Dmitry Podborits

09:30 pm: The End Of Exurbia and High Noon in The Desert

The Quest For Complex Understanding of Nuanced Realities

The January/February 2006 issue of the World Watch Magazine features an article by Dr Vaclav Smil, a Distinguished Professor at the University of Manitoba at Winnipeg, who is also an award-winning researcher and the acclaimed author of a number of books on the subjects of energy, the biosphere and the civilization.

The article is titled Peak Oil: A Catastrophist Cult and Complex Realities and can be viewed in PDF form here at the U. of Manitoba site.¹

In the words of the author, the purpose of the article is to "dismantle the foundations of the new catastrophist cult" -- the conclusions by "peak oil advocates"² (Colin Campbell, Kenneth Deffeys, et al.) These conclusions, in Dr Smil's view "are based on interpretations that lack any nuanced understanding of the human quest for energy, disregard the role of prices, ignore any historical perspectives, and presuppose the end of human inventiveness and adaptability." The author slams the "peak-oil groupies" with the accusation of spreading "the culture of doom", and raises the following key points to rebut their arguments, on which (the points) he then elaborates in the article:

"First, these preachings are just the latest installments in a long history of failed peak forecasts.

Second, the peak-oil advocates argue that this time the circumstances are really different and that their forecasts will not fail—but in order to believe that, one has to ignore a multitude of facts and possibilities that readily counteract their claims.

Third, and most importantly, there is no reason why even an early peak of global oil production should trigger any catastrophic events."

Among his elaborations on the point number three, Dr Smil presents this argument:

"[A]s already noted, price feedbacks are inexplicably missing from all accounts of coming oil depletion and its supposedly catastrophic consequences. Instead, there is a risible assumption of demand immune to any external factors. In reality, rising prices do trigger powerful adjustments. Between 1973 and 1985 the U.S. Corporate Average Fuel Economy standard was doubled to 27.5 miles per gallon, but further improvements were not pursued largely because of falling oil prices: a mere resumption of that rate of improvement technically easy to do) would have us averaging 40 mpg by 2015. A more aggressive adoption of hybrids could bring the rate to 50 mpg, more than halving the current U.S. need for automotive fuel and sending oil prices into a tailspin."

I believe that, considering the credentials of the author, this is inexcusably hapless, misleading and misguided analysis. After all, isn't it true that the energy consumption, and oil consumption in particular, has been steadily increasing, despite well-publicized improvements in energy efficiency of individual cars and trucks, as (a) more and more people (notably, in the emerging economies such as China and India) participate in daily driving, and (b) people drive longer and longer distances (notably, with the continuing suburbanization and "exurbanization" in North America)?

Other issues aside, how can one analyze the trends in U.S. energy consumption without taking into account the overall trend for exurbanization of the U.S.?

Generally, it is not my view at all that questions like these can be answered with statistics, however, what statistics can be good for is to clearly highlight a trend the context for which has already been sufficiently established. Take a look, for example, at this U.S. Census Bureau statistics of "New Privately-Owned Housing Units Authorized in Permit-Issuing Places". If we consider one-family units alone, about 1.7 million of them is being created in the U.S. per year (the U.S. Census statistics for home construction are on annualized basis^2a), of which about one-half (867,000) are in the fast-growing South (as of this writing, the latest month for which the data is available is November, 2005). And the trend is accelerating. The fastest growing South shows 16.8% (!) increase in one-family units year-to-year, while the U.S. overall is "only" 7.7%. Where do you think the bulk of these units go?

in In this year-old article in The New York Times [free registration required] NYT columnist David Brooks quotes an observation that "America's population is decentralizing faster than any other society in history", and continues:

The New York Times -- November 9, 2004
Take a Ride to Exurbia
By DAVID BROOKS, Orlando, Fla.

"People in established suburbs are moving out to vast sprawling exurbs that have broken free of the gravitational pull of the cities and now exist in their own world far beyond. Ninety percent of the office space built in America in the 1990's was built in suburbia, usually in low office parks along the interstates. Now you have a tribe of people who not only don't work in cities, they don't commute to cities or go to the movies in cities or have any contact with urban life. You have these huge, sprawling communities with no center. Mesa, Ariz., for example, has more people than St. Louis or Minneapolis."

However, this is just, so to speak, a social observation, a note on living conditions. In a very recent article The New York Times makes a step further and connects the two realities:

The New York Times -- December 18, 2005
Far and Away: In Exurbs, Life Framed by Hours Spent in the Car
By RICK LYMAN, FRISCO, Tex.

"Frisco is an exurb caught in an adolescent age of gawkiness, where every major artery is under construction, or soon will be, and a drive across town can be a maddening crawl between orange cones and roaring bulldozers.

America is growing at its fastest in places like this, at the margins of some of its biggest cities, in the domain of the automobile and the master-plan subdivision, far from the urban centers that spawned them.

They begin as embryonic subdivisions of a few hundred homes at the far edge of beyond, surrounded by scrub. Then, they grow - first gradually, but soon with explosive force - attracting stores, creating jobs and struggling to keep pace with the need for more schools, more roads, more everything.

And eventually, when no more land is available and home prices have skyrocketed, the whole cycle starts again, another 15 minutes down the turnpike.

But in the meantime, life here is framed by hours spent in the car.

It is a defining force, a frustrating, physical manifestation of the community's stage of development, shaping how people structure their days, engage in civic activities, interact with their families and inhabit their neighborhoods."

One can only wish that the great newspaper demonstrated the insight and/or courage to mention the degree of sensitivity of this way of life to the oil markets' dynamics in the context of described realities -- let alone to comment on possible changes in the daily routine, populace's sentiment, and politics that might affect these currently fast-growing communities in a not-too-farfetched case of "decreased affordability" of oil and energy as a whole.

It wouldn't take a whole lot of imagination to visualize the type of liability that these communities would present to themselves and to the society as a whole in case of "oil markets becoming disorderly". It is unconscionable, however, for a society of responsible grown-ups not to even entertain the consequences of such a lifestyle, practiced by tens of millions of people (with millions more joining every year), in the epoch that we are entering. I would like to consider this -- purely hypothetical, but more probable than some people would be willing to let on -- scenario. From geopolitical standpoint, such lifestyle represents a phenomenal strategic disadvantage (imagine the logistics of policing, providing aid to, and preventing their life from becoming desperate in a crisis for tens of millions of people in dispersed communities, when military personnel, equipment and supplies will be probably needed elsewhere). From the financial standpoint, it presents a risk of a colossal default and the consequent write-off on tens of millions of mortgages, which, without a doubt, would collapse the world's (not just U.S.) financial system. Just to put things in perspective: the Long Term Capital Management collapse in 1998 would have had an impact on the economy that was estimated at 100 billion dollars. Well, if you consider the average mortgage size to be (to pick a number) $200,000, it would take a write-off of "only" half a million mortgages to make the same kind of a financial impact. Half a million one-family homes are being constructed in only a matter of a several months in the South alone. Do you think that any adjustments to the short-term interest rate the the Federal Reserve could make would be able to have any noticeable impact at all under such conditions? By the way, it is not difficult to imagine the impact that such an event would have on the dollar as the world's reserve currency, the dollar-denominated debt all over the world, and on the oil markets, which would be prevented from stabilizing ever again. I am sure that I would be counted among the "catastrophists, spreading the culture of doom" by Dr Smil and the like-minded people, but it is my firm view that people grossly underestimate the risk of a scenario under which the living arrangement and the infrastructure of exurbia would present a clear and present danger to the national security of this country. If members of Al Qaeda have infiltrated the urban planning circles of the U.S., the best strategy they can pursue from their perspective is simply to allow the current trend to continue.

The financial leverage can be represented as a kind of an upside down trapezoid, whose base -- the short of the two parallel sides -- represents how much was invested, and whose top -- the long side -- represents how much money is controlled. The short side (the base) of the leverage trapezoid in the case of LTCM was about $4.6 billion -- this is how much the Fed had to "persuade" the biggest financial firms to invest to prevent the whole trapezoid to collapse. The long side was estimated at $100 billion -- this would have been the impact of the leverage on the economy had the trapezoid been allowed to collapse.

The mortgages represent the base -- the short end of the leverage trapezoid, as colossal and highly sophisticated derivatives portfolios in countless banks are built on leveraged mortgage loans. The type of leverage that LTCM used (over 20 times) is probably on the extreme side, however it is unquestionable that the financial impact of the collapse of millions of mortgages, should it ever happen, will be much, much bigger than the total of the mortgages^2b. To put it in perspective, the short side of the mortgage trapezoid is much larger than the long side of the LTCM trapezoid was. Although the mortgage system has sophisticated built-in risk mitigation mechanisms with part of the risk borne by the U.S government, part of the risk borne by financial institutions and part by individuals the sheer magnitude of the impact will ensure that all these will be no more helpful than extra layers of cardboard walls as a protection against an explosion of a nuclear reactor. The U.S. and the world financial and economic landscape will never be the same after such an event. The political implications of this are anybody's guess.

It is also very obvious that, in the case of suddenly skyrocketing energy prices, people will use everything in their power to mitigate the crisis short term in such a way that will necessarily execerbate it longer term -- for example, by going deeper into debt -- before radically changing their lifestyle under such conditions. This is because people typically even consider emergency relocations from their homes and their communities only as a matter of the last resort, in periods of strife and turmoil. (Actually, it is not so clear what is the cause and what is the effect here, because periods of strife and turmoil happen when people are forced to leave their communities -- and by the way, I hope you don't think that cities and near suburbs will suddenly become more affordable and offer attractive alternatives to millions of ex-exurb residents who came to an unexpected realization that the far reaches may had not been such a great idea to begin with, as their affordability turned out to be more illusory than reality-based)

My personal view is that, in our society as currently observed, high oil prices play a very valuable role (and they thus should really be much, much higher), as they serve as a sort of a painful feedback signal for a child who burns himself by touching the hot iron before grabbing it, instead of listening to his Mom who admonishes him to stay away from it. Pain is the child's only incentive, as he still lacks the full understanding of the consequences of his actions, and has yet to learn to think ahead. The somewhat high energy prices are currently the only limiting factor for exurbanization. If one imagines that the dynamics of the oil markets would suddenly turn around, and the oil prices temporarily drop to mid-1990s levels, this would only present a powerful additional boost for continued ex-urbanization, as people who have been priced out of the suburbs would continue to move farther and farther into the outer reaches of what Jim Kunstler calls the "asteroid belts" of the society.

Also, note that, if one "talks the talk" that the market forces will offer solutions that will mitigate our energy problems, one really should "walk the walk" and give the markets a chance to do this work. This means that one really shouldn't attempt to control the market prices by political or anti-market means, such as by releasing the oil from strategic petroleum reserves, much less by cajoling Europeans to release oil from their strategic reserves for our consumption. How can we expect to know what kinds of solutions the markets are capable of finding if we are too weak to let them, as our politicians succumb to the slightest political pressure and are afraid to take any heat at all?

For example, as soon as the gasoline prices go above a certain level, you see senators here and there push for temporary lifting of the gas tax, and thus score points with their constituents. Excuse me, but is it not the raison detre of higher prices in the market system, which should, by definition, to limit consumption of the scarce commodity? How can you expect any help from the markets forces under such circumstances? To use oil from strategic reserves in order to sustain the exurban development and not allow hummer dealers to avoid bankruptcy, i.e. use oil from strategic reserves in order to create infrastructure that is designed to increase our future non-negotiable oil demands -- can anything be more shortsighted and misguided?

In the society as infantile and as non-attentive to reality as ours, the ex-urbanization is taken as a welcome trend by almost everybody:
- by would-be home owners who see this as an opportunity to get "affordable" living in the "nice" environment (and energy worries be damned!);
- by the politicians who advertise the view of non-negotiable way of life (which must be good because people want it);
- by the economists who know that home construction, furnishing and financing have become the primary engine of the US economy (that also cannot be outsourced! a major plus), and who are concerned only with the year-to-year growth, not with longer-term consequences;
- by Wall Street, which is mostly concerned with the same;
- by the real estate industry;
- by the mortgage financing industry;
- by the homebuilders;
- by the municipalities;
- by Wal-Mart and its immitators;
- by the automakers;
- by the land owners;
- and, last but not least, by oil companies...

These are all very powerful forces. And who tries to counter them -- James Howard Kunstler? Well, who listens to him?

Thus, in such a society hypothetically cheap energy prices (should they ever return) would act like a Mom who gives her child painkillers and leaves him to play with a hot iron. Both she and the child will worry about the consequences later.

So, how can a Distinguished Professor and an energy author ignore these realities as he attempts to analyse trends in the US oil consumption?

Here, for example, is a worthy reply to Vaclav Smith from an interview with one energy expert, taken shortly after the infamous blackout of August 2003. I apologize for the extended quotation, but it is necessary to make an important point:

"The recent blackout is a great example of the lack of any systemic thinking in our culture. Part of the reason for the blackout is because energy is so cheap. If we in North America lived more like Europeans, who consume no more than half or 2/3 of what we consume, we would greatly lower the need to move large blocks of electricity around and hence reduce the risks of transmission failures. But people are not willing to change. As if SUVs, some weighing 4.5 tons were not enough, people are now buying Hum-Vs, military assault vehicles just to go to the local supermarket. If this is not energy insanity, what is?

Q: What do you see as possible solutions to our energy problems?

Both energy and goods are so cheap. If energy prices and the capital cost of big consumer items increased, people would be forced to deal with these problems. But in the US prices would have to increase a great deal before people change their ways: as economists would say, it is all very inelastic here. People are living so far away from where they work, that we've gone beyond suburban housing—we're now seeing ex-urban housing, with people commuting 80 miles to work in some cases. Even if gasoline prices double or triple, these people are not going to give up their houses because they have to pay higher gas prices. They'll just pay more. That is what I call infrastructural inefficiency.

And even efficient systems are predicated on energy use. My house is energy super-efficient. It's so well insulated that I have an air-to-air heat exchanger so that carbon dioxide doesn't build up inside. So even in my efficient house I must have a device that is running 24 hours a day.

If our housing system was designed with higher residential density we would be more efficient because we'd require fewer infrastructures and hence less energy to build and to maintain them. But so much of new housing in US and Canada is now located on ever larger lots, this requires much more infrastructure—from copper wiring to snow cleaning machinery to maintain the streets. We're spending more energy just to keep it all running.

Q: Do you think that people's habits can change? Can mentalities change?

You can't get people to shrink their current usage rapidly. It can happen, perhaps, but very, very slowly. If the recent blackout had lasted three months, then people would do something. We act only when prices increase dramatically or when the hardship is not just fleeting. It would require a real constant commitment. [...]

I heard an interesting statistic recently: over 70% of people who don't have SUVs would love to have them but don't because they can't afford them. And, in the same study, 20% of people would love to buy a Hum-V, but they can't afford it. We could consume so much less—but the choices seem to be running in the opposite direction."

As you can see, this interview demonstrates a sophisticated understanding of the link between energy consumption and the living conditions, and very fairly describes the oil prices as inelastic (or, to use Dick Cheney's term, non-negotiable) In the expert's analysis, people are very slow to change their living conditions and to make life-style adjustments, and so it takes truly monumental price changes to achieve this affect -- and cause equally monumental disruptions in people's lives (the kind of developments that fall under Kunstlerian circumstances are propelling us category).

Well, you may be interested to know that the expert who is quoted in the interview is the same expert who wrote the article in World Watch -- Dr Vaclav Smil, the Distinguished Professor in the U. of Manitoba at Winnipeg, the acclaimed author and researcher. The interview itself can be viewed here. The irony here is that Dr Smil attacks Drs Campbell, Deffeys and others for worrying about exactly the type of factors that his older interview showed him himself very much aware of (and these worries proved absolutely correct by the course of the events of the past 2+ years), but which his current analysis conveniently fails to mention at all, as they would instantly disqualify his attack and make him look very biased and ridiculous.

Thus, it is not clear to me exactly what kind of "nuanced understanding" lack the members of the supposed "catastrophist apocalyptic cult" and in what way they "disregard the role of prices" and "ignore any historical perspectives". What is clear, however, is that the Distinguished Professor here is engaged in a "peevish exercise in intellectual dishonesty", a term originally used to describe another energy expert and author.



* * *

High Noon In The Desert
(with apologies to both Julian Darley and Matt Simmons)

On November 17, 2005 The Wall Street Journal published an article titled Solar's Day in the Sun? by Rebecca Smith, a WSJ's staff reporter. (WSJ Online requires subscription, but the article can be viewed here as a PDF file or here in a text only version; curiously, Chicago Tribune ran the same story on December 4th)

The article describes some industrial-scale solar-based power generation projects currently in an early development stage, and comments on the prospects of the solar industry in general. One of such projects is described thus:

Solar's Day in the Sun?

High Costs of Supplying Electricity Embolden Two California Utilities to Bet on Alternative
By REBECCA SMITH
Staff Reporter of THE WALL STREET JOURNAL
November 17, 2005; Page B1

Ambitious plans to cover two big swaths of California desert with solar dishes could finally help the energy-producing technology make the leap to industrial-scale development. Stirling Energy Systems Inc., of Phoenix, hopes to construct 20,000 solar dishes covering four square miles of the Mohave Desert near Victorville, Calif., each dish pointing skyward to collect the sun's energy and convert it into electricity that would flow 80 miles south to power-hungry Los Angeles. The solar encampment, if eventually built, could produce 500 megawatts of electricity, enough to meet the daytime needs of 300,000 homes, doubling the state's solar capacity. The project cleared a hurdle last month when state regulators approved a 20-year power-purchase agreement between Stirling and Southern California Edison, a unit of Edison International.

The type of devices that Stirling Energy Systems Inc. (SES) is planning to use to convert solar energy into electric power are the so called stirling engines connected to electric power generators. A stirling is an incredibly ingenuous type of a heat engine whose early models go back almost two centuries. Stirling represents an external combustion engine type, whereby the flow of heat is applied from the outside of the engine and thus can be more easily controlled, unlike in an internal combustion engine found in a typical car, as well as in the vast majority of petroleum-burning engines today. Wikipedia, HowStuffWorks, and this and this articles in Mechanical Engineering Magazine offer good descriptions of this technology, its history, and associated pros and cons.

One of the most important "pros" of the stirling engine-based solar solution is its high efficiency, far exceeding that of photovoltaic (PV) systems. This press release from Sandia National Laboratories, a US Government-owned organization focusing on renewable energy research and working closely with SES, cites solar-to-electric power efficiency reaching 30% with stirling solutions, an unheard-of level of efficiency for PV. Another advantage is that power generated by stirling-based systems is grid-ready and can be fed into our existing electric infrastructure immediately at the point of generation, without requiring extra layers of costly conversion, inevitably leading to additional losses in efficiency. Needless to say, SES fully utilizes modern material science and computer technology in their solar units, which utilize space-age materials and advanced system automation. Sandia's PR release describes it thus:

"Each unit operates automatically. Without operator intervention or even on-site presence, it starts up each morning at dawn and operates throughout the day, tracking the sun and responding to clouds and wind as needed. Finally it shuts itself down at sunset. The system can be monitored and controlled over the Internet. Researchers want to make the six systems work together with the same level of automation. The controls and software that perform this integration will be scalable to much larger facilities."

On the other hand, even the most advanced PV systems show far less impressive efficiency (this article, for example, describes one cutting-edge PV system³ which demonstrates less that one-half of the efficiency level of SES systems)

So clearly, this technology represents a good shot in large-scale utilization of solar energy to satisfy the needs of "power-hungry Los Angeles" (as Rebecca Smith puts it), or other large-scale structures. For example, SES' public relations page lists a number of high profile endorsements of their solution for a large-scale use, from energy utilities to political leaders. This seems very timely, as solar is widely considered a large-scale solution to our future energy problems. Sandia's press release sited earlier contains this statement:

"A solar dish farm covering 11 square miles hypothetically could produce as much electricity per year as Hoover Dam, and a farm 100 miles by 100 miles in the southwestern U.S. could provide as much electricity as is needed to power the entire country."

Analogous statements can be seen at SES's FAQ page, as well as in publications and statements by business authors, economists, and various advocates for transition from petroleum to solar to satisfy the growing power needs of our energy-challenged economy.

[An interesting perspective on the US utilization of solar gives this table at US Geological Survey's site. (USGS is an agency of US Dept. of Interior). Although clearly dated (published in 1998), the table demonstrates how vastly "outpowered" the solar energy is by fossil fuels and such in our total energy consumption structure. The table lists overall solar usage at 0.07% of the total 94 Quad BTU of US energy consumption as of 1998, hardly enough to be even noticed. Without a doubt, the share of solar has increased since 1998, and will continue to increase going forward with projects such as described in WSJ' article above going online, however the extremely low starting base appears to indicate that the untapped solar potential in our present economy is enormous, especially considering the imminent deficit of petroleum energy, which our current economy and the entire living arrangement is based on.]

So, what would it take to scale the solar solution such as SES' to the level where it could make a contribution big enough to be noticed, or, better yet, to start a transition from petroleum-based to solar-based economy?

Unfortunately, the Wall Street Journal's article is more misleading than helpful, as it cites the value of 500 megawatts of output power for 20,000 (planned) units, which gives the power output of 25 kilowatts per unit. By itself this number doesn't tell us very much, as the WSJ correspondent forgot to consider that the energy is measured in kilowatt-hours, and as most readers of the WSJ know (with the exception, perhaps, of certain energy economists), the solar power is not distributed equally throughout the day (for example, at 7:00AM and 3:00PM the solar output is expected to be different on most days). No big deal -- not the most serious omission by the WSJ correspondent (a much more serious lapse will be discussed below). Indeed, the Sandia press release cites the same 25 kilowatts as the peak power output expected. Fortunately, SAS' FAQ page offers a more intelligent estimate:

"How much power does solar Dish Stirling system produce?
One dish on an annual basis can produce 55,000-60,000 kWh of electricity. This is equivalent to the total energy required for 8-10 homes in the U.S."

So, the energy output can be generated with a fair degree of confidence. Ok, how much will the economy required to pay for this amount of energy? What will it take to manufacture and install each solar unit?

Not a word from WSJ, and Sandia's PR only offers the number in dollars:

"The cost for each prototype unit is about $150,000. Once in production SES estimates that the cost could be reduced to less than $50,000 each, which would make the cost of electricity competitive with conventional fuel technologies"

Unfortunately, providing a number in dollars is also more misleading than helpful, as it fails to consider the changes that the society will need to undergo to implement this solution on a truly large scale.

In order to see this better let's take a look what each unit really is (a good image gallery can be seen at the SAS site or on Sandia's press release). Each unit is a massive structure approximately the size of a six-storey building, whose most visible element is a solar-reflecting dish 37' in diameter (this image gives a pretty good sense of scale). The area of the dish is cited by the Mechanical Engineering Magazine to be 90 square meters, which agrees, more or less, with the dish's 37 feet diameter. If, for example, the ultra-modern honeycomb aluminum panels that comprise the dish utilize only 2 grams of aluminum per each square centimeter of the dish's surface, they will require 1.8 tons of aluminum alone per dish, not counting other high-tech materials. Furthermore, consider the strength of the steel frame required to sustain a dish of this mass and square footage in a wind-swept desert, and to keep it steady, along with the generator unit described to be "the size of a barrel of oil", or roughly 14 gallons in volume. The structure is truly massive.

And how will this compare with the power output? Well, to put it in perspective, the 60,000 kwh of energy that each unit is expected to generate in a year represents only 7 kwh per hour (roughly). That is the power output easily produced by such a trivial petroleum-based device as a high-end scooter or a medium class motorcycle engine, connected to an electric power generator!

Compare the enormous difference in size and mass between the two types of devices, generating roughly the same power output -- a scooter engine and an SES solar dish. Is this because the SES units are inefficiently designed or poorly implemented compared to scooters? Quite the contrary: SES solar units are masterpieces of cutting-edge engineering, and represent the best of human knowledge in physics, material science and computer technology. What we are dealing with here is the vast difference in energy density between solar and petroleum. Energy economics of (renewable) solar are dramatically different from the energy economics of (nonrenewable) petroleum, and we will need to go through the process of adjusting our expectations accordingly if we are to go anywhere with the transition process.

Nonetheless, let us say that we decide to go ahead and implement a US economy-scale solar solution on systems such as SES' -- in anticipation of completely replacing our energy base from rapidly depleting petroleum to renewable solar. As Sandia and others are fond of repeating, a 100 x 100 miles swath of desert anywhere in the South West could provide enough capacity to satisfy (today's) energy demand of the entire US economy. As the solar encampment on the WSJ article mentions, 20,000 units occupy 4 square miles, so on 100 x 100 = 10,000 square miles we will need to allocate
20,000 x 10,000 / 4 = 50,000,000 (fifty million) units. Let's say (purely hypothetically) that starting next year we will be manufacturing and bringing online 1.5 million units per year, on average, thus smoothly completing the transition from petroleum to solar in a little over 30 years.

Before appreciating the implications of the above proposal (and I am not saying that this cannot be done), we need to consider the following numbers. 1.5 million units per year, with 1.8 tons of aluminum per unit will constitute 2.7 million tons of aluminum. Well, you may be interested to know that 2.7 million tons, per this statistics by USGS, was the entire US aluminum production in a recent year (2003). Of course, a lot of aluminum in the current economy is recycled, however we are discussing here an enormous scale development of gigantic solar dishes -- you don't expect the aluminum for them to come from recycled empty Coca Cola cans, do you? And you would still need to produce aircraft, packaging, electrical equipment, buildings, and consumer durable items to which the currently produced aluminum goes, as one would expect under "normal" economic conditions.

Again, I am not at all saying that the production of aluminum cannot be doubled to meet the demands of this project, nations are known to mobilize all of their resources under war conditions, for example, or when faced with credible threats to their existence. However, please consider the following statistics (again, from the same US Geological Survey's page):

Year	Net US Aluminum production (primary)	Total number of people employed by the aluminum industry	Net reliance on aluminum imports
1999	3,779	76,300	31%
2000	3,668	77,800	33%
2001	2,637	71,200	38%
2002	2,707	62,200	39%
2003	2,700	60,000	41%

Source: US Department of Geological Survey website
URL: http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/alumimcs04.pdf

Do you see a recognizable trend here, with ever-growing reliance on imports as a total percentage of consumed aluminum, and ever-shrinking number of people employed in the industry? This trend would need to reverse if we are even to pretend to get serious about implementing the discussed renewable solution, don't you think?

(Unless, of course, you believe that our reliance on imports from countries such as China, South Korea, et al can grow indefinitely, and that they will be happy to provide us with most of our supplies of this highly energy intensive and strategically important product well into the post-peak oil period, in exchange for our currency and our debt obligations.)

On a related note, I wonder if our economic luminaries and dignitaries such as Mr Greenspan are aware of such trends, or even consider them relevant, when they make statements such as the following:

"The energy intensity of the United States economy has been reduced by about half since the early 1970s in response to sharply higher prices. Much of the displacement was achieved by 1985. Progress in reducing energy intensity has continued since then, but at a lessened pace. This more-modest rate of decline in intensity should not be surprising, given the generally lower level of real oil prices that prevailed between 1985 and 2000. With real energy prices again on the rise, more rapid decreases in the intensity of use in the years ahead seem virtually inevitable."

[Source: U.S. Federal Reserve Web site
http://www.federalreserve.gov/boarddocs/speeches/2005/20050405/default.htm]

Do you really consider your energy intensity reduced when you rely on ever-growing imports of energy intensive, strategically important products from other countries? Isn't there an element of self-deception present when you pretend that potential energy problems of your importers will not quickly become your problems under such circumstances?

But back to our large-scale solar project implementation. Let's not loose focus of the purpose of the entire solar project, which is to provide the economy with more energy that has been spent on manufacturing of the solar units and relevant logistics. Thus, we need to estimate the energy spent on solar units, and compare it with the energy produced by units brought online (which is known to be estimated at 60,000 kWh per year), before we will be in a position to make a judgement on the energy viability of such project.

Well, it is very hard to estimate precisely how much energy will be required to be spent on manufacturing solar units from scratch. Large-scale manufacturing effort for them does not yet exist at present time.

However, we can get some cues from another mass-produced high-tech device whose production cycle has been exhaustively studied and optimized over decades of ruthless competition between manufacturers: an automobile. Interestingly, WSJ quotes an SES researcher who compared each unit to a car in comlexity (but not, of course, in size).

An organization called Institute For Lifecycle Environmental Assessment published this breakdown of the total energy impact of the lifetime of a typical Ford Taurus (the analysis was performed by Carnegie Mellon University researchers). According to this analysis, the manufacturing process of a typical car requires approximately 120,000 MJ, or 1/10 of the total energy consumed by the car over its lifetime. 120 MJ = 33,333 kWh. However, that's for a car, which is a tiny device next to the six storey building-tall SES solar unit, with its huge dish, barrel-sized engine and the massive steel frame. For example, per US Department of Energy statistics, the production of assumed 1.8 tons of aluminum of a typical dish alone would require about 24,000 kWh of energy. Steel for the massive frame would require about 2,300 kWh per ton. And that is just metal -- before the manufacturing process even starts.

Consider that the energy to manufacture each unit is required "upfront", so to speak, before the unit is brought online. This is what makes energy so different from money -- the rules of the game here are very different than in the monetary system. In the monetary system, anything that brings future cash flows can be valued against them, and this value immediately becomes a part of the economy and is included in the overall financial system before even the first cash flow is made. You can use the value of future cash flows as a colateral for a loan to expand your existing business, or to acquire a new one. The monetary system is capable of expanding through instruments like stock market and credit creation and thus can allow you, for example, to open or acquire a business with only a fraction of the capital that this business would generate over its foreseeable lifetime.

Not like that with energy. You cannot create energy required to manufacture a dollar unit by "expanding" the energy system against the future stream of "energy flows" that this unit would produce once brought online. Every single watt for this manufacturing process must exist in the energy producing capacity of the economy before it can be spent. The corollary of this is that there is always a time lag between the energy required for a unit's manufacture and the energy available from increased energy capacity once the unit is brought online. And because you start with the low base and target a very high base, over a relatively short period of time, you need to live through the period of the energy deficit -- even if you ignore any kind of peak oil-related decrease in already existing energy capacity.

The comparison with cars can ultimately also be much more misleading than helpful, as the car production happens in the framework of mature industries. Not like that with solar units. They will require first to build entire industries from scratch, before solar units can actually start being produced. Every single one of them would present a very non-trivial problem in the energy-short environment, and the time for planning these efforts is running short.

The bottom line is: to implement renewable energy solution on such a scale that would make a difference, you need to have an energy-rich economy to begin with. You also need to have a clear focus and understanding of the scope of the problem, as well as the political will and the grass-root support to go through a war-like economic development effort that will strain every economic muscle in such a society.

If Los Angeles, for example, ever comes to rely on energy this hard-won for a significant portion of its energy ration, it may still be "power-hungry", but not at all in the sense that Rebecca Smith currently observes it to be.

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[1]Note: unless you already have a recent version of Adobe Acrobat Reader, you may choose to upgrade it before opening this PDF file; using an older version didn't seem to work properly for me.

[2] I personally find the characterization peak-oil advocates laughable, as if the scientists and authors who are trying to attract the public's and the policymakers' attention to this problem are somehow working hard to expedite the happening of peak oil; as though peak oil is not a part of the objective reality. A volcanologist may predict a future erruption, or attract public's attention to it, but he is unlikely to be called an advocate of volcano erruptions; the same applies to seismologists working to predict earthquakes and the same applies to climate scientists. On the other hand, for example, free trade advocates or fiscal responsibility advocates are true advocates, as they are trying to actually promote and advance their causes, not just to bring the public's attention to them.
Another definition that you may see being used by the media a lot and which I find even more clueless is peak oil theorists. In the eyes of your typical debate host of the average gullibility, or a 15-seconds-attention-span journalist uncapable to distinguish between demagoguery and reality-based reasoning, nothing works better to discredit something than to present it as a "theory". PO is no more of a theory than that NASDAQ at 6000 was overvalued in 1999 was a theory, or that the amount of coffee in your cup decreases with every sip you take from it is a theory.

[2a] The initial version of this article had a serious mistake of misinterpreting the U.S. Census statistics -- U.S. Census home construction numbers are on the annualized basis, which I initially failed to realize. I would like to thank the author of this commentary for pointing this out to me -- D.P.

[2b] As gigantic an impact that such a mass mortgage default would have, when considering the overall financial impact one should not forget about other types of debt at risk. For example, the collapse of the municipal debt obligations from failed communities would by itself have very serious consequences, also greatly amplified by the associated derivatives. The mass failure of corporate and personal debt (I would assume that people are unlikely to be making prompt payments on their credit card loans under such circumstances) should also have an enormous significance. Of course, we will not have the luxury of addressing each of these problems in isolation. The combined impact is likely to be stronger than the total of its components.

[3] Thanks to Igor Yudovich for this reference

08:13 pm: On The Prospects Of Using AAA Type Batteries As Peak Oil Mitigation Devices, and Other Observations
Joseph Tainter in his groundbreaking book The Collapse Of Complex Societies makes the following trivial, but nonetheless tantalizing observation: "The number of challenges with which the Universe can confront a society is, for practical purposes, infinite".

It will probably be noncontroversial to formulate a follow-up to the Tainter's observation thus: "The range of possible responses of a society confronted with the Universe's challenges is also, for all practical intents and purposes, infinite". We know from history that past societies have used (with a mixed record of success) a whole range of responses to their problems -- from sacrificing vestal virgins to invading and enslaving their neighbors, and from institutionalizing infanticide as a population control mechanism to reorganizing their industry and food production systems.

If the responses of our political and economic mainstream to the challenges presented to our particular society, in that very special slice of space-time that we happen to inhabit, truly represent our best shot, we are virtually guaranteed to enter a very interesting period in history (interesting as in the well-known (faux) ancient Chinese curse¹, May you live in interesting times). A dispassionate observer from the outer space may watch with amazement how an incredibly complex and resourceful society of Homo economicus, armed with the most advanced technology and all of the knowledge amassed through their entire history, which voluntarily, with determination, even enthusiastically paints itself into a corner as it reduces its future options to what in the game of chess is termed zugzwang (compulsed move) -- by deferring the recognition of the Universe's challenge until the crisis that is currently clearly visible on the horizon becomes detectible through market and monetary mechanisms, signals from which in this particular peculiar civilization apparently take precedence over the other six senses.

[I follow the modern philosophical tradition and count rational reasoning, which clearly distinguishes our kind from the rest of flora and fauna, as a sixth sense. However, it appears as if it almost doesn't matter whether we possess that prized and unique sixth sense or not, as we choose to ignore what it tells us, unless, of course, the message also becomes recognizable as a signal from the free market.]

This unique form of behavior -- idealization and absolutization of the free market -- is especially puzzling, considering that inability of the market signals to reliably serve as a long term indicator of anything at all has been established beyond any controversy, as lakes of ink have been spilled over documenting the minutia of Enron and LTCM collapses, the hazards of the current real estate bubble and other market phenomena, and as the same breed of analysts who in 1999 were seen busily convincing the public that, say, the common stock of Intel Corp. had been a bargain back then at the price of $80 a share, were spotted in 2000 spreading the message that the same Intel stock had a long way to fall at a price of about $25 a share.

Exhibit A is the argument I have seen being used all the time, starting from the Vice President Dick Cheney in televized interviews, to TV personalities characterized by Nassim Taleb as "financial entertainers of the excessively commentating variety" on the CNN's The Money Line with Lou Dobbs. This same argument is utilized explicitly and implicitly in a range of documents from pronouncements by Chief Economists to publications by IEA.

The argument goes like this (I generalize it from all these multiple sources):

Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than it did circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.

It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy twice as vulnerable (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?

Let me use this example. Let's say, thirty years ago I started a business leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in size and revenue, and currently I lease out two super energy efficient Toyota Priuses as taxis, which together consume the same amount of fuel as the old Buick consumed alone, but produce double the revenue amount (again, in constant dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a bigger impact on the economy in terms of lost revenue -- one stalled taxi or two stalled taxis? Which economy has more capacity to optimize its energy usage and find reserves for growth, instead of shrinking its GDP -- an energy inefficient economy or an energy efficient economy? Which economy is more likely to contract in the face of shortages?

[An important disclosure: I will be the last one to claim that the US economy as currently observed has utilized all possible reserves for energy efficiency. I only attempted to demonstrate the inherent speciousness of this surprisingly popular argument for "reduced vulnerability", which seems to have engulfed the crème de la crème of the political and the economic world]

The next exhibit -- exhibit B -- is a short, sloppily written, but highly opinionated, borderline arrogant article by an energy economist and author Peter Huber (who is also a senior fellow of the Manhattan Institute) that asserts such a sweepingly generalized new economic principle that it reads almost like a manifesto of the "New Age" energy economics. The article, titled Thermodynamics and Money, was published by the Forbes magazine and can be viewed here.

Huber starts with an unfortunate personal attack on the late oil geologist M. King Hubbert, stating:

"In his day M. King Hubbert was a great geologist who spent his life studying the planet's deposits of oil and gas. But as he got older, he simply lost it. His "peak oil" theory--which many people are citing these days--is a case study in junk economics."

Clearly, Mr. Huber is perfectly entitled to express his criticisms of the late M. King Hubbert or anybody else, as there are no "sacred cows" in this world. Marcus Tulius Cicero, for example, was known to have had famously described the hellenized Egyptian queen Cleopatra as a boring woman, in a radical disagreement with both Gaius Julius Caesar and Marc Anthony. Thus, obviously, Peter Huber also has the right to state whatever opinion he wants on Mr. Hubbert. (He is also free to characterize peak oil as a case study of junk economics, or, say, the Modern Portfolio Theory as a case study of junk geology.) However, as someone who is to a degree familiar with the subject, I will humbly suggest that maybe there was more to M. King Hubbert's life work and impact than meets the eye of Peter Huber.

Nevertheless, the main idea that Huber communicates in his article is that EROEI is a false measure of energy efficiency, and thus it should stop being used, as it confuses things rather than adds value. Per Huber, it doesn't matter how much energy was spent to acquire a unit of energy; what matters only is how much that final form of energy will be sold for per unit. Huber formulates it thus:

"Eroei calculations now litter the energy policy debate. Time and again they're wheeled out to explain why one form of energy just can't win--tar sands, shale, corn, wood, wind, you name it. Even quite serious journals--Science, for example--have published pieces along these lines. Energy-based books of account have just got to show a profit. In the real world, however, investors don't care a fig whether they earn positive Eroei. What they care about is dollar return on dollar invested. And the two aren't the same--nowhere close--because different forms of energy command wildly different prices. Invest ten units of 10-cent energy to capture one unit of $10 energy and you lose energy but gain dollars, and Wall Street will fund you from here to Alberta."

I believe that this may be a very happy day for Jim Kunstler, as his message about the coming Long Emergency has finally reached such a high degree of market penetration that it is being broadcast (in a slightly veiled, but clearly recognizable form) from the pages of the Forbes magazine, by a senior fellow of the Manhattan institute, no less.

What is Kunstler basically all but shouting from the rooftops? That in historically very near future the energy in such forms that can be readily utilized by our society and our infrastructure will become scarse and expensive. Everything else is a corollary, a quite obvious corollary, but a corollary nonetheless (for example, that systems such as transportation, food production and distribution, government services, living arrangements, et alia will have to either adjust to this permanent condition of scarse and expensive energy, or they will stop functioning -- with pronounced effects on other interrelated systems and the society as a whole).

What is Huber stating in his article? Essentially, the same basic message: that (in Huber's scenario above) energy will become so expensive that, after investing ten units of cheap energy to produce one unit of the "final form", consumable energy, that consumable energy will still sell at a handsome profit (why else otherwise would Wall Street care to fund such a business from here to Alberta, as Huber puts it?) In short, selling very expensive energy will become a very profitable business, but no cheaper forms of energy in a consumable form will be available. Obviously, energy production in a society thus described by Huber will be at the very center of the economy, and will remain among the few profitable activities, as many other formerly profitable businesses and entire industries will be killed off by the skyrocketing energy prices. In other words, an economic shrinkage of societal scale in the scenario formulated by Huber is unavoidable.

Moreover, who is to say that the so-called cheap energy will remain cheap, as there will be so much more of it needed -- to produce the expensive energy? Won't the increased demand cause the dearth of the formerly cheap forms of "cheap energy"? (I deliberately pose this question in a form that may be more familiar to the energy economist). Surely Mr Huber will not be arguing that the capacity to produce the cheap energy needed to produce expensive energy can be increased indefinitely at a whim, without any effect on the price and availability of that cheap energy -- otherwise he risks to be laughed all the way out from the Manhattan institute.

It is also obvious that in the Huber's scenario a lot more overall energy will be required than before, as much more of it will be burned for the needs and within the confines of the energy industry itself and will not be usable by the rest of the economy -- except, quite likely, that it will manifest itself through dramatically increased C0₂ emission. That is what EROEI considerations that Huber ridicules, perhaps unwittingly, are all about -- that as more and more energy will be consumed by the energy industry itself, less and less will become available for the rest of the economy.

Furthermore, I would like to point out to all of the esteemed energy economists out there that even today, during the time of relatively cheap energy, with the economy merrily humming along, and consumer holiday shopping season being in full swing, we already have exactly the type of an energy form that fits Peter Huber's criteria: alkaline batteries. I use one of those, an AAA type, manufactured by Energizer, in my MP3 player right now as I write these lines. Since EROEI doesn't matter in the Huber's world, but only the final price that the consumable form of energy commands in the marketplace, we could probably use AAA batteries as a decent alternative to other energy types in the post-Peak Oil scenarios; after all, this is a successful commercial technology that we are already accustomed to and have a solid understanding of, unlike other, more experimental forms of alternative energy.

The rationale may be presented like this: We already have a huge profitable market for alkaline batteries, as evidenced by some very savvy investors and conglomerates such as Gillette and Warren Buffet's Berkshire Hathaway, which invested huge amounts of capital into battery producers like Energizer and Duracell. If we simply keep on increasing our manufacturing capacity for AAA batteries at the rate of 50% per year (which is the growth rate comparable with the one achieved during the early years of the Internet industry), in 20 years we will increase the overall AAA battery production by a factor of over 3,000 (obviously, Duracell and friends will be happy to oblige). In such Huberian world, where physical constraints play no role, the surplus AAA battery capacity, unutilized by MP3 players, vibrators, and other consumer electronics, could be used in transportation systems and such, thereby mitigating or even completely eliminating the effects of peak oil...

I just can't help but wonder, how clueless must be that segment of the respectable business magazine's audience and staff that is willingly lending Huber's arguments even a shred of credibility.

However, the epitome of cluelessness in this little survey for me is the exibit C, the article published in The Wall Street Journal titled The War Against the Car, by Stephen Moore, a member of this newspaper's editorial board (WSJ online requires subscription, but the article can be viewed here). It is really worth reading in its entirety (quoting a paragraph or two will not do it justice), if one wants to appreciate the degree to which we as a society have cut ourselves loose from the realities of the world. However, I still would like to comment on the two closing paragraphs of the article:

"The good news is that environmental groups and politicians aren't likely to break Americans from their love affair with cars -- big, convenient, safe cars -- no matter how guilty they try to make us feel for driving them. Instead they are using more subtle forms of coercion. The left is now pining for a $1-a-gallon gas tax to make driving unaffordable. Washington has also wasted over $60 billion of federal gas tax money on mass transit systems, yet fewer Americans ride them now than before the deluge of subsidies began. When the voters in car-crazed Los Angeles opted to fund an ill-fated subway system, most drivers who voted "yes" said they did so because they hoped it would compel other people off the crowded highways.

To be sure, if the entire membership of the Sierra Club and Greenpeace surrendered their cars, the world and the highways might very well be a better place. But for the rest of us the car is indispensable -- it is our exoskeleton. There's a perfectly good reason that the roads are crammed with tens of millions of cars and that Americans drive eight billion miles a year while spurning buses, trains, bicycles and subways. Americans are rugged individualists who don't want to cram aboard buses and subways. We want more open roads and highways, and we want energy policies that will make gas cheaper, not more expensive. We want to travel down the road from serfdom and the car is what will take us there."

It is quite clear that we, Americans, are suffering from an acute form of hystorical Alzheimer's desease, for which we may have to pay extremely dearly. We forget that "the end of history" as proclaimed by Francis Fukuyama, turned out to be a dangerous fantasy in the early XXI century. Apparently, many of us feel that we can always get what we want, if only our governing bodies develop the right policies. We have no appreciation for the specialness and uniqueness of our current transitory historical period, during which we already understand the nature of our predicament in excruciating detail (well, some of us do), but still have options, and we mindlessly let this period lapse and thereby foreclose these options forever. We don't understand that ruthless competition for resources is much more common and much more fundamental as a driving force of history than, say, our cherished notions of democracy, human rights, and public welfare. We don't realize that investing into the infrastructure alternative to "big, convenient, safe cars" that we have such a strong love affair with today is what may save our economy from total paralysis in historically very near future, allow it to regroup, and thereby give our civilization a chance to fight another day. We think that our political and business leaders will solve these problems for us -- well, guess what -- our political and business leaders read Forbes and Wall Street Journal, and make public pronouncements in the spirit of the above argument by Dick Cheney. We are an infantile civilization that may be foregoing its chance to grow up.

To close on a lighter note, I recommend the following debate (MP3 file is available here; approx. 52 minutes long) between Jim Kunstler and the energy analyst Michael Lynch on the issue of oil, hosted by Christopher Lydon from National Public Radio. At the end of the debate, at the point of summarizing the show, the host makes the following remark (at 50:04 on the audio file), followed by this reply:

CL: "Walkable cities, denser living, I mean -- these are all good things, but my verdict would be, just on the hour, Mr. Kunstler, that you haven't shown us that they will be absolutely required."

JHK: "Well, I mean -- I don't know what I have to do -- jump up and down and go 'woo, woo, woo'?!"

1. As was pointed out to me in the reader commentaries below, this so-called "ancient Chinese curse" is neither Chinese, nor ancient. It appears most likely to be a product of the American culture. This and this pages, for example, provide satisfactory explanations. Interestingly, this occurence of faux ethnic (mis)attribution is far from unique. For instance, the cultural phenomenon that is known in the US as Russian roulette in the Russian culture, in which I grew up, is known as American roulette. Only one of these attributions can be right, or they can both be wrong. But they are unlikely to be both correct at the same time!

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Acknowledgement: The motivation to write this article came to me as a result of a discussion in the New York City Peak Oil Meetup Group, where some of the most intelligent and thought provoking discussions on this incredibly complex subject are taking place on and off the Internet.

12:37 am: How Round Is Your Table?
I would like to start with an excerpt from a roundtable discussion between experts on a radioshow which (the discussion) I find absolutely hilarious. This is from The Financial Sense Newshour radioshow as of 10/1/2005 titled "Is the Global Warming Just Hot Air?" and dedicated to the climate change controvercy. The show was hosted by the famed radiocommentator and financier Jim Puplava; it can be streamed or downloaded from FinancialSense.com.

The panel of experts consisted of: Dr. Robert C. Balling, Jr., Professor in the climatology program, Dept. of Geography at Arizona State U., Alan Caruba, a veteran business and science writer, and Evelyn Garriss, the editor and publisher of The Browning Newsletter. Participants' credentials, publications and achievements are listed on the above Web page full detail.

[I jotted the transcript down into a notepad while listening to this radioshow on my Creative MUVO MP3 player on a NYC subway ride. The dialog fragment starts from 0:45:25 and ends at 0:49:57 on the audiofile. Thanks to Jay Smith from NY OilAwareness group who reviewed this transcript and offered valuable editorial remarks to make it as accurate as possible.]

EG: "... And I somehow think that if peasants in Medieval Europe were able to survive the warm temperatures of the Medieval Warm period, with all our technology we might somehow struggle through. It is not the alarming catastrophy that they make it up to be!"

RCB: "No, I totally agree with Evelyn on that. Even if the world wormed up a degree or so, I think the benefits would far outweigh the cost, and the humanity and the biosphere will be better off. But the key is, the humanity and the biosphere have seen warming and cooling in the past, will see it again in the future, and we all evolved in the world with a highly variable climate; I don't see anything at all alarming in what has happened in the last 25 years."

AC: "Well, that's the good news. I think the bad news is that when people say 'Global Warming' they often mean different things; enviromentalists mean that it's going to happen very rapidly, and have a disastrous effect on human life, and all life on Earth; whereas climatologists say 'Global Warming' and they are thinking in terms of a couple of thousands of years"

RCB: "I don't think the public out there is loosing sleep that often over global warming, I really don't. I've seen these polls come out on 'what are you most concerned about?', and the Global Warming is off the radar screen, so the average guy on the street is not walking around shaking like a leaf because the world is warming. In most cases they've heard about it, they were skeptical of it, they've heard some guy on the radio making fun of Global Warming. I don't think the American public out there is that alarmed about Global Warming. I think that there are certainly people who are trying to get them alarmed, but I don't think that's sold at all across this country. And to this day, I would guess, the vast majority of Americans find it more of a hoax than they find it something to be alarmed at."

AC: "That's good. I am glad to hear you say that."

RCB: "I don't have any data to back it up, but that's my sense."

AC: "No, I think you are right; I've been watching now since the [19]70-s. I think I would have to agree with you -- I think, in general, when you say Global Warming people kind of.. err... snicker and laugh, because it's inherently a kind of a silly notion"

RCB: "Right. And I think Evelyn was right earlier: if you go to Europe and say 'Global Warming', there are people shaking like a leaf. They've done a better job -- 'they' meaning the enviromental groups -- selling Global Warming in Europe, and maybe Europeans were just leaning that way anyhow, and [they] jumped onboard, and have been on a crusade from the get-go. I can get into my car and drive three hours south of here and enter Mexico, and start asking people what they know and think about Global Warming -- and they have never heard of it, I mean -- they have no idea what you are talking about, so it's completely off their radar screen. If you go to Mexico City, and meet with officials, then certainly Mexican government has a stake and the presence at the U.N., but probably two-thirds of the people on this planet have never heard about Global Warming, ever."

AC: "Well, then, maybe the whole thing will just blow away..."

RCB: "Right. I was in the graduate school in the [19]70-s, when the Global Cooling was the big scare -- hey, you mentioned that earlier; Newsweek [inaudible] cover stories on the coming cooling, and the crisis of cooling, and that certainly disappeared; Global Warming has a lot more momentum; administratively, around the world, there is apparatus at work now, thousands of scientists -- it's a big business onto itself. There are billions of dollars being spent every year on research in Global Warming, meetings are being held all over the world. That really never got rolling for the Global Cooling scare back in the [19]70-s, there is much more momentum in this one, but it will run out of gas sometime. I guarantee... no, I can't guarantee that, but that's my suspicion."

AC: "Well, I obviously messed up when I went to college -- I should have started meteorology [laughter]."

RCB: "I did, and I never anticipated when I was a doctoral candidate in climatology that the subject I was focusing on would one day be frontpage news all over the world. I never knew that when I was studying at that level, I never dreamed of it. So, it did worked out well. And here is another little signal -- the scientists themselves have seen a lot of good things happen because of their involvement in Global Warmimg. I mean, I am looking around here -- I have students like we've never had before, we have resources like we've never had before; so the scientists themselves, sittin' on airplanes, flyin' around the world, sittin' in the business section of the plane, sippin' on champaign, and havin' a lobster bisque -- yeah, their take in it -- it's a pretty good deal!"

AC: "[With laughter, mockingly] It comes down to money!.. And if they pay you enough, you can play with the figures long enough, and make them come out to mean almost anything."

Even if you find the above quoting excessive, I certainly hope that you don't find it boring. I most definitely didn't, as the dialog above is much fresher, more vivid and more character revealing than many made-up dialogs in sitcoms or movie scripts (Mssrs. Larry David and Quentin Tarantino, if you are reading this, it is my hope you are not offended).

I need to say right away that I didn't sit down to write yet another environmentalist text and have no stake in the pro- and anti-Global Warming debate (at least, no more of a stake than any other denizen of the Great Industrial Civilization of the early 21st century, anyhow). I have deep respect for Jim Puplava who over the years hosted and made available for download hundreds of interviews with experts and authors, many of them top-notch.

But now, having savored in all of its (considerable) entertainment value the above roundtable discussion of experts, I'd like to attempt to pose some questions, to most of each I don't know (and will probably never know) the answer.

The conventional thinking is that actions come from policies and priorities, which in turn come from views and opinions. But how do views and opinions come to be what they are? Do we arrive at what we believe by deductive reasoning? By inductive generalizations? Through the influence of tradition, i.e. by following the steps of our cultural forebears? By repeated trials and errors? By all of the above? By none of the above? It completely baffles me.

There is a sociopsychological phenomenon mentioned by Nassim Taleb in his seminal Fooled By Randomness that he called "the firehouse effect". The concept is that firemen often have lengthy idle periods between fire alarms, so they spend a lot of time within the same group of people of a similar background (other firemen) discussing the same issues, expressing the same views and having the same discussions over and over again. Over time this leads to the following effect: they stop questioning, and start to agree with each other on many things that most outside, impartial observers would find ludicrous. Their opinions and views converge, as after a while, opinions constantly perpetuated in the same group stop being considered with skepticism. Obviously, in the case of the fire emergency personnel, this convergence process plays a positive role; however it becomes a huge liability in the case of experts or analysts. Experts or analysts often exhibit ridiculous views and opinions which do not become subject to questioning or skepticism by their colleagues -- not because they are stupid, but because the tendency to question disappear over time, and as views become a part of the group's tradition, or worldview.

Would it be justified to speculate that the firehouse effect in a group of experts may make appear as a discussion on issues what really is a caricature of a discussion? As analysis what really is bastardization of analysis? As a balanced opinion what really is sheer and utter nonsense? The lines appear to be completely blurred.

Suppose it turned out that one of the above analysts served as an advisor to a holder of a Very Powerful Political Office and, by giving advice and providing concil, impacted various Policies and Priorities. Is it hard to imagine such a scenario? Can we trust that people advising, say, senators, chairmen, or even Presidents on issues such as energy, public infrastructure or climate change exercise more balance and substance in their judgement than the experts in the above panel? I honestly doubt it because more often than not people advising office holders are the same people as those who comprise roundtable discussion panels.

Even large-scale societies such as cities and nations succumb to the firehouse effect syndrome. For example, in the above discussion, one of the experts dismisses a concern regarding a highly complex and poorely understood phenomena due to its European origin, and "the Europeans were leaning that way, anyhow", which by definition, in his view, is grounds for dismissing it outright. By this, presumably, he intends to score points with his listeners, fellow Americans. No further justification is warranted. I wonder, if the experts ever not just express opinions, but also pose questions to themselves (in a sort of a reflexive excercise of navel gazing): what was the logical chain of reasoning that brought me to this or that conclusion? Can I retrace that logical steps and double-check them? Are there independently verifiable intermediate results that I could regression-test (to borrow a term from software engineering)? For example, if I reject the idea of global warming because it is European, would it be logical to also reject the idea of coffee because it's Brazilean (for example), or toilet paper, because it's Chinese in origin?

Let's imagine, for example, Evelyn Garriss in some high profile gathering, such as a congressional hearing, setting forth the above quoted argument:

"... And I somehow think that if peasants of Medieval Europe were able to survive the warm temperatures of the Medieval Warm period, with all our technology we might somehow struggle through. It is not the alarming catastrophy that they make it up to be!"

-- followed by Dr. Robert C. Balling, Jr., Professor in the climatology program, Dept. of Geography at Arizona State University, going on record with the following:

"I don't think the American public out there is that alarmed about Global Warming. I think that there are certainly people who are trying to get them alarmed, but I don't think that's sold at all across this country. And to this day, I would guess, the vast majority of Americans find it more of a hoax than they find it something to be alarmed at."

What should the people on the receiving end of the experts' advice make out of it? Well, honestly, absolutely nothing. These are non-falsifiable statements replete with weasel words, non-sequiturs, circularities, as well as glaring examples of other falacious arguments (notably, "not invented here"). Basically, an impartial observer might note that the experts exhude extreme confidence whose sole basis is their own extreme confidence, ad infinitum.

Should, for example, the standards of living and the life expectancy of Medieval European peasants become the acceptable "floor", it would be very easy to sell The Long Emergency message. If the public is ready for this minimalist approach, then I think people like Jim Kunstler can find their life work complete and retire to Cayman Islands. Because we have such a long way to fall between today and Medieval Europe, we have virtually nothing to worry about (even considering that the population density has increased by a factor of ten since then). Consider, for example, that in order to fall that low we have to pass the 1970-s level first, then 1930-s level, then 1900-s level, and so forth -- and still have a long way to fall. Imagine a politician reporting to his constituents: "Yes, the life has become a lot harsher for many of our fellow cuntrymen, but, considering how low it could have fallen by now, I believe that, as a public servant, I am doing a pretty darn good job! Comparing where you could have been today, I represent a huge value for your hard-earned tax money".

Also note how this argument can be used as a sort of a an image of a knight on a sheet of cardboard paper with a hole for a face, a time-honored prop used by generations of professional photographers. For example, imagine Kunstler come along and utter something like "We are facing huge difficulties, but the life in The Long Emergency with an advanced and well-maintained raiload system will be much more tolerable and much more orderly than the life without one".

To which Evelyn Garriss responds: "I somehow think that if Medieval peasants were able to survive without the railroads, with all our technology we might somehow get by".

After which, say, an advocate of fiscal responsibility comes along, and to his arguments Evelyn responds "If Medieval Peasants managed to survive without worrying about budget deficit and fiscal responsibility, with all our technology we must somehow get by".

To which standing nearby Professor Robert C. Balling would add: "I don't think the American public out there is that alarmed about fiscal responsibility. I think that there are certainly people who are trying to get them alarmed, but I don't think that's sold at all across this country. And to this day, I would guess, the vast majority of Americans find it more of a hoax than they find it something to be alarmed at."

I really wanted to avoid asking climate change-related questions in this text, as I didn't set out to write on that topic, but more on the topic of how we think, how we analyze and who we receive advice from. And I plead almost complete ignorance on the climate change issues.

But here is a question that I just can't help asking. A professor of climatology, a Ph.D. at Arizona U., is publicly stating: "I can get into my car and drive three hours south of here and enter Mexico, and start asking people what they know and think about Global Warming -- and they have never heard of it, I mean -- they have no idea what you are talking about, so it's completely off their radar screen".

But are't Mexicans the wrong people to ask? Maybe, a three hour trip south from Arizona is not such a great idea? Maybe Dr. Balling would be better off asking the Eskimos instead, for example? After all, the claim is that the climate change manifests itself through the thawing permafrost, ice shields turning into icebergs, melting snowcaps and greening tundra. What would Mexicans have to say about all that?

That is, of course, if one wishes his publicly pronounced opinions to be at least somewhat correlated with reality.

It is really disturbing to think that Dr. Balling is somebody's advisor on climate issues, however, a cynic in me tells me that he probably is, and a very successful one.

08:56 am: ON DANGERS OF BEING AN INSECT WITH WINGS AND A MYSTERIOUS INSTANCE OF MASS MAILING
Have you ever wondered why various winged insects (such as moths or nocturnal butterflies) tend to behave as if they are attracted to artificial light sources? Isn't it harmful, and often suicidal, mode of behavior? After all, what is in it for them? Why waste time and energy on clumsy bumbling about a lamp or a candle, visible to all predators, in the company of other equally hapless creatures, and risk an untimely death by burning your delicate wings with a characteristic "Zap!"?

It turns out that this behavioral anomaly is largely well understood by biologists (although there is still scientific debate about details going on). It turns out that flying insects have built-in navigational systems based on the notion of light sources (e.g., stars and the moon) being far, far away -- an infinity away, as far as each insect is concerned. If such an insect needs to fly in a certain direction in the face of adversities such as winds and obstacles, all it needs to do is to strive to maintain a constant angle to one of such convenient light sources. This has been an invaluable and reliable navigational technique for more than 99.99% of the insects' evolutionary history, as the notion of a light source that is not, for all practical intents and purposes, an infinity away simply did not exist.

With the entrance of human-made light sources into the scene the situation for winged bugs changed dramatically. As each burning lamp or candle within a moth's view is clearly not an infinity away but only maybe some minutes or seconds of flight away, by maintaining a constant angle the moth will spiral towards the light source until it bumps into it, with all of the above-mentioned unpleasant consequences. It can be said that the notion of non-infinity, or finality of distance (to the light source) wreaks havoc with the sophisticated navigational system perfected over hundreds of millions of years and leads many a moth to their untimely demise.

For the purposes of this essay, I would like to slightly transcend the conventional terminology and propose that the moths are driven by, and fall victims of, an ideology of infinity, through which they view the world. After all, what is an ideology if not a way of looking at things, a word view (Weltanschauung) which serves the purpose of mapping the incredibly complex multi-dimensional reality into something more simple and manageable, at the expense of completeness. Any ideology purports to describe the world through a precanned systems of patterns and regularities. Without it, the vast randomness surrounding creatures and societies would remain, well, a vast randomness. Living creatures tend to fool themselves that by forcing complexity of reality into simplicity of ideologies they gain some control over the infinity of Tainterian challenges the Universe is presenting them with. Living creatures are, in fact, being fooled by randomness (for more treatment of this topic please see "Fooled by Randomness" by Nassim Taleb).

[Note that any ideology presupposes a fair amount of rigidity and inflexibility and is linked to the conditions under which the past generations of carriers of the ideology, and the ideology itself, have evolved. Without being rigid and past-oriented, there is really no ideology, as it would probably morph into something far less binding, such as tradition. The English language, for example, is nuanced enough to differentiate between, say, a religious ideology, and a religios tradition. The former presupposes projection of the the world view and the mode of behavior from the past into the future, in a fairly rigid way. The latter acknowledges the conditions under which the entity has evolved, but leaves enough flexibility to not to presuppose any fixed mode of behavior for the future.]

Thus, for the purposes of this essay, we can say that the moths are afflicted by ideology, and a fairly rigid one. (To those insisting on scientific rigor in every statement: please don't indict me for excessive anthropocentrism just yet. You don't think that it's the moths who I really have in mind when writing this, do you?).

I wonder what a moth could tell about its experience as it diligently followed the signals coming from its infinity-based navigational system processed by ideological centers in its brain. Moth's main indicator of direction, as we know, is the angle that it is able to maintain to the lamp. So, as it sufficiently approaches the lamp, it starts to decend down to it in a sort of a "mortal spiral". However, as it circles closer and closer, it will have to resist ever-increasing centrifugal forces, which must appear to the moth as an external force (such as the wind) attempting to blow it off-course and prevent it from maintaining the right angle. The moth's answer to this circumstance is quite logical, from its ideology's perspective: to overcome the adversal force it needs to redouble its efforts, increase its wing power, flap its wings ever more frantically and do its best to maintain the sacred angle until the burning sensation felt during the impact with the lamp's glass does not evoke some other kind of response.

The lengths to which I am going to describe the trials and tribulations of lowly insects in a blog mostly dedicated to the members of a different biological class may be surprising to some readers. After all, how is their plight relevant to ours? Ok, it's true that insects, to borrow a phrase from the famous biologist Richard Dawkins, the author of The Sefish Gene, are "highly tuned pieces of survival machinery", and it is also indisputable that over their hundreds of millions of years of history on this planet they have seen many different creatures (some of whom may have initially shown a lot of promise) come and go. But don't we have a key advantage over them that we are basically, much, much smarter, and are capable of learning? We evolve techniques, they don't. We invented industrial agriculture, representative government, professional boxing, telemarketing and credit derivatives. They just keep on flapping their wings as they did a hundred million years ago.

Yes, all of this is true, but I believe that we have lessons to learn from the butterflies (that would only be fitting for creatures professing to be capable of learning).

One of the lessons is that if we interpret reality through some sort of an ideological lense, then our adaptations to reality are only as good as that lense. Whatever signal makes it through the lense, distorted or not, it IS our reality -- up to the point until we feel the burning sensation in our wing area accompanied by "Zap!". The lenses many of us wear are surprisingly rigid. Jim Kunstler often talks about the psychology of the previous investment -- the phenomena preventing living organisms (not just people) to assess the value of objects independently from the organisms' own history with these objects, including the amount of pain and suffering -- literally and figuratively -- that the organisms incurred to acquire the objects in question. From this immediately follows that our value system is highly, to use a mathematical term, path-dependent, and that decisions made at points of bifurcation (the forks on the road) get immediately elevated to the status of "it was the right thing to do".

Well, then, the corollary of the above blather is that the conditions of the past form the lenses through which we view the future. The key difference between us and earlier generations is that the finality of our "distance to the lamp" is getting harder and harder to ignore. If you are a moth and the lamp is a mile away, then your navigational error compared to the lamp being a light year away maybe small enough to ignore. But what is the cutoff point? How close do you need to get to the lamp before you say to yourself: "I am very greatful to the moth Gods who equipped me with a navigational system which reliably allowed me to travel thus far. But I am even more greatful that they created me with the courage and the wisdom to recognize that this navigational system is no longer adequate for my current location in space and time. Thus, I hereby announce my plan to stop relying on that system and commence a transitional period during which I will mobilize myself to create a more fitting one"? You can see that the term "creeping normalcy" and the Aesopean tale about a frog who failed to recognize the gradual temperature increase of water in the pot and who found itself cooked maybe relevant here.

* * *

I fancy myself someone who pays attention to the issues related to the economics and finance, and thus don't hold the great Efficient Markets Hypothesis (which forms the foundation of the modern finance) in a particularly high regard (those who read my criticism of the authors of Freakonomics with respect to their public stance on Peak Oil will not be surprised by this my view). Make no mistake -- the modern financial theory, and mathematics it is expressed in, is supremely beautiful, elegant and remains one of the crown achievments of human intellect; it the assertions or assumptions that it adequately describes reality that we live in that I consider dangerous in their cluelessness.

It has to be further differentiated, however, between the dynamics in the markets of abstract financial products and the markets of commodities available in finite quantities, such as petroleum.

Devastating blows have been dealt to the Efficient Markets Hypothesis as it applies even to highly abstract financial constructs such as financial derivatives and fortunes have been made exploiting various cracks and holes in it (see above-mentioned book by Nassim Taleb, who is a practicing hedge fund manager, for example). George Soros, a long-time critic of EMH, who has made many billions of dollars trading commodities and currencies while at the helm of his Quantum fund over decades betting AGAINST the prevailing financial theory, catalogues its inadequacies in great detail in his book "The Crisis of Global Capitalism". Many people are familiar with the brief history and collapse of the Long Term Capital Management in 1998 which almost caused the world economy to tank; however the following irony (which can be described as delicious) maybe lost on some people:

* The LTCM founders included famed financial theorists who were awarded Nobel prize for the theoretical breakthroughs on which the modern financial theory is based; the chief assumption of the MFT, of course, being the Efficient Markets hypothesis;

* The charter of the LTCM was to exploit market abberations and deviations from EMH for fun and profit; the assumption apparently was that those who made a spectacular career deriving financial theory from EMH would be best-qualified to understand where and how it doesn't correlate with reality;

* This their understanding of shortcomings and inadequacies of their own theory was ruthlessly tested by merciless reality yet again when their assumptions about their theory's inadequacies turned out to be non-realistic and led to the fund's spectacular collapse; the financial crisis of the US and world economy was averted, however, by Alan Greenspan's decidedly non-free market move, specifically by "persuading" the heads of US largest banks and financial institutions to make multi-billion dollar capital injections the into sinking LTCM's market positions (for more details, read "When the Genius Failed", the financial journalist Roger Lowenstein's account of LTCM's history and collapse).

However, regardless of its basis in reality, I hold that purely financial storms in the ocean of the world economy are relatively harmless. Ultimately, the real question of any financial instrument is the question of value and risk, both expressed in purely monetary terms, i.e. how much "a rational agent" should pay for the right to acquire this asset, and what risk the owner of the asset could incurr in the case of adverse market conditions. Expressed in purely monetary terms, incorrect value assessment mechanisms will result in "rebalancings", plain and simple, as money would be changing hands as markets would reevaluate the "real" value of the assets. Some savvy people and institutions would find themselves in this scheme richer -- at the expense of reckless or miscalculating others. But ultimately, the money stays within the sea of the economy, only ebbs on one shore and flows to the other, in a tide-like pattern. Moreover, with entities like Federal Reserve chartered with maintaining the optimal for the economy level of water in the sea, it will be all but insured that no shore will find itself dangerously dry: one of the raisons d'etre of the Fed is to maintain liquidity in the economic sea. In fact, the sea will be perenially expanding as prodigious amounts of liquidity are constantly being pumped into it.

Thus, it is important to stress that our "financial" value system is entirely based on the notions of infinity and continuity, as it projects monetary expansion (underpinned by the economic growth) indefinitely into the future. For example, given the projected rates of monetary expansion (expressed in interest rate curves) markets routinely ask, and answer, questions such as -- if someone promises to pay me one thousand dollars in 2045, how much would I pay for this promissory note today, in 2005? Infinity and continuity is the very fabric from which the "modern finance"-based value system is created. The recognition of its own finality, of discontinuities lying ahead, is not something that modern financial theory is capable of -- no more than a butterfly maintaining the proper angle to the light source is capable of distinguishing between finite and infinite.

[Another example comes to mind -- for those familiar with classical Euclidian geometry and Einstein's General Relativity. Imagine someone attempting to describe galaxy-scaled systems based on Euclidian geometry, to which an infinite straight line is a very fundamental notion. However, the space itself is being warped by massive objects, such as planets, stars, and black holes. The latter, through their exhorbitant mass, create discontinuities in space-time. Thus, a notion of a straight line, as exhibited, for example by a ray of light, is meaningless without taking these discontinuities into account. Modern financial theory is like Eucliadian geometry based on infinite straight lines and purporting to describe reality, but ignoring a massive black hole easily observed in the neighborhood.]

As lakes of ink have already been spilled over the economic impact of peak oil, I will avoid providing yet another speculation-ridden analysis here. However, from the above it may be concluded that the modern financial theory and the modern financial practice will find themselves to be less and less correlated with reality -- just like the navigational system of a moth sufficiently close to a light source -- as their infinity-based value assessment mechanisms will be ever more warped by the increasingly "unbearable finality of being".

In the ensued turmoil, alternative valuation schemes will be experimented with, new valuations will be assigned to the presently existing portfolios, new notions of financial risk and new methods of calculating it will emerge, and new financial theory will be developed. However, the process may not be orderly. One of the prominent economists of our time, Paul Samuelson, described the process of knowledge acquisition thus: "funeral by funeral, the theory advances" (which fits well into the "ideological lenses" observations in the first part of this article). I imagine, however, that some big discoveries in what constitutes and what doesn't constitute value, and how it should and should not be assessed, may be made in the coming months and years by the present, not some future, generation of economic theorists and practitioners.

* * *

I was still entertaining the thought of the possibly stark contrast between the current and the future ways of assessing value as I came across an article in Boston Globe describing ongoing debate between the architects, urban planners, and other interested parties regarding the future of suburban development.

The article, titled "The Virtues of Sprawl", and subtitled "Sprawl isn't what it used to be, some experts contend. Is it time we stopped worrying and learned to love the subdivision?" -- was published on October 2nd, 2005. and can be viewed here:

The journalist who wrote the article did his best to present the views expressed by different schools of thought in a fair and balanced way; clearly, however, he wanted to finish on an optimistic note, as he concluded with remarks by this expert:

"Ultimately, says [Joel] Kotkin*, author of ''The City: A Global History" (2005), ''The problems of sprawl have to be solved within the context of sprawl. You're not going to stop it. You can't reengineer society by getting everyone to move back to Boston. Forget about it. It's not happening."

As I was reading these remarks, I imagined the following letter mass-mailed by some mysterious unknown sender simultaniusly to many politicians, economists, business leaders, urban planners and other powers that be:

Dear [name withheld]:

I regret to inform you that I have decided not to extend into the future the conditions under which your present living arrangements have evolved.

Please be advised that the negotiations regarding your future living arrangements are currently underway. I would like to emphasize that your participation in this negotiation process is not, strictly speaking, required.

However, I hereby inform you that your continued absence from the above negotiation process will result in that your future living arrangements will be decided for you.

Please let me know if you have any questions.

With best wishes, Your Reality.

Will the addressees open the envelope or consider it junk mail?

*) Joel Kotkin is senior fellow with the Pepperdine University Institute for Public Policy and the Pacific Research Institute. He is a frequent contributor to the Opinion pages of the Los Angeles Times and the Wall Street Journal and an author of several books