Energy Security

[Rick M]

Dayuhan,
I agree completely on your concerns re investment, which confirm the following point: price volatility may be worse than sustained high prices.

If high prices were sustained (prices would need to be sustained for at least a decade in order to achieve the following benefit) then more of the difficult oil would be brought on-stream, thus buying us some much-needed time to develop non-carbon alternatives.
However, a see-saw effect where the price dips regularly subvert such efforts will make investors reluctant to risk their money on something which cannot endure many consecutive months of losses.

But your final point about “an apocalyptic peak oil scenario where the oil simply runs out” makes me wonder if you share a common misconception about peak oil, which is to equate peaking with running out.

This is a very important distinction.
Some peak oil analysts argue that the peak (ie. point of maximum production/flow-rate) should coincide more or less with the half-way point. That is, production will peak when we have extracted about half of the ultimately recoverable reserves.
Personally, I see no causal link between the two, nor did Brent Fisher in his excellent study for the Institute for Defense Analyses (IDA).

Here is a review of his IDA study (2008):
http://www.energybulletin.net/node/49272

But the main point here is that peaking is not about running out, any more than the start of commercial extraction in 1858 (here in Canada, not in Titusville the following year) was about running out.

My bet is that we will have more than half the potentially extractable oil in the ground when we peak., so physical supply may not turn out to be the primary problem after all.
But the central thesis of the peak oil analysts is this: the troubles will start as we approach the apparent peak. It probably will matter little what combination of factors ‘causes’ the peak, and we could have serious difficulties simply from the perception of a peak, even if the perceived peak should later prove to have been a false alarm.

But I agree with everything else that you have said, including the scenario that you describe in your final paragraph.


David in the UK,
I am in regular contact with several UK analysts, both military and civilian.
Your nation seems to be awakening to the unhappy brevity of fossil fuel supply: from having little domestic production other than coal, to the sudden discovery of the wondrous North Sea oilfields, to Mrs. Thatcher’s gung-ho approach to extraction, to the sudden realization that your one-time bonanza had peaked within a generation, and finally to the stark realization that the UK will forever be an importer of oil & gas…. all of this within half a lifetime.

To the UK’s credit, at least they are taking a serious look at how one might manage fuel emergencies, which is more than we can say in North America, where fuel emergencies are barely on the radar.
Brits learned in Sept. 2000 just how problematic a liquid fuels supply problem can be, but here in Canada we have had no such experiences.
We are very complacent….

[Rick M]

This morning I worked my way through three recent UK documents:

1. DECC's Business Continuity Management for Fuel Shortages (Nov. 08)

This brief document (10 pgs) contained the observation that local fuel supplies "could be exhausted within 48 hours of an incident and it could take up to 10 days before stock levels are fully restored" (p.2).

DECC's Maximum Purchasing Scheme would limit purchase for non-essential users to maximum 15 litres (roughly 3 gallons).
This strikes me as a bad idea for two reasons:
1. History: In USA during the 1979 crisis they limited purchases to $5 max, a similar volume. As Yergin states, "The results were exactly the opposite of what was intended, for it meant that motorists had to come back to gas stations that much more frequently" (The Prize, p. 692).
2. Common sense: People will want to top up their tanks as soon as they have gone 75 miles or so.
Topping-up creates line-ups which waste time & additional fuel and increases tensions at the pumps.

Better to have a fixed limit, say 30 litres, no more and no less.
That will reduce topping up.
Emergency pricing will do the rest of the job....

Here is the link:
http://www.cabinetoffice.gov.uk/medi...el_nov2008.pdf

2. NHS Guidance on Planning for Disruption to Road Fuel Supply (Oct. 08)

At 30 pages, this is the most comprehensive of the three documents.
It contained a few interesting observations:
- In the aftermath of Hurricane Katrina, health facilities had power and their lights acted as a beacon (literally) for displaced citizens, and this created some security issues for those facilities.

- This doc has several warnings not to underestimate the complexities of a fuel shortage, which is prudent.

- The "Myth of a Central Fuel List" (p. 14) is interesting... it indicates how seriously businesses view their fuel supply and gives a hint of the efforts that people will go to in order to gain preferential access/Essential User status.

- The recommendation to "attempt to have all workers try public transport options" (p. 14) of course makes sense, but as Kathy Leotta points out, "Transit systems have only limited capabilities for quickly increasing services... due to a small supply of extra vehicles and drivers" (p. 4).
Switching to public transit will be easier said than done.

- Other than its request that "all unforecasted costs... are captured for audit" (p. 17) there is little acknowledgment of the budgetary concerns which could quickly arise. It seems highly unlikely that any free-market economy could have an extended fuel supply problem without also having an extended price spike.
Here is the link:
http://www.dh.gov.uk/en/Publications...ance/DH_089955

3. Heart of Birmingham NHS Fuel Shortage Plan (reviewed June 27/09)

I found this 21-page plan to be the most intriguing of the three since it addresses some of the significant details of managing the Temporary Logo Scheme (p. 4-5), issues around communicating info to the public (p. 6), concerns about supply chain failures, etc.

Returning to the topic of budgetary problems arising during a fuel emergency, it is puzzling to see no warnings in any of these three documents that pricing during a fuel emergency could prove problematic to their budgets and/or to the service delivery capability of their agencies.
In the Birmingham document, the topic of Financial Implications (Sect. 12.0) is raised, but this section contains a single unfathomable sentence: "There are no significant financial implications anticipated in the implementation of this plan" (p. 13).

Similarly, Sect. 10.0 on Training states: "There are no specific training requirements associated with this plan" (p. 13).

Both NHS documents contain some specific and sensible recommendations for personnel, for delivery of services, accountability re fuel use, etc.
One would think that this would surely require some rather detailed consultation with staff (and subsequent training) in order to implement these recommendations.
Here is the link:
http://www.bpcssa.nhs.uk/policies/_h...cies%5C881.pdf

4. Some final comments

To their credit, the UK planners have recognized two central facts:
1. a fuel emergency can be a whopper of a problem, and
2. fuel supply and other emergencies must be addressed at the local level first, hence the need for local plans, pre-authorization & empowerment, etc.
Here in North America, there seems to be little awareness of either fact, and therefore precious little action, especially at the local level.

I fear that even the UK planners may be overlooking the issue of price spikes, the resulting budgetary constraints & economic difficulties, and the potential threat to civil order.

[Surferbeetle]

From the Washington Times by Paul Saunders: Oil losses pull Russia's claws

In Russia's case, the crisis has clearly profoundly damaged both the overall economy and the energy sector. Russia's stock market is down around 75 percent, its officials project a 2.2 percent contraction of gross domestic product in 2009, and the Central Bank has already spent more than $200 billion, one-third of Moscow's reserves, trying (largely without success) to defend the value of the ruble, now down by one-third against the dollar. At the same time, Russian officials admit to $130 billion in capital flight in 2008, with the true figure possibly significantly higher.

The state gas monopoly Gazprom also faces growing pressure as prices tumble in the European market, which provides an estimated two-thirds of the company's profits.

[Rick M]

Thanks for your posting, Surfer.
Paul Saunders' point is well taken: the combination of a struggling Russian economy and low gas prices means less ability for them to invest at their end to ensure European winter heating.

My focus is more at the other end... how can people plan for and best administer a fuel shortage.
The following may be of interest as the same principle (of solidarity in burden-sharing) is a cornerstone of international response to an oil supply shortage.

European solidarity was briefly tested during the January 09 cut-off of Russian gas, but the result was hardly encouraging.
A few weeks later, the former executive director of the IEA, Claude Mandil said that a central lesson learned from the crisis is, “Solidarity is still just words.” He went on to cite the example of Italy, saying, “Italy doesn’t care for a second for the global supply of Europe, which is the exact opposite of European solidarity.”
The full transcript is here:
http://www.euractiv.com/en/energy/ma...article-179254

Should this winter prove to be a cold one, Europe will be worried.

Meanwhile, we North Americans need to thoroughly examine this issue. Should anything interfere with our supply of affordable fuel (whether liquid fuels or gas) during the Canadian/North Dakota winter, we would have a most formidable problem on our hands... one which (like Ice Storm '98, which knocked out our electricity in January) must be dealt with at the local level.
The problem is that when it comes to fuel, we have no local plans.

The Brits and Australians are onto this in a serious way, and they barely have a winter.
We North Americans don't believe it will happen over here.
Thanks for your interest.

[Surferbeetle]

My focus is more at the other end... how can people plan for and best administer a fuel shortage.
The following may be of interest as the same principle (of solidarity in burden-sharing) is a cornerstone of international response to an oil supply shortage.

Rick,

Thanks for the links and conversation. My interest in energy security was certainly energized by a tour in Iraq (sorry, couldn't resist ).

At a marco level mapping is a powerful tool to use in gaining a better of understanding the of condition, needs, and capabilities of centralized energy infrastructure. My dirty boots experience in Iraq (03-04) was counterintuitive when compared to the typical emergency response that we would mount in the west.

Decentralization was the name of the game for energy requirements in Iraq. There are of course added costs and inefficiencies for an economy as a result of decentralization, however as an Iraqi if you wanted to have water, electricity, and fuel you could not count upon the Government to deliver it.

Blackmarket activities were prevalent, gas stations were dangerous places, and 'normal' economic activities were thoroughly disrupted. If one had money one would purchase a cheap generator (often Chinese brands - Caterpillar was big money and usually only seen in government applications) and sell electricity to nearby neighbors. Some of the families I visited would head out to the nearest watermain, dig a hole in the street, shoot a hole in the pipe (cross-contamination was prevalent due to open channel conditions), run a rubber hose back to a small pump attached to a large aluminum box in the courtyard and wait for the watermain to be filled (every 7 days or so where I was at). Others would contract with a water truck entrepreneur for deliveries. Cooking was done by propane canisters delivered by huge trucks at centralized locations.

Early in my tour (generators were not yet prevalent) I visited with some farmers near the Euphrates. They had dug rectangular pits/wells down to the water table and had mudbrick wellhouses nearby for irrigation. The centralized electricity was out and we brainstormed solutions...I shared a trick I have seen which involves pulling a tire off a car rim, while the car is on blocks, and running a band between rim and pump to power the pump (run the car while its on the blocks)...

Farm applications...hmmm. Popular Mechanics has had a few articles on 'closed loop' farm systems. It's not pretty but it's definitely the type of 'get ur done' that might get one through tough times.Cows to Kilowatts: U.S. Farms Save Big Turning Manure to Energy

Holstein No. 2699 gazes warily over Shawn Saylor’s shoulder. The 39 other cows lining the stainless-steel stalls of the milking parlor at Hillcrest Saylor Dairy Farm appear unperturbed—by two strangers or by the vacuum pumps being swiftly attached to their udders. “They’re very particular,” notes Saylor, a fourth-generation dairy farmer. “Everything has got to be consistent.” No. 2699 gives one last measured look from under long lashes, lifts her tail and ejects a stream of runny, brown energy that, very soon, will help power the farm.

Most people don’t think of manure from 600 cows—18,000 gal, produced daily—as an asset; Saylor’s neighbors in Rockwood, Pa., certainly didn’t. Until two years ago, the waste was pumped to a holding pond on the property and spread on the fields every spring and fall. “You’d see a 2-ft crust floating down there that you could pretty much walk across,” Saylor says matter-of-factly. “The odor was unbelievable.”

A lot of people might not see a 50-gal drum of used cooking oil, flecked with bits of fried chicken, as a resource either. That’s why I asked my uncle, Dave Hubbard, to drive me here from West Virginia in his biodiesel Jetta TDI. Uncle Dave converts the waste oil from local taverns into fuel to run his car, a motorcycle and tractors for five farms, so I figured he and Saylor could trade tips.

Saylor, 35, is both practical and inventive—much like Uncle Dave. Above the Leatherman clipped to his belt, the sleeves of a well-worn blue work shirt are rolled up to the elbows; his face dimples from smiling even as he talks shop in the milking parlor. “There’s a recycle–flush system here,” Saylor says, activating a pump. Water recovered from other uses cascades across the floor, sweeping manure in murky streams down the length of the barn and into a tank at the mouth of an anaerobic digester.

[Rick M]

Thanks again, Surfer... interesting stuff.

The rear-axle & drive-belt idea was of course standard on the old steam tractors 100 years ago and had all sorts of applications (except the tractors came with an elevated side wheel for that purpose).

I had not seen the PM article but some progressive work in on-farm methane is being done here in eastern Ontario:
http://www.agrinewsinteractive.com/a...ticle-7716.htm

It's interesting that the pioneers over here in alt-energy and organic ag are so often of Swiss/German background... meticulous in their "attention to detail."

We need more of this, much more, but most Canadian farmers are low-income and lack the investment to undertake such projects.

Meanwhile, farmers are only 2% of the population (same in USA, I believe) and on-farm energy use is only about 10% of energy use in the agri-food sector overall. Most agri-food energy use is for transportation, processing, packaging, refrigeration, etc.

Part of the reason for the UK focus on the "localization" of emergency response is because the panic buying of fuel and food typically occurs by local people stocking up at their local pumps and supermarkets. Supplies which could & should last many days can be depleted in 48 hours, thus greatly exacerbating an already difficult situation. The prevention of hoarding and the administration of more prudent measures can best (only??) occur at the local level.

(But I will state this again: North America has not yet moved in this direction. Actually, here's a challenge for SWC participants: please phone your local and state Emergency Management Office and ask if they have a plan for fuel shortages/oil supply emergencies. They will have plans for pandemics, nuclear attacks & hazardous spills, etc, but no regime to allocate fuel to the public during a fuel crisis. They will probably also indicate their surprise at your enquiry.
Please let this forum know if anyone finds info to the contrary.)

Defence Academy is a research arm of the UK military, and one of their researchers has done an excellent job of examining the UK food supply chain, including the vulnerabilities created by energy shortages.
Here is the link to Helen Peck's excellent study:
Wrong link and refer Post 13 for actual link.

Her study is very thorough (about 170 pages) but the most relevant info to our discussion here may be found in Section 1 (the first 20 pages)... well worth reading.

[slapout9]

The centralized electricity was out and we brainstormed solutions...I shared a trick I have seen which involves pulling a tire off a car rim, while the car is on blocks, and running a band between rim and pump to power the pump (run the car while its on the blocks)...

In Alabama that is centralized electricity what's the big deal?

[Rick M]

Sorry, folks

Surferbeetle alerted me to the fact that the link which I provided in posting #11 no longer leads to Helen Peck's study.
I'm not sure why, and that is unfortunate because it provided a concise intro which people could examine before linking to the study itself.

Here is a direct link to Helen Peck's "Resilience in the Food Chain" (July 06):
http://www.cranfield.ac.uk/cds/depar...l%20report.pdf

Sorry for the confusion

rm