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09 April 2011

Pumpdrunk and Loving It

The AA “12 Step Program” Approach to Overcoming America’s Oil Addiction


We are in the grip of a powerful, complex addiction.  Whether oil prices are $29 a barrel as in 1983 or $129 as in July 2008*, the cyclical highs and lows that we have become accustomed to over the past forty years literally make us pumpdrunk.  Pumpdrunk is the only way to explain how we willingly rearrange our personal finances at the peril of oil's price swings but have not done much of anything in the long-term to rid ourselves of the addiction.  Like true addicts, our actions are focused exclusively on the next score. 
"Where's the cheapest filling station this week? Let me text my friends.  Can't wait for that new 2012 Jive SUV to come out -- it looks awesome, like an aerodynamic rectangular box with wheels, and they improved the fuel economy to 21 MPG!"   -- Words of an addict. Words spoken by all of us. 
It's not just imported oil.  Whether imported or domestic, every barrel of oil is priced in a similar market, where supply and demand are carefully balanced.  We can't fault the production industry alone for what happens in the oil markets.  But that is exactly where we first assign blame.  A drunk does not look inward for answers.  After the binge, the negative outcomes are always someone else's fault.  When gas prices leap up, you'll hear the same thing everywhere in the U.S.  Outright contempt for entire oil producing countries, their people, their governments and the U.S. companies that broker the oil. 

Fellow addicts, please understand that in a capitalist society, markets are where things like oil go to trade.  Even the people who brought us the Beanie Babies craze of the 1990s understood that it is financially advantageous to constrain supply.  Beanie Baby economics is taught to 6th graders.  The market will sort out what people are willing to pay so at the end of the day we have only each other to blame for high prices. 

For such a rugged and dirty fuel the oil markets are really quite fragile.  Weather disruptions, political turmoil or even just the threat of political instability in oil-producing areas of the world cause prices to shoot up.  

Beyond the gasoline fumes that are making us loopy, oil is in practically everything that we value and trade.  The plastics, cosmetics, chemicals and myriad stuff we make from oil makes us feel rich and free. The stuff we power with oil shapes our settlement patterns, keeps the lights on and makes for a much faster, smaller, more interconnected world.

Unfortunately, this life on oil begins like one night of reckless drinking that soon cascades into a lifetime of out-of-control decisions.
In the moment, everything is beautiful, carefree and the $1 slice of pizza tastes amazing.  -- Actual quote from an oil addict, overheard last night in New York City
The next morning, your choice of booze or oil consumption hangover is accompanied by the throbbing realization that it was all an illusion. By pumping oil from deep within the earth and trading it, we are not really controlling the resource, it's controlling us.  Our addictive behavior reveals the truth about just how captive we really are to oil's whims. On our best days as oil consumers, we become poorer both as individuals and as a nation. Each gallon pumped is a dollar exported overseas in return for black sludge that pollutes our environment and dilutes our sanity. As we think more about the effects of oil, it all becomes clear. Even the pizza was a lie. It was probably cold, limp and greasy. We don't recall.

Addicts don't care about who they hurt or what the consequences are.

The price we pay for each gallon of liquid freedom, as high as it is, fails to include countless uninternalized costs that we end up paying in places that are not obvious at the moment the gas pump is in hand.  The indirect costs of oil accrue through taxes, health costs, environmental cleanup budgets, defense spending, lost purchasing power, and even human lives.  From the financial cost perspective, we all have a fixed amount of discretionary income.  A dollar spent on gas is a dollar not spent on some other product with benefits to the domestic economy.  A 1998 report (see PDF) estimates that the combined external costs of gasoline add between $5.60 and $15.14 to the retail price of each gallon we pump.  Take those numbers as ballpark figures.  Following this eye-opening study we've initiated new oily wars in the middle east that are likely to drive costs even higher.  Numbers like this are a shot in the dark at best because the largest external cost of all, climate change, is not included in the analysis.  

A narrower study of defense department spending on gasoline for combat vehicles in Afghanistan revealed that the Pentagon pays an average of $400 for a gallon of fuel by the time it arrives in the remote locations where U.S. troops operate.  This is a perfect illustration of how powerful cost externalities are.  Thanks to the military's disciplined cost-tracking through all phases of their fuel production and transport chain, you can see how the price of a gallon is all relative to the externalities accounted for within the price. 

As pumpdrunk fuel addicts, the price we pay compared with the true cost of oil does not matter to us.  As long as the pump turns on, we're satisfied.

Addicts show no sign of stopping.

In a hundred years since the Ford Model T rolled off the line, we have developed neither better ways to power our vehicles nor commercially viable substitutes for the products that oil makes possible.  It's not for lack of options.  For example, there are commercially viable alternatives for styrofoam created from mushrooms that could replace the oil-intensive material currently occupying 25% of our landfill space.  Fuel economy standards for vehicles set by the government have failed to go anywhere since the oil shocks of the mid 1970s.  Oil prices volatility has persisted since then but consumers are left to absorb the ill effects.  MPG efficiency topped out in the 1980s for political reasons (a.k.a corruption) and we pay the price every day.


Source: PEW Charitable Trusts (get PDF)
 We are simply pumpdrunk out of our minds. Nothing else but total inebriation explains how we can pay the financial price of the oil market's ups and downs on a daily basis but still fail -- on a timescale of decades -- to take control of this critical portion of our energy mix.

Approaching oil addiction as we would alcohol addiction

The reality of America's oil addiction has more in common with traditional notions of substance abuse than we realize.  Oil and its related products are such an ingrained part of life that it is actually self-destructive to question how we've failed so miserably to enact meaningful solutions.  As a result, we continue to hit the bottle harder and harder to dull the pain. Traditional approaches that look only at the economics of oil supply and demand or the technological feasibility of alternatives largely ignore the fact that our oil addiction is rooted in emotional issues that run deeper than the pocketbook.
Graphic adapted from the Alcoholics Anonymous illustrated guide to the 12 Step program (PDF here). 
Our discussion reorients the problem of oil addiction using the perspective of the first five AA steps.  If this proves more effective than America's current strategy, which amounts to the "coffee and a cold shower" approach, we'll know that we are getting somewhere.
AA Step 1 - We admit we are powerless over our addiction - that our lives have become unmanageable

When oil prices are up, the economy cries out in pain. Oil is such an important input to every facet of the domestic economy that small fluctuations in price create large ripples. In the finance world, it is widely accepted that
every 10 percent increase in oil prices causes roughly a 0.2 percent decrease in GDP. A $10 increase in the price of a barrel of oil equates to roughly 25 cents at the pump and costs consumers $40 billion per year. $40 billion is the entire amount that Congress managed to shave from the federal budget this weekend, just in time to avert a full government shutdown. $40 billion represents the largest spending cut in U.S. history. For the pumpdrunk U.S. populace, $40 billion is just another day at the gas station. This is terrifying.

The smattering of entrepreneurs, alternative energy developers, scientists and environmental activists who make it their job to find long-term solutions to massive problems are powerless to help the pumpdrunk see beyond the next fill-up even though such large amounts of money are involved.  Try asking an addict to "take a break for a while and look at some more productive activities." It's useless. Government is largely absent from the conversation because our elected officials are just as drunk on oil as the rest of the population.  Running three concurrent military operations to secure the oil-producing regions of the world are the desperation moves of a government that just needs to procure more oil to satisfy its growing cravings.

At a certain high price of oil -- a level which we've never experienced for very long -- individuals begin to contemplate meaningful change even in the absence of government leadership. How much would a hybrid vehicle save me annually? What is the price of locally-grown in-season produce compared with food flown in from overseas? While not everyone has this sort of clear dialogue in response to high oil prices, the questions force themselves out in mainstream media. For example, when gasoline is expensive, automakers tout fuel efficiency over other attributes.  Stores feature products that have lower shipping costs and therefore have higher margins. It's a simple phenomenon really.  At very, very high prices, some of the social and environmental externalities of oil begin to precipitate from the usual murkiness.

But, just as an escape from oil's slick grip might be glimmering on the horizon, the market fights back and pulls us right back in by lowering prices.  Once more we find ourselves spiraling toward rock bottom addiction. Clearly we cannot manage this problem on our own.

AA Step 2 - Come to believe that a power greater than ourselves could restore us to sanity

We put up with a lot of pain before cutting back on oil consumption or any other form of energy for that matter.  Before the recession hit in 2008, the price of oil was on a steady trajectory to levels exceeding $130 per barrel. Then the subprime mortgage pyramid toppled, the market tanked and demand for oil collapsed. All forms of energy consumption including electricity declined as the economy contracted. And, of course, oil prices decreased sharply.  This is a powerful illustration of how oil prices and market forces alone cannot be relied upon to break through the core addiction. If oil kicked us in our lowest moments with higher prices that induced some kind of rock bottom moment in life, it might be a different story. Then, we might make some different decisions.  But markets don't work that way.

Prices ease under constrained demand, thereby enabling our addiction to persist.  Under low oil price conditions, whatever positive momentum we've managed to achieve toward increased energy efficiency and alternative fuel infrastructure grinds to a halt or reverses. The numbness brought on by the lifestyle enhancing effects of oil persists and even swells to new heights as we reunite with the joy of taking a road trip in a three ton vehicle.

When markets, the most powerful mechanism in the capitalist toolbox, cannot support the kind of infrastructure shift that we know is required to avert environmental and economic catastrophe, we have to seek out solutions of a higher power to address the problem. 

AA Step 3 - Make a decision to turn our will and our lives over to the care of the Prius as we understand the Prius

Eventually, our pumpdrunk love affair with oil starts to take its toll.  After several years of seesawing oil prices, there is a slow but palpable awareness building across America.  We sense that super high prices are a constant possibility and therefore present a threat that warrants some kind of protective decision making.  We've admitted to ourselves, and to the people who depend on us, that there is a better way.  At this step, we seek out the powers that can help us achieve change. 

Timing is crucial.  This action needs to be contemplated at one of those rare sober moments (somewhere between the ebb of a massive oil price hangover and the start of the next bender) when we are lucid enough to taste the freedom that would result from not having to worry so much about the price volatility of oil.

Each of us has a personal power that acts as the impetus for change.  For some, the BP oil spill was too tragic to reconcile and served as a wake-up call strong enough to incite awareness and action. For others, financing a daily car commute that suddenly costs $50 is the level at which oil becomes more than a necessary evil and starts to actually take food off the table. 

It understandably takes a shock of some kind to make the owner of a powerful, roomy, inexpensive GM automobile switch to the delightfully eccentric and underpowered Prius. Early adopters are simply not numerous enough to reshape oil demand or make a meaningful environmental impact. To its credit, the Prius celebrated its one millionth sale this week, meaning there are one million people out there saving around $1,300 dollars per year on fuel...or collectively, $1.3 billion per year. That money is going to pay the rent or mortgage, into savings accounts, retirement portfolios or for college educations. It's a start.

To contemplate other solutions which do not invovle simply buying a different kind of vehicle, we need more than an oil shock and a new type of car. 

AA Step 3 (part II) - Make a decision to turn our will and our lives over to the care of Renewable Energy as we understand Renewable Energy

The Prius is a nice thing to have and its popularity was certainly accelerated by $130 oil (orders skyrocketed at the time). It is not, however, a singular cure for pumpdrunk ways. There are too many other places where oil prices factor into daily life.  Food prices, shipping, airline tickets, plastics, cosmetics, fertilizer -- it's all riding on oil.

By making a decision to break the cycle of addiction once and for all and turn our lives over to renewables, we gain independence and control over our energy future.

Renewable energy requires massive infrastructure investment in order to produce a meaningful amount of energy to feed the electricity market, let alone become a replacement for oil. Using renewable energy to power our vehicles will require large scale electrification of our entire transportation system.  Every joule of transportation energy that presently comes from oil would need to be generated by electric utilities. 

We presently lack the clarity to bring together all of the pieces of the renewable energy puzzle in a way that could reasonably create a surrogate energy source for oil.  The power generation technology is not the problem.  We've been harnessing the wind and the sun for at least as long as we've been burning oil. Financiers know how to fund renewables through clever energy contracts and traditional financing vehicles. Individuals don't have to do anything differently because energy flows into cars and appliances in familiar ways. When we get to government and business, renewables at the transportation scale fall apart.

First, we need major investments in our energy grid, research and development for new energy storage technologies and billions of dollars in incentives to signal the shift to a renewable energy economy. Only then can businesses contemplate the changes necessary to accommodate an economy that revolves around renewable energy.

Unlike oil which can be harnessed cheaply and predictably, renewables produce intermittent power and are expensive to build. The power market fears intermittency and Wall Street fears high capital costs which it cannot reconcile outside of the present day quarterly mindset. The upside is that renewables, once built, produce energy at near zero cost. There is a fundamental need to understand how to align this benefit with traditional financial markets and old-fashioned thinking regarding government's role in promoting infrastructure investments.

Oil currently absorbs billions of dollars in subsidies, tax breaks and energy development incentives just to keep our existing supply and demand machine running long enough to see another day.  Shifting this level of investment to renewables could not make more sense.  Zero cost energy with none of the unpleasant external costs of oil is something that even an addict can crave with impunity. 

AA Step 4 - Make a searching and fearless moral inventory of ourselves

This step has nothing to do with markets or prices or Priuses.  The simple notion of right and wrong is a critical component of our oil addiction that is typically hidden deep below our day-to-day fixation with gas prices and foreign conflicts.  We fear the worst truths about oil enough to bury them in our subconscious.  We fail to confront these realities each time we turn the ignition key.  How could we? We're just trying to live.  It would be unbearable. 

An addict is also unable to confront the moral consequences of his actions and continues to feed the addiction indefinitely as a result.   

It's not easy, but this fearless moral inventory of oil's effects is a step long overdue.  We have exhausted all possible excuses not to confront ourselves with the tough, controversial questions that get at the heart of our addiction. For example:
  1. Why is our memory for searing financial and environmental pain so incredibly short that we never commit to alternative energy infrastructure when we have the opportunity?
  2. Do we secretly hate pristine oil-free beaches and clean air?
  3. After hundreds of years of rapid advancement in agriculture, technology, and medicine, when did we stop innovating and start relying on cheap, dirty energy to advance our lifestyle?
  4. Do we like the taste of oil-derived pesticides in a summertime tomato salad?
  5. Do we know what a vegetable tastes like that has not been sprayed, fertilized, packaged and transported with toxic petrochemicals?
  6. Could I personally look an Ecuadorian person in the eye and explain that Texaco-Chevron needed to create the toxic petrochemical waste pools that killed their family so that I could drive my SUV to the mall in comfort and style at a reasonable price? 
  7. Are we really OK with the fact that the BP Deepwater Horizon oil rig dumped millions of gallons of oil into the gulf while our government was actively supporting riskier deep water drilling by offering expedited permitting incentives?
  8. Why did we ever believe that pulling ancient fossil fuels out of the ground and crudely burning them in engines that exhaust into the air would not sicken, warm and destroy our planet?
  9. Am I smarter than a fifth grader? Really, am I?
  10. How long will it take us to come to the same conclusion about oil that we came to about cigarettes once we made the connection that the loved ones dying all around us were dying from smoking? 
  11. Are we OK with continuing to vote with our spending dollars for cheap, dirty energy thereby leaving the environmental problems oil creates for our children to deal with in their time?  
  12. Do we have the strength, intellect and capacity as a society to change before we are forced to? 
  13. Are we proud that our country's inability to lead the clean energy revolution will result in a new world power distribution where those who invested in renewable energy today are reaping the benefits of free energy tomorrow?
  14. What am I, personally, doing about any of this?

Step 5 - Admit to God, to ourselves and to another human being the exact nature of our wrongs

When someone is into the sauce as deeply as we're into oil, a serious intervention is in order. 

We must look beyond the philosophical questions, technological hurdles and economic complexities of divorcing ourselves from an oil-driven future. Whether you confide in God, a god, gods, family, friends or your cat, it is unbelievably naive to think that individual decisions have a place in the transition to an oil-independent future. As we've said about the few environmentalists willing to sacrifice, protest, boycott, and avoid consumption -- their efforts are futile and self-destructive.
The word "change" in the year 2011 embodies social change, driven by the power and conviction of entire communities but rooted in the triple bottom line principles of sustainability.  The role of the individual is simply to become aware and to participate as an individual.  The power of the community acting together is what makes change happen.  
Green has always worked best when executed locally, with a firm grounding in what is economically viable as well as environmentally responsible. In a representative democracy, local action quickly becomes the national agenda. The federal government is frequently compelled to act when local and state pressures become too substantial to ignore. The presumption that our government was built to govern is totally false. The U.S. government was built to be governed, by the people and for the people. In doing so, it can provide for the needs of the people, including clean, safe, affordable energy.
By the strict AA fifth step definition "admitting the exact nature of our wrongs" we might begin by admitting that the costs of oil in our lives are not contained neatly within the price we pay at the pump, no matter how high or low the price is on a given day. To take this vital step, we must each take moral responsibility for a tragedy like the BP Deepwater Horizon incident. BP was not pumping the oil from the ocean floor for fun.  The oil was destined for land, for our cars, planes, and industries. We are all responsible by way of our participation in the market.

Closing words

There are of course six more steps in the AA 12 Step program for overcoming addiction. They involve removing defects and shortcomings, making amends to those who have been harmed, continuing to inventory and admit our wrongs, seeking increased knowledge and, lastly, having a "spiritual awakening" in order to engage other people who suffer from the same addiction. These are serious steps that have helped millions of people fight and conquer a deadly addiction.  By relating the first five steps of the AA program to society's pumpdrunk relationship with oil, our goal was simply to create a human scale framework for tackling the addiction to oil at both an individual and societal level.

The legitimacy of this approach relies upon the presumption that all addictions have similar underlying causes and unwanted effects that can only be remedied through an approach that accounts for the fallibility of human nature.
From where we are today with our addiction, stumbling around pumpdrunk on the manic highs and lows of oil price volatility, there appears to be no clear end in sight. Ask an addict if they see an end to their problem in sight. If they're still in the grip of the addiction as we are with oil, they'll probably say, "what problem?"

America's wars, the slop on our shores, the soot in our air, the poverty of the middle class and the warming planet are each side effects of oil which represent irrefutable evidence that this is a problem worth tackling with every bit of ingenuity we can muster. 

We can each take the critical first step today by admitting that oil addiction makes our lives, businesses and promises about the future to our children unmanageable.  From there, we just need to follow the program.

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