Monday, February 6, 2012

Left versus Right: The game used to play the masses.

            In my book “Sustainable Trade” I am advocating for a dramatic shift in the way we have thus far organized global trade, in order to promote resource and environmental sustainability.  Promoting standardized global trade tariffs that encourage a smaller environmental footprint per unit of GDP produced at a national level, which would be applied to all countries, even if some may be against being subjected to such a tariff, is change that I believe to be imperative if we are to have any hope whatsoever of meeting humanity’s most basic needs for the long term.  It is a message I believe to be important enough to try to make people aware of this concept.  The main stumbling block I find aside from my own relative lack of fame, is the already generations’ old political game of left and right, which many of our citizens are currently fiercely invested in emotionally, as well as intellectually.  I try to appeal to logic instead, starting from the most logical of assumptions that neither side holds all the right answers, nor is the other side always automatically wrong, and I have to say that it is not easy to convince those who are already heavily invested ideologically to listen. 

Environmental and resource sustainability advocates are currently mostly focused on convincing people at a national, local and individual level to have the goodwill to sacrifice in the name of sustainability globally.  Basic economic theory tells us that this approach is flawed, because environmental and commodity sustainability are what economists call public goods.  In other words they are just like a sidewalk, which is used by everyone, regardless whether they contributed to paving it or not.

If people were to be asked to contribute voluntarily, in effect it would mean that they would be asked to give up a portion of the advantage they desire to have as a result of spending what they earned on their own needs and desires, in favor of contributing to something that they may find useful, but so will those who chose not to contribute.  So those who chose not to contribute, gain an advantage in consumer satisfaction.  Same can be said about those who choose not to contribute to the effort of preserving our natural resources and the environment.  So, for those hoping for the grand global agreement to solve these sorts of global issues, they will most definitely be left disappointed.

Those who think that “people power” can be mobilized for goodwill that will change the world through promoting responsible individual choices of lifestyle and patterns of consumption, will likewise discover that they are only preaching to the convertible, while the vast majority of the world’s population is not.  For those who do not believe me, they should try to go a middle class neighborhood in China, and try to gauge the reaction of people there to the proposal to give up their newfound desire to eat meat, in order to help provide more nourishment to the global poor, a large proportion of which are to be found in their own country.

            The deniers are supported in their view by the mainstream elite, which by its very nature has an automatic incentive to present the masses that prefer to be oblivious to many of our problems with reinforcement for their views.

 The non-technical, cultural denier explanation is that the ones, who raise alarm bells, are nothing new, have always been part of society and are always wrong.  No mention is made ever of course of many societies in the past, which experienced collapse due to unwise decisions in the way they adapted themselves to the environment (Easter Island, Rwanda, Haiti, and Greenland’s Viking Settlers).  Given that we are now a more or less global society, we may set ourselves up for the ultimate collapse of humanity, because all previous collapses were regional in nature, because economies were also mainly regional.

We cannot know for sure, but my guess is that at some point, there may have been a few individuals out of a population of 20,000 inhabitants on that island who may have raised concern about the wisdom of chopping down the island’s forest cover in order to build large stone heads.  It is possible that those “Chicken Littles” had their little heads cut off, in order to prevent the rest of the population from panicking and demand change in policy.  Our own “Chicken Littles” do not have their heads chopped off, but judging by the case of Jeff Rubin, who was let go from his job at the CIBC soon after he had his book published “why our world is about to get a whole lot smaller”, I’d have to say that not much has changed, because being marginalized in today’s society may not seem as dramatic, but I’m sure that those who do become marginalized may feel that they would prefer to be dead.

            On the technical front, the deniers like to argue that previous analysis missed the mark as was the case more recently with geologists like Kenteth Deffeyes, Kjell Alekett and others who argued that peak oil was upon us by 2005.  While conventional crude production did indeed peak in 2005, just as many have predicted, it is now being argued by the deniers that peak oil was pushed back indefinitely, as higher prices provided an incentive to try to raise the recovery rate from conventional fields, as well as push for more and more production from unconventional fields.

            A recent analysis done by Exxon Mobil is an example of this reinforcement for denial.  It argues that we can continue adding new production at least until 2060 thanks to improving methods and higher prices, we therefore have nothing to worry about.

            In this report they want to present a reassuring forecast that we will increase fuel liquids production globally, from about 88 mb/d today to over 120 mb/d fifty years from now. 

Unfortunately, the natural reaction of many who argue that peak oil is imminent was to deny the geological probability of such an increase happening as a possible reality.  I on the other hand will do no such thing.  I do actually believe that given the right price, right political environment and some good old human ingenuity, we can make this increase a reality.  So why do I still believe then that there is a serious problem?

            If we take a closer look at how this increase in total liquid fuel supply is to be achieved, we should actually be very much concerned about our future.

Conventional petroleum reserves currently produce about 80% of all liquid fuels, and these fields have now reached stagnation, as I mentioned and as many have predicted in 2005.  To achieve the projection presented by Exxon, we would have to maintain the current production plateau until 2060.  Problem is that currently proven conventional reserves add up to 800 billion barrels (excluding OPEC’s political reserves), while we produce 25 billion barrels per year.  New finds have been adding about 7 billion barrels per year in the past two decades, so if we continue this rate of discovery, which is actually a very optimistic assumption given the steady decline in discoveries since the 1960’s, we can add about 350 billion barrels through discovery alone.  We will however produce 1250 billion barrels of conventional petroleum by then, so without great improvements in field recovery rates, it will be impossible to maintain the current plateau.  Currently we have about 5,000 billion barrels of conventional original oil in place, while current methods allow us to recover 40% of that, and we produced already about 1,100 billion barrels (20% of total oil in place).  So we need to raise recovery rates to about 60% at least by 2060.  I believe that if the price of petroleum is right, we can do that.  We have after all managed to increase recovery rates from just 15% a century ago to 40% currently.  In the process however we went from a rate of energy return on energy invested of about 100/1, to about 20/1 currently, and technology did not help reverse that trend, nor can we expect it to in the future, for geological reasons.  If we increase recovery rates to 60% by 2060, we should expect these fields to yield an energy return on energy invested rate of about 5/1.  So the end consumer will go from having 66.5 mb/d available to them currently, to having just 56 mb/d out of the total 70 mb/d produced, if we manage to maintain the plateau.

Unconventional sources will in the Exxon scenario to 2060, yield 50 mb/d at least.  The energy return on energy invested from these sources is about 4-5/1 currently, and as we will go for harder and harder to get to resources, it might even drop to 3/1, which means that out of the 50 mb/d of total production; only about 35 mb/d will be available to the end consumer.

Putting conventional and unconventional together, we get about 91 mb/d that will be available to the end consumer, which is only an increase of about 9 mb/d over current energy availability, which is about 82 mb/d out of the total 88 mb/d being produced.  It is a very different picture than the one Exxon offered us, which would suggest that we have an increase of about 32 mb/d coming our way by 2060.  The environment however will feel the effect of us burning through 120 mb/d per day, even if it will not feel like it to the economy.

Given this reality, global economic growth will be constrained by energy availability, and with this realization, the theory of trickle down economics that most deniers adhere to goes out the window, because there will be very little wealth created by favoring the rich, therefore not much will trickle down (This will be my topic for next week’s article). Maintaining the current status quo in global finance and trade is not feasible with such a small increase in net energy available to the consumer, because global growth rates for this period would slow down dramatically, and that in turn would cause systemic risks.  In other words, we will likely fail to reach production of 120 mb/d by 2060, not because it is geologically and technologically impossible, but because the economy will fail to remain stable, due to the painfully low rates of growth of net energy available to the consumer.  I covered the effect on the economy of lower liquid fuel supply growth in a past article “Peak oil and environmental degradation deniers own the podium” in more detail on my blog.

Given these considerations, there is little to counter argue my assessment that given what the right and the left have to offer us, my proposal for the sustainability trade tariff is the superior choice for the long-run, and it should be something that I hope at least the political center can embrace, even if it is in its traditionally passive fashion.  I just hope that the few, who currently agree, will not continue to be outnumbered by a million to one by the ones who still buy into the current political game, which increasingly offers very little.

I want to end, by thanking those who did show interest in my book and my articles on the blog.  I hope you enjoyed my writing so far, and I will do my best to continue to keep you interested in the future.      


  1. The truth is that the middle class layer is getting thinner and thinner. More and more people are falling on the poor side of the balance, all over the world. The governments do not afford any more to support a social safety network which is dragging the costs upper and upper. I think that this is one of the things that triggered some of the European countries down (but not the only thing!). There might be places, like China and Brazil, Germany and Scandinavians, where social programs will be maintained (at least for a while) and, even extended, but the rest…As for Americans, the resources to offer social network to 300 mil people are not there anymore, they are gone, sold or carried overseas. To try to do this would, in my opinion, lead to an economical disaster!
    And there is no will for all these,either…I’ve read a while ago an editorial of a sociolog who was saying that poor people have less access to both education and information and, as this is happening, they become more and more just a bunch of voters, easy to manipulate, easy target. This might be the final destination of humanity (pathetic!) in a political game, as you state. With the exception of very violent revolts, I do not see how this mass will be ever put back to the rights and the true democracy reinstated. However this issue is in undermined as well, as more and more stuff is controlled (phone, internet, etc) to prevent such things to happen. We will all belong…and all the wealth will belong to few!
    Other than this and in regard to oil reserves denials, I maintain my points stated in my comments for your first article.

    Got your book. Hope to get some time to read it. I went through few pages here and there. Interesting idea, well put in the context, but a lot of thoughts of a lot of things, although nicely put under the same umbrella of necessity of a “sustainability tariff”. You got on all and everybody; did you left anyone out? :-)Maybe I’ll write a review for your book, as well. Keep going…

    1. Thanks for buying my book. I hope you will find it interesting and informative. Yes I did not leave too many out, that however is apropriate, because we are after all talking about the "global village", and our collective future.

    2. I hope indeed that, "the generation of your son", as you state in the book, will have better chances and more wisdom to solve the economical issues that we either detrimentally disconsidered and/or we are incapable to deal with…I also hope it will not be too late already for then, and for us, for this...