3 Cats Stalking

On Trusting Economic 'Experts' on the Future of Energy Supplies

I have a dilemma. My intellectual background is rooted in the American educational system. I learned early to listen to what the experts had to say and to believe. Since my own field of expertise became physics and engineering and computer science, I have developed a strong bias to believing the world is what the other engineers and physicists and computer scientists say it is. The educational level and experience of the 'experts' in those physical sciences matter.

My dilemma is that when I try to apply the rules of intellectual expertise to other disciplines, too many times I cannot trust those other experts. Take for instance, economics, where self-proclaimed experts in that field comment on the physical world of which I have long-time experience. Too much of the time their background and education levels in economics does not seem to be correlated with an understanding of the real world. So, after 70-plus years of trying to bridge the gap between soft-science experts and physical-science experts, I have concluded that the majority of economists in particular believe in a web of pseudo-science that allows them to ignore the fundamentals of the physical world. They are too often following the teachings of someone from long ago who did not have the oppportunity to consider the limits of the world we now live in.

My dilemma really hurts when I discuss issues of energy supplies with other physical scientist/engineers who apparently have complete faith in the conclusions of the economic experts.

Most of the current economic theory is based upon an assumption of limitless resources. Therefore, they can forecast limitless growth. But in the physical science of medicine, we know that when the bacteria in a petri dish consume all the food there is, they all die. The explosive growth of the colony of bacteria ensures its demise.

There are a few mavericks in the economic arena who are working on theories of how an economy survives when there are limits on growth, and their studies will soon become most important. Until then, I don't trust most of the economic experts who tell the world there is nothing to worry about on the future of energy supplies.

It goes by several labels, but the one I learned about a few years ago was Peak Oil. Now it is upon us.

 

Barrels and Drums, or Drums and Barrels

Definition: one (1) Barrel of Oil is forty-two (42) US liquid gallons of liquid measuring 158.987294928 liters. This is based on the 1870s wooden barrel used to transport liquids around the world. It is NOT the 55 gallon drum that became a standard during World War II. The 42-US-gallon oil barrel is a unit of measure. However, such wooden barrels are no longer used to transport crude oil -- the industry now uses tankers and pipelines.

The modern day 55-gallon steel drum (known as the 44-gallon drum in Britain and the 200-litre drum elsewhere) resulted from military shipping requirements in World War II, the first war in which trucks, cold rolled steel, stamp or pattern forging machinery and welding were widely available. The drums helped win the Battle of Guadalcanal in the first U.S. offensive in the South Pacific Theater. The U.S. Navy could not maintain control of the seas long enough to offload aviation fuel for U.S. aircraft ashore, so the drums were often transported to the island on fast ships such as destroyers and shoved over the sides (or, time permitting, lowered in cargo nets). Aviation fuel is lighter than seawater, so the drums floated, and Navy Seabees in small craft corralled the drums.

There has been confusion about the true size of a barrel of oil, and some have assumed that the 55 gallon drum had become the standard. NOT TRUE. The real present day measurement is the old 1870s definition: 42 US gallons.

Risk Aversion and Mitigation for Unstable Fuel Supplies

I live in a small community of RVers in the high desert region of southern California. RVers are people who generally live in, or at least use, a rolling home, either pulled by a pickup truck or containing a motor so it can drive itself (called a motorhome). There are about 290 retired families (some single) here. We are 14 miles from the nearest services: groceries, fueling stations, restaurants, general stores, and medical services. It is quiet and beautiful.

Our community functions largely on volunteerism. Every one does something to help. It may be repairing the roads, serving ice cream, cutting weeds, tending the irrigation system, and working on the Board and various committees to bring a semblance of order to our collective efforts. Part of my volunteerism is to study various risks to our community and way of life. I have looked at earthquakes and climate change and some economic risks. My latest request was to look at the risks regarding fuel availability and costs. What risks do we face in the next five years, and how may we mitigate them?

I have been studying Peak Oil and other resource depletion issues for the past five years. I see a growing consensus that Peak Oil has happened and within a few years (maybe by 2015) the USA will begin to see the effects of a world-wide diminishing production rate for fossil fuels. This consensus includes the IEA and the US Military. Of course, there are also those who say we will never be faced with a problem of diminishing resources -- but with my task I still have to consider what is the risk if those optimists are wrong.

There are two primary effects to be considered: supply and demand for fossil fuels. Best estimates at this point are that production supplies will be decreasing by 2% per year by 2015. At the same time, while demand in the USA is constant or maybe decreasing slightly, demand from China, India, and other developing countries is increasing at nearly double digit rates. Somebody in the world is not going to get the supplies of fossil fuels they want without paying big-time for it.

The nature of the world supply system is that shortages of fuel will develop in some locations. It will probably develop first in some of the poorer developing countries, but it could be here in the USA. We could find some day that at least a few fueling stations hang a sign out that says their tanks are empty until further notice. For example, this could be the knock-on effect of some oil tanker being diverted from the local refinery in Long Beach and sent to China because they will pay more for the oil.

If fuel shortages become a persistent problem, expect rationing. Our society must have fuel for the fire trucks and EMTs. Other vital services like food transportation will get priority. Ride sharing will again become fashionable. (I remember the shortages back in the 70s.) Sorry, RVers may the at the bottom of the totem pole. The people in my community should plan on filling their fuel tanks during times when fuel is available so they can still move when fuel is in short supply.

And there is the matter of cost. Here is southern California we are currently paying $3.40 per gallon for diesel, over $3 for unleaded. That is with the world price of oil at $89 per barrel. If demand keeps growing like everyone wants it to (it's called a recovery), the oil price could climb to over $100 per barrel, and the cost at the pump for diesel and unleaded could climb to over $5 per gallon.

In Europe the price of fuel is already over $5 per gallon equivalent, so we know society can live with that, but the lifestyle is very different. For one thing, they do not have so many RVs. They find other ways to get around.

People in my community should expect to see lifestyle changes. We must car-pool into town to shop; we must order more things over the Internet and have them delivered to us; we must look into grocery delivery services; maybe we should buy a community van. As RVers we will probably not travel so much and will stay at home more of the time. Of course, that means we are here during the hot summer and will use more electricity for air conditioning. The overall cost for maintaining our community will increase because we must use fuel to get some things done.

And by the way, if the cost of fuel goes up, expect the cost of electricity to go up as well. But that's another set of problems.

So you see some of the changes we have to look at, and they will probably start within the next five years. 2015 may be a very interesting year of adjustment.

sam