Archive for September, 2005

>Katrina, Rita, and Peak Oil

2005/09/30 1 comment

>by Richard Heinberg

MuseLetter 162 (October 2005)

Like just about everyone else, I was transfixed by news reports from New Orleans and the Gulf coast of Mississippi and Alabama during the week of August 29. My wife Janet grew up in New Orleans, most of her family members still live there (to the degree that anyone can for the moment say they do), and we visit the city every year. The scenes were heart-wrenching and mind-boggling: an entire modern American metropolis had effectively ceased to exist as an organized society. The tens of thousands of survivors who had been unable or unwilling to evacuate prior to the storm were utterly helpless as they awaited rescue, some of them reduced to looting to obtain food and other necessities, a few even joining armed gangs.

Soon the Internet began pulsing with stories of how the Bush administration had exacerbated the tragedy by encouraging the destruction of wetlands and barrier islands, by appointing FEMA heads with no experience in disaster management, by focusing the agency’s resources on counter-terrorism rather than disaster relief, by refusing funds for upgrading New Orleans’ levees, and so on. By the end of the week, mainstream media had begun picking up on some of these stories.

The damage to oil production and refining facilities, while serious, was seemingly (according to most media sources) rather quickly repaired or compensated for.

Then, in the last week of September, a second major storm – Rita – temporarily shut down nearly all refining and production capacity and damaged some infrastructure not already affected by Katrina.

The American Petroleum Institute says that 58 Gulf of Mexico oil and gas platforms and drilling rigs were damaged or lost as a result of the first hurricane. Port Fourchon, the hub for oil and gas production in the gulf was able quickly to be pressed back into service. The Louisiana Offshore Oil Port (LOOP), which is the only port in the nation designed to receive supertankers, was also soon operational, though it is still unclear if it will be able to work at full capacity because a complete inspection of the underwater pipelines connecting it to the mainland has yet to be completed. Altogether, there are thousands of miles of undersea oil and gas pipelines that will take weeks to inspect. If the overwhelming destruction of the wetlands and barrier islands of southern Louisiana and Mississippi is any basis for judgment, there is likely to be damage to many of these pipelines, which will require months to fix. In addition, 21 of the region’s refineries were temporarily closed, with four likely to be off-line for many weeks or months (again, this is only the damage from Katrina). Relighting refineries is a process that takes about a month and requires large amounts of nitrogen delivered by pipeline or tank. Repair efforts will be hindered by the lack of a nearby functioning port or city from which to base operations. Intermittent communications in the Gulf region have slowed the recovery, as has a shortage of helicopters, boats, divers, and power.

The four refineries that remain shut after Katrina account for five percent of US gasoline production capacity. Damage to the Empire petroleum terminal, operated by Chevron, slowed the delivery of output from Gulf producers that were otherwise unaffected.

Katrina also inundated the important offshore oil service port at Venice, Louisiana, and significantly damaged natural gas processing plants that have the capacity to handle more than forty percent of Gulf output.

US gasoline refining capacity was practically maxed out before Katrina, and, as of September 24, was down about five percent from pre-storm levels. Some resulting shortfalls will last months.

Oil production from the Gulf was down by over half as of the third week of the month (about 800,000 barrels per day, or about ten percent of total US oil production capacity). The easiest of the repair operations – ones that consisted essentially of throwing switches and opening valves – were quickly completed; the remainder will be slow and arduous, and reduced flow rates are expected for a year or more.

All of this was before Hurricane Rita struck one of the most important oil-producing and -refining regions of the Gulf. We will not know the full extent of Rita’s impact for many more days; however, the Financial Times noted on September 27 that

“Hurricane Rita has caused more damage to oil rigs than any other storm in history and will force companies to delay drilling for oil in the US and as far away as the Middle East, initial damage assessments show”. The loss of drilling rigs means delays to new production projects stretching years ahead. It appears that at least one more large refinery will likely be down for weeks, and additional oil production capacity from existing fields will be shut in for up to eight weeks. The cumulative loss of oil production from shutdowns and damage to facilities is likely to amount to upwards of five percent of the year’s expected total. These are not minor problems.

Consequences for Peak Predictions

For oil and gasoline the bottom line seems to be that – once the market has figured out how serious the shortfalls are going to be and that releases from the Strategic Petroleum Reserve cannot make up for them over the long term – prices will climb, putting downward pressure on economic activity in the US and then the world as a whole.

As a result of Katrina and Rita, forecasts for the global oil production peak must be adjusted. Whereas previously it was possible to envision a definable peak occurring perhaps in 2007, the picture now is less certain. Shut-in production from the Gulf of Mexico will gradually come back on-line over the next year. Meanwhile, high prices will have destroyed some demand and sparked worldwide economic problems (more about that in a moment). As a result, we are likely to see a few years, possibly even a decade, of bumpy plateau during which production and prices gyrate unpredictably, with political and economic events – and perhaps further natural disasters – serving as triggers.

A decade from now we will probably be able to look back and confidently say that the world has passed its all-time oil production peak. But it will be difficult to pinpoint a certain moment in time when geology alone caused the downturn. Instead, we will be reflecting on years of periodic chaos, during which production declines were always seemingly explainable by immediate events.

So far the media have failed to grasp the storms’ consequences for natural gas availability and prices in North America. Here impacts are likely to be even more severe than for oil.

Up to 38% of US natural gas production from the Gulf was shut in by Katrina (about 3.8 billion cubic feet per day), according to the Minerals Management Service of the US Department of Interior; by now 78% is off-line as a result of Rita (only some of that results from damage; most is simply from prudent equipment shut-downs and employee evacuations). How much is likely to remain off-line for days, weeks, or months to come has yet to be determined, but having so much production shut down even for a few weeks will almost certainly result in supply shortfalls this winter. As readers of Julian Darley’s excellent book High Noon for Natural Gas well know, North America is approaching a natural gas supply crisis anyway due to depletion (prices tripled in the past five years, from $2 per thousand cubic feet to $6); now gas is selling for over $13 with no ceiling in sight, even before the commencement of the winter draw-down season.

In some respects the natural gas market is less elastic than that for oil or gasoline. We use gas for home heating, chemicals, plastics, nitrogen fertilizer manufacturing, and to power peaking electrical generating plants. Gas shortages could therefore mean that some people will have difficulty affording to heat their homes, farmers will be unable to afford fertilizer, manufacturers will face much higher materials costs, and power blackouts will increase in frequency. Again, these are effects we are likely to see beginning this winter.

All told, the economic consequences of the two storms may be dramatically worse than those of the 1973 Arab oil embargo. In the months ahead, as the administration attempts to fund a $200 billion rebuilding effort in the Gulf on the back of the Iraq occupation and record deficits, and as the Fed responds to the inflationary pressure of high energy prices by continuing to raise interest rates, we are likely to see the US descend into economic turmoil, with higher levels of unemployment and high relative prices for food, transportation fuel, electricity, and natural gas for home heating. The airline industry is at risk and we will probably see at least one more major carrier (in addition to Delta and Northwest, which filed this month) enter bankruptcy before year’s end. Soon air travel may no longer be the reliable and affordable means of transport we have come to expect and rely on. The trucking industry will also suffer.

And from these economic impacts there will be knock-on political consequences. George W Bush’s approval ratings, now around forty percent, are unlikely to recover if the nation lurches into recession. Americans have extremely high expectations for their personal futures, and only the oldest retirees remember what it was like to live during a depression. Dashed expectations will quickly translate into disorganized fury. The American people will scan the horizon for scapegoats, and, as the crisis snowballs, civil unrest may ensue. Efforts to repress localized, sporadic uprisings will only deepen the growing social rifts between haves and have-nots. Dissention may occur within the government itself as well: the Bush administration may seek to provoke conflict with foreign enemies (or foment more terrorist incidents on domestic soil) in order to justify crackdowns and to win allegiance from the masses; however, large segments of the increasingly disgruntled Defense Department, CIA, State Department, and other agencies might resist efforts in this direction, given the fiasco that ensued from their somewhat grudging acquiescence in the invasion of Iraq.

A Gaping Wound

The head of International Energy Agency forecast on September 3 that Hurricane Katrina could set off a worldwide energy crisis. “If the crisis affects oil products then it’s a worldwide crisis. No one should think this will be limited to the United States”, Claude Mandil told the German daily Die Welt. That same day, 26 nations – including the United States – agreed to release onto the general market some sixty million barrels of oil, gasoline, and other petroleum products from their emergency reserves over the next thirty days. This nearly unprecedented move (the IEA also opened its taps during the first Gulf War) was surely a measure of the seriousness with which national leaders viewed the problem.

While the bringing to market of stored oil and gasoline temporarily calmed speculators and prevented what would otherwise have been immediate price spikes, it cannot balance the global supply-and-demand equation for more than a few weeks (the world uses 84 million barrels of oil each day, after all). The trick may be repeatable in the aftermath of Rita; however, once these nations’ stores are gone, the world will have no cushion whatever in the event of further supply threats. In the best case, Gulf of Mexico oil and gas production will come back on line quickly and a few months or years will intervene before really serious shortages ensue. But in the worst case, Katrina and Rita may mark the beginning of the years- or decades-long inevitable unraveling of the petroleum-based industrial world system.

The United States is the center of that system. Think of New Orleans and the Gulf Coast as a gaping wound in the national body. Organisms need a steady flow of energy in order to maintain their ordered existence; a wound is like an intrusion of entropy within the system. When wounded, the body essentially takes energy away from other parts of itself to restore order at the site of injury. In ordinary times, nations as “organisms” do this very well. But in this case the timing is bad, as energy is scarce anyway (the wound was incurred at the onset of what will within months or years snowball to become a global energy famine); the nation has already been hemorrhaging trained personnel, materiel, and money in Iraq for three years; and the site of the wound couldn’t be worse: it is in the part of the national body through which much of its energy enters (the region is home to half the nation’s refining capacity and almost thirty percent of production). Thus it seems likely that, without deft leadership to muster popular cooperation in cutting demand and funding alternative sources, the available energy may not be sufficient to overcome the entropy that has been introduced; rather than being contained and eliminated, disorder may fester and spread.

Atlantis of the South?

Will New Orleans be rebuilt, and how? These questions are difficult to answer at the moment. Common sense would say that the city must be salvaged: the nation needs a port at the mouth of the Mississippi, and the port needs a city to support and service it. New Orleans is one of the few US cities with character and charm, and its residents desperately want to return to their homes. Moreover, the Bush administration needs the appearance of effectiveness, and a rotting and molding New Orleans offers more than a mere emblem of incompetence.

As of mid-September, it seemed that the only event likely to prevent rebuilding would be another strong hurricane hitting the Gulf this season. Nature didn’t take long in sending that second storm.

Rebuilding, to the extent that it occurs, may proceed in the context of a national economy that is crippled, and a global complex system of production and trade that is starting to lose its battle against entropy.

Moreover, the unfolding reports of geo-ecological changes inflicted by Katrina on the wider southern Louisiana region suggest that New Orleans’ survival in any recognizable form may be threatened by factors beyond politics or economics. Without wetlands and barrier islands – previously under attack by developers, now largely destroyed by the storm – the city will be even more vulnerable, capable now of being overwhelmed by much smaller hurricanes.
Before Rita, a battle loomed over the form that rebuilding would take: would the government put up homes for the tens of thousands of mostly black poor, or a vacation site for the well-off? Would New Orleans end up as a whiter, more Republican city? And would the administration merely use the immense recovery budget ($200 billion promised for Katrina alone) to line the pockets of campaign contributors like Halliburton?

Now, after renewed flooding from levee breaches from Rita, more questions may be raised as to how much of the city should be rebuilt. In any case, whether New Orleans ends up as a Creole Venice, a jazz-and-gumbo Disneyland, or a Spanish-moss Atlantis, it is unlikely ever to be recognizable by the majority of its former residents.

Deliberate Relocalization or Haphazard Disintegration?

During the week of the Katrina disaster a mass-mailed letter appeared in my box, obviously composed and sent before the hurricane was on anyone’s mind (at the time the letter arrived, I was in Guatemala – one of the many beautiful and resource-rich but fiscally poor Latin American nations still run by remote control from Langley, Virginia). The missive was from the Middlebury Institute, which “hopes to foster a national movement in the United States” that will “place secession on the national political agenda; develop secessionist and separatist movements here and abroad; … create a body of scholarship to examine and promote the ideas of separatism; and work carefully and thoughtfully for the ultimate task, the peaceful dissolution of the American Empire”. The authors, Kirkpatrick Sale and Thomas Naylor, note that “the national government has shown itself to be clumsy, unresponsive, and unaccountable in so many ways” that “power should be concentrated at lower levels”. They also point out that “the separatist cum independence movement is the most important and widespread political force in the world today”, the United Nations having grown from 51 nations in 1945 to 193 in 2004.

Sale’s and Naylor’s effort seems quixotic, yet it may be one whose timing is uncannily opportune. The American people are looking to recent events in the Gulf and asking, “Can we rely on the Federal government for protection, service, and guidance?” While low approval ratings for Bush seem warranted (it is difficult to avoid understatement in this regard), they are also a danger signal. The man will most likely remain in office for the next three years, barring an unforeseen personal health crisis or another “lone gunman” scenario for which America is infamous. During that time, unless the soon-to-be-indicted (let us pray) Karl Rove can do something to inspire greater confidence in the Oval Office, the nation will suffer from a lack of common assurance in the legitimacy and competence of its leadership. Without the presence of a coherent opposition party, the consequence is likely to be a splintering of allegiances and a drift toward factionalism and regionalism. Sale and Naylor would no doubt say that this is a good thing (and, in principle, I agree), but in the instance the process will be messy to say the least.

A couple of insightful locutions have recently caught my ear – one from the lips of Permaculturist David Holmgren, who referred to the “drip-feed” of industrial society; another from Julian Darley, who said that “We humans are the only creature that does not live within walking, swimming, wriggling, or flying distance from its food”. These are evocative and concise ways of summarizing our dependency on a social structure that is overly mechanized, incomprehensibly elaborate, beyond our individual control, and inherently unsustainable.

This structure is hideous in its impacts on nature, culture, and the human soul. But because it has almost fully replaced whatever self-reliant, subsistence, place-based cultures that preceded it, it has left us with no immediate alternatives. Unless we can recreate those alternatives very quickly, we will be in deep trouble.

We still need clean water, food, and shelter, just as our ancestors did. They supplied for themselves those necessities, which now come from inscrutable corporate or governmental bureaucracies. Electricity – which was a luxury only a few generations ago, and still is for large numbers in poorer countries – is now a basic necessity for nearly everyone in the developed nations. Electricity is not something a hunter-gatherer can go out and find or make (unlike water, food, and shelter), though it is possible for communities to generate it using intermediate-level technologies. The absence of electricity in a modern city throws life into ruin: nothing operates. The way most of us get electricity now depends on highly complex tools made of mined and refined materials made by still other elaborate tool systems energized by globe-spanning resource delivery systems, all embedded in complicated financial and social networks. The electrical grid is vulnerable to disruptions in any of those systems.

In short, the disintegration of large social structures – desirable though it may be for a raft of reasons – is entirely foreseeable, but is likely to entail more than mere discomfort unless we manage to undertake the process with unprecedented degrees of forethought and coordination.

The Next Disaster

No one can say there wasn’t sufficient warning prior to Katrina. FEMA had for years included a hurricane-over-New-Orleans scenario in its top-three list of likely natural disasters facing the US. Scientific American had run a lengthy article discussing the potential damage resulting from the flooding of the city by a break in its levees. And the New Orleans newspaper, the Times Picayune, had published an extensive three-part series outlining both the risks and the actions needed to avert the worst of the consequences.

In the event, it was as though no one had ever thought such a thing could happen. By now, the story is well known: Though Louisiana’s governor issued an immediate request for assistance, FEMA director Mike Brown waited until hours after Hurricane Katrina had already struck the Gulf Coast before asking his boss, the head of Homeland Security, to dispatch 1,000 employees to the region; Brown gave them two days to get there. FEMA’s top officials were political appointees with little or no background in emergency management. Prior to his FEMA appointment, Brown himself had served for eleven years as chairman of the International Arabian Horses Association, where he spent a year investigating whether a breeder had performed liposuction on a horse’s rear end. He was asked to leave that job. Soon after questions arose as to whether he had padded his embarrassingly thin resume, Brown was quietly forced to resign from his FEMA position (though he is still on the payroll).

In the event, hundreds died, while hundreds of thousands were rendered homeless. Tens of thousands were stranded in New Orleans with no way to evacuate and with no sources of clean water or food. Property damage continues to be calculated, with estimates in the low hundreds of billions of dollars. There was much that could not have been prevented, such as the overwhelming destruction of the forests of southern Mississippi. But there was much that could have been.

The response to Rita appears to have been far swifter – no doubt largely because of the ugly public-relations fallout from the administration’s handling of Katrina. Is the government’s reaction to the challenge of Peak Oil likely to resemble that of the former or latter calamity more closely?

As with Katrina, we can see Peak Oil coming from miles (or years) away. We have a government-sponsored report (the Hirsch Report from SAIC) which says that Peak Oil is inevitable, that it may have dire consequences, and that the government should give top priority to preparing for it. We have prominent industry leaders and analysts like Matt Simmons and T Boone Pickens saying that the peak is occurring virtually now.

Nevertheless, actual preparations on the part of government appear practically non-existent. No administration officials have publicly discussed the Hirsch Report. Investments in alternative energy supply, and in demand-reducing schemes, exist only as miniature projects serving the purpose of political window-dressing. In short, the US government appears to be preparing its citizens for Peak Oil in approximately the same way it prepared the citizens of New Orleans for Hurricane Katrina.

Is there are deeper pattern here? I think so. In my view, the US Federal government is quite literally terminally dysfunctional. There are all sorts of reasons for this. Many books have been written about the hypocrisy, ineptness, and even criminality of Washington’s elite, and how matters of state managed to degenerate so utterly and completely during the past few decades and especially the past few years. But the bottom line, for me, is this: democracy is dead (if you think I’m exaggerating, please read Mark Crispin Miller’s excellent and frightening essay “None Dare Call it Stolen” in the August issue of Harpers, available online at the site), and the functionality of the government itself, as a guarantor of rights and entitlements, is nearly gone. The US leadership has given up on the republican (with a small “r”) form of government and is preparing a totalitarian future for its citizens. It will soon be unable to deliver on its economic promises, built up over past decades; so, rather than admitting that fact and asking for a new consensus founded on shared but dramatically reduced material expectations, it is hunkering down for the inevitable class conflict. One can hardly write such words without experiencing strong emotions – principally rage, sadness, and fear. We Americans were brought up to admire the checks and balances among the branches of our government, and the guarantees of freedom and fairness in the Constitution.

Now we have the test case of Jose Padilla, a US citizen held in prison for years without benefit of charges or trial. The highest court to hear his case so far has held that the government may continue imprisoning him. Evidently the American judicial system believes that there are two Constitutions – one for peacetime (in which citizens are guaranteed a trial), and one for wartime (in which the President can summarily strip any citizen of all rights). Of course, the President can also decide when we are at war: after all, a state of war against Iraq – or against “terror”, as if such a thing were possible – has not been declared by Congress (which has the sole power to do so, according to the Constitution), yet the courts agree with the President that a state of war nevertheless exists; given the fact that the Iraq occupation is likely to persist for many years, perhaps decades, this means the “peacetime Constitution” is effectively defunct.

Next stop for the Padilla case: the Supreme Court.

How I would have loved to be a Senator at the hearings for the confirmation of John Roberts as Chief Justice of the US Supreme Court (Roberts, of course, is one of the judicial proponents of the new and unprecedented citizen category of “enemy combatant”). I would have asked him, “Would it not be your job, sir, as Supreme Court Justice, to uphold the US Constitution?” Once I’d obtained his inevitable affirmative reply, I would have continued: “Then where in the Constitution does it say that all the rights of any citizen can be revoked by the President at his sole discretion? Don’t you think that an interpretation of the Constitution that holds that the Constitution itself can be held null and void at the whim of the President must constitute the highest and most dangerous form of so-called judicial activism?”

Maybe one of the Democratic Senators questioning Roberts actually had the guts to ask that; I don’t know: I wasn’t able to listen to the hearings in their entirely. Ultimately it doesn’t matter much. The deal is done; the Constitution is cooked. National elections are now a farce and the rights of citizens exist only at the pleasure of the Executive. That is the definition of a dictatorship. The only choice that may still be available to the American people is, Will their police state be administered by nasty, stupid people; or by nice, intelligent people? But even that choice is likely more illusory than real.

What’s as important to realize as that we have a dictatorship is why we now have one. Surely, this can be seen as simply the latest twist in the same old game of power and corruption that’s been playing itself out since the founding of the Republic – no, since the beginning of civilization itself. But there’s more. Now the folks in charge realize that it will soon be impossible to maintain the entitlements that have enabled the US to function as a quasi-democracy for many long. If a minority is to preserve its comforts, this will be at the expense of shattered living standards for the majority. The only way to keep a lid on such circumstances, the elites have evidently concluded, is with brutal force. For a time, a large segment of the population can be cajoled into supporting the regime by cowing the media and shaping its messages, and by manipulating hot-button issues (religion, sex, and terrorism) in the political arena. But in the end popular support is optional.

I’m sorry if I sound dire, but I see no point in continuing to pretend that these fundamental changes to our society have not occurred, or are not occurring.

In short, it appears to me that the US government has neither the capability nor the intention of protecting its citizens from the impacts of the next disaster. Please, prove me wrong.


Katrina tells us just how bad things could get if society disintegrates chaotically rather than cooperatively. And it tells us what we should do to avoid the worst of the peril.

First, place is important – both geographic and social. Be around people you trust – people with cool heads who know how to work with others. Try not to be in a place where folks are likely to become violent and desperate (that is, where they rely overwhelmingly on the “drip feed” and have no alternatives). And try to be in an area with soil, water, and weather that can provide for your needs and those of your family and community.

Anticipate events. When warnings appear, pay attention and respond.

Re-localize now, ahead of the rush. Don’t wait to begin forming networks of mutual aid. After Katrina, it was volunteer local citizens groups that did the most effective rescue work. Only later did the Feds come in with helicopters and bullhorns, and in many instances they just got in the way.

Of course, with Peak Oil the breakdown will not be as sudden as it was in the case of New Orleans, and it hopefully will not be as complete. On the other hand, for Katrina victims there was the assurance (or illusion?) that their chaos was unusual and isolated, and that there was a still-functional outside world that could come to their assistance – not soon enough perhaps, but eventually. With Peak Oil, there will be no “outside” to come to the rescue. Everywhere will be some version of New Orleans.

At recent presentations – to city and county officials in Bloomington, Indiana, and Sebastopol, California; at the Second Annual Conference on Peak Oil and Community Solutions in Yellow Springs, Ohio; and at a prominent conference in Frederick, Maryland with Matt Simmons, Ken Deffeyes, and Representative Roscoe Bartlett – I have offered basically the same advice as contained in this essay. And I see increasing willingness, especially at the local level, to respond. But the challenge is enormous and time is short.

As a result of the two recent storms we seem to have been catapulted prematurely into an economically, socially, and politically volatile period. From here on out, there will probably be no more business as usual.

Richard Heinberg is the author of Powerdown – Options and Actions for a Post-Carbon World (New Society Publishers, 2004). He is a journalist, educator, editor, and lecturer, and a Core Faculty member of New College of California, where he teaches courses on “Energy and Society” and “Culture, Ecology and Sustainable Community”.

If you wish to republish any of these essays or post them on a web site, please contact for permission.

Bill Totten

Categories: Uncategorized

>Cap and Trade

>On Monday, September 26th, I posted an essay entitled “Economics in a Full World” by Herman E Daly from the September 2005 edition of Scientific American.

I received the following excellent comment, with which I concur fully, from Patrick Bond:

“There are lots of good ideas here, but this one isn’t:”

He was referring to the following paragraph from Daly’s essay:

“The policy most in accord with maintaining natural capital is the cap-and-trade system: a limit is placed on the total amount of throughput allowed, in conformity with the capacity of the environment to regenerate resources or to absorb pollution. The right to deplete sources such as the oceans or to pollute sinks such as the atmosphere is no longer a free good but a scarce asset that can be bought and sold on a free market, once its initial ownership is decided. Cap-and-trade systems that have been implemented include the Environmental Protection Agency’s scheme for trading sulfur dioxide emission permits to limit acid rain and New Zealand’s reduction of overfishing by individual transferable fish-catch quotas.”

Mr Bond pointed out that a year ago, a group of lefties offered the following in response to the logic of commodifying the air for carbon trading:-

Climate Justice Now!

The Durban Declaration on Carbon Trading

As representatives of people’s movements and independent organisations, we reject the claim that carbon trading will halt the climate crisis. This crisis has been caused more than anything else by the mining of fossil fuels and the release of their carbon to the oceans, air, soil and living things. This excessive burning of fossil fuels is now jeopardising Earth’s ability to maintain a liveable climate.

Governments, export credit agencies, corporations and international financial institutions continue to support and finance fossil fuel exploration, extraction and other activities that worsen global warming, such as forest degradation and destruction on a massive scale, while dedicating only token sums to renewable energy. It is particularly disturbing that the World Bank has recently defied the recommendation of its own Extractive Industries Review which calls for the phasing out of World Bank financing for coal, oil and gas extraction.

We denounce the further delays in ending fossil fuel extraction that are being caused by corporate, government and United Nations’ attempts to construct a “carbon market”, including a market trading in “carbon sinks”.

History has seen attempts to commodify land, food, labour, forests, water, genes and ideas. Carbon trading follows in the footsteps of this history and turns the earth’s carbon-cycling capacity into property to be bought or sold in a global market. Through this process of creating a new commodity – carbon – the Earth’s ability and capacity to support a climate conducive to life and human societies is now passing into the same corporate hands that are destroying the climate.

People around the world need to be made aware of this commodification and privatization and actively intervene to ensure the protection of the Earth’s climate.

Carbon trading will not contribute to achieving this protection of the Earth’s climate. It is a false solution which entrenches and magnifies social inequalities in many ways:

* The carbon market creates transferable rights to dump carbon in the air, oceans, soil and vegetation far in excess of the capacity of these systems to hold it. Billions of dollars worth of these rights are to be awarded free of charge to the biggest corporate emitters of greenhouse gases in the electric power, iron and steel, cement, pulp and paper, and other sectors in industrialised nations who have caused the climate crisis and already exploit these systems the most. Costs of future reductions in fossil fuel use are likely to fall disproportionately on the public sector, communities, indigenous peoples and individual taxpayers.

* The Kyoto Protocol’s Clean Development Mechanism (CDM), as well as many private sector trading schemes, encourage industrialised countries and their corporations to finance or create cheap carbon dumps such as large-scale tree plantations in the South as a lucrative alternative to reducing emissions in the North. Other CDM projects, such as hydrochlorofluorocarbons (HCFC)- reduction schemes, focus on end-of pipe technologies and thus do nothing to reduce the impact of fossil fuel industries’ impacts on local communities. In addition, these projects dwarf the tiny volume of renewable energy projects which constitute the CDM’s sustainable development window-dressing.

* Impacts from fossil-fuel industries and other greenhouse-gas producing industries such as displacement, pollution, or climate change, are already disproportionately felt by small island states, coastal peoples, indigenous peoples, local communities, fisherfolk, women, youth, poor people, elderly and marginalized communities. CDM projects intensify these impacts in several ways. First, they sanction continued exploration for, and extraction, refining and burning of fossil fuels. Second, by providing finance for private sector projects such as industrial tree plantations, they appropriate land, water and air already supporting the lives and livelihoods of local communities for new carbon dumps for Northern industries.

* The refusal to phase out the use of coal, oil and gas, which is further entrenched by carbon trading, is also causing more and more military conflicts around the world, magnifying social and environmental injustice. This in turn diverts vast resources to military budgets which could otherwise be utilized to support economies based on renewable energies and energy efficiency.

In addition to these injustices, the internal weaknesses and contradictions of carbon trading are in fact likely to make global warming worse rather than “mitigate” it. CDM projects, for instance, cannot be verified to be “neutralizing” any given quantity of fossil fuel extraction and burning. Their claim to be able to do so is increasingly dangerous because it creates the illusion that consumption and production patterns, particularly in the North, can be maintained without harming the climate.

In addition, because of the verification problem, as well as a lack of credible regulation, no one in the CDM market is likely to be sure what they are buying. Without a viable commodity to trade, the CDM market and similar private sector trading schemes are a total waste of time when the world has a critical climate crisis to address.

In an absurd contradiction the World Bank facilitates these false, market-based approaches to climate change through its Prototype Carbon Fund, the BioCarbon Fund and the Community Development Carbon Fund at the same time it is promoting, on a far greater scale, the continued exploration for, and extraction and burning of fossil fuels – many of which are to ensure increased emissions of the North.

In conclusion, ‘giving carbon a price’ will not prove to be any more effective, democratic, or conducive to human welfare, than giving genes, forests, biodiversity or clean rivers a price.

We reaffirm that drastic reductions in emissions from fossil fuel use are a pre-requisite if we are to avert the climate crisis. We affirm our responsibility to coming generations to seek real solutions that are viable and truly sustainable and that do not sacrifice marginalized communities.

We therefore commit ourselves to help build a global grassroots movement for climate justice, mobilize communities around the world and pledge our solidarity with people opposing carbon trading on the ground.

Signed 10 October 2004
Glenmore Centre, Durban, South Africa

Bill Totten

Categories: Uncategorized

>Crying Sheep

>We had better start preparing for a decline in global oil supply

by George Monbiot

Published in the Guardian (September 27 2005)

Are global oil supplies about to peak? Are they, in other words, about to reach their maximum and then go into decline? There is a simple answer to this question: no one has the faintest idea.

Consider these two statements:

1. “Last year Saudi Aramco made credible claims that as much as 500 billion to 700 billion barrels remain to be discovered in the kingdom”.

2. “Saudi Arabia clearly seems to be nearing or at its peak output and cannot materially grow its oil production”.

The first comes from a report by Energy Intelligence, a consultancy used by the major oil companies {1}. The second comes from a book by Matthew Simmons, an energy investor who advises the Bush administration {2}. Whom should we believe? I have now read 4000 pages of reports on global oil supply, and I know less about it than I did before I started. The only firm conclusion I have reached is that the people sitting on the world’s reserves are liars.

In 1985, Kuwait announced that it possessed fifty percent more oil than it had previously declared. Had it just discovered a new field? Had it developed a new technology, which could extract more oil from the old fields? No. OPEC, the price-fixing cartel to which it belongs, had decided to allocate production quotas to its members based on the size of their reserves. The bigger your stated reserve, the more you were allowed to produce {3}. The other states soon followed Kuwait, adding a total of 300 billion barrels to their reserves {4}: enough, if it existed, to supply the world for ten years. And their magic oil never runs out. Though extraction has long outstripped discovery, Kuwait posts the same reserves today as it claimed in 1985 {5}.

So we turn to the US Geological Survey for an answer, and find that its estimates of global oil supply are as reliable as the Pentagon’s assessments of Iraqi weapons of mass destruction. In 1981 it said we possessed 1719 billion barrels of oil {6}. In 2000, 2659 {7}. Yet the discovery of major oil fields peaked in 1964 {8}. Where has it come from?

It is true to say that oil reserves are not fixed. As technology improves or the price increases, oil that was formerly too expensive to extract becomes available. But the oil geologist Jean Laherrere points out that the survey’s estimate “implies a five-fold increase in discovery rate and reserve addition, for which no evidence is presented. Such an improvement in performance is in fact utterly implausible, given the great technological achievements of the industry over the past twenty years, the worldwide search, and the deliberate effort to find the largest remaining prospects.” {9}

The current high oil prices are the result of a shortage of refineries – exacerbated by the hurricanes in the Gulf of Mexico – rather than a global shortage of crude. But behind that problem lurks another. Last week Chris Vernon of the organisation PowerSwitch published figures showing that while total global oil production has risen since 2000, the production of light sweet crude – the kind that is easiest to refine into motor fuels – has fallen, by two million barrels a day {10}. This grade, he claims, has already peaked. The refinery crisis results partly from this constraint: there aren’t enough plants capable of processing the heavier grades.

And next in the queue? Who knows? All I can say is that Bush himself does not appear to share the Geological Survey’s optimism. “In terms of world supply”, he said in March, “I think if you look at all the statistics, demand is outracing supply, and supplies are getting tight”. {11} What has he seen that we haven’t?

If the figures have been fudged, we’re stuffed. That might sound extreme, but it is not my conclusion. It is that of the consultants hired by the US Department of Energy. In February this year, the department released a report called “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management”. {12} I say “released”, for it was never properly published. For several months the only publicly available copy was lodged on the website of the Hilltop High School in Chula Vista, California. {13}

The department’s consultants, led by the energy analyst Robert L Hirsch, concluded that “without timely mitigation, the economic, social, and political costs will be unprecedented”. It is possible to reduce demand and to start developing alternatives, but this would take “ten to twenty years” and “trillions of dollars”. “Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades”, which would cause problems “unlike any yet faced by modern industrial society”. {14}

Of course, we have been here before. Oil analysts and environmentalists have warned of disappearing reserves ever since drilling began, and they have always been proved wrong. According to people like the Danish statistician Bjorn Lomborg, this is because the industry is self-regulating. “High real prices deter consumption and encourage the development of other sources of oil and non-oil energy supplies”, he says. “Since searching costs money, new searches will not be initiated too far in advance of production. Consequently, new oil fields will be continuously added as demand rises … we will stop using oil when other energy technologies provide superior benefits.” {15}

It is beginning to look as if he is wrong on all counts. As the Economist magazine pointed out on September 10th, “demand for petrol is pretty inelastic in the short term” {16}, because people still have to go to work, however much it costs. According to the analyst it cites, “it would take a doubling of petrol prices to reduce American petrol consumption by just five percent”. {17} Lomborg’s idea that companies can just go out and find new oil when demand rises suggests that he believes geology is as malleable as statistics. One day – or so we should hope – a superior technology will certainly emerge, but cheap alternatives to liquid fuels are currently decades away. Yes, the pessimists have been crying wolf for almost a century. But better that, perhaps, than crying “sheep” when the wolves appear.

The Hirsch report has no truck with those who believe in the magic of the markets. “High prices do not a priori lead to greater production. Geology is ultimately the limiting factor.” {18} There are plenty of oil shales, tar sands and coal seams available for turning into liquid fuels, but it would take years and a massive investment before enough came online. Hirsch compares the projections of the oil optimists to those of the gas optimists in the late 1990s, who promised “growing supply at reasonable prices for the foreseeable future” in the US and Canada. Today the same people are bemoaning the deficit. “The North American natural gas market is set for the longest period of sustained high prices in its history, even adjusting for inflation … Gas production in the United States (excluding Alaska) now appears to be in permanent decline”. {19}

“The bottom line”, Hirsch says, “is that no one knows with certainty when world oil production will reach a peak, but geologists have no doubt that it will happen”. Our hopes of a soft landing rest on just two propositions: that the oil producers’ figures are correct, and that governments act before they have to. I hope that reassures you.


1. Energy Intelligence, 2005. High Oil Prices: causes and consequences.

2. From Matthew Simmons, 2005. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Wiley. Quoted by Peter Maass, 21st August 2005. The Breaking Point. New York Times.

3. Adam Porter, 15th July 2005. How much oil do we really have?

4. Jean Laherrere, 2nd May 2000. Is USGS 2000 Assessment Reliable?

5. Adam Porter, ibid.

6. J W Schmoker and T S Dyman, 2000. Chapter RV, US Geological Survey, World Petroleum Assessment 2000.

7. US Geological Survey, 2000. World Petroleum Assessment 2000. Executive Summary.

8. Cited in Aaron Naparstek, 2nd – 8th June 2004. The Coming Energy Crunch. New York Press Volume 17, Issue 22.

9. Jean Laherrere, ibid.

10. Chris Vernon, 26th August 2005. OPEC reveal global light sweet crude peaked.

11. George W Bush, 16th March 2005. Press conference.

12. Robert L Hirsch, Roger Bezdek and Robert Wendling, February 2005. Peaking Of World Oil Production: Impacts, Mitigation, & Risk Management. US Department of Energy. This is now available at

13. Richard Heinberg, 30th July 2005. Where is the Hirsch Report?

14. Robert L Hirsch, Roger Bezdek and Robert Wendling, ibid.

15. Bjorn Lomborg, 2001. The Skeptical Environmentalist. Cambridge University Press.

16. No author, 10th September 2005. No Safety Net. The Economist.

17. Philip Verleger, the Institute for International Economics.

18. Robert L. Hirsch, Roger Bezdek and Robert Wendling, ibid.

19. Hirsch et al are citing Cambridge Energy Research Associates, Spring 2004. The Worst is Yet to Come: Diverging Fundamentals Challenge the North American Gas Market. In 2001 they said “The rebound in North American gas supply has begun and is expected to be maintained at least through 2005. In total, we expect a combination of US lower-48 activity, growth in Canadian supply, and growth in LNG imports to add 8.95 Bcf per day of production by 2005”. (R Esser et al, Natural Gas Productive Capacity Outlook in North America – How Fast Can It Grow? Cambridge Energy Research Associates, Inc. 2001.)

Bill Totten

Categories: Uncategorized

>You Are Responsible!

2005/09/27 2 comments

>by Nikos Raptis

ZNet Commentary (September 26 2005)

It is you, ordinary Americans, who are responsible for these crimes: “In sworn testimonies to army investigators, soldiers … tell of a shackled prisoner being forced to roll back and forth on the floor kissing the boots of his two interrogators as he went. Yet another prisoner was made to pick plastic bottle caps out of a drum mixed with excrement and water as part of a strategy to soften him up for questioning.” The soldiers and the torturers were US soldiers.

“The findings of Dilawar’s autopsy were succinct … what killed him was the same sort of ‘blunt force trauma to the lower extremities’ that had led to Habibullah’s death”.

“One of the coroners … at a pretrial for Brand … (said) the tissue in the young man’s legs ‘had basically being pulpified’ “.

” ‘I’ve seen similar injuries in an individual run over by a bus’, the coroner Lieutenant Colonel Elizabeth Rouse added”.

Dilawar was a 22-year-old Afghan man, a taxi driver who just happened to drive by a US military base. Willie Brand is a Specialist (!) in the US Military and one of the torturers of Habibullah. Habibullah was “a portly well-groomed Afghan”.

All the above sentences in quotation marks can be found in a New York Times article (May 21 2005) by Tim Golden written in collaboration with Ruhallah Khapalwak, Carllota Gall, David Rohde, and Alain Delaqueriere, who all deserve the praise of all the people in the world for revealing these atrocities.

If I, a member of the semi-Third World society of Greece, know about this information found in the New York Times it is reasonable to expect that ordinary Americans, members of a privileged and advanced society, know or could know that information also. If you know what is going on and you do not act you are RESPONSIBLE for these crimes. If you do not know, again you are responsible, for not having the moral urge to know about these crimes.

The conclusion of an honest observer will be that you know!

In a ZNet Commentary of December 12 2001 a question was raised which is historically of crucial significance. The question: “Does the ordinary American KNOW what the American Government has been doing to the other peoples of the world?” (Emphasis added) The answer given, then, was: “The majority of the Americans have (at least) a VAGUE idea of what is going on”. (Again, emphasis added)

The notion of you having only a “vague idea” was based on the assumption that you could not readily know the details. Details as these revealed by Yiannis Leloudas, a Greek poet and archaeologist, tortured by the US supervised 1967 military dictatorship in Greece, who in 1969 wrote:

“One does not mind the lack of food, but the lack of water is excruciating … a guard … allowed me to go to the toilet, where I managed to drink from the water pipe leading to the Turkish (type) toilet, my hands and my lips touching the excrements of others like myself left floating there …” These details found in the book “Barbarism in Greece” by James Becket, a Harvard Law School graduate, could not be available to the millions of ordinary Americans as there were only a few hundred copies of the book. But the details of more recent crimes are in the mainstream press available to millions of ordinary Americans.

Quite recently (May 5 2005) in the International Herald Tribune there was the photo of a young white female, Private 1st Class Lynndie England, a member of the US military. Ms England exudes pride and self-confidence in the photo. In an instinctive flash, this photo brought to my mind the photo of another white female, Ilse Koch, which I had seen as a teenager in the Greek newspapers in 1947. Again, that (rather pretty) female face had pride and self-confidence.

Ilse Koch was a female guard in the Nazi Sachsenhausen concentration camp near Berlin. In 1937 she married Otto Koch who became the Commandant of the infamous Buchenwald concentration camp. In Buchenwald, as the wife of the Commandant, she selected prisoners to be killed in order to have lamp shades made from their tattooed skin.

For this she gained the “title” of the “Bitch of Buchenwald”. In 1947 she was tried by a war crimes tribunal and sentenced to a life term. In 1948, General Lucius Clay of the US Army (who in 1961, almost single-handedly started a nuke war with the Soviets, see ZNet Commentary of November 15 2001) commuted that sentence to four years’ time!

Eventually, she was tried by a German court on charges of her having abused and killed German inmates and sentenced to life, again. She spent the rest of her life in prison until she committed suicide in 1967.

Is it incorrect to compare Lynndie England to Ilse Koch? Whether or not Koch had lamp shades made out of human skin is not the crucial factor in this problem. What is of paramount importance is that the torture, even by insulting, of even a single human that is helpless and powerless is a crime. The acts of Koch and England show that through their upbringing, et cetera, they had become crooked personalities, harmful to their fellow-humans.

[Note: All my life I held the view that women were more benign or benevolent beings than men, even more rational. Of course, most ladies that heard this view thought that I was naive, because only a female can really understand her peers. Lately, I have being doubting about the correctness of this view of mine, yet I still believe that women are kinder.]

The argument against all the above usually is: what can the ordinary people do, even if they knew about the crimes? It is the Government or the President that are responsible.

The answer to you, the ordinary Americans is: yes, you can! Because, you had already acted against the violence of the US Government or the US President, in the past. You had scared the shit out of Nixon with your movement against the War in Vietnam. (Even if it was the US economic elites who stopped the war, their turn for your fury was pending.)

You can do the same now. The President and the Congressmen should get the message that you do not APPROVE of their crimes. Approval, that you have granted to them now by waving little American patriotic flags.

The President and the Congressmen are irrelevant, they are “cardboard” figures playing theater inside the US, while they massacre people in other countries in your name. It is you, the ordinary Americans, the ones that have flesh and blood substance, who matter. But, it is also you, the ordinary Americans, that make the cardboard figures relevant, by your approval of their acts.

Some Greek journalists call the US President: The “planetarch” (the ruler of the planet, in Greek). The term is used half in jest. However, without probably intending, they denote the irrelevance of the “planetarchs” in history. Can anyone be a planetarch? Take Hitler, was he a planetarch? It was the ordinary Germans that made him relevant.

What if Johann Elser was successful in his attempt to assassinate Hitler in 1939 (see ZNet Commentary of December 16 2000). And what if (a big if) the ordinary Germans were dancing in the streets for stopping the (by then) obnoxious murderer. Wouldn’t that dancing have made Hitler irrelevant?

The reference to the Nazis was intentional. The twelve-year long Nazi period should be distinguished in the pre-World War II (preparatory) period and the (actual) World War II period. It seems that the US just passed its own Nazi-preparatory period and is advancing to its (actual) war-against-the-peoples-of-the-world period. Of course, it rests with me to prove that the comparison of the US to the Nazis is not an exaggeration (which I plan to do in a future Commentary).

But if I am right, it means that you, the ordinary Americans, are in the position of the ordinary Germans of 1939. Also, if I am right, for Bush (son of Barbara), for Rumsfeld, for ConDolcezza(!) Rice, et cetera ahead lies a Nuremberg Tribunal. The crimes of the Bush gang are not cause for a simple impeachment, they belong to a higher Christian Anglo-Saxon level.

Bill Totten

Categories: Uncategorized

>Economics in a Full World

2005/09/26 8 comments

>The global economy is now so large that society can no longer safely pretend it operates within a limitless ecosystem. Developing an economy that can be sustained within the finite biosphere requires new ways of thinking.

by Herman E Daly

Scientific American (September 2005)

Growth is widely thought to be the panacea for all the major economic ills of the modern world. Poverty? Just grow the economy (that is, increase the production of goods and services and spur consumer spending) and watch wealth trickle down. Don’t try to redistribute wealth from rich to poor, because that slows growth. Unemployment? Increase demand for goods and services by lowering interest rates on loans and stimulating investment, which leads to more jobs as well as growth. Overpopulation? Just push economic growth and rely on the resulting demographic transition to reduce birth rates, as it did in the industrial nations during the 20th century. Environmental degradation? Trust in the environmental Kuznets curve, an empirical relation purporting to show that with ongoing growth in gross domestic product (GDP), pollution at first increases but then reaches a maximum and declines.

Relying on growth in this way might be fine if the global economy existed in a void, but it does not. Rather the economy is a subsystem of the finite biosphere that supports it. When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth. We will then have what I call un-economic growth, producing “bads” faster than goods – making us poorer, not richer [see box “When Growth is Bad” below]. Once we pass the optimal scale, growth becomes stupid in the short run and impossible to maintain in the long run. Evidence suggests that the US may already have entered the uneconomic growth phase [see box “Measuring Well-Being” below].

Recognizing and avoiding uneconomic growth are not easy. One problem is that some people benefit from uneconomic growth and thus have no incentive for change. In addition, our national accounts do not register the costs of growth for all to see.

Humankind must make the transition to a sustainable economy – one that takes heed of the inherent biophysical limits of the global ecosystem so that it can continue to operate long into the future. If we do not make that transition, we may be cursed not just with uneconomic growth but with an ecological catastrophe that would sharply lower living standards.

The Finite Biosphere

Most contemporary economists do not agree that the US economy and others are heading into uneconomic growth. They largely ignore the issue of sustainability and trust that because we have come so far with growth, we can keep on going ad infinitum. Yet concern for sustainability has a long history, dating back to 1848 and John Stuart Mill’s famous chapter “Of the Stationary State”, a situation that Mill, unlike other classical economists, welcomed. The modern day approach stems from work in the 1960s and 1970s by Kenneth Boulding, Ernst Schumacher and Nicholas Georgescu-Roegen. This tradition is carried on by those known as ecological economists, such as myself, and to some extent by the subdivisions of mainstream economics called resource and environmental economics. Overall, however, mainstream (also known as neoclassical) economists consider sustainability to be a fad and are overwhelmingly committed to growth.

But the facts are plain and incontestable: the biosphere is finite, nongrowing, closed (except for the constant input of solar energy), and constrained by the laws of thermodynamics. Any subsystem, such as the economy, must at some point cease growing and adapt itself to a dynamic equilibrium, something like a steady state. Birth rates must equal death rates, and production rates of commodities must equal depreciation rates.

In my lifetime (67 years) the human population has tripled, and the number of human artifacts, or things people have produced, has on average increased by much more. “Ecological footprint” studies show that the total energy and materials needed to maintain and replace our artifacts has also vastly increased. As the world becomes full of us and our stuff, it becomes empty of what was here before. To deal with this new pattern of scarcity, scientists need to develop a “full world” economics to replace our traditional “empty world” economics.

In the study of microeconomics, the branch of economics that involves the careful measuring and balancing of costs and benefits of particular activities, individuals and businesses get a clear signal of when to stop expanding an activity. When any activity expands, it eventually displaces some other enterprise and that displacement is counted as a cost. People stop at the point where the marginal cost equals the marginal benefit. That is, it is not worth spending another dollar on ice cream when it gives us less satisfaction than a dollar’s worth of something else. Conventional macroeconomics, the study of the economy as a whole, has no analogous “when to stop” rule.

Because establishing and maintaining a sustainable economy entails an enormous change of mind and heart by economists, politicians and voters, one might well be tempted to declare that such a project would be impossible. But the alternative to a sustainable economy, an ever growing economy, is biophysically impossible. In choosing between tackling a political impossibility and a biophysical impossibility, I would judge the latter to be the more impossible and take my chances with the former.

What Should Be Sustained?

So far I have described the “sustainable economy” only in general terms, as one that can be maintained indefinitely into the future in the face of biophysical limits. To implement such an economy, we must specify just what is to be sustained from year to year. Economists have discussed five candidate quantities: GDP, “utility”, throughput, natural capital and total capital (the sum of natural and man-made capital).

Some people think that a sustainable economy should sustain the rate of growth of GDP. According to this view, the sustainable economy is equivalent to the growth economy, and the question of whether sustained growth is biophysically possible is begged. The political purpose of this stance is to use the buzzword “sustainable” for its soothing rhetorical effect without meaning anything by it.

Even trying to define sustainability in terms of constant GDP is problematic because GDP conflates qualitative improvement (development) with quantitative increase (growth). The sustainable economy must at some point stop growing, but it need not stop developing. There is no reason to limit the qualitative improvement in design of products, which can increase GDP without increasing the amount of resources used. The main idea behind sustainability is to shift the path of progress from growth, which is not sustainable, toward development, which presumably is.

The next candidate quantity to be sustained, utility, refers to the level of “satisfaction of wants”, or level of well-being of the population. Neoclassical economic theorists have favored defining sustainability as the maintenance (or increase) of utility over generations. But that definition is useless in practice. Utility is an experience, not a thing. It has no unit of measure and cannot be bequeathed from one generation to the next.

Natural resources, in contrast, are things. They can be measured and bequeathed. In particular, people can measure their throughput, or the rate at which the economy uses them, taking them from low-entropy sources in the ecosystem, transforming them into useful products, and ultimately dumping them back into the environment as high-entropy wastes [see “Economy as an Hourglass” below]. Sustainability can be defined in terms of throughput by determining the environment’s capacity for supplying each raw resource and for absorbing the end waste products.

To economists, resources are a form of capital, or wealth, that ranges from stocks of raw materials to finished products and factories. Two broad types of capital exist – natural and man-made. Most neoclassical economists believe that man-made capital is a good substitute for natural capital and therefore advocate maintaining the sum of the two, an approach called weak sustainability.

Most ecological economists, myself included, believe that natural and man-made capital are more often complements than substitutes and that natural capital should be maintained on its own, because it has become the limiting factor. That goal is called strong sustainability. For example, the annual fish catch is now limited by the natural capital of fish populations in the sea and no longer by the man-made capital of fishing boats. Weak sustainability would suggest that the lack of fish can be dealt with by building more fishing boats. Strong sustainability recognizes that more fishing boats are useless if there are too few fish in the ocean and insists that catches must be limited to ensure maintenance of adequate fish populations for tomorrow’s fishers.

The policy most in accord with maintaining natural capital is the cap-and-trade system: a limit is placed on the total amount of throughput allowed, in conformity with the capacity of the environment to regenerate resources or to absorb pollution. The right to deplete sources such as the oceans or to pollute sinks such as the atmosphere is no longer a free good but a scarce asset that can be bought and sold on a free market, once its initial ownership is decided. Cap-and-trade systems that have been implemented include the Environmental Protection Agency’s scheme for trading sulfur dioxide emission permits to limit acid rain and New Zealand’s reduction of overfishing by individual transferable fish-catch quotas.

The cap-and-trade system is an example of the distinct roles of free markets and government policy. Economic theory has traditionally dealt mainly with allocation (the apportionment of scarce resources among competing uses). It has not dealt with the issue of scale (the physical size of the economy relative to the ecosystem). Properly functioning markets allocate resources efficiently, but they cannot determine the sustainable scale; that can be achieved only by government policy.

Adjustments Needed

The transition to a sustainable economy would require many adjustments to economic policy. Some such changes are already apparent. The US Social Security system, for example, faces difficulties because the demographic transition to a non-growing population is leading to a smaller number of working-age people and a larger number of retirees. Adjustment requires higher taxes, an older retirement age or reduced pensions. Despite assertions to the contrary, the system is hardly in crisis. But one or more of those adjustments are surely needed for the system to maintain itself.

Product lifetimes. A sustainable economy requires a “demographic transition” not only of people but of goods – production rates should equal depreciation rates. The rates can be equal, however, at either high or low levels, and lower rates are better both for the sake of greater durability of goods and for attaining sustainability. Longer-lived, more durable products can be replaced more slowly, thus requiring lower rates of resource use. The transition is analogous to a feature of ecological succession. Young, growing ecosystems have a tendency to maximize growth efficiency measured by production per unit of existing biomass. In mature ecosystems the emphasis shifts to maximizing maintenance efficiency, measured by how much existing biomass is maintained per unit of new production – the inverse of production efficiency. Our economic thinking and institutions must make a similar adjustment if sustainability is to be achieved. One adaptation in this direction is the service contract for leased commodities, ranging from photocopiers to carpets; in this scenario, the vendor owns, maintains, reclaims and recycles the product at the end of its useful life.

GDP growth. Because of qualitative improvements and enhanced efficiency, GDP could still grow even with constant throughput – some think by a great deal. Environmentalists would be happy because throughput would not be growing; economists would be happy because GDP would be growing. This form of “growth”, actually development as defined earlier, should be pushed as far as it will go, but there are several limits to the process. Sectors of the economy generally thought to be more qualitative, such as information technology, turn out on closer inspection to have a substantial physical base. Also, to be useful to the poor, expansion must consist of goods the poor need – clothing, shelter and food on the plate, not 10,000 recipes on the Internet. Even the wealthy spend most of their income on cars, houses and trips rather than on intangibles.

The financial sector. In a sustainable economy, the lack of growth would most likely cause interest rates to fall. The financial sector would probably shrink, because low interest and growth rates could not support the enormous superstructure of financial transactions – based largely on debt and expectations of future economic growth – that now sits uneasily atop the physical economy. In a sustainable economy, investment would be mainly for replacement and qualitative improvement, instead of for speculation on quantitative expansion, and would occur less often.

Trade. Free trade would not be feasible in a world having both sustainable and unsustainable economies, because the former would necessarily count many costs to the environment and future that would be ignored in the growth economies. Unsustainable economies could then underprice their sustainable rivals, not by being more efficient but simply because they had not paid the cost of sustainability. Regulated trade under rules that compensated for these differences could exist, as could free trade among nations that were equally committed to sustainability. Many people regard such restrictions on trade as onerous, but in fact trade is currently heavily regulated in ways that are detrimental to the environment [see “Sustaining the Variety of Life”, by Stuart L Pimm and Clinton Jenkins, on page 66].

Taxes. What kind of tax system would best fit with a sustainable economy? A government concerned with using natural resources more efficiently would alter what it taxes. Instead of taxing the income earned by workers and businesses (the value added), it would tax the throughput flow (that to which value is added), preferably at the point where resources are taken from the biosphere, the point of “severance” from the ground. Many states have severance taxes. Such a tax induces more efficient resource use in both production and consumption and is relatively easy to monitor and collect. Taxing what we want less of (resource depletion and pollution) and ceasing to tax what we want more of (income) would seem reasonable.

The regressivity of such a consumption tax (the poor would pay a higher percentage of their income than the wealthy would) could be offset by spending the proceeds progressively (that is, focused on aiding the poor), by instituting a tax on luxury items or by retaining a tax on high incomes.

Employment. Can a sustainable economy maintain full employment? A tough question, and the answer is probably not. In fairness, however, one must also ask if full employment is achievable in a growth economy driven by free trade, off-shoring practices, easy immigration of cheap labor and adoption of labor-saving technologies? In a sustainable economy, maintenance and repair become more important. Being more labor-intensive than new production and relatively protected from offshoring, these services may provide more employment.

Yet a more radical rethinking of how people earn income may be required. If automation and off-shoring of jobs results in more of the total product accruing to capital (that is, the businesses and business owners profit from the product), and consequently less to the workers, then the principle of distributing income through jobs becomes less tenable. A practical substitute may be to have wider participation in the ownership of businesses, so that individuals earn income through their share of the business instead of through full-time employment.

Happiness. One of the driving forces of unsustainable growth has been the axiom of insatiability – people will always be happier consuming more. But research by experimental economists and psychologists is leading to rejection of that axiom. Mounting evidence, such as work in the mid-1990s by Richard A Easterlin, now at the University of Southern California, suggests that growth does not always increase happiness (or utility or well-being). Instead the correlation between absolute income and happiness extends only up to some threshold of “sufficiency”; beyond that point only relative position influences self-evaluated happiness.

Growth cannot increase everyone’s relative income. People whose relative income increased as a result of further growth would be offset by others whose relative income fell. And if everyone’s income increased proportionally, no one’s relative income would rise and no one would feel happier. Growth becomes like an arms race in which the two sides cancel each other’s gains.

The wealthy countries have most likely reached the “futility limit”, at which point further growth does not increase happiness. This does not mean that the consumer society has died – just that increasing consumption beyond the sufficiency threshold, whether fueled by aggressive advertising or innate acquisitiveness, is simply not making people happier, in their own estimation.

A fortuitous corollary is that for societies that have reached sufficiency, sustainability may cost little in terms of forgone happiness. The “political impossibility” of a sustainable economy may be less impossible than it seemed.

If we do not make the adjustments needed to achieve a sustainable economy, the world will become ever more polluted and ever emptier of fish, fossil fuels and other natural resources. For a while, such losses may continue to be masked by the faulty GDP-based accounting that measures consumption of resources as income. But the disaster will be felt eventually. Avoiding this calamity will be difficult. The sooner we start, the better.

The Author

Herman E Daly is a professor in the School of Public Policy at the University of Maryland. From 1988 to 1994 he was senior economist in the environment department of the World Bank, where he helped to formulate policy guidelines related to sustainable development. He is a co-founder and associate editor of the journal Ecological Economics and has written several books.

Box: Crossroads for the Economy

The Problem: The economic status quo cannot be maintained long into the future. If radical changes are not made, we face loss of well-being and possible ecological catastrophe.

The Plan: The economy must be transformed so that it can be sustained over the long run. It must follow three precepts:

1. Limit use of all resources to rates that ultimately result in levels of waste that can be absorbed by the ecosystem.

2. Exploit renewable resources at rates that do not exceed the ability of the ecosystem to regenerate the resources.

3. Deplete non-renewable resources at rates that, as far as possible, do not exceed the rate of development of renewable substitutes.

Box: When Growth is Bad

Uneconomic growth occurs when increases in production come at an expense of resources and well-being that is worth more than the items made. It arises from an undesirable balance of quantities known as utility and disutility. Utility is the level of satisfaction of the population’s needs and wants; roughly speaking, it is the population’s level of well-being. Disutility refers to the sacrifices made necessary by increasing production and consumption. Such sacrifices can include use of labor, loss of leisure, depletion of resources, exposure to pollution, and congestion.

One way to conceptualize the balance of utility and disutility is to plot what is called marginal utility and marginal disutility. Marginal utility is the quantity of needs that are satisfied by going from consuming a certain amount of goods and services to consuming one unit more. It declines as consumption increases because we satisfy our most pressing needs first. Marginal disutility is the amount of sacrifice needed to achieve each additional unit of consumption. Marginal disutility increases with consumption because people presumably make the easiest sacrifices first.

The optimal scale of consumption is the point at which marginal utility and marginal disutility are equal. At that point, a society enjoys maximum net utility. Increasing consumption beyond that point causes society to lose more in the form of increased disutility than it gains from the added utility. Growth becomes uneconomic.

Eventually a population having uneconomic growth reaches the futility limit, the point at which it is not adding any utility with its increased consumption. The futility limit may already be near for rich countries. In addition, a society may be felled by an ecological catastrophe, resulting in a huge increase of disutility. This devastation could happen either before or after the futility limit is reached.

The diagram represents our knowledge of the situation at one point in time. Future technology might shift the lines so that the various features shown move to the right, allowing further growth in consumption before disutility comes to dominate.

It is not safe to assume, however, that new technology will always loosen limits. For example, discovery of the ozone hole and global warming, both consequences of new technologies, changed the graph as we knew it, shifting the marginal disutility line upward, moving the economic limit to the left and constraining expansion. – Herman E Daly

Box: Measuring Well-Being

To judge from how gross domestic product (GDP) is discussed in the media, one would think that everything good flows from it. Yet GDP is not a measure of well-being or even of income. Rather it is a measure of overall economic activity. It is defined as the annual market value of final goods and services purchased in a nation, plus all exports net of imports. “Final” means that intermediate goods and services, those that are inputs to further production, are excluded.

GDP does not subtract either depreciation of man-made capital (such as roads and factories) or depletion of natural capital (such as fish and fossil fuels). GDP also counts so-called defensive expenditures in the plus column. These expenditures are made to protect ourselves from the unwanted consequences of the production and consumption of goods by others – for example, the expense of cleaning up pollution. Defensive expenditures are like intermediate costs of production, and therefore they should not be included as a part of GDP. Some economists argue for their inclusion because they improve both the economy and the environment. We can all get rich cleaning up one another’s pollution!

To go from GDP to a measure of sustainable well-being requires many more positive and negative adjustments. These adjustments include uncounted household services (such as those performed for free by spouses); increased international debt; loss of well-being resulting from increasing concentration of income (the well-being induced by an extra dollar for the poor is greater than that for the rich); long-term environmental damage such as ozone layer depletion or loss of wetlands and estuaries; and water, air and noise pollution. When all these adjustments are made, the result is the index of sustainable economic welfare (ISEW), as developed by Clifford W Cobb and John B Cobb, Jr, and related measures. These indices have been used by ecological economists but are largely ignored by others in the field.

For the US, it appears that, beginning in the 1980s, the negative factors in the ISEW have been increasing faster than the positive ones. Similar results have been found for the UK, Austria, Germany and Sweden. In other words, for some countries in recent years, the costs of growth are rising faster than the benefits.

As important as empirical measurement is, it is worth remembering that when one jumps out of an airplane, a parachute is more beneficial than an altimeter. First principles make it abundantly clear that we need an economic parachute. Casual empiricism makes it clear that we need it sooner rather than later. More precise information, though not to be disdained, is not necessary, and waiting for it may prove very costly. – Herman E Daly

Box: Economy as an Hourglass

Humanind’s consumption ofresources is somewhat akin to sand flowing through an hourglass that cannot be flipped over. We have a virtually unlimited supply of energy from the sun, but we cannot control the rate of its input. In contrast, we have a finite supply of fossil fuels and minerals, but we can increase or decrease our consumption rate. If we use those resources at a high rate, we in essence borrow from the supply rightly belonging to future generations and accumulate more wastes in the environment. Such activity is not sustainable in the longrun.

Some economists express these facts in terms of physical laws. They argue that this lack of sustainability is predicted by the first two laws of thermodynamics, namely that energy is conserved (finite) and that systems naturally go from order to disorder (from low to high entropy). Humans survive and make things by sucking useful (low-entropy) resources – fossil fuels and concentrated minerals – from the environment and converting them into useless (high-entropy) wastes. The mass of wastes continuously increases (second law) until at some point all the fuel is converted to useless detritus. – Herman E Daly

Bill Totten

Categories: Uncategorized

>Will oil strike $380 a barrel by 2015?

2005/09/25 1 comment

>by Adam Porter in Perpignan, France (April 21 2005)

A steep rise in prices is expected due to growing energy demands

A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.

Analysts Patrick Artus and Moncef Kaabi said in the next ten years demand for oil will outstrip supply by around eight million barrels per day.

“If one takes into account the level of previous oil shocks such as in the 1970’s, we don’t think a price level of $380 per barrel is out of the question”, they said.

The analysts argued that the shortfall in energy needs would not be made up by alternatives as they were not developed as yet. “Thus the world will still need to rely upon traditional fossil fuels”, their report said.

Growing demands

They also said existing new oilfield projects would not be enough to satisfy unprecedented growth in demand from developing economies, particularly China.

“We have taken into account every new oil discovery and potential source … as well as this we note the continuing situation of a fall in new field discoveries”, the analysts said.

They pointed out China would contribute greatly to the world’s rising energy needs.

“Rapid movements of people from the Chinese countryside into the cities would increase the demand for housing, cars and general transportation. All of this will fuel energy consumption”, the report said.

Economic juggernaut

Industrial production in China is also growing rapidly with no major signs of decline.

“The types of energy-intensive production in China are growing fast and forecasts also point to continued growth”.

“Chinese economic development is at a stage where the amount of energy used is not yet recycled back into the economy. This has definitely been the case in recent times and this explains the sharp increases in China and other similar nations recently”, Artus and Kaabi said.

“One could thus envisage a scenario where there is a near seven-fold increase in crude oil prices, whereby, adding annual 2.5% inflation … we arrive at a price of $380 per barrel by 2015”.

Bill Totten

Categories: Uncategorized

>$380 Oil?

2005/09/25 2 comments

>Banks Talk Oil Depletion

by Michael Kane

From The Wilderness (June 07 2005)

Banks across the world are now talking about oil in terms of “price spikes” and “depletion”. This includes Goldman Sachs, the Bank of Montreal, and the French Investment bank Ixis-CIB.

The Goldman Sachs’ report raised their price range for oil from $55 to $80 a barrel, to $55 to $105 per barrel. Goldman sees a high probability that a “super-spike” in oil prices will occur that would eventually drop back down. They took the time to address Peak Oil by stating they are not subscribers to the theory that global oil supply will hit some “magical inflection point” that would result in permanent declines.

Just days later the Bank of Montreal released a report on the largest oil field in the world, Ghawar, stating that the Saudi Arabian field is now in decline. Following this trend, the French investment bank Ixis-CIB has reported that oil prices will reach $380 by the year 2015. {1}

The CIB report estimates that by 2015 the world will be facing an eight percent deficit in supply verses demand. They see demand being 107.9 million barrels per day, but production only pumping 100 million barrels per day. As a result, adding 2.5% inflation annually from the United States, this would mean the price of oil would have to rise 6.86 times for supply to equal demand. {2} Barring any miraculous supply increase, nothing short of that staggering level of price-induced “demand destruction” can bring the two numbers back together.

Ixis-CIB is a respected investment bank. According to Adam Porter, all the bank did was take the numbers that the oil industry and governments have published in terms of supply and depletion, then plugged them into a basic equation to project supply and demand ten years from now. {3}

Is $380 oil possible?

The term “demand destruction” is used repeatedly in the Goldman Sachs report; as Adam Porter points out at his web-cast (Oilcast #2), this is effectively a code phrase for massive recession. Before $380 oil could become reality, it is likely (if not inevitable) that a massive economic collapse would occur.

What’s important now is not whether it is possible for oil to hit $380 per barrel in 2015, but rather the fact that banks are making such predictions at all. Six months ago such reports would have never been published by these respected investment banks. {4}

Peak Oil awareness advocates have gained such a strong voice that it appears the major economic players may be ready to ride oil up for short-term profits.

Once these players decide it is time to ride up the “super-spike”, they may attempt to manipulate the inevitable to occur at a time of their choosing in order to maximize their profits. If geo-political events render such manipulation impossible, it is highly likely that the super-rich have already positioned their finances for when a major catastrophe, such as the collapse of Ghawar {5}, causes the markets to panic – fulfilling Goldman’s prediction.

Either way, the outcome is effectively identical.

Whether they use the term “Peak Oil”, avoid it all together, or choose to ridicule this geologically sound scientific principle as a “magic inflection point”, it is abundantly clear that Peak Oil is now the barometer by which the pressure in the economic atmosphere will be forecast.

The “super-spike” will be just the beginning.


Special thanks to Adam Porter for his outstanding reporting at

1 “Will oil strike $380 a barrel by 2015?” by Adam Porter,, 4/21/05,

2, Oilcast #6.

3 Phone interview with Adam Porter on May 8 2005.

4 Ibid.

5 Aging oil wells often use a process called water injection in order to sustain or increase the production rate. The water pressure forces oil upward and out. This process is quite volatile and can lead to the destabilization or total collapse of an aging well, leaving the remaining oil reserves behind and effectively unrecoverable. Production at Ghawar is utilizing this technique along with horizontal drilling. Matt Simmons has warned that when used in combination these two techniques will accelerate the decline of Ghawar. If that happens, Saudi Arabian production will almost certainly have peaked. And Simmons’ position is that Saudi Arabia may already have peaked.

Copyright 2005, From The Wilderness Publications, All Rights Reserved. May be reprinted, distributed or posted on an Internet web site for non-profit purposes only.

Bill Totten

Categories: Uncategorized