The Passionate
E-Mail
I received an impassioned E-Mail chain letter last week. The
author asked everyone on the list to boycott ExxonMobile because
the price of gasoline is too high. My response? The price of oil
is set by a complex interaction between producer nations and the
commodity markets. The current price increases have been caused by
the very thin margin between world supply and demand, and a lack
of refining capacity – particularly in the United States. Since
gasoline, diesel, propane, and heating oil fuels are all made from
oil, consumers can expect more price shocks in the future. The
supply of oil and refining capacity will continue to be inadequate
until new production comes on-line, or demand decreases. Although
future oil prices promise to be very volatile, resource depletion
guarantees the long-term price trend is UP. As for "Big Oil", I
agree these imperious corporations need to stop hiding behind the
walls of their PR fortresses and "come clean" about profits and
prices. But most troubling of all, they should tell us why (most
of them) aren't finding enough oil to increase their reserves.
They appear to be using higher and higher levels of technical
sophistication to find smaller and smaller puddles of oil.
Although the boycott idea is naive, it reflects a genuine
distrust of "Big Oil" and an unfortunate lack of knowledge about
resource depletion. But the letter got me to thinking. It added
"fuel" to my concern that the recently passed energy bill will
fail to resolve America's energy challenges.
We need a better plan.
Program Management Vs. Political Power
Read the poorly written conference summary of the Energy Bill.
Just passed by Congress and signed by a grateful President, the
Energy Policy Act of 2005 is a collection of fashionable
technology decisions driven by political expediency, rather than
the practical disciplines of sound program management. In more
than 1700 pages of disjointed and profligate spending, Congress
has found a politically beneficial way to funnel $14.5 billion to
farmers, energy companies, and an assortment of pop-culture ideas.
The Energy Policy Act of 2005 is too fragmented to be useful.
Lest someone be offended, all solutions have been considered
equal. This legislation virtually guarantees that competing groups
of energy solution advocates will continue to position themselves
for additional taxpayer largess. There is no practical mechanism
to focus our resources on the best technology. It would appear
Congress has even discouraged objective scientific inquiry by hand
picking the winners.
How was this achieved?
Although Congress has neither the qualifications nor requisite
self-discipline, it has put itself into the position of making
program manager decisions. As a result, preordained solutions have
been selected without adequate critical evaluation or
technological development. Many simply pander to pop culture
idealism (the hydrogen car), entrenched special interests (ethanol
from corn), corporate influence (shale oil development), or down
home pork (coal). The ensuing energy programs will be dominated by
entrenched special interests with big wallets or pop culture
appeal.
Dare we ask? Is Congressional duplicity built into the energy
bill?
This patchwork of legislative micromanagement and vague
directives throws taxpayer money at multiple projects. Tax
credits, loan guarantees, accelerated depreciation, and/or direct
financing have been specified for multiple research projects
including; ethanol, nuclear power, methane hydrates, clean coal
and coal gasification projects, oil from oil shale, hydrogen
production, fuel cell development, solid-state lighting devices,
bioenergy from cellulose feedstocks, solar power, ocean energy, a
zero-energy house, energy efficiency, and cogeneration of hydrogen
and electricity from renewable sources. Worthwhile research has
been intermixed with legislative pork in a tome of bewildering
complexity.
Congressional hearings and political opportunism have thus
produced a long list of energy projects and policy. Everyone is
positive the results will be good. We have lots of promises.
But no credible management plan.
Despite lengthy hearings, years of bureaucratic confusion, and
indeterminable political vacillation, Congress has failed to
launch a disciplined and well-organized program of energy research
and development. For example, the energy bill establishes a
program to encourage the purchase of stationary and vehicular
hydrogen fuel cell systems, even though the technology is not
ready for prime time. This timetable, which is good politics (but
lousy science), ignores the realities of fuel cell development and
hydrogen production, storage, distribution and consumption.
Nevertheless, it sets a goal of enabling the private sector to
make a fuel cell vehicle commercialization decision by 2015, and
encourages the purchase hydrogen fuel cell products before then –
perhaps on the assumption - technology will solve all problems.
Somehow. Maybe.
The Energy Policy Act of 2005 lacks focus. The lines of
authority and responsibility are too fragmented. Turf wars are
inevitable. Solutions will be selected on the basis of political
power and expediency, rather than the prudent management of
technology. The bill failed to establish a comprehensive energy
strategy, ignored the basic marketing questions, selected
technology without regard to reality, glossed over the
manufacturing challenges, ignored the related energy consumption
issues, and simply assumed there are no distribution problems. But
worst of all, the energy bill did not establish a cohesive
management mechanism for cooperative energy research and
development, production, distribution, and consumption.
Why not? Why didn't the Energy Policy Act of 2005 include a
credible program management structure with the authority and
funding needed to achieve the goals so important to our nation's
economic health?
Can We Come Together On A Common Sense Plan?
The first step in addressing any problem is to understand it.
We need a really good definition of the challenges that lie ahead
– technical, social and economic. Thus we start with a thorough
review of the energy market. We need a realistic forecast of
America's energy requirements by fuel type by year for the next 20
years. Fuel types fall into two basic categories: fuels for mobile
applications (cars, trucks, railroad engines, airplanes, etc.),
and fuels for stationary applications (power plants, furnaces,
generators, pumps, industrial motors, etc.). Then we need a
forecast of fuel resources by type by year for the same 20-year
period. The supply forecast must include a conservative estimate
of resource depletion, potential political challenges, and
international competition for available fuels. Our market plan
should also examine future cost/price trends and their potential
impact on our economy.
Where shortages appear in our forecast – and they will – we
need to review alternative solutions. Again, there are two
categories: energy efficiency and new resource development. Since
energy efficiency improvements provide us with the quickest and
cheapest solution, all avenues of improved energy efficiency must
be defined and quantified. The remaining energy shortfall defines
the annual fuel volume requirements of our resource development
objectives.
Changes in energy consumption, no matter how they occur, will
have an impact on our culture. It's inevitable. Employees will
either have to live closer to where they work or telecommute. For
many families, one stall of the suburban two car garage will be
empty. Private vehicles will gradually be replaced by pubic
transportation. Neighborhood relocalization will displace distant
shopping malls for daily needs. Municipalities will have to
encourage higher density zoning. These multiple changes all need
to be explored before we can develop our strategic plan because
they define the parameters of distribution and consumption.
Our energy solutions will come from existing and proposed
technologies. Each one deserves careful consideration and
evaluation. We need to understand the source, use and application
of each technology, its ultimate development, manufacturing and
distribution cost, the method of consumption, and its
environmental impacts. Tradeoffs need to be made between competing
and complimentary technologies. Selected technologies will be
matched against a set of specific performance objectives, given
adequate funding, and developed according to a timeline with
managed milestones.
Energy is not just "Big Oil". In point of fact, most of our
energy challenge lies with foreign governments, cultural conflict,
multiple companies working the supply chain, technology, increased
demand, insufficient attention to fuel efficiency, environmental
constraints, NIMBY activism, weather, and geography. The point is,
before we invest our money in the development of energy solutions,
we need to understand the energy industry as a whole, including
exploration, production, transportation, refining, distribution
and consumption. Against this knowledge, we can select options
that make common sense because they fall within existing industry
attributes and the evolution of consumer demand.
If we do a good job, we now have a clear definition of the
problem. We have characterized our challenge by fuel type, by
application, and by development objectives. Available technologies
have been identified. Government, corporate and academic resources
have been evaluated. We have factored cultural change and economic
impact into our strategy. We have given due consideration to
ecology and energy efficiency. This report would then be
communicated to the public in multiple media formats and forums.
Public education is a vital component of our program.
By the way. Did Congress take these steps? No.
Why not?
The next step is to create a business plan to address the
problem. Yes Virginia. If we are to make any sense of this highly
complex effort, we need a real business plan with a statement of
goals and objectives, a comprehensive strategy, and an
organization.
- The statement of goals and objectives establishes what we
need to accomplish and a timeline for the completion of our
strategy. It is highly likely that an honest job of market
research will reveal we Americans must moderate our energy
intensive lifestyle. We have to move from a carbon-based energy
cycle to an energy resource that does less environmental damage.
Energy moderation will mean cultural change on a scale we have
never experienced. So although our goal will be to gradually
reduce per capita petroleum consumption, it will have to be done
in a way that sustains our economy and the transformation of our
culture. The objectives we then postulate will address the means
to achieve these basic goals.
- It appears our strategy falls (roughly) into three phases:
those changes and developments that can be done within 5 years
(improved energy efficiency, introduction of hybrid vehicles,
etc.), those changes and developments that can be done in 5 to
15 years (development and distribution of alternative fuels,
diesel fuel from coal, the nuclear option, enhancements to
public transportation, etc.) and those changes and developments
that will take longer than 15 years (introduction of a new fuels
technology, lifestyle changes, etc.).
- A task of this magnitude requires the resources of a large
organization. It must have the funding, structure,
responsibility, and authority to carry out its mission. This
organization must provide, or identify and contract, the
technical, manufacturing, and distribution resources needed to
ensure the success of America's energy program. It should make
periodic reports to Congress on its progress.
There you are. Three key components of a successful business
plan.
By the way. Again. Did Congress put these three elements into
place? No.
Why not?
It's Time to Re-mission NASA
We need a large organization that is familiar with the
challenges of technology development to manage our energy program.
Look around. Where can we get an established technology management
resource that is large enough to handle this program? An outfit
like Battelle Science and Technology International? Sure. The DOE
(Department of Energy). Of course. The people at DOE certainly
understand the challenge and management disciplines.
But this effort is far larger and more important than anything
we have ever attempted. We need a dedicated technology development
center. Management skills. Technological competence. A sense of
mission. A sense of urgency. A program that is both comprehensive
and cohesive. And we need a management team that can (hopefully)
make science-based choices.
Here are a few of the program challenges this organization must
manage:
- Create an energy R&D program that recruits the best talent
we have from academia and industry.
- Establish and fund cooperative projects.
- Establish an international research program to share
development costs and technical knowledge.
- Define planned products and their purpose by application,
volume/time, and cost/price targets.
- Select the best technologies against an established criteria
(such as Energy Returned On Energy Invested - EROEI).
- Manage the resources needed to bring selected energy
solutions to market, including research, development,
manufacturing, and distribution.
- Establish objectives and milestones for each project.
- Establish and conduct phase reviews.
- Manage project financing, including the source and use of
funds.
- Explore alternative project funding mechanisms such as R&D
partnerships, cooperative ventures with industry, and cost
sharing programs with other national governments.
- Propose and initiate the necessary regulatory changes,
including safeguards for intellectual property, methods of fuel
distribution and handling, and environmental mitigation.
- Foster communication, rather than competition, among
alternative energy solutions.
- Work with industry to be sure selected energy resources can
be manufactured (or produced), distributed and consumed within
an evolving supply chain.
- Identify the required feedstock resources for manufactured
products.
- Provide quarterly reports to the American people on program
progress.
Give our organization a name that articulates energy, a
positive definition of program responsibility, and the authority
to carry out its mission. We can make this work if we are united
by our concern for the potential cultural, economic and ecological
impacts of petroleum depletion. Prudent energy resource management
must include conservation, improved efficiency, ecologically
responsible energy production and consumption, and the development
of alternative energy resources under the direction of a qualified
product management team.
And by the way, America's energy program must be an
international program.
- Since no nation will be able to resolve its energy
challenges without due consideration for the energy needs of
other nations, we must encourage international cooperation in
the development and production of our planet's energy resources.
- In addition, we need to resolve both the technical and the
political issues of sharing our planet's dwindling energy
resources. Equitable sharing will be a long-term challenge. But
we have a choice - share or compete. From the perspective of
cultural economics, a well crafted sharing arrangement will have
the least recessive impact on international GDP, and
consequently offers the best way to mitigate the inevitable
cultural impact of energy resource depletion.
And finally. Petroleum depletion will inevitably force
extensive cultural change. Of particular interest is the
development of a constructive response within our state, municipal
and county infrastructure, the implementation of a pragmatic
federal agenda, and the formation of productive partnerships
between private and public organizations.
Now where can we find an existing organization that has the
skills to manage complex technology programs?
NASA
Think about this. What is more important. Heat for your home?
Or a mission to Mars? Fuel for your car? Or counting the pixie
dust floating around some planet?
NASA had a mission. Now it needs a new one.
There are some very bright people at NASA. Forget outer space.
Think of our kids. Think of humanity. Re-mission NASA. Put these
people to work on a comprehensive energy program. We need their
intellectual energy. We need their program management skills. NASA
can provide the focus we need for a successful energy program.
Sure. I know this idea is not politically expedient. Congress
has a hard time setting priorities. And we sure as hell can not
expect Congress to do something perfectly logical and fiscally
responsible. But nevertheless, I firmly believe we should take the
best minds we have in America (and on our planet) and put them to
work on a REAL challenge with REAL benefits for all of us.
I mean – like – why not? If we have to blow tax payer money on
this organization, shouldn't they be working on a challenge that
benefits humanity?
Move most of NASA (AND its budget) over to the DOE, restructure
the entire energy program, and presto – we have the right stuff.
Does this proposal make sense?
Dare we ask? Why didn't Congress create a credible program
management organization? Is Congress incapable of restructuring
the Federal bureaucracy? Are these agencies supposed to be managed
as a public trust for the benefit of the American taxpayer? And
where is the Bush administration? At lunch?
Conclusion
The Energy Policy Act of 2005 is not about success. It's about
failure. It's unlikely the new energy law will stabilize or lower
fuel prices, give America any real energy security, provide an
effective framework for energy independence, result in the use of
cleaner energy resources, or create a net increase in American
jobs. Unless we get really, really lucky, it will not solve the
energy challenges facing America (and the rest of the world). In
fact, the energy bill's greatest impact - in all probability -
will be to exacerbate the economic and cultural chaos that
threatens to turn our whole existence upside down.
We are a long way from having all of the answers to our energy
challenges. There will be many ideas. Some good. Some not
practical. But we must test them all against economic and
technical criteria. We must select and implement the best
available technology based on the adroit use of scientific
investigation under the direction of competent program management.
But it will not happen. Congress has failed us - again. When
they passed this bill, were our politicians concerned about
protecting their own selfish-best-interests?
- Although refinery capacity is a key downstream bottleneck to
the production of gasoline, diesel fuel, propane and heating
oil, Congress apparently believes it will not be politically
expedient to take meaningful action until after fuel shortages
occur.
- Even though conservation and improved energy efficiency
should have been a centerpiece of America's energy policy,
Congress has sidestepped politically dangerous measures like
vehicle fuel economy and energy prudent development.
- Congress continues to make technology decisions based on
political expediency rather than science-based inquiry. One
would think they should have learned their lesson after they
used the Police Power of the State to force the use of MTBE as a
gasoline additive – and poisoned our drinking water in the
process.
- Worst of all, Congress has failed to communicate the need
for a comprehensive energy policy to the American people. The
realities of resource depletion have been largely ignored. One
can only wonder, is this because Congress doesn't understand the
problem? Or because it wants to avoid the subject?
Only two champions of truth stand out in my research of the
Congressional Record. Joseph P. Riva, Jr., a Specialist in Earth
Sciences for the Library of Congress, did an excellent report on
oil depletion "World Oil Production After Year 2000: Business As
Usual or Crises?" in 1995. (For the numerically challenged, that's
ten years ago). The other voice is Congressman Roscoe Bartlett, R-
Maryland, who was allowed to speak before the House of
Representatives on Peak Oil for one hour at 10 PM on March 14,
2005, and again for 10 minutes at 11:40 PM on April 20, 2005.
(Late night presentations are allowed for subjects that Congress
doesn't want to think about).
It is most regrettable. Sad. When I wrote Oil, Jihad and
Destiny, I entertained the naive notion that Congress would
understand the problem of oil depletion and take intelligent
corrective action. In fact, the "Best Case" scenario described in
my book makes this fundamental assumption. Unfortunately for us
voters, and our kids, Congress has put us on a path that makes the
book's "Production Crisis" scenario inevitable, and suggests the
"Political Crisis" scenario is highly likely to happen.
Congress could have done a better job. America is the one
nation on this planet with the financial and technical resources
to launch an international program of science based cooperative
energy research, development, production, and distribution. We
could have made substantial improvements to energy efficiency and
conservation, cooperative petroleum sharing agreements among
nations, and long-term international supplier/consumer agreements.
Everyone on our planet would be a beneficiary. Creative
cooperation is far more likely to be productive than political
confrontation. The challenge is to get the players to focus their
collective power on solving the problem, - rather than fighting
with each other.
What we got from Congress was political expediency, evasion,
pandering and conflict.
What a shame.
Am I right? You decide. Take the challenge. Do your own
homework. Then answer the following four questions:
1. Has Congress shown it comprehends the potential economic,
lifestyle, and environmental chaos of the energy challenges that
lie ahead?
2. Has Congress done an effective job of communicating our
emerging energy challenges to the people of this country?
3. Did The Energy Policy Act of 2005 establish a credible
foundation for managing the business of energy research,
development, production, distribution, and consumption?
4. Has Congress demonstrated that science based program management
is more important than political expediency?
And one more:
Do you believe the Energy Policy Act of 2005 will solve our
energy problem?
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