[A-List] On the Prospects of Using Type AAA Batteries

[Bill Totten <shimogamo@xxxxxxxxxxxxx>]

As Peak Oil Mitigation Devices,

and Other Observations

by Dmitry Podborits

Live Journal (November 26 2005)


Joseph Tainter in his groundbreaking book The Collapse Of Complex Societies
makes the following trivial, but nonetheless tantalizing observation: "The
number of challenges with which the Universe can confront a society is, for
practical purposes, infinite".

It will probably be noncontroversial to formulate a follow-up to the Tainter's
observation thus: "The range of possible responses of a society confronted with
the Universe's challenges is also, for all practical intents and purposes,
infinite". We know from history that past societies have used (with a mixed
record of success) a whole range of responses to their problems - from
sacrificing vestal virgins to invading and enslaving their neighbors, and from
institutionalizing infanticide as a population control mechanism to reorganizing
their industry and food production systems.

If the responses of our political and economic mainstream to the challenges
presented to our particular society, in that very special slice of space-time
that we happen to inhabit, truly represent our best shot, we are virtually
guaranteed to enter a very interesting period in history (interesting as in the
well-known [faux] ancient Chinese curse {1}, May you live in interesting times).
A dispassionate observer from the outer space may watch with amazement how an
incredibly complex and resourceful society of Homo economicus, armed with the
most advanced technology and all of the knowledge amassed through their entire
history, which voluntarily, with determination, even enthusiastically paints
itself into a corner as it reduces its future options to what in the game of
chess is termed zugzwang (compulsed move) - by deferring the recognition of the
Universe's challenge until the crisis that is currently clearly visible on the
horizon becomes detectible through market and monetary mechanisms, signals from
which in this particular peculiar civilization apparently take precedence over
the other six senses.

[I follow the modern philosophical tradition and count rational reasoning, which
clearly distinguishes our kind from the rest of flora and fauna, as a sixth
sense. However, it appears as if it almost doesn't matter whether we possess
that prized and unique sixth sense or not, as we choose to ignore what it tells
us, unless, of course, the message also becomes recognizable as a signal from
the free market.]

This unique form of behavior - idealization and absolutization of the free
market - is especially puzzling, considering that inability of the market
signals to reliably serve as a long term indicator of anything at all has been
established beyond any controversy, as lakes of ink have been spilled over
documenting the minutia of Enron and LTCM collapses, the hazards of the current
real estate bubble and other market phenomena, and as the same breed of analysts
who in 1999 were seen busily convincing the public that, say, the common stock
of Intel Corp had been a bargain back then at the price of $80 a share, were
spotted in 2000 spreading the message that the same Intel stock had a long way
to fall at a price of about $25 a share.

Exhibit A is the argument I have seen being used all the time, starting from
the Vice President Dick Cheney in televized interviews, to TV personalities
characterized by Nassim Taleb as "financial entertainers of the excessively
commentating variety" on the CNN's The Money Line with Lou Dobbs. This same
argument is utilized explicitly and implicitly in a range of documents from
pronouncements by Chief Economists {2} to publications by IEA {3}.

The argument goes like this (I generalize it from all these multiple sources):


Because our economy requires a lot less oil circa 2005 for each dollar of GDP
that it generates than it did circa 1973, therefore it (the economy) is much
less vulnerable to oil supply disruptions and oil price spikes than it was
thirty years ago.


It is just incredible to me to hear this argument again and again in our
enlightened age from such a diverse group of seemingly intelligent people
(although I suspect that, say, Dick Cheney may have much more insight into
the nature of our energy predicament than he is letting on). If our economy,
for the sake of the argument, doubled in terms of dollars of GDP since 1973
(let's measure everything in constant dollars, adjusting for inflation), and
(again, for the sake of the argument) our annual oil consumption did not change
from back then, we have twice as many dollars of GDP riding on the same barrel
of oil we consume, do we not? Doesn't it make the economy twice as vulnerable
(as expressed in the monetary impact) to the same amount of oil shortage
(as expressed in barrels), instead of less vulnerable?

Let me use this example. Let's say, thirty years ago I started a business
leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in
size and revenue, and currently I lease out two super energy efficient Toyota
Priuses as taxis, which together consume the same amount of fuel as the old
Buick consumed alone, but produce double the revenue amount (again, in constant
dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a
bigger impact on the economy in terms of lost revenue - one stalled taxi or two
stalled taxis? Which economy has more capacity to optimize its energy usage and
find reserves for growth, instead of shrinking its GDP - an energy inefficient
economy or an energy efficient economy? Which economy is more likely to contract
in the face of shortages?

[An important disclosure: I will be the last one to claim that the US economy
as currently observed has utilized all possible reserves for energy efficiency.
I only attempted to demonstrate the inherent speciousness of this surprisingly
popular argument for "reduced vulnerability", which seems to have engulfed the
creme de la creme of the political and the economic world.]

The next exhibit - Exhibit B - is a short, sloppily written, but highly
opinionated, borderline arrogant article by an energy economist and author
Peter Huber (who is also a senior fellow of the Manhattan Institute) that
asserts such a sweepingly generalized new economic principle that it reads
almost like a manifesto of the "New Age" energy economics. The article, titled
"Thermodynamics and Money", was published by the Forbes magazine and can be
viewed here {4}.

Huber starts with an unfortunate personal attack on the late oil geologist
M King Hubbert, stating:


"In his day M King Hubbert was a great geologist who spent his life studying
the planet's deposits of oil and gas. But as he got older, he simply lost it.
His "peak oil" theory - which many people are citing these days - is a case
study in junk economics."


Clearly, Mr Huber is perfectly entitled to express his criticisms of the late
M King Hubbert or anybody else, as there are no "sacred cows" in this world.
Marcus Tulius Cicero, for example, was known to have had famously described the
hellenized Egyptian queen Cleopatra as a boring woman, in a radical disagreement
with both Gaius Julius Caesar and Marc Anthony. Thus, obviously, Peter Huber
also has the right to state whatever opinion he wants on Mr Hubbert. (He is also
free to characterize peak oil as a case study of junk economics, or, say, the
Modern Portfolio Theory as a case study of junk geology.) However, as someone
who is to a degree familiar with the subject, I will humbly suggest that maybe
there was more to M King Hubbert's life work and impact than meets the eye of
Peter Huber.

Nevertheless, the main idea that Huber communicates in his article is that EROEI
is a false measure of energy efficiency, and thus it should stop being used, as
it confuses things rather than adds value. Per Huber, it doesn't matter how much
energy was spent to acquire a unit of energy; what matters only is how much that
final form of energy will be sold for per unit. Huber formulates it thus:


"Eroei calculations now litter the energy policy debate. Time and again they're
wheeled out to explain why one form of energy just can't win - tar sands, shale,
corn, wood, wind, you name it. Even quite serious journals - Science, for
example - have published pieces along these lines. Energy-based books of account
have just got to show a profit. In the real world, however, investors don't care
a fig whether they earn positive Eroei. What they care about is dollar return on
dollar invested. And the two aren't the same - nowhere close - because different
forms of energy command wildly different prices. Invest ten units of ten-cent
energy to capture one unit of $10 energy and you lose energy but gain dollars,
and Wall Street will fund you from here to Alberta."


I believe that this may be a very happy day for Jim Kunstler, as his message
about the coming Long Emergency has finally reached such a high degree of market
penetration that it is being broadcast (in a slightly veiled, but clearly
recognizable form) from the pages of the Forbes magazine, by a senior fellow
of the Manhattan institute, no less.

What is Kunstler basically all but shouting from the rooftops? That in
historically very near future the energy in such forms that can be readily
utilized by our society and our infrastructure will become scarse and expensive.
Everything else is a corollary, a quite obvious corollary, but a corollary
nonetheless (for example, that systems such as transportation, food production
and distribution, government services, living arrangements, et alia will have
to either adjust to this permanent condition of scarse and expensive energy, or
they will stop functioning - with pronounced effects on other interrelated
systems and the society as a whole).

What is Huber stating in his article? Essentially, the same basic message:
that (in Huber's scenario above) energy will become so expensive that, after
investing ten units of cheap energy to produce one unit of the "final form",
consumable energy, that consumable energy will still sell at a handsome profit
(why else otherwise would Wall Street care to fund such a business from here to
Alberta, as Huber puts it?) In short, selling very expensive energy will become
a very profitable business, but no cheaper forms of energy in a consumable form
will be available. Obviously, energy production in a society thus described by
Huber will be at the very center of the economy, and will remain among the few
profitable activities, as many other formerly profitable businesses and entire
industries will be killed off by the skyrocketing energy prices. In other words,
an economic shrinkage of societal scale in the scenario formulated by Huber is
unavoidable.

Moreover, who is to say that the so-called cheap energy will remain cheap,
as there will be so much more of it needed - to produce the expensive energy?
Won't the increased demand cause the dearth of the formerly cheap forms of
"cheap energy"? (I deliberately pose this question in a form that may be more
familiar to the energy economist). Surely Mr Huber will not be arguing that
the capacity to produce the cheap energy needed to produce expensive energy
can be increased indefinitely at a whim, without any effect on the price and
availability of that cheap energy - otherwise he risks to be laughed all the
way out from the Manhattan institute.

It is also obvious that in the Huber's scenario a lot more overall energy
will be required than before, as much more of it will be burned for the needs
and within the confines of the energy industry itself and will not be usable
by the rest of the economy - except, quite likely, that it will manifest itself
through dramatically increased carbon dioxide emission. That is what EROEI
considerations that Huber ridicules, perhaps unwittingly, are all about -
that as more and more energy will be consumed by the energy industry itself,
less and less will become available for the rest of the economy.

Furthermore, I would like to point out to all of the esteemed energy economists
out there that even today, during the time of relatively cheap energy, with the
economy merrily humming along, and consumer holiday shopping season being
in full swing, we already have exactly the type of an energy form that fits
Peter Huber's criteria: alkaline batteries. I use one of those, an AAA type,
manufactured by Energizer, in my MP3 player right now as I write these lines.
Since EROEI doesn't matter in the Huber's world, but only the final price that
the consumable form of energy commands in the marketplace, we could probably use
AAA batteries as a decent alternative to other energy types in the post-Peak Oil
scenarios; after all, this is a successful commercial technology that we are
already accustomed to and have a solid understanding of, unlike other, more
experimental forms of alternative energy.

The rationale may be presented like this: We already have a huge profitable
market for alkaline batteries, as evidenced by some very savvy investors and
conglomerates such as Gillette and Warren Buffet's Berkshire Hathaway, which
invested huge amounts of capital into battery producers like Energizer and
Duracell. If we simply keep on increasing our manufacturing capacity for
AAA batteries at the rate of fifty percent per year (which is the growth rate
comparable with the one achieved during the early years of the Internet industry),
in twenty years we will increase the overall AAA battery production by a factor
of over 3,000 (obviously, Duracell and friends will be happy to oblige). In such
Huberian world, where physical constraints play no role, the surplus AAA battery
capacity, unutilized by MP3 players, vibrators, and other consumer electronics,
could be used in transportation systems and such, thereby mitigating or even
completely eliminating the effects of peak oil ...

I just can't help but wonder, how clueless must be that segment of the
respectable business magazine's audience and staff that is willingly
lending Huber's arguments even a shred of credibility.

However, the epitome of cluelessness in this little survey for me is the Exhibit
C, the article published in The Wall Street Journal titled "The War Against the
Car", by Stephen Moore, a member of this newspaper's editorial board (WSJ online
requires subscription, but the article can be viewed here {5}). It is really
worth reading in its entirety (quoting a paragraph or two will not do it justice),
if one wants to appreciate the degree to which we as a society have cut
ourselves loose from the realities of the world. However, I still would
like to comment on the two closing paragraphs of the article:


"The good news is that environmental groups and politicians aren't likely to
break Americans from their love affair with cars - big, convenient, safe cars -
no matter how guilty they try to make us feel for driving them. Instead they are
using more subtle forms of coercion. The left is now pining for a $1-a-gallon
gas tax to make driving unaffordable. Washington has also wasted over $60
billion of federal gas tax money on mass transit systems, yet fewer Americans
ride them now than before the deluge of subsidies began. When the voters in
car-crazed Los Angeles opted to fund an ill-fated subway system, most drivers
who voted "yes" said they did so because they hoped it would compel other people
off the crowded highways.

"To be sure, if the entire membership of the Sierra Club and Greenpeace
surrendered their cars, the world and the highways might very well be a better
place. But for the rest of us the car is indispensable - it is our exoskeleton.
There's a perfectly good reason that the roads are crammed with tens of millions
of cars and that Americans drive eight billion miles a year while spurning buses,
trains, bicycles and subways. Americans are rugged individualists who don't want
to cram aboard buses and subways. We want more open roads and highways, and we
want energy policies that will make gas cheaper, not more expensive. We want
to travel down the road from serfdom and the car is what will take us there."


It is quite clear that we, Americans, are suffering from an acute form of
hystorical Alzheimer's desease, for which we may have to pay extremely dearly.
We forget that "the end of history" as proclaimed by Francis Fukuyama, turned
out to be a dangerous fantasy in the early XXI century. Apparently, many of us
feel that we can always get what we want, if only our governing bodies develop
the right policies. We have no appreciation for the specialness and uniqueness
of our current transitory historical period, during which we already understand
the nature of our predicament in excruciating detail (well, some of us do),
but still have options, and we mindlessly let this period lapse and thereby
foreclose these options forever. We don't understand that ruthless competition
for resources is much more common and much more fundamental as a driving force
of history than, say, our cherished notions of democracy, human rights,
and public welfare. We don't realize that investing into the infrastructure
alternative to "big, convenient, safe cars" that we have such a strong love
affair with today is what may save our economy from total paralysis in
historically very near future, allow it to regroup, and thereby give our
civilization a chance to fight another day. We think that our political and
business leaders will solve these problems for us - well, guess what - our
political and business leaders read Forbes and Wall Street Journal, and make
public pronouncements in the spirit of the above argument by Dick Cheney.
We are an infantile civilization that may be foregoing its chance to grow up.

To close on a lighter note, I recommend the following debate (MP3 file is
available here {6}; approx. 52 minutes long) between Jim Kunstler and the
energy analyst Michael Lynch on the issue of oil, hosted by Christopher
Lydon from National Public Radio. At the end of the debate, at the point of
summarizing the show, the host makes the following remark (at 50:04 on the
audio file), followed by this reply:

CL: "Walkable cities, denser living, I mean - these are all good things, but my
verdict would be, just on the hour, Mr Kunstler, that you haven't shown us that
they will be absolutely required".

JHK: "Well, I mean - I don't know what I have to do - jump up and down and go
'woo, woo, woo'?!"


Notes

{1} As was pointed out to me in the reader commentaries below, this so-called
"ancient Chinese curse" is neither Chinese, nor ancient. It appears most likely
to be a product of the American culture. This {7} and this {8}, for example,
provide satisfactory explanations. Interestingly, this occurence of faux ethnic
(mis)attribution is far from unique. For instance, the cultural phenomenon that
is known in the US as Russian roulette in the Russian culture, in which I grew
up, is known as American roulette. Only one of these attributions can be right,
or they can both be wrong. But they are unlikely to be both correct at the same
time!

{2} http://www.vfinance.com/ei/Economic_Insight_041805.pdf

{3} http://library.iea.org/dbtw-wpd/textbase/papers/2004/high_oil_prices.pdf

{4} http://www.forbes.com/forbes/2005/1031/122_print.html

{5} http://www.citizenreviewonline.org/nov2005/11/car.htm

{6} http://www.globalpublicmedia.com/interviews/541

{7} http://www.chinasprout.com/html/column15.html

{8} http://www.noblenet.org/reference/inter.htm


Acknowledgement: The motivation to write this article came to me as a result of
a discussion in the New York City Peak Oil Meetup Group, where some of the most
intelligent and thought provoking discussions on this incredibly complex subject
are taking place on and off the Internet.

 http://www.livejournal.com/users/dpodbori/3005.html


Bill Totten     http://billtotten.blogspot.com/