So I'm presently suffering through the tail end of another Thursday like the one I described two weeks ago. Apologies in advance if what follows, which is meant to be kind of informal, is also incoherent. I'll probably edit the bejeezus out of this entry tomorrow once I've had some sleep. Check back again during the weekend to see if you can find the changes!
This is meant to be in summary fashion as I've not worked out all the particulars myself, but should prove illustrative of the concepts. I may dredge up some better sources over the weekend but what follows was derived from an off the cuff googling, and as such is easily reproducible by the curious reader.
But. Stephen Den Beste has been posting lately on a subject which interests me considerably, namely energy and energy independence (particularly from Arab sources). Den Beste gives an excellent treatment of some of the problems of scale from the perspective of an engineer today and yesterday, but I think the analysis of a humble accountant economist may be useful in refining his engineering discussion. His basic premise can be summarized:
There is no technology for generation, transmission, conversion or storage of energy which we currently understand or could plausibly develop which would be efficient enough, and which could be deployed soon enough, cheaply enough, and at a scale large enough, to significantly aid us in winning this war. And if it can't do those things, I don't care about it.
What follows is not a rigorous economic analysis and ignores some obvious things like the drop in price of crude oil which may result from, eg, drilling in ANWR; it further ignores that such a drop in price would tend to increase American demand for oil, partially offsetting the new supplies available from ANWR. This effect will mitigate, though not eliminate, the effects described below.
First. Den Beste spends a lot of time talking about the total electricity consumption of the United States, and the sheer staggering scale of it at 3.5 terawatts, and in the current post and several excellent ones he wrote last year, he painstakingly explains why there isn't any alternative fuel which can make much of a difference in this; he is especially dismissive of those (like me) who believe that a systematic reduction in American consumption of Arab oil would be an excellent weapon in the war on terror, reducing the availability of cash for hostile, ambivalent, or greedy Arab governments to fund terrorism. But despite his excellent engineering analysis he misses the point, as he blurs the issue of independence from Arab oil and the issue of electricity production considerably.
For geopolitical purposes, it is not necessary to do anything tremendously significant to alter the sourece of electricity production; Arab oil is used primarily for transportation, not electricity production. Presently about 52% of our electricity production is from coal (mined domestically); about 21% comes from nuclear fission plants; and about 8% from hydroelectric and other sources. Natural gas accounted for 16% of electricity production and petroleum only 3%. So for purposes of considering American independence from Arab oil, its use in electricity production is negligible.
So we can consume all the electricity we want without buying any Arab oil. But we obviously use it for our prime source of transportation fuel.
Den Beste seems to work with an assumption which I don't agree with: he appears to conclude that if we can't entirely stop using Arab oil that reducing our consumption of it won't make any difference (geopolitically), and that besides if we can't eliminate all use of Arab oil by all nations then there's no point in doing anything along these lines at all.
I'm not entirely in agreement with him here.
For scope, let's consider the following:
1. The US uses about 20 million barrels of oil per day, of about 70 million barrels total worldwide daily consumption.
2. Half (10M barrels/day) the oil consumed in the US is domestically produced.
3. So the rest of the world produces about 60M barrels per day, of which 10M collectively are sold to the United States.
So, to work backwards from den Beste's arguments, consider whether eliminating just American purchases of foreign oil would matter much to the Saudis, even though everyone else kept on buying at the normal rate. We (in March 2004) bought some 45M barrels of oil from Saudi Arabia, about 1.5M per day of the 10M we buy worldwide every day. In 2002 the Saudis had total oil exports of some 7M barrels per day. What would happen if they suddenly had exports drop by 1.5M/day (from 7 to 5.5M)?
In Econ 101 terms, this would be a permanent shift of the demand curve to the left. Since our demand for Saudi oil had gone down in this scenario, the price would drop in addition to the quantity output decreasing. In gross terms, as the Saudis have little GDP apart from oil production, this would result in a drop in GDP of about 1.5/7=21.4%. Reducing a nation's GDP by a fifth has some entirely nontrivial effects, none good, on that country.
By way of comparison, during the recent recession, the US economy shrank from a annualized real GDP of $9888B in fourth quarter 2000, to a low of $9835B in third quarter 2001--a decrease of one-half of one percent. Even if we are powerless to stop Saudi Arabia (and, more generally, Arab OPEC countries) from selling oil to other nations, we would put a Great Depression-sized dent in their economy if we were to stop buying foreign oil. It would hurt even if we were the only ones to develop independence from oil.
Now, the remaining question is whether it's possible to achieve this without wrecking our own economy essentially in a fit of pique. Den Beste says no, and he's certainly correct about that as far as it goes. But again it's important to recall that economics is not like engineering. It is not an all-or-nothing question of whether this goal is fully attainable. If it were even one-fourth attainable it would (using our simplified figures above) drop overall OPEC nations' GDP by more than 5% (ten times worse than our own latest recession). So where could any of this savings come from?
ANWR is the obvious place to start if we are to make a serious national attempt at reducing dependence on Arab oil. ANWR, if memory serves, was supposed to be capable of producing 1.5 million barrels per day--the same amount we buy now from Saudi Arabia--should we decide to open the area for oil production. This leaves us, with no hocus-pocus of new technologies, (only the perhaps equally fantastic political will required to affect such a thing as actually harvesting our own domestically-owned natural resources) able to satisfy 11.5 million of our 20 million barrels per day domestically, and we've already completed 15% of our goal. This naturally is in addition to the economic benefits associated with employing all manner of Americans to produce this oil, and the general benefits which the US economy always enjoys when the price of oil drops.
Where else to come up with reduction in foreign oil consumption? A lot of small things can be done for conservation, such as hybrid vehicles. To start out I took a look at Den Beste's 9/24/2002 assessment that conservation isn't going to yield meaningful results.
Den Beste incorrectly states with reference to hybrid vehicles that "The vehicles you describe aren't as much more efficient as you think they are, and they have the problem of requiring that we replace our physical plant." To be fair, this was an old article of his and he may simply not have been that conversant with the latest hybrids. The latest hybrids are pretty good and do not require any changes to systemwide physical plant (I'm not sure they ever did, unlike pure electric vehicles). The Honda Civic hybrid gets 51 MPG on the highway, compared to 38 MPG for the gasoline-only Civic, a 34% improvement. How significant is this likely to be?
The hybrid system used by Honda is somewhat different from that used by Toyota for the Prius. The Honda system achieves its efficiency by using a weak engine, which--even without electric assist--would propel the car slowly along, achieving 51 MPG all by itself. The electric assist is, truly, more a performance improvement than anything. In this respect it is no different from multivalve technology (more than one intake and exhaust valves per each cylinder) or a turbocharger, either of which allow a four-cylinder engine to produce power similar to a V8 engine which does not utilise these technologies.
Turbos, and more especially, multivalve technology have improved to the point that they are effective and fairly cheap. It's nearly impossible to buy any four- or six-cylinder engine which doesn't feature multivalve technology nowadays. There's no reason that with economies of scale hybrid technology couldn't become as pervasive. The tightening of the Corporate Average Fuel Economy loophole which allows trucks to have such preposterously low fuel economies, if tightened, would provide an incentive for investment by all vehicle manufacturers to figure out how to make more hybrid vehicles, and cheaply. A substantial tax credit for the purchase of such a vehicle would encourage drivers to consider them sooner and in greater numbers. It's hard to say what the net impact would be in this, but I don't find it farfetched to estimate a 1% drop in net oil consumption in this country--another 0.2M barrels per day.
So, on no sleep and with little research, I've already suggested means (given some political will) to reduce our consumption of foreign oil by some 17%, 1.7M barrels per day; smart people who analyse this stuff for a living should be able to do better. Knowing the sort of turmoil such an economic event would cause in a country which sells nothing but oil, I find it difficult to conclude that this would somehow not make it harder for, eg, state-sponsored terrorism in the middle east and elaborate nuclear weapons programs. Even if it doesn't solve the problem on its own--which it certainly won't--it still seems to represent a nontrivial disruption of the economic activities of our adversaries.
Someone should point this out to John Kerry and Tom Daschle.
Posted by JKS at June 5, 2004 05:55 AM