Sunday, November 19, 2006

Does The Oil Drum threaten CERA's market share?

Cambridge Energy Research Associates (CERA) fired another missile at the peak oil movement last week by releasing a report attacking the notion of an imminent peak in world oil supplies and projecting an "undulating plateau" in oil production starting sometime after 2030. To rework a now shopworn phrase coined by the group's president, Daniel Yergin, this is not the first time CERA has attempted to undermine those concerned about a nearby peak, it's more like the fifth.

CERA is a profit-making business that sells its consulting services and specialized reports to a narrow, well-heeled audience. Why would it care about the pronouncements of a relatively small band of peak oil Internet vigilantes, some mostly retired oil company geologists, a few energy analysts and some concerned citizens who still constitute only the tiniest fraction of the public? The answer could lie in the accessibility, credibility and packaging of their message, a message that can be examined in detail for free by anyone (including CERA clients) at The Oil Drum, Energy Bulletin, The Oil Depletion Analysis Center , the Association for the Study of Peak Oil & Gas, and myriad other places.

No one who is reading this needs to be told how much the Internet has revolutionized the dissemination of information. And so, the question I ask in the title of this piece is actually more than half serious. Companies whose business is the collection and dissemination of specialized information are having a harder and harder time competing with the free resources that are now available online. They are also having a harder time keeping their information offerings under wraps since those who receive them often write about them on the net. In addition, if that information impinges on important public policies, its authors may find the information dissected by an army of volunteers whose expertise and depth may collectively approach or exceed that of the issuing company.

Firms that provide consulting or information on narrow technical or managerial issues almost never find themselves the target of such scrutiny. But CERA is large and well-known, and for reasons that are not completely clear it has staked its entire business on the assumption that hydrocarbon energy will be plentiful for three or four decades to come. Anything that calls that assumption into question threatens the credibility of those who work for CERA. Unfortunately, the very nature of the Internet has created a dilemma for the firm and its employees. How can CERA refute analyses appearing on such sites as The Oil Drum without giving away valuable information for free?

The answer is a public relations campaign that relies on carefully crafted messages which appear to refute CERA's detractors while presenting very little actual evidence. The beauty of this approach is that the evidence never comes under serious scrutiny. (Only a small portion of that evidence has so far leaked into the public domain through presentations by CERA itself or via short tidbits offered by those who've read the CERA reports.)

The firm would only be spending time on such a strategy if its principals thought that analyses from such sources as The Oil Drum and stories such as Peter Maass's piece in The New York Times were a threat to its credibility. It's not hard to imagine CERA clients reading the peak oil analysis now in the public domain and calling Daniel Yergin to ask what's up. It's also not hard to imagine that there might be some CERA clients who dislike talk of a nearby peak because it is bad for business or bad for their position in the world (as in the case of certain oil exporting countries). And, this might be true regardless of what those clients actually believe about the timing of a peak.

The CERA counteroffensive got underway in earnest last year with a guest editorial authored by Yergin in The Washington Post. It has since been escalating with a series of media interviews, an appearance before Congress and the occasional new report like the one in August predicting clear sailing through 2015.

CERA's tactics are shrewd and not necessarily easy for the uninformed reader to detect. One tactic is to accuse the other side of what you yourself are doing and thus draw attention away from your own actions. The press release trumpeting the availability of the report states that peak oil modelers "have not made available a transparent and detailed analysis that would allow objective and rational discussion." First, CERA must not have looked very hard since much of the work is available in print or on the web and many modelers have been more than happy to explain their methods to questioners. Second, CERA makes this claim even as it restricts access to its own analysis, which it says it must do, of course, for business reasons. (Each copy costs $1,000.) But for a company whose whole operating premise is that peak oil is decades away, one would think it would want the world and especially potential clients to know exactly why it believes this. Perhaps CERA simply doesn't want the kind of scrutiny that would result from a public release of the report. It's hard to believe that the firm would miss the income.

In addition, Yergin has said that for Matthew Simmons "[peak oil] seems to be a theological issue." Simmons' book, Twilight in the Desert, sounded an alarm about Saudi Arabia's capacity to produce more oil. But Yergin, who authored Commanding Heights, a paean to free-market ideology, may need to exorcise his own god--the god of the marketplace--in order to assess the oil situation more objectively. For Yergin the marketplace will fix all.

Another important tactic is to use words and phrases that denigrate one's opponent. The report itself is entitled, Why Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources. Do I need to underline the denigrating words?

A third tactic is to set up straw man arguments. Here is where CERA excels. The CERA report pretends that among peak oil theorists there is exactly one estimate for the remaining recoverable oil. Here CERA doesn't acknowledge differing definitions of oil and ignores what CERA experts must surely know, namely, that the low estimates don't include unconventional reserves such as oil sands. Many peak oil modelers believe those unconventional reserves won't change the date of the peak much, but may help to cushion the decline in output. Nevertheless, CERA chooses the lowest estimate without explanation so as make that estimate seem unreasonable within the context of the report.

CERA also claims that peak oil theory always implies a "sharp decline" in production. In fact, peak oil analysts vary in their views. Some like oil analyst Henry Groppe say the peak has arrived and that we are now on a long plateau. Consultant Robert Hirsch does indeed worry that the decline might be sharp. Resource economist Douglas Reynolds thinks that oil supplies will trace out a long, gently sloped curve of decline. Of course, CERA wants to lump all such theorists into the Chicken Little category.

In addition, the report claims that all peak oil modelers ignore political factors, economics, technology and infrastructure. Some do and some don't. It depends on what the modeler is trying to accomplish. Certainly, all assumptions need to be examined including CERA's.

The report claims that peak oil thinkers focus on "superficial analysis of reservoir constraints." In fact, they focus on observed and expected flow rates as well. Those flow rates do, of course, have to come from reservoirs. But, here CERA itself doesn't appear to deal with possible bottlenecks for flow rates from such sources as oil sands and oil shale. The firm just assumes that technology will provide the needed bounty. Finally, there is perhaps CERA's favorite straw man argument: Peak oil believers say we are running out of oil. Of course, what they really say is that rates of production will decline after peak.

Let's stop for minute. The authors of the CERA report say they have done an exhaustive field-by-field survey of the world's existing oil supplies. And, they claim to have done a detailed projection of new discoveries. But for some reason they didn't bother to check out the true spectrum of opinion among the peak oil community before putting misleading and distorted arguments in the mouths of those who disagree with them. It's hard to accept that the authors did this out of carelessness rather than calculation.

Despite the seeming effectiveness of the public relations offensive, CERA may ultimately find itself in a losing battle. There is, of course, the question of timing. Events may overtake us all. But even if a peak is delayed for some time, CERA has put itself in an untenable position. Please forgive the analogy, but when it comes to arguing its case, CERA is like a stripper who wants all the attention, but is only willing to show a little leg. The major voices on the other side are willing to bare all and let anyone with an Internet connection examine their logic and evidence.

For all these reasons, I take with a grain of salt CERA's supposed olive branch in the report which states: "We respect the urgency and seriousness with which some with whom we disagree put their case...We invite others to join in a considered dialogue, which now seems too easily lost in the rancor."

If the firm's partners really want to have an honest dialogue, they could start by making their own evidence available (not just their conclusions) and by dispensing with the dishonest straw man arguments. But, CERA probably already knows that the kind of scrutiny that would surely follow could easily be bad for business.

CERA is in the forecasting business. But, forecasting is nothing more than pretending to know the one thing which none of us can know: the future. Given how much money people are willing to pay for forecasts, it is doubtful that CERA's soothsayers would ever concede that they, like the rest of us, are in the dark about the exact trajectory of oil supplies. It's not that forecasts can't be useful tools. They can be. However, this is not because we can get forecasts exactly right with any regularity; rather it's because forecasts can help us assess the risks we face and plan for those risks.

On that count I'm sticking with writers of The Oil Drum, their kindred spirits, and the information that is publicly available. If CERA would like to join the conversation instead of merely engaging in public relations campaigns, that would be a step in the right direction. Until then, those looking for clues about the future of oil and other hydrocarbons might do no better than to start with The Oil Drum and other like-minded sites and work their way out.

Sunday, November 12, 2006

Attitude adjustment: Facing our ecological predicament

After a talk I gave last year on food and energy, one audience member remarked that it seemed to him that we face challenges so daunting that little can be done to stop a worldwide collapse of civilization. "What is the point in trying?" he seemed to be asking. As I prepare for guest lectures on peak oil and the consequences of overshoot at a local college this week, I'm asking myself: Is that person's attitude really all that unreasonable?

Attitudes, of course, flow from assumptions, and there is a wide assortment of assumptions regarding our ecological future. Those assumptions are widely debated and large bodies of evidence have been marshalled for various views. But, perhaps we also need to know something about the usefulness of certain attitudes. People maintain particular attitudes not merely because of the evidence available to them, but also because of the efficacy of the attitudes themselves.

For some people, of course, the problems of global warming, energy depletion, soil erosion and the whole gamut of ecological dangers aren't problems at all. These people simply deny the existence of any ecological problems. This attitude may seem foolhardy until we understand its advantages. First, those who deny our ecological problems are free from the anxieties about any potential bad effects. That leaves more emotional energy available to focus on day-to-day activities and immediate needs. Second, the denial itself serves to immunize these people against contrary evidence. This is a timesaver since contrary evidence has been ruled inadmissible ahead of time and therefore need not be considered. Third, the deniers may not necessarily be cocksure of their position. But, they may also believe that if they are wrong, the consequences of any gathering ecological calamity may be so far in the future so as not to matter to them or even to their children.

Strangely, my glum audience member arrives at almost the same place as the deniers just mentioned because he assumes that our problems are so immense that they cannot be addressed. Intellectually, our pessimist has accepted the premise of ecological peril and social collapse, so he is not freed from the anxieties bred by this knowledge. He does, however, gain time and emotional energy to focus on what is left of the "good life" before the worst hits. He doesn't need to spend time evaluating new evidence for or against the possibility of a collapse. And, if the consequences of the inevitable calamity do visit him, he will have the satisfaction of having made the most of his time prior to its arrival. If there turn out to be no severe adverse consequences in his lifetime, at least he will not have wasted much energy worrying about them. Yes, his children will likely be affected, but under his assumptions, there is nothing he can do about it anyway.

So far, I've detailed two opposing viewpoints that seem nothing more than a defense of apathy. But, there are two other slight variants that lead to only a little more activity though they may appear to be more "reasonable" to the casual observer.

First, there are those who believe we have potentially serious problems, but that technology guided by the marketplace will inevitably solve them. They may even allow for some government intervention, for example, through carbon taxes to help slow global warming. The advantages of this view are obvious. There is very little work for individuals to do. Corporations and even to a certain extent the government will take care of everything. (Some may regard this as a disadvantage, but that's another discussion.)

Second, there are those who share the aforementioned belief that we face potentially serious problems; however, they also believe that only the right kind of technology can address these problems, so-called "green" technology. This technology will not simply be introduced by the marketplace, but must be subsidized or mandated by the government. Other bad technology such as coal-fired power plants must be actively and severely regulated and ultimately replaced. While this view requires a little more action since citizens must pressure their governments to enact the various subsidies, standards and regulations needed for this bright green future, it still envisions a more or less business-as-usual world albeit one based on "green" technology.

Paradoxically, the hardest sell is not a view that would require the greatest change in belief. We've already covered that. It's actually quite easy to sell people on a deeply pessimistic view of the future. As we have seen, those who hold such a view may adopt an attitude of complete resignation that resembles in its results the attitude of those who deny any problems at all. (Compare, for example, the apparent resignation of those who believe in an imminent biblical apocalypse.)

The hardest sell to any audience is that there is a chance for us to chart a course to sustainability, but that it will take a lot of work at every level: individual, household, municipal, state, federal and even international. And, by the way, when we get there all of us will have considerably less material wealth than we do today.

Not surprisingly, the thought of working hard for a future with lowered expectations is not all that appealing to a public whose ever-expanding pursuits continue to float on a sea of seemingly endless fossil fuels. The advantages of the path to sustainability are actually quite numerous. One can point to many nonmaterial benefits such as closer communities and families, a closer relationship with nature, a slower pace, possibilities for a deeper spiritual life, and an ecologically sound human society for the generations to come. Unfortunately, all of these advantages have little appeal to an audience that would prefer something closer to business as usual.

And, yet the approach which is hardest to sell seems like the safest. It relies on the concrete, concerted actions of people everywhere doing things that require no miracles of technology, no rosy assumptions about the future availability of critical resources, and only limited faith in the marketplace (a marketplace that has consistently given us the illusion of decreasing scarcity.) It is an approach that one can get started on today without the enactment of any big government program. To that extent it empowers individuals and small groups.

So, why does this approach which some are calling Plan C get the cold shoulder? I think in part this is because it requires people to hold in their minds two simultaneously troubling ideas: 1) the terrible ecological dangers that we face and 2) the difficult truth that we can only surmount them through efforts that have grown deeply unfamiliar to many of us. It puts the burden for reaching sustainability squarely on the shoulders of every community member. Given our atrophied community-building skills and our vast ignorance of nature, we may be forgiven for wondering if we are up to the task. It is more comfortable to think we can rely on experts in government and industry whom many of us assume (perhaps wrongly) know what they are doing.

If Plan C is to become the main focus of action, as I believe it must, then people will ultimately need to accept two critical notions: 1) that technology will not save us and so we must save ourselves and 2) that we can save ourselves and our children because we are still capable of learning and executing the things we need to do to build a sustainable society.

William James in his essay, "Is Life Worth Living?", wrote:

It is only by risking our persons from one hour to another that we live at all. And often enough our faith beforehand in an uncertified result is the only thing that makes the result come true. Suppose, for instance, that you are climbing a mountain, and have worked yourself into a position from which the only escape is by a terrible leap. Have faith that you can successfully make it, and your feet are nerved to its accomplishment. But mistrust yourself, and think of all the sweet things you have heard the scientists say of maybes, and you will hesitate so long that, at last, all unstrung and trembling, and launching yourself in a moment of despair, you roll in the abyss. In such a case...the part of wisdom as well as courage is to believe what is in the line of your needs, for only by such belief is the need fulfilled.
Let us not hesitate and let us believe what is in the line of our needs so that we may succeed.

Tuesday, November 07, 2006

The 'Dark Matter' of American Politics

There is an invisible "dark matter" in American politics influencing the issues debated in every election but which few voters or politicians perceive. To understand this analogy you will need to recall that dark matter was postulated by scientists decades ago to explain the movements of large objects such as galaxies. Such movements could not be explained by the gravitational effects of the known, visible matter in the universe. Instead, scientists reasoned, those movements must also be influenced by gravity from unseen matter which they dubbed "dark matter."

The "dark matter" of American politics is the physical world--the climate, the air, the water, the minerals, the energy resources--upon which all of our political, social, cultural and economic life depend. The state of our physical world exerts a kind of hidden gravitational pull on the important issues of the day. And yet, to listen to the rhetoric of the most recent election campaign, you would conclude that the ecological underpinnings of our civilization are in such good condition that they require virtually no attention.

The vast majority of candidates of both major parties have barely mentioned global warming. (There are, of course, notable exceptions such as California governor Arnold Schwarzenegger.) Despite a seven-year drought in the West, discussion of the link between that drought and global warming is completely lacking even though all the scientific evidence points to more and longer droughts as the world warms.

The future of water supplies remains a local concern and the drought in the West has barely registered as a national issue except in those areas seeking federal drought aid. Most puzzling of all, the devastation wrought by Hurricane Katrina has virtually dropped off the political radar. When it is discussed, the discussion turns to the incompetence of the federal and state response, but not to global warming which may be responsible for the increasing number of intense storms entering the Gulf of Mexico.

With regard to energy, there is talk of energy security and the need to reduce oil imports. Enthusiasm is greatest for the development of biofuels; but that's primarily because the manufacture of such fuels provides an opportunity for heavy government subsidies to politically well-connected biofuels processors; their army of lobbyists can and do reward politicians with huge campaign contributions. Without the subsidies most of the industry would disappear.

The most prominent issue of the American campaign, of course, was the war in Iraq. While most Americans know the obvious--Iraq has lots of oil and America needs lots of oil--the debate has centered around democracy, terrorism and the human and financial costs of the conflict. Very little has been said about the fact that oil is central to economic growth and that there is no ready substitute for it. And, virtually nothing has been said about the possibility of a peak in world oil production, an event which is likely to happen within the next decade or two. (Some say it already has.) From the political rhetoric you wouldn't know that the reason Iraq has been the central issue of the campaign is precisely because of its large role in the oil markets.

In addition, soil erosion and fertility, the depletion of major fisheries, the destruction of forests, and the skyrocketing prices of raw materials such as copper, nickel and steel are all nonstarters for political candidates. It's as if the basics of civilization--stable climate, fresh water, fertile soil, minerals, and energy supplies--were afterthoughts or at most a problem of location as in the case of oil.

And yet, major issues in American politics flow directly from our ecological predicament. Perhaps most obvious is the increasing vulnerability of the American way of life to the vicissitudes of Middle Eastern oil politics and conflict. This vulnerability has its roots in the peaking of domestic oil supplies way back in 1970. The stagnation of incomes since then has to do in part with the enormous amount of American wealth which has been sent overseas to supply the economy with the energy it needs.

Heavy military expenditures, increasing public and private debt, and threats to our democratic institutions are all related to the stressed condition of the biosphere. A detailed list of the symptoms that result from that stress--the stress of living beyond the earth's carrying capacity--is provided in the latest edition of Limits to Growth. That list reads like a summary of the causes of American political disputes over the past 30 years. Unfortunately, many of these symptoms have been cast in ideological terms instead of ecological terms. This has led people to believe that addressing the symptoms is merely a question of electing the right politicians rather than reworking our way of life. The list of symptoms bears repeating:

1. Capital, resources, and labor diverted to activities compensating for the loss of services that were formerly provided without cost by nature (for example, sewage treatment, air purification, water purification, flood control, pest control, restoration of soil nutrients, pollination, or the preservation of species).

2. Capital, resources, and labor diverted from final goods production to exploitation of scarcer, more distant, deeper, or more dilute resources.

3. Technologies invented to make use of lower-quality, smaller, more dispersed, less valuable resources, because the higher-value ones are gone.

4. Failing natural pollution cleanup mechanisms; rising levels of pollution.


5. Capital depreciation exceeding investment, and maintenance deferred, so there is deterioration in capital stocks, especially long-lived infrastructure.

6. Growing demands for capital, resources, and labor used by the military or industry to gain access to, secure, and defend resources that are increasingly concentrated in fewer, more remote, or increasingly hostile regions.

7. Investment in human resources (education, health care, shelter) postponed in order to meet immediate consumption, investment, or security needs, or to pay debts.

8. Debts a rising percentage of annual real output.

9. Eroding goals for health and environment.

10. Increasing conflicts, especially conflicts over sources [that is, resources] or sinks [for pollution].

11. Shifting consumption patterns as the population can no longer pay the price of what it really wants and, instead, purchases what it can afford.

12. Declining respect for the instruments of collective government as they are used increasingly by the elites to preserve or increase their share of a declining resource base.

13. Growing chaos in natural systems, with "natural" disasters more frequent and more severe because of less resilience in the environmental system.

The authors of Limits to Growth go on to say:

A period of overshoot* does not necessarily lead to collapse. It does require fast and determined action, however, if collapse is to be avoided. The resource base must be protected quickly, and the drains on it sharply reduced. Excessive pollution levels must be lowered, and emission rates reduced back to levels below what is sustainable. It may not be necessary to reduce population or capital or living standards. What must go down quickly are material and energy throughputs. In other words, the ecological footprint of humanity must be lowered.

So, what has been keeping American voters from understanding the ecological predicament which all humans now face? One might want to blame in part the suppression of research on global warming by the current administration. Or one could finger active propaganda efforts by global warming deniers such as ExxonMobil. Those efforts seem to have had some effect on the American public; 59 percent believe that human activity has no effect on climate.

Some blame must go to the environmental movement itself for having defined environmental concerns as either 1) remote and narrowly focused on certain strips of wilderness or endangered species or 2) mere adjuncts to better living in an industrial society as was the case for campaigns for clean water and clean air. But perhaps the most effective piece of propaganda affecting Americans' views on the sustainability of their way of life has been the continued availability and low prices of the basic resources they use. The marketplace has been inaccurately signaling that there is nothing to worry about. Resource economist Douglas Reynolds calls it the illusion of decreasing scarcity.

To complement the public's experience, there is the convenient market ideology of the cornucopian economists who espouse virtually no limits to economic growth. Cornucopian ideas find resonance in American culture because the experience of European colonists and their descendents in the New World--especially in what is now the United States--was that resources are basically limitless. Anyone willing to do the work to extract them could make a good livelihood. Critical to this mindset is the fact that the United States was the world's preeminent oil power and its largest oil exporter well into the 20th century.

The question then is, What would it take for the true ecological picture to break through into American political discourse? Only emergencies such as the two oil crises of the 1970s have so far been able to focus the public's and the politicians' minds on critical ecological issues. Many people believe that we are heading for just such a crisis when world oil production begins to decline in the next decade or two. Some believe the decline has already begun and that its full effects are only a few months or at most a year or two away.

The only rational response given American political realities is to try to educate as many Americans as possible about the true context in which we now live and the limited range of responses available to us given our ecological predicament. When the crisis comes, if the number of people who understand our true predicament is sufficient, they may be able to spread the word far enough to move political, economic and social decisions in the right direction. If not, then the "dark matter" of American politics will remain hidden and the country may face a series of economic and environmental reversals born of faulty understanding and false hopes.

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*The condition of having exceeded for the time being the permanent carrying capacity of the habitat.