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The Alternative Energy religion is based on a false premise

February 27, 2013
Beaufort County has a habit of chasing pink elephants. That is essentially the strategy upon which our economic development programs has been based for over a decade and it has resulted in colossal failures. In fact, arguably, there have been no winners, and certainly no bonanzas.

Now our county fathers are chasing "alternative energy." They are junketing to Washington to cozy up to Federal officials in attempts to get a wind farm going near Pantego. The only way that project can make a go of it is to be heavily subsidized by the taxpayers. It's a case of robbing Peter to pay Paul. But then, that's exactly what all these economic development schemes Al Klemm and Jay McRoy sold to us. Take from other businesses and give it to a few. But wind energy is much more of a boondoggle than anything our leaders have chased, except perhaps ethanol.

The alternative energy movement is a scam. A huge, gigantic scam. That is so, because of nothing else is considered it is based on a false premise to start with—that we are going to run out of oil and natural gas—fossil fuels if you will. But that is a bogus idea, as is explain in this article by Bill Freeze:
One of the most persistent beliefs among proponents of alternative energy is that we are in danger of running out of fossil fuels. This economic theory, known as "Peak Oil," was first articulated by geophysicist M. King Hubbert in 1956. It states that for any geographic region—indeed, for the world as a whole—the extraction of fossil fuels follows a bell-shaped curve that eventually hits a maximum and then must inevitably decline. It seems like a commonsensical, compelling theory—except for a few small problems. It ignores the role economics plays in shaping supply and demand, it completely discounts the power of human ingenuity to come up with novel ways to solve problems, and it has been repeatedly refuted by the facts.

Every prediction over the last half century—and there have been many—that global oil production has or will soon hit a peak has been proven wrong. In fact, Peak Oil advocates have been so thoroughly debunked that they seem to now inhabit an alternate reality—one where fracking and horizontal drilling were never developed. Today, U.S. oil production is soaring, and the International Energy Agency predicts that the U.S. is on track to become the world's largest crude oil producer by 2017.

Yet the Peak Oil theory lives on, like a zombie that refuses to die. The Wikipedia entry on the subject still states "Hubbert's Peak was achieved in the continental US in the early 1970s. Since then, it has been in a gradual decline." A new report published by the Post Carbon Institute, A New Era Of Energy Abundance? reprises Hubbert's arguments and dismisses the current boom as a bubble destined to fizzle out. No word from the report's author, David Hughes, on whether he is willing to reprise Paul Ehrlich's famous wager with Julian Simon that the price of a basket of scarce minerals would rise due to resource exhaustion and overconsumption. (I can't wait to see the look on his face when teachers from the bankrupt state of California begin marching to allow drilling in the Monterey Shale so their underfunded pensions can get paid.)

The purpose of this column is not to review the laundry list of reasons why neo-Malthusian theories like Peak Oil consistently fail to predict reality—many others have done so in impressive fashion, especially Julian Simon in his classic opus, The Ultimate Resource. Rather, it is to point out that if somehow fossil fuels were to start to "run out," that would necessarily imply that solar, wind, biofuel, algae, and any other politically favored alternative energy source that got a seat at the subsidy table could not possibly have captured a lion's share of the market. For had any of them done so, the reduced consumption of fossil fuels would keep fossil fuels from running out!

This is not a complicated concept, but grasping it requires forever abandoning the static analysis that so distorts the debate over energy and natural resources. Every school kid understands the basic law of supply and demand and the role that changing prices play in balancing the two. And yet Peak Oil promoters and alternative energy zealots seem to believe that increased oil prices will not bring about increased exploration, innovation, and discovery (never mind that they brought us the current fracking boom) and that decreased consumption due to a massive switch to alternative energy will not lower fossil fuel prices, making it ever harder for alternative energy sources to gain market share.

Through its seemingly automatic adjustments—not directed by any commissar or central planner—the oft-maligned invisible hand has an uncanny way of upsetting economic experts' carefully devised predictions of what the market will look like a few years hence, along with politicians' cleverly designed government policies to distort it. And while these distortions can certainly influence markets at the margin, the energy industry is way too large for bankrupt governments to support economically unsustainable energy schemes for long. Just look at the solar investment bubble's spectacular collapse in Germany and Spain.

So next time you hear a Peak Oil alarmist prophesying doom, calm him down by pointing out that if natural energy resources were to ever run dry, we would already be living in an alternative solar-windmill-algae cheap energy nirvana.

# # #

Bill Frezza is a fellow at the Competitive Enterprise Institute and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here. If you would like to have his columns delivered to you by email, click here or follow him on Twitter @BillFrezza.
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  1. reply print email
    Peak oil
    February 27, 2013 | 02:26 AM

    Peak oil is not a theory. It's an observation.

  2. reply print email
    Wind energy is expensive energy
    February 27, 2013 | 09:52 AM

    Wind energy is just another green boondoggle. It is far more expensive than conventional energy and is unreliable since it produces no energy when the wind is not blowing. Alternative energy does nothing but run up the utility bills of consumers.

  3. reply print email
    "spectacular collapse"
    February 27, 2013 | 10:08 AM

    The article states: "Just look at the solar investment bubble's spectacular collapse in Germany and Spain."

    Citations? I expected none here, as usual. PV and wind in Europe are in fact, victims of their own success, indeed, flooding the market with cheap energy at times when an outdated grid system is poorly equiped to handle the inputs. Do the traditional producers who are stuck in a 20th century energy paradigm like it? No sir. They're seeing their largely fossil-based monopolies being challenged in ways they didn't plan for, and are under-equiped to exploit this new resource, much in the same way oil and gas drillers in the US who didn't adopt more modern extraction techniques have suffered. Funny that those natural gas producers who are currently having great success with their technology have also flooded their markets, realizing less than stellar profits due to an ongoing glut. We don't hear much about that, especially in this 'stellar' publication.

    Oil and gas production has peaked in many locations, and will absolutely do so globally at some point. Those who think outside the 20th century box (that you seem stuck in) will be uniquely positioned to prosper. The hyperbole of those threatened by these changes will be assigned to the dust bin.

  4. reply print email
    Peak Oil.
    February 27, 2013 | 04:27 PM

    M. King Hubbart's observation of a bell shaped production curve for oil production from individual wells to whole oil producing regions can equally be applied to tight shale oil production. These tightly packed fracked horizontal wells only recover about 5% of the oil in the formation in typically 2 years before they start to deplete. To offset depletion new wells have to be drilled in the field in an undisturbed location that has not already been fracked. After a few years there will be no sites in the field left to drill that have not been disturbed. Redrilling old sites is possible, but fracking merely reopens existing fractures that are already depleted. Therefore once you've run out of drilling locations production will peak and decline. Probably 90% of the shale oil 'reserve' will never be recovered as a result!

    David Ede
  5. reply print email
    Peak Oil
    February 27, 2013 | 05:51 PM

    To say that any natural resource is infinite, as Julian Simon essentially claims, is a ludicrous proposition. School kids understand the "law" of supply and demand but they also understand that there is no such thing as infinite supply. Seeing as how the author is venture capitalist I think he should stick to economics and not dabble in geology which he apparently does not know much about. Resources and reserves are not the same and fossil fuels resources and reserves are not all of the same quality and energy content. I like how pundits point out Hubbert, who made his prediction about U.S. oil production peak in 1956, as if oil geology and understanding of fossil fuel resources has not changed since that time.

    Chris Johnson
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    February 27, 2013 | 10:00 PM

    There remains the threat of anthropogenic global warming. If AGW is real, we should transition from fossil fuels as soon as we can. But since renewable energy is intermittent and unreliable, we should transition to advanced (4th generation) nuclear.

    Chris Lang
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    The Alternative Energy religion is based on a false premise
    February 27, 2013 | 10:07 PM

    Globally most of the oil down in the ground is not recoverable, at a market price. Oil drilling, and all industries work on the margin. When crude oil price rises a dollar, it pays to get the next drop out of the ground. The limit is not an absolute, it is based on a cost-benefit analysis, and that changes with new discovery and cost effective extraction technologies, e.g. seismic surveys and fracking. This is based on a free market of economical supply, and demand. Oligopolies, subsidies, mandated purchases, and regulations can, and has distorted the market price.

    There is no possible way that the green energies can compete with carbon combustion for base supply; they are all too expensive and will remain that way due to inherent technical weaknesses. The sole reason to foster them is a judgment that climate change is lethal, will destroy mankind. The certain result is a drastic reduction in our standard of living, as energy costs will sky rocket. Our technical infrastructure is junk status; some day it will collapse. We are out of time, and will, or have, reached the point of no return whereby physics, not politics will control our grim future.
    I engineered a score of nukes, two score fossil fueled power plants and spent decades assessing advanced energy technologies.

    Mr. R. L. Hails Sr. P. E.
  8. reply print email
    It's not Peak Oil - It's Global Warming !
    February 27, 2013 | 10:07 PM

    The author seems to be oblivious of the real issue driving Alternative Energy policies. It has nothing to do with peak oil. It has everything to do with the scientific fact that more carbon dioxide in the atmosphere undeniably leads to more warming of the globe. The National Academy of Sciences does not 'scam' anyone. They, and all other such scientific organizations around the world, strongly endorse a policy of developing alternative energy sources, and as quickly as possible. They take the extremely conservative view that we should try to reduce the danger of causing dramatic shifts in the climate. It's very simple to summarize the extremes to which blithely continuing our fossil fuel energy consumption will bring us: simple extrapolations of the volume of the northern polar ice cap indicate that it will effectively disappear in summer months within this decade. No scam.

    Erik Ramberg
  9. reply print email
    Economics and Peak Oil
    February 28, 2013 | 04:58 AM

    Disbelief in Peak Oil is supported by the history of all prior predictions of Peak Oil having been proven to be wrong.

    The fact that oil discovery and exploration techniques as well as patterns for hydrocarbon useage are influenced by clearer understanding of the issues in geology, physics and engineering in no way discredits the application of the economics of supply and demand.

    As prices for oil rise, reserves that are more difficult to discover and expensive to recover become more practical to develope. As oil prices rise substitutes are found for oil and users become less wasteful.

    Known and accessible reserves of oil are growing and growing rapidly. Efficiency of oil use is continually improving.

    To say that there is a finite limit to oil reserves is correct. There is a last barrel, but none of us can know what that finite physical limit is. More reserves are being regularly found and each barrel is being put to more efficient use as market prices incentivize discovery and useage. As each new unit of supply is more efficiently put to use, it is stretched in its disappearance, while availability of the resource for further use is expanding. As prices monitor discovery and disappearance the usefullness of each barrel expands.

    So far this process of

    Warren Smith
  10. reply print email
    A Short History of Climate Hysteria
    March 01, 2013 | 05:37 AM

    Under the category of "Often Wrong, Never in Doubt":

    Remember when “a major cooling of the climate” was “widely considered inevitable” (New York Times, May 21, 1975) with “extensive Northern Hemisphere glaciation” (Science magazine, Dec. 10, 1976) which must “stand alongside nuclear war as a likely source of wholesale death and misery” (International Wildlife, July 1975)? Remember reports that “the world’s climatologists are agreed” that we must “prepare for the next ice age” (Science Digest, February 1973)? Armadillos were leaving Nebraska, heading south, and heat-loving snails were scampering southward from European forests (Christian Science Monitor, Aug. 27, 1974). Newsweek (April 28, 1975) said meteorologists were “almost unanimous” that cooling would “reduce agricultural productivity.”
    Washington Post, February 22, 2013

    George Will
  11. reply print email
    alternative energy
    March 04, 2013 | 09:26 AM

    The sustaining impetus of 'alternative energy' is not scarcity of petroleum, nor is it 'global warming'. The purpose of the movement to inflict expensive and unreliable energy production is to collapse the economy of the United States as outlined by the cloward-piven strategy.

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