A concerted effort to change entrenched and massively powerful bureaucracies, will require enormous efforts, money, and time. With no guarantee of success.

Greed is more predictable and could ultimately speed this process up. Yes capitalism could come to the rescue. As the price of oil rises, many innovative people and companies are looking for ways to “save” energy. Saving big bucks for consumers of electricity.

Big corporations are well versed in the culture of cutting costs, so these energy saving innovators, could be unleashed into open arms.  Entrenched Wall Street is desperately looking for energy saving projects to fund. Plenty of seed capital.

What is the one policy that Exxon and OPEC fear?

Taxes that keep oil energy prices high, reducing volume permanently. High energy prices encourage exploration. Never in human history have so many holes been poked in the Earth as is going on right now. If this new oil comes to market in the face of decreasing demand, prices will fall sharply.

Nothing gets peole on a bus, like $5 a gallon gasoline.

If you give the tax to our politicians to spend though, they will make Rome look like a cheap B movie.

If we applied the tax revenues to social security or our debt, with no exceptions for pork, I suspect that the dollar would rise, oil consumption will fall, and although counter-intuitive, the price of gas might fall enough to counter-act the tax increase. Which may require another tax increase to keep oil energy price high enough to ensure a robust innovation environment.

With oil energy high for a guaranteed time period into the future, an entrepreneurial Tsunami would be unleashed forcing bureaucracies to change, or become extinct.

That’s bureaucratic incentive at its best.

~

Craig, thanks for the thoughtful post.

Do you think that our institutions (government, business, education) reflect what out societal and human belief systems are? 

Perhaps we need to look inward rather than outward for the causes of our behaviors.  Example: despite the increased price of gas, most cars and trucks I’ve observed are still exceeding the speed limit.  Have you noticed the increase in cars running red lights in Bellingham?  Neither of these behaviors makes a lot of sense, although one could argue that running red lights saves gas. 

So on two important values that are supposedly held by most of us(conservation of energy/fuel and transportation safety), the observed behavior appears to be in conflict with the values.  One might surmise these behaviors are largely unconscious.  After all, who would consciously waste precious resources or put others in harm’s way?

The point? It’s hard to come up with “fixes” that really fix when the core behaviors and beliefs stay the same.

Ham,

Good question.  I do not believe that our institutions reflect our societal or human belief systems.  I have had too many conversations with people on their values and belief systems and most of them are the antithesis of our government, business, and education.  One may argue that people go along with these institutions without thinking through what it really means, but if pressed to think through it they come up with something opposite.  I think the greatest challenge is getting our institutions to reflect our societal beliefs and values, a difficult challenge, but I also think it is possible.

Max Weber, an early 20th century philosopher spent a great deal of time thinking about large institutions and had some very insightful thoughts.  His most famous quote is something to the effect of bureaucracy turning from a light clock to an iron cage that instead of liberating people would take away their freedoms.  I think in many senses we are seeing this from our education, business and government, although again I do not think this is human nature, but may be institutional nature.

I think there may be two forces we are dealing with in energy and transportation.  One is that life is hectic and we tend to react to the hurried pace of life without a lot of thought as to what impact our actions have on others (speeding, running red lights).  The other is that we really do not have many choices because of what our institutions have left us with.  I gladly ride the bus in Vancouver, but it is not an option in Bellingham.  I have little choice as to the gas mileage of my car given my economic situation is such that I have a large family to move about and no money for a new, more fuel economic vehicle. 

We really do not have much choice but to drive a car fueled by gas, unless we go to great lengths to do something different.  Yes, part of this is our decisions, but I also believe part of it is the failure of the system (business and government) to give us more viable options.

I appreciate the thoughtful discussion from all sides. Hopefully I’ll have time to come back and add more thoughts, but for now just a few relevant links.

Oil numbers
Paul Krugman, New York Times
“There are two basic facts that would seem to explain a lot about what?s happening to oil prices.

First, Gross World Product growth has accelerated - from 2.9 percent in the 90s to almost 5 percent in recent years, according to the IMF. All of this is because of growth in emerging economies, largely China.

Second, world oil production has stalled - after growing around 1.6% a year in the 90s, it?s been basically flat for the last three years.

So we?ve got rapidly growing demand due to industrialization in Asia colliding with stagnant supply, basically because oil is getting hard to find.

... This is what peak oil is supposed to look like - not Oh My God We?ve Just Run Out Of Oil, but steady pressure on the economy and the way we live from rising energy prices and their consequences. And it doesn?t matter much whether we?re literally at the peak, or whether production can rise by a few million more barrels a day; unless there are big sources of oil out there, we?ll be feeling peakish for the foreseeable future.”
(15 April 2008)
http://krugman.blogs.nytimes.com/2008/04/15/oil-numbers/

Barreling Along: The Big Thirst
By JAD MOUAWAD, The New York Times
Published: April 20, 2008

“Today?s tensions are only likely to get worse in coming years. Consider a few numbers: The planet?s population is expected to grow by 50 percent to nine billion by sometime in the middle of the century. The number of cars and trucks is projected to double in 30 years? to more than two billion ? as developing nations rapidly modernize. And twice as many passenger jetliners, more than 36,000, will in all likelihood be crisscrossing the skies in 20 years.

All of that will require a lot more oil ? enough that global oil consumption will jump by some 35 percent by the year 2030, according to the International Energy Agency, a leading global energy forecaster for the United States and other developed nations. For producers it will mean somehow finding and pumping an additional 11 billion barrels of oil every year.

And that?s only 22 years away, a heartbeat for the petroleum industry, where the pace of finding and tapping new supplies is measured in decades.

...?The country has been living beyond its means,? said Vaclav Smil, a prominent energy expert at the University of Manitoba. ?The situation is dire. We need to do relative sacrifices. But people don?t realize how dire the situation is.?
http://www.nytimes.com/2008/04/20/weekinreview/20mouawad.html?pagewanted=1&_r=2

Check out the “Conserving Oil” graphic to the left of Jad Mouawad’s article above, courtesy of U of Manitoba’s Vaclav Smil. Four steps to reducing American gasoline consumption by up to 1/3. Just one of these four steps reduces it by 1/4.  If Americans reduce the average amount of miles they drive to 1980 levels, it would save 25% of our gasoline consumption.

Another excellent link, also the New York Times, is an article by Michael Pollan. He doesn’t talk specifically about transportation, but his discussion is relevant to general topic of changing human behavior:

Why Bother
by Michael Pollan
“...For us to wait for legislation or technology to solve the problem of how we?re living our lives suggests we?re not really serious about changing ? something our politicians cannot fail to notice. They will not move until we do. Indeed, to look to leaders and experts, to laws and money and grand schemes, to save us from our predicament represents precisely the sort of thinking ? passive, delegated, dependent for solutions on specialists ? that helped get us into this mess in the first place. It?s hard to believe that the same sort of thinking could now get us out of it.

Thirty years ago, Wendell Berry, the Kentucky farmer and writer, put forward a blunt analysis of precisely this mentality. He argued that the environmental crisis of the 1970s ? an era innocent of climate change; what we would give to have back that environmental crisis! ? was at its heart a crisis of character and would have to be addressed first at that level: at home, as it were. He was impatient with people who wrote checks to environmental organizations while thoughtlessly squandering fossil fuel in their everyday lives ? the 1970s equivalent of people buying carbon offsets to atone for their Tahoes and Durangos. Nothing was likely to change until we healed the ?split between what we think and what we do.? For Berry, the ?why bother? question came down to a moral imperative: ?Once our personal connection to what is wrong becomes clear, then we have to choose: we can go on as before, recognizing our dishonesty and living with it the best we can, or we can begin the effort to change the way we think and live…?
http://www.nytimes.com/2008/04/20/magazine/20wwln-lede-t.html?ref=magazine

Can government solve the problems? Do individuals need to change their thinking? Their behavior? All of the above and more. We need to address these issues in all quadrants, all levels and all lines - from as many angles as possible - an integral approach.

How can we support the needs of the planet so that it is able to continue supporting life on a long term basis? What can be done on a governmental and societal level to bring about the changes needed? What can we do as “we the community”? What can we do personally and individually? All important questions to address.

In our community, if we care about continuing life on the planet, we must figure out ways to dramatically reduce fossil fuel use. We also need to be looking at all issues through the lens of mitigating, planning for, and adapting to the realities of living on a planet with finite resources. Expect resource scarcity and plan as best as possible for extreme price volatilities.

These concerns inform my positions on many local issues. A few examples:

Big box stores - I support limiting their size. There’s no point in expanding them now, as the model that has allowed their growth is not sustainable and we’ll soon be left with empty shells.

UGA’s - it’s more important than ever to preserve rural farm lan so that it remains available to grow our county’s food. If we could save a good percentage of energy expended transporting food around the globe, we’ll be making real progress.

Urban Villages and infill - do as much as possible to limit local growth to our actual carrying capacity, and direct what growth does occur to carefully managed infill and walkable neighborhoods.

Waterfront - use our port as a port. Shipping by water is usually more energy efficient than shipping on roads, and especially so when using wind power. We need to take advantage of this natural asset. New kite-sail technology brings wind power on the water into the 21st century.
http://www.nytimes.com/2008/04/20/magazine/20Move-body-t.html?pagewanted=all

Libraries - Just as we don’t need larger big box stores, we don’t need a new and larger central library (as much as I value libraries). We certainly don’t need a new parking garage that encourages more individual car trips. What we need is an energy efficient system of distributing books to library patrons throughout the city and county. Perhaps branches that combine use with other purposes, but please no new building projects. Let’s get creative with existing structures.

Hopefully you can see how all these issues relate to transportation, energy, and climate change issues.

All of my comments are
still having my sentences
cut off. No matter what
computer I use, or whether
I type directly in the box
or copy & paste from my
word processing software.

Now I’m trying hard returns
with shorter lines.

To read my comments in full,
copy & paste my comments
into your own word processing
software.  Thanks.

Recently, Douglas MacDonald, former Secretary of Transportation of Washington State, wrote an analysis of “Vision 2040”, the growth plan adopted by the Puget Sound Regional Council as a guide for planning in the area composed of King, Pierce, Snohomish, and Kitsap Counties.

It was published in Crosscut: http://crosscut.com/politics-government/13638/A+big,+new+growth+management+plan+is+already+outgrown/

It is an exhaustive analysis, worth a read by anyone interested in growth and transportation issues. MacDonald points out that growth in the four-county region is not occurring according to the plan. The article includes links to related contributions from other interested entities.

I was struck by one of the comments posted, that I think demolishes one of the myths that I see widely distributed, that other cities, Vancouver B.C., and Portland, for instance, have planned for and accommodated growth in new and innovative ways:

growth managment plan

Posted by: DMorrill on Apr 25, 2008 11:29 AM
“Mac Donald provides a fairly sober assessment of plans versus reality for the region, even if he tries in the end to embrace the goals for future development.
As a geographer-demographer, urban settlement is my field of study, and I periodically review urban trends for the Central Puget Sound Real Estate Research Report. Basically, from 1990-2007, 17 years of growth management, growth of population has been overwhelmingly at the suburban edge and beyond, in the satellite towns, precisely where there was still land to develop. Downtown Seattle and even more downtown Bellevue, have added thousands, but this was dwarfed by larger forces for decentralization. And the decentralization pattern is as strong or even stronger for jobs, despite goals for even greater job than population concentration. [The ?problem? was that the majority of jobs do not fare well in dense centers]. Despite the downtown growth and widespread in-filling and redevelopment construction in inner areas, especially Seattle, inner urban populations have not changed much, simply because average household size fell, as larger families were replaced by singles or 2-person households, as families either could no longer afford city housing, or refused to live in apartments or condos and moved as far as necessary to find single family housing. Planners, our elected leaders, and, I guess, Mr MacDonald continue to be in denial about what people really want.
The metropolis does have a fairly high, and increasing share of singles, childless couples, empty nesters and educated professionals who are a good market for denser urban living, but they are NOT a majority, and do not have an ethical right to impose their preferences on everyone else. It is simply predictable, then, that the goals of vast population growth in Seattle and other core cities, or that the urban growth boundary will not need to be reevaluated before 2040, will not occur. Folks will rebel, many businesses will relocate, and a significant share of the assumed growth may be displaced to other counties and other states.
I would point out that those denser cities we want to emulate, like Boston or New York or San Francisco, in fact have vast and extensive suburban single family zones, and our more ?perfect? neighbor rival, Portland and Vancouver BC, are in fact very much like us.”

Writ smaller, that is us.

David MacLeod,
Concerning your post of April 21:
This might be the only decent analysis of any market performed by Paul Krugman, an econimist with a deep distrust of markets, if that makes any sense.

That said, it is still static and politicized, and includes predictions that don’t hold, in that they don’t take into consideration the influence of price considerations and technological innovation.

The bottom line is that Krugman, like all Malthusians, is most likely wrong. If you’re looking for an economist with a better record of predicting the future, Google Julian Simon.

Concerning April 22:
“Big box stores - I support limiting their size.”
Big box stores, including costco and W@alMart, are under enormous economic pressure to expand. their financial model forces them to do so. If they don’t, they fail. You apparent favor failure. Your position will result in sprawl, since the forces that force them to expand will lead them to move to a location more economically advantageous.

I’d like bigger stores stores closer to the center of town, leading to shorter commutes to the stores and more compact land use patterns.

“UGA?s - it?s more important than ever to preserve rural farm lan so that it remains available to grow our county?s food.”

Most of the rural “farm” land is not, and never was, economically viable farmland, including much of the land in the ag overlay zone. This includes much of the land in the recently-abandoned urban growth area. You must like the tumbledown buildings and the abandoned farm vehicles that populate much of this land as you drive by.

This land, which serves as free open space for city dwellers who want to take a drive in the “country” is paid for the the poor saps who happen to own it. There is an economic loss to both, at no real benefit to either.

“Urban Villages and infill - do as much as possible to limit local growth to our actual carrying capacity, and direct what growth does occur to carefully managed infill and walkable neighborhoods.”

I hate to tell you this, but there is a complex hierarchy that sits in opposition to infill. It consists of private covenants, zoning rules, statutory regulations (can you say, “Stormwater”?),the interests of neighborhood associations, who always fight increased density, the interests of mortgagors, and the fire department, which always resists increased density and reduced street widths, with good cause.

The fact is that the only near-term candidate for an urban village is Old Town, where the neighbors have fought for reduced density and height, so far to good efect, from their point of view. What should be allowed there, in my view, is maximum height, in a negotiated tradeoff for reduced site coverage. the increased density will provide the threshold of density required for viable retail development within walking distance of the residential development.

Tall, slender buildings will interfere with views far less than wide, say, five-story buildings, and example of which is the building at Railroad and Laurel. The interests of the neighborhood association, which are always parochial, should be subordinated to the broader interests of the city, in its goal of increasing density, in my opinion. this would, however, require fundamental changes to the zoning code. Either you want zoning, which is top-down, or you want neighborhood control, which is bottom up. Please do not use one model while paying lip service to the other.

This brings us to Jack Weiss, a proponant of urban villages. the only trouble is that he has proposed such a village in the Samish Neighborhood, where there is already a thriving commercial district. I doubt that he owns a building there that he is willing to demolish to provide the required housing density.

I note that Mr Weiss’ neighborhood, Birchwood, recently successfully shot down a proposal by a developer to build a work-live development that would have reduced commute times and have resulted in increased density. After all, it was out-of-keeping with the lofty neighborhood goals. Nevermind the overarching goal of increased density and reduced carbon footprint. the bottom line is that those efforts by neighborhood associations discourage divelopment of any kind.

What we’re left with is the recently-abandoned urban growth area, in which development in the pattern of the desired model could have occurred. This is a huge loss, one that will probably be corrected as the result of litigation, which could have been avoided by a more forward-thinking approach on the part of Mayor Pike and the Council.

David Orkels,

Your comments are well reasoned and well stated, however you haven’t really addressed the problems of energy scarcity and price volatility.

“Malthusian” is not a fair characterization of Paul Krugman. He seems to be a fairly recent convert to the ‘peak oil’ point of view, and it seems to me he’s only slowly shifting his thinking to allow the possibility that the Limits to Growth crowd might have something to say to us. On April 22 he put out a blog post titled “Limits to growth and related stuff,” where he points out that back in the early ‘70s he “was Bill Nordhaus?s research assistant, working on energy issues…Nordhaus, among other things, wrote a hostile review of Jay Forrester?s World Dynamics, which led to the later Limits to Growth.”

He lays out some criticisms of Forrester, but he ends the post as follows “while the Limits to Growth stuff of the 1970s was a mess, the history of energy technology doesn?t support extreme optimism, either.”
(krugman.blogs.nytimes.com)

As a counter to Julian Simon, I offer Albert Bartlett - look for his “Arithmetic, Population, and Energy” presentation at global public media.com. Bartlett says “the greatest shortcoming of the human race is our inability to understand the exponential function.”

When it comes to energy issues and economics, I don’t think there’s anyone in a better position to analyze the situation than Fatih Birol, the chief economist for the IEA (the International Energy Agency). A couple of years ago Birol and the IEA was in complete denial of a problem with oil supply. Now He’s sounding shrill alarm bells, and a newly published translation of a recent interview is astonishing in it’s frank assessment of our energy situation. It can be found in today’s Energy Bulletin.net

Birol:
“we see a sharp decline in production from the existing oil fields, especially in the North Sea, the USA and many non-OPEC countries. Even here money should be invested, to slow down that decline. The third reason why we expect a risk for overall production is, that we looked at all oil exploration projects around the world: 230 altogether, in Saudi-Arabia, Venezuela, the North-Sea, everywhere. Even if all those projects which are already funded will be implemented, the overall capacity they can bring for new oil production is too little.”

Big Box Stores - I don’t FAVOR their failure, I EXPECT their failure because their business model is predicated upon cheap and abundant fossil fuel energy. To be expanding them and building more of them now is most likely wasted energy and resources.

The primary difference between you and I on the economic viability of rural farmland is, I believe, that you expect the conditions of the immediate past to continue linearly into the future. I foresee a much different energy constrained situation where we’ll need to source most of Whatcom County’s food within Whatcom County.

Again, the current arrangements of our society have been built on cheap and abundant fossil fuel energy. When Energy Uncertainty becomes more and more of a problem, we’ll have to begin making other arrangements. My view is that we best begin planning the infrastructure of these other arrangements while we still have some relatively cheap energy available.

David MacLeod,
You are correct. I should have described Krugman as, ...a recently converted Malthusian.” He is less so, however, than are you.

As far as my comment about Krugman’s politicization of his analysis, I offer this: In his blog on March 30, he wrote, “The point is that the official definition of recession has become delinked from peoples? actual experience. Right now, we?re in an economy with deteriorating employment and incomes, collapsing home prices, and business retrenchment. Is it also an economy in recession? Who cares?”

The truth is that the unemployment rate is down, that jobs have declined less than predicted and in a seasonal manner, and durable-goods spending is up, as is GDP. Home prices are stable in all but a few markets, although turnover is down, mostly because buyers tend to wait for a visible bottom in the market at time like this. The stock market, traditionally a reliable leading indicator, is up sharply.

Krugman was arguing for redefining “recession”, and was only able to do so by fudging the numbers and referring to people as “worried”.

I read some of Albert Bartlett’s work, and the essence of it is that he discovered the theory of compound interest and erroneously applied it to demographic trends. Even the weight of his scholarly pedigree is insufficient to carry his argument, which he is able to defend only by relying on his flawed premise.

The best estimates are that the world’s population will peak at around 9 billion by about 2050. Recently, however, fertility rates have fallen faster in both the first world and the third world than demographers previously believed possible. Economic development in Africa will speed that decline.

I also read Fatih Birol’s op-ed piece in the Independent. It’s a good thing I did, because he refutes your argument, that peak oil is imminent, which you buttressed with a paragraph cherry-picked from the middle of the piece.

Here are excerpts from the first and last paragraphs:
“We are on the brink of a new energy order. Over the next few decades, our reserves of oil will start to run out and it is imperative that governments in both producing and consuming nations prepare now for that time. We should not cling to crude down to the last drop ? we should leave oil before it leaves us. That means new approaches must be found soon.”  To me, the key words are “Over the next few decades, our reserves of oil will start to run out…”

And the last paragraph:
“In the long term, we must come up with an alternative form of transport, possibly electric cars, with the electricity being provided by nuclear power stations. The really important thing is that even though we are not yet running out of oil, we are running out of time.”  To me, the key words here are, “In the long term…”

I’m not against planning, but to take this piece and use it to argue against Wal Mart’s and Costco’s expansion plans in Bellingham at the present time is at least insupportable from a policy point of view.

Your prediction of empty box stores should carry no weight in how these companies choose to invest their own capital at the present time, in my opinion.

If they don’t expand where they are, they’ll move, perhaps to the Lummi Reservation. Is that your idea of sound public policy, from either a revenue perspective, a transportation point of view, or a carbon footprint view?

You mention the viability of rural farmland, claiming that we will soon be growing all of our food here. Not in my lifetime, sir, and I doubt in yours either. You ignored my point that much of the land in the county is not, and never was, viable agricultural land.

Mr. Mayberry concludes, “Based on my experiences, I am much less optimistic [goverment and big business] will come through.”

Government won’t, but big business will. Nothing concentrates the mind of an auto executive like dealers’ lots full of unsold SUV’s. The market will quickly move to accommodate higher fuel prices, while Congress will saddle us with more distortions in the model of the ethanol mandates that are helping distort agricultural markets.

People will soon alter their driving habits and make more of their trips to multiple destinations. Transit ridership will increase. Mr. Mayberry’s tepid endorsement of the role of market forces will be found to have been unduly pessimistic.

If you consider that a 45 passenger bus gets about 2.5 miles per gallon, it’s easy to do the math and see that a bus with five passengers is not very fuel efficient. I think that a jitney (privately or company-owned) or a van-pool system, scheduled with a sophisticated, maybe viral, computerized scheduling system, will provide convenient, custom, door-to-door transportation that our existing large-unit bus system is unable to supply without huge time penalties for users. Government, again, will be the largest impediment to this transformation.

Last, you didn’t address my comments about the difficulties facing attempts to increase the density of existing neighborhoods in Bellingham.

David Onkels,

I’m glad you took the time to look up comments by Fatih Birol (chief economist for the IEA). However, you got several things wrong.

1) I do believe peak oil is imminent, but how close the peak is wasn’t the focus on that particular post. The focus was on economists in the best position to analyze our current situation with energy. I was pointing out how the IEA, and Mr. Birol in particular, was, over time, becoming increasingly frank, candid, alarmed, shrill in his assessment of oil supply and demand.

2) I did not cherry pick the quote, and in fact the quote I used did not come from the article you refer to at all, but from a more recently published interview. I mentioned that I got it from the Energy Bulletin on May 2nd.  A German interview from Internationale Politik, and this is an unauthorized translation into English. Energy Bulletin has since taken it down by request of IP, but you can still find it in Google’s cache. An authorized translation is said to be coming out soon.

3) Birol’s article in the Independent - I’m tempted to post the entire piece, but I’ll resist. Readers can find it here:
http://www.independent.co.uk/news/business/
comment/outside-view-we-cant-cling-to-crude-
we-should-leave-oil-before-it-leaves-us-
790178.html (I’ve learned not to post long urls on this blog - you’ll have to reconnect the breaks).
To me the key words of the first paragraph are “That means new approaches must be found soon.”  The Hirsch report for the U.S. Energy Dept. in 2005 stated that a 20 year lead time is needed to effectively transition our economy off of it’s current dependence on cheap and abundant oil. If peak oil is decades out, we still need to start making a transition now.

And again, the key words of the last paragraph are “we are running out of time.”

This post is long enough. Point number 4 will be in a new post.

...continued.

Point #4) The Fatih Birol interview I quoted from. As I mentioned above, his comments are getting more “shrill” over time. And “shrill” is the word he uses (if the translation is trustworthy). Did I cherry pick? More extensive quotes from this interview below. Notice from the first section below that the IEA’s 2007 report speaks of a slump in oil production from now to 2015 (this is not decades out).

Astrid Schneider:
Mr. Birol, in your “World Energy Outlook” which was published in November 2007 the IEA has warned for the first time that there could be a slump in oil production and escalating prices in the time from now to 2015. The reason you give is that there has been too little investment in oil production.

Fatih Birol:
Indeed. There are three reasons why that is so. The first one is the increasing demand, mostly from China, India and the Middle Eastern countries themselves. These countries are the main reason for the increasing oil consumption. Even if there should be a recession in the USA, this would not slow those countries down much, because India and China have a strong internal economic growth, while high oil prices will help the economy in the Middle East. The demand for oil will therefore remain high.

Schneider:
The second reason ...?

Birol: ... is, that we see a sharp decline in production from the existing oil fields, especially in the North Sea, the USA and many non-OPEC countries. Even here money should be invested, to slow down that decline. The third reason why we expect a risk for overall production is, that we looked at all oil exploration projects around the world: 230 altogether, in Saudi-Arabia, Venezuela, the North-Sea, everywhere. Even if all those projects which are already funded will be implemented, the overall capacity they can bring for new oil production is too little.

Schneider:
How much is missing?

Birol:
Exactly 12.5 million barrel a day are still missing, about 15 % of the global oil demand (the current global oil consumption is 84 million barrel a day, note from the editor). This gap means that we could face a supply shortage and very high prices during the next years.

Schneider:
Is there still a way to avoid this?

Birol:
There are only three ways out of this dilemma: First of all we have to increase energy-efficiency drastically, we have to build more economical cars, trucks and airplanes, to slow down the incline in oil consumption. Secondly we have to use more alternative fuels in the traffic sector. If you take a look at how little governments are doing to help higher efficiency, though, I have little hope that there will be such a change of policy. The third thing is that we need many more oil production projects, especially in the key countries in the OPEC.

[Note that he says we need more projects from OPEC…below he doubts they can or will provide what we need. DavidM]

...Schneider:
In the WEO 2007 it is mentioned that the rapid decline of oil production will be between 3.7 and 4.2 percent per year. Is that right?

Birol:
Exactly-

Schneider:
This decline is even steeper than the one predicted by the Energy Watch Group!

Birol:
I can already tell you that in our “World Energy Outlook 2008” which will be published in November we will deal in depth with the prospects of the oil and gas production. We will take a look at the 350 most important oil and gas fields and explore how much production rates are sinking and what that means.

Schneider:
What do you mean by that?

Birol:
As far as I know this will be the first profound public study in which we verify and revise our knowledge about how much oil and gas is going to the markets. Many people will come to new conclusions about this.

Birol:
...I think we are entering a new world oil order. The new players, which decide how much oil is going to the markets, are mostly public oil companies. For many reasons things will not be as easy as they have been before.

Schneider:
The Energy Watch Group has pointed out in its studies that the oil reserves in the Middle East are likely estimated 50 % too high. When you ask the Middle East countries today to increase their production capacities, how good is your knowledge on their oil reserves and on the amount those countries could produce if they wanted to?

Birol:
We are talking about a very important issue here and the most important accomplishment I expect from the WEO 2008 is more transparency as far as the oil reserves of the national as well as the international oil corporations is concerned.

...Schneider:
Does transparency alone help?

Birol:
Even if the oil reserves of Saudi-Arabia should be estimated wrongly by 50 %, they could increase their production from 12 mb a day to 18 mb. But I don’t think they will raise production that much in the next 25 years. So there are mainly three different problems: geology, investment and policy of the main oil producers. Those three aspects taken together make the future of oil very difficult.

...Schneider:
Will we be able to meet all three challenges?

Birol:
If you look at the dimensions, I don’t think that the markets alone can solve those problems. We cannot leave everything to them. The national governments as well as international institutions have to help to define the rules and follow them. The issue is too important.

Schneider:
You are not alone with your warnings about supply shortages - at the world economy summit in Davos Jeroen von der Veer, the Shell CEO, admitted for the first time that conventional oil and gas will not suffice to cover world demand from the year 2015 onwards. Will this not lead to a further decline in production?

Birol:
Several people now think that the global oil and gas production will get into troubled waters soon, but this is not only due to resource depletion. The lack of investments are another problem, as well as the fact that some countries don’t want to increase production.

Schneider:
So what is your conclusion?

Birol:
I would be very surprised if the oil productions would effortlessly increase during the next 20 to 25 years to meet, lets say, 120 mb a day without any problems. Even if the potential should be there, we will not get this oil to the markets. The conclusion is that we have to be prepared to see very turbulent, tight and high prices oil markets - this will not be good for the economy.

...Schneider:
But when you think of the life cycle of goods, of the long investment cycles of machines, power stations or air conditioning systems: do you think an adjustment of the consumer side to a lower supply path could be done that fast?

Birol:
No, but I don’t think that prices will go up that rapidly. We can see a gradual incline and that will give the people some time to adapt. But on the long run it has to be clear: if oil will be gone by 2030, or in 2040 or 2050 does not change much.

Schneider:
You really say that?

Birol:
Yes, one day it will definitely end. And I think we should leave oil before it leaves us. That should be our motto. So we should prepare for that day - through research and development on alternatives to oil, on which living standards we want to keep and what alternative ways we can find.

[note: he doesn’t say “peak by 2030,” he says “gone by 2030” etc. His point is that, like the Hirsch report tells us, it doesn’t matter much how close we get the timing if we don’t begin making other arrangements now. DavidM]

...Schneider:
...How loud are your alarm bells ringing by now?

Birol:
We are talking about two different functions here. The first is that we can put reserves to the market when there is physically not enough oil to meet the demand. We did that in 2005 for example when the hurricane Katrina hit the USA. The second task is, as you have mentioned, to “sound the alarm”. That’s what we have done last year.

Schneider:
You already did ring the bell? When?

Birol:
With the World Energy Outlook 2007. It was a clear signal to the governments of all our member countries. They take energy and oil security much more important than before, now. And when we present the WEO 2008 this November, I think it possible that the sirens will shrill even louder.

I posted this at “Peak Oil”.

From a comment at Sound Politics: “I recently got back from a trip to Kiev, Ukraine. They had Park N Ride size vans all over the place. People would line up on a street corner, and another van came along every 10 or 15 min. Around subway stops, there would be half a dozen lines of people, one for each route. The little vans just kept coming, and the lines moved nicely.

Inside the vans were clean and well maintained. Passengers voluntarily passed money forward to the driver, making change from each other’s payments.

It was efficient, convenient and friendly. And all private enterprise.

About a year ago I read that some enterprising Eastern Europeans tried informally doing something similar in NY. Everybody loved it. So the city shut it right down.

Yeah, you can’t start a private bus company ‘round here.”

What do you suppose would happen in Whatcom County if “some enterprising Eastern Europeans tried informally doing something similar ” here?