The Great Oil Fallacy

by John Quiggin on November 27, 2012

That’s the headline for a piece I published in The National Interest last week. Opening paras

Among the unchallenged verities of U.S. politics, the most universally accepted is that of the crucial strategic and economic significance of oil, and particularly Middle Eastern oil. On the right, the need for oil is seen as justifying an expanded and assertive military posture, as well as the removal of restrictions on domestic drilling. On the left, U.S. foreign-policy is seen through the prism of “War for Oil,” while the specter of Peak Oil threatens to bring the whole system down in ruins.
The prosaic reality is that oil is a commodity much like any other. As with every major commodity, oil markets have some special features that affect supply, demand and prices. But oil is no more special or critical than coal, gas or metals—let alone food.

This piece expands on my earlier argument that the US has no national interest at stake in the Middle East, just a set of mutually inconsistent sectional interests and policy agendas. I don’t talk about climate change explicitly, but we’ll never have a sensible debate about climate change until oil is demystified.

{ 122 comments }

1

Harald Korneliussen 11.27.12 at 8:12 am

I’m disappointed that you conjure up the import numbers, as if they have any significance. Yes, the US imports comparatively little oil, and most of it from Canada. But oil being as fungible as it is, that is mostly a question of logistics. What matters is the share the middle east has of world production, and of reserves (taking into account how accessible they are, in terms of flow ratio and cost of extraction). On those measures, the middle east is still very important.

2

Peter T 11.27.12 at 10:26 am

“But oil is no more special or critical than coal, gas or metals—let alone food.” Food is not critical? What does JQ live on?

3

Z 11.27.12 at 10:32 am

As much as I respect the intellectual endeavor and as much as agree with the final conclusion (that the battle for the control of oil is a reminiscence of things past), I still think you are missing the elephant in the room: the strategic control of the middle-east oil production by the US is neither for domestic consumption (as you say), nor to guarantee that strategic allies have a secure access to oil (as you also say) but to prevent strategic enemies to control the middle-east oil production. In the immediate aftermath of the second world war and in the first stages of the cold war, this was indubitably a crucial strategic factor. With the prospect of a military confrontation between superpowers extremely remote, the control of the middle-east production might be considered valueless, but this is neglecting the fact that the middle-east dictatorships are essentially cash flow machine for anyone able to interact (or control) them. Back when I visited Prince Saudi Air Base (in 2001) for instance, it was crystal clear to US Air Force and French Air Force officials alike that the primary mission was certainly not to enforce no-fly zone resolutions but to sell fighter jets to the Saudi. The same crony capitalism concerns probably underlies the strong support the US lent to the vicious crushing of the popular uprising in Qatar. See also the explicit warnings of the US/UK/Spain alliance that those who wouldn’t get on board the invasion of Iraq would certainly not benefit from reconstruction contracts and the future oil revenues (or symmetrically the slightly too vibrant to be honest rejection of that invasion by Chirac; a rejection that was probably not unrelated to the fact that Saddam was the main client of Dassault, the fighter jets manufacturer who had launched Chirac’s political career and who remains a steadfast financial and political support of the right-wing party).

To sum it up, it seems to me that the US élite regards the middle-east as vitally important partly because it has retained outdated strategic schemes (if we get in a land war with Russia or China, we cut the oil supply), partly because their world vision is zero-sum (someone has to control oil production, so it better be us, because otherwise, who knows what might happen) and mostly because the middle-east autocracies function as cash machine for the oil/construction/military industry; three sectors with structurally close link with the political elite.

An empirical test for the validity of this theory is to look for structurally similar relations involving other states: check for instance the repeated assertion by the French élite that the Maghreb or West Africa is our “sphere of influence” (something which is, if anything, even more anachronistic than cold war era strategic concerns, as it seemingly echoes scramble for Africa modes of thinking) and the support it invariably lends to its autocrat despite the fact that these countries have no strategic importance whatsoever but certainly because these autocrats are very convenient backdoor financing machine for crony capitalist enterprises and/or unscrupulous politicians (google Affaire Elf or Françalgérie for a primer).

4

Mao Cheng Ji 11.27.12 at 11:12 am

“Food is not critical?”

Food is critical in the aggregate; having access specifically to foie gras is not. And with oil it’s like that, all or nothing: either you have, and can afford, fuel to put into the tank, or everything is paralyzed.

5

bexley 11.27.12 at 1:09 pm

@2

I think JQ is saying oil is not more critical than food.

6

prasad 11.27.12 at 1:21 pm

I kept reading this, hoping at least (since the claim is that oil has little relevance to US policy) to see an argument for what *changed* to make it that way. Instead I saw an argument that it didn’t matter even during the OPEC crisis. And yet, fact is, the Eisenhower did overthrow a democratically elected Iranian government because it wanted to nationalize its oil industry. And while Gulf 2 is hard to see as being largely about oil (or anything sensical), this is a much harder case to make for Gulf 1. Oil doesn’t have to dominate all other considerations in every war for it to matter a great deal in some, or to some extent in many or most…

7

reason 11.27.12 at 1:43 pm

bexley @5
Isn’t though, one of the main claims of the peak oil movement that food supply depends critically on oil (via chemical fertilisers and pesticides).

8

rf 11.27.12 at 1:46 pm

“I kept reading this, hoping at least (since the claim is that oil has little relevance to US policy) to see an argument for what *changed* to make it that way.”

Isn’t the argument not that oil wasn’t important to US policy, but that US policy was flawed to put such importance on oil?

9

reason 11.27.12 at 1:46 pm

Not to mention competition for land (ethanol production).

10

Peter Erwin 11.27.12 at 2:27 pm

prasad @ 6:
I kept reading this, hoping at least (since the claim is that oil has little relevance to US policy) to see an argument for what *changed* to make it that way.

What changed is alluded to briefly, e.g.:

Oil has become steadily less important as an energy source in recent years. U.S. consumption of petroleum for gasoline peaked in 2005, well before the recession, and economic recovery has not produced a rebound. Consumption of oil per person has been declining since about 1980. At least as far as the United States is concerned, Peak Oil is an event in the past, not the future.

and:

High prices have already led to the abandonment of oil in many uses for which it was once the preferred fuel, such as electricity generation.

The argument, as I understood it, was roughly: “Oil really wasn’t as economically important back in the 1970s as people thought it was, and it’s become even less so (for the US, at least) since then.”

11

reason 11.27.12 at 2:45 pm

“Consumption of oil per person has been declining since about 1980. At least as far as the United States is concerned, Peak Oil is an event in the past, not the future.”

Seeing as peak oil refers to total oil consumption and the statistic quoted is per person oil consumption, is this true? It is not self-evident.

12

prasad 11.27.12 at 3:19 pm

“Isn’t the argument not that oil wasn’t important to US policy, but that US policy was flawed to put such importance on oil?”

Rereading more carefully, I agree that this is exactly right in characterizing the argument. Thanks.

13

ponce 11.27.12 at 4:12 pm

I think someone is stuck in the 70s.

The U.S. commitment to the Middle East is quite small.

We have about 19,000 troops stationed there(15,000 in Kuwait), plus a few ships patrolling the Persian Gulf.

The latest Israel-Palestine tantrum was covered here in the U.S. as some kind of mixed martial arts freakshow gutter brawl, not something that had any serious impications for the U.S.

Now China…

14

Anderson 11.27.12 at 4:13 pm

Hopefully LGM will just look at this post, squint, and then shrug it off.

Tho IIRC, a large motivation for the initial Western interest in Middle Eastern oil was … battleships!

15

Tom Hurka 11.27.12 at 4:14 pm

Surely what puts Peak Oil at least farther in the future is primarily shale gas and shale oil, i.e. a huge new source of supply on the North American continent. Natural gas prices are already way down, as in consequence are monthly heating bills in Canada. And shale oil is on its way.

This is, by the way, trouble for government attempts to stimulate green energy projects. The amount of subsidy you have to pay for e.g. a windmill farm depends on how much more expensive the electricity it produces is than electricity produced in more conventional ways. As the natural gas price has gone down, that gap has got bigger.

16

mpowell 11.27.12 at 4:48 pm


The prosaic reality is that oil is a commodity much like any other.

This is only true if you ignore all the properties of oil that make it different from other commodities. Here are a few. First, lack of flexibility in supply. There is very little short term flexiblity in the global supply of oil and not much long term flexibility either. Second, difficulty of substitution. Oil is an energy source that cannot be substituted for in the short term and only to a limited degree in the long run. Third, there is not much flexiblity in demand. There is very little flexiblity in the economy to simply skip travel to save on gas. If the goods can’t be shipped around they can’t be used or sold. All of these factors together leave the market in oil extremely vulnerable to disruptions to supply. Most other markets for commodities miss at least one of these properties and no other commodity market remotely as large as the one for oil matches up on all three points. Contra your claim, this makes oil a very unique commodity. So US oil expenditures amount to “only” 4% of GDP at $100/barrel. As we have seen recently the price of a barrel of oil can change dramatically in a short period of time by 50% or more. And that’s without the kind of disruption imagined by an event like Iran attempting to close the straights of Hormuz. An increase in the price of oil to $150/barrel could lead to a demand shock for the rest of the goods in the economy of 2%. It may be a minority of economists who believe that oil price spikes as we have experienced them cause recessions, but is there any other commodity good that is even discussed in this way? And what percentage of economists would change their opinion if they thought $200 or $300 oil was a possibility with the attendant 5%+ impact to the economy?

It is certainly true that the $1T+ price tag for the Iraq war makes no sense as a war for oil, but arguing against the current levels of American military expenditures in the middle east (a point on which I generally would agree with you) using the claim that oil is not a particularly important commodity is only going to appeal to people who are already persuaded. For those who are not, I think it discredits the argument more than anything.

17

Omega Centauri 11.27.12 at 5:19 pm

What Z says in 3. Oil isn’t in oversupply globally, so any change in supply means a large price increase is required to cut global demand proportionately. Theres been a lot of hype about shale oil lately, claiming a new age of plentiful oil is about to begin. But fracking isn’t just environmentally controversial, it is also expensive (something like $7million per well), and the amount of oil produced per well is small, and they rapidly deplete, so the rate we can obtain shaleoil is limited by the finite supply of extraction technology/infrastructure. And no, the US is still the worlds largest importer (as well as third largest producer) of oil. Most of our imports come from the Americas, but unless we are contemplating a forced merger with Canada, Mexico and Venezuela, we are not, and won’t be close to being self sufficient any time soon.

18

ragweed 11.27.12 at 5:47 pm

Isn’t though, one of the main claims of the peak oil movement that food supply depends critically on oil (via chemical fertilisers and pesticides).

It’s not the most solid claim, however, as natural gas is a more significant input for chemical fertilisers and pesticides.

Shipping is one of the other big issues for the peak oil collapse folks. Which I don’t quite get. I understand that shipping is very dependant on bunker fuel, but it also seems like big hulking cargo ships would be one of the easier things to convert to some sort of pulverized coal boilers or NG turbines. The navy is working on hybrids as we speak. I would think shipping would be one of the easier conversions.

I think the issue with oil is that it does have pretty low elasticity in the short term, and has a huge impact on consumer sentiment. Yes, we can convert to a number of alternatives, but the cost of substitution for individuals is steep, and there are a number of critical infrastructure issues involved (it is not hard to get a car that runs on CNG, but the fueling infrastructure is limited).

Of course, if the US prioritized building that infrastructure rather than spending 1 trillion on a war, it would be a much different transition. Oil has portability advantages, but they are not unsurmountable.

(In fairness, one of the arguments of the peak oil crowd is that substitution could happen, but nobody is doing the planning to make it happen in time – there is recognition that oil is critical because of institutional choices, rather than only a fact of nature).

19

Steve LaBonne 11.27.12 at 5:52 pm

I hope this doesn’t trigger one of those discussions from hell, but I have to say that I think the Israel lobby has a lot more to do with our Middle Eastern policy than oil does.

20

rf 11.27.12 at 6:19 pm

On the US/Iran/Saudi relationship during the period this new book is meant to be decent (and the review below goes into a good bit of detail)

http://www.thenational.ae/arts-culture/books/the-oil-kings-how-nixon-courted-the-shah#full

21

Sandwichman 11.27.12 at 6:43 pm

“The prosaic reality is that oil is a commodity much like any other.”

Oh my god! I’ve just wasted 12 weeks of my students’ lives teaching them the fallacy that the peculiar attributes of oil make it unique not only economically but politically.

Although I’m reluctant to vouch for every assertion of his analysis, Timothy Mitchell makes a compelling case for the strategic role that the control over extraction and transport of carbon fuels has played historically in the evolution of what we today think of as democracy. Back in 1980, Robert Costanza made what impresses me as a damn solid argument about the interdependence of factors of production to the extent that there is strong correlation between the monetary value of the output of various industrial sectors and their embodied energy.

It seems to me that saying “oil is a commodity much like any other” is one tiny step removed from saying labour is a commodity much like any other. Next station on that line of argument is the general substitutability of commodities and factors of production and ultimately the old “technology” for natural resources perpetual motion machine. The fallacy of the latter is that technology embodies labour, energy and other natural resources and that embodiment constitutes the limit of substitution.

As an inveterate deconstructor of alleged fallacies, it is my contention that they often arise as rhetorical gestures to dismiss the ‘wickedness’ of what are in fact wicked policy dilemmas. Where I would agree with JQ is on the inadequacy of both the conservative and the liberal responses to the policy dilemma posed by oil. But that inadequacy is NOT because “oil is a commodity much like any other” but rather because oil, like labour, rips asunder the fetishism of the commodity category.

22

Watson Ladd 11.27.12 at 6:46 pm

Oil has never carried out revolutions in protest about its commodification.

23

Sandwichman 11.27.12 at 6:54 pm

Watson Ladd: “Oil has never carried out revolutions in protest about its commodification.”

That’s debatable. Of course, literally oil has never carried out a revolution. But oil, and before it coal, has played a key strategic role in revolutions and counter-revolutions. Ever hear of a guy named Joe Stalin? Ever hear of the 1905 strike in the Baku oil fields?

24

VeeLow 11.27.12 at 7:17 pm

19–would you be uncomfortable knowing your position was one held by the Bay Area Situationist collective? A chapter in _Afflicted Powers_ (Verso) lays out this position, iirc…

25

Steve LaBonne 11.27.12 at 7:49 pm

I have no idea who they are, but I have no control over who happens to share opinions that I hold.

26

Trader Joe 11.27.12 at 8:08 pm

While it may be true I can grow food without oil it would be virtually impossible to support even a fraction of the U.S. or world population without it. Oil and any other energy source is an enabling commodity….food, copper, gold, iron ore are raw materials for actual production.

Oil is like a dollar bill – its only good for what it can do, not what it is.

The only reason the U.S. has never gone to war over food is because we’re the best in the world at producing it….if ever had a shortage you can be darn sure we’d warm up the battleships and find some nice chunk of Africa or South America to plant and control (look at Coca-cola in Belize or Starbucks in Costa Rica).

27

Curmudgeon 11.27.12 at 8:24 pm

@Trader Joe #26:

Not to mention United Fruit.

@Ragweed, #18:

The greatest crisis risk from plateauing oil supplies seems to be in terms of fuel for cars and trucks. Converting shipping, rail and industrial oil users to other fuel sources is comparatively easy–and comparatively cheap–compared to converting road transport to an oil alternative.

28

ajay 11.27.12 at 8:31 pm

Converting shipping, rail and industrial oil users to other fuel sources is comparatively easy–and comparatively cheap–compared to converting road transport to an oil alternative.

That’s true but misleading. What you are missing is turnover time. Re-equipping every vehicle owner in the US with a new vehicle would be tremendously expensive. But it’s going to happen over the next 10 years or so – because that’s how long the average vehicle lasts! You don’t have to do it with a massive compulsory purchase/junking/replacement process right now.

Ships, on the other hand, last thirty years. Railway engines last twenty. Industrial plant could be even more than ships. Retooling all of that lot may be technically easier, but the longer fleet halflife means that it is practically much more difficult.

29

Omega Centauri 11.27.12 at 9:15 pm

There actually is a lot of research and product development in terms of making cars, trucks, buses etc. far more efficient wrt specific oil consumption. My new partially electrically powered vehicle is doing roughly 75mpg on the commute. Partial airdams on trucks (saves nearly 10%) are now pretty common, although they’ve only been around a few years. Lots of innovation is being pushed, particularly by industries that know peak oil could hurt them (like autos), they really do seem to understand that their products will have to do more with less.

And shipping, that doesn’t use that much fuel. Plenty of ways to make it more efficient, larger ships do that. slow steaming does that. Wind assist does that. Many efficiency innovations don’t require rocket science, they just need the price of fuel to reach the point where they are cost effective.

30

John Quiggin 11.27.12 at 9:43 pm

@Sandwichman If all commodities/factors are equally special, then none are especially special. Labor is special, in all sorts of ways, energy much less so, particular energy sources like oil hardly at all.

In particular, notice that Costanza’s energy theory of value implies that labor input must be unimportant as a source of value unless it is highly correlated with embodied energy, which it is not.

31

Mao Cheng Ji 11.27.12 at 10:03 pm

They are all special, but not all are critical. Pet rock, for example, is a special commodity, in its own way. Not critical, however. Oil is a bit more critical.

32

Sandwichman 11.27.12 at 10:23 pm

John,

Let me put it this way: Machines displace workers. Machines consume fuel.

As long as we can deal with those two propositions in isolation, we have no problem. 1. Make the machines more efficient so they consume less fuel per unit of output. 2. Expand the economy to reabsorb unemployed workers displaced by machines. Voila! Perpetual prosperity!

It’s only when we recognize that the machines that displace workers are the same machines that consume the fuel that we run into the double paradox that having more jobs entails consuming more energy or that consuming less energy means having fewer jobs.

I beg to differ on what Costanza’s energy theory of value implies with regard to labour. Costanza derived his correlations between energy input and monetary value by redrawing the system boundaries for an input-output analysis so that it could evaluate households and government as inputs. In what capacity are households and government inputs? In their capacity as suppliers of labor.

This is not solely my own eccentric interpretation. There’s a 1989 article in Ecological Economics by D.H. Judson, titled “The convergence of Neo-Ricardian and embodied energy theories of value and price,” that comes to substantially the same conclusion.

If labor is “special” and energy (oil) displaces labor, then that makes energy kind of special in my book.

Now it may be just a coincidence that both the paradoxical Doctor Jevons and the peakish Mister Hubbert thought there was some kind of affinity going on between fuel and labor. Jevons, as I’ve pointed out before, based his notorious rebound effect on a “a principle recognized in many parallel instances,” namely in the case of workers displaced by machinery. Twenty years or so before issuing his peak predictions, Hubbert was Technocracizing about “Man-hours Distribution.”

33

Sandwichman 11.27.12 at 10:28 pm

I should add that with regard to households and government being “suppliers of labor”, I am referring to what is commonly called “social reproduction” not to households and governments being the workers who directly supply the labor, although the workers are, of course, members of households.

34

ragweed 11.27.12 at 10:59 pm

“Ships, on the other hand, last thirty years. Railway engines last twenty. Industrial plant could be even more than ships. Retooling all of that lot may be technically easier, but the longer fleet halflife means that it is practically much more difficult.”

I don’t think there are many industrial plants running on oil – some remote small plants and generators maybe, but I think most industry uses n-gas, coal or electric.

I still suspect that ships would be a relatively inexpensive refit, rather than having to build ships anew.

35

MattC 11.27.12 at 11:04 pm

As I understand it the issue is not the oil and sourcing of it per se but the ability to constrict supply in a manner that ensures consistent and stable economic growth in the Western economies. There is ample evidence in the last 100 years of this mantra becoming unstuck and wreaking havoc.

36

Sandwichman 11.27.12 at 11:11 pm

Furthermore, John posted above the opening paragraph to his National Interest piece. His closing sentence re-iterated the nothing special about oil theme:

“It’s time to recognize that in the second decade of the 21st century, oil is just one commodity among many in an economy that is mainly driven by services and information.”

Pardon me for borrowing a metaphor, but isn’t this “economy driven by services” precisely the zombie that Costanza killed 32 years ago in “Embodied Energy and Economic Valuation” with its analysis of the interdependence of primary factors?

The possibility for large changes in energy efficiency is small since, all things considered, total energy efficiency is fairly constant from sector to sector. Any reductions in direct energy consumption are offset by increases in indirect energy consumption through increased use of labor, land, or capital.

In conclusion (Costanza’s) there is no free lunch, only the illusion of a free lunch by looking at small parts of the system in isolation. “When the whole system is analyzed, however, it becomes clear that all you can do is transfer the cost of your lunch to another part of the system.”

37

ponce 11.27.12 at 11:59 pm

@19

“I think the Israel lobby has a lot more to do with our Middle Eastern policy than oil does.”

If that were true, the U.S. would have bombed Iran back when Dick Cheney was president.

The U.S. talks about the Middle East a great deal, but we really don’t really expend many resources on it beyond the bribes we pay to Egypt and Israel.

38

Nick 11.28.12 at 12:43 am

@13: “The U.S. commitment to the Middle East is quite small.

We have about 19,000 troops stationed there(15,000 in Kuwait), plus a few ships patrolling the Persian Gulf.”

ponce, where are you sourcing those figures from?

Here says 67,000 in Afghanistan alone:

http://www.military.com/daily-news/2012/11/26/report-us-aims-to-keep-10k-troops-in-afghanistan.html?comp=700001075741&rank=1

And I can find recent-ish quotes from Centcom that put total toops in the ME up around 125,000…am I missing something?

39

ponce 11.28.12 at 12:48 am

@37

“Here says 67,000 in Afghanistan alone:”

Afghanistan isn’t in the Middle East…it borders China.

40

rf 11.28.12 at 12:51 am

Ponce, I think, is talking about troops specifically in Arab countries, ignoring those in Afghan and offshore, which seems to be closer to 125,000. Also ponce seems to be ignoring Iraq and Jordan, aswell as Pak and Afghan, when making claims about US ‘bribe money’, (the six top recipients of US mil aid, according to wiki) because ponces thesis is ludicrous when presented factually

41

ponce 11.28.12 at 1:26 am

@39

I’m talking about the Middle East.

What are you talking about?

42

GiT 11.28.12 at 1:27 am

@36

Sounds like you’re forgetting the bribes we pay to Jordan (over half a billion) and Iraq (over 1.5 billion).

43

Matt McIrvin 11.28.12 at 1:54 am

I thought the peak-oilers who claimed fertilizers came from oil were just using “oil” as a metonym for fossil hydrocarbons in general; natural gas would then count as a kind of oil. It’s subject to eventual depletion much as oil is.

44

Joshua Holmes 11.28.12 at 2:00 am

Cars can run on liquefied natural gas, ethanol or biodiesel, not to mention electricity.

Ethanol production cannot be increased much because of the limits of arable land and food production. LNG has all sorts of transportation problems that make it difficult to compress and transport, and getting enough out of the ground to make a serious dent in oil consumption removes gas’s price advantage. Electric cars are as crappy as they were 110 years ago, because of the limits of batteries. If you’re going to drive, there just isn’t a good substitute for oil.

45

John Quiggin 11.28.12 at 2:00 am

“a few ships patrolling the Persian Gulf.”

I hesitate to resume naval warfare, but that seems like an inadequate description of the US 5th Fleet

http://en.wikipedia.org/wiki/United_States_Fifth_Fleet

46

Del Rey 11.28.12 at 2:13 am

Oil is essential for motorized transportation, and motorized transportation is essential to the economy. Cars, trucks, trains, planes and ships. Quiggin breezily dismisses this critical point with the observation that “cars can run on liquefied natural gas, ethanol or biodiesel, not to mention electricity.” Well yes, they can. It’s technologically possible. But we are decades away from those alternatives providing a practical and economically feasible alternative to oil at a national scale for our automobiles (250 million of them). Let alone for planes, trains and ships as well. It’s taken 12 years just for hybrid-electric technology to achieve a 2.5% share of the automobile market — and that didn’t require any new infrastructure. Oil is essential to the economy and will be for many decades to come.

47

Matt McIrvin 11.28.12 at 2:16 am

Electric cars are as crappy as they were 110 years ago, because of the limits of batteries.

The 1907 Detroit Electric had a top speed of 20 mph. I’m pretty sure the Nissan Leaf can do a little better than that.

48

ponce 11.28.12 at 2:27 am

@44

“I hesitate to resume naval warfare, but that seems like an inadequate description of the US 5th Fleet”

It’s gotta be somewhere. Doesn’t mean it’s doing anything.

We’ve got 50,000+ troops sitting in Germany, for example.

49

Nick 11.28.12 at 2:31 am

“Afghanistan isn’t in the Middle East…it borders China.”

Correct, ponce. I forgot that half-trillion dollar Afghanistan fiasco was all about pivoting towards China at 5km altitude through the Wakhan. I like the way Wiki refers to it as being responsible for ’100 ponyloads of trade a year’…that was in 1905 though…it’s decreased since then.

I think you’ll find, more significantly, it also borders two Persian Gulf countries – and that Afghanistan has been officially regarded by the US to be *part of the Middle East* ie. anything west of India and China, for at least the last 50 years.

50

ponce 11.28.12 at 2:40 am

@47

I think you are mistaken.

Is Russia part of the “Middle East” too?

And more on topic, how much oil does Afghanistan export each year?

51

Nick 11.28.12 at 2:51 am

Always telling when someone picks the strand left loose to argue even more ridiculously…

Q: How many US troops are in the Middle East?

A: 125,000

Not something I made up. Straight from Centcom. Go argue with them about their definitions.

52

ponce 11.28.12 at 3:02 am

@49

Okay. From Centcom’s homepage:

“Located between the European and Pacific combatant commands, U.S. Central Command’s area of responsibility covers the “central” area of the globe and consists of 20 countries — Afghanistan, Bahrain, Egypt, Iran, Iraq, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Lebanon, Oman, Pakistan, Qatar, SaudiArabia, Syria, Tajikistan, Turkmenistan, United Arab Emirates, Uzbekistan, and Yemen.”

How much oil does Afghanistan export, Nick?

53

John Quiggin 11.28.12 at 3:19 am

“It’s gotta be somewhere. Doesn’t mean it’s doing anything … We’ve got 50,000+ troops sitting in Germany, for example.”

Yes, another fine example of randomly locating troops for no conceivable reason. No one could ever imagine that the US might regard Germany as being of strategic concern. It’s just that Fort Dix was getting overcrowded.

This has been fun, ponce, but I’m calling a halt now. Nothing more from you on this thread and no responses from others, please.

54

Omega Centauri 11.28.12 at 4:33 am

You run into a lot of conflation of oil with energy, and energy with economic production. The usage of oil as the primary energy supply was more true half a century ago, as a lot of oil was combusted to generate electricity and/or industrial process heat. The oil price spikes of the seventies largely displaced these uses. Oil is also used as an important chemical feedstock, for chemicals, and plastics, and even pharmaceuticals. I believe it is also possible to turn oil plus bacteria into food. But all of the uses can in principle be substituted by other means, although not necessarily at today’s scale. The original industrial use of oil (discounting the use of natural seeps of for instance asphalt, which has been used for more than a thousand years), the first modern use of oil in volume was kerosene for lighting (displacing whale oil lamps). Only later was it used as fuel for portable and fixed-point power.

Liquid fuels and chemical feedstocks will still be possible even after the last oil well has been shutdown, although anything approaching current volumes seems unlikely. The largest current usage of liquid fuels which seems almost impossible to replace is airplane fuel. But we can probably maintain some form of global aviation industry on a couple of million barrels per day.

55

Curmudgeon 11.28.12 at 5:02 am

@Ajay, #28:

It’s the gas stations that make alternative fuels a hard problem for cars and trucks. Alternative fuel engines aren’t particularly useful for road vehicles without a dense enough network of refueling stations for it to be possible to make more than just short trips.

Alternative fuel vehicles will remain a niche product without a refueling infrastructure and no comprehensive refueling infrastructure will be created by market forces without a substantial target market.

Chicken, meet egg.

Alternative fuels for ocean shipping and railway use are an easier problem because the number of refueling stations required are much lower on account of trip patterns and operational ranges. LNG, for instance, is rapidly approaching the point of viability for ocean shipping even with only small minority of ports able to refuel LNG ships worldwide.

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Sandwichman 11.28.12 at 5:41 am

“anything approaching current volumes seems unlikely” is not good enough when what is required for system stability is the ability to expand perpetually beyond current volumes.

Just read the data from 1948 to now. Only from 1973 to the mid-1980s did energy intensity per hour of employment actually decline in the U.S. Arguably that was a one-time-only, low-hanging fruit opportunity.

But not to worry, folks, the big technological breakthrough is just around the corner. And Godot said he would come.

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gavinf 11.28.12 at 5:43 am

JQ this puts me in mind of Linda Botterill and others who have written about the strength of farming mythologised as a foundational narrative in Australia results in a disproportionate influence on policy. I can see how that could apply to US and oil.

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Bruce Wilder 11.28.12 at 6:02 am

The most important “substitute” for oil in the economy is likely to be “conservation”: we will switch to less energy-intensive arrangements. In transportation, jet air travel will become very expensive indeed, but shipping and rail will gain, at the expense of long-distance autos and motortrucks. As rail gains, urban density will increase: we will simply live closer together. No source of energy will be as convenient in its portability and density, and no source will be as cheap, all-in, as we pretended fossil fuels were.

The 150 years during which the petroleum industry has expanded steadily, seeking reliable rents from a vast network of systems for extracting, refining, transporting and distributing petroleum products established patterns, which will be turned upside down by the decline of volumes. Never shy about externalizing costs in the gogo years, the damage to the environment will escalate as the impossibility of producing oil products profitably becomes an increasing challenge. At the same time, the temptation to seek a subsidy from running down the excess infrastructure will add to the hazards.

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Nahim 11.28.12 at 6:10 am

A lot of the discussion on this thread has been on how you can substitute away from oil, whether it’s in transport or in petrochemicals. What seems to be ignored is the cost of substitution. There’s not only the (one-time?) cost in re-building infrastructure, but also the impact on prices of other energy prices. For instance a large-scale switch to natural gas vehicles would raise natural gas prices considerably from their current low levels in the US.

You also have to contend with the inter-connected structure of the global energy market, which is such that you cannot just sit back and hope to be immune from shocks around the world. Outside of the US, most major gas consumers are paying natural gas prices that are still pegged to the price of oil. Once the US begins exporting its own natural gas, US prices will be influenced by what happens to natural gas prices in the rest of the world. So even if the US somehow stopped consuming oil, oil prices will continue to matter to the US unless the global energy market undergoes some kind of radical overhaul of its pricing mechanisms.

And on top of all this, the fracking boom has meant that the US is set to grow as an oil producer, and in fact is expected to become the world’s leading oil producer again within a decade or so. Meanwhile an agreement on climate change looks unlikely in the near future, and in any case would impact coal far more than oil. So arguing that oil is a commodity of “modest importance” appears to me to be a misreading of the situation.

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Bruce Wilder 11.28.12 at 6:29 am

“. . . arguing that oil is a commodity of “modest importance” appears to me to be a misreading of the situation.”

Indeed, it seems that way to me.

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Greg 11.28.12 at 8:29 am

I’m wondering out loud, but do we sometimes ourselves overstate and overthink the particular strategic importance of the Middle East to US foreign policy?

If it’s all about full spectrum dominance, and the US regards the whole globe as its “sphere of influcence”, doesn’t that just mean that wherever there are fun hegemonic wars to be fought or elites to purchase, the US will be there to fight them and buy them? And doesn’t that “wherever” just happen to be in the ME and the Muslim world right now? Because of no single dominant regional power, and because sphere-of-influence-wise it falls down the crack between Europe, Russia, India and China?

By this view, the ME is no more or less important than any other region, there just happens to be more opportunity to do stuff there. So yes, roughly speaking, no matter how important it might be as a commodity, oil is kind of an irrelevance (and so is AIPAC). There is no need to build either of them up to be MacGuffins in our ME story.

For the record, I agree that just because you can do something doesn’t mean that you should, and the resulting ME strategy is a whole kaleidoscope of different shades of awful.

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Alex SL 11.28.12 at 8:42 am

Many other have made the same points already that I would make.

From the article: “In the second decade of the 21st century, oil is just one commodity among many in an economy that is mainly driven by services and information.”

Try eating services and heating your home with information, then we’ll talk.

I think the peak oil people have a point when they point out that the energy density and ease of transportation of petrol is unmatched by anything we have ever had before and, unfortunately, anything we seem to get in a hurry. Unless fusion power, which is perennially 30 years away, and much better rechargeables are invented pretty damn soon we may run into a lot of trouble. (Not of the end-of-the-world type, but of a series of crises that will catalyze a world that produces food much closer to where the population is concentrated and that will be considerably poorer than it is now.) Solar and wind won’t power a couple of billion cars, trucks, airplanes and harvesting machines.

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Alex 11.28.12 at 9:35 am

Centauri @ 52 has a very good point about the conflation of oil with energy and energy with output. You might even think this conflation was the result of an effort to convince the public that oil as such was enormously, overridingly important and therefore a justification for certain foreign policies…

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Hawkeye 11.28.12 at 9:48 am

Energy is the master resource. And Oil is the daddy of them all:

http://en.wikipedia.org/wiki/Economic_growth#Energy_and_energy_efficiency_theories

“Ayres and Warr have presented a model that aims to address deficiencies in the neo-classical and endogenous growth models. It claims that physical and chemical work performed by energy, or more correctly exergy, has historically been a very important driver of economic growth. Key support for this theory is a mathematical model showing that the efficiency of a composite indicator using electrical generation and other energy efficiencies is a good proxy for the Solow residual, or technological progress, that is, the portion of economic growth that is not attributable to capital or labor.”

Dissecting each resource omits the complex interactions between them. Many energy sources and essential resources (such as food, medicine, mining etc) are interwoven in a web of complements, and are not substitutes for each other. For instance, oil is essential for large scale agri-business (machinery, processing, water pumping, fertiliser).

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Peter T 11.28.12 at 9:52 am

“but we’ll never have a sensible debate about climate change until oil is demystified.” I am not sure oil is central to the climate issue – coal is far more important. I also fail to see why “demystifying” oil is necessary. Middle Eastern oil is critical to supply insofar as the Middle East is the only place with low-cost, readily available reserves, able to compensate for interruptions elsewhere. There’s no mystery there. And elsewhere, ordinary demand and supply have led to increased exploitation of high-cost sources such as shale and tar sands (this latter a major climate threat). Again, no mystery there. The mystery, if there is one, is that oil can be dismissed as just another commodity and yet remains so central to industrial life as we know it that we are prepared to drill in the arctic or under the deep sea, or frack water supplies, to get at the last few sources.

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floopmeister 11.28.12 at 11:02 am

Sounds like someone needs to look at the work being done around ‘Far From Equilibrium’ (FFE) systems – energy is ‘not just another commodity’. It’s the crucial element of dissipative systems such as economies, cities, cities, and yes life forms like ourselves.

No access to energy – no maintenance of steady states. Period.

Or we could just consider the supply of energy as an externality… whatever.

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Matt 11.28.12 at 11:16 am

Embodied energy does not generalize to embodied oil. Aluminum, steel, and nitrogen fertilizers all embody a lot of energy — but none of them embody much oil.

No other energy source has been or will be as cheap as fossil fuels? Hydroelectric power was cheaper than fossil-burning thermal plants 100 years ago and it’s cheaper today, even cheaper than coal.

In 1979 oil prices hit a local peak of $114 per barrel. Today a barrel of Brent Crude goes for $110 and contains 5862 megajoules of energy, 1.9 cents per megajoule. According to “2011 Wind Technologies Market Report” from Lawrence Berkeley National Laboratory, American wind power purchase agreements went for an average of $35 per megawatt hour last year — add $23 in federal subsidies for $58 per megawatt hour (1.6 cents per megajoule inclusive of subsidies). So wind already provides cheaper energy than oil can now or that oil could when I was born — but it would have to improve a lot to match oil energy in the halcyon late 1990s. Beware of careless Googling about the cost of wind power — there currently seems to be a spate of fossil-shills trashing wind costs on the basis of older theoretical studies and ignoring actual American contract prices.

Well-sited solar power is still much more expensive than well-sited wind power, per megawatt hour, though its equipment cost has been falling faster recently and it produces more of its energy when demand is high. In sunny regions even unsubsidized solar is cheaper than liquid-fueled generators, unless liquid fuels are directly subsidized, e.g. the case of diesel in India. Hawaii is one of the few places left in America that still gets a large fraction of its electricity from petroleum (diesel) fueled generators. It’s adding solar power so fast that it’s becoming a challenge for the government to keep up with permitting and the utility companies to deal with falling consumption.

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Peter Erwin 11.28.12 at 11:53 am

Greg @ 59:
… wherever there are fun hegemonic wars to be fought or elites to purchase, the US will be there to fight them and buy them? And doesn’t that “wherever” just happen to be in the ME and the Muslim world right now?

There have been quite a few wars in sub-Saharan Africa during the last ten or twenty years (and plenty of elites to be purchased, given the number of corrupt governments); US military involvement there has been pretty minimal — probably less than that of France.

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Peter Erwin 11.28.12 at 12:04 pm

Damn; forgot to close the italics tag — my apologies!

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soru 11.28.12 at 12:26 pm

In general, I would agree the importance of oil is commonly overrated, especially when compared to less fungible goods like arms, education and infleunce.

On the other hand, the distinctive thing about oil, compared to pretty much any pther commodity, is the way in which it is easy to transport, but _only in peacetime_. There is no such thing as a coal pipeline or tanker. And no such things as a pipeline or tanker that can navigate a war zone unguarded; they have too much of a tendency to add their own conveniently dense energy to whatever explosive input the locals provide.

That does tend to mean that small wars far away that would otherwise be easily ignorable are less so. In a competitive market you can’t afford not to buy at the cheaper prices during peacetime, and then when a war does start you’ve already got the infrastructure built around those prices.

I suppose the trick is to find something to do, other than ignoring them, that does less harm than help. Easier said than done of course.

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Greg 11.28.12 at 1:37 pm

Peter Erwin: yes, I was going to do some handwaving about Africa, but I need to think about it a bit. The obvious thing to say is that if you can only do one region at a time, the ME is much smaller and at current development levels it offers more hegemonic ROI (although that might bring oil back into the equation).

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Greg 11.28.12 at 1:39 pm

Looks as though Peter’s open italics tag is bridging time and space… Fixed now, I hope – JQ

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Joshua Holmes 11.28.12 at 2:48 pm

No other energy source has been or will be as cheap as fossil fuels?

It’s not just cheapness. Hydroelectric power can only be generated at certain spots. It can’t be ramped up slowly in response to slowly rising demand. Most of the best spots outside of the Amazon are already taken. And electricity is a lousy fuel for cars, because of the limits of batteries.

Wind power has the serious problems of intermittancy and storage. There has to be baseline power generation for all the times the wind doesn’t blow. And electricity is a lousy fuel for cars, because of the limits of batteries.

There is just no good substitute for oil.

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Anderson 11.28.12 at 3:14 pm

There is just no good substitute for oil.

… besides nuclear power.

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MPAVictoria 11.28.12 at 3:19 pm

“And electricity is a lousy fuel for cars, because of the limits of batteries.”

Check out the Chevy Volt. Fantastic idea that resulted in a pretty well executed car. Batteries powerful enough for the average daily commute back and forth to work combined with a small, efficient gas engine for longer trips. This kind of thing is the future of personal vehicles.

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Charrua 11.28.12 at 3:41 pm

Z, at @3, sums it up best.
We can argue all day about the specialness of oil and the value of energy, but the fact is that it’s very hard to see the Middle East policy of the US on the last 30 years as having any conceivably desirable effect on the price of oil.
It’s not that oil or its price aren’t important, is the difficulty of affecting its supply/demand on a sufficient scale in a desirable direction what makes its strategic value doubtful ….during peacetime.

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William Timberman 11.28.12 at 4:11 pm

I’m thinking that we can eventually solve the problem of short and long-range transportation based on internal combustion engines, but not any time soon. Personal vehicles will probably have to disappear, at least the kind of personal vehicle that you can jump into and drive anywhere on the continent you live on. That will certainly take a long time in the U.S., where much of the infrastructure built over the last 100 years or so will have to be repurposed, or rebuilt. It’s also very hard to imagine the outlines of a realistic political process that can get us from here to there, or foresee the pressures that might bring such a process into being. Will the inevitable transition be a stable, relatively peaceful process? Having experienced the braying and bared fangs of the Republicans during the last few elections, and read with genuine puzzlement the full-spectrum dominance wet dreams of our military experts, one does wonder.

So, leaving aside transportation for the time being, it seems clear that if climate change proceeds slowly enough for us to get our act together, we should start our transition with static power generation, as Germany, for example, is now trying seriously to do. The less fossil fuel we burn in power plants, the more photovoltaic panels we erect on our existing roofs, the more oil and gas will be available to us for use as petrochemical feedstocks. Looking again to the long run, these may be far less replaceable than hydrocarbon fuels. In a world of seven or eight billion people, it’s hard to imagine returning to wood, brass, steel, wool, leather, cotton, glass, brick and stone as primary materials for our buildings and personal furnishings, and I think we’ll find it impossible to feed all however many billion of us if we go back to make fertilizer out guano, or plastics out of peanuts and switchgrass.

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Sandwichman 11.28.12 at 4:25 pm

“Embodied energy does not generalize to embodied oil.”

True that oil is not the only game in town. But it is the game in which some very big players have some very large stakes. And over time much of the infrastructure of the world has been arranged to ensure a hefty return to those players.

One thing I agree with Amory Lovins on is that we could live on less energy than we currently waste. But that waste is the flip side of superprofits. Who profits from conservation? Everybody and nobody. Everybody a little bit and nobody big time.

Anything you prodigiously and systematically waste becomes toxic. It’s not in the peculiar nature of petroleum to be evil guck. When the problem is viewed as one of systematic wasteful consumption rather than of this or that particular commodity, then replacing oil with whatever doesn’t look quite so warm and fuzzy.

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Stuart 11.28.12 at 4:38 pm

The left wing position you identify is surely indifferent to the truth or otherwise of the “great oil fallacy.” All that matters is that policy makers are under the impression that oil is a strategic interest unlike any other. Whether these policy makers are mistaken as to their strategic interests is irrelevant to the claim that the perceived need to secure a steady supply of oil helps direct foreign policy.

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Sandwichman 11.28.12 at 4:39 pm

” replacing oil with whatever…” (as a driver of perpetually expanding waste, that is).

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xana 11.28.12 at 5:06 pm

Must-read site for all things energy and climate, from a quantitative basic physics perspective http://physics.ucsd.edu/do-the-math/post-index/

On oil in particular:
Peak oil perspective/
The way is shut

Transportation:

100 mpg on gasoline/
Easing Off the Gas
Fossil Fuels: I’m Not Dead Yet

Of special interest to John Quiggin (and other economists):
“Dinner conversation with an economist”

I agree with other posters that oil is a special, critical commodity. Too much breath in this thread is wasted on that obvious fact (because of the provocative formulation, a bit like in the LGM naval war).

But I also agree with JQ, that its geopolitical importance is vastly over-rated. Foreign policy and military action are inadequate tools to handle disruption of the oil supply. It is better to bet on preparedness, strategic reserves, and plans to switch to energy sources in case of oil shock.

The problem is inertia of US foreign policy in the ME, based on the status quo of propping up the Saudi oil kingdom, and unconditional support of Israel.

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JE McKellar 11.28.12 at 6:02 pm

I was hoping someone would say something about oil as the new gold, i.e. the USD backed by oil markets priced in dollars rather than bullion reserves.

In particular, I’m worried that the current idea that replacing oil isn’t as simple as just finding a cheaper substitute, but instead about reforming the whole political and economic apparatus built around the petrodollar.

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Joshua Holmes 11.28.12 at 6:09 pm

Check out the Chevy Volt. Fantastic idea that resulted in a pretty well executed car.

And only twice the price of a comparable gas-only car.

This kind of thing is the future of personal vehicles.

I doubt it. The future is probably $1000 mopeds, not $40,000 Volts.

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Del Rey 11.28.12 at 7:38 pm

Personal vehicles will probably have to disappear, at least the kind of personal vehicle that you can jump into and drive anywhere on the continent you live on.

Given the enormous benefits of personal vehicles and the fact that we have spent 60 years and trillions of dollars building urban areas designed around them, it’s very unlikely that personal vehicles will disappear. Personal vehicles powered by gasoline engines will probably disappear, but not for decades, and they will be replaced by personal vehicles powered by other forms of energy, most likely electricity.

The future is probably $1000 mopeds, not $40,000 Volts.

Mopeds and motorbikes are too dangerous and impractical to be a large-scale substitute for cars. As batteries (and maybe fuel cells) get better and cheaper, electric cars will get better and cheaper. Hybrid vehicles like the Volt are a transitional form. Taking into account tax incentives, lower fuel and maintenance costs and other benefits, electric vehicles can already be an attractive alternative to conventional vehicles for limited applications.

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Del Rey 11.28.12 at 7:38 pm

Personal vehicles will probably have to disappear, at least the kind of personal vehicle that you can jump into and drive anywhere on the continent you live on.

Given the enormous benefits of personal vehicles and the fact that we have spent 60 years and trillions of dollars building urban areas designed around them, it’s very unlikely that personal vehicles will disappear. Personal vehicles powered by gasoline engines will probably disappear, but not for decades, and they will be replaced by personal vehicles powered by other forms of energy, most likely electricity.

The future is probably $1000 mopeds, not $40,000 Volts.

Mopeds and motorbikes are too dangerous and impractical to be a large-scale substitute for cars. As batteries (and maybe fuel cells) get better and cheaper, electric cars will get better and cheaper. Hybrid vehicles like the Volt are a transitional form. Taking into account tax incentives, lower fuel and maintenance costs and other benefits, electric vehicles can already be an attractive alternative to conventional vehicles for limited applications.

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John Quiggin 11.28.12 at 7:55 pm

As regards the alleged impossibility of replacing oil in this or that use, the original article mentions the disappearance, over a few decades, of oil-fired power stations which accounted for around 25 per cent (and rising) of all OECD electricity in 1970. Same is occurring now in home heating.

To restate, US oil consumption has been declining for nearly a decade, and consumption per person for more than three decades. Against this evidence, I’ve seen nothing but handwaving and arguments from incredulity.

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Sandwichman 11.28.12 at 8:26 pm

“As regards the alleged impossibility…”

I dunno, John. Oil is not irreplaceable. But that’s not the problem. The question is whether oil is replaceable at a sufficient scale, at a low enough price, in the time available and given no drastic upheaval in political-economic constraints?

If all that was at stake was technical feasibility, oil could probably be replaced inn short order purely by conservation and efficiency improvements. Is that going to happen? Well, it’s not going to happen if the mere fact of technical feasibility is smugly advanced as the reason there is no need to worry about it.

Things become impossible if their very possibility becomes a pretext for not doing them.

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DFC 11.28.12 at 8:41 pm

“The prosaic reality is that oil is a commodity much like any other.”

Absolute wishful-thinking

In fact oil is not ending, what is ending is “cheap” oil with the deterioration of EROI due to the depletion of conventional oil and the surge in deep-water, artic and “uncoventional” oil, much more expensive (energetically), dangerous and environmentally harmful

All the product we use are “embedded” in energy, and it is very difficult to have a energy “source” with an EROI bigeest than 10:1 in the renewable sector, and all the renewables depend on oil for their construction, transport, installation, maintenance, etc…Biofuels have less than 2:1 EROI, and some of then less than 1:1, so, in fact they are merely “sinks” of energy or “vehicles”, but not real “sources”, because the crops depend heavily on fertilizers. machinery, transport, transformation, etc…

Due to our extreme use of energy is hard to imagine a world of energy resources with an EROI of less than 5:1, probably an industrial society cannot survive in this case

On the other hand the article ingnore the tremendous importance of the oil in, for example the monetary policy and the reasons because the US$ is the international currency even today. The Nixon’s security agreements US-Saudi Arabia in 1974, plays a giant role where the saudis and other members of the OPEC will only accept US$ as money to buy oil, and US will be the “bodyguard” of the 9.000 Saudi princes (of course against the other poor arabs, Israel was never a threat to the wealth of the saudi family)
Thanks to this agreement the US$ has an intrinsic value, like the gold, and everibody need US$ to buy oil, but, who does not need oil?, rise your hand!, so you can print US$ as much as you can, and all the world has to buy them or starve…I consider this a huge advantage of the “oil policy”, and a way to avoid the negative effects of the ending of the Bretton Woods regime in 1971 (end of the gold standar), and the flood of fiat US$

The last part of the puzzle of the oil “threat” is the declaining of net oil available to export, and the case of Malaysia, UK, Vietnam, Egypt. Argentina and Indonesia, show clearly how quickly a country can pass from an exporter to an importer of oil, and if the internal oil consumption of the oil export countries continue at the same pace (as for example the case of Saudi Arabia), and the same trend in growth of oil consumption of China + India, before the end of this decade ALL the oil available to export will cover only the needs of China + India, so we have some few years to change all the autos, all the infraestructures for new cars moved by an “unknown”, and “secret” new energy source, and all this transformation has to be made in the middle of a huge recession due to the energy scarcity

Dont worry, something magic will happens, …or not

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Sandwichman 11.28.12 at 8:47 pm

And by price, I should stipulate a full life-cycle cost price. One of the things that makes oil so “irreplaceable” is that vast “free” carbon sink formerly known as the earth’s atmosphere.

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xana 11.28.12 at 9:14 pm

Re “40000$ Volt vs 1000$ moped”, the following posts from “Do The Math” are of interest:

energy requirements of electric cars ( plus focus onbattery development and
solwr- powered cars)
personal transportation efficiency
MPG for a Human

Also check out Lowtechmagazine.com, whose current top story is “Electric Velomobiles: as Fast and Comfortable as Automobiles, but 80 times more Efficient”.

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John Quiggin 11.28.12 at 10:09 pm

“Things become impossible if their very possibility becomes a pretext for not doing them.”

As I see the debate, the problem is the opposite. Things are only possible if the people who need to do them believe in the possibility. As long as people think oil is essential to their way of life, they will resist efforts to stop using it.

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chrismealy 11.28.12 at 10:22 pm

xana, I loved that MPG for a human link. Thanks.

People interested in seeing high-quality bike infrastructure should check this out:

http://bicycledutch.wordpress.com/

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Matt 11.28.12 at 11:00 pm

All the product we use are “embedded” in energy, and it is very difficult to have a energy “source” with an EROI bigeest than 10:1 in the renewable sector, and all the renewables depend on oil for their construction, transport, installation, maintenance, etc…Biofuels have less than 2:1 EROI, and some of then less than 1:1, so, in fact they are merely “sinks” of energy or “vehicles”, but not real “sources”, because the crops depend heavily on fertilizers. machinery, transport, transformation, etc…

Hydroelectric, wind, thin film photovoltaics, and concentrating photovoltaics all have EROI above 10:1 when properly sited. Wind, hydro, and CPV can go above 20:1. Geothermal is more like 5:1 and non-concentrating thick silicon PV 6-7. Of course any renewable can achieve very low EROI with bad siting — don’t put your solar plant on the Arctic Circle!

People were building windmills and hydroelectric dams before oil became a significant energy source. PV modules, wind turbines, and dams contain little embedded oil. There’s a very small amount used for making lubricants and polymers. The fact that their maintenance workers and installers currently use oil powered vehicles doesn’t reveal a fundamental oil dependency any more than loggers using chainsaws reveals a fundamental oil dependence in forestry.

I’m in violent agreement that biofuels have low EROI and scalability. Biomass is better thought of as a feedstock for valuable chemicals (specialty fuels, lubricants, polymers, dyes…) than as a primary energy source.

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Sandwichman 11.28.12 at 11:13 pm

“As long as people think oil is essential to their way of life…”

Slippage much? Oil is essential to their accustomed “way of life” of, say, North Americans. That’s not the same as being irreplaceable.

According to the International Energy Agency, fossil fuels account for 81% of the world’s primary energy use. Not all that is oil, of course, but if you’re just talking about replacing conventional petroleum with coal and “unconventional hydrocarbons” then its “oil” as far as I’m concerned — snake oil. The “way of life” is unsustainable, oil or no oil. And why shouldn’t everybody in the world be entitled to the same, unsustainable “way of life”?

The “way of life” was designed with the express aim of enlarging the market for petroleum products. That lends it a certain logic. Once upon a time there was a surplus of oil. So what’s the point of finding substitutes so that we can keep living as if there was a vast surplus? This is Say’s Law on steroids. Or the ill-begotten spawn of Say’s Law and the Sorcerer’s Apprentice. The ghost of overproduction past keeps on creating its own demand even after the supply is gone!

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JazzBumpa 11.28.12 at 11:29 pm

@37

“I think the Israel lobby has a lot more to do with our Middle Eastern policy than oil does.”

If that were true, the U.S. would have bombed Iran back when Dick Cheney was president.

You’ve done something important and illustrative here, articulating one of my pet peeves, the totally erroneous counter-factual, AKA making shit up.

There has to be at least one other logical fallacy imbedded in these few words, but I have no idea what to call it. You posit the most extreme version of a proposition and then state that since it did not play out that way, the entire proposition is invalidated.

I’m impressed, but not in a good way.

JzB

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Peter T 11.29.12 at 12:12 am

The idiocy of US policy in the Middle East is a side issue. The key here is that as oil has become more expensive, we have eliminated much of the easily replaceable demand for it (home heating, power generation), but the remaining uses – primarily transportation – are proving hard to deal with. There are alternatives, but they are more expensive in themselves and require very large investments in infrastructure and associated major changes in patterns of living. The last time we did anything like this (roughly 1935-55), it was under the pressure of a major war, involved massive social and political mobilisation and enormous public expenditure. And that allowed the industrial economy to tap cheaper, more convenient sources of energy. This time the transition will be to allow us to get by on more expensive, less convenient sources. Any pretence that it will be easy, or can be met through some simple acts of political will, are just hand-waving.

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Andrew F. 11.29.12 at 2:10 am

It looks like you make three points in your article to support your argument:

-> the US spends about 700bn per year on oil, assuming an avg price of $100/bbl. Yes, but that obviously doesn’t tell us what happens to the price of oil as a result of a sudden supply shock, or what the effects on the broader economy would be as a result of that change in price.
-> oil has become less important as the use of other fuels has grown.
Yes, but that doesn’t mean that it’s unimportant. It’s a fuel that accounts for about 30% of total global energy consumption. 20% of that fuel passes through the Strait of Hormuz.
-> oil can be substituted by other fuels.
Yes, over time. Not quickly, and if it must be as quickly as possible then very expensively and very disruptively.

Let me ask a more pointed question:

If oil output from the Middle East suddenly became very uncertain – the Strait of Hormuz were closed, a regional war broke out involving Saudi Arabia, etc. – do you think there would be great economic implications for the world at large and for the US? If so, then how can you say that stability in the ME is not a matter of strategic significance to the US? If not, why?

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John Quiggin 11.29.12 at 4:16 am

“If oil output from the Middle East suddenly became very uncertain – the Strait of Hormuz were closed, a regional war broke out involving Saudi Arabia, etc. – do you think there would be great economic implications for the world at large and for the US?”

Lots of disruptions have economic implications – the food crisis of 2007-08 was bigger than this would be, and the Global Financial Crisis much bigger. In the long run, health care is a much bigger deal than oil, or energy in general. Those are the comparators I used in the OP.

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Eli Rabett 11.29.12 at 6:18 am

In the US oil is food. The old saw is that commercial ag is a machine for turning oil into eats.

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reason 11.29.12 at 9:17 am

JQ @98
But John don’t you think this runs the danger of mistaking price for value. Air has no price, but in an environment where it is in danger of becoming scarce it is more valuable than anything else.

101

reason 11.29.12 at 9:25 am

JQ @98
“the food crisis of 2007-08 was bigger than this would be”

And the lessons have not been learnt. We were saved by the weather not by a good policy response.

102

DFC 11.29.12 at 1:00 pm

The argument of “size” of money spent in oil is a fallacy itself.
I weight around 85 Kg but I am pretty sure that if I lose “only” 4 Kg of blood I’ll have very big health problems, and you can say that “only” 4 Kg is “low”, but it is the way our body feed the cells, transmits the energy, and maintain the organism alive, similarly the oil is the “blood” of our economic organism, and it is hard to imagine how costly is to change the way we do the “things” if we do not see the problem, o neglect it (as for example CO2 emmisions or peak-oil & gas)

About the renewable energy, due to our brutal energy consumption, the EROI problem is due to the “diminishing returns” caused by the scale they should be deployed if we try to cover the existing primary energy production to the present levels in a significant proportion with them, to decrease the CO2 footprint and the effect of peak-oil and gas

In contrast the reasearch around the nuclear fusion are having a chronic lack of resources and political interest, and in the current context it should be prioritized as Nº 1 project for the whole world, as Stephen Hawking and Brian Cox defend, and should have more money than the Apollo project had, we (and the rest of the world) are in a much more dangerous situation then in the 60′s, but our politicians ignore it

103

Geoff 11.29.12 at 1:52 pm

Amazingly, a search on the comments page for ‘manufacturing’ yielded no results. I get the impression from the article that oil is only being considered as a fuel which of course is only part of its utility; it’s products are essential for agriculture and manufacturing. If oil were replaced as a fuel, we would still be dependent on it. Securing future supply should be at the top of any governmental agenda.

104

Andrew F. 11.29.12 at 3:04 pm

Okay, so it’s not that oil lacks strategic significance, but that oil should be considered in the context of other items of strategic significance and not as an item of strategic significance that outranks all others?

I agree with that, although if oil is in the same category as “food” and “financial stability” then it’s pretty high on the list.

Also, and I could be wrong about this, didn’t high energy prices play a role in the 2007-2008 food crisis? My limited and second-hand understanding is that high energy prices added costs on the supply side and also, by increasing demand in biofuels, shifted the demand curve for certain foods out at the same time. If so, then – depending on the state of other variables – couldn’t the type of supply shock I asked about also result in another food crisis, among other things?

105

Omega Centauri 11.29.12 at 6:59 pm

Geoff, The amount of oil needed as industrial (petrochemical) feedstock is pretty low, under 10% of our total consumption. That is well within our domestic production capability. If we quit using oil for fuel we would have at least a century to figure out how to replace it for these purposes.

106

liberal 11.29.12 at 9:26 pm

xana (@81): “Of special interest to John Quiggin (and other economists): ‘Dinner conversation with an economist’”

Yeah, I loved that when I first saw it a few months ago.

107

xana 11.29.12 at 10:09 pm

@106

It’d great isn’t it? If I had to introduce a third party it would be a palaeontologist.

108

Peter T 11.30.12 at 3:23 am

@ 81, 106

at least one economics blogger thought it was a cruel parody:

http://noahpinionblog.blogspot.com.au/2012/11/murphys-law.html

109

Matt 11.30.12 at 3:32 am

About the renewable energy, due to our brutal energy consumption, the EROI problem is due to the “diminishing returns” caused by the scale they should be deployed if we try to cover the existing primary energy production to the present levels in a significant proportion with them, to decrease the CO2 footprint and the effect of peak-oil and gas

With wind and solar at least these diminishing returns are yet to appear and may never become significant. The better sites for solar and wind power are exploited first, but there are vast areas within epsilon of the very best resources that are not yet exploited. And at the same time EROI is being improved through design and manufacturing. Higher efficiency solar modules, thinner solar wafers, lighter support structures, taller turbines that tap better wind resources, direct drive turbine designs, and diminished operational and maintenance efforts are all improving EROI.

Second, wind, PV, and hydroelectric generators produce electricity without an intervening heat engine. A diesel generator may consume 285 liters of fuel per megawatt hour, turning 10220 megajoules of fuel energy into 3600 megajoules of electricity. Solar PV instead of a diesel generator means completely eliminating 6620 megajoules of waste energy production for every megawatt hour substituted, with no loss in useful energy. This means that renewables generally don’t need to substitute for fossil fuels 1 to 1 in terms of primary energy, more like 1 to 3.

The only case where renewable energy needs to substitute fossil fuels 1:1 on primary energy is for high temperature heating, like melting metals or making cement from limestone. These high temperatures can only be achieved with fuels, electrical furnaces, or directly concentrated sunlight. For low temperature heating, like keeping an office building warm, renewable energy still has a primary energy advantage because electrically operated heat pumps are more efficient than electrical resistance heating or direct fuel combustion in a furnace.

110

DFC 11.30.12 at 11:11 am

@ Matt

There are plenty of limitations if we try to avoid decrease our current level of consumption in the developed world, specially in US, and subsitute them for renewable sources, for example it is not true that the energy conversion will be 1:1 from PV or wid turbines to charge batteries, transmissión lines, and others massive means of storage, so the ratio will be much less effectivelly, and these are unavoidable “diminishing returns” compare to an isolated PV panel for some light bulbs in a rural house
¿Do you know how much copper will be required to electrify the whole countries to substitute the oil usage?, for the world scale there is not enough copper reserves, and the energy required to build this infraestructure will be astonishing, and then the pace will be very very low

One of the main problems with the post-carbon energy, is the case of transportation, there are clear limitations for the battery capacity and efficiency, and if we want to maintian the usage of SUV, Humvees, etc… y a masive scale, that means serious problems to substitute the very high energy density of the gasoline, also to solve the energy storage of big family cars, and in general transport trucks if very far from solved, and if you try to storage the electricity by means of chemical bonds (producing, for example H2) then lost of efficiency will be again very big

Certainly there are improvements in the EROI, but some systems are far from compete with the oil now, for example, the standar PV cell, in the life cycle estimations, need to operate at least 9 years to star to recover the energy spent in their manufacturing and installing, and this in very high radiation places, for example in North Europe, there are sinks of energy and never will give the same amount of energy to make them, this panels were a carbon subsidy from China, that makes cheap PV panels not taking account the real costs of the coal

We have to change the way we live or….

111

Katherine 11.30.12 at 11:29 am

Mopeds and motorbikes are too dangerous and impractical to be a large-scale substitute for cars.

That’s a peculiarly rich/Western world way of looking at it. Visit any town or city in, well, Asia, and you’ll see how commonly mopeds and motorbikes are used where we in the West would use a car. Not saying they are used safely, mind, but you have to see a family of five plus luggage travelling on one moped before you decide on practicality I think.

Of course, as such countries get richer, people are moving from motorbikes to cars.

112

dax 11.30.12 at 1:59 pm

In a decade we’ll be able to see whether it’s empire or oil, since the US should be producing more oil than it needs and won’t need foreign oil at all.

113

reason 11.30.12 at 2:03 pm

Katherine @111
I think they are mostly only dangerous because they share the road with much bigger vehicles (OK that is not the case for powerful motor bikes – but they aren’t much of an energy saver anyway). Proper design of transport infrastructure would help a lot. (I often think that covered urban bikeways (inside transparent tubes?) are a potential future innovation.

114

reason 11.30.12 at 2:10 pm

dax
Was that meant to be sarcasm. I want to see your work. Maybe you mean North America and not “the US”. Perhaps. Otherwise – how much do you want to bet!

115

Del Rey 11.30.12 at 6:45 pm

That’s a peculiarly rich/Western world way of looking at it.

Lots of safer and more practical technologies are largely “peculiar” to rich countries because they are more expensive. I’m not sure what your point is. If you think the fact that people in poor countries who can’t afford cars make do with things like mopeds and bicycles for urban transportation means that people in rich western nations will be willing to give up their cars for those inferior alternatives, I think you’re mistaken.

116

Del Rey 11.30.12 at 7:06 pm

One of the main problems with the post-carbon energy, is the case of transportation, there are clear limitations for the battery capacity and efficiency, and if we want to maintian the usage of SUV, Humvees, etc… y a masive scale, that means serious problems to substitute the very high energy density of the gasoline, also to solve the energy storage of big family cars, and in general transport trucks if very far from solved, and if you try to storage the electricity by means of chemical bonds (producing, for example H2) then lost of efficiency will be again very big

Large SUVs like Humvees were never more than a small share of the automobile market. Since electric vehicles are so much more efficient than gasoline ones, we don’t need batteries with anything close to the energy density of gasoline for electric vehicles to be practical. The main obstacles to large-scale adoption of electric vehicles are price and the lack of recharging infrastructure. Batteries will almost certainly continue to get better and cheaper, and hybrid-electric technology (especially plugin-in hybrids) provides a way to dramatically reduce gasoline consumption as we transition to fully electric vehicles.

117

Sandwichman 11.30.12 at 7:33 pm

And so we ascend the tower of Bab-oil! Not only is there no consensus of what the problem is that has to be solved, many participants in the comment thread can’t even acknowledge that there are alternative framings of what the actual problem might be.

118

Matt 12.01.12 at 7:04 am

Do you know how much copper will be required to electrify the whole countries to substitute the oil usage?, for the world scale there is not enough copper reserves, and the energy required to build this infraestructure will be astonishing, and then the pace will be very very low

Certainly there are improvements in the EROI, but some systems are far from compete with the oil now, for example, the standar PV cell, in the life cycle estimations, need to operate at least 9 years to star to recover the energy spent in their manufacturing and installing, and this in very high radiation places, for example in North Europe, there are sinks of energy and never will give the same amount of energy to make them, this panels were a carbon subsidy from China, that makes cheap PV panels not taking account the real costs of the coal

There is little difference in copper infrastructure needs between a nation with an electrical grid that uses (e.g.) internal combustion engine vehicles and one that uses electrical vehicles. High-voltage and medium-voltage electrical distribution, used for long and intermediate distance distribution of electricity, typically uses wire made of aluminum and structurally supported with steel. Household copper wiring does not need to be upgraded to accommodate electric vehicle charging. Charging runs when people are sleeping and vehicles are stationary, getting a higher duty cycle from the same infrastructure.

Your energy payback time for PV cells seems way too long under high-insolation conditions. Are you referring to 30 year old data? I’ve spent a lot of time reviewing PV EROI studies over the past 5 years and can’t recall any numbers so dire.

As a counterexample,
24th European Photovoltaic Solar Energy Conference, 21-25 September 2009, Hamburg, Germany
UPDATE OF PV ENERGY PAYBACK TIMES AND LIFE-CYCLE GREENHOUSE GAS EMISSIONS
Fthenakis, Kim, et al.

Estimates energy payback time of about 1.8 years for bog-standard 13.2% efficiency polycrystalline silicon PV under southern European insolation of 1700 kWh/year.

I haven’t seen any studies that PV modules are lifetime net energy negative, even in pretty low-insolation locations like Scotland, dating later than the 1970s.

119

kosimba 12.01.12 at 6:49 pm

I think this is wrong though I think JQ is normally full of sense so I offer avery tentative counter.
1) Iraq: delusions of comptence are a big part of the story – they didn’t know they were going to screw up, and from a class interest point of view taking a biggie like iraq out of the state sector and back into the multinational sector is pretty major achievement – reversing the trend since the seventies of nationalisations.
2) You think Eurpeans not bothered? What about the French? Elf Aquitane created a slush fund for the entire french political class and successor total was I think the largest company by value on European stock exchanges. Not sure quite what my point is but food for thought.
3) Having lived in some poor cities in Africa I noticed rises in the price of petrol were pretty traumatic – food went up and transport fares and people ate less. I may be a luddite but I get worried by we depend on services and information line – civilisation is three meals deep…

120

Omega Centauri 12.02.12 at 2:23 am

Thanks Matt, for your rebuttal of DFC. A somewhat older Sandia study had PV payback of 3years, because the stuff is always improving 1.8 years sound emminently credible. I saw a reference that claimed the insolation difference between the best and worst mainland US sites for PV was only a factor of two (coastal Washingtom versus Mojave desert), I doubt Germnay is worse than coastal Washington.

Obviously, transport with the current paradigm of oversized and overpowered vehicles traveling at high speeds is problematic for electric. I have a plug in Prius, and even with the government and Toyota incentives (I figured zero percent financing assuming a 6% interest rate was a 15% discount), had I based the purchase simply on cost benefit beancounting I wouldn’t have bought it. I’m enough of an energy geek, that a couple of thousand isn’t too much to pay to have an interesting “toy”. But this shows just how far we are from ubiquitous electric transport. Batteries are from from what we’d like, both in terms of performance and cost. And they were a fairly mature technology a century ago. There is no guarantee that throwing money at them will lead to a breakthrough. I have more hope for grid-scae storage. There are a couple of innovative ideas for compressed air energy storage (dealing with the heat of compression is the big issue, otherwise efficiency is terrible). So storage is finally receiving enough attention that it looks like progress is being made.

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John Quiggin 12.02.12 at 6:59 am

“Batteries” aren’t just one technology but many, with a lot of different characteristics. There are a couple of mature battery technologies, such as lead-acid for cars and ordinary household batteries, but there are lots that have never really been explored because the market is too small. The required characteristics for an electric car are very different from those of an internal combustion engine, so there’s every reason to think there is room for innovation once the market is large enough.

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Matt 12.02.12 at 9:28 am

Batteries are from from what we’d like, both in terms of performance and cost. And they were a fairly mature technology a century ago. There is no guarantee that throwing money at them will lead to a breakthrough. I have more hope for grid-scae storage. There are a couple of innovative ideas for compressed air energy storage (dealing with the heat of compression is the big issue, otherwise efficiency is terrible). So storage is finally receiving enough attention that it looks like progress is being made.

I agree that storage is the remaining big challenge for electrical transportation and dominant use of renewable energy. I think that you’re a little too pessimistic about battery progress. A 1912 Detroit Electric couldn’t go much faster than 40 kph, and it cost $2800 or $3410 depending on whether it had a lead-acid battery or Edison nickel-iron battery, $65000 or $80000 in inflation adjusted terms. A Tesla Model S in that price range has more than twice the range at 3 times the speed, despite being nearly 4 times as heavy and having a much larger interior. This is possible due to large improvements in battery technology, including switching chemistry from lead/acid to lithium ion.

In fact I think that battery technology is already good enough on technical metrics (lifetime, specific energy, power) to electrify 75%+ of the American passenger vehicle market, if the cost were much lower. Lithium ion batteries can contain some relatively expensive materials, such as cobalt, but the finished battery cost is many times that of the purified material inputs. It reminds me of the solar PV market 10 years ago, when completed modules had a much larger cost over the purified silicon that went into them. I don’t know if batteries can demonstrate similar cost reductions but it’s suggestive.

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