The FT on the Nobel Peace Prize

Beautiful day here in North Jersey. The sun's out, and the Giants just routed the Raiders. Here's the Financial Times on Obama's Nobel Peace Prize, from yesterday, "Urgency of Now?". Excerpt:

The Norwegian Nobel committee has made odd decisions before. Awarding this year’s peace prize to Barack Obama, however, is not merely bizarre but bad: for Mr Obama, for the prize, and for the cause of peace itself.

[...]

This is the first time the prize is given for what remain, for now, mere aspirations.

[...]

Despite Mr Obama’s undeniable diplomatic ambitions for a more peaceful world, there has simply been no time for him either to realise or betray them. So – to borrow from his own rhetoric – why the fierce urgency of now?

The answer is a Nobel Committee trapped in an adolescent adulation of Mr Obama that, if once shared by many, most have put behind them. Its continuing desire to flatter a particular tendency in US politics – Al Gore and Jimmy Carter are recent laureates – risks painting it as an annex to the left wing of the US Democratic party. Hoping the prize will strengthen Mr Obama domestically is deeply misguided: it will embarrass his allies and egg on his detractors.

Elsewhere, it will come to be seen as awarded for wishful thinking, not hard work. Peace is not served by devaluing the moral force of the prize, whose greatest impact has always been the moral support it can give those who fight oppression with their lives – a von Ossietzky, a King or a Walesa – or leaders who make heavy concessions needed for peace. Mr Obama has done neither. It is, however, in his hands to rescue the prize from itself – by declining it in deference to those more worthy than he.

Freeman Dyson in Tomorrow's NY Times Magazine

Tomorrow's New York Times Magazine features a cover article on the physicist Freeman Dyson, by Nicholas Dawidoff, "The Civil Heretic". The eighty five year old Dyson has led an eventful life so far, and the article covers a lot of its interesting parts. Below are a few brief excerpts of Dyson on Al Gore, James Hansen, and coal, followed by a brief note about Dyson's artistic sensibilities.

Among those he considers true believers, Dyson has been particularly dismissive of Al Gore, whom Dyson calls climate change’s “chief propagandist,” and James Hansen, the head of the NASA Goddard Institute for Space Studies in New York and an adviser to Gore’s film, “An Inconvenient Truth.” Dyson accuses them of relying too heavily on computer-generated climate models that foresee a Grand Guignol of imminent world devastation as icecaps melt, oceans rise and storms and plagues sweep the earth, and he blames the pair’s “lousy science” for “distracting public attention” from “more serious and more immediate dangers to the planet.”

[...]

For Hansen, the dark agent of the looming environmental apocalypse is carbon dioxide contained in coal smoke. Coal, he has written, “is the single greatest threat to civilization and all life on our planet.” Hansen has referred to railroad cars transporting coal as “death trains.” Dyson, on the other hand, told me in conversations and e-mail messages that “Jim Hansen’s crusade against coal overstates the harm carbon dioxide can do.” Dyson well remembers the lethal black London coal fog of his youth when, after a day of visiting the city, he would return to his hometown of Winchester with his white shirt collar turned black. Coal, Dyson says, contains “real pollutants” like soot, sulphur and nitrogen oxides, “really nasty stuff that makes people sick and looks ugly.” These are “rightly considered a moral evil,” he says, but they “can be reduced to low levels by scrubbers at an affordable cost.” He says Hansen “exploits” the toxic elements of burning coal as a way of condemning the carbon dioxide it releases, “which cannot be reduced at an affordable cost, but does not do any substantial harm.”

[...]

Dyson has great affection for coal and for one big reason: It is so inexpensive that most of the world can afford it. “There’s a lot of truth to the statement Greens are people who never had to worry about their grocery bills,” he says. (“Many of these people are my friends,” he will also tell you.) To Dyson, “the move of the populations of China and India from poverty to middle-class prosperity should be the great historic achievement of the century. Without coal it cannot happen.” That said, Dyson sees coal as the interim kindling of progress. In “roughly 50 years,” he predicts, solar energy will become cheap and abundant, and “there are many good reasons for preferring it to coal.”

The article notes in passing that Freeman Dyson disliked John Adams's opera "Dr. Atomic". That puts me in good company, I guess: I turned the PBS simulcast of this opera off after a half hour. Below is the trailer for the Metropolitan Opera's production of Dr. Atomic.

Why We Will Be Using Fossil Fuels for Decades to Come

From Vaclav Smil's essay in the American, "Moore's Curse and the Great Energy Delusion":

“Energy transitions” encompass the time that elapses between an introduction of a new primary energy source oil, nuclear electricity, wind captured by large turbines) and its rise to claiming a substantial share (20 percent to 30 percent) of the overall market, or even to becoming the single largest contributor or an absolute leader (with more than 50 percent) in national or global energy supply. The term also refers to gradual diffusion of new prime movers, devices that replaced animal and human muscles by converting primary energies into mechanical power that is used to rotate massive turbogenerators producing electricity or to propel fleets of vehicles, ships, and airplanes. There is one thing all energy transitions have in common: they are prolonged affairs that take decades to accomplish, and the greater the scale of prevailing uses and conversions the longer the substitutions will take. The second part of this statement seems to be a truism but it is ignored as often as the first part: otherwise we would not have all those unrealized predicted milestones for new energy so.

[...]

The scale of transition needed for electricity generation is perhaps best illustrated by deconstructing Al Gore’s July 2008 proposal to “re-power” America: “Today I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years. This goal is achievable, affordable, and transformative.”

Let’s see. In 2007 the country had about 870 gigawatts (GW) of electricity-generating capacity in fossil-fueled and nuclear stations, the two nonrenewable forms of generation that Gore wants to replace in their entirety. On average,these thermal power stations are at work about 50 percent of the time and hence they generated about 3.8 PWh (that is, 3.8 x 10¹⁵ watt-hours) of electricity in 2007. In contrast, wind turbines work on average only about 23 percent of the time, which means that even with all the requisite new high-voltage interconnections, slightly more than two units of wind-generating capacity would be needed to replace a unit in coal, gas, oil, and nuclear plants. And even if such an enormous capacity addition—in excess of 1,000 GW—could be accomplished in a single decade (since the year 2000, actual additions in all plants have averaged less than 30 GW/year!), the financial cost would be enormous: it would mean writing off the entire fossil-fuel and nuclear generation industry, an enterprise whose power plants alone have a replacement value of at least $1.5 trillion (assuming at least $1,700/installed kW), and spending at least $2.5 trillion to build the new capacity.

But because those new plants would have to be in areas that are not currently linked with high-voltage (HV)transmission lines to major consumption centers (wind from the Great Plains to the East and West coasts,photovoltaic solar from the Southwest to the rest of the country), that proposal would also require a rewiring of the country. Limited transmission capacity to move electricity eastward and westward from what is to be the new power center in the Southwest, Texas, and the Midwest is already delaying new wind projects even as wind generates less than 1 percent of all electricity. The United States has about 165,000 miles of HV lines, and at least 40,000 additional miles of new high-capacity lines would be needed to rewire the nation, at a cost of close to $100 billion. And the costs are bound to escalate, because the regulatory approval process required before beginning a new line construction can take many years. To think that the United States can install in 10 years wind and solar generating capacity equivalent to that of thermal power plants that took nearly 60 years to construct is delusional.

Are High Energy Prices Shifting Attitudes on Energy Policy?

A Conservative Newspaper's Point of View

The editors of Investor's Business Daily argue in favor of increased domestic energy production in this editorial, "Energy Myths". Excerpts:

Many in Congress seem either disconnected from reality or intentionally disingenuous about our energy crunch. They have well-honed negative responses to common-sense ideas about solving our energy crisis, particularly drilling for more oil.

These responses are based on a number of widely held myths. Sadly, they've become the backbone of the Democrats' energy policy. They include:

• "We can't drill our way out of our energy crisis."

Actually, we can. As we've noted before, conservative estimates put the total amount of recoverable oil in conventional deposits at about 39 billion barrels. Offshore, we have another 89 billion barrels or so. In ANWR, 10 billion barrels.

[snip]

ANWR alone is expected to yield 1 million barrels of oil a day. Now make the highly conservative assumption that we're able to get a like amount of oil from the other sources — for a total increase of 3 million to 4 million barrels of oil a day.

That's an enormous rise in oil output. Today, we produce just under 8 million barrels of oil a day from domestic sources. So we could, in effect, boost our energy output 50%, and thus our energy independence, by bringing an additional 4 million barrels of oil to thirsty world markets each and every day.

By the way, those calculations don't include the trillions and trillions of cubic feet of natural gas found in the same locations, which, along with nuclear power, could be used to fire our power plants.

Are more Americans coming around to the IBD's point of view?

Apparently yes, according to the results of the Pew Poll released this week. As energy prices have gone up this year, support for domestic energy exploration and production has increased:



More interestingly, support for these policies has apparently more than doubled among self-categorized liberals:



Implications of this Shift in Attitudes

The first question is whether this shift in attitudes will lead to a shift in federal energy policy, and if so, when. I imagine that if energy prices stay high long enough, and support builds among the public for increased domestic energy exploration and production, federal policy will eventually change accordingly. There are a few factors that could delay this process though:

- A cyclical correction in oil prices could reduce the political pressure and keep this issue on the back burner.
- Those who have placed their bets on alternative energy may continue to oppose expanded domestic oil & gas production. Politically-savvy alternative energy entrepreneurs such as Vinod Khosla and Al Gore likely will continue to advocate for increased federal funding for alternative energy instead, as will large companies that have been positioning themselves to benefit from an expected surge in green energy initiatives (e.g., GE).
- Affluent political donors tend to be to the left of the general public on energy issues. See, for example, the Rockefellers' recent proxy challenges against Exxon Mobil.
- The current political environment. Recent polls favor Obama to win the presidency, but even if McCain wins, his views on energy policy don't appear to be radically different than Obama's, notwithstanding McCain's recent flip-flop in favor of offshore drilling. McCain still opposes drilling in ANWR, and McCain styles himself as a 21st Century Teddy Roosevelt, the Conservationist, Progressive president who busted up Standard Oil and created scores of national parks. In either case, Congress is likely to have a stronger Democratic majority next year, and the current Democratic Congressional leadership remains opposed to expanding domestic energy production.

The second question is, assuming the political stars align, and policy changes to expand domestic energy exploration and production, what effect will that have on energy prices? The IBD editorial I excerpted above predicts that this would immediately lower energy prices, since it would raise expectations about future supply. I'm skeptical about this for a couple of reasons. First, once new federal lands and waters are opened to exploration, it might take a couple of years of mapping and exploratory drilling to get a better sense of the probably supply; second, large oil finds in recent years (e.g., the discoveries off the coast of Rio de Janeiro) haven't seemed to put much downward pressure on oil prices.

The upshot of all of this, from my perspective, is that although shifting attitudes on energy policy may bode well for increasing energy supplies in the U.S. over the long-term, it doesn't seem that they will have much impact on supplies or prices over the next five years. So I remain confident that, although we'll probably have a cyclical correction or two along the way, the secular bull market in oil will continue for the next five years.