Freeman

ARTICLE

Power to the People?

Why Are Voluntary Accomplishments by the Public Ignored in Favor of Huge Government Programs and Mandates?

JANUARY 01, 2003 by MICHAEL C. LYNCH

Filed Under : Subsidies

Michael Lynch is a research affiliate with the Center for International Studies at the Massachusetts Institute of Technology.

In his piece “The Power to Change the World: A Hydrogen-Based System Replacing Our Reliance on Oil Would Revolutionize Society” (Los Angeles Times, September 2, 2002), political activist Jeremy Rifkin lays out an argument for switching to a hydrogen-based economy. This, he states, is necessary because of looming petroleum scarcity. And given the attractiveness of omnipresent hydrogen and particularly the large-scale efforts now under way to develop fuel-cell automobiles, he argues the task should be pursued by society forthwith (that is, subsidized). However, while Rifkin seems to make a straightforward case, the premises on which he bases his arguments are either incorrect or severely exaggerated.

This is one of many instances where concern about long-term oil supplies has been used as a rationale for various policy proposals, and many have become alarmed about the warnings because of their wide publication, as well as the fact that they are (often) made by geologists and (always) purported to be scientific. Since the method used correctly predicted the peak of U.S. production three decades ago, it is assumed to be valid.

But the reality is that the new set of warnings is no more reliable than those of a quarter century ago, which predicted global upheaval by the mid-1980s, prices of $100 per barrel in 2000, and a huge shift in political power to commodity producers. The truth is that the opposite occurred, and the primary threat is from political instability in impoverished oil-producing countries that can’t find markets for their overabundant resource.

Those worried about resource scarcity are relying on a flawed method, specifically the “Hubbert curve,” named after a prominent geologist, M. King Hubbert, who correctly predicted in 1956 that lower-48 U.S. oil production would peak in 1970. Because of that, and little else, his method attained great credibility in the view of some. Yet he also predicted that the United States would run out of natural gas by now (production is relatively close to the historic record), and most others using his method have failed to predict national, regional or, global production—failed abysmally.

The model is extremely simple. It assumes that production will follow a bell curve whose entire length represents the total amount of oil that will be recovered. The only thing affecting the curve is geology: the amount of recoverable oil. (This is why the alarmists are so dismissive of economists’ opinions on the subject.) Most alarmists are then taking estimates of the amount of recoverable oil in a region (or the world) and using it to predict a peak in production (the point where half has been produced).

The primary flaw is that the amount of oil that is recoverable depends not just on the amount in the ground, but the technology available to recover it and the cost of production. Technological advances continually add to the “recoverable” resource base, as does economic progress. (Build a road into a region, and the cost of drilling a well drops.) Since the early 1950s, estimates of the amount of oil recoverable have grown from 1,000 billion barrels to about 3,000 billion recently, and while we are continually warned that our dependence on OPEC will grow, OPEC instead finds its market share falling.

The current crop of alarmists claims that they have resolved this problem, and that their estimates of the world’s recoverable resources will not grow. Yet, they have also repeatedly raised their estimates, faster than world consumption has grown, in fact—an inconsistency they ignore. Indeed, Colin Campbell, one of the most prominent alarmists, now says that half the countries he has examined have already found more oil than he stated they would ever possess in his analysis five years ago.

Any Lessons Learned?

As a result, it is hard to see where the new alarmists have learned lessons from past cries of scarcity. In 1989, when most were arguing that oil prices would increase 50 percent over the next decade, Campbell insisted the production had already reached a peak and that prices would double or triple within a few years. (I predicted they would tend to decline because of abundant supply, which proved correct.) Since then, every few years he has reiterated his warning, always moving it further into the future. Oddly, though he continually sees production falling over the edge just beyond the (ever-receding) horizon, he derides his critics as “flat-earth economists.”

In an excellent lesson for any policymaker, the alarmists’ recent publicity reflects the particular nature of the publishing industry, not the validity of the work. Reporters prefer to report opposing positions without judging them, and most editors have little scientific background and thus are not qualified to judge claims by scientists. Also, few bother to check the validity of mathematical results and most assume that blunt statements must be true.

Having taken the time to investigate these claims in some detail, I found that they are seriously wanting. In part, the authors bolster their credibility by creating straw men, misrepresenting the arguments of those who disagree with them. For example, they refer to all of their detractors as “economists,” which is untrue, and often make bold—but meaningless—statements such as: “Economists don’t understand depletion,” apparently to bolster the “scientific” nature of their work. Similarly, many of the authors make numerous vague representations about the beliefs of their opponents without attribution, many of them incorrect. And some of the attributed statements can be shown to be clearly misrepresented.

Most egregiously, they state that their methods are “robust” or that they have “checked the validity” or that a curve may be “extrapolated with confidence” without providing any supporting material. Worse, in each case their confidence can be shown to be misplaced. Jean Laherrere repeatedly publishes figures showing the decline in production of the Forties Field in the North Sea, arguing that it will continue in a straight line until production ceases, allowing the total recoverable resource in the field to be estimated. From that, he estimates national, regional, and global resources. Figures for only a few fields are ever shown, with no indication of how many do or do not conform to this model, implying that they all do. But when I examined a larger sample (large fields in the U.K. offshore), it turns out that the method fails more often than it works. Clearly, it cannot produce reliable results.

Ultimately, these gentleman are falling into a basic scientific trap, fitting data to a curve and then presuming that the curve must represent an immutable law of nature. This, however, is no more sophisticated than astrology. And given that the research to date has not only repeatedly failed, but can be shown at its source to be clearly invalid, it isn’t even good astrology.

But that doesn’t mean society shouldn’t convert to hydrogen, if Rifkin’s other arguments—that it would be easy—were true. Sadly, the subsequent steps in Rifkin’s logic show no greater validity. For example, he calls for an effort comparable to that which created the World Wide Web to convert our economy to hydrogen. Any policymaker should blanch at the imprecision of such a statement. The World Wide Web was hardly a monumental effort: servers and software were the bulk of the investment needed, since it relies primarily on home computers and phone lines. That was in no way comparable to the enormous effort Rifkin is advocating.

A hydrogen economy would need not “hydrogen [which] is so plentiful and exists everywhere,” but massive investment in power plants to generate said hydrogen. Pointing to the increasing use of renewable energy to generate electricity, which could then be used to produce hydrogen, is akin to pointing to the growth in space travel and urging interstellar colonization. Renewable electricity at present accounts for 0.1 percent of the total power generation in the United States, and producing enough hydrogen to displace, say, one-third of our oil use for transportation would require an expansion of the current level of solar and wind power by a factor of 80, at a cost of about $300 billion. This is not to mention the cost of the hydrogen plants, and the distribution facilities, as well as a huge number of cryogenic storage tanks, which would double or triple the cost, using conservative figures.

On top of that, fuel-cell automobiles remain prohibitively expensive. For all the talk about auto manufacturers studying them, or promising demonstration vehicles, and so forth, they remain a toy of the very rich. This is hardly alien to those like Rifkin, who can be called “Antoinettes” for their opposition to genetically modified organisms (their message to the poor: “Let them eat organic food, grown by hippies in Vermont”). But with the kind of damage that would be done by a trillion-dollar program to reduce our oil consumption by a mere 20 percent, there would be a lot fewer rich around to afford the toys.

What’s worse is that this is a distraction from what might be accomplished. Since the oil crises in the 1970s, the amount of oil consumed per person has dropped by 15 percent, and consumption related to GDP by about 40 percent, all without any crash government programs or revolutionary technology—except perhaps SUVs. It is sadly typical of activists like Rifkin that voluntary accomplishments by the public are ignored, in favor of huge government programs and mandates. Let us hope policymakers will be more astute.

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January 2003

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