You can download the show (21 mins) here: RealPlayer | WinAmp | Windows Media | MP3

See also: 

Energy politics at the piano bar

Reframing the transportation debate

The narrow ledge of oil prices

Have we reached an inflection point in economics history?

Three deformations of the apocalypse

In response to my 2012 outlook last week, a reader requested a five-year outlook that’s long on opinion and short on data. As SmartPlanet’s resident energy futurist, how could I decline? As that reader suggested, I will offer three scenarios: the bad, the good, and the likely.

The bad: Evil drift

Tough times call for tough men. But at this crucial turning point in history, they are nowhere to be found. The entitled class of pantywaist leeches who command our political and economic institutions spend their time slap-fighting over picayune issues and debating points of style like 18th Century French courtesans, accomplishing nothing, utterly tone-deaf to the cries of the people. (Overheard in the Bastille in the spring of 1789: “These protestors are so disorganized and filthy. What do they want? Can’t somebody just clear them from the square?”) As it always has in the past, this toxic brew spawns revolution.

The Fed remains committed to pushing printed dollars onto a world already awash liquidity, in hopes that growth will return. But it doesn’t. The captains of the financial industry refuse to mark their hallucinated assets to hard assets, because the former exceed the latter, and the people are unable to force a reckoning that would put the economy back on terra firma. The great tide of the global currency wars sucks the sand out from under our feet as it recedes, and we gradually sink deeper into the mire of debt and deflation. Slowly, bit by bit, the Great Contraction tightens around the world.

Rick Santorum is elected president in 2012 on the back of a massive evangelical campaign. The Tea Party retains its hold on the House, and the Democrats retain control of the Senate, ensuring four more years of legislative gridlock. Grover Norquist is appointed to Santorum’s cabinet, and embarks on a relentless campaign to shrink the federal government, browbeating the House leadership into radical cuts to social services. These new austerity measures squeeze the economy dry.

Spot shortages of gasoline and food begin to appear, along with ever more frequent failures of infrastructure. Transformers blow up and water mains break once a week in major metropolitan areas. Road transportation becomes increasingly difficult as roads and bridges fall into disrepair, but mass transportation systems are unable to compensate due to power outages and fuel shortages. The veneer of civilization wears thinner, and finally crumbles as complex delivery systems begin to fail.

In the aftermath of the 2012 election, Americans lose their last vestiges of faith in the corrupt, immobile knot of their so-called democratic institutions. Realizing that there are only passengers on this ship, and that no strong hand will take the till to keep us from drifting into the teeth of disaster, they live up to their self-image as anti-government, rugged individualists and take matters into their own hands.

There simply aren’t enough National Guard and police to keep the peace, and our military troops remain committed to securing our globalized corporate interests on the far-flung reaches of the American empire. Tax revolts deprive state and local governments of enough revenue to maintain, let alone increase, their police and fire services. Civil order begins to break down.

By 2013, protestors are occupying public spaces permanently. Retail shopping becomes next to impossible, sucking the remaining wind out of economy. Inner-city neighborhoods in poor areas fall under the control of local gangs. Wealthy areas hire private security and throw up fences. Street gun battles become commonplace as local thugs vie for turf. Vigorous black markets in food and fuel bloom like toxic red mushrooms in an early winter rain.

Armed mobs take over Wall Street, and go hunting in the Hamptons. The national banks collapse as it becomes impossible for them to function, leaving only small regional banks. Lloyd Blankfein meets a gory end, hanging by his thumbs from the Brooklyn Bridge. The dollar becomes worthless and gold and silver become the only accepted currencies.

Global oil supply begins to decline in 2014 as the depletion of non-OPEC producers entwines with the collapse of governments across OPEC, keeping prices high even as the global economy contracts and demand falls. Consumers in the West are continually outbid for rapidly falling available net exports by the five billion people of the East. New geopolitical alliances are formed along the shortest energy supply routes, binding Asia to Russia, and India and Pakistan to the Middle East.

By the general election of 2016, the remaining vestiges of American civil society, now desperate for order and stability, elect a hardcore right-wing fascist who promises to “kick ass on those ragheads and make ‘em give us their oil.” He launches military strikes against Iran and Syria, and re-occupies Iraq. He imposes a harsh domestic police state in an attempt to restore domestic order, imprisoning all dissidents without due process under the legal framework that Barack Obama signed into law on the last day of 2011. Millions of destitute citizens are conscripted to serve in a massively expanded military- prison complex. The governments of Canada, Mexico, and all of Central and Latin America fall under the new authoritarian government of the U.S. in all but name, as it installs friendly puppet regimes.

Global resource wars break out in 2017. The people revolt against the increasing taxes needed to fund the wars and the domestic police state, and Texas secedes from the union, followed by the states of the Pacific Northwest. (Think it can’t happen? It already did, in 1941.)

Five years from now revolution, and the dissolution of the American republic, are under way.

The good: Seizing the future

President Obama, having been reelected in 2012, abandons his previous ineffectual tactics of appeasement and finally finds his sac. At the head of a new Democratic majority in both houses of Congress, in which labor threw out the stultified party leadership and brought in a new crop of reformers, he leads the country on a breathtakingly ambitious infrastructure rebuilding program, riding roughshod over all opposition. Over $1 trillion dollars per year are committed via public-private partnerships to transition transportation to rail, rebuild our water and sewage systems, and transition grid power to renewables. Only essential local roads are maintained, and lanes of interstate highway are converted to rail corridors. The power grid is nationalized and upgraded with smart-grid technology. A high-voltage long distance DC transmission grid is built to redistribute wind power from the Plains, solar power from the South and Southwest, geothermal power from the Rockies, and marine power from the coasts. Solar PV becomes the cheapest form of power generation by 2016.

The program reunites the country politically, restoring full employment and national pride. The principled opposition to federal spending is swept away by a new fervor to retake the high ground of the global economy. The American Restoration Act of 2012 imposes harsh penalties on profits made from foreign operations, while rewarding the repatriation of profits and manufacturing with generous tax breaks. “Made in America” becomes a national slogan again, and is proudly stamped into every nut and bolt.

The surge of domestic rebuilding tilts the global balance of power back toward America, as companies scramble to rebuild manufacturing capacity at home and withdraw from their outposts in Asia. The dollar becomes stronger, and the return of growth allows the Fed to begin withdrawing the trillions of dollars it injected after the crisis of 2008.

Sweeping financial reform legislation is forced through Congress, including a massive transfer of private sector assets to the federal balance sheet. Bondholders are forced to take a 50 percent haircut. New incentives allow all Americans to refinance their homes and personal debt under federal programs at 2 percent interest for 30 years, with the stipulation that they can no longer use credit cards. Banks are once again relegated to the boring historical norm of making loans earning no more than 2 to 3 percent interest, and are forbidden to use leverage or take positions in equities or commodities. The finance sector is forced to shrink from over 8 percent of GDP today to just 2 percent, as it was in the 19th Century, and millions of its workers are forced to find something useful to do.

The “Victory Garden” initiatives of WWII are revived, and everyone plants vegetables in their yards. Those without yards are given plots to farm in public parks. Overbuilt and disused suburbs are demolished, and the land converted to agriculture. Tariffs are imposed on imported food in proportion to how far it traveled to get to the U.S., and agriculture is slowly relocalized across the country, resulting in a two-million-barrel-per-day cut in domestic oil consumption by 2017.

Five years from now, America is on course to be a new economic powerhouse with domestic demand replacing the falling consumption of Asia. The decline of global oil supply pinches the economy, but does not break the skin, as demand is shifted from liquid fuels to domestic renewables. Realizing that she can get by on North American oil supply once the transportation and power transitions are complete, America begins to withdraw its military forces across the globe, ending the drains of military adventures and foreign oil expenditures simultaneously. By the time the global resource wars ensue in 2017, she will stand once again as a prosperous, peaceful, more insular, “shining city on a hill.”

The likely: Decline by default

Barack Obama is reelected by default in 2012, since none of the GOP’s insane clown posse are deemed both electable, and acceptable to the Tea Party. A broad anti-incumbent electoral revolt completely transforms the leadership of both parties and creates a balance of power in both houses of Congress, creating a brief window of opportunity for real change.

Unfortunately, that opportunity is squandered for a lack of effective vision and leadership. As in all other scenarios, oil still declines starting in 2014, squeezing the economy and stifling growth. The Fed keep printing, but in vain. America is sucked into the deflationary vortex by default.

Oil prices remain just above the pain threshold of ordinary Americans. In response they move to small apartments in converted downtown office buildings. Empty suburbs are abandoned and James Howard Kunstler does a victory dance in the dust of the geography of nowhere, to the applause of no one. Roads and bridges fall into disrepair, forcing the working class to crowd into slow, meandering buses and decrepit light rail systems when they aren’t traveling on foot or bicycle. Things work until they don’t, and then they are abandoned.

America is drawn by default into the global resource wars starting in 2017, but fails to secure any significant new supply of foreign oil. Available imports from the Middle East begin to fall, prompting a massive drilling and mining campaign across every last inch of America where hydrocarbons may be found, with attendant soaring environmental damage. But solar PV still becomes cheaper than regular grid power, and millions of small rooftop solar systems with battery backup are installed by individuals in self-defense, creating little islands of light in a country plagued by sporadic blackouts.

Unemployment continues to rise until Americans are willing to work for less than the Chinese. Farming is the hot sector for young people entering the workforce, as the finance, insurance and real estate sectors shrink. Millions of Americans move to Canada in search of a better life and a stronger currency. The dollar survives, but it doesn’t buy much.

Five years from now, America is crumbling, mumbling and bumbling its way to a smaller, leaner, and more agrarian economy. Its superpower days are fading into history. The republic holds together in name only. The inability of the economy to generate excess revenue starves the federal government of receipts and a gradual, decades-long shift to more regional governance and culture begins.

Postcript

I have offered these fanciful, extreme, and hopefully mildly humorous scenarios to provoke thought, not to draw a map. And if I seem hard on the GOP, it’s because of their staunch opposition to energy and transportation transition, which I believe are absolutely necessary to avoid collapse. In reality, the next five years will be replete with surprises—including natural disasters, unprecedented political upheaval, and unimaginable financial hijinks—that may incorporate elements of all these scenarios.

So. . . What’s your scenario?

Illustration: “Enchantment’s End” (gideon_wright/Flickr)

In conversation with Dr. Colin Campbell, Ballydehob, West Cork, Ireland

Campbell was also featured on the ‘Eco Eye’ program on Irish Television last night. If you’re in the UK you can probably see it, but sadly, they don’t allow it to be viewed from here in the US. Here is the link: http://www.rte.ie/player/#!v=1129353

That was originally part of my recent post, The questionable economics of shale gas

I’d also point your attention to a new piece by Reuters, who did some good investigative journalism on top shale gas operator Chesapeake Energy, and accused them of conducting a stealth “land grab” operation by using a series of shell companies: Energy giant hid behind shells in “land grab”

This kind of work is vitally important, because the majority of press about shale gas still consists of wild-eyed optimism and verbatim repetition of industry propaganda. For example, this new piece in the Wall Street Journal.

There is still plenty of energy-illiterate press going around, such as the recent rash of articles that misinterpreted the US becoming a net exporter of refined products as being a net exporter of oil, when we are still the world’s top importer of oil. It’s pathetic. The data are freely and publicly available, so why are these egregious errors still being propagated in high-profile publications? I hope my recent pieces help to clear things up just a little.

Postscript: Al Gore blogged on my story January 8, 2012

Corrections: Most regrettably, I discovered two typos in the story some weeks after it was published:

1) “At the 2010 rate of American consumption—about 24 tcf per year—that would be a 95-year supply of gas, which apparently has been rounded up to 100 years.” should have been “At the 2009 rate of American consumption—about 22.8 tcf per year—that would be a 95-year supply of gas, which apparently has been rounded up to 100 years.” At the 2010 consumption rate of 24.089 tcf/yr, the 2,170,000 bcf estimate would last 90.082 years. (Therefore, one could say that one year’s increase in US gas consumption shaved five years off the claimed supply.)

2) “It offered a range of estimates, from 43 tcf at 95 percent probability, to 84 tcf at 50 percent probability, to 114 tcf at 5 percent probability.” The high end USGS estimate was 144.1 tcf, not 114.

Read it here: 2012: Terra incognita

Predicting the future is never easy, but as I contemplate what 2012 might bring, I confess that it’s never been harder.

In 2005, it was fairly easy to see that commodity prices would rise in the coming years, and that the purveyors of petro-Prozac who dominated the press were wrong. It was evident in the data, particularly on oil. My outlook was generously validated up through the first half of 2008. While I expected a significant correction in housing prices and equities, I underestimated the magnitude of the late-2008 crash in the financial markets. Only a few observers who paid close attention to arcane derivatives markets got that one right.

In the fall of 2009, I made some outlier calls for 2010 on oil, equities, the US dollar, and China, all of which proved correct. I attribute that in part to luck, but mostly it was the result of having done my homework and developing a fine-tuned contrarian view.

Then it got more difficult.

In the fall of 2010, I was having a long email discussion with some fellow peak oil analysts about our outlooks for oil supply, trying to identify when the next big oil price spike might occur. After working over several detailed models of OPEC and non-OPEC supply, I snipped irritably that oil prices would likely be affected far more by above-ground factors in the next few years than below-ground factors. Geopolitics would soon trump geology, I ventured, and we would do well to pay attention to the news overseas. One well-placed bomb, another big hurricane in the Gulf of Mexico, a civil war in the Middle East, or any number of other events could blow our carefully constructed mathematical models out of the water.

But even I did not anticipate how radical the upsets of 2011 would be. No one could have predicted the earthquake and devastating tsunami that struck Japan on March 11, or foreseen how wide-ranging its effects would be: from shutting down automobile manufacturing plants, to record grid power prices in Hawaii, to several of the world’s most advanced economies turning their backs on nuclear power. We had plenty of advanced warning that weather would become more erratic due to climate change, but a record 12 natural disasters in the U.S. costing $1 billion or more, each, was an eye-opener. And I don’t think anyone expected the Arab Spring. It was a tough year for dictators.

Geopolitical challenges for fossil fuels

Above all, what jumps out of my crystal ball about 2012 is geopolitical instability. The popular unrest we saw worldwide this year feels like a mere prelude to a very chaotic period.

As an example, consider the slew of threats that currently imperil the global oil market:

• On December 16, a months-long peaceful protest by striking oil workers in Kazakhstan exploded into violence. Somewhere between 14 and 64 people were killed by police over the following weekend (depending on whether you believe the official count or a report from the morgue) in a harsh government clampdown which included shutting off all Internet and telephone access, and cordoning off the city. (Steve LeVine has been doing some terrific coverage of the events there for Foreign Policy.) The echoes of the Arab Spring are unmistakable. With about 1.6 million barrels per day (mbpd) of oil production, Kazakhstan is the world’s 18th-largest oil producer, on par with Libya’s output before the uprising there added about $10 to the global price of oil.
• Fresh waves of unrest in Syria could lead to civil war and seriously destabilize the already-tenuous oil trade in the Middle East. Oil production there has fallen from over 400,000 barrels per day in 2010 to 260,000 bpd now, in part due to EU sanctions. And Egypt is still very much in play in the region.
• Sanctions are likewise behind heightened tensions with Iran, as the US and EU forbid domestic and foreign partners from doing any business with the country in continuing efforts to stymie its nuclear ambitions. Iran conducted naval war game exercises near the Straits of Hormuz last week in retaliation, an implicit warning that it would attempt to shut down the critical Persian Gulf oil trade chokepoint if hostilities increase. And yesterday, they made that warning explicit, as Vice-President Rahimi said, “If Iran oil is banned not a single drop of oil will pass through Hormuz Strait.” Iran’s primary oil buyers, including China, Japan, Korea, and India appear to be seeking alternate supplies, but that will support oil prices globally as competition increases for oil from OPEC producers, notably Saudi Arabia.
• The situation in Iraq deteriorated almost immediately upon the exit of US military forces, with fighting between Sunni and Shiite leaders within the fledgling central government threatening its dissolution. A barrage of attacks in Baghdad over the last week portend continuing violence and instability, and do not bode well for the future of oil supply in the region.
• Tens of thousands of protestors jammed the streets of Moscow on Christmas Eve, jeering the Kremlin over widely alleged fraud in the recent election which retained Prime Minister Vladimir Putin’s grip on power. Russia was the largest oil producer in the world at the beginning of 2010, and now stands just below Saudi Arabia with 10.3 mbpd of production. Were it not for Russia, non-OPEC oil production would have been in steep decline for the last several years, and as such it remains a critical pillar of stability for world oil markets. . . a pillar which may now be eroding.

Though little reported in the American press, popular protests are on the rise in China as well. With a major turnover in leadership scheduled for 2012, there is at least the potential for significant reforms favorable to the country’s burgeoning middle class, who are growing increasingly restive under the suppression of its central government. But there is also the potential for renewed attempts to reinforce authoritarian rule. In the province of Guangdong in the south of China last week, tens of thousands of residents participated in two separate protests against the local governments over land policy and a planned expansion of a coal-fired power plant in the smog-choked town of Haimen. With the largest GDP of any province in China due to its heavy manufacturing base, Guangdong may be considered a leading indicator of China’s direction, more oriented to its trading partners to the west than to Beijing. Local authorities capitulated to the demands of the Haimen protestors, but only after police used tear gas to quell the demonstration. In short, China looks like an interesting wild card in 2012 where popular unrest could explode, particularly if its economic growth slows significantly, as some observers expect, and/or if the protests in Russia become more strident.

Another interesting wrinkle with potentially far-reaching implications emerged on Christmas Day, as China and Japan announced that they would begin direct bilateral trading of their currencies. About 60 percent of the trade between the two nations is currently settled in US dollars, according to Japan’s Finance Ministry. Coming from the two largest holders of foreign-currency reserves in the world, the accord constitutes a potentially serious threat to the hegemony of the US dollar, which has conferred an enormous economic advantage to America for many decades. The pact is considered largely symbolic for now, but could signal the ascendancy of the renminbi, and will likely lead to continued weakening of the dollar against it. More broadly, the move could presage an entirely new era of geopolitical alliances.

Economic outlook

The economic front looks perilous indeed. It is certainly possible that 2012 will be another year of aimless bouncing around in a narrow channel while the world’s central banks keep trying to extend and pretend. With just three trading sessions left in a brutally difficult year that ruined many a seasoned hedge fund manager, the S&P 500 stands up a lousy 0.6 percent on the year. That could happen again. But I would put greater odds on a real reckoning. The long series of attempts to save the Eurozone in the final months of 2011 staved off collapse, but they fixed nothing. The enormous overhang of leveraged debt and the impossibility of restoring economic growth in the West are still with us, and every month that passes without an honest strategy to bring obligations in line with hard asset values only increases the threat. Faith in the markets, the dollar, and the euro has all but evaporated, and our economies now hang by a string dangling from the hand of Ben Bernanke. If that string doesn’t break in 2012, it will in 2013, or 2014 at the latest. The key question is how long the world’s central bankers can skate on the thin rim of the deflationary vortex.

Should the global financial regime fail, there will be blood in the markets. Bank runs are not out of the question. Commodity and equity prices could fall to the tune of 40 percent or more, but without destroying enough demand in Asia to restore a comfortable cushion of supply in oil and agricultural commodities. Here, it is useful to reflect on 2008. From 2005 on, the data suggested that 2012 would be the turning point when oil supply began its long, inevitable, terminal decline. But the crash of 2008 bought us a few more years of adequate oil supply at a moderately uncomfortable price, and pushed that point off, at least theoretically, to around 2014. If there is a similar crash in 2012, the turning point could be delayed another year or two, but only if supply from all of the highly unstable sources mentioned above remains firm. I would put 50-50 odds that it does not, in which case prices will remain uncomfortably high even as deflation takes a firmer grip on Western economies. The world will be hard-pressed to increase liquid fuel supply from current levels.

Certain uncertainty

The one thing I can say with certainty about 2012 is that it will be fraught with uncertainty. 2011 could look tame by comparison.

More natural disasters are almost certainly on the menu, which will disrupt supply chains and exact a painful toll of blood and treasure the world over.

Regional skirmishes over resources, particularly in developing oil-rich areas like the Caspian and Africa, are likely.

Authoritarian governments, along with their corporate sponsors, will continue to be challenged by the people, and will resort to heavy-handed crackdowns in response. The Arab Spring and the Occupy movement are merely the beginning of popular revolts that will ultimately transform the political and economic order of the world. Unrest in previously pacific areas should be expected.

Intelligence agencies will find it difficult to keep up with multiplying threats. Attacks by the hacker group Anonymous on powerful vested interests, like the Christmas weekend attack on the US-based security think-tank Stratfor, will become more commonplace and focused on high-value targets like government and military organizations. The potential disruptions to business as usual are hard to overestimate. Banks, public services, utility grid operators, and communications systems could suffer extended outages. Electronic systems of exchange could be compromised. Faith in our large, complex systems will wane.

In the face of all this uncertainty, then, what is one to do?

The answer is simple: Do what you can.

Minimize your expenses, and pay down debt as rapidly as possible.

Grow some of your own food, whether you have a big backyard or just a little balcony with room for a couple of small pots. Millions of people have begun doing so since the crash of 2008, and they have found it a universally rewarding and fun experience. It helps to ground one in reality, and brings a little peace of mind. Before you know it, you’ll be expanding your garden and maybe keeping a few chickens.

Reduce your consumption of fossil fuels any way you can, by focusing on efficiency. Then (and only then), if you can, think about installing some solar hot water, solar PV, and battery backup on your house or business. I expect the distributed solar market to be a rare and surprising bright spot in 2012.

Keep a little “rainy day” cash on hand. To really hedge your exposure to financial collapse, physical gold and silver bars and coins are your best insurance.

Renew your relationships with friends, family and neighbors. Nothing is worse than feeling alone when the world is going crazy around you, and they will help you keep your head on straight.

Most importantly: Try to keep your mind in the present. Don’t let the uncertain future frighten you into immobility, and don’t let the past keep you from doing the best you can today. It’s surprisingly hard to do, but it gets easier with practice. The Buddhist approach is to simply be mindful of what you’re doing, seeing, hearing, and feeling right now, be it walking down the street or cleaning the cat box. Or, in the Biblical verse of Matthew 6:34, “So do not worry about tomorrow; for tomorrow will care for itself. Each day has enough trouble of its own.”

I wish all of us luck, wisdom, fortitude, and peace of mind in what will undoubtedly be a very challenging year. We will soldier on, somehow.

Photo: marcobellucci/Flickr

Read it here: The mon(k)ey trap

We live in a very strange time.

The most serious existential crises that our species has ever faced, issues we have known for decades we’d have to deal with eventually, are now at our doorstep, yet still we fail to respond.

We know that fossil fuels, comprising over three-quarters of the world’s total primary energy supply, are entering a new era of slow contraction. Oil supply hit its ceiling in late 2004, and will likely go into terminal decline by 2014-2015. Coal and gas will be right behind it, peaking circa 2020-2025. We’ve known about this potentiality since the 1960s. Yet official policy and models continue to deny it completely. In our most honest moments, we make up improbable stories about how we might get around it, without acknowledging it directly.

We’ve also known for decades that carbon emissions could change the climate. The climate itself frequently reminds us that it has broken with historical norms, and is now taking a heavy toll in human life, wildlife, damaged infrastructure, crop yields, and supply chain interruptions. Fresh indications of thawing permafrost and methane bubbling in the Arctic are but the latest of warning signals. Yet we continue to deny that it’s even an issue (indeed, some call it a hoax, despite the obvious lack of any hoaxers). The best we have done is to squabble ineffectually at climate summits, accomplishing little.

We have known for centuries that debt bubbles always pop. We’ve known for several decades that driving economic growth through debt, instead of organic productivity, could leave us in an over-extended position, and that excess leverage could ruin the global financial system. Yet we knowingly let “financial innovation” run wild, and still cannot bring ourselves to rein it in, or prosecute abuses of fiduciary responsibility and the public trust.

Why? Why do we invariably choose to protect vested interests, rather than do what is sensible or rational?

Nobody really believes that fossil fuels are infinite, or that their exploitation won’t look like a bell curve in hindsight. That’s been true for our consumption of every natural resource.

Nobody seriously believes that carbon, sequestered naturally over hundreds of millions of years, then released into the atmosphere over a mere 150 years, would have no effect on the climate. That suddenly vaporizing over one trillion barrels of oil, over half a trillion tons of coal, and over 80 trillion cubic meters of natural gas would have zero effect. No. That’s simply not rational.

Nobody really knows how this planet could sustainably support over 9 billion humans. All models in which that is possible require a liberal dose of magical thinking about technological progress, and human altruism and fairness. We know from biology what happens to populations with exponential growth rates: they rapidly increase, hit the limit of carrying capacity, then die off even more rapidly. Does anyone think the human organism is somehow exempt from this well-understood phenomenon?

Nobody has politically acceptable solutions for any of these problems. Surely we can put them off a few decades more. All we do is try to create enough uncertainty around them to avoid facing them now.

Even so, no one would dispute that any of these challenges can threaten our very survival. So why can’t we deal with them?

Climate policy and energy policy

The answers to these questions inevitably circle back to a basic human foible: We value the present more than the future. It’s a species-scale instance of a monkey trap. According to folklore, one can catch a monkey by putting some tasty treats in a jar, coconut, or other container with an opening just wide enough to put an empty hand into, then chaining the container down. If the monkey cannot remove its hand while still clutching the treats, it will remain with its hand stuck inside and allow itself to be captured rather than letting go of the treats.

The metaphor is apt. Consider the recent brouhaha over the Keystone XL pipeline.

The sensible, rational response to climate change is simple enough for any child to understand: transition from fossil fuels to renewables. Doing so would simultaneously address the problems of fossil fuel depletion and climate change.

But that’s too threatening to the vested interests of the fossil fuel lobby, which utterly dominates our political system. So we tried to clamp down on emissions without providing a substitute energy supply, which isn’t really a solution. When that proved too difficult in climate summit after climate summit, and carbon taxes remained a non-starter, we turned to trying to stop a single pipeline which would have permitted more synthetic oil from the tar sands of Alberta to reach our existing, underutilized refineries on the Gulf Coast. That challenge was a lose-lose proposition for the Obama administration. On the one hand, they would have risked alienating their base by approving the pipeline, and on the other, risked some modest job-creating bi-partisan legislation by killing the pipeline proposal. So the president punted the decision until after the election by sending it back to the State Department for more busy-work review. The Republican leadership countered by attaching the pipeline review as a poison pill to legislation that would have extended the payroll tax cut. If they had wanted to extend the payroll tax cut, as Ezra Klein pointed out in the Washington Post, they could have offered a clean bill approving the one-year extension, and it would have passed both houses in 10 minutes flat. Instead, they employed brinksmanship to try to force the president to approve the pipeline quickly.

The risks of the pipeline itself weren’t even that significant, in my estimation. Look at this chart of the existing oil and gas pipeline network, helpfully provided by John Mauldin, and ask yourself why the Keystone XL would have been so much worse.

Yes, the Keystone XL pipeline would run across the giant Ogallala Aquifer, but so do dozens of others already. And yes, the tar sands are an environmental nightmare. I have called them the oil junkie’s last fix. But stopping this pipeline would not stop the development of the Alberta tar sands; that oil would simply find its way to market elsewhere—probably Asia. In short, stopping that pipeline would be a vanishingly small win for the climate hawks, if it were a win at all. Conversely, approving the pipeline would probably reduce our imports from hostile countries only marginally, given the dynamics of our refinery industry and a free(ish) global market for oil and refined products. There is no requirement that the refined products made from oil delivered by Keystone XL would only be sold to American consumers.

But look how far afield from the original problem we’ve gotten. Now we’re having twice-removed, picayune debates about how many jobs one pipeline might create, and arguing over a bile-soaked hairball of legislation that will accomplish nothing for the causes of climate change, nor energy transition. The pipeline wouldn’t even create very many jobs when compared to the enormous infrastructure-building exercise of energy transition.

We’re so far down the legislative rathole now, we can’t even remember why we started down it in the first place. The latest bill failed due to another Tea Party revolt in the House yesterday, and as of the new year, a two percentage-point payroll tax increase will go into effect on 160 million workers, unemployment benefits will be terminated for millions of jobless Americans, and reimbursement rates for doctors who treat Medicare patients will be reduced. We went from climate change to Medicare in just a few turns of the political sausage-grinder. The actual merits and risks of the pipeline aren’t even in play.

Even respected energy economists can’t quite seem to grasp that climate change and energy policy are inseparable. A long essay by MIT lecturer emeritus Dr. Denny Ellerman, published in the inaugural issue of the new journal Economics of Energy & Environmental Policy by the International Association of Energy Economics, argued that we should not conflate climate policy with energy policy, because the latter has been a failure. “Energy policy has evolved since the 1970s into the promotion of whatever form of energy has the requisite political support at the moment,” and therefore we should not let climate policy fall to the same fate. As if there were another option!

The root problem, as Harvard professor Lawrence Lessig argues in his new book, Republic Lost: How Money Corrupts Congress, and a Plan To Stop It, is that money buys results in Congress. Just 0.05 percent of Americans max out the Congressional campaign, he says, and only 0.26 percent give more than $200 each. Meanwhile, Congressmen spend 30 to 70 percent of their time chasing campaign funding. Corruption isn’t just a cancer on our electoral system; it’s completely endemic to it. The vested interests of this country, an even smaller portion of the country than “the 1 percent,” call the shots. Our leaders are stuck in a mon(k)ey trap, but rather than strike at the roots of the problem, as Thomas Jefferson put it, we flail uselessly at the branches.

As a final point, consider the recent comments by Olivier Rech in Le Monde. Rech was the point man developing the IEA’s oil outlook scenarios for three years until 2009. I have followed the IEA’s scenarios closely for many years, including those developed under Rech’s leadership, as I reviewed two weeks ago. Nowhere in those scenarios did I find the sort of stark realism that Rech now offers. He believes that oil supply has peaked, and expects an annual decline of 1 to 2 million barrels per day (mbpd) beginning in 2015-2020, with initial tensions evident by 2013-2015. Unconventional oil, and new oil development in areas from Africa to South America, will not be able to compensate for the background decline of mature fields, which is running at 5 percent per year. Conventional and unconventional oil combined will remain below 95 mbpd, he says.

This outlook is very close to mine, as I have detailed in this column and elsewhere. But the IEA never said that while Rech was developing their outlooks. Clearly, it was politically impossible for him to tell the plain truth while working for the agency. Instead, we were given some pretty stories about how demand would fall and unconventional fuels would rise, meeting in perfect harmony. Oil decline wouldn’t be an issue until well after 2020, they said.

Again, politics trumped reason. The vested interests the IEA represents simply would not allow the truth to be spoken.

It’s quite a mess we’ve gotten ourselves into, and it seems now that only radical measures can clean it up. How far we have strayed from the ambitions articulated in the Preamble to the Constitution, to “establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty.” A broad electoral revolt against all incumbents in the next election might shake some of the moneyed influence out of politics, but even that wouldn’t be enough to restore true popular representation. We would need sweeping reform of lobbying, and bold new initiatives aimed not only at energy transition, but transportation transition as well. Ultimately, we’d have to shake off our hallucinations of endless growth, and start facing up to the Politics of Less.

A tall order indeed.

Illustration: Monkey trap artwork by Brian Call, used by permission