Peak Oil, Foreclosures, and Suburbia

“Over the next four years, we are likely to witness the greatest mass
exodus of vehicles off America’s highways in history.”
Jeffrey Rubin, CIBC Markets, June 2008

The Denver Post ran an article this morning about the impact of $4/gallon gas on SUV sales. The article confirmed that not only where new SUV sales being decimated but that people were selling or trading in their SUV’s at a deep discount to blue book in order to escape $100 per week fuel costs.

However, peak oil and the resulting run away gas prices will soon effect more than the sales of inefficient SUV’s and trucks. A recent Canadian Imperial Bank of Commerce [CIBC] study predicts that 10 million cars will disappear from America’s highways as people with incomes of less than $25,000 are priced out of the car driving public and that U.S. automobile sales will decline from 17 million to 11 million by the year 2012.

It’s not surprising that the initial impact of Peak Oil would be to reshape the American automotive landscape, but what about the automobile’s twin sister, suburbia? What was probably more interesting about the Denver Post article was the subtle connection between gasoline costs, foreclosures, and housing. The article points out that in Temecula, a suburb at the outer reaches of a reasonable commute to San Diego and Orange County, has a staggering 15% of its 25,000 homes in foreclosure indicating that many of the commuting suburbanites of Temecula may have been pushed over the edge of solvency by the cost of gasoline to get them to work and back homes they can no longer afford.

This may be just the beginning of a massive shift in the real estate axiom of “location, location, location” as housing prices hold near job centers but continue to decline rapidly in the outer reaches of suburbia.

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Fossil Fuel Whack-A-Mole

“I believe strongly that this country has to get off oil … The electrification of the
automobile is inevitable.”
Bob Lutz, GM Vice-Chairman, in Newsweek magazine, 2007

“Our view is that oil production will peak in the near future. We need to develop power train(s) for alternative energy sources,” to “move beyond petroleum.”
Katsuaki Watanabe, President of Toyota, June 2008

Our pattern of dwelling in America would not be possible without the everywhere, anytime mobility of the automobile. The initial catalysts for our grand experiment with suburbia were abundant and cheap gasoline, the GI bill of 1944, and the vision of William Levitt who brought land outside of cites like New York and Philadelphia and constructed “towns” made of thousands of low cost homes. Levitt’s invention would be duplicated all across America and gradually devolve into the suburban sprawl, traffic jambs, and one hour commutes of the 21st century.

I spent my early childhood in a Southern California version of one of these post WWII developments. We lived amid thousands of homes laid out in military grid formation with wide asphalt streets, concrete sidewalks, and the occasional park and school. We ate 25¢ hamburgers at America’s first drive-in restaurants and fell asleep eating popcorn in the back of our family station wagon at the local drive-in theatre. Cars where central to our lives and Detroit was still king of the automotive world. Like a Paris fashion event, the annual introduction of new car models was exciting news and we all looked forward to how our nation’s car designers would drape and color the latest in sheet metal fashion for America’s showrooms. Everyone in the neighborhood could play “name the make, model, and year of that car” and when a new model arrived in someone’s driveway, we all gathered around to admire and compare.

However, today the shine is off the Studebaker. Levitt & Sons has gone bankrupt. A victim of overreach and the sub-prime mortgage crisis. What’s left of the Detroit auto industry is hemorrhaging cash as they scramble to survive in a $130 per barrel, SUV killing world. In an effort to save our vast investment in suburbia and our automotive lifestyle major auto companies and a few entrepreneurial startups are designing and beginning to promote plug-in hybrid, all electric, compressed air, and hydrogen fuel cell cars as the answer to rising gas and diesel prices.

I have to question whether we will just transition painlessly to the next generation “power train” or will this new autopia be a game of fossil fuel whack-a-mole before we have to face up to to the unsustainable reality of suburbia? In the short term the answer is a tentative maybe as we navigate the two decades between today’s emerging crisis of peak oil and tomorrow’s crisis of peak coal.

Understanding and Comparing A New Generation of Automotive Power Trains
Nothing is free when it comes to energy and transportation, and all of these new automotive power trains will merely transfer the current demand for gasoline into a new demand for electricity. In America, that means we’ll be trading off oil against coal and natural gas which together comprise the base fuels for about 80% of our electrical capacity.

Electric, compressed air, and hydrogen cars often get promoted as super clean, zero emission, technologies and I still get the occasional email from friends who seem to think that the laws of thermodynamics have been suspended for these new technologies and that we’ll be driving around burning water for fuel.

The truth is that all of these new power trains will require fossil fuel inputs to get us to work and back. Electric and plug-in hybrid cars will depend on lithium ion batteries that will need to be plugged into the national electric grid every evening for a recharge. Air cars will depend on high pressure storage tanks of compressed air that will have to be re-pressurized every evening using electrical power. The one question that usually goes unasked and answered for hydrogen cars, is “where does the hydrogen come from?”. The unfortunate answer is that hydrogen will come from the electrolysis of water and that will require an energy input of either electric power or the burning of natural gas. In addition, after creating the hydrogen, much like air, it must be compressed to store enough usable energy for the fuel cells to convert hydrogen into DC electricity for the power train.

Although there are cost tradeoffs between the three options, based on the efficiency of converting electrical power into miles driven, lithium ion electric cars have a clear advantage. A study by the Institute for Lifecycle Environmental Assessment based on incorporating each of the three drive trains into the equivalent of a Ford Taurus gives the lithium ion technology a three to one advantage in miles per kwh of electrical input.

Based on electrical rates in Denver, and 18 miles/gallon for a Taurus, the “equivalent gallon” costs of all three technologies easily beats our current national average of over $4. However, when you compare the CO2 emissions, based on 1.8 lbs/kwh in Colorado, only the electrical car emits less greenhouse gas than the equivalent gasoline powered Taurus.

A Game of Fossil Fuel Whack-A-Mole?
We get about 60% of our electrical energy from coal and about 20% from natural gas. The good news is that coal plants, which provide most of our base load power, have excess capacity after about 10 PM at night, and ased on a study by the Oak Ridge National Laboratory that assumes plug-in hybrids gain a 50% market share by 2030, we’ll only need an additional 8 large power plants to meet that new electric car demand. The bad news is that if we plug in at 5 PM instead of 10 PM, we’ll need an additional 160 large power plants to meet demand.

In either case, we’ll be burning millions of tons of additional coal to power the electric, hybrid plug-in, compressed air, and hydrogen cars of the near future. In the process we’ll be driving up the cost of coal and electricity and hastening coal’s eventual depletion.

An October 2007 report by the Energy Watch Group estimates that we’ll be facing a world wide peak in the production of coal sometime around 2030. This study does NOT factor in a new generation of automotive power trains that rely on electricity. Since electrical power generation is the primary end use of coal, this peak in coal production will only move closer.

I agree with Bob Lutz that “the electrification of the automobile is inevitable”, but if we think coal is the answer then we’re just playing a pathetic energy endgame of Fossil Fuel Whack-A-Mole.

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The Politics of Personal Virtue, Sustainability, and Population Growth

“Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy.”
Vice President Richard Cheney, 2001

I have begun wonder lately whether anything I personally do can be considered sustainable. I live at 9,000 feet in the Colorado Rocky Mountains and I’m in the process of converting my home to a zero energy standard powered completely off-grid with a hybrid wind and solar system and transforming my 3 acres into model of permaculture capable of providing all of our food requirements. At a personal level that seems “sustainable” and at least provides a sense of satisfaction and security, however from a global perspective of 6.7 billion people it amounts to nothing more than a personal fortress. A fragile island of self-sufficency, in a world racing toward ecological overshoot and collapse.

Is Cheney right about conservation being no more than a virtue? Is what we do at a personal level no more than a greener than thou ego fantasy? Is nothing we do personally sustainable in the larger context of a growing pop of 6.7 billion people and the equivalent 2 to 3 more earths required support a Chinese, Indian, and Brazilian population determined to achieve the American standard of consumption?

It is likely that we have already exceeded the carrying capacity of the earth. The point at which the combination of the world’s population and that population’s average level of consumption exceeds the capability of the earth to provide sustenance. Individual actions to achieve a sustainable level of consumption are no longer meaningful. Actions and policies of entire countries are only slightly more meaningful.

I don’t agree with world view embedded in Cheney’s cynical quote, however one word speaks to the truth. Our continued survival on this planet will depend on a comprehensive world policy of sustainability and living within our planet’s carrying capacity and that policy must address and include the politically explosive issue of population growth.

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Natural Gas Shortages and the coming CHILL in America’s Living Rooms

Conventional, easy-to-get natural gas in the U.S. has already peaked and natural gas from all sources will peak in North America around 2010 and globally between 2030 and 2035.
Dr. Michael Smith, Energy Files Ltd., 2004“

The North American outlook for natural gas production is not good. Mexican production has been in decline since 1999. U.S. production has been in a plateau for some time. All the big finds have been tapped and are in decline. Currently, we are bringing new wells online at a maddening pace just to keep our domestic production flat. And the new wells are declining at rates as high as 80% in the first year. The size of the new finds is also diminishing. Over the past decade, the amount of gas found per foot drilled has declined by 50%.
Dale Allen Pfeiffer, The Natural Gas Cliff, October 2005

Since natural gas is used to heat over 60% of the homes in America and in about 70% of new homes, its important to know how it gets to our homes and how fragile natural gas is as a source of both direct heating energy and as an indirect source of electrical generation for cooling.

Natural gas consists mostly of methane. Conventional natural gas is found in underground formations of porous rock, and conventional, easy sources of NG in the U.S. peaked in 1973. To keep up with demand, we are now frantically drilling and keeping our supply heads above water with a combination of shale gas, tight gas(from non-porous rock formations), deep gas (from wells over 15,000 feet in depth), sub-sea gas, and coalbed methane gas. These “unconventional” sources all require more risk and capital for extraction. Nearly 20% of U.S. demand is filled with imports from Canada through our existing pipeline system and to a much lessor extent via imports of liquid natural gas (LNG) from Trinidad and Tobago.

Natural gas gets to our homes through a complex system of pipes or “lines”. Gathering lines connect drill rig production areas to natural gas processing or refining plants which separate out natural gas liquids, water, carbon dioxide, sulfur, and inert gases such as helium which would reduce the energy value of the gas. The refined gas is then piped into a 280-thousand mile North American transmission network. This network consists of 20 to 42-inch diameter pipes with compressor “boost stations” located about 75-miles apart to maintain sufficient working pressure.

Local distribution companies tap into to this network, providing a storage buffer, and metering the gas through a system of more than one million miles of mains and smaller trunk lines that bring gas to our homes.

Much of the soil in the Great Plains is little more than a sponge into which we must pour hydrocarbon-based [natural gas] fertilizers in order to produce crops.
Dale Allen Pfeiffer, Eating Fossil Fuels, 2004

Looming Natural Gas Shortages

No one knows how and exactly when shortages will occur, but shortages are inevitable, even in the context of exploiting new arctic natural gas sources and the building of a massive LNG (liquid natural gas) infrastructure. Both of these sources will take years to develop and to have an impact and will require billions of dollars in capital expenditures. LNG is our best hope of avoiding severe shortages, but dependence on LNG will thrust us into the international gas market, forcing us to compete for Middle Eastern and Russia gas with Europe and the emerging economies of India and China, at prices two to three times what we pay today. By the time arctic gas and imported LNG become available in meaningful quantities, we will have already begun a steady and irreversible decline in our current North American sources of production.

A few years ago people looked at L.N.G. as a solution to North America’s gas needs. But
today we see that there is less L.N.G. around than people expected, and there is more
competition for that L.N.G. from markets that are willing to pay more than the United States.
Nikos Tsafos, analyst with PFC Energy, 2008

At first higher prices will cause demand destruction in the industrial sector and manufacturers will convert to other energy sources like coal or move production to locations in the world where natural gas is still plentiful. Eventually, because modern agriculture is heavily dependent on fertilizer, and natural gas in the primary fertilizer feedstock, we may be faced with the dilemma of either heating our homes or putting food on the table.

Just as we will be forced to find new ways to configure and power a personal transportation system, we will have to find new ways (or revert to old ways) to moderate the internal environments of our homes. The equivalent of 500 HP forced air furnaces lumbering away in the basements of our poorly constructed and insulated homes will no longer be sustainable in a world of rapidly depleting fossil fuel supplies. In many ways the inertia of transforming over 100 million existing homes will be more difficult than transforming our transportation system and onus and urgency for change will fall on the homeowner.

There are about 2,000 drilling rigs in the U.S.  That’s one rig for every 150,000 people, an
increasingly dicey formula. Last winter we Americans collectively consumed more than 2 trillion cubic-feet of natural gas each month, one-fourth of it from the Rockies. Due to accelerating decline rates in older fields, we now need to replace with new drilling one-third of the gas we used the year before. Charlie calls this the “depletion treadmill,” and he is chained to it. If guys like Charlie stopped working for a year, you’d have to turn a few things off, big things like, say, New York and Ohio. – Peak Oil Review 8/25/08

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