Friday, June 15, 2007

Cha-Ching

Critics of the idea of peak oil point out - quite rightly - that there's plenty of black gold left. This is true - but peak oil isn't an argument that we're about to run out of the stuff. Rather, the theory is based upon the readily observable phenomenon of what happens when you get most of the easy stuff out of the ground (remember pictures of those gushers? That was oil escaping the earth under the power of its own pressure, something that's more a memory than a reality). What is left in the ground is harder to get out, that is, it gets more expensive to produce. The easiest way to explain this is EROEI: "energy returned on energy invested." In its heyday in the 1940s, the U.S. was getting the equivalent of 100 barrels of oil for every barrel it invested in retrieving it. Nowadays we're fortunate if we get around 15:1, which is still pretty good. Compare to some other EROEI numbers: wind, 5:1; solar, 4:1; tar sands, 1.5:1; hydrogen, 1:1; and, my favorite, ethanol, approximately -1:1. That's right - the alternative energy future being pushed by our political leaders is a net energy loser, once you calculate the amount of petroleum inputs needed for fertilizer, pesticides, and processing. Can anyone say "government subsidies"?

Basically, you can't get something for nothing, though the society we built during the day of the 100:1 EROEI was based on that fantasy. We will experience Peak Oil not in the form of running out of the stuff, but in the form of higher prices. So, when you read the paper, you too can start making the connections - it's really fun! So, for instance, a front page story in today's New York Times notes the jump in interest rates last week that will make the cost of borrowing (housing, capital investment, etc.) more expensive. Watch all the fun when all those ARMs start adjusting (well, it's happening already, with foreclosures reported today to be at historic highs)... Why did the interest rates go up? Inflation, of course. Where's the inflation coming from? Well, the article doesn't really say: "Producer Prices" rose nearly 1% in May - but what made the cost of production go up that much? Do your own investigative reporting...

Sometimes, however, the paper will even do some of the work for you! Here's an article on the front of today's business page of the Washington Post: "The Rising Tide of Corn: Ethanol Driven Demand Felt Across the Market." Two dots are connected here: our food prices are rising because of the demand for ethanol (which is, recall, a net energy loser, so we're actually getting hit twice - once in our food prices and again through our taxes, in the form of agricultural subsidies). Our entire food system is based upon cheap corn (a product whose price has gone up over 42% over the past year) - everything from our sweeteners (corn syrup) to our carbohydrates (corn meal) to milk and meat (corn fed beef), to eggs (corn fed chickens), not to mention all the corn-derived additives (maltodextrin, anyone?). As Michael Pollan points out in his great book "The Omnivore's Dilemma," we're as close to being made out of corn as the Incas were. Except that we grow our corn by dousing it in petroleum (fertilizers, pesticides), so actually we're mostly made out of oil in the form of corn.

Now, the article makes two of these connections - it notes that "the nation's unquenchable thirst for gasoline - and finding an alternative to what's been called our addiction to oil - has caused an unintended consequence: The cost of the foods that fuel our bodies has jumped." One question the Post reporter doesn't ask, however, is why we don't just buy more oil so that the price of corn can drop and food can become cheaper again. Inquiring minds want to know... Once you begin to make the connections, you realize that everything we assume about our society is about to change. The growth economy will be a thing of the past. We will have to get by with less. We will have to change our patterns of living. The suburbs will become unsustainable. Living in a community will not be a hippie option. And, that's if things go relatively well....

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