01 Introduction



01 Introduction.doc.lnk

Introduction

The Problem

We can’t go on living like this. We can’t keep using energy like there’s no tomorrow. Something has to give. We are running out of gas, running out of roads, and turning the whole planet into a hothouse. Ouch.

Public opinion is swinging around behind the scientists on this issue. We are a long way from agreement on what is happening, why it is happening, and what it will mean in the long run. All that is fairly clear is that something has to change.

Every attempt to figure out what will happen by projecting today’s trends into the future tells us there will be a problem. The question is which of many problems will get to us first. At today’s consumption rates oil will run out in somewhere between 20 and 40 years. At today’s rate of increase in oil usage, especially in China and the developing world, it will run out earlier than that. At today’s rate of emitting carbon dioxide (CO2) into the air the temperature will go up somewhere between two and nine degrees over the next century. Without building more roads traffic is liable to slow to a crawl. Road building is slowing, however, because land and construction are expensive and people don’t want new roads in their back yards.

The easy part is knowing that the straight line growth we’ve seen in the use of energy and automobiles can’t continue. There will be a discontinuity. The hard part is figuring out what will happen.

Our track record for seeing around the corner isn’t very good. We knew the Soviet Union could not continue as it was, Japanese stock market and real estate were wildly overpriced, ditto the NASDAQ a decade later. There were precious few accurate predictions of how these situations played out. We thought at the time of the first oil crisis, in 1973, that we would have to change our wasteful ways. We thought rationalism would eclipse religion. Wrong again and again!

Conventional wisdom is probably wrong about what is going to happen in energy and transportation. There are too many variables in play. We disagree on how each of the variable such as population, automobile efficiency, home size, third world development, are going to vary independently. Experience shows that most of them will not conform to a simple straight-line or exponential extrapolation. Future demand for energy and transportation, which depends on these and many, many other variables, is very hard to project. The odds are very remote that any model will correctly project what happens with all the variables.

Investors make money on changes in perception. Incorrect perceptions in something as big as the future of transportation translate into big opportunities for whoever sees it right. Bets on railroads, bicycles, cars and airplanes paid off handsomely in their time.

The linear projection is that we will need more of what we have today. More cars, more vehicle miles, more roads, and more energy used for transportation. For this to be true we will eventually need to use something besides liquid petroleum to power these cars. In the meantime we will have to make better use of the petroleum resources we have. The investment opportunities from this perspective are in hydrogen and fuel cell technologies, hybrid motors, and intelligent vehicle technologies such as platooning. Other developments to watch are new petroleum sources, such as shale oil, the potential of international agreement on greenhouse gas emissions, and projects to dispose of CO2 in deep aquifers and oceans.

Looking at the problem from a social perspective there could be several social causes for a decrease in energy usage. Travel demand could go down or there could be a large-scale reversion to walking and bicycling. These scenarios are rather improbable. Either one would imply some significant changes in our society. We might curb our birth rate, start to live closer to work, vacation less, make our friendships and school our children in the neighborhood, car pool more, use more public transportation, have goods delivered to us instead of going shopping, invent all-weather bicycles and bike paths, want more exercise, trust our neighbors more, do more work remotely as telecommuters, communicate more by telephone and video conferencing and less in person. The seeds have been sown for all these trends, but it would be hard to bet than any of them will be significant enough to bail us out of our energy problems.

The alternative most people are betting on is that we can let travel continue to grow at the same time we reduce fossil fuel consumption. It only appears to be the less radical alternative. Taking into the massive dimension of our travel needs and fuel consumption and the embryonic state of the proposed alternatives, finding a technical solution to the problem may be less likely than a radical change in society.

Objective of the book

This book is an attempt to wrap the mind around some of the biggest issues of the day: global warming, fossil fuels, our transportation needs, geopolitics, markets and the future of mankind. The specialized knowledge available in each of these areas is would fill libraries; even experts are hard pressed to understand it all. Yet, like the big questions in investment, religion and politics, individual people have to make decisions on matters that will be affected by these issues. Is it prudent to buy a Chevrolet Suburban? Should my retirement portfolio include energy stocks? Should I buy a house 40 miles from work? Are dramatic changes in the climate likely to make the world uninhabitable for my grandchildren?

The life cycle of social problems may escalate through stages dim awareness, general concern, crisis and action. They can end through resolution or simply evaporate as matters of public concern. Consider such unrelated issues as slavery, illegal drugs, prohibition, womens suffrage, radiation from power lines, child labor, tuberculosis, AIDS, air pollution, nuclear preparedness, and fluoridation of the water supply. Some are resolved, some like fluoridation just went away, and many are still with us.

Global warming, the exhaustion of fossil fuels (or at least rising fuel prices), and the increasing congestion on our roads are already matters of general concern. A great many people are spending a lot of money looking for solutions. Governments are spending money to get a better understanding of the problems. Private industry is investing much more to develop money making solutions to the problem. Universities receive private and government funding to pursue promising lines of research.

Like all markets, the research market is driven by perception. We frame our problem in light of the world we know: cars, buses, interstate highways, subways, gas stations and electoral democracies. Because everybody owns cars, we cast the problem as the search for a more efficient car. Because transportation and industry alike use fossil fuels, we cast the problem as a search for less polluting fossil fuels and a means of disposing of excess CO2.

Many industries, probably many economies, will suffer dramatically if we do not find solutions that more or less fit today’s transportation paradigm. The revolution that brought us cars a century ago devastated businesses associated with the horse and bicycle, changed public transportation from a profitable business to subsidized service for the poor. Airplanes did in ocean liners. Railroads eclipsed canal barges, and trucking is eclipsing railroads. Road vehicles powered by internal combustion engines are so dominant in transportation that we forget how short a while they have been around. Industrialized countries have fought a retrograde battle against some of the problems brought about by their success, such as air pollution and a shortage of roads. Developing countries are losing those battles. The remaining problems, exhaustion of petroleum reserves and global warming, show even less promise.

There is opportunity to be found in the gulf between the expectation that solutions to the fossil fuel/global warming/congestion issue will resemble what we know today and the fairly obvious reasons why such solutions are unlikely. We have a fairly good idea of what won’t work, but we don’t know what will. It is likely that some investments in what appear to be fringe technologies will do quite well.

Professional investors have fairly pure motivations. They are paid for performance. Individual investors, though they also look for profits, tend to be more visionary. They have more of a tendency to become enamored with the concept behind a stock. Faith like that paid huge rewards in Apple, Microsoft, Cisco, Oracle, Amazon, AOL, E*Bay and any number of companies that have since become part of the establishment. “Irrational exuberance” also cost these investors tremendously in the NASDAQ meltdown of 2000-2001. In any case, small investors and venture capitalists play a very important role in getting money into corners of the market that are not dominated by established companies. It is my hope that this book will get some investors thinking about where their money might be well applied.

Social Basis for getting away from cars – going to the point on page 1

There is increasing concern about cars in themselves, the mixed blessing that transformed the 20 century. They started out as an infinitely convenient device. That convenience factor has waned simply because there are too many of them. They get in each other's way. There is no place to park them anymore.

Through the first half of the automobile age there were grumbling about pollution. People noted their cars dripped oil, smelled bad, made a lot of noise, and got the dogs upset. In the ‘50s and ‘60s the complaints became systematic. The Los Angeles basin became so blue with fumes that she couldn't see, in your eyes watered as you entered town over the grapevine hill. We noticed that the underground storage tanks at gasoline stations poisoned the soil. Crankcase oil was fouling the rivers. Legislatures went to work to protect us from ourselves.

Social scientists and critics are usually at odds with industry. Folk singer and protester Malvina Reynolds was out in front of the hippies when she criticized the monotony of suburban life in her song about “little boxes on the hillside, all made out of ticky-tacky and they all look just the same.” It was cars that made those little boxes possible. We could commute out of the city to our one-eighth acre paradise in the suburbs. Music made a big thing out of cars. “My Merry Oldsmobile” came out when they were new. Themes of the ‘50s included drag racing and romantic death in car wrecks. The romance is gone now. They aren’t a big deal in our music, but we talk a lot about road rage.

Cars benefit those who can use them: people who can afford one and can drive. That leaves out big slices of the population. There are disabled and old folks who can’t drive. There are children who aren’t allowed to. Some people can’t afford cars. And there are the soreheads who want to walk, bicycle and take public transportation. Cars are a nuisance to them. They make the roads dangerous or at least unpleasant.

Cars and highways isolate us. We used to see our neighbors when we walked to the corner store, rode the trolley to work, or hung out on the porches of our row houses. Not any more. Many developments don’t feature sidewalks anymore. Because of the car, our houses are so far-flung that it doesn’t make sense to serve them with public transportation. Our big modern houses have an inward focus: the rec room and the patio instead of the front porch or stoops.

I was recently called for jury duty in a civil suite arising out of an auto accident. The judge asked for a show of hands to see how many of the prospective jurors had been in an automobile accident. It was almost everybody.

Prodded by our government, carmakers are producing safer products every year. The number of deaths per 100,000 people has fallen from 21 to 15 over the past three decades but cars remain dangerous. In 1999 alone, 41,611 people died in auto accidents in the U.S

We don’t have good measures of the changes in behavior driven by fear of the automobile. Most families in the 1950s only had one car. Most people were used to walking. We walked to school, to the corner store, and to our friends’ houses. Our family has several cars. My children always ride. It is a cultural thing. None of their friends walk. There are very few sidewalks in our neighborhood. Mothers are concerned they might be hit by cars or splashed by cars. A child molester in a car might snatch them can carry them away.

Cars are been cheap to own. Our family fleet of American cars, which we buy new and run into the ground, costs us between 33¢ and 50¢ per mile for the first 100,000 miles per car. Fuel accounts for only about 10% of the cost of driving for U.S. citizens, and transportation only about 11% of consumer expenditures[1]. The costs would not be that much more even if we lived somewhere like Europe or Japan where taxes on ownership and fuel are much higher. People overseas buy smaller and more efficient cars. Not only does it keep ownership costs down but it gives the Europeans a prayer of finding a parking place on their crowded continent.

Gas prices will certainly continue to go up, but prices alone will probably not be the limiting factor in our continued use of cars. So much of the cost of gasoline is in refining, distribution and taxes that if the price per barrel of oil quadruples, the price at the pump in the U.S. might double. The effect in Europe would be much less. All things considered, doubling the price of gas might raise the real cost of operating a car 30% or so, in line with what it was in the 70s and 80s.

A sustained quadrupling of oil prices would certainly put some good minds to work in the energy industry. Exploration would zoom. Stripping oil from old wells would become a hot business. Environmental considerations would replace cost as the limiting factor in recovering the huge energy reserves trapped in oil shale. Human ingenuity is likely to be able to overcome problems of scarcity. The question is, can we overcome the bigger problems brought on by our very ingenuity?

Social issues again

The term “Tragedy of the commons” describes what happens when farmers share common grazing land. It is in each farmer’s individual interest to pasture as many sheep as possible, despite the fact that overgrazing ruined the commons for everyone. We see the phenomenon more frequently now that humanity has spread to every corner of the earth. In the area of taking, we have stripped the oceans of fish, depleted our rivers and aquifers. In respect to giving we have loaded our air, rivers and oceans with so much effluent that it shortens lives even in wealthy countries. Ultimately, the most insidious pollutants are probably the most fundamental ones. Combustion produces heat, and carbon dioxide that enters the environment and traps heat. Global warming.

This isn’t meant to be an alarmist book about the environment. There are enough of them already. They are moving in from the fringes to affect mainstream thinking. Instead, this book attempts to divine how humanity will react when the message sinks in. How we will change the way we transport people and goods in response to economics, politics, guilt and fashion.

Churchill is credited with the aphorisms “Democracy is the worst form of government… except for all the others” and “You can always count on the Americans to do the right thing… when all else has failed.”

Our form of government makes us slow to react. The U.S. has survived despite being caught flat-footed by the British, the Germans (twice), the AIDS epidemic, and so many other perils. The world as a whole is far slower to react than an individual nation. However, being slow to act has served us pretty well, considering all the threats that never materialized.

Even in prehistory people had a major impact on the ecosystem. The art of hunting was supposedly so well developed by the time the first native Americans made it to the new world that they quickly killed off most of the big mammals, from mastodons to giant anteaters, to the point that there were none left to domesticate. French cave paintings depict, and Greek and Roman writings talk about plants and animals that went extinct long ago. We’re certainly better than they were. For the first time in history, we care. Legions of people line up to save the whales, gorillas, tigers, spotted owls and even snail darters. Man’s impact on the environment is hardly breaking news.

Malthus’ gloomy projections about population explosion overcoming our ability to provide for ourselves have yet to prove out. The six billion people alive today are better off by most measures than the one billion two centuries ago when he wrote. He predicted we would get dumber because poor people are most prolific. Instead, IQ tests show we keep getting smarter. There is always a dread disease to worry about. Today we worry about AIDS and ebola. Going back in time it has been polio, smallpox, tuberculosis, typhus, plague and any number of others. Great minds had us worried about nuclear annihilation, germ warfare, acid rain, global cooling, and since at least the 1950s, running out of petroleum.

What about pollution? The air was truly nasty in Los Angeles and London in the 1950s and 1960s. We passed some laws and cleaned it up. Lady Bird Johnson was shocked about the state of the Potomac River in the 1960s. Hubby signed more laws and, except for the pesky cops who don’t want you to drown yourself, you can swim in it now. We Americans have reacted in shock to situations like Love Canal. We are spending the billions necessary to clean them up.

So what is the problem? What good has all our worrying done us? We have survived, healthier than ever and tooling around in two-ton SUVs that are certainly better made than ever and cheaper to operate, relative to our income, than cars have ever been. The major threats seem to be political. If OPEC did not artificially restrict production prices would stay low and there would be enough for everybody. Have we cried wolf too often? Will the wolf at the door ever be real? Our behavior shows that we don’t think so.

To get our attention, the alarmists have to make a pretty good case that things are different this time. Here is the gist of the arguments.

In the 19th century, for the first time in history, we ran out of frontiers. People occupy every habitable place on earth. And quite a few that most of us would call uninhabitable. For the first time in history all people are in touch with each other, with only “six degrees of separation” between any two of us. This connectedness is wonderful for communication of ideas, dubious for the transmission of cultural values, and pernicious for the transmission of diseases.

Gorillas, chimps and our uncivilized ancestors could foul their nests and move on. We six billion primates of the species homo sapiens have to live with our mess. For the first time in history people have had an impact on the atmosphere and the oceans themselves. We have seen our activity blow a hole in the ozone, destroy coral reefs, and decimate the rain forests. Our activity affects virtually all fertile lands and aquifers. We can enumerate the total endowment of mineral riches of the earth, and projecting by our rate of consumption, estimate when many of our resources will be exhausted. Hard figures increasingly replace a vague malaise about what we are doing to ourselves and our posterity.

The general shapes graphs and curves here should be familiar to investors. Some phenomena, population and auto registrations, grow like compound interest, that is to say exponentially. The amount of grows every year, and the amount by which it grows also increases. Some grow in a linear, or arithmetic fashion, like simple interest. Fossil fuel consumption and CO2 in the air are increasing more or less linearly. Going the other direction, fuel consumption per mile is falling very slowly; and the world’s petroleum reserve is going down at an accelerating rate. The interesting questions are, where and when do the curves intersect, what are the implications when they do, and how can we avoid or postpone its happening?

Social factors will play a role. The amount of highway that can be built for a given amount of money decreases every year. The value of the land that must be bought for the right-of-way goes up, the cost of litigating against the myriad interest groups who oppose growth increases exponentially, and the costs of labor and materials rise in a more linear fashion. The amount of permissible pollution per vehicle goes down somewhat exponentially. More cars means we can tolerate less pollution from each one. The higher emissions of older cars needs to be offset by lower emissions of newer cars. On top of all that, politicians at home and around the world are coming to believe that we are approaching, or have even surpassed, definable limits on how much pollution the environment can be expected to absorb. The Kyoto agreement set limits on the emission of greenhouse gasses such as carbon dioxide.

Technology curves are part of the equation. The rate of improvement of tangible objects such as automobiles, airplanes and television sets tends to be linear at best. Each year they offer marginally better mileage and marginally better safety. The rate of improvement of less tangible products, that is to say those with more of an intellectual content, tends to be exponential. This includes things like computer processing speeds, computer memories, and communications speeds. The improvements in these areas come from improved intellectual content: better algorithms, better manufacturing processes, more intelligent use of bandwidth and so forth.

Applying the exponential improvement in computers and communications in the sphere of the tangible has saved lots of money in the past. Airline scheduling, railcar tracking and loading, just-in-time manufacturing, and the whole Federal Express empire are cases in point. The Internet has almost eliminated the need to send physical letters and even parcels containing written materials, photos and film. Telecommuting is replacing commuting for many people, and teleconferencing replacing travel. Experience would suggest that we are at least as likely to find solutions to our personal travel problems in the sphere of communications and information as in mechanical improvements.

The convergence of these various curves is the thesis of this book. Most simply put, at some point we will no longer have the luxury of hopping into a 4000-pound vehicle whenever our 150 pound body has a notion to go somewhere. There are several possible reasons why. It may no longer be affordable, congestion may make it too time consuming and aggravating, or you may be prohibited from driving or using certain roadways.

The limitations on car use will be a result of some combination of economic factors, governmental actions and supra-national agreements. The best outcomes would be those guided by the invisible hand of self-interest. It will be wonderful if people freely select marketplace alternatives that are easier on the environment than cars. The alternative would be legislation, a soft word for government coercion. A quick examination of the U.S. government’s record in attempting to improve auto efficiency through the Corporate Average Fuel Economy (CAFE) legislation, operating the AMTRAK rail system and managing air traffic through the FAA is not encouraging. Free markets, albeit encouraged by public policy, are much quicker to respond.

Memes – saving the environment

Ideas, good and bad, propagate like viruses. Three centuries ago Scots and English philosophers came up with the idea of individual rights. A century and a half ago Karl Marx came up with the idea of communism. Good or bad, these mental viruses quickly spread over all the earth. Communism retained its popularity for seventy years (at least among the intelligencia -- the people who lived with it knew better) despite the obvious fact that it never worked.

The Individual Rights meme worked better and has lasted longer. It is the basis of our very successful society in the United States. One might say that it is getting ahead of itself; that rampant individualism is eating away at the consensus (other memes, such as religion) that hold the U.S. together as a country. There is a good case to be made that Hollywood, the lawyers and the ACLU have freed people to “do their own thing” to the detriment of society as a whole. That is not my issue; I simply observe that Individual Rights is a very powerful meme.

Before moving on, it is worth observing that as airy notions memes can stand in contradiction to one another. Individual rights were a basic tenet of Communist theory. In practice they were incompatible. How many Christians believe in evolution? How many of us believe that cars are destroying the environment but drive SUVs anyway? How about Environmentalism as a meme?

The core notion in the environmental meme is that we are destroying the environment and we had better stop. Humanity has a moral imperative to stop. People have been telling us for generations that there is a problem.

Thank God we’ve stopped. Starbucks uses recycled paper for their napkins. McDonalds has replaced their Styrofoam hamburger packaging with paper. My children and yours have a compost bucket beside the garbage disposal to collect coffee grounds and banana peels to put in the garden. Some of us car pool, when it is really convenient, so only 90% of the cars at rush hour have only one occupant. Whew! Glad we solved that problem.

Hmmmm. A cynic would correctly observe that we are not be all the way there yet. We’ve taken a few “feel good” measures but we haven’t bitten the bullet. We haven’t taken the difficult measures.

The question is whether, and when, we will be ready. Humanity is getting primed to do something. The Green Party has been a factor in German politics for a couple of decades. Ralph Nader brought the environment into the presidential debate for the first time in the 2000 debates. The tree huggers in the California redwoods, the protesters at the World Trade Organization meeting in Seattle

Investing offers a very apropos measure of the movement of memes through our society. Investors are ultimately betting on what will sell in the future. PCs? Cell phones? Groceries ordered over the Internet?

Stock prices are at least once removed from the fact. They rise and fall with changing perceptions of the future. Today as I write Intel Corporation has just reported that their quarterly earnings will be down because of a falloff in sales of both PCs and servers. The market is reacting as if the fall is permanent. People like me who think that the desktop paradigm is coming to an end will sell Intel. People who believe that the Microsoft world of Windows and Office is here to stay will buy Intel. The future will tell us who is right. Needless to say, there are numbers of meme-meisters like Maria Barteromo helping to shape our opinions both ways. Do I watch for her opinions alone? How do I make up my mind on these things?

We might say that stock in several environmental memes has sold well. The stocks are sexy and besides that they are cheap. Just to name a few:

Who cannot be in favor of saving the tigers (or gorillas, or chimpanzees)? We will all give money for this cause.

Who does not believe in saving the rain forests? We have already put our native rain forests (to wit, the Hoh rain forest in Washington State and those in Hawaii) under protection. Why can’t Brazil do likewise with half their country?

We favor an absolute halt to building freeways. Through our own neighborhoods, that is.

We deserve some credit for supporting legislation to stop using leaded gasoline, chlorinated fluorocarbons (CFCs) for refrigeration, lead-based paint, asbestos, high-sulfur coal in power plants, and other such ills. Individually we are willing to pay somewhat more for certain products to spare ourselves and fellow humans the noxious fallout of using those products.

More and more city folk are turning to bicycle commuting and public transportation, motivated positively by reasons of health, money and concern for the environment, or negatively by frustration with traffic.

The stock of ideas that would make a big difference to the environment, however, isn’t selling very well. They cost too much. An investor would be stupid to buy them unless it appeared that everybody else would, and given the inconvenience they involve, we have little faith that will happen. Just a partial list would include:

Making it a public policy to limit population growth by whatever means: incentive payments for not having children, mandatory birth control or sterilization. These are total non-starters.

Imposing severance taxes on fossil fuels that more nearly reflect their total cost, in terms of impact on the environment and the cost of not having these irreplaceable resources available to future generations. For decades the visionaries have proposed adopting European-level gasoline taxes. It hasn’t happened because the pain would be too great. There would be wholesale turnover in Congress.

Making individuals pay the full costs to society of providing their children with education and medical care. This would mean coming to regard children as a social burden and not an asset. It would be a total reversal of everything we have believed since mankind had the brains to believe anything, and it isn’t going to happen soon.

Charging or taxing companies that draw from common resources, be they waters, forests or the atmosphere, the full costs of their actual use. This would mean charging Western ranchers and loggers for the costs of the federally funded roads they use and depreciation for the wear-and-tear they impose on federal property.

Controlling immigration. Since we don’t want, and can’t afford, to build a Berlin Wall along our 18,000 miles of borders and coastlines, the only effective way to do it would be through a national identification system. That is another non-starter; individual freedom has been a cornerstone of our democracy, much more than in Europe or anywhere in the world.

Most people do not dwell at any length on these thoughts. Those who do, and whose thoughts run counter to the prevailing memes, have the good sense to stay shut up. People have a wonderfully consistent tendency not to even engage the argument. Instead, they relish attacking the messenger and impugning his motives. Especially at the beginning, it can be lonely being a Jack Kvorkian, Garrett Hardin or Ralph Nader.

The memes named above are not ripe for change. They may be getting close. We have seen some major meme-changes in our lifetime. Some of them have a direct bearing on the environment, in that they affect our attitudes towards reproduction and hence our population. We have come to accept homosexuality; homosexuals are not a terribly fertile group. Our embrace of women’s rights gives them choices other than motherhood. We are much more tolerant of casual sex, sex for fun as opposed to reproduction.

Will trading the responsibilities of parenthood for simple fun be our salvation? The answer to that question depends in part on the speed with which American culture floods the world. Who knows? An equally big question is what kind of a dent our fun will make on the environment. Many of our pastimes take a lot out of the environment:

Motorboating, motor cross and snowmobiling take several large tolls. First, large bodies of water or land have to be set aside for the sport. Secondly, they consume fossil fuels and directly pollute the environment where they are practiced. Third, it takes a lot of energy just to make these motor toys. Fourth, and certainly not last, it takes a lot of fuel for the sportsmen to get to wherever the sport is to be enjoyed.

TV, movies, video games, running, roller blading, bridge or chess would be at the opposite extreme in terms of environmental impact. Cards and chess sets are cheap and the games take no energy other than mental. The transportation costs involved in bringing players together (or the electricity to support playing over the Internet) is trivial. If humanity can be coaxed to find its entertainment in these ways, the world may continue to be able to tolerate our presence.

Conclusion to the Introduction

This book finds a middle path between optimism and pessimism. It expresses optimism that many people will make a lot of money betting against the present-day optimism of others. When those optimists turn around (and it will happen more than once, just as it has already happened in the Great Depression, Oil Crisis of 1973, and many times prior to that) two things will happen. First, the overall panic will drive all markets down (like the demise of the PC is doing with the NASDAQ today), then, like phoenix rising from the ashes, investors will perceive the value in the companies that are dealing with the “what then” scenarios.

Perversely, we are currently so gluttonous in the U.S. that our current excesses may provide a buffer for our future. When we stop exporting food, stop eating so much meat, cut down on the French Fries, we may survive while most of the world starves. Also, we have made food so cheap that a lot of farmland is going out of production. Connecticut and much of the country is being reforested. The option to farm it again gives us another buffer.

02 Pollution Issue.doc.lnk

Pollution Issue

Before mankind there was a rough balance in the energy equation of the earth. As Figure 1 shows, the energy of the sun was captured by photosynthesis and stored as plant matter. The life processes of plants or animals released most of it back. Some was released by forest fires. The balance swung back and forth over the four billion years of the earth’s history.

Fortunately for us, some of the plant matter turned into coal, oil and natural gas. Our sphere put on fat, so to speak, in the form of biomass that was not reconverted to energy and CO2 (carbon dioxide) as fast as it was built up by photosynthesis. This excess of stored energy took the form of organic deposits within the earth’s shell: coal, oil, natural gas, peat and so forth. Actually, the vast majority of the buried hydrocarbons were eaten up by bacteria or decomposed into gas under heat and pressure, but what is left is highly concentrated and hence very useful.

The primary raw materials for photosynthesis are CO2 and water. Algae, plants, wood, and other forms of plant life release oxygen into the atmosphere as they use the sun’s energy to convert these raw materials into hydrocarbons.

Animals support their own life processes with by using energy stored by plants. Before man the only energy available to animals was generated by their muscles out of the food they put through their gut. The only energy stores they could take advantage of were recently dead: plant life, or second-hand plant life in the form of the animals.

Mankind figured out how to beat the system. Wood fires released solar energy to heat our bodies softened our food, later to transform ores into metals. At the dawn of agriculture we co-opted other animals, using their energy to do our work. The fundamental equation stayed in balance, though, because these early inventions only changed the beneficiaries of the energy stored in plant materials. People got the benefit of solar energy that had been recently captured by plants instead of termites, oxen and other animals.

The first widely-used fossil fuel was coal. The Chinese and the Romans knew about it before the Christian era. People didn’t start to mine it in significant quantities, however, until the industrial age. That’s when they discovered it could be converted into coke, for making steel, and coal oil for illumination. It wasn’t long before they found it was pretty useful for heating houses and running locomotives as well.

Mankind has always known about petroleum. Egyptians used it to wrap mummies. Ancient angelenos probably got stuck in the La Brea tar pits. The success of coal oil got people thinking about how to produce it. In 1859 the Americans devised a way to pump petroleum out of the ground. It turned out to provide more light per gallon and to be easier to work with than coal oil. With a little ingenuity people found a number of other uses for it besides just lighting.

For the last couple of centuries we have been using the energy that was stored away over the past 500 million years. That means releasing the carbon that has been stored over that period, putting it back into the air from whence it came so long ago. The air usually provides only temporary storage for carbon. It finds its way out of the atmosphere not only by photosynthesis but by being dissolved in the waters of the oceans and aquifers. This natural cycle, however, takes centuries, and we are far outpacing nature’s ability to clean up after us.

Pollution

Ideal combustion gives off heat -- that’s the useful part -- along with water and CO2. Our historical pollution problem has been that combustion is often far from perfect. Fossil fuels contain sulfur, nitrogen and other elements along with the carbon and hydrogen. When they burn they throw sulfuric acid, nitrous oxide and other noxious chemicals into the air. Even the two primary elements of combustion, carbon and oxygen, often combine as carbon monoxide (only one oxygen atom attached to the carbon) instead of co2.

Pollution control efforts in the developed world to date have been fairly effective, depending on who you accept as an authority, in cleaning up these traditional pollutants. We got the lead out of gasoline. Refiners do a much better job of eliminating elements such as sulfur. Large users of coal put “scrubbers” in their smokestacks to capture sulfur and other pollutants before they reach the atmosphere. The acid rain problem hasn’t gone away but it isn’t getting worse very quickly.

Catalytic converters in exhaust systems encourage most of the carbon monoxide to combine with free oxygen molecules to form CO2. It doesn’t change the number of atoms of each element released in your exhaust, but it does ensure that they are combined in friendlier molecules. Co2 is environmentally friendlier than carbon monoxide. New diesel engines burn more completely. They put out less carbon as black soot and more as CO2. There is a theme here: CO2 is as clean as it gets in fossil fuel exhaust.

Developing countries, especially in the previously communist bloc, don’t benefit much or at all from even these pollution control measures. There are major air and water quality problems in much of Latin America, Asia and Africa. Since we share common oceans and a common atmosphere, at some point their problems will become ours.

The pollution we cannot eliminate is at the heart of the global warming problem. Ideal combustion of fossil fuels produces only heat and co2. In excess, even these work against us. Co2 is the most significant of the greenhouse gas, which most scientists now believe trap heat and cause temperatures to rise. While the exact relationship between average temperatures and greenhouse gases is not known, we can measure the change in greenhouse gases.

Figure 2 shows there is about 30% more CO2 in the air now than there was at the beginning of the industrial revolution 250 years ago. There is also about and 150% more methane. Those are big increases, though from small bases. The total level of CO2 in the environment now is about .037%. Various projections put it as high as 900 parts per million by the end of the 21st century. While CO2 is certainly toxic in high concentrations, people who are routinely exposed to levels of up to 1% (thirty times what is in normal air) do not show ill effects. It is worth nothing at the same time that no cause has been identified for the marked increase we are seeing in asthma and other respiratory ailments. Who knows?

Just as the human animal has proven quite adaptive, able to survive if not thrive among high levels of radioactive wastes, dioxins, airborne pollution and obesity, the earth has so far managed to adapt to the major changes we have made in the land, seas and atmosphere. So good so far, but how long can it go on? We don’t know for sure what the long term effects of the change will be. It would seem foolishly optimistic to assume there are none. The prudent course of action is to attempt to get it back into its former shape. Ignoring the changes in our atmosphere is like ignoring a 30% increase in your weight and cholesterol. There is cause for concern even if you don’t feel sick yet.

Trapping some of the greenhouse gases produced at major points of combustion such as power plants is only a partial solution. Even where it works it doesn’t trap all the gases. It doesn’t apply easily to smaller sources of combustion, such as cars. The question remains of what to do with the gases once they have been captured.

By far the most effective solution to the problem of pollution and global warming is to reduce our use of fossil fuels. We have been getting smarter about using them for a few decades: better mileage, fewer emissions, more complete combustion. We have been able to increase vehicle usage without a proportionate increase in warming or pollution. A major thesis of this book is that computers and communications will give us the ability to actually reduce vehicle usage as we improve transportation.

Right of Ways

President Eisenhower was a visionary when he had our superhighway system laid out in the 1950s. The nation was in love with cars, we had fewer people and much less urban sprawl, more belief in progress and less litigation. We were able to build an impressive national system before resistance was able to coalesce.

Fifty years later we are not building many new interstates. It is very expensive even to add lanes to the roads we have. Look at the big-city projects now under way. Boston’s 7.5 mile “big dig” is costing about $2 billion per mile. The Wilson Bridge between Virginia and Maryland and Virginia’s Springfield mixing bowl upgrade each took more than a decade to get underway. Legal opposition has repeatedly killed new freeways in Washington D.C. and its suburbs.

Improving our roads does not seem to alleviate our problems. No sooner do we get more lanes or a new highway than the road is at capacity again. New suburbs, further out, put more traffic on each new stretch of road.

For all that they appear overburdened, seen from another perspective our highways are way underutilized. Imagine for a moment how many more people could be transported over the land area dedicated to highways using any other mode of transportation: buses, trains, car pools, walking or bicycles. There are a number of factors:

✓ Automobile transportation employs fifteen foot, 4,000 pound vehicles to transport an average of 200 pounds of humanity. A car takes up maybe 90 square feet of roadway space to transport about six square feet of human cargo, a ratio of about 1:15

✓ Automobiles at highway speeds have to be spaced about 7 car lengths apart, a ratio of 1:8

✓ Automobiles take up only about half the width of a lane, a ratio of 1:2

Multiplying out 15x8x2, people only take up 1/240th of the surface of a crowded freeway. The rest goes to cars and the buffer space around them. That is pretty inefficient compared to public transportation, or bicycles, or soldiers marching over the same roadway. Even if they only marched at 3 ½ MPH, 1/20 as fast, our roads could move more troops per hour than they do cars because a military formation puts people much closer together. If we could move people at the same speed but more efficiently bunched, like in buses or trains, our present roads could handle our transportation needs for years to come. So what is our problem? Is it a lack of roads or the way we use the roads?

An allegory

Stretching for an analogy, the earth is like a beehive with the plants as worker-bees and animals as the drones. Throughout history the worker-bees would feed their young, feed the drones, and have enough left over to store as honey.

Nature’s balance remained as long as the drones were content to be fed by the workers. However, a special breed of drone (that’s us) figured out how to bypass the workers and just drink the honey. That’s when the wild party began. We used all this borrowed energy to fix up the hive beyond all previous imagination, fly all over the world, and reproduce at a mad rate. They stomp all over the worker bees and foul the hive with their sweaty CO (consumption odor). And now here we are. The party is raging full-tilt. The honey is almost gone. The next question is how bad the hangover will be.

Following the metaphor a bit further, a few smart drones (color them green) have figured out there is a problem coming up. They buzz around trying to sober up the other drones, hoping to convince them of the impending problem and get them to lay off the honey. Irked, the other drones ignore them and party on.

An even smaller minority see the problem coming, look for solutions that will be palatable to the party timers, and figure out how to skim off a little honey for themselves in the process. After all, it isn’t bad stuff. And those, dear reader, are you and me. Depending on the clarity of our crystal ball.

03 different trajectories.doc.lnk

Finiteness of petroleum reserves.

The year 2000 has shown the pessimists to be premature again. Not wrong, but early. Figure 3 shows that the U.S. Geological Service’s estimates of total oil reserves are increasing faster than we are consuming oil. We cannot expect reserves to increase to go on forever. Petroleum geologists have pretty much determined that they will be found on land or continental shelves and no more than three miles deep.

The theory is that most oil comes from small organisms living in the ocean. They died, sank, and were buried in the sand. At least they originated in the oceans. However, according to the plate tectonics theory the ocean floors are continually being created at the mid-ocean ridges and being pushed outward. The plates that make up the earth’s surface are shoved together more or less along the edges of the continents. The net effect is that most or all of the bed of the deep seas is relatively new in geological terms. The older sediments, where one would expect to find the most oil, have been pushed to the continents and continental shelves.

Crude oil is created by the decomposition of this old organic matter. Heat affects the rate and extent to which it decomposes. Below about three miles down the temperature is so great that oil decomposes into coal and other substances. Petroleum geologists are fairly confident that there are no significant amounts of oil to be found outside of the types of geological formations they are already exploring..

Figure 4 shows a more pessimistic view. While it is granted that we are certainly finding more oil, there is across the board consensus that very little new oil is being created in nature. The top line in the figure, the earth’s total original petroleum resource, may not be at the right vertical position in the chart, but for sure it is a flat line. Moreover, much of the oil in known and yet to be discovered reserves will have to stay in the ground. We do not have the technology to recover it, and the energy we spend pumping and refining it would exceed the energy in the oil itself. Once it takes the energy equivalent of a barrel of oil to pump and refine a barrel, the only way it will make sense to produce oil is when we need it for purposes other than energy, such as for plastics feedstock, and we can use cheaper energy from another source, such as photovoltaics or nuclear, to recover it.

Oil companies generally keep their profits up by first pumping the oil that is cheapest to get out of the ground. At the same time they continue to improve their methods for stripping wells of the hard-to-get remainders. The costs of production have to go up at some time in the future. By the USGS International Energy Outlook 2000 (IEO2000) estimate, however, over one trillion barrels of OPEC oil can be produced for less than $5 per barrel. Price increases over the next couple of decades will be driven more by politics than production costs. In predicting stable energy prices the USGS says:

“Limits to long-term oil price escalation include substitution of other fuels (such as natural gas) for oil, marginal sources of conventional oil that become reserves when prices rise, and nonconventional sources of oil that become reserves at still higher prices. Advances in exploration and production technologies are likely to bring down prices when such additional oil resources become part of the reserve base. The IEO2000 low and high world oil price cases suggest that the projected trends in growth for oil production are sustainable without severe oil price escalation. There are oil market analysts, however, who find this viewpoint to be overly optimistic, based on what they consider to be a significant overestimation of both proven reserves and ultimately recoverable resources portrayed in the IEO2000 projections.” (Italics added)

The finiteness of the oil supply used to look like the ultimate brake on petroleum usage. That view is changing. We now know that we have a few hundred years’ worth of fossil fuel in the form of coal, and as Figure 2 above shows it appears that we may have enough in petroleum also, to make our planet unfit for habitation. If we continue to use it at today’s rates it looks like we will change the earth radically enough to threaten our own survival.

The Department of Energy International Outlook 2000 also addresses the issue of the environment. Partially, that is. It examines the effects of acceptance of the Kyoto protocol on energy production.

The Kyoto agreement calls for the 159 countries to reduce their emissions of greenhouse gases by 5.2 percent below 1990 levels by 2012. As energy use has gone up since 1990, that figure represents fairly sharp reductions over the next twelve years. As population is also rising, it represents an even greater decrease in per-capita energy consumption. Three years after its drafting in 1997, the United States declined to ratify the Kyoto agreement. It does not appear that there will be a global agreement any time soon.

A second question is whether or not the Kyoto Protocol would have reduced global warming. It would not. At most it would have slowed the rate at which the amounts of greenhouse gases in the environment are growing, but it fell far short of calling for an actual reduction in the amount of carbon in the air. IEO2000 estimates that 1990 carbon emissions from fossil fuels were 3.9 billion tons. It optimistically projects the 2010 level to be only 4.3 billion by 2010 without the Kyoto protocol, 3.7 billion with it. 4 billion tons represents an increase of about 2 parts per billion, or half a percent increase, per year. Figure 5 shows approximately how CO2 would continue increase even if the Kyoto protocol were adopted.

If there is substance to the growing belief that CO2 causes global warming, and if the hypothesis is right that global warming run amok will melt the ice caps, flood our coastlines and cause major climatic shifts, then the Kyoto Protocol would only be a band-aid, a necessary first step but nowhere near a final solution.

How Global Warming Works

It is worth a couple of paragraphs for an investor’s view of the way the greenhouse effect works. Why an investor? Precisely because a scientist would cringe at such a gross oversimplification.

As Figure 5 shows, about 33% of the sunlight hitting the earth is reflected right back into space. The remaining 67% is absorbed as heat, 45% by the ground and 22% by the atmosphere. The process is similar to the way food heats up in a microwave as it absorbs radio waves.

The energy from the sun has relatively short wave lengths, mostly as visible light. It is absorbed as heat in the earth and atmosphere. The earth has to throw off as much heat as it absorbs. If it did we would cook to death. Like your dinner when you take it out of the microwave, the earth cools off by radiating heat.

Because surface of the earth is about 25 times colder than the sun (measuring from absolute zero), by a law of physics the wavelengths of the heat it radiates are proportionately longer. While the sun radiates mostly visible light, the earth radiates heat in the infrared range, beyond red, the longest visible wavelength.

To cool off the earth needs to radiate its infrared heat back into space. Fortunately for us, most infrared radiation passes right through the two major gases in the atmosphere, oxygen and nitrogen. Unfortunately, however, CO2 is more efficient at absorbing infrared. It is like the difference between microwaving your dinner in an open or covered casserole. Methane is even more effective. So, greenhouse gases act like the casserole lid in a microwave. They keep the heat in so we cook better.

The more heat there is in the atmosphere, the more is able to escape into space. Ultimately there is a balance. Unfortunately, more greenhouse gases mean that the earth finds its balance at a higher average temperature. That is global warming.

As Figure 2 shows, the earth has cycled through ice ages for a significant part of its recent history. In a vast simplification, the theory is that when CO2 becomes abundant it encourages plant growth. The plants take CO2 out of the air by photosynthesis. As they do they decrease the amount of CO2 in the air, cooling things off. When the earth gets cold a number of the plants die off. They absorb less CO2, so the CO2 level in the atmosphere goes up and it gets warm again. Kind of like a thermostat.

Our burning fossil fuel is like cranking the thermostat up to 90. Over a number of centuries, plant species would presumably react to the superabundance of CO2 by becoming more numerous, using that CO2 and cooling things down. The hockey stick shape of Figure 2 shows we are not giving the plants any time at all, in geological time, to react. More than that, we are forcing what plant life we have to fight back against deforestation, overgrazing and topsoil loss. So not only have we cranked the thermostat up, we threw away the knobs and locked the windows.

That’s the doom and gloom scenario. There is an infinitesimal chance it won’t happen, and a fair chance that the effects won’t be severe enough to cause massive disruptions within the next generation. There is a very good chance that perceptions of the problem will change over the next few years. We will realize how serious it is and finally give up our optimism as we hear from many more Ralph Naders and Green Parties from all over the world. Perceptions move markets.

About investments – doesn’t belong here

The purpose of equities markets is move money to where there is opportunity. The purpose of this book is to anticipate the opportunities that will arise when we become concerned enough to do something.

The opportunities will not be a one-time phenomenon. We went through a cycle of concern about a gasoline shortage in the ‘70s and ‘80s. It was also a time of severe inflation. The value of tangible assets that would be convenient to have as civilization folds, like gold and farmland, went the roof. Holdings such as common stock that reflect faith in the future became very cheap. It is highly likely that perception will continue to see-saw back and forth depending on short-term climatic cycles, the politics of the OPEC countries, the success of the green parties and the like. Over the long term companies that offer solutions to the issues raised by global warming should continue to rise. An investor with good timing should be able to profit from them cycle after cycle, like semiconductors. The long term investment opportunities are the thesis of this book.

Automobile efficiency We are slowly improving (doesn’t this duplicate elsewhere)

Surprisingly, cars are relatively energy-efficient. [2]Surprisingly, city buses are no more efficient per passenger mile than cars and light trucks. While they carry an average of 9 people vs. 1.6 for cars, they achieve correspondingly worse fuel economy. Their efficiency has dropped since 1970 along with falling load factors, presumably as people have shifted to using cars. Intercity buses, by comparison, are about five times as efficient as cars and growing more efficient. They have a higher load factor and achieve greater fuel economy in steady-speed highway driving.

Rail and air travel are no bargains either.

The total amount of personal travel in America keeps growing

A Department of Transportation’s Bureau of Transportation Statistics estimates that in 1998 the average person took somewhat over three trips per day and averaged 9000 miles per year of vehicle travel for a total of 2.35 trillion miles. The number of cars on the road has approximately doubled since 1973. Presumably the number of vehicle miles has done about the same. Yet total petroleum consumption in the U.S. has only risen .4% per year, from 17.31 million barrels per day in 1973 to 19.39 million barrels in 1999.

The relatively stable use of petroleum is due to several factors. A shift from oil to other fuels for heating and electric generation accounts for some of it. Another large factor is the increased efficiency of our vehicle fleet. The government’s Corporate Average Fuel Economy requirements have pushed the measured economy of new models to 27.5 miles per gallon, up from 18 MPG in 1978. Actual mileage achieved for cars in 1998 was 21.7, 17.1 for light trucks. This is up from 13.4 and 10 in 1973. Between cars and trucks, while the number of miles driven has doubled since 1973, fuel consumption is only up 30%.

The Transportation Energy Data Book shows that the number of miles driven per year by all vehicles approximately doubled from 1973 to 1998, to 2.4 trillion miles. It is a credit to the CAFÉ standards that fuel usage did not rise nearly as much. The rate of increase has not slacked off, and no wonder. The out-of-pocket costs of transportation for U.S. citizens are very reasonable and getting more so. Fuel was 10% of the cost of operating a car in the U.S. in 1999. Cars all told represent about 11% of consumer expenditures.

Move this to chapter on transportation alternatives: intro to jitneys

Useful citation, maybe doesn’t belong here.

From 1995 National Personal Transportation Survey, DOT-FHWA

“LAND USE AND TRANSPORTATION

The myth of Americans’ love affair with our cars may actually be a marriage of convenience. Contemporary land use patterns require the use of private vehicles, whether or not we love those vehicles.

The continued spatial expansion of our metropolitan areas creates a scenario that is increasingly auto-dependent. There are some exceptions to this, particularly in the initiatives for liveable communities. But, the reality is that much of today’s travel is suburb to suburb, with widely dispersed origins and destinations. This is reflected in the substantial share of private vehicle travel--the predominant suburban and exurban mode. Most of this travel is for non-work purposes, mainly family and personal business and social/recreational, for which travel demand management offers little in terms of mobility improvement.

Alan Pisarski, a pivotal national transportation analyst, has said that transportation is the collision of demography with geography. If we are 1 to continue to maintain our current levels of mobility, much more needs to be done in assessing the impacts of land use on transportation. The 1995 NPTS dataset, with the characteristics of the residence and workplace appended to the interview data, provide us with a rich source to use.”

Research: Freight movement by road & railroad (ton-miles)

See Transportation Energy Data Book, Acrobat page 55/354. For rail freight, the amount of energy consumed per ton-mile has dropped from 691 to 365 since 1970. BTUs per ton/mile for trucks are much higher, 2990.

Efficiency of trucks increases with increasing size. The biggest trucks get only about 5-6MPG, but they can move up to 80,000 lb (my guess). at that efficiency.

Miles driven, by vehicle type. Graph: Total ton-miles, POV and commerical.

Figure 6 shows that U.S. citizens continue to drive more and more. As of 1996 we had one car for every two people. Three and four car families were no longer a rarity. Compare this with other populous countries such as China and India. As of 1996 each country had on the order of 5 million cars, roughly one car per 200 people. Not surprisingly, the rate of new car registrations was growing quickly: 17% annually in China, 10% in India. Surely these peoples have the same appetite for material goods as westerners. If it is doubtful whether or not we can sustain the rate at which automobile usage is growing in the developed countries, it is an absolute certainty that we cannot satisfy the appetites of the developing world.

The U.S. is in no position to retard development in the rest of the world. However, we do for the moment set the trends. Trends that stagnate here (private plane usage, supersonic transports, smoking) may stagnate or never get started elsewhere. Whatever meaningful alternatives we find to the extraordinary amount of personal travel we consume is likely to be eagerly adopted by other countries. For one thing, most don’t have the capital to build a roadway infrastructure similar to ours. The reason they have been so quick to embrace wireless communications is because they could not afford to lay land-lines. If we can help them use what they have, such as wireless communications, to partially replace what they don’t have and can’t afford in the first place, namely a transportation system, we may have some success.

Right of way

Right of way costs are going up. The fact that states do much of the acquisition on their own, and they track their costs by parcel of land rather than highway mile, there are no national figures for right-of-way costs. The Federal Highway Administration (FHWA) does keep track of construction and congestion. Congestion is increasing. Only half as many lane-miles are built each year as would be required to maintain the status quo.

Anecdotally, we all know of local projects that have been killed by community opposition. On a national level we know of projects such as Boston’s “big dig” that consistently exceed their budgets. The FHWA points out the difficult decisions that road builders must make. The encounter significant resistance from the community when they attempt to acquire right-of-way through developed areas. The environmentalists scream when they attempt to take advantage of the relatively little undeveloped land in urban areas. Acquisition and legal costs make it very difficult to build new roads. Often the best that can be done is to expand existing right-of-ways, and even that is a hard-fought battle.

04 availability and cost of fuel.doc.lnk (move to other chapter on fuels)

1.2.2.3. Biomass

Biomass energy comes from recently-dead organic materials. Our ancestors got energy by burning wood, grasses, cow chips and the like. Today’s landfill operators routinely generate electricity using methane gas from decaying garbage. The U.S. and Brazil have been encouraging use of “Gasahol,” the mixture of alcohol and gasoline, since the energy crisis of the ‘70s.

Biomass energy from landfills has a positive effect on the environment. It burns methane that would otherwise escape into the atmosphere. Methane is twenty times as effective as a greenhouse as carbon dioxide. Not only is the energy free, but getting rid of it helps combat global warming.

Organizations within the American Bioenergy Association have several demonstration projects underway growing crops exclusively for energy. It is another form of solar power. Solar cells use silicon to generate electricity directly from sunlight. The biomass approach is to let plants capture energy through photosynthesis, get the energy back by burning the plants or fermenting them to make alcohol.

The criterion for a good energy crop is that it grow like a weed. It should grow on marginal land with a minimum of attention. Marginal farms and worn-out pastureland are natural choices. In addition to yielding energy, the crops can actually help the soil, first by holding it down and second by adding carbon, nitrogen and other nutrients.

1.2.3. Nuclear has its own problems

Nuclear advocates are quick to point out that nuclear power plants in the west have had an incredible safety record. Never the less, the fears stirred up by the slip-up in Chernobyl. still haunt the West.

There is no getting around the fact that nuclear energy leaves messy residues. Spent nuclear fuel remains radioactive for as long as 10,000 years. Additional wastes are created in the manufacture of nuclear fuels. No country in the world has come up with a permanent solution to the problem of nuclear wastes. There are a multitude of technical solutions, such as burying waste in the Nevada desert, none of which has proven to be politically acceptable.

It is hard to know how much pain in the form of higher energy costs the developed nations would need to suffer before they would accede to the construction of more nuclear power plants. The enormous capital costs and the long planning and construction cycle inherent in nuclear plants make them a poor hedge against an OPEC-induced energy crisis.

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[1] 2000 Transportation Energy Data Book, p. 133.

[2] See Table 2.11, Acrobat Page 51, in Transportation Energy Data Book. Use improved Acrobat to copy the table.

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Figure 1Highly simplified Oxygen-Carbon Dioxide Cycle

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Figure 5 Quick Picture of Global Warming

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Figure 3 The Optimist’s View: Increasing Estimates of Oil Resources

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Figure 4 The Pessimist's View – We are going through our reserves very quickly

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Figure 6 Trillions of Miles driven annually in the U.S.

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Figure 2 Atmospheric Carbon Dioxide Levels during the Human Epoch

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