Barack Obama's Energy Policy - a Consideration

Yesterday Democratic presidential candidate, Senator Barack Obama, issued a brief statement pertaining to U.S. energy policy, what one might call a positioning statement. His remarks were made at a speech at the University of New Hampshire.

“We’ve been talking about climate change in Washington for years and energy independence and efficiency for years,” Obama said. “but no matter how many scientists testified about greenhouse gases, no matter how much evidence that they’re threatening our coasts and endangering our weather patterns, nothing happened with global warming until now.”

In other words, Obama appears to see U.S. energy problems primarily in environmental and foreign policy terms and not in terms of the impact of constrained supplies and higher prices on the economy. And in this he is not unusual.

Obama went on to say “It will take a grass-roots effort to make America greener and end the tyranny of oil.” Or about what would expect in a stump speech, and again very much in the mainstream.

Obama, incidentally, is known to favor carbon limits as a means of addressing greenhouse gas problems, and he has indicated that such limits will stimulate increased production of corn-based and cellulosic ethanol which apparently he sees as replacement fuels for refined petroleum products.

At any rate, there was nothing very exceptional in Obama’s take on our energy problems. One hears essentially the same position enunciated by almost any candidate who cares to speak on the subject, and indeed there is little apparent difference between Obama’s position and that of George W. Bush save in the matter of regulating emissions. Bush, of course, favors “voluntary” regulations, which is another way of saying no regulations at all and thus arguably no change in the status quo since businesses are perfectly free to reduce their emissions today if they wish to do so.

Generally, Democratic candidates, both possible and declared, tend to be a bit more explicit in their pronouncements on energy than are their Republican counterparts, but no one in either party has enunciated what I would deem a comprehensive energy policy, let alone one that provides any plausible means of containing environmental damage while achieving long term energy security.

And little wonder because the problems are so intractable.

Why Energy Policy Gets Short Shrift

As in any discussion of a national energy policy one should start with fundamentals. And I shall. The American economic and industrial system is and has been rooted in the ready availability of low cost energy. America has been blessed with fossil fuel and nuclear resources beyond those of any other nation and has used those resources and those of other nations to build the world’s pre-eminent industrial establishment and consumer culture. Any precipitate diminution in the rate at which fossil fuel resources are exploited and consumed jeopardizes the health and integrity of American material culture in all its aspects. Unfortunately, as we have indicated in other articles and information resources available on this Website, just such a diminution is possible and perhaps even likely within the first or second term of the next President of the United States. If it occurs, the consequences will be serious.

Most Presidential candidates, including the aforementioned Barack Obama, advocate diversity in energy resources with an emphasis on renewables combined with a drive for greater fuel efficiency in personal transportation. Some also advocate improved efficiency in the utilization of thermal and electric energy for heating and lighting.

Such measures do in fact constitute the rudiments of an effective energy policy, but in and of themselves, they are more in the nature of goals than instruments.

Let us take the matter of fuel diversity. We happen to love alternative fuels. We think they represent the future, and that research toward improved feedstocks and production methods is certainly warranted.

The problem is that no alternative fuel has proven itself to be cost competitive with conventional fossil fuels. Some fuels made with some production methods appear promising, but nothing out there on the horizon is a sure bet, including cellulosic ethanol which is currently getting the same kind of hype as hydrogen did a few years ago.

And in some, perhaps most cases, there is a definite tradeoff between cost and environmental impact. Virtually all biofuel production methods make heavy use of fossil fuels for processing and transport. Take away the nonrenewables altogether and the cost escalates. Similarly, liquid fuels from coal and from tar sands can be made fairly cheaply today by most accounts, but only if one is willing to tolerate high emissions of carbon dioxide. Sequester the CO2, and the cost goes way up, though how much is a matter of dispute.

Candidates in their pronouncements on energy blithely assume that the means of achieving energy independence and carbon neutrality are at hand and that they will not entail fundamental and probably wrenching changes in the American way of life. They fail to acknowledge any tradeoffs for the most part. They may be right, but it seems unlikely. And the reasons that they are probably wrong bear examining.

Clean Energy and Electrical Power

Elsewhere on this Website we have explored the cost and feasibility of a replacement electrical grid anchored with renewable energy generators. Our conclusion is that such an entity is essentially infeasible with present day technology. That means that any semblance of our current high energy consumption material culture can only be maintained by building more nuclear capacity or more coal fired plants or both, at least until more effective means of exploiting renewable energy sources are developed—leaving aside the whole issue of transportation fuel and assuming that plug-in hybrids are probably inevitable in personal transportation in the longer term.

It goes without saying that nuclear generators carry with them a whole set of serious problems, but the biggest immediate problem is the enormous capital cost of constructing them and the length of time required to add significant nuclear capacity. Nuclear power is not now remotely competitive with conventional fossil fuel, and that is why it has never assumed the role that many thought it would fill at the dawn of the nuclear age. MIT has published what is the definitive study on nuclear costs and interested parties should consult it.

Of course more nuclear capacity may eventually be constructed nonetheless on the grounds that nuclear plants do not emit carbon dioxide. But even if one accepts such reasoning, one must confront the fact that uranium is not a renewable resource and that by many estimates only breeder reactors can ensure long term energy security. Unfortunately, they would also certainly ensure nuclear proliferation. Truly a Hobson’s choice, this.

Coal fired plants in their older incarnations are notoriously dirty, and while coal gasification combined with carbon sequestration can achieve near zero emissions, the economics of coal gasification plants are uncertain, although certainly they would be considerably more expensive than the conventional dirty plants of today.

In any case, whether one opts for coal gasification or nuclear or some combination of both, the cost of replacing America’s dirty coal generating capacity would run in the trillions of dollars and would result in plants that would have to charge more to consumers than conventional coal plants in order to be profitable. Will private capital invest in such dubious markets? Possibly with heavy government subsidies or disincentives, but that does not change the fact that if either nuclear and/or clean coal should become predominant, the public is sure to pay more for electrical power. The choice is clear, pay more for power if you want to make serious inroads into carbon emissions, or pay less to continue polluting and spewing carbon dioxide into the atmosphere.

What about renewables such as wind, solar, or geothermal? See our prior pieces on the renewable grid. Renewables cannot and will not dominate electrical generation any time soon, though they can provide element of diversity in our power portfolio and they have much to recommend them in distributed and home power applications.

And forget natural gas. Natural gas prices are ascending into the stratosphere and gas fired generator plants will be gone within a decade or so unless someone figures out a way of tapping methane hydrates—a remote possibility at this juncture.

So is Barack Obama or anyone else going to be able to transform the American power grid through executive fiat or legislative jaw boning? Would any American politician even attempt such a transformation? Maybe some day after America has endured a dire and protracted energy crisis someone can effect such a transformation, but over the course of the next ten years? I’ll leave you to come to your own conclusions.

Transportation

High oil prices are the most proximate irritant on the energy scene today, and we’re predicting that they will inch upward gradually before taking off like a rocket with the decline of global production from conventional sources. When such a peak occurs, and it will occur inevitably, shock waves will almost certainly radiate through the American and world economies.

Mull these figures over. The National Energy Commission states that oil production could decline by a full 4% within one year after peaking, a figure cited by other authorities as well. They calculate that such a decline could precipitate a 177% increase in the price of crude oil which probably take oil to well over $100 per barrel. Since every $50 increase in crude results in roughly $1 more at the pump, we can see where this is going. But it gets worse because every year thereafter we can reasonably expect to see at least a 2% decline in production with corresponding increases in crude oil prices.

How would the U.S. private economy and the U.S. government respond? Candidates avoid this topic like the proverbial plague, and conservative Republican congressman Roscoe Bartlett is the only political figure to discuss the matter seriously. But even Bartlett provides no answers.

Obviously, citizens at large would have to allocate much more money to transportation and also to heating their homes if they reside in regions where residual oil is commonly used for that purpose. Just as obviously, such expenditures would depress spending in other areas, resulting in declining retail sales and manufacturing, a sharp and telling blow to the travel and hospitality industries, and significantly increased prices for food and durable goods. Sound like the makings of a recession or worse?

Real estate developments predicated on lengthy commutes by automobile would also be greatly devalued, and one could foresee considerable turmoil in the housing industry.

So how are you going to deal with this scenario, Mr. Candidate?

To redirect the question, how could anyone deal with it?

Probably any President regardless of party affiliation would attempt to initiate crash programs for alternative fuels at such time as declines in conventional oil production became manifest. But it is almost inconceivable that new capacity could then be built quickly enough to offset declines in conventional oil. One would need significant capacity in place at the moment the decline began. Large scale production plants take years to complete even with accelerated building schedules. One could be making due with 20% less liquid fuel by the time that significant replacement capacity was in place, and what would that do to the economy?

How about more fuel efficient cars?

Certainly such could be made with current technology. Tripling the fuel efficiency of present day automobiles is a goal within reach but it would require enormous capitalization on the part of auto manufacturers to put in place new tooling to make new kinds of engines and motors and new low mass bodies and frames. Tweaks in existing designs would only yield incremental improvements because they are already highly optimized. America’s beleaguered auto makers would be strongly disinclined to make such investments and would probably be unable to do so from existing capital reserves. Would the capital markets come to the rescue? Or the government?

Asian and European manufacturers might be more agile in meeting the demand for ultra high efficiency, but how would the U.S. economy respond to the virtual demise of American manufacturers?

Ultra efficient cars using hybrid power plants and composite construction body panels would almost certainly be substantially higher priced than current Detroit iron, further encumbering the consumer struggling to adapt to higher prices generally. No one wants to pay more for less—small, cramped vehicles with less horsepower—but that would be one’s lot.

Tripling efficiency would probably entail adopting plug-in hybrids en masse with a tremendously increased draw on the electrical grid. Lots and lots more high priced coal gasification plants, anyone?

Greatly increased use of public transportation would ease the draw on scarce fuel supplies, but are Americans ready to embrace it let alone pay for its construction directly or indirectly?

The scene I have painted here is by no means a worst case scenario. Not even close. I’m assuming that energy shortages will stress our economic system without shattering it, but stress it they will by almost any reasonable projections if the peak in oil production comes soon. There are no plausible technological transformation that could occur within the next decade that could inoculate America—and the rest of the world for that matter—against the malaises attendant upon declining oil production.

Of course no one wants to air such concerns in a political debate. If a candidate wishes to resort to scare tactics better to summon the shadowy figure of the Islamic terrorist who in truth could not wreak one millionth the economic damage of a serious oil shortage. The image of the terrorist engages the passions of the crowd while at the same time the problem of terrorism appears susceptible to a simple military solution. But what is the simple military solution to global warming or constrained supplies? One could, I suppose attempt to seize the oil resources of Middle East and provide U.S. consumer with priority access, but such an act of outright piracy would surely be accompanied by a whole chain of unpalatable repercussions.

One could of course rely on the market to solve all of our energy problems, but if one waits until an energy shortfall is apparent would the market be able to respond with sufficient alacrity and to marshal sufficient resources? Remember we’re talking about tens of trillions of dollars of investment to make over America’s energy infrastructure. Would such funds be forthcoming or would investment continue to go peer to peer video services on the Internet?

So is it any wonder that Presidential candidates are vague in discussing energy policies? Their own political futures depend upon best case scenarios, and the whole idea of serious risk management is appallingly absent.

Whoever heads the next Administration is likely to face unprecedented challenges in this regard, and so one must ask oneself, who among the candidates is most likely to meet such challenges? Who has the courage, intelligence, charisma, and the full grasp of the manifold dimensions of the problem? Does anyone?