Putting the pieces together

One of the great challenges we face as a society is that we’re really not very good at seeing how the pieces interrelate.

We are so used to dealing with things in fragments. Each discipline requires “its” experts. Outsiders are held at bay.

The news (paper, radio or television, or website, it does not matter) can have stories from the financial world, from the energy world, from the transportation world, from the mining world, etc. all in the same issue, broadcast or home page, yet tying these together into a consistent picture is pretty much never done.

For instance, most of the news from the technology world is about new things. New products, new companies, new methods: we are used to the idea from this that there are armies of people beavering away creating new solutions that will fix any problem.

What we don’t do is differentiate between those things that have been scaled up and are known to work reliably as large-scale processes. A new solar panel design: great! The ability to build one hundred million of them a year, affordably, and install them at low cost? Ah, that’s usually missing.

So, too, with bio-reducers to produce energy. Yes, you can throw wood chips, used fish & chips shop oils, and the like into a cooker and convert the inputs into useful outputs. Does it scale? What are the sources of supply, and will they be maintainable? Does the energy return on (financial) investment and the energy return on energy invested in running the process make sense?

Fracking and other high tech oil extraction techniques have created new oil fields in the United States — and there’s been no shortage of optimism as a result. North Dakota has consumed billions in capital to get to the point where its Bakken formation wells produce half a million barrels of product per day. Given the longevity of these wells — the average is not good — and the average production per successful well, the state (just one of fifty) will require billions per year in new capital to maintain that flow, much less grow it. In turn, 500,000 bbl/day represents 1/35 of oil consumption in the United States. How you get “let’s join OPEC” or “we’ll be an oil exporter again” out of this escapes me.

Where the billions required will come from, when our fiscal policies have systematically destroyed capital formation for years with ultra-low interest rates, is a second question. But that would require someone to unify two domains.

Then there’s “do we have the right kind of refineries” and “do we have a suitable pipeline structure”? Oil is not a univocal product. A refinery that handles heavy product — oil sands from Canada or from Venezuela — is not the same as one that handles light sweet crude from under Los Angeles or what’s left in Texas, is not the same as one that handles a high-sulphur product, etc. It’s very easy, in fact, to find that all the remaining required infrastructure is the wrong kind, and so you have product backed up waiting to be refined here, while you’re closing refining plants there for lack of inputs.

Which, of course, has been going on these past few years. The owners of those East Coast American refineries, in turn, aren’t investing in replacements that could handle all this “new oil product”. Whether that’s because it’s a poor use of capital, the pipeline infrastructure to bring the product isn’t there, or for some other reason I leave to your investigation.

Unmentioned so far is the question of timing.

Consider, for a moment, the history of scaling things up, even when the prototypes and experiments work.

It generally takes decades to make widespread change happen. (The Internet, the thing usually held up as proof that change has deeply accelerated, rides on the back of infrastructure that already existed: it was only necessary to extend its speed, range and reach as demand grew. In turn, it took two decades to get to the point where the underpinnings of the Internet were “ready for prime time” — and while solving such basics as “domain naming standards and lookup” and “mail that works in more than one location” they completely forgot to build in security and authentication. It hadn’t been needed, after all, in the closed world of the prototypes and carefully extended network.

If you need decades, that means that what we have has to generate all the excess that carries us forward to that day, plus pays for all the capital work required to scale up, roll out, switch over.

Do we have decades? Our financial world is imploding around us as masses of debt overwhelm the system and destroy assets (and asset prices) once the central banks lose control even for a moment. (The destruction will — literally — occur at the speed of light.) “Capital” would appear to be in short supply and highly risky to count on.

Our existing infrastructure is often at end of life — we’ve been making do, deferring maintenance, etc. for years.

We use that infrastructure to operate a society totally dependent upon cheap energy. Whatever the “new sources” are, the one word that doesn’t apply to any of them is “cheap”. Indeed, most of the celebrated ones of late produce at a loss at today’s oil price, itself driven down by a fall in demand (from a society that’s sucking almost all its residual capital into exploration) and the backlogs of product waiting to be handled.

This is just a taste of why technology won’t be the saviour. Neither will discoveries. We’ve run the clock down.

It was too easy, back in 1980, to laugh at people like Jimmy Carter who added up the numbers and called for action, and to instead go with the “Morning in America” optimism of Ronald Reagan (who stopped all the transitional work Carter had started). It was too easy, back in 1972, to laugh at the Club of Rome report, to point to technology and say “no problem and no worries, eh?”. It was too easy to bury Margaret Thatcher and Brian Mulroney with their worries about what we were doing to the planet, never mention it again, and go “damn the torpedos, full speed ahead”. It’s always been too easy to defer maintenance and say “aw, hell, nothing’s going to happen” as we clamour for lower taxes.

The pages of the newspaper, the content of the news, says the bills are coming due — and in a hurry. But that is still buried between the articles.


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