Peak Oil


In 2005, the Department of Psychology at Yale University taught capuchin monkeys how to use money, then observed what spending decisions they made when faced with various purchasing scenarios.

In their studies monkeys were given a budget of disks and asked to decide how much to spend on apples, and how much to spend on the gelatin cubes, even as the prices of these goods and the size of their budgets fluctuated. Capuchins performed much like humans do. Capuchins, like humans, react rationally to these fluctuations.

In a second experiment, capuchins were asked to choose between spending a token on one visible piece of food that half the time gave a return of two pieces, or two pieces of visible food, that half the time gave a return of only one piece. Economic theory predicts that consumers should not care which of these outcomes they receive since they are essentially both 50-50 shots at one or two pieces of food. The capuchins, however, vastly preferred the first gamble, which is essentially a half chance at a bonus, than the second gamble, which is essentially a half chance at a loss.

Loss avoidance is a key feature of prospect theory which explains why we tend to work harder to prevent the loss of £10 than we would to gain £10. What we own is valued more than the equivalent that we do not own. The Yale experiment with capuchins points to loss aversion being deeply rooted in our evolutionary past, and as such this primitive irrational bias is very difficult to overcome when we go through life making everyday financial decisions. One major consequence of this can now be observed in the mortgage market as the housing bubble deflates. Last June, mortgage approvals hit a record low which implies that the house prices that sellers are asking for are too high in relation to the credit that is available to buyers. This reluctance to lower prices can easily be explained by the seller’s aversion to the loss perceived when the stratospheric house evaluations of one year ago are used as reference.  The bias is only made worse if the owner is in negative equity.

Michael Shermer, author of The Mind of the Market, has long recognised the role that loss aversion and other irrational biases play in market making decisions. He writes of the Yale research:

This research goes a long way toward debunking one of the biggest myths in all of psychology and economics, known as “Homo economicus.” This is the theory that “economic man” is rational, self-maximizing and efficient in making choices.

What is interesting is that Shermer is generally in favour of minimally regulated free markets – a libertarian ideal he shares with followers of the Austrian School of Economics. Rational individualism forms one of the key pillars upon which the system of laissez-faire capitalism relies.  Due to a deeply ingrained mistrust of regulation and big government, there is a strong tendency for libertarian capitalists to be in denial about global warming issues.  However, Shermer seems to be one of those rare individuals with libertarian leanings who has become convinced of the reality of anthropogenic climate change and the need to adopt measures to mitigate against it. He has since voiced support for tradeable emissions permits via carbon credits, a scheme intended to harness free market mechanisms to bring down CO2 output globally. In effect, CO2 pollution becomes a scarce right much like private property.

If recognition of our inherent psychological irrational tendencies is what allows people like Shermer to overcome the ideologically-driven confirmation bias that is endemic within the libertarian movement, then perhaps it is the exploitation of these same psychological mechanisms that holds the best promise for overcoming our reluctance to change course toward a more sustainable future. A major obstacle for taking decisive action in the face of peak oil and climate change, is the fact that most people frame this decision as losing the fossil-fueled lifestyle of convenience. This is why off-shore drilling has such an appeal in the US because it offers a chance, however small, that they would not have to give up their high energy consuming existence.  Expert lifehackers are well versed at motivating productive activity by working with one’s emotional biases rather than directly opposing them.  With an appropriate reframing, even loss aversion can become a powerful ally when pursuing changes in lifestyle one may be reluctant to make initially. It is a strategy that everyone, on both sides of the sustainability debates, would do well to adopt.

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It’s been over a year since the original “Did You Know?” video went viral and since then a second version had been made about one year ago:

It was originally intended to provoke discussion about the suitability of the US education system for the fast paced globalised world in which we now live. However, in light of the fact that globalisation is not panning out to be as rosy as the authors of that video seemed to be portraying a couple years ago — what with the credit crunch, recession worries, energy crisis, food crisis, and general reduction in freedom — I thought it would be a good time to create my own version this video:

(In case you need to see the URL references blocked by the YouTube logo, you can also view it on the YouTube website)

One can consider this to be the flipside of the globalisation coin — the side that the authors of the original video deliberately left out. Not sure if K-12 can tolerate this level of cynicism and reality in one 10 minute sitting however.

I sometimes observe that the initial knee jerk reaction by some environmentalists to attacks on the climate change science is to favor an ad hominem approach. Find out if some fossil fuel industry is funding the attacker and expose them. Often I have found such a strategy unsatisfying. Not simply because it better to evaluate arguments on the merits of what science actually does say (which does take more time but one can learn a great deal in the process), but because in the event that one fails to uncover any financial links to an “evil” oil company, does this somehow lend greater weight to the argument of the attacker? Are scientists who have not sold their soul to any oil, gas, coal, or automotive company, really that much more trustworthy as commentators on scientific issues?

In a lecture titled, “The American Denial of Global Warming”, Professor of History, Naomi Oreskes, reveals to one of the root causes motivating many of the attacks on climate science. And surprise, surprise. It is not Exxon.

As it turns out, it is the unwavering ideological belief that free markets, unhindered by government regulation, can solve all problems that is subverting the public dissemination of science. While the laissez faire market ideal is quite popular amongst the rightwing republican conservatives, where it is really held up as gospel truth is amongst the libertarians. This is consistent with what I’ve often observed on libertarian websites and blogs where the pro-capitalism arguments of Ayn Rand, Milton Friedman and Julian Simon are quite popular. Where the Austrian School of Economic theory rules the land, and Keynesianism is the devil at which stones are to be thrown. I recently stopped listening to a libertarian podcast that specialised in anti-Keynesian attacks, supported Ron Paul and questioned the certainty of global warming. Curiously, the publishers of this podcast, Financial Sense, do believe in peak oil theory, but not as an argument for sustainability and environmentalism, but instead as a means by which Keynesianism will ultimately fail.

Incidentally, Ron Paul frames environmental concerns as a pollution problem that can be solved by strenthening private property rights. It’s a pity he doesn’t have much chance at becoming US president as I am loooking forward to finding out how global warming emissions could be dealt with in this way, given the fact that most environmental damage is indirect and non-local in nature (melting icecaps flood tropical areas, storms form over warmer water far from where they make landfall, etc). Perhaps this explains why he’s popular among technologists — some believe free market driven technological development is the best way to solve the global warming problem.

Ray Kurzweil: None of the global warming discussions mention the word “nanotechnology.” Yet nanotechnology will eliminate the need for fossil fuels within 20 years. If we captured 1% of 1% of the sunlight (1 part in 10,000) we could meet 100% of our energy needs without ANY fossil fuels.

At least this shows that some pro-technology libertarians have begun the process of resolving this internal conflict: denying science, while at the same time, hyping technology that is often based on the same science — a line of reasoning which I’ve seen far too often on technology blogs and news sites. It is not surprising that this conflict is at the heart of the George C. Marshall Institute, the think-tank that Oreskes investigated; it was originally formed to promote Star Wars technology but attacked the physics needed to make it work.

It is good to see that there is at least one person in Trinidad and Tobago that is peak oil aware. Mary King, a columnist for the Trinidad Express, wrote a column a week ago that urges policy makers to consider peak oil in their energy resource utilisation plans. Regular contributors to the peak oil blogs at Energy Bulletin and The Oil Drum must have been doing Google News queries to find it, or somehow got to heads up from their membership and others who frequent their blog. Mary King’s follow-up column includes the resulting responses from the worldwide peak oil movement. Unfortunately, according to her articles, the government of Trinidad and Tobago has adopted an energy policy that is at the opposite end of the spectrum to that of her next door neighbour, Venezuela. The natural gas wealth is being sold to and drained away by the highest bidding multinational corporation. As an illustration of how important the Manning government considers the foreign investment that will extract and export the nations finite reserves as quickly as possible, they recently highlighted the “constant dialogue with energy companies about security” as a way to reassure potential investors that terrorism would not be a problem in the wake of the recent JFK bomb plot. The T&T citizens see some benefit from trickle down economics, but as is typical of Third World resource exploitation, the vast majority of the population see themselves as largely missing out on the island nations energy-driven prosperity. The endemic stratospheric violent crime rate is likely a direct consequence of this.

A few weeks ago there was a debate on the proposition that “Global warming is not a crisis” that featured scientists and authors on both sides. More of the audience left the debate supporting the proposition than did at the start partly due to the complexity of the issue playing into the hands of the doubters of anthropogenic global warming. The team arguing against the proposal lost the audience mostly due to the climate modeller, Gavin Schmidt, coming across as condescending to the wider public:

Brian Lehrer: But Gavin Schmidt, you seem to suggest that the other side does not have a real scientific argument, but a culturally or politically constructed one. You don’t think they’re sincere?

Gavin Schmidt: I don’t think that they are completely doing this on a level playing field that the people here will understand.

Gavin Schmidt should take a few lessons from Bill Chameides, Chief Scientist, Environmental Defense. Listen to Bill Chameides, when challenged on a phone-in radio show by a caller with 3 well known contrarian talking points (20 minutes 45 seconds into the podcast), in a very respectful but authoritative manner deliver reasonable but brief explanations. A few of these classical talking points featured in the debate. Philip Stott brought up the global cooling myth and cosmic rays. Richard Lindzen hightlighted uncertainties and questioned whether consensus was meaningful. However, what was really revealing was how much ground the no-crisis supporters had given up over the past couple of years. Michael Crichton, whose book, State of Fear, was filled with bad climate science, brought up very few of these arguments now that he was faced with a climate scientist. What is remarkable was the emphasis on non-climate science arguments:

Michael Crichton: And so if – if it were only gonna do symbolic actions, I would like to suggest a few symbolic actions that right – might really mean something. One of them, which is very simple, 99% of the American population doesn’t care, is ban private jets. Nobody needs to fly in them, ban them now. And, and in addition, [APPLAUSE] let’s have the NRDC, the, the Sierra Club and Greenpeace make it a rule that all of their, all of their members, cannot fly on private jets, they must get their houses off the grid, they must live in the way that they’re telling everyone else to live. And if they won’t do that, why should we. And why should we take them seriously. [APPLAUSE]

This is the well known “He who is without sin” argument for not even taking the first tentative steps toward a solution. We’re all living in the same greenhouse so no one is allowed to throw stones. A similar strategy is being deployed to counter Al Gore.

Sen. James Inhofe (R-OK) attempts to silence Al Gore by highlighting his above average energy use. The rightwing media outlets have orchestrated a similar attack against Gore. The hypocrisy argument is an emotionally satisfying way to justify inaction, but it is counter-productive in practice. Imagine if the US was asked by other UN members to halt all trade with nuclear weapon capable countries that have not signed the Nuclear Non-Proliferation Treaty (India, Pakistan and Israel has yet to sign up) before they would participate in sanctions against Iran. One may think this a flawed analogy since nuclear proliferation is different in nature from pollution. However, since fossil fuels are fungible resources in the global economy, Jevons Paradox comes into play. If a minority stop buying gas, the price of gas drops due to lower demand which makes it more affordable to the majority who are still burning the stuff so they end up burning more of it. Maybe this is the real reason behind Crichton’s and Inhofe’s demands.

Even if Gore jumped through these arbitrary hoops, the denialist can always move the goal posts or point to other hypocritical environmentalists. This childish playground attitude has been used against other celebrity figures who raise the issue of poverty and unfair trading practises. Those opposed to Bono’s Make Poverty History public awareness campaign attack his wealth and refusal to take a vow of poverty. What is obvious about these demands is that the real intent is not for the celebrity take a vow of poverty, but a vow of silence.

In addition to silencing critics, The Poor Excuse is also used to justifying inaction through a prioritisation argument:

Michael Crichton: This doesn’t need to happen. We’re allowing it to happen. And I don’t know what’s wrong with the rich self-centered societies that we live in in the west that we are not paying attention to the conditions of the wider world. And it does seem to me that if we use arguments about the environment to turn our back on the sick and the dying of our shared world, and that’s our excuse to ignore them, then we have done a true and terrible thing. And it’s awful, thank you.

Philip Stott: Everyday 30,000 people on this planet die of the diseases of poverty. There are, a third of the planet doesn’t have electricity. We have a billion people with no clean water, we have half a billion people going to bed hungry every night. Do we care about this? It seems that we don’t. It seems that we would rather look a hundred years into the future than pay attention to what’s going on now. I think that’s unacceptable. I think that’s really a disgrace.

This argument parallels that of statistics professor, Bjorn Lomborg, who poses the question: “If we had $50 billion to spend over the next four years to do good in the world, where should we spend it?”

Small wonder that under these restrictive spending conditions global warming is at the bottom of a list of priorities. But this question can be turned on its head. If the lowest priority problem in the world has such dire consequences to civilization why do we limit ourselves to $50 billion? This is less than one tenth of that spent on the war in Iraq over the last 4 years. Lomborg also wishes we would spend this much on the big problems as this removes some of the tough choices from his prioritisation issue. Perhaps he should stop attacking Al Gore and instead help him to convince governments to free up the funding necessary so all problems can be given priority. Richard C. J. Somerville, debating on the pro-crisis team, would agree:

“You know, I cannot imagine why Philip Stott and Michael Crichton seem to think that doing something about these terrible crises is impossible if you do something about climate change, or even made more difficult, climate change need not be in competition with or be an alternative to doing something about the terrible toll that poverty and preventable disease take.”

Furthermore, Lomborg’s higher priority problems are not independent of climate change. Poverty, malaria and AIDS may be more difficult to solve in a warming world due to displacement of populations and regional changes in the ecology. Further justification for inaction arises from his view that robust economies can insulate against any climate calamity:

To finally answer the question, let me repeat a story told by Nobel Laureate Thomas Schelling. The UN climate panel expects that the average person in the developing world will be much richer in 2100 than the rich world is today (just like a hundred years ago, Denmark was a poor, peasant state.)

So, imagine an average Chinese, Congolese or Columbian in 2100 thinking back on 2007. Maybe he will be amazed we cared so much about him that we were willing to spend vast sums of money to curb global warming, helping him out just a little bit. But he will likely also think: “How odd that they cared so much for me, who is now rich, but cared so little for my grandfather and my great-grandfather, whom they could have helped so much more, at so much lower a cost. These were the men who needed help most desperately.”

Indeed, Thomas Schelling does think the effects of climate change are best mitigated by rapid economic development:

“What we must recognize is that the real victims of climate change are going to be in the developing countries, where a third of the gross national product may be agricultural and maybe half the population practices subsistence agriculture,” Schelling said. Probably the best way for them to defend against the adverse effects of climate change is to develop as rapidly as they can, he said. The sooner Malaysia can become like Singapore, the sooner it can worry less about the impact of climate change on health, comfort, and productivity.

Echoing Thomas Schelling, Richard C. J. Somerville:

“in fact, it’s exactly the poorest and most vulnerable people on the planet who will suffer the most from the consequences of global warming which goes on unabated.”

And this maybe in some perverse way be the real reason behind the unwillingness of richer nations to act on climate change. It is seen as a problem primarily affecting the poor. There are two important questions one must answer if the Lomborg-Schelling vision is to come to pass:

  1. Is it necessarily true that given enough economic development, all countries can adapt to climate change and minimise it’s effects?
  2. Is it even possible for all poorer nations in 100 years time to become as rich as today’s wealthy?

Jorgen Randers, coauthor of Limits to Growth, attempted to answer both questions in the 2006 Templeton Lecture at Sydney University:

This is what I wanted to get to, the boring thing of self-reinforcing effects of climate gas emissions.

So the second reason why it is dangerous to have delay in strong action on climate is that the world, sadly, includes what are called self-reinforcing mechanisms, that, once triggered, start driving up the temperature, basically, of the ecosystem and the atmosphere, and there is nothing you can do to stop it once it starts.

He is refering to the real risk of breaching climate tipping-points that may initiate a run-away greenhouse effect. It has happened before.

Sadly, even the poor do not seem to be a high enough priority today to warrant heroic actions from wealthy nations. The unwillingness to seriously pursue the UN Millennium Developmental Goals was the subject of a speech by the president of the American Association for the Advancement of Science, John Holdren, at the AAAS Annual Meeting in January:

For example, he said, efforts to meet the UN Millennium Development Goals have been uneven, at best. Child mortality levels show improvement, but remain “really appalling.” And he described the United States as the “second stingiest” among nations in the Organisation for Economic Co-operation and Development in providing assistance as a percentage of gross domestic product. [Only Italy ranks lower, he said.]

But in addition to the problems of developing nations, John Holdren also mentions climate change, the liquid fuels crisis and nuclear proliferation. Any one of the three has the potential to limit economic growth to a crawl over the next century, even send it into reverse. It seems dubious to claim that all of the worlds poor today will be in 100 years time as rich as today’s wealthy. The common wild card that the cornucopians love to trumpet in support of unending growth is the limitless potential of human ingenuity and advances in technology. They will probably find that they have something in common with those that believe Singularity is near which requires one accept Ray Kurzweil’s Law of Accelerating Returns. Near the opposite end of the technological spectrum is David Edgerton, author of Shock of the Old, who sees the vast majority of inventions as making only trivial to very modest steps toward the advancement of civilization. What advances he considers as truly significant or revolutionary will be surprising to many.

Despite Jorgen Randers holding views on global warming that the denialists would consider alarmist, he does believe that economic and technological growth will overcome the challenges of peak oil:

that sooner or later if this transpires, namely the decline in oil consumption, oil availability and oil consumption, prices will gradually increase and gradually they will fund a transition into alternatives and I think this will happen in a manner where the total energy available every year will not decline and so we will not have collapse, not even in the oil consumption. It will be a flat portion before it rises.

However, he seems to have a high threshold on what would classify as disasterous. He considers 30-50% increase in energy prices to scrub the CO2 from power plants as being easily affordable. (He does live in Norway.)

In the big picture in my book the only thing that really matters, and I am pushing as hard as I can, is carbon capture and storage. It’s technologically simple, the only thing it does is increase the cost of power by something between 30 and 50 percent, which actually doesn’t matter an iota at our income levels.

Thomas Schelling would be the first to admit difficulties in economically quantifying the consequences of global warming: “We’re still trying to learn how to think about – especially to think collectively about, internationally – how to deal with global warming and the impending climate change and some of its consequences.” One of the first attempts at this, the Stern Review recommends, “There’s still time to avoid the worst impacts of climate change, if we take strong action now.” The longer we wait the more costly it will be. Unlike the climate science behind global warming, such policy reviews
are easier to pick apart
.

Will economies and technology develop rapidly enough to counter the negative effects of that development? Or will nature eventually overtake our ingenuity and overwhelm our own inventiveness? My humble blog cannot possibly have a conclusive answer to so important a question, so I shall conclude with the wise words of author, Arthur C. Clarke, who once posited the following three laws:

  1. When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
  2. The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
  3. Any sufficiently advanced technology is indistinguishable from magic.

The first two can equally apply to technology as it can to climate, but the last law is revealing. Investing all our faith on a future possessing technology sufficiently advanced to effectively tackle the consequences of climate change is little different from a belief in magic.

Port-of-Spain lighthouse and twin towers

I have returned to Trinidad and Tobago for the holidays and for the past two weeks have not been able to blog much due to the really bad Internet connection at my parents’ house. This twin island republic is perhaps the wealthiest island nation in the Caribbean due to the geological proximity to Venezuela. The local economy is almost completely driven by fossil fuels, however according to Colin Campbell, production of crude oil peaked two decades ago and prosperity is becoming increasingly dependent on natural gas related exports. Stories in local newspapers reflect this. The parliament has been debating gas deals for proposed aluminium smelting plants. Prime Minister, Patrick Manning, toured a natural gas facility last week declaring that there are a lot of reserves to be found in decades to come. However, the big multinational corporations seem reluctant to explore the deep waters east of the island. When exploration rights of 8 deep water blocks, each of 80,000 hectares in size, were put up for auction, only Statoil placed a bid for one of the blocks. Apparently 12 corporations invested in a 2D seismic survey of the deep water areas of interest but later complained the quality of the scan was poor. Statoil bid for a block adjacent to one in Venezuelan waters where gas had been found recently. Such is the risk averse nature of deep water exploration.

… according to Barry Schwartz, sociology professor at Swarthmore College and author of The Paradox of Choice: Why More is Less, who expressed this sentiment in his TED talk:

I remember expressing something similar when growing up and my friends asked why I always downplayed my abilities and accomplishments. I guess I felt the need to surprise myself as well as others who I found were always expecting more from me.

This may partly explain the tendency towards hyperbole expressed by certain fanatical supporters of especially gloomy predictions. The Y2K had their fair share of exagerators and one wonders if January 2000 was a particularly happy month for them. The doomsday scenarios of today are no exception: James Lovelock, who conceived the Gaia hypothesis, says that we’ve already passed the point of no return with regard to global warming. Matt Savinar maintains a particularly scary website explaining why technology is not a panacea for peak oil, while James Howard Kunstler speculates on the disastrous consequences on an oil addicted civilization. This doesn’t mean that they’re necessarily wrong, but the believers of their extreme outlook will be happy even if the lesser of two disasters comes to pass.

Professor Schwartz’s quote shouldn’t be taken out of context. Planning one’s life based on the lowest expectation of every possibility will inevitably lead to lost opportunity and regret. His larger point is that having too much choice has the downside of higher expectations and increased chance of disappointment. It is a case of the Goldilocks Principle that I can spin to my advantage next time anyone criticises my past career choices: The Caribbean had too few options for career growth, the US had way too many, and the UK was just right.

NB. Google TechTalks has for a much longer version of the Professor Schwartz lecture.

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