The Hindu Business Line : Oily skid is just dangerously around the corner

`Chindia' will require increasingly high amounts of energy for its growth, points out Stephen Leeb in The Coming Economic Collapse. As alternative energy, biodiesel is well poised "to enter both the vocabulary and the fuel tanks," predicts Lyle Estill in Biodiesel Power.

Energy crisis is the biggest problem ever that our civilisation will have to face, declares Stephen Leeb in, The Coming Economic Collapse, from Warner Books (www.twbookmark.com). Leeb, as you may know, wrote, The Oil Factor, two years ago, predicting runaway energy prices of $100 a barrel by the end of the decade; crude was under $33 then. Now, in the latest book, he talks about `$200 a barrel'! There seems to hope, however, because `how you can thrive' is the subtitle. "Crude prices marched toward $68 per barrel," reports Pittsburg Morning Sun `24 minutes ago', at time of writing this.

Two books convinced Leeb that our civilisation was falling prey to colossal errors of judgment: Collapse, by Jared Diamond, and The Collapse of Complex Societies, by Joseph Tainter. "These books graphically delineate how may past civilisations fell because their leaders did not prepare for a shortage of resources," states the author's note.

Mirror image of tech bubble

Chapter 1 draws a parallel with the tech bubble — the delusion in 1999 that the bull market in technology would endure. What we now have is a mirror image, says Leeb: "That oil prices will stay perpetually low." Worryingly, "consequences of today's delusion may be a far greater disaster than the tech crash."

A chapter titled `a collision course with disaster' decries that Wall Street analysts are ignoring the realities of the oil industry. "Instead of recognising the growing supply/demand squeeze, Wall Street has decided that commodities like oil have `normalised' prices."

What is a normalised price? One that does not undergo long-term uptrends but rather fluctuates around the midpoint of a long-term; essentially flat trading range, explains Leeb. Arjun Murti of Goldman Sachs had predicted in March 2005 that oil might exhibit a super-spike to take the price to $105. "The nature of a spike is that it is brief," counters Leeb. "The price falls quickly back to where it started. Goldman Sachs still believes oil's long-term price will average between $30 and $40."

The book exhorts readers to `identify a little bit less with the herd' to shake off `our psychological blind spots' such as `conformity, authority, and groupthink'. As Swarthmore psychologist Solomon Asch has shown, "most human beings, under conditions that are hardly severe, will follow the crowd, even when the crowd is clearly wrong."

Another study, cited by Leeb, is of Stanley Milgram — "that most people's tendency to trust and obey authority is so strong that they will shed all personal responsibility, moral training, or creative volition for the sake of following orders." Drawing lessons from history, including the recent WMD bogey, Leeb appeals for `emotional maturity' and `willingness to look at potential problems well in advance.'

The Chindia factor

A chapter titled `Chindia and the future of oil' discusses the oil needs of China and India. Though "the per capita consumption of virtually everything in Chindia, from energy to computers, is a small fraction of what we find in the developed world," remember that 35 per cent of the world's population lives in Chindia. These two countries already consume nearly 90 per cent of goods and services as the US, in terms of PPP (purchasing power parity).

Even a $260 a barrel price may not induce `meaningful conservation,' predicts the author. Chindia needs an annual growth of at least 8 per cent "just to provide jobs for the tens of millions joining the workforce each year," is from Pete Engardio's article, Crouching Tigers, Hidden Dragons, Business Week, August 22, 2005. "Fear of worker unrest is a big reason Beijing has kept stoking its boom with massive lending and growth in the money supply."

For Chindia, growth is essential, and will require increasingly high amounts of energy, points out Leeb. But "virtually all significant oil deposits in the planet's crust have already been found." As a result, "further exploration will result in ever smaller discoveries, and an even higher exploration cost per barrel of oil discovered."

What is the havoc that oil price hike can cause? Oil prices are like taxes, says the author. For, they add to the cost of everything. "Oil prices of over $200 a barrel will increase the cost of maintaining a complex society — and simultaneously lower the returns." Policymakers will then have to choose between the Scylla and Charybdis of either fighting inflation `by choking growth and running the risk of recession,' or stimulating growth even as inflation leaps to double-digits.

Disturbing read.

Petroleum replacement is not as elusive as world peace

Are we nearing the end of oil, or the end inexpensive oil? In either case, we need to find alternative fuel, urges Lyle Estill in, Biodiesel Power, from New Society Publishers (www.newsociety.com). The book is `a chronicle' of an emerging industry, capturing `all the buzz from the biodiesel blog,' and `the passion, the people, and the politics of the next renewable fuel.'

B100 is `100 per cent biodiesel,' used by a small community of consumers. "I have inhabited the B100 world for the past three years, making my own fuel, designing and building biodiesel reactors, experimenting with different feedstocks, catalysts and reactants," writes Estill in the intro.

"Anyone can make biodiesel in a blender," guides the author. "The recipe calls for some dangerous ingredients such as methanol and lye. All are toxic, nasty substances in themselves and are even worse when combined in the biodiesel reaction." A chapter on `biodiesel economics' informs the 2001 cost to be $1 per gallon, including a labour component of 50 per cent. "Our cost for methanol has increased by four times since then," says the author. Yet, the cost of homemade is between $1 and $1.50, he adds. The book enlightens readers on the use of alternative inputs, such as used fryer oil.

Get to know about converting your vehicle to SVO (straight vegetable oil). "Merely get an additional fuel tank with a radiator pre-installed, cut into the coolant lines under the hood and redirect them to the radiator in the extra tank." Why? "That way the waste heat generated by driving down the road is moved into the vegetable oil to make it good and hot." Then? "By simply `teeing' into the fuel system and adding a solenoid and a switch on the dash, the driver is able to tell the system to `stop sucking from my diesel or biodiesel tank and start sucking from my vegetable oil tank." Ready?

In the chapter on `the renewables establishment' meet Kumar, `a committed distributor of B100 in Northern California', `an industry pundit whose opinions have tremendous weight'. His dad is a CPA and so Kumar's blog has `interpretation of tax credits'.

Do you know that glycerin is a sidestream product of biodiesel? "Procter and Gamble controls most of the worldwide glycerin supply and they make among other things, soap. They also have been known to thwart biodiesel legislation in Europe," informs Estill. "Even if a fraction of the biodiesel production that is proposed comes online, the crude glycerin market will completely collapse." Since it is pure carbon, Estill suggests that the use of glycerin as a good ingredient in soil making.

"A lot of the costs in the production of biodiesel come from petroleum," says Estill. How so? "The boats that import soybeans from Brazil are powered by petroleum, as are the trains and tank trucks that deliver B100 to market." Strangely, where biodiesel is cheaper than petroleum, it gets snapped up by the general public (and "construction fleets, cement makers and transportation intensive industries") rather than by "customers dedicated to biodiesel."

Petroleum replacement is not as elusive as world peace, quips the author, in conclusion. "It should be easier than that." He is positive that biodiesel is well poised "to enter both the vocabulary and the fuel tanks of the driving public."

Good fuel for the book-hungry!

http://bookpeek.blogspot.com

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