Blog: Kirk Westphal

Banks and offices are the buzz-kill of downtowns. Know why? Urban documentary filmmaker Kirk Westphal, founder of Westphal Associates, gives his view on this and other reasons why folks will do a hard stop and head no further down the block.

Post 3: Why Peak Oil is the most important thing you'll never hear

In 2005, energy researcher Robert L. Hirsch produced a report at the request of the US Department of Energy (he wrote a great 9-page summary of it here). In this report, a couple of sentences particularly grabbed my attention: "Failure to initiate timely mitigation with an appropriate lead-time is certain to result in very severe economic consequences... The world has never confronted a problem like this."

Soon after, Hirsch received instructions never to talk about this subject again.

What did he and other countries let out of the bag? Here's the gist: We're entering an era of decreased oil availability, we'll need to find a way to live with a lot less of it, and the likely consequences of inaction aren't pretty.

The desire for self reliance and weaning ourselves off foreign oil makes for good speeches. But policies to achieve this have never actually been attempted in this country with any degree of sincerity, as evidenced by this excellent segment:

The part that's not funny about this situation is that it looks like we're running out of time to do something meaningful about it. And while we dither, much of the roughly $500 billion dollars that U.S. drivers spend on gasoline every year not only leaves the country, but goes to people who arguably don't have our best interests at heart.

My goal in this final post is to 1) give you a glimpse of the global energy dynamics that will ultimately impact each of our day-to-day lives, and 2) look at some things we can do to shape these changes and emerge a more successful, resilient community.

Here are the basics: Oil (and its products like gasoline, diesel and jet fuel) powers the global economy, directly or indirectly, more than any other fuel, from manufacturing products to growing food to transporting people and goods (by cars, boats, trains and planes). And demand for oil is increasing. The world population is growing, and a growing proportion of those people are acquiring an oil-intensive Western lifestyle: driving cars, getting new homes and filling them with things, eating less local food.

On the supply side, oil production is plateauing. Companies haven't been finding new oil fields (the worldwide supply curve has "peaked" or will soon, which is where the term Peak Oil comes from). And it's getting more expensive to get more oil out of the ground, whether it's because it's in deep water, in the arctic, or mixed in with a bunch of rock, gone are the days of the Beverly Hillbillies "gushers" where you poke a hole in the ground and out it comes.

So it's not that the Earth is literally "running out" of oil, it just now requires an increasing amount of energy to get to it or process it. At some point, when the amount of the energy it takes to get oil approaches the amount of energy you get from burning it, extraction logically comes to a halt because your net "energy return" is zero. Along the way, following the laws of supply and demand, oil and everything that depends on oil becomes more expensive. (Not in a gradual way, either -- smooth supply curves don't apply when you're dealing with a finite resource. What you end up with are price increases punctuated by a series of spikes and shortages.) Again, no matter how much more efficient our products or way of life becomes, oil extraction will cease when net energy return is zero.

There's not a lot of argument about what I've laid out so far. Nor is there disagreement that even a "crash course" in retrofitting will take a long time to replace the most critical parts of the world's oil-powered infrastructure to run on potential temporary substitutes like natural gas and coal-fired electricity. (While there is debate about when exactly Peak Oil will occur, even the rosier projections of when we'd need to start preparing have passed us by.) And I say "temporary substitutes" because natural gas and coal are also finite, and will increase in price as demand shifts to them.

It's also acknowledged that it is physically impossible for any combination of fully-ramped-up renewable sources (solar, wind, hydroelectric) to pick up enough of the slack to avoid severe economic consequences when oil availability slows. And while they'll certainly help, the fraction of today's energy use that these renewable resources could replace is quite small --  there just isn't nearly the reliability or energy "density" in these resources to match the energy we're accustomed to from oil.

What can we do? At risk of being unfashionable, I'll say that we could learn a thing or two from our peers around the world. Pretty much every wealthy Western country has done something about their relationship with oil, except the US. The use of taxes is one area we've been particularly skittish about: here's what gas prices look like among this group:

Economists talk about government's role in "taxing people away" from products that a society wants their people to buy less of. By inflating the price, people buy less of the "bad things", they consequently put more of their money into "better things", the societal costs associated with the ill effects of using the "bad thing" are reduced, and the tax revenues that are generated can be put to productive use. We tax things like cigarettes and alcohol, but in the case of oil, there seems to be as much talk about the "political infeasibility" of raising gas taxes as the benefits of doing so. (More on this later!)

The Economist article associated with that chart, titled "Tax Away Vulnerability", says it well: "Petrol prices in America are substantially below levels elsewhere in the rich world, and this is almost entirely due to the rock bottom level of petrol tax rates. The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens." Our unwillingness to tax ourselves keeps the price low, enabling and strengthening our addiction, and making more of us financially vulnerable when oil prices do rise.

Even though we're late to the party, it seems to me that we would do well to implement a gradually increasing gasoline tax. And as it starts making more financial sense for people to look for alternatives, businesses here in the U.S., and Michigan in particular, that are creating products and technologies to help us ride down our oil binge would start to thrive. (The notion that such a tax would be a "job killer" is nonsensical: we already see jobs "shifting" to industries that are helping us transition to other fuels.) It takes time for these companies to grow, and our choice is between helping them grow here or waiting until the last minute and buying product from other countries because we weren't up to speed. And as for the question of what to do with the billions in tax revenue, well, I'm sure you could do less popular things than paying down our country's obscene credit card debt or shoring up Social Security.

In the event we don't see any progress on this issue at the federal or state level, the buck will most certainly stop either at your local government or your doorstep. Michigan cities don't have the state's permission to levy taxes on things like gas, so we have to improvise. How each municipality or region weathers oil shortages will hinge on many different questions: How vulnerable is your average citizen to higher fuel costs? Will they be able to get to work? (Sadly, southeast Michigan has one of the country's most vulnerable populations in terms of percent of household budget spent on transportation.) Will your businesses and institutions be able to function with higher fuel costs and lower citizen discretionary spending? How much more will it cost to run the operations of your city -- moving trucks around, piping and treating water? How will your average citizen react when they see quarter-mile long lines at gas stations or empty shelves at Wal-Mart? Are they prepared? Or resentful that "you should've done something about it?" (Following the lead of other cities, a minority of folks on the Environmental Commission thinks we should at least evaluate our vulnerability. See paragraph five of this Ann Arbor Chronicle article.)

If you're wondering why we haven't heard more about this predicament, there are very good reasons for it. Every year, there are millions of dollars spent on clouding the issue of peak oil. Oil companies are some of the most profitable in the world. Their management and shareholders survive on tomorrow's stock prices, and they do not want them jeopardized by any negativity. So they spend lots of money on lobbyists and political campaigns, not to mention gobs of advertising in magazines and on television (seen many pretty pictures of wind turbines lately?). They pressure lawmakers and reassure the public, "We're on it; everything's going to be okay." News outlets are rarely in the mood to bite advertisers' hands, with some exceptions (read "Real Men Tax Gas"). Heck, these companies even helped finance an entire anti-tax movement just to help make people feel foolish about starting the conversation about taxes. (And while the idea of more taxes isn't intrinsically appealing to most people, myself included, there's room to debate whether we're truly Taxed Enough Already or why these people in countries with the highest taxes don't seem angry about it.)

So you're on board and asking, "What can we do here, now?" There are plenty of ideas out there, but here are some things that I've done. I'd welcome other suggestions!

Call your people in the House and Senate in DC and in the Michigan House and Senate to begin, and tell them why you think a gas tax would help our energy security and benefit [insert your benefactor of choice]. You might even get a letter thanking you!

Save on heating and cooling costs at your home and business. These expenses are likely to increase along with all energy prices. Start with an energy audit and find out what the payback period will be on improvements. (We're already recouping money from ours, and the house is more comfortable!)

Practice using less gasoline: if you're thinking of moving, try not to move farther from work or day-to-day needs; try not buy a bigger car or additional one if you can avoid it (if you can afford a new one, and the majority of your driving amounts to less than 100 miles a day, consider going electric); take the bus, pump up those bike tires, dust off those walking shoes if you can make it part of your routine. (My family of four has done great with one car, plus the bus, a bike, the occasional carpool and a bunch of sneakers.)

Patronize local businesses. More of our food and products will have to be sourced locally when it gets more expensive to ship them long distances, so let's make sure to help them ramp up production now. (We like to make an event out of the Farmer's Market and pick up as much as we can before heading to the supermarket. It's the freshest and best food around.)

Speak out in support of policies locally that 1) give people more options to live closer to their jobs, families and shopping (and get around safely with less oil -- buses, sidewalks, bike lanes), 2) strengthen local businesses and industries, and 3) decrease your city government's vulnerability to higher oil prices.

Talk about these ideas with people you think should know, watch for news about it, Google around mainstream media or start from this primer by the Post Carbon Institute. If "intellectual horror movies" are more your thing, check out Collapse or The End of Suburbia.

Why not follow the federal government's advice and get a preparedness kit? (We saw what 4" of snow did to grocery store shelves.)

If you want to tap into a worldwide network of folks who have thought a lot about our energy future, have a chat with the friendly people from Transition Ann Arbor.

As I'm finishing this post, a politician appears to have successfully baited the White House on the subject of taxation: he's accusing the administration of wanting to increase gasoline prices in an attempt to make alternative fuels and efficient vehicles more competitive. The White House is responding, "We want to make gasoline as affordable as possible." What's especially disheartening is that this administration (as well as a bipartisan committee of deficit hawks) knows we need to tax gas much more. But asking people to make sacrifices just doesn't get you elected.

In the end, political rhetoric aside, I do think there's plenty of reason to be optimistic about life with less oil. The vast majority of human history had nothing to do with the sticky stuff, from the building of the pyramids to the Renaissance to the founding of this country. We have no choice but to accept our lot at the end of the Oil Age. Whether we transition with purpose --or on a prayer-- is up to us.