change forces us to kill off the hydrocarbon economy quickly and build a low-emissions energy future on its ashes. As convinced as I am that our energy plans must address climate change, I do not find the latter view very motivating or convincing. Nor do I think it would be terribly appealing to anyone who is dismayed by the relatively modest economic slowdown now playing out as a result of high energy prices and the fallout from the subprime crisis--a pale shadow of what a true oil crash would look like.

How close are alternatives to being able to replace fossil fuels? The progress that has been made in the last 30 years is certainly encouraging. For example, the cost of producing electricity from wind was once a large multiple of the cost of conventional power. That gap has shrunk so much that a 2 cent-per-kilowatt renewable electricity tax credit--which is still in jeopardy--appears to be the difference between profit and loss. But in order for renewables to make serious inroads into the market shares of power produced from coal and natural gas, wind and solar power must first reach a scale at which their annual capacity additions can cover the average annual growth of electricity demand. In the US, that figure has varied between 1-2%, which amounts to roughly an additional 60 billion kWh of net generation each year. That means that, at an average capacity factor of 30%, we would need to add 29,000 MW of wind, solar and other renewable electrical capacity per year. According to the American Wind Energy Association, installed US wind power capacity grew by 5,244 MW last year, and should grow by at least that much this year. Grid-connected solar is still much smaller, though growing somewhat faster than wind.

Turning to liquid fuels, although demand growth in the US has stalled for the time being, due to high prices and lower economic growth, covering 1% annual growth in liquid fuels also looks challenging. Although US corn ethanol volume increased by 1.7 billion gallons last year and was on a pace to add at least that much new output this year, prior to the Midwest flooding, after adjusting for its lower energy content this amounts to 0.8% of US gasoline demand and only 0.3% of our total petroleum demand. Covering the 1% annual growth that would be consistent with stronger economic growth and lower energy prices would require the energy equivalent of an incremental 5.5 billion gallons per year of ethanol each year, without accounting for the significant quantities of oil and natural gas consumed in producing this fuel.

Conservation and efficiency can and should help to decrease the height of these goalposts, and we see that in the apparent shrinkage of US gasoline demand, as consumers adjust to the reality of $4 fuel. But whether needed to cover normal historical growth in energy demand, or merely as an important milestone along the path toward actually eroding the market shares of oil and coal, it will take wind, solar and biofuels several more years of sustained high growth rates to attain that scale. And that will still be the case, even if changes in consumer preferences speed up the planned improvement in US new-car fuel economy and bring more plug-in and all-electric vehicles and efficient homes and appliances into the market. For a system this large, massive change cannot happen overnight.

All of this makes for an uncomfortable transition period, during which we will remain frustratingly reliant on sources of energy that we know emit unsustainable quantities of greenhouse gases into the atmosphere, while leaving us vulnerable to unstable foreign suppliers. Although I am optimistic about the potential of alternative energy sources and improved efficiency to alleviate both of these problems in the longer term, I remain pragmatic about how much can be done right now. However viscerally satisfying the prospect might seem to many people, we cannot yet turn our backs on the fossil fuels that supply 85% of our energy needs today. Doing so prematurely would align us with the path of perpetual energy scarcity, rather than long-term clean energy abundance, just as much as if we abandoned the alternative energy technologies that are only now starting to produce on a scale that really matters. It's a shame The Economist didn't tackle the subject of managing our expectations during the energy transition they described so ably.

Energy Paragon

Today's Wall St. Journal profiles Japan's efforts to reduce its reliance on imported oil over the years. It's a compelling story, and the accompanying figures show remarkable progress between 1975 and 2004, presumably the last year for which all the comparable data was available. The author concludes that, as a result of these changes, Japan is better positioned to weather the economic impact of sustained high oil prices than other countries. The only problem with this analysis is that by many of the same criteria, the US is in even better shape than Japan.

I wouldn't want to take anything away from what Japan has done to reduce its vulnerability to oil shocks, and to make its economy more energy-efficient. It reduced its oil imports by about 4% in the last 15 years, while US oil imports were growing by an average of 4% per year. This is all the more remarkable, considering that Japan produces less oil than Wyoming. In the process, Japan has achieved one of the lowest levels of greenhouse gas emissions per unit of economic output, though because of the size of its economy, it ranks 5th highest among emitting nations.

Two of the factors contributing to this excellent energy performance might not be worth emulating, however. First, the period of comparison coincides with the flattening of population growth in Japan, resulting in one of the world's most rapidly aging populations and all the economic worries that brings. It also overlaps with the protracted recession that followed the collapse of the "bubble economy." Over the same period, US economic growth was robust, while our population increased by nearly half.

Nor does the US look so bad, in energy terms. The Journal extols Japan's 40% improvement in energy use per GDP, compared with 1975, yet in the same interval, the US reduced its BTUs/$GDP(real) by 44%. And while Japan imports 82% of its total energy needs, with oil making up 46% of the total, the US is still 71% self-reliant in energy, with oil making up 40% of the mix, down from 45% in 1975. For all of our problems, I wouldn't trade our position for theirs.

All of these comparisons are superficial, because the US and Japan are very different countries, with important economic, social and historical distinctions. Rather than touting the energy improvements of one against the other, the more useful conclusion is that both of these large industrial economies--and most others, by extension--became a lot more efficient after the energy crisis of the 1970s and are thus in a better position to absorb high energy prices without falling into severe recession. That helps explain why the virtual doubling of oil prices this year hasn't been catastrophic for the world economy, thus far. The longer oil prices remain high, the more these countries will invest in efficiency, making them even less vulnerable in the future, with accompanying benefits for the fight against climate change. Japan isn't alone in knowing how to do this.

I'd like to wish my US readers an enjoyable Thanksgiving. Postings will resume on Monday, November 26th.

A Muted Response

Yesterday afternoon I was interviewed by a reporter researching a story on why the response to high oil prices hasn't been more pronounced, especially on Capitol Hill. To the degree that Congress reacts when consumers complain, however, the current muted response is understandable. While the crude oil price has risen by 29% since Labor Day, the average pump price of unleaded regular has only gone up by 8%, so far. Nor is $3.00/gallon startling, any more, no matter how much it stretches the average person's budget. That kind of price fatigue is unlikely to last, though, if refining margins recover sufficiently to push gasoline to $3.50.

There are many reasons why the current oil price shouldn't be as worrying as the price spikes of the 1970s, and you've heard most of them before. The US uses only half as much energy per dollar of real GDP as it did then, and oil's share of those BTUs is 10% lower, today. At the same time, as I pointed out to the reporter, the price of crude oil is a pretty abstract concept to most people, compared to the price of gasoline or heating oil. I don't know how many other folks have actually bought or sold a barrel of petroleum, but I would guess it's fewer than 1 in 1,000, even counting those who receive royalty payments on their mineral rights.

Contrast that with gasoline. When we fill up at the self-service pump, we can hear it and smell it going into our cars, and most of us experience this at least once a week. How many times a day do Americans see a gas price on a pole-sign? I'd bet more people know the price of a gallon of gasoline than know the price of a loaf of bread. It doesn't get more concrete than that. So when the average retail gasoline price broke $3.00/gallon for the first time after Hurricane Katrina, the public's shock and outrage were palpable, and political consequences followed promptly. And when it breached $3 last summer and again this spring, it was hard for many people to understand, because it was being driven more by tight refining capacity than rising oil prices. With oil company profits soaring on higher refining margins, that didn't seem fair, even if it was a natural consequence of supply and demand.

The current situation is different. This spring, when gasoline peaked at $3.22/gallon, crude oil accounted for less than half of its cost; today, that ratio is over 70%. Oil company profits are being squeezed, as a larger share of the higher oil revenue is going to producers in Venezuela, West Africa and Russia. These shifts may not evoke much sympathy for Big Oil, but they undermine claims that the companies are gouging consumers.

The public's apathy about high oil prices can't last. If oil remains above $90 for very long, sooner or later gasoline prices will spike higher, as heating oil prices are starting to do now. It could happen because demand strengthens, or after some accident or other event shuts down a key refinery or pipeline. Then gasoline will push toward the next major price threshold, the complaints will sharpen, and a torrent of angry emails to Congress will follow, with unpredictable consequences in an election year.

The Energy Diet

An article I read over the long weekend got me thinking about how we talk about energy supply and demand, particularly when we're looking at alternatives to current sources and usage patterns. In an editorial in the July issue of Chemical Engineering Progress, the journal of the American Institute of Chemical Engineers, the editor referred to efforts to "find the right 'energy diet'." I'm sure I've seen that phrase a million times before, but for some reason this time it struck me as particularly apt for addressing the energy and environmental problems we face today.

Generally, I've tried to frame competing energy alternatives in terms of how they might fit into our future energy mix. That often prompts questions about which current component of the mix would give up market share to the newcomer, as oil effectively yielded to nuclear power in the 1970s and 80s. But as accurate as it is, the terminology of "energy mix" lacks something in the context of our concerns about climate change and energy security. In particular, it is neutral about the size of the total energy pie, when its size ought to be as much of an issue as its makeup. "Energy diet" connotes something quite different: not only the notion of balance among the various components, but the idea that there might be an optimal quantity of energy for an entity of a given size.

If we talked more about a national or global energy diet, it would be harder to dodge the need for conservation and efficiency, to address the large quantities of energy we now waste. It could also remind us that not all calories--BTUs or kW-hours--are equal, in a world that is increasingly worried about greenhouse gas emissions. High-carbon energy sources such as coal might come to be seen as analogous to cholesterol-promoting foods or trans-fats. Renewables such as wind, solar and biofuels then start to look like fruits and vegetables: healthy components of a balanced diet, but not enough to live on, by themselves.

I don't want to belabor this point, except to say that the way we frame these issues is important. Terminology matters, whether it's the aide of a Congressional leader referring to coal power plants "destroying the air", or proposals to subsidize renewable energy sources by penalizing fossil fuels in the name of "energy independence." All-or-nothing tactics seem unlikely to deliver an energy mix that promotes economic growth while minimizing greenhouse and other emissions. Debating the national energy diet--how much of which kinds of energy we should consume--just might.