A recent mailing list post by Roger Baker got me started synthesizing my thinking about where we stand in relation to the twin energy crises of peak oil and global warming.

I've been thinking for a long time now that a long, flat oil peak is really our best hope for a relatively smooth transition to a renewable energy future, as it gives us more time to do the research, development, engineering, and infrastructure rollout we'll need than a sharp peak followed by a steep decline. So if production has been flat for over two years and the industrialized world is slipping into recession, that's actually good news from a big-picture perspective. (If I wanted to be more rigorous here I'd also look up the most recent Chinese GDP figures, but hey, this is just a blog.)

To me the big picture is about two cost trend lines that are closer to intersecting than people seem to realize. The first is the marginal cost of producing a unit of energy by extracting, refining, and burning fossil fuels, which has been low but is rising rapidly due to peak oil and growing demand from China. The second is the marginal cost of producing energy by investing in renewables, which has been high but is falling with advancing technology and economies of scale. The important point is that once the latter drops below the former, peak oil (and peak gas and even peak coal) no longer matters. The economy will seek energy inputs from the cheapest available source, which will no longer be fossil fuels.

Thus energy cost can only be a long-term brake on economic growth if you believe renewable energy is subject to the same "peak" logic as fossil fuels, and I don't see any prospect of that in the foreseeable future. One does hear that a few European countries are beginning to exhaust their wind power potential because the best onshore wind farm sites have already been developed. I personally don't believe it, but I haven't looked into it closely enough for any confidence either way. Even if it's true, the US is nowhere near that point. And, Dyson spheres and Ringworlds aside, we won't even need a framework for thinking about a "solar plateau" for a very long time (and no "peak" even then since solar energy won't actually decline for hundreds of millions of years).

When you break it down by energy source (oil, gas, coal, wind, solar, etc.) and type of energy use (basically electric power generation, heating, and transportation), you get different trend lines and different intersection points. The renewable trend lines are likely to be kinky as various bottlenecks come into play. Storage seems to be the big one right now, and transitions from research to development to production engineering to infrastructure investment for various technologies will all play a part. But the overall trends are basically the same, and we're not that far from the intersection points in a growing number of areas -- that is, renewables are already becoming price-competitive with fossil fuels in many cases, electric power from wind being the most prominent example.

The thing is, responding to price signals is exactly what the market is best at. The higher the price of oil, the greater the incentives to conserve and develop alternatives, and there's plenty of potential for both. There may be other crises looming that are simply beyond the capacity of human ingenuity to deal with, but I just don't see that being the case for energy.

The other huge energy-related concern is global warming. For some odd reason the climate crisis and peak oil conversations don't seem to overlap much, but if you believe as I do that climate change is a bigger threat than economic dislocations from high energy costs, then rising fossil fuel prices, like anything else that discourages CO₂ emissions, are a good thing. My guess is that we will end up burning the rest of the (conventional) oil, and we'll have to deal with that additional CO₂ in the atmosphere one way or another -- but the fact that the total supply of oil is limited means the problem is at least not open-ended. What the climate consequences will be I don't know, but (fingers crossed that no runaway positive-feedback loops are triggered) they're at least finite.

What I'm much more worried about is coal, since global coal reserves are generally thought to be much greater than oil reserves. I'm extremely skeptical about "clean coal" and carbon sequestration, so in my opinion the great challenge facing the human race is bringing down the cost of renewables for all our various energy uses fast enough to keep coal from becoming the default source. I sincerely hope the article I linked to above is right, though it generally presents "peak coal" as one more thing to worry about, not celebrate.

(After I wrote the above, Roger pointed me to a 2005 paper known as the Hirsch Report that addresses the costs and lead time requirements of potential peak oil mitigation responses. We've been in denial on energy supply issues ever since Reagan tore Carter's solar panels off the White House, and we've lost a whole generation when we could have been working on new energy tech. It's going to be a much rougher ride than it needed to be, but I remain cautiously optimistic that we'll ultimately get through it. Maybe I'll have more to say here after I've finished reading the Hirsch paper.)

The Washington Post's Steven Hill demolishes "Five Myths About Sick Old Europe":

1. The sclerotic European economy is incapable of leading the world.
2. Nobody wants to invest in European companies and economies because lack of competitiveness makes them a poor bet.
3. Europe is the land of double-digit unemployment.
4. The European "welfare state" hamstrings businesses and hurts the economy.
5. Europe is likely to be held hostage to its dependence on Russia and the Middle East for most of its energy needs.

Wrong, not even close, wrong again, bzzz, thanks for trying.

Jérôme at European Tribune notes the correlation between record high oil prices and a record low dollar against the euro and asks, "Should I start a 'Countdown to the $2 euro' series...?"