The Methadone Economy  

Tom Konrad's latest peak oil investment article has a look at alternative fuels - the "methadone" for fossil fuel addicts - The Best Peak Oil Investments, Part IX: The Methadone Economy.

The first eight parts of this series looked into alternative fuels. I concluded that no alternative fuel listed could replace oil as we use it today fast enough to replace dwindling oil supplies. Conventional biofuels cannot be produced in enough quantity, and making hydrogen is an inefficient use of electricity or natural gas. Electric vehicles are too expensive or have too little range. There is not enough natural gas and there is too little fueling infrastructure to make natural gas vehicles practical on a large scale. Gas-to-liquids makes sense for stranded natural gas, but there are too many other high value uses for natural gas to make a large dent in declining oil supplies. Coal to liquids does too much environmental harm, and algae needs too much more technological development to achieve its promise in time.

The biggest problem with alternative fueled vehicles, however, is not the alternative fuels, the problem is the vehicles and how we use them.

Oil was a one-time bonanza of a readily available, easily transportable, durable, energy-dense liquid. With oil, humanity won a natural resources lottery ticket. Like a lottery winner who blows cash that could have lasted a lifetime in a few months, we now need to realize that we've spent most of our winnings. It's unreasonable to expect that we're going to win another such jackpot before we have to start watching our fuel budget again. The main question is how soon and how deliberately we will make the necessary adjustment. Will we act like the lottery winner who uses his last hundred thousand to tide him over while he looks for a job? Will we keep partying to the bitter end, until one day we wake up, hung over in the gutter? Will it be something in between?

The Methadone Economy

Switching to a drug analogy, most alternative fuels are the methadone to treat our petroleum/heroin addiction. Methadone is given to heroin addicts in treatment because it mitigates withdrawal symptoms and can block the euphoric effects of heroin, morphine, and similar drugs, reducing the urge to use.

Alternative fuels can be sufficient to allow our society to function, but we're not going to feel the highs we felt when the oil was flowing freely. Alternative fuels cannot take us back to a "normal" pre-peak oil state because our use of petroleum over the last few decades as been far from "normal:" it has been one long, fossil-fueled high. We will eventually kick the petroleum habit with the help of alternative fuels not because alternative fuels are better than petroleum and can bring us something that petroleum cannot, but because our supplier will be getting smaller shipments over time, while the number of fellow junkies knocking on his door will keep going up with big increases in petroleum demand from emerging economies.

There are several competing visions of a future powered by alternative fuels, ranging from wildly optimistic to gloom-and-doom, with variations depending on how effectively the prognosticator thinks we can replace fossil fuels with alternatives.

A high-technology optimistic vision includes smoothly running efficient pods in mass transit systems powered by renewable energy. High speed bullet trains network the land, making overland air travel unnecessary. The low-technology optimistic vision involves a peaceful return to local economies where food is grown locally, and increasing local interdependence fosters strong local community ties, and people grow happier as they become more connected to the land and each other. The low-technology pessimistic vision is a free-for-all scramble for dwindling resources like the vision out of Mad Max referenced above.

I'm long on optimism about technology, but short on optimism about our will to make the necessary sacrifices to implement that technology quickly or efficiently. I'm betting on a pessimistic, high-technology future. In this future, we manage to cobble together a hodge-podge of last-minute, jerry-rigged solutions to keep the economy functioning at a basic level, but not at all smoothly or evenly. In it, we lurch from a crisis caused by financial melt-down, to a crisis caused by peak-oil to one caused by climate change. We'll tackle each crisis with incredible ingenuity, staving off total chaos, but at the cost of mis-allocated resources and a deteriorating standard of living. We hold out in the belief that after just this one more fix, the world will be back to normal and we can stop worrying. But that day will never come.

Forward thinking planners in some municipalities and communities will work on implementing true, long-term solutions. But they will not have enough money or resources to do more than ameliorate the next crisis. The large-scale, system wide solutions of better mass transit, algae biofuels, and continent-wide electricity transmission of the high-technology optimistic vision will be implemented too slowly, on too small a scale to achieve the economic stability the techno-optimists hope for. But these half-built systems will still bring considerable benefit, and keep the succession of crises from being the complete disaster that would come with a complete lack of planning.

This is the Methadone Economy. Alternative-fuel oil replacement therapy is necessary because oil supply will not keep pace with demand; we must replace oil or do without. But alternative fuels are not oil, and will require more effort devoted to energy production to produce the same effect. The Methadone economy will function, but it won't give us the highs we got from the cheap, concentrated, easily accessible energy of oil.