API Energy IQ

At a time when Americans are focusing on energy issues and policies, a survey from API and Harris Interactive finds that most U.S. adults have a fundamental lack of knowledge regarding energy demand and supplies and the role of America's oil and natural gas companies. In fact, when presented with 23 multiple choice questions, on average more than 25 percent of respondents said they were "not sure," and in many cases people chose the response that is farthest from the correct answer. Test your knowledge on 10 questions.

Think you understand energy issues? Click here to see the questions and comments on TheOilDrum.com.

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It Aint Easy Being Green

Green Challenges

I try harder than most both to live an environmentally frugal life and to prepare for an era of fossil fuel scarcity. I garden (fruit trees, berries, vegetables, flowers), and have been gardening for over 40 years. I have a compost bin, and I grow worms in my garage (to reduce waste to the sewer and waste systems). I bought 5 expensive “Earth boxes,” essentially potting-mix based hydroponic systems, including wheels to move them around to the best areas of the yard depending on season.

Outside of my gardening efforts, I have replaced every light possible with CFLs (and will use LEDs when available). I’ve added insulation to the attic. We use a portable outdoor clothesline. I have a sun oven. We drive a Prius, when we drive; I have used only public transit (D.C. bus and metro) for the past 4 years. I could go on and on.

And I’m discouraged.

Whether it’s due to climate change, or just the gardener’s perennial luck of the draw, my gardening yields in recent years have been at best mediocre. Animals (from deer to raccoons to rats) have taken their toll. I’ve built a deer fence (that the deer smashed into and I repaired). I (hate to admit) I have put out a rat trap. Still, the birds, raccoons and squirrels take their pick of the best of everything from berries to tomatoes. And they’re getting slim pickings too.

This year I decided to try planting more “heritage” varieties of tomatoes and lettuce (for starters). I assumed they would be more resistant to variations in the weather, they would not need as much (or any) artificial fertilizer, and they would taste better than hybrid varieties. That was the theory. I’ve never had such skimpy yields; tomatoes with blossom end rot; the pumpkins and squash have no fruit set. I blame that (in part) on the nearly complete lack of bees.

And if everything worked fine and yielded as much as I used to get in New England, the effort would still be significant. And I’m willing to pay that price of effort, materials, etc. Now I pay the price and get very little in return.

No matter what the advertising brochures claim, the Earth Boxes, I hate to report, yield far less than simply planting veggies in the ground. CFL bulbs (especially the more expensive dimmable versions) burn out in as little as 3 months – not 5 years.

Recently I tried a different approach. I asked for a solar panel assessment, knowing I had some daytime shade. Result: You’d have to cut down all the trees around your house (illegal in D.C. unless the trees pose a danger or are diseased), since if one cell of one panel is shaded, the whole panel’s output is diminished. And if one panel’s output is diminished, the whole series work inefficiently. Just not worth the $25-$30 thousand investment, even though I know electric costs are going to skyrocket while electricity availability will become increasingly intermittent.

I also visit and read nearly every post on theoildrum.com, daily.For another wakeup call (if you need one), read “Gail the Actuary’s” post on the “oildrum,” at http://www.theoildrum.com/node/4381, titled “The Path From Petroleum Shortages To Electricity Shortages .” If Gail is right (and she is certainly persuasive and informed), we can all look forward to a large assortment of unexpected consequences from peak oil supplies, including intermittent availability of electricity.

Here is an excerpt from Gail's recent post:

"The issue I see is that if we know we are very likely to have electrical difficulties within twenty years, it does not make sense to start a transformation to a more electrical society. For example, if we start building a lot of electric trains, we are likely to discover that that we don't have the electricity to operate them when they get built."

Now if I am working this hard to become a darker shade of green, and getting so little effort in return, what about the other 99% of society who probably either are ignoring peak oil issues or doing very little to prepare. If you think you can just dig up a patch in your back yard, buy some seeds, and haul in the veggies to supplement your grocery bill… good luck with that.

Still, I am something of a perennial optimist. I believe if you try hard enough to improve your processes, learn from past mistakes, and continue trying, you’ll both be better off and provide credible insights for others how to succeed when they decide to try out gardening or energy saving strategies. Or at least I hope it works out that way.

Investing in a Post Peak World

It is only prudent to prepare for a post-peak Oil world, and part of that planning is financial planning. Specifically, I've been wondering whether there will be a pronounced use of online commerce when automobile fuel cost becomes scarce or prohibitive. If people flock to the web to make their purchases, then it follows that home delivery of those online purchases will also increase. OK, so does that mean that UPS or FEDEX could be stocks to buy as part of a personal hedge against the difficulties of peak oil?

I contacted Jim Hansen, a financial consultant at KMS Financial Services based in Seattle, Washington. He posted on The Oil Drum and writes an investment newsletter titled the “Master Resource Report.” I asked Hansen specifically about whether he thought FEDEX or UPS might be good Peak Oil investment plays. My paraphrase of his reply follows.

First, he's not giving any advice on the companies specifically but suggested instead some guidelines for evaluating them or other delivery services.

1. First, consider the GDP issue raised by Roger Bezdek and Robert Hirsch. With a flat to declining GDP, consumer spending will decline. That decline could be significant and last for a long time. This could hurt online sales and economic activity in general.

2. Many times the shipping cost is a large percentage of the cost of the item being shipped. At what point do consumers flinch and say “I'll pass”?

3. In every case, localization is important (and among other things, reduces the use of shipping long distances).

4. High value items will probably benefit from the use of delivery services, but probably not low-value items such as CDs, books, etc.

5. The primary advantage of FEDEX or UPS is speed versus shipping by rail or ship. Cheap energy is an important factor to make the FEDEX or UPS model work.

6. And the business model is critical. Jet fuel cost less than .41/gallon recently, and is now about $3/gallon. Airline fuel expenses are now 30-40% of total costs, more than labor for the first time ever. What happens when fuel costs approach 50% of costs? If they try hedging forward that won't help since markets will realize that future fuel supplies will be constrained, essentially forever.

So if online commerce goes down with the economy in a post-peak world, what are some other investment alternatives beyond the obvious (oil services for example). Other companies with an online presence such as Disney?

I'd love to hear your thoughts.