Two Letters Re: The Coming Energy Crisis: Hubbert’s Peak Or Not–Be Prepared!

Dear Jim:
Let’s face it, most of our energy shortfalls are completely self-imposed. Gone are the days of the 1950s when generations looked to and planned for the future, built infrastructure and power plants for the grand cities that would one day be. Now we in the US haven’t built a new nuclear power plant since the Three Mile Island incident. We’ve turned against coal even though we have hundreds and hundreds of years worth of the stuff or more. Ted Kennedy won’t let windmills go up any more since they wouldn’t look nice to Ocean front property owners in Massachusetts. We can’t drill in many parts of the Gulf of Mexico because we don’t want to oil on Florida beaches. We can’t build a new pipeline in Alaska because we down in the Continental 48 [states] claim to care about the caribou, who all but a handful of us will ever even see. Perhaps we should ask the good folks who live in Alaska about that, but my guess is, to the environmentalists, they up there just don’t know what is good for them, so why give them the chance to make a decision for themselves.

Since I was in grade school in the 1970s, we always had just 25 years of oil left. I remember vividly I was taught the US would run out of oil and landfill space by the year 2000. I resent that part of my education, or should I say indoctrination. Most of it was wrong and politically motivated then, as it is now. We have a lot of oil in the World, problem is it gets tougher and more expensive to get to. The Middle East oil is cheap to get to – it costs just 29 cents a barrel in overhead costs, whereas in the North Sea, it’s more like $18 a barrel for the rig. The difference between those two numbers is pure profit to the Arab leaders, which is why they are so rich. The laws of economics still serve us, especially with such inelastic demand (as price goes up, supply doesn’t decrease very much). As the price goes up, more and more exploration and new oil will be found, for it is now profitable to do so. Old fields will be “reclaimed” as they squeeze out more. Also, over time, people adjust and find substitutes, and change the way they live, at least to some extent.

For survivalists, the most simple forms of energy are clearly solar and wind. You can get systems for a few thousand dollars which will give you bare bones service for a RV level of electronic existence. You learn in a hurry to cut the waste and get to minimum usage, which is good after all. If you can actually tap into a water source, there are some nice small hydroelectric systems. Here in Wisconsin, wood is of course the common choice for heating, and would power a steam driven generator. Steam is expensive, messy, noisy, smelly, and a pain to watch over IMHO. If you are going to do it, I would opt to have a large system that powered a group of homes. One person can run a big one as surely as a small one. Other sources to be aware of are methane based – some farms use manure to generate power. I would be wise to know where such installations are for later, and these are million dollar operations that are a couple megawatts. A sterling engine would nice, but they are too inefficient, and nobody seems to make a good one the right size. Otherwise, its diesel (with additive) and propane generators for more of us, I suspect, which are both good long term storage fuels.- Rourke


Dear Jim:
It appears we are running out of oil, but how much of a crisis this will be can be debated endlessly. No one can predict the bounds of human ingenuity and future technological advances in power generation. The market’s adaptation to oil scarcity will mean higher oil prices, and a huge incentive to conserve and get creative with alternatives. The “Limits to Growth” crowd cried wolf once before in the 1970s, and still has egg on their face.
So, if I had to guess I would bet that the market would handle the transition to nuclear power, shale oil, solar, wind power etc., etc. with possibly some belt tightening, but no catastrophic disruption. Unfortunately we don’t have a free market in general, and especially not in building nuclear plants. The government’s regulatory delays to go nuclear, or implement other alternatives, may easily put us in a severe crisis. Count on the government to make it worse, as seen in the recent discussion of ethanol – squandering scarce resources on a net energy loser.
One thing I am pretty sure of is that the secondary or ripple effects of a perceived energy crisis will probably be more damaging than the crisis itself. Case in point, the U.S. military is in Iraq and Afghanistan at least partially because of the government’s perception of a looming energy crisis. Ripple effect – the hemorrhaging of our finances in the Mideast tarpit will make the economic and financial crisis we have coming even worse. The chewing up of our military equipment in the desert sand, will change the global balance of power with unpredictable effects.
If they subsidize gas prices the free market will not give the right signals to conserve and find alternatives. If they slap price controls on energy, as in the 1970s, then we will really see shortages and disruption. Longer term and more ominous, the conflict between governments to control scarce oil could easily start World War III.
Bottom line, we probably have a crisis in the works. Could the free market handle it, if left alone? Most likely. Will the government turn it into a real crisis? Definitely.
Regards, – OSOM “Out of Sight, Out of Mind”