Archive for December, 2010


Economic Optimism? Yes, I’ll Take That Bet

December 29, 2010

Wednesday, 29 December 2010 12:18 John Tierney, The New York Times

Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.

The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”
I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.

I took him up on it, not because I knew much about Saudi oil production or the other “peak oil” arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.

As the leader of the Cornucopians, the optimists who believed there would always be abundant supplies of energy and other resources, Julian figured that betting was the best way to make his argument. Optimism, he found, didn’t make for cover stories and front-page headlines.

No matter how many cheery long-term statistics he produced, he couldn’t get as much attention as the gloomy Malthusians like Paul Ehrlich, the best-selling ecologist. Their forecasts of energy crises and resource shortages seemed not only newsier but also more intuitively correct. In a finite world with a growing population, wasn’t it logical to expect resources to become scarcer and more expensive?

As an alternative to arguing, Julian offered to bet that the price of any natural resource chosen by a Malthusian wouldn’t rise in the future. Dr. Ehrlich accepted and formed a consortium with two colleagues at Berkeley, John P. Holdren and John Harte, who were supposed to be experts in natural resources. In 1980, they picked five metals and bet that the prices would rise during the next 10 years.

By 1990, the prices were lower, and the Malthusians paid up, although they didn’t seem to suffer any professional consequences. Dr. Ehrlich and Dr. Holdren both won MacArthur “genius awards” (Julian never did). Dr. Holdren went on to lead the American Association for the Advancement of Science, and today he serves as President Obama’s science adviser.

Julian, who died in 1998, never managed to persuade Dr. Ehrlich or Dr. Holdren or other prominent doomsayers to take his bets again.

When I found a new bettor in 2005, the first person I told was Julian’s widow, Rita Simon, a public affairs professor at American University. She was so happy to see Julian’s tradition continue that she wanted to share the bet with me, so we each ended up each putting $2,500 against Mr. Simmons’s $5,000.

Just as Mr. Simmons predicted, oil prices did soar well beyond $65. With the global economy booming in the summer of 2008, the price of a barrel of oil reached $145. American foreign-policy experts called for policies to secure access to this increasingly scarce resource; environmentalists advocated crash programs to reduce dependence on fossil fuels; companies producing power from wind and other alternative energies rushed to expand capacity.

When the global recession hit in the fall of 2008, the price plummeted below $50, but at the end of that year Mr. Simmons was quoted in The Baltimore Sun sounding confident. When Jay Hancock, a Sun financial columnist, asked if he was having any second thoughts about the wager, Mr. Simmons replied: “God, no. We bet on the average price in 2010. That’s an eternity from now.”

The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars — a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.

What lesson do we draw from this? I’d hoped to let Mr. Simmons give his view, but I’m very sorry to report that he died in August, at the age of 67. The colleagues handling his affairs reviewed the numbers last week and declared that Mr. Simmons’s $5,000 should be awarded to me and to Rita Simon on Jan. 1, but Mr. Simmons still had his defenders.

One of his friends and fellow peak-oil theorists, Steve Andrews, said that while Mr. Simmons had made “a bet too far,” he was still correct in foreseeing more expensive oil. “The era of cheap oil has ended,” Mr. Andrews said, and predicted problems ahead as production levels off.

It’s true that the real price of oil is slightly higher now than it was in 2005, and it’s always possible that oil prices will spike again in the future. But the overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Waldand Cliff Krauss have recently reported. Giant new oil fields have been discovered off the coasts of Africa and Brazil. The newoil sands projects in Canada now supply more oil to the United States than Saudi Arabia does. Oil production in the United States increased last year, and the Department of Energy projects further increases over the next two decades.

The really good news is the discovery of vast quantities of natural gas. It’s now selling for less than half of what it was five years ago. There’s so much available that the Energy Department is predicting low prices for gas and electricity for the next quarter-century. Lobbyists for wind farms, once again, have been telling Washington that the “sustainable energy” industry can’t sustain itself without further subsidies.
As gas replaces dirtier fossil fuels, the rise in greenhouse gas emissions will be tempered, according to the Department of Energy. It projects that no new coal power plants will be built, and that the level of carbon dioxide emissions in the United States will remain below the rate of 2005 for the next 15 years even if no new restrictions are imposed.

Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.

The New York Times, 28 December 2010


Big Energy Stories of 2010

December 28, 2010

This from Energy Tribune online

By Geoffrey Styles
Posted on Dec. 27, 2010

Ed. note: This piece first appeared on Energy Outlook, Geoffrey Styles’ blog.
Many of the main energy trends of 2010 were predictable at the year’s start, including the growing reliance of renewable energy on government assistance in the aftermath of the financial crisis, the debate over US greenhouse gas legislation, the emphasis on green jobs and competition with China, the delayed arrival of cellulosic biofuels, and the anticipation surrounding the product launches of the first mass-market electric vehicles. As interesting as all this was, the year in energy was dominated by two transformative events: the Deepwater Horizon accident and the multi-million barrel leak that ensued, and the less spectacular but no less profound awakening to the possibilities of the shale gas revolution.
The Deepwater Horizon disaster has been the subject of such extensive coverage and investigation that there’s little I can add concerning the facts, other than to note that we have not heard the last word on just how much oil actually leaked into the Gulf of Mexico. The consequences of our response to the spill will be with us for a long time, both in terms of reduced offshore drilling activity and the decline in US oil output that must inevitably follow. The impact will reach far beyond the tens of thousands of workers whose livelihoods are directly or indirectly linked to the US offshore industry. Early in 2010 it looked like the industry would finally be offered access to areas that had been off-limits for decades, and by year-end not only has drilling in the central and western Gulf come to a near standstill, but the prospect of leases in the eastern Gulf and the mid-Atlantic coast has been foreclosed, perhaps permanently.
The psychological impact of the event could extend even farther than its physical and economic fallout. Whatever misgivings many people had about offshore drilling before the accident, the industry had built up trust through an impressive string of technical achievements–pushing the boundaries of resource accessibility from depths of a few hundred feet into nearly two miles of inhospitable ocean–and a solid reputation for safety. In the space of one day and the following weeks, that trust was shattered. Coming on the heels of a financial crisis that destroyed the trust of millions of Americans in the nation’s largest financial institutions and markets likely amplified the effect. As fickle as we Americans sometimes seem, I wouldn’t bet that this trust can be restored quickly, or to the same degree.
The shale gas revolution is a completely different kind of story, though it, too, has arguably been tainted by Deepwater Horizon. As it unlocks a resource that has converted the US natural gas supply outlook from one of scarcity and growing import dependence to expected abundance for decades, the gas industry can’t assume it will receive the benefit of the doubt concerning the environmental impact of the drilling techniques that have made this turnabout possible.

Perhaps one reason the impact of cheap natural gas hasn’t sunk in yet is that the main market price for gas, the futures price at the Henry Hub in Louisiana, doesn’t have much relevance for the average consumer. Residential gas customers don’t buy their gas in the million-BTU (MMBTU) lots in which the futures contract is denominated; we buy gas in therms–one tenth of an MMBTU–and by the time we see it on our bills all sorts of handling and distribution fees and mark-ups have been added on. But when you compare the price of traded gas in barrels of oil equivalent (BOE) to the price of West Texas Intermediate crude, the remarkable divergence of the last two years becomes obvious, as shown in the chart above. Between 2000 and 2006 gas and oil tracked each other closely, allowing for the greater seasonal volatility of the former. There were even periods when a barrel-equivalent of gas was worth more than a barrel of oil (take the MMCF price for gas times 6 to get oil equivalent in BBls; MMCF$ X 6= price of oil $/BBl). Yet while oil and gas prices fell precipitously when the recession and financial crisis burst the various asset bubbles, they have diverged sharply since then, with oil advancing back up to today’s $91/bbl and gas settling into the $20-25/bbl range in which we were accustomed to see oil prices a decade ago. Adjust that for inflation and you’re looking at an average natural gas price for 2010 equivalent to $20/bbl in 2000.

That might help explain why the developers of renewable electricity sources such as wind have struggled so much this year, despite receiving $3.9 billion in direct cash grants from the US Treasury. They’re not competing with less than 1% of its electricity from petroleum this year, through September. Instead, they’re competing with gas at an effective price of $25/bbl or less. But if this is a new obstacle for some renewables, it surely represents a huge opportunity for the country as a whole, as we struggle to find our way out of the fiscal and competitive pit we’ve dug. Cheap energy has always been a key to growth, and right now, gas is the only energy source offering that without requiring an enormous up-front investment. It’s no panacea, and it can’t take on every burden without being spread so thin that its price advantage would disappear. But I’d much rather be looking at the possibilities this presents than at the constraints that high-priced oil and natural gas imposed only a couple of years ago.

That’s probably as good a note as any on which to end the year. New postings will resume the week of January 3, 2011. In the meantime, I wish my readers a happy holiday season.


U.S. Rare Earth Mine Resumes Active Mining

December 28, 2010

By Michael Kan, IDG News

A major U.S. mine for rare earth metals has gone back into operation, adding a much needed source to offset China’s control of the unique group of materials necessary to build tech gadgets like smart phones and laptops.

Colorado-based Molycorp (  resumed active mining of the rare earth metal facility at Mountain Pass, California last week. The site had been shutdown in 2002 amid environmental concerns and the low costs for rare earth metals provided by mining operations based in China.
Rare earths encompass a group of 17 metals that are vital to the miniaturizing of electronic components such as magnets and capacitors. China mines more than 90 percent of the world’s current demand for them, according to analysts. But the country has been tightening control of its supplies, causing concerns among countries like the U.S. and Japan, which import rare earth metals.

Those fears came into the spotlight when in September media outlets reported that China had stopped exporting rare earths to Japan following a diplomatic spat. While Chinese officials have said the country will not use the resources as a bargaining chip, the government announced earlier this month it was raising export tariffs on certain rare earths.

Molycorp, the owner of the Mountain Pass mine, is seeking to free the U.S. from it’s dependence on China for rare earth metals. By the end of 2012, the company is aiming to produce 20,000 tons of rare earths, likely enough to start meeting U.S. demand. Molycorp also plans on breaking ground to the construction of a new rare earths manufacturing facility at the site next month.

China, on the other hand, produced about 124,000 tons of rare earths in 2009, according to analysts reports. The country is also the biggest manufacturer of products that use the metals.


The (Shale) Gas Renaissance

December 24, 2010

This from the Energy Tribune on-line

The (Shale) Gas Renaissance
By Peter C Glover and Michael J. Economides
Posted on Dec. 24, 2010

The (Shale) Gas Renaissance

Arguably the biggest story in the United States energy scene, and de facto for the rest of the world, has been the development of shale gas. Natural gas production in the United States was flat from about 1995 to 2005, standing at about 2 Tcf per month. But over the last five years, production started going up (see graph) moving to around 2.3 Tcf per month. The entire increase is because of shale gas, contributing at least 17 percent of domestic production. This is remarkable, considering that shale gas accounted for an estimated 2 percent just a few years ago.

The (Shale) Gas Renaissance

U.S. gas reserves double

In its latest updateU.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, a summary of its Annual Energy Outlook 2011, the EIA reports U.S. natural gas reserves, driven almost entirely by shale gas additions, increased by 11 percent in 2009 to 284 trillion cubic feet (Tcf). That’s the highest level since 1971. The EIA now projects technically recoverable unproven shale reserves standing at around 827 Tcf, 474 tcf above its 2009 projection – twice as much as previously estimated.

Elizabeth Campbell, associate policy fellow at the Americans for Energy Leadership project, suggests that this is, “enough to power every American household’s electricity consumption for over 73 years.” The US Geological Survey agrees. A spokesman for the USGS confirms, “Assuming one per cent recovery, these deposits [in U.S. territory] could meet the natural gas needs of the country [at current rates of consumption] for 100 years.”

Apart from the obvious benefit of reducing, what only a few years ago was considered as certainty in the near future, massive liquid natural gas (LNG) imports to meet declining domestic production, natural gas has many other positives. It is certainly the cleanest of all fossil fuels and, for those concerned about greenhouse gases, natural gas means a reduction of between 20 and 50 percent over coal emissions. Though it won’t be enough to keep the Planet Gore eco-warriors happy (little would), it represents a quantum leap over the feeble achievements of bureaucratic interference amidst the wreckage of the carbon credit market. Texas oil magnate T. Boone Pickens has even described how abundant gas reserves could make the U.S. the “Saudi Arabia of natural gas”.

EIA’s Administrator, Richard Newell, identifies, “Louisiana, Arkansas, Texas, Oklahoma and Pennsylvania [as] leading states in adding new proved reserves of shale gas in 2009”. Louisiana announced a net increase of 9.2 Tcf (77 percent), mostly through its Haynesville Shale development. Arkansas’s Fayetteville Shale and Pennsylvania’s Marcellus Shale developments both almost doubled their reserves with increases, respectively, of 5.2 and 3.4 Tcf.

Less than a decade ago, an economically viable reservoir exploitation strategy of gas extraction from shale rock remained elusive. But drilling horizontal wells with a very large number of transverse fractures, properly spaced and with proper zonal isolation, has made shale both accessible and economically attractive. Although some have lamented the impact that lower natural gas prices, hovering around $4 per MMBtu, might have had on shale gas production, the industry has responded admirably. Range Resources published the break even prices for natural gas production in a number of US shale formations, many of which fall below $4.


Click to enlarge

But the shale gas revolution not only offers the power to help refloat the U.S. economy – it is good news for the world, too.

European energy ‘Grinches’

Global shale gas is looking set to be the energy story of the 21st century, and for a very good reason. Overnight, it has changed the global natural gas and energy narrative from lack to glut, switching focus from supply to demand. By 2014, Canada will be a major producer and exporter of shale gas. Within just a few years, the U.S. could (and if it has its energy act together, it should) join Canada as a key natural gas exporter.

The impact on Europe, suffering under Russian dominance for natural gas supplies, could come even quicker – if it were not for environmental ‘concerns’ which all too often paralyzes EU energy thinking. Poland, in particular, has potentially large reserves of shale gas. Analysts Wood Mackenzie predicts that Polish shale deposits alone could increase European gas reserves by as much as 50 percent. An additional problem for Europe derives from much higher costs for drilling and hydraulic fracturing than the streamlined and optimized costs in North America. Europe would need a massive re-orientation both politically and logistically to exploit its shale gas resources.

The UK has in recent weeks discovered a “substantial flow” of shale gas a few miles from its ‘Dancing with the Stars’ capital, Blackpool, on the north-west coast of England. But other English counties further south are believed to be sitting atop their own shale gas reserves.

Typical of the ‘let’s highlight the risks and downplay the benefits’ thinking endemic in European energy circles, the British Geological Survey report plays up the possibleenvironmental risks to such an extent that the government is not likely to back serious exploitation anytime soon. The reality is, as one report suggests however, that the UK could save over $46 billion on current gas imports from places like Qatar. Currently the UK is forced to import more than half of its gas needs.

In October, Schlumberger’s CEO, Andrew F. Gould, confirmed how the development of shale gas and oil would likely meet with far more political and environmental roadblocks in Europe than in America. If true, it won’t be the first time Eurocrat ‘Grinches’ have got their energy priorities wrong. Elsewhere, however, the scramble to check out domestic reserves is on.

In early December, Argentina’s president Cristina Fernandez de Kirchner announced a huge shale gas find that could supply the country’s gas needs for 50 years. A Moroccan delegation has already called upon U.S. shale expertise to help develop its resources. And, speaking at the World Shale Gas Conference in Dallas-Fort Worth in November 2010, Ukraine Government ministers proudly proclaimed their country had “the biggest shale gas deposits in the world”.

Meanwhile, China and India have been quick to spot the game-changing qualities of domestic shale gas development. China’s deposits could exceed 1000 Tcf (Wang and Economides, Paper SPE 133458, 2010.) Last year, China signed the U.S.-China Shale Gas Resource Initiative, the latter already perceiving the U.S. as the world leader in shale gas technology.

That the global energy landscape is switching in favour of gas is also confirmed by developments at the energy majors. In an interview with Fortune magazine, asked about the future strategy of Big Oil, Shell President Marvin Odum stated that by 2012 Shell would be producing more gas than oil.

We will return to this theme in the near future and we will address a number of issues including the topic of hydraulic fracturing, one that has generated controversy from environmental groups.


Liberalism: An Autopsy

December 5, 2010

I am now essentially an independent.  I was never a slavish liberal, more a social liberal and fiscal conservative than a “knee jerk” type.  But as I become more and more  disillusioned with the Dems and their adherence with far-left policies (and with mirror-image issues with the Repubs) I finally registered as Independent last year.  Maybe there is more than some truth in Churchill’s  saying about liberalism and youth and conservatism and age.   Or maybe I’m only following the crowd as Emmit Tyrrell, Jr. points out in the following.


The heirs of the New Deal are down to 20% of the electorate.


In the tumultuous history of postwar American liberalism, there has been a slow but steady decline of which liberals have been steadfastly oblivious. The heirs of the New Deal are down to around 20% of the electorate, according to recent Gallup polls. Conservatives account for 42% of the vote, and in the recent election the independents, the second most numerous group at 29% of the electorate, broke the conservatives’ way. They were alarmed by the deficit. They will be alarmed for a long time.
Liberalism’s decline might appear, at first glance, to have begun with the 1961 inauguration of President John F. Kennedy—when historians noted the first glimmerings of what was to become liberalism’s distinctive trait, overreach. Kennedy’s soaring oratory was infectious and admirable and even impressed a later generation of conservatives. But it was a bit dishonest. There never was a missile gap with the Soviet Union, as he claimed, or any other cause for histrionics. On the domestic side, the oratory set in motion President Lyndon Johnson’s catastrophic War on Poverty.
JFK’s stirring language represented a break with the Burkean understanding of President Dwight Eisenhower. Ike, whether he articulated it or not, wanted to put the Great Depression and the dangerous confrontations of the early Cold War period behind us. He wanted to return to normalcy. Yet Kennedy’s inaugural put America on a different path, one that led to the Cuban missile crisis and ultimately to Vietnam. It fixed America’s stance in the world, and with that stance we were on the road to Iraq and Afghanistan. Domestically it set us on the path to a behemoth big government.
Still, in tracing liberalism’s decline, one cannot ignore an earlier event: the civil war that broke out in the aftermath of World War II. The conflict pitted what we might call the radicals led by Henry Wallace against the advocates of what Arthur M. Schlesinger Jr. would call in his book, “The Vital Center,” more practical liberals like Hubert Humphrey, Joseph L. Rauh and Walter Reuther. They were hard-headed and patriotic, and their desiderata were reasonable by comparison with the radicals’ utopian ideas about the Soviet Union.
Practical liberals won in the late 1940s, but by 1972 civil war had broken out anew.

The practical liberals won in the late 1940s, but in 1972 civil war broke out anew. This time the radicals won. In the meantime, LBJ’s Great Society caused even some liberals to warn against the “unintended consequences” of government programs. These were to be the first new recruits to modern conservatism. Jeane Kirkpatrick, Irving Kristol and, for a time, Daniel Patrick Moynihan, were in Kristol’s words liberals “who were mugged by reality.” The radicals were seeking refuge from reality in a self-regarding fantasy. Only a crisis in the leadership of President Richard Nixon, Watergate, allowed them to hide from the American electorate their fantastic delusions.
Conservatives have had Edmund Burke and the Founding Fathers as their cynosures. Sometimes they have provided discipline; sometimes conservatives have followed their own star. The problem for liberals is they have been denied a cynosure. Some had looked to the British Fabian Socialists and some to Karl Marx, but since the late 1940s liberals became coy about their intellectual mentors.
From the Nixon administration on, the numbers have not been good for liberals. In 1972 only one state went for presidential candidate George McGovern, who even lost the youth vote. In 1976 liberalism did better, but Jimmy Carter ran as a moderate.
Then came 1980. Ronald Reagan benefitted from the ongoing electoral accretions that modern conservatism has attracted: the neocons, the evangelicals (aka the Christian Right), the Reagan Democrats. Liberals could claim nothing new.
During his eight years in office, Reagan changed the political center for years to come. As the Old Cowboy headed back to California, the political center was center-right: vigilance about big government, balanced budgets, low taxes and peace through strength.
In 1992, after 12 years of conservatives in the White House, Bill Clinton beat George Herbert Walker Bush. Yet he too ran as a moderate. Once in office he tried to push a big government agenda and was trounced in the midterm election.
The rest of Clinton’s presidency was defined by his pronouncement that “The era of big government is over.” The Reagan revolution was secured. In 2000, Clinton’s vice president lost to the governor of Texas despite prosperity and peace. George W. Bush won the midterms in 2002. Then came the Republicans’ wilderness years in 2006 and 2008—but not conservatism’s. Conservatives remained more popular than liberals by about a 2-1 margin.
Conservatism has steadily spread through the country since its larval days in the 1950s, and the reason is that the vast majority of Americans favor free enterprise and personal liberty. Note the tea party movement. The Republicans just took the House of Representatives by over 60 seats and gained six seats in the Senate. The social democrat in the White House has been routed.
Over the past two years the Democrats showed their true colors. Faced with an entitlement crisis, they rang up trillion dollar deficits. We now face an entitlement crisis and a budget crisis—and liberals have no answer for it beyond tax and spend. They still have support in the media, but even here they are faced with opposition from Fox News, talk radio and the Internet.
As a political movement liberalism is dead. They do not have the numbers. They do not have the policies. They have 23 seats in the Senate to defend in 2012 (against the Republicans’ 10) and Republican control of state houses and legislatures will give them even more seats in the future. Liberalism R.I.P.

Mr. Tyrrell, a syndicated columnist, is editor in chief of The American Spectator. His current book is “After The Hangover: The Conservatives’ Road to Recovery,” published by Thomas Nelson.


The Utter Futility of Reducing Carbon Emissions

December 1, 2010

By Art Horn via the Energy Tribune

The attempt to reduce human carbon dioxide emissions to control global warming is completely and utterly pointless and doomed to failure. Well, perhaps I should qualify that statement a bit. Reducing man made carbon dioxide emissions is completely and utterly pointless if your goal is to change the future climate. On the other hand if you’re looking to make money from the trading of carbon allowances (carbon credits) than it makes a great deal of sense. If you’re looking to control the way the modern world makes energy then it makes perfect sense as well. If you’re trying to save the world from capitalists it makes it highly desirable to reduce “dirty” carbon emissions. If your mission is to extract money from developed nations and give it to those countries that have been robbed of their right to burn fossil fuels to grow their economies then it is the moral thing to do. If you are in the renewable energy business it makes perfect sense to support the reduction of carbon dioxide “pollution”. If you’re one of hundreds of environmental corporations whos mission is to save the planet at any cost, then shutting down all sources of man made carbon dioxide is a war you must win. What cause could be nobler than to save the planet?

Earth has a thick atmosphere that provides the living things on it and in its oceans with a warming greenhouse effect. This keeps the earth’s temperature at an average of 59 degrees Fahrenheit. Had there not been greenhouse effect the average temperature of the earth would be zero degrees. Life as we know it would not likely exist. The primary greenhouse gases listed in order of their contribution to the effect are: Water vapor, carbon dioxide, nitrous oxide and methane. There are others but their concentrations in the atmosphere are so small they don’t contribute much effect. Water vapor and clouds are about 93% of the greenhouse effect. Carbon dioxide about 5%, nitrous oxide about 0.95% and methane contributes about 0.36%. It’s the combined greenhouse warming from these gases that gives the earth its current average temperature.

Studies by Raval & Ramanathan (1989) estimated that the greenhouse effect of a cloudless atmosphere is 146 W/m2 (watts per square meter) for the average earth. They further pointed out that water vapor is accounting for most of this greenhouse effect, leaving about 8 W/m2 for the total amount of atmospheric CO2, i.e. some 5%. In addition the Intergovernmental Panel on Climate changes (IPCC) 4th assessment showed that 3% of the atmospheric CO2 comes from man made sources. Global gross primary production and respiration, land use changes plus CO2 from the oceans totals 213 gigatons of carbon exchanged each year between the earth/oceans and the atmosphere. The IPCC figure also shows man made carbon emissions to be about 7 gigatons bringing the total to 220 gigatons per year. So from this we can see that making energy from fossil fuels is adding about 3% of the carbon dioxide added to the air each year. From that the total human component of the greenhouse effect is therefore about 3% of the total carbon dioxide component of the greenhouse effect which is 5%. That gives us a value of 0.1% from man made carbon dioxide. If you think that’s a small number you’re right.

The important question is how much effect does burning fossil fuels have on the temperature of the earth? The following is simplistic but makes a lot of sense to me. The average temperature of earth is 59 degrees. Carbon dioxide is 5% of the greenhouse effect so 5% of 59 degrees is 2.95 or about 3 degrees Fahrenheit. All of the carbon dioxide in the air keeps the earth 3 degrees warmer than if there were none (5% of 59 degrees). The human component of the greenhouse warming is 3 percent of 3 degrees or 0.1 degree Fahrenheit or one tenth of one degree. So our contribution to the total greenhouse effect is very small. The large exchanges of carbon that take place in nature dwarf the human contribution and will continue to do so in the future.

And yet, the United Nations Intergovernmental Panel on Climate Change (IPCC) says even this small amount of warming cause by human’s use of fossil fuels will cause dramatic warming in the future. This dramatic warming is forecast by the use of computer models which presumably much data with physics. The IPCC’s forecasts are flawed for many reasons but one significant error is the residency time of carbon dioxide in the air far into future. The IPCC claims carbon dioxide, once emitted into the air stays there for 50 to 200 years. The vast majority of studies say the residency time for carbon dioxide is more like 5 years.

The very small human component of the greenhouse effect has profound implications when governments are considering reducing carbon dioxide concentrations to fight global warming. The United States produces about 20% of the world’s carbon dioxide emissions each year. If we were somehow able to shut down ALL sources of carbon dioxide emissions from the United States, the effect on the global average temperature would be 20% of 0.1 degree or 0.02 degrees. And that’s with shutting down everything that makes carbon dioxide! This decrease of 0.02 degrees is so small it is completely irrelevant. If achieved it would drop the global average temperature from 59.0 to 58.98 degrees and it would take billions if not trillions of dollars to achieve. After all we make 87% of our energy from burning fossil fuels. If there were a way to eliminate ALL carbon dioxide emissions on a global scale the decrease in temperature would be 0.1 degree dropping the temperature from 59.0 degrees to 58.9 degrees. Once again, completely and totally insignificant and at a cost that would quite possibly bankrupt the world.

When so much is at stake you would think this would be common knowledge but apparently it is not. Part of the reason is that there are so many competing factions looking to squeeze every dollar they can from the lie. Interestingly the Chicago Climate Exchange closed its doors recently. This can only be seen as good news. Not for Al Gore, Goldman Sacks and others but for the nation at large, very good news. Apparently the Republican electoral victory of 2010 has caused the climate exchange to be taken off life support. The Republicans took over the House of Representatives and made significant gains in the Senate. Because of this the idea of a national cap and trade law that would allow the buying and selling of carbon allowances on a national scale is over. “It is dead for the foreseeable future” said Myron Ebell, director of the Center for Energy and the Environment, part of the Competitive Energy Institute. “Economy-wide cap and trade died of what amounts to natural causes in Washington” said Fred Krupp, president of the Environmental Defense Fund that supported cap and trade legislation.

So on the bright side not all is lost. The bad economy is dragging on and on and enough people have come to see that trying to control the climate is potentially out of this world expensive and impossible. They’ve seen that a few individual investors would make billions while nations go broke and the climate goes on doing what it has been doing for millions of years, changing on its own. If only more people knew the total temperature payback for eliminating all carbon dioxide emissions was one tenth of one degree cooling. That news would change the political climate forever.