Posts from — June 2009

One of my most favorite authors, Thomas Freidman, from the New York Times recently wrote an opinion piece about the situation in Iran and how oil plays a large role in any revolution since the beginning of the 20th century.

While we are trying to figure out how to overcome the current economic and fiscal crisis in the United States, another crisis is growing in the 5th largest oil exporting country in the world, Iran. It would be foolish for me to try to write what Friedman expresses so brilliantly. Here is what he wrote on June 23rd, 2009

There has been a lot of worthless chatter about what President Barack Obama should say about Iran’s incipient “Green Revolution.” Sorry, but Iranian reformers don’t need our praise. They need the one thing we could do, without firing a shot, that would truly weaken the Iranian theocrats and force them to unshackle their people. What’s that? End our addiction to the oil that funds Iran’s Islamic dictatorship. Launching a real Green Revolution in America would be the best way to support the “Green Revolution” in Iran.

Oil is the magic potion that enables Iran’s turbaned shahs — “Shah Khamenei” and “Shah Ahmadinejad” — to snub their noses at the world and at many of their own people as well. President Mahmoud Ahmadinejad behaves like someone who was born on third base and thinks he hit a triple. By coincidence, he’s been president of Iran during a period of record high oil prices.

So, although he presides over an economy that makes nothing the world wants, he can lecture us about how the West is in decline and the Holocaust was a “myth.” Trust me, at $25 a barrel, he won’t be declaring that the Holocaust was a myth anymore.

The Obama team wants to pursue talks with Iran over its nuclear program, no matter who wins there. Fine. But the issue is not talk or no talk. The issue is leverage or no leverage. I love talking to people — especially in the Middle East — on one condition: that we have the leverage. As long as oil prices are high, Iran will have too much leverage and will be able to resist concessions on its nuclear program. With oil at $70 a barrel, our economic sanctions on Iran are an annoyance; at $25, they really hurt.

“People do not change when you tell them they should; they change when they tell themselves they must,” observed Michael Mandelbaum, the Johns Hopkins University foreign policy specialist. And nothing would tell Iran’s leaders that they must change more than collapsing oil prices.

Mr. Obama has already started some excellent energy-saving initiatives. But we need more. Imposing an immediate “Freedom Tax” of $1 a gallon on gasoline — with rebates to the poor and elderly — would be a triple positive: It would stimulate more investment in renewable energy now; it would stimulate more consumer demand for the energy-efficient vehicles that the reborn General Motors and Chrysler are supposed to make; and, it would reduce our oil imports in a way that would surely affect the global price and weaken every petro-dictator.

That is how — as Bill Maher likes to say — we make the bad guys “fight all of us.”
Sure, it would take time to influence the regime, but, unlike words alone, it will have an impact. I believe in
“The First Law of Petro-Politics,” which stipulates that the price of oil and the pace of freedom in petrolist states — states totally dependent on oil exports to run their economies — operate in an inverse correlation. As the price of oil goes down, the pace of freedom goes up because leaders have to educate and unleash their people to innovate and trade. As the price of oil goes up, the pace of freedom goes down because leaders just have to stick a pipe in the ground to stay in power.

Exhibit A: the Soviet Union. High oil prices in the 1970s suckered the Kremlin into propping up inefficient industries, overextending subsidies, postponing real economic reforms and invading Afghanistan. When oil prices collapsed to $15 a barrel in the late 1980s, the overextended, petrified Soviet Empire went bust.
In a 2006 speech entitled “The Collapse of an Empire: Lessons for Modern Russia,” Yegor Gaidar, a deputy prime minister of Russia in the early 1990s, noted that “the timeline of the collapse of the Soviet Union can be traced to Sept. 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices, and Saudi Arabia quickly regained its share in the world market.

“During the next six months,” added Gaidar, “oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms. As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.”

If we could bring down the price of oil, the Islamic Republic — which has been buying off its people with subsidies and jobs for years — would face the same pressures. The ayatollahs would either have to start taking subsidies away from Iranians, which would only make the turbaned shahs more unpopular, or empower Iran’s human talent — men and women — and give them free access to the learning, science, trade and collaboration with the rest of the world that would enable this once great Persian civilization to thrive without oil.

Let’s get serious: An American Green Revolution to end our oil addiction — to parallel Iran’s Green Revolution to end its theocracy — helps us, helps them and raises the odds that whoever wins the contest for power, there will have to be a reformer. What are we waiting for?

As often before, I totally agree. The eco-conscious pioneers I am working with and new ones we hope to attract will do their part to move the green revolution forward. Please join us - together we can make a difference!

This post has been provided by my good friend Debbie Zachry

20 June 2009 

Plan Designed by Leading Architect to Revive Staggering Economy-
As the market recession rolls on, the housing industry is one of the many trades at a standstill. Founded by distinguished architect Edward Mazria, Architecture 2030 is a “One Year 4.5 Million Jobs Investment Plan” to help America invest in green homes building and revamp present homes to make them more energy efficient.

A place to start

Mazria claims that the private building division is the biggest solution toward enlivening the United States economy and creating green jobs, as the industry accounts for about 10 percent of the U.S. gross domestic product. Construction produces demand in every division of the economy such as wholesale, retail, distribution, manufacturing, constructing, banking, development and professional services; utilizing expensive products such as rubber, steel, glass, insulation, lumber, electrical appliances, heating/cooling appliances, fabrics, paint, windows, tile and metal.
Apart from tax credit incentives applied to first time home purchasers, the $787 billion stimulus funds didn’t do much to support the housing market; causing many American residential home builders to feel the impact of layoffs. The Architecture 2030 Plan entails energy efficiency incentive grant offerings to “buy down the interest rate” on home mortgages used to buy new energy efficient homes or to remodel exisiting homes, proposing a 1 percent full interest rate buydown for a new home that uses 50 percent less energy than present energy standards, or a home energy modification that would lower energy consumption of an already existing residence to 30 percent below current requirements.

For example, if your mortgage interest rate quote is 4.75 percent, the plan would offer an interest buydown which would lower the interest rate a full percentage point, to 3.75 percent. The Architecture 2030 Plan is one of intelligence and fervor which may possibly guide the way out of America’s lingering recession; we can only wait to see how the Obama Administration and Congress respond to this powerful proposal.

My German heritage and close ties to friends and family in Germany allow me to stay in touch on topics regarding the issues of sustainability, business, and economics, besides other subjects. Every once in a while I receive some amazing documents (in German) that are worth translating and bring to the attention of my readers and followers.

Solar Roof of BMW-Welt

As we have heard over and over again in the media, the world is suffering from recession and a global economic crisis. The impact of this crisis is different from country to country, and region to region, mainly because the systems of commerce are different. When Americans can pile up credit card debt across multiple cards from Visa, Master Card, and American Express, purchases made with credit cards by German customers are paid in full directly from their bank accounts at the end of each month. There is no such thing like credit card debt.

Similarly, there was no real housing bubble in Europe, except for Britain, which uses a similar system like the United States. Still, economies across the globe are suffering and one of the biggest impacts has come to the auto-industry.

Double-Cone Munich

We have all read and heard the stories about GM and Chrysler. All the money that was provided by the US government ultimately didn’t avoid bankruptcy for both of these former giants. Now the question is: What shall we do and what should we safe? Where does it make sense to spend more tax payer money?

A highly respected German magazine (Focus Money) recently compiled a special edition looking into the impact of alternative energy industries, specifically solar energy. Compared to the sunshine state, or places like Arizona, Nevada, Utah, California, and New Mexico, among others, Germany is not particularly blessed with sunshine. Still it is dominating the world market in solar technology.

World Sunshine Distribution Map

Here are some perplexing facts from the special edition of Focus Money:

• While more than $11 Billion have been spend to support Opel (a GM subsidiary) and pay for new car incentive programs directly by German tax payers, government funds are provided to energy companies (similar to PG&E or Edison) to subsidize the generation of green power only when system actually produce.
• There are now more jobs in Green Technology in Germany (1.2 Million) than in all engineering firms (approximately 1 Million) and the automobile industry (about 760.000).
• The cost for an average household to pay for the government subsidies to green energy generation is 1 cent per KW/h on the utility bill.
• The prices for solar system installed on privates homes fall 8% - 9% per year while the companies providing the systems still keep a profit margin of 20% plus.
• The solar and green technology industry is growing, even in the current crisis, while all other industries are either contracting or stagnating
• Investments in technology and research pay huge dividends. While wages in Germany are high compared to competitors in China and India, the German systems have top market share because they focus on quality and efficiency versus lower prices.
• A recent test solar system at the cutting edge of research produced a world record efficiency of 41% while typical systems in use reach 15- 17% efficiency.

In comparison to what has been happening in solar energy research and system installations in Europe, the US market is still very small. Wind energy installations have caught up by annual installation standards, although they have been hampered by the fact that US banks don’t lend money but use government handouts to prop up their balance sheets, something that doesn’t just apply for alternative energy companies, but all businesses and even private home owners who want to get financing.

Today Market Watch reported that it has never been harder to receive a small business loan in the US than it is in the current environment.

We will need a modern and successful auto industry in the future. That makes it sensible to provide some funding for it, provided the money will be used to find new approaches, new technologies, and new systems to protect the environment. At the same time it is important to realize that we should pay way more attention to modern technologies like solar, wind, and others.

The regions and countries we have traditionally competed with, like Germany, Britain, Italy, etc. have a huge lead in these technologies, and they are joined faster and faster by countries like China, India, and Japan.

There is nothing wrong with having more people employed inventing new solar and wind systems, installing them, and providing all the services related to them, than will ever again work in the US auto industry. Yes, the workers in these companies will use cars and trucks to get to work and back home. If we want to be successful and competitive in the future, our focus should shift and our funds should be spend where the potential is high, like solar, wind, wave energy, etc.

Preserving the old industries is like hoping to regain economic leadership with steam engines and horse buggies. That wouldn’t have worked in the 20th century, and hoping to use the broken auto industry to restart the economy will not work now.

We will know that we are on the right track when the cars we drive generate part of the green, clean energy, that power our houses, together with solar panels and other suitable systems.

Every once in a while you wonder if members of your community actually recognize what you do or if things are just coincidence. In the last post to this site, my friend Dr. Charles Savage and I had spoken about peak oil and he had provided me something he had written about the subject for me to post. I added some additional data and created an article around the topic of peak oil and its fellow “Peak brothers”.

Today, June 7, 2009, when reading the local paper Santa Barbara News Press, I found a story that looked to me like part 2 of what I had started recently. Here it is for you to enjoy, written by a fellow consultant and adjunct professor, and one of his collegues from University of California in Santa Barbara. Maybe it’s just coincidence, but maybe we are on to something the public should be aware of and begin to take appropriate action.

A call to action: Peak oil should be at the forefront of global concerns

We are being lulled to sleep by temporarily low oil prices caused by the global financial crisis. In fact, low prices may lead to an increased level of consumption and accelerated exhaustion of oil reserves.

“Peak oil,” the point at which global oil production peaks and then rapidly declines, is still not sufficiently on the minds of the American public and policymakers. We don’t know exactly when peak oil will arrive, but it is very likely to occur within 10 to 20 years. Some say that it may even be here now. The U.S. Army Corps of Engineers, for example, wrote in a 2005 report: “We are at or near a peak in global oil production.” Peak oil should be at the forefront of everyone’s mind. Here’s why:

As soon as the global economy recovers, we can expect oil and other fossil fuel prices to shoot right back to where they were last summer, and probably far higher. The International Energy Agency (IEA), formed in the 1970s to act as an energy watchdog for western nations, stated in its 2008 World Energy Outlook:

“Current global trends in energy supply and consumption are patently unsustainable . . .The future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.”

This is a call to action of the most urgent kind and we dare not ignore it.

United States oil production peaked in 1970 and has declined ever since, apart from a small and short uptick in the late 1970s, and oil imports have increased steadily. We now produce half of what we produced at our peak and import about 60 percent of our oil.

What is the global situation? The United Kingdom struck oil in the North Sea in the 1970s and became a major world producer. But oil production peaked without warning in 1999 and the U.K. suddenly transformed from an oil exporter into an oil importer just seven years later. U.K. North Sea oil production is now down almost 50 percent from its peak.

The same pattern occurred in Indonesia, formerly a member of OPEC. Norway, Russia and the majority of other oil producers also are past their peak. This is why the IEA regards the situation as so dire: existing oil fields are declining very quickly and new oil fields are not coming online quickly enough to replace them. The IEA concludes that we need three or four additional Saudi Arabias to meet projected demand by 2015.

Cambridge Energy Research Associates, a respected oil forecasting firm that has been very skeptical of the peak oil discussion, also recently forecast that oil projects worth 8 million barrels per day have been canceled or delayed since the global recession hit, exacerbating the mid-term situation further.

Oil production is not the only issue, however. Natural gas production will follow a similar production decline, probably just a few years behind oil. Natural gas currently constitutes about one-quarter of the world’s energy consumption, so this cannot be forgotten in the discussion.

As we’ve seen with food exports such as rice, when fears grow over the domestic availability of key resources (like food, oil or gas), nations will change export policies overnight. Last year, Thailand, the world’s second largest exporter of rice, temporarily outlawed rice exports.

The same thing could very well happen in oil- and gas-exporting nations. As soon as the global economy recovers and the supply shortage becomes clear, major exporters can simply forbid exports, keeping their precious oil and gas for their own use.

Similarly, some countries’ oil and gas exports are already declining quickly. Mexico, while struggling with a major drug war, saw its oil exports plummet more than 20 percent in 2008 due to the decline by 33 percent in just one year of its major field, Cantarell. Mexico is the third largest supplier of oil to the U.S.

Mexico’s oil revenue has fallen off a cliff as its oil exports and oil prices more generally have plummeted; 40 percent of Mexico’s government funding is oil revenue. Clearly, Mexico is facing a formidable future and may not survive as a functioning nation, a conclusion also reached by the U.S. military’s Joint Forces Command in a 2008 report.

The time is now to invest heavily in alternatives to oil and gas, such as energy efficiency, conservation, renewable energy and more efficient transportation. Our own dream is a sustainable energy future powered predominately by solar and wind energy, backed up with energy storage and baseload geothermal, biomass and hydro power.

Much is happening in these areas already, and this is hopeful: the Obama administration has budgeted billions of dollars for these efforts and has made energy reform one of its three top priorities. Individuals and communities around the world also are springing into action through various initiatives.

But much more needs to be done. As the IEA concludes: “What is needed is nothing short of an energy revolution.”

Walter Kohn is research professor of physics and chemistry at UCSB and a Nobel Laureate in chemistry . Tam Hunt is a private consultant and a lecturer in renewable energy law and policy at the Bren School of Environmental Science & Management at UCSB.