JALA Thoughts

The clamor for SOMEBODY to do something about rising gas prices continues, particularly the election-season pressure from various lobbyists to persuade Congress and whomever is elected President to open up offshore drilling for oil. In my previous blog I commented on the likelihood of such a move to have any short term effect whatsoever. Now it’s time to consider the broader issue: is this move really necessary or desirable at all?

First a short review of history. The United States owes part of its economic success to the fact that abundant supplies of petroleum were discovered and exploited here. Petroleum trumped whale oil and became the fundamental source of energy for the transportation industry. That, in turn, was a major component of the rise in America’s fortunes. But production of oil in the US peaked in the early 1970s; new discoveries have not exceeded production since then. The US oil glass is more than half empty and the level of its contents is dropping. Consequently, we are now importing more oil than we produce domestically. In June 2008 two-thirds of our oil was imported, according to the Energy Information Administration. The United States, with 5% of the world’s population, consumes 25% of its energy.

So now the popular plan is to expand our offshore drilling so that we can use up our native supplies faster, right? The latest idea is to use up all our oil resources as fast as we can so that we can be thrall to the likes of Russia, Venezuela, Nigeria and the various middle-eastern powers as soon as possible? Just because we don’t want to pay $4+ per gallon of gas? Do you get the feeling that something is not right here? We are the world’s prodigals* and we want to keep it that way? Worse: the rest of the world wants to be just like us?

Continue reading The prodigal sons…and daughters

Here’s one of the key problems in the debate about energy and global warming. Many, if not most, of the commentators are ignoring the dynamics of global change. The fundamental issue is that global climate change and global energy use are massive, huge, enormous–whatever ultimate adjectives you can think of. And what is a prime characteristic of massive, huge, enormous things?

It is very hard to change their courses. They have enormous inertia. As Isaac Newton said in the 17th century about the dynamics of motion (Newton’s First Law):  Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it. In the case of global warming the human race has steadily been forcing the atmosphere to change since the Industrial Revolution. The warming force is the heat retained as a result of the CO₂ and methane we have been pouring into the air all those years. As we are beginning to notice, the atmosphere is now moving right along, heatwise. Atmospheric change now has substantial momentum, according to most knowledgeable environmental scientists, although they differ on the extent of human influence.

As Paul Krugman put in in his New York Times column on 1 August 2008:

It’s true that scientists don’t know exactly how much world temperatures will rise if we persist with business as usual. But that uncertainty is actually what makes action so urgent. While there’s a chance that we’ll act against global warming only to find that the danger was overstated, there’s also a chance that we’ll fail to act only to find that the results of inaction were catastrophic. Which risk would you rather run?

Now here’s the dilemma: Continue reading It’s the dynamics, stupid!

In an article in the 24 May 2008 Los Angeles Times Ford CEO Alan Mulally is quoted as saying that the automobile industry has “reached a tipping point” because of rising oil prices; a point that will fundamentally change the kinds of vehicles that consumers will buy. A similar article in the 24 May Financial Times describes a plan to drastically lower the emissions from cars in Europe. Specifically, “The average new car sold in the European Union in 2020 will have to use less fuel than almost all conventional models on the road today”.

Hello? Where has the industry been for the past three decades? After more than 30 years of complacency after the oil shock of 1973 the industry is suddenly panicked by the thought that we might actually be running out of oil and that oil prices will surely rise as the remaining oil is more expensively extracted. The triple whammy of oil depletion, increased competition from China and India, and global warming has indeed caught the world’s attention recently. Both of the articles cited above emphasize the changes in the mix of vehicles bought, not to mention the cars and trucks that are suddenly hard to sell.

Add to those woes the economic slowdown, the Cyclone in Burma and the earthquake in China. It never rains but it pours. What to do.

Continue reading Tipping point?

Well, at least in the Washington, DC region. In an article in the July 27th Washington Post Matt Zapotsky reported that the number of teleworkers reporting to telework centers in the DC region has increased from 253 last September to 415 now. The most often quoted reason for this escalation?

Gas prices. The trigger point? Reportedly gas at $3.75 per gallon according to a survey by Telework Exchange.

Although the price of oil has declined to $125 per barrel (remember when most people thought it would never exceed $100 per barrel?) that’s not likely to drop the price at the pump below $3.75. And that $125 won’t last Continue reading Gas prices induce 64% more teleworking?

Occasionally we print a reminder to Americans that they’re still living in a fantasy world of fuel prices. With all the moaning and tearing of hair one encounters about the price of gas at the pump it is easy to forget that much of the world has it far worse. At least in non-oil-exporting countries. The 29 June edition of the New York Times provides some evidence of this in its Week in Review section; specifically an article titled Savoring Bargains at the American Pump.

The good news is that the cost of gas at retail ranges from about $3.50 to $4.80 per gallon in much of the world these days. The price of gas at retail is another story altogether. The prices quoted in the article range from $0.25 per gallon in Venezuela to $10.05 per gallon in the Netherlands.

Why is this and what can be done about it? Continue reading Fuel prices? It’s all relative

Two interesting articles have come to my attention, both pointing to the growing importance of telecommuting. The first, on-line from National Public Radio, analyzes the locational distribution of homes suffering from the sub-prime housing crisis. Titled: Home Prices Drop Most in Areas with Long Commute, the article notes that much of the drop in real estate prices comes from those who face large bills for fuel. Specifically:

Economists say home prices are nowhere near hitting bottom. But even in regions that have taken a beating, some neighborhoods remain practically unscathed. And a pattern is emerging as to which neighborhoods those are.

The ones with short commutes are faring better than places with long drives into the city. Some analysts see a pause in what has long been inexorable — urban sprawl.

The second article, also on-line but a blog from Tech Republic, discusses the four main trends observed at Interop (a large high tech trade show) by Executive Editor Jason Hiner. Trend 3 of the 4 is Supporting a decentralized workforce. Here’s a key quote:

At Interop, one vendor told me that 70% of all employees now work outside of the corporate headquarters. Another vendor told me that number is actually up to 80%. One representative of a very large IT company said that it recently moved into a new headquarters and that the employee-to-workstation ratio is now 4-to-1 (up from 1.5-to-1). That’s because they now have a lot more mobile employees and they actively encourage employees to work from home during times they don’t need to come into the office.

Admittedly, the attendees at Interop come from the infotech-intensive part of the economy but it is clear that the growth of acceptance of telecommuting continues. What can we infer from these two articles?

Continue reading Mounting evidence

As the price of oil continues to increase, and the price of gas heads toward—or exceeds—$4.00 per gallon in the US, there is the anticipated hue and cry for lowering gas prices. Presidential candidates McCain and Clinton have proposed eliminating the gas tax for the summer at least.

Here’s why I think that the gas tax should be raised instead.

Continue reading Why gas taxes should INcrease

Yesterday the price of oil exceeded $113 per barrel. Today the Financial Times included an article to the effect that Russia had reached its peak in output last year and would likely not exceed that production level in the foreseeable future. Another production peak heard from. According to the article, Leonid Fedun, of Lukoil, estimated that a trillion dollars would be needed in new exploration and development investments to sustain last year’s level of production for the next 20 years. I suspect Mr. Fedun is an optimist.

Is this another symptom of the decline in global oil production or is it just an anomaly of the Russian situation? Continue reading Another shoe drops

In my experience, as well as that of most of my friends, one of the most powerful reasons for working for a large organization is its health care plan. Big organizations, both public and private, usually have health insurance with coverage and prices that are unattainable by individuals. This is also one of the primary reasons why budding entrepreneurs decide not to take the entrepreneurial leap and go it alone. Quality health care is a powerful safety net. Yet, according to the Center for American Progress: “The share of private-sector workers with a pension dropped from 50.3% in 2000 to 43.2% in 2006, and the share of people with employer-provided health insurance dropped from 64.2% to 59.7%.” So that bastion of support seems to be eroding.

But what if quality health care were available to everyone, regardless of their employer? Then the fear of disaster if you became ill between job changes would vanish because you’d still be covered. The dread of physical and/or financial ruin would evaporate. How could this be possible in the good old US?

Both leading Democratic candidates for President are proposing some form of government-regulated health insurance that would cover most Americans. The Republicans shriek in horror at this idea and scorn it with the label “Socialized Medicine”, something apparently almost as bad as HIV in their minds. As Jacob S. Hacker says in the Washington Post of March 23rd: “Never mind that nobody is proposing to turn doctors into public employees and hospitals into government institutions — the literal meaning of socialized medicine.” What’s being proposed is portable health insurance; insurance you have regardless of your means of income, that goes where you go. The government’s role is to regulate the quality of care and to seriously reduce the inflation rate of such care (Hacker’s article goes into more detail).

The connection between portable health care, telework, and entrepreneurship is obvious, to me, at least. Continue reading Telework, entrepreneurship and “Socialized Medicine”

The world is finally beginning to perceive that oil might just be more dear in the future. Today comes another news note pointing to the concept that we may have reached the peak of global oil production. The news is that discovery of new oil reserves in the Gulf of Mexico has hit the lowest level in a decade. Specifically, according to the energy consultancy Wood MacKenzie as quoted in today’s Financial Times and elsewhere, the 2007 new reserves were less than half of those found in 2006. Continue reading Peaking out?