Sunday, October 27, 2013

The problem with (affordable) helium

If I had had space, I would have included a subtitle for this piece as follows: Things do not have to run out to become unavailable. So, now you have a general idea about the problem with helium, a problem to which I'll return shortly. But, first let me discuss the broader issue my subtitle enunciates.

How many times have you heard someone say that we have huge quantities of such and such a resource underground (or even in seawater), so there is nothing to worry about? It is hard to know where to start with this simplification because it comes from minds that are so egregiously uninformed.

There are dozens of reasons that things can become unavailable before they ever "run out." It is a favorite ploy among cornucopians (mostly economists) to accuse those warning of resource shortages of saying that some particular resource, say oil, is running out. But that is not what they are saying at all. Rather, the realists, as I call them, are simply pointing out that a number of factors are coming together than may raise the cost of obtaining such resources beyond the means of many to afford them.

The rich will pay whatever price is necessary for their food and energy. These are small percentages of their income even if food and energy costs double, triple or go up 10 times. But such is not the case for the vast majority of humans on the planet. At some price, food becomes unaffordable, gasoline becomes unaffordable, and even drinkable water become unaffordable.

What this tells us is that the smooth functioning of the global system depends not just on resources, but widely affordable resources and the products and services they make possible. Whatever the causes of an affordability problem are, millions and even billions could go without adequate food and fuel as a result. Many on the margins would become ill from inadequate nutrition, some might starve outright, and many could freeze for lack of warmth in cold climates.

Perhaps all this is too dramatic just yet. So let's take an example of something which has already become suddenly and unexpectedly less available: Helium.

Helium is the second most abundant element in the universe after hydrogen. But, on planet Earth it is exceedingly rare. The main source is decaying radioactive minerals in the Earth's crust which emit helium nuclei as part of their decay process. A small portion of this helium gets trapped in natural gas reservoirs. The rest makes its way into the atmosphere and then into outer space. Very few gas reservoirs are rich enough in this trapped helium to make it worthwhile to extract, process and get to market. Unless we find another affordable source of helium, this means that helium production will necessarily peak and decline when the helium-rich natural gas reservoirs that hold it peak and decline.

It wouldn't matter so much that helium is becoming hard to get if it were not for the fact that for many applications there is no substitute, none. Let me quote at length from a piece I did more than four years ago entitled "Let's party 'til the helium's gone":

Perhaps the most important uses of helium are in its liquid form. Helium is the gold standard for low-temperature processes and research. In its liquid state it can reach temperatures as low as -459 degrees F or almost absolute zero, the temperature at which all molecular motion would cease. (No one has ever succeeded at reaching absolute zero, and theoretically, it is thought to be impossible to achieve.)
Liquid helium simply has no equal. Currently, it is critical in magnetic resonance imaging, a non-invasive diagnostic procedure that allows physicians to obtain images of many tissues and organs, notably the brain, that are superior to those provided by X-rays. This is an application for which superconductivity is critical, and very low temperatures are essential for optimum results. In addition, superconductivity is an area of intense ongoing scientific research for ways to reduce electricity losses in the electrical grid and increase the efficiency of power storage and electric motors.
Perhaps the most visible use for helium beyond filling balloons is that in filling airships or blimps. More exotic uses include rocketry where helium is used to flush out fuel tanks and then prepare [that is, condense] liquid oxygen and hydrogen for those tanks. Helium is preferred for this work and for blimps because it is nonflammable and inert, that is, under ordinary circumstances it doesn't chemically combine with other elements.
These two properties also make it ideal as a shielding gas for certain types of critical welding. Preventing normal atmospheric gases from reaching a weld can enhance its strength and quality. The same properties make helium critical for producing silicon wafers, the basis of today's electronic world.
In addition, helium is used for heat transfer in gas-cooled nuclear reactors, and it is used to check for leaks in critical equipment because it flows more readily through such leaks. There are many more uses, both industrial and scientific, but you get the idea.

First, we are not running out of helium. What's happening is that the U.S. government, which for years dominated the helium business, has been gradually getting out.

All this was telegraphed a long time ago to industry. In 1996 the U.S. Congress passed a law mandating that the government get out of the helium business by 2015. That was supposed to give plenty of time for the private marketplace to pick up where government would leave off.

But, it hasn't turned out that way. Congress let the Federal Helium Program set prices too low in order to hasten the liquidation of its stockpile. Those low prices kept away potential new entrants into the helium business. And, now as the federal program ratchets up the price to address the problem, consumers of helium are yelling "ouch." And yet, at the same time there are few new players to replace the dwindling federal supply in the market.

It's not clear what price helium would have to rise to in order to incentivize private development. Since 1925 the U.S. government has essentially dominated the market, so there is no historical free market price to look at. One would have thought that with the impending government withdrawal from the market, some savvy entrepreneur would be stockpiling helium for the day when the price would skyrocket.

But such is not the case. For one thing, it takes an extensive infrastructure to capture helium from natural gas fields and thus a huge investment, one that few would undertake without reasonable assurances that prices would rise to cover the costs.

But perhaps even more important, U.S. sources are the world's most prolific. Nothing compares to them. And, this is not simply a question of incentivizing people to go out and look for economical deposits of helium. Helium currently is found only in commercial quantities in natural gas reservoirs and then only certain ones. All the richest sources, therefore, are already being produced.

The only course then is to raise the price of helium to a level where much leaner resources of helium could profitably be extracted from natural gas reservoirs, prices high enough to justify huge capital outlays. Keep in mind that separating helium from natural gas requires temperatures of -315 degrees F.

As prices rise to make these more-costly-to-get helium resources available, who will be priced out of the market? Right now, it turns out, people who want helium for party balloons are willing to pay the most. It's a small part of the market, but it shows that the distribution of helium in a higher cost world might not turn out to be what most of us would think is socially desirable. Many research labs might not be able to afford as much. Other critical uses in medicine and computer chip manufacture might be curtailed or result in considerably higher costs for medical diagnosis and electronic equipment.

All this is to demonstrate that a resource does not have to "run out" in order for it to become unavailable to large numbers of people. There are plenty of molecules of helium in the Earth. But the cost of getting them out for all who want to use them, even for critically important purposes, might be too high for many to bear.

The same analysis can be done for other finite resources, oil, coal, natural gas, rare earth minerals, lithium and many more. The cornucopians like to say that we will never run out of what we need. The market will provide the necessary incentives for getting more out of the Earth more efficiently or for finding substitutes. We will always have what we need when we need it at prices we can afford in the quantities we require.

But, there is no guarantee that this will happen in every instance that we want it to. As such the above assertion is simply an article of faith in the economics field, born of an era in which the rate of resource extraction was rising continuously and limits were nowhere in sight.

Now, limits do not mean that we have "run out." Instead, they mean that we cannot produce at a higher rate or that we cannot produce at a higher rate without significantly higher prices or that no viable substitute, competitive in price and sufficient in quantity, can be found.

The socially desirable outcomes we might want to see with regard to resource use do not have to be mandated. Market-based incentives--which must include high taxes on the resources we want people to use less of--can go a long way quickly to bring our choices in line with our long-term best interests.

It's either that or we can party 'til the remaining resources of helium and other critical substances are reduced to the point where we no longer have enough time to make a transition to a society that can adapt to their loss of affordability.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, October 20, 2013

The numbers don't add up to U.S. energy independence

Energy independence sounds good, and that's why politicians and oil company executives love to say the words. It's so easy to say, but oh so hard to actually accomplish, which is why the United States has been a consistent importer of oil since the late 1940s.

Recent overblown statements about U.S. energy independence from the oil industry, its paid consultants and the fake think-tank academics it funds simply aren't supported by the numbers. I have discussed this issue in two previous pieces, "The Oil Industry's Deceitful Promise of American Energy Independence" and "Oil and gas industry uses deceptive energy independence message to push U.S. exports".

Recently, friend and colleague Jeffrey Brown--who is best known for his Export Land Model which foretold of shrinking global oil exports--did some fairly simple math to show how difficult it will be for the United States just to maintain its current production, let alone produce all the oil and natural gas it consumes.

In a recent email Brown, who is a Dallas-based independent petroleum geologist managing a joint-venture exploration program, wrote the following:

The EIA's [U.S. Energy Information Administration's] estimate for the most recent four week average crude oil production rate (Crude + Condensate) [which is the definition of oil] was 7.6 mbpd (million barrels per day). Refinery runs were 15.8 mbpd, and net crude oil imports averaged 8.0 mbpd. The numbers for total liquids are, of course, different.

As several people have noted for some time, the primary problem with the tight[oil]/[natural gas] shale plays is the high decline rate.

At a (probably conservative) 10%/year decline rate for existing U.S. crude oil production, in order to simply maintain current U.S. crude oil production, the industry would have to put on line the productive equivalent of every current oil field in the U.S. over the next 10 years, or in round numbers we would need the productive equivalent of 10 new Bakken plays over 10 years, in order to maintain current crude oil production.

Citi Research [an arm of Citigroup] puts the decline rate for existing U.S. natural gas production at about 24%/year, which would require the industry to replace about 100% of current U.S. natural gas production in four years, just to maintain current production, or we would need the productive equivalent of 30 new Barnett Shale plays over 10 years, in order to maintain current natural gas production.

Companies are not finding one new Bakken play each year; nor are they finding three new Barnett Shale-sized plays each year. In fact, production of U.S. natural gas has been just about flat since the beginning of 2012. U.S. crude oil production continues to grow, outpacing most projections. But, the United States would have to more than double its output from here to supply all of the country's needs.

Keep in mind that U.S. energy independence has almost always been about oil. U.S. coal production has long satisfied U.S. consumption. And, U.S. natural gas imports from 1990 through 2010 averaged just 16.8 percent of total U.S. consumption. Almost all of that came from Canada, the country's northern neighbor and longtime ally.

That percentage came down in 2011 and 2012 to 14.2 percent and 12.5 percent, respectively. It's possible that U.S. production may yet grow just enough to bring that percentage down to zero. But, given the steep production decline rates for natural gas wells being drilled today, it's doubtful that production at a level high enough to avoid net imports could be maintained for very long.

That leaves us with oil. On average from 1990 through 2012, for domestic use the United States imported about 54 percent of its crude oil and petroleum products such as gasoline and diesel fuel (based on historical data gathered by the EIA). In 2012 the percentage had come down from that average to 48.3 percent.* It's progress, but the country is not even close to becoming energy independent. These percentages are based on crude oil and total petroleum products which include natural gas liquids that come from natural gas wells. It isn't clear how to back out these non-oil liquids in the statistics.

Still, the numbers give us a reasonable look at what the data actually say about the prospect of U.S. energy independence, which really means oil independence. The prospects are not good.

Brown points out that we've been down this road once before when the huge oil find around Prudhoe Bay in Alaska boosted U.S. oil production for a time in the 1980s. But Prudhoe Bay peaked in 1988 and has been on the decline ever since then. And, with it went total U.S. production until recently.

Given the potential for U.S. tight oil in deep shale deposits and a high oil price which makes it possible to incur the high costs of getting it out, U.S. production could grow for a time. But at some point the high production decline rates for tight oil wells (around 40 percent per year) will be too much of a barrier, and total U.S. crude oil production will begin to decline once again, Brown believes.

The cornucopian's argument is that the third time's the charm, that the industry can now do what they could not do from 1970 to 1977 [after the peak in U.S. oil production] and what they could not do from 1984 to 1991 [during the boom in Alaskan oil production], i.e., indefinitely maintain the rate of increase in production. And, of course, we are going to do this with the highest overall decline rates that we have ever seen.

Brown says you have to keep in mind that tight oil wells drilled today will in a few years be producing just a small fraction of what they are producing now. And, that means new wells will have to be drilled just to make up for this decline. Only then can production start to grow. As total U.S. production increases and the number of producing wells grows considerably, the number of new wells needed just to make up for the decline in the production of existing wells will grow along with it. At some point it will become impossible both to make up for declines in existing wells and to grow production.

Brown believes that the United States is unlikely ever again to exceed the 9.6 mbpd of crude oil production it achieved in 1970, the peak year. More likely is a continuation of an undulating decline with occasional upturns followed by fresh downturns.

What he finds ironic is that those who are saying that peak oil is dead are using the United States, an oil producer that saw its production peak more than 40 years ago, as the poster child for their arguments. Yes, the ride down the peak can feature a significant bounce here and there, just as--if you'll forgive the analogy--a dead cat hurled downward can appear to show some life as it bounces off the floor.

The oil age may not be dead yet, but Brown believes that the top is nearby--not just for the United States, but for the world. And, that means we are wasting precious time being lulled to sleep by the oil optimists when we should be preparing for a post-peak oil world.

_______________________________________________________________________________


*I arrive at this percentage by subtracting U.S. exports from total U.S. consumption which includes petroleum products refined for export. This gives me actual domestic consumption. I also subtract U.S. exports from U.S. imports to give me net imports. Then I divide net imports by domestic consumption to yield the percentage of that consumption which is dependent on imports.


Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, October 13, 2013

Bad advice: Why the future won't be like the past

It's easy to get bad advice from successful people. Here's why: Successful people assume that the same circumstances that prevailed while they were achieving their success will generally prevail while you are pursuing yours. But, your circumstances will almost surely be different, probably in major ways.

The second mistake successful people make is that they underestimate the role of luck in their success. As it turns out, financial rewards--and that's what Americans almost always mean when they use the word "success"--are distributed more randomly than most people at the top or even the bottom of the economic pyramid would like to admit. Who gets wealthy, especially really wealthy, is largely a matter of luck.

If your measure is fame rather than wealth, the story is the same. It's hard to imagine that the world's 10th best concert violinist is far less talented than the world's best concert violinist. Most of the difference in fame (and income) is in all likelihood due to luck rather than skill.

Luck can come in many forms, but it mostly boils down to three things: chance meetings, lucky guesses (about investments or a promising business venture or an artistic product such as a book or a song); and birth. The family you are born into, of course, greatly influences the opportunities available to you. My father once said of another man who had inherited considerable wealth that he "chose his parents well." My father was, of course, making fun of the idea that our successes come primarily from brilliant choices.

I cover this terrain because we are currently inundated with unsupported claims that our energy future will be continuously more abundant in line with our historical experience of the last 200 years or so. And, I've written about the actual risks we face. Guessing right in the past about the supply of a finite resource, that is, fossil fuels, is no guarantee that the next optimistic projection will be correct. In fact, the finitude of fossil fuels suggests that the day will come when optimistic projections will be wrong, and we will be caught unawares with devastating results. (Oh wait! Didn't that already happen when at the beginning of the previous decade wildly optimistic projections of ample, cheap supplies of oil turned out to be wildly wrong?)

But for this piece I have two examples of our failure to understand the limits of our knowledge from the world of finance: an overheard dinner conversation in my adopted home of Portland and a recent sad story from an acquaintance who entrusted money to a well-reputed investment management organization. The second story definitively illustrates my point. The first only illustrates it in principle since those receiving the advice have clearly not acted on it yet. We'll return to these stories in detail later.

But first, we must keep in mind that in general terms, the future--that is, the future down through history--has not monotonously repeated the past. In fact, history is the story of what changed, and we have lots of history. This doesn't mean that things cannot seem stable for long stretches, sometimes spanning several lifetimes. This isn't the rule, however, but rather the exception. In fact, when this does happen, it turns out that both in society and in nature long periods of stability are frequently followed by catastrophic change. Think 2008 market crash and the 2004 Indian Ocean tsunami.

We are delving now into the what the great philosopher of skepticism, David Hume, referred to as the problem of induction which is often illustrated as follows: Seeing white swans on thousands of occasions does NOT prove that all swans are white. It suggests perhaps that the odds are high that the next one sighted will be white; but, even this could be mistaken because we can never see all instances of swans everywhere throughout the expanse of time backward AND forward--which is just another way of saying that our sample size is actually quite small, whatever we may believe. In the end, Europeans who landed in Australia did find what seemed impossible up to that point: a black swan.

Now, finding a black swan was astonishing, but not necessarily damaging on an individual or societal scale. But, if your life, livelihood or entire society absolutely depends on the future being more or less like the past (as you and others have lived it), then you would be a fool simply to let things ride without further investigation. It only takes one black swan to invalidate the supposition that all swans are white.

The great contemporary authority on risk, Nassim Nicholas Taleb, puts it best in his book entitled The Black Swan: "It does not matter how many times something succeeds, if failure is too great to bear." Just what does this gem of brevity mean. In practical terms it means that we must consider not only the PROBABILITY of a future event, but also its possible SEVERITY. The possibility of getting a hangnail in the next week ought not to concern us much. The possibility of losing an arm ought to rivet our attention, even if the risk seems small.

Let me return to the overheard dinner conversation. An older man was counseling his son or more likely his new son-in-law about the wisdom of buying real estate no matter how high the market. The young married couple was considering buying their first home. The man used as proof of his point that he invested in real estate as a young man and never looked back. He always made money on every home when he sold it, and was able to live in better and better homes along the way. The older man counseled his son-in-law and daughter that things always turn out all right in the end--to which I can only add "OR NOT."

It's easy to see that the sample size here is very, very small. And, the specifics of real estate are actually very important versus, say, the specifics of a commodity such as oil or gold. Location, location, location are the three considerations said to be most important in valuing real estate.

I'm not opposed to owning real estate and have owned some in the past. But I have always considered it a very expensive consumer item, not an investment. I don't doubt there are some who are sharp-eyed enough to make money on real estate consistently. But the rest of us, I believe, are better served by regarding residential real estate as a method of providing living quarters. The most recent housing bust should have made this abundantly clear (but apparently it did not do so for everyone).

The above example illustrates what such advice sounds like before it is acted upon. The second example illustrates the effects of breaks from past. An acquaintance enlisted a well-known investment management firm to invest all his money. The acquaintance explained that he was a very conservative investor and valued safety over return.

The investment firm put him 45 percent in stocks through broadly-based mutual funds and 45 percent in bonds, much of them of the government variety. The remaining 10 percent was in a money market.

Historically, this allocation looked "safe" and quite conservative. After all, the firm explained, when stocks go down, bonds go up. And, when bonds go down, stocks go up. But in aggregate this strategy was supposed to offer steady, modest growth over time.

Almost immediately the stock market and the bond market tanked simultaneously. It wasn't supposed to be that way. The losses were not massive, but they were sudden and contrary to what the management firm had foretold.

The acquaintance sold all his stocks and bonds and put the proceeds into a money market account. Whether this will prove wise in the long run is unknown. But, the reaction was not out of fear of loses so much as fear that the future will not look like the past--that the promised steady small gains over time would not materialize because markets were acting contrary to past patterns.

If we cannot necessarily rely on past patterns to guide us, what does the voice of experience have to offer? The answer should actually be unsurprising. Since none of us can know the future, our task ought to be to make ourselves more resilient come what may. The usual advice is to get a good education (but not so much that you become a rigid thinker); maintain your health enough to do your work and the other things you enjoy; cultivate many relationships to increase your chances of meeting your needs and of doing interesting things and thinking interesting thoughts; and finally, be willing to fail while experimenting to discover the best path to your goals. There is nothing startling about all this.

We like to think that we shape our destiny rather than destiny shaping us. It's not so much that our choices don't matter as that we cannot accurately forecast their results. If those choices redound to our benefit, then we style ourselves brilliantly perceptive. If they dog us with failures, we blame it on the stars.

I am reminded of Michael Grant's pithy summary of Stoic philosophy in his wonderful short history The World of Rome: "So pray not for blessings, but for the power to do without them." That's the true meaning of a robust life: Living well even when fortune does not favor us.


Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, October 06, 2013

Fukushima and our inability to gauge risk

Perhaps the most important energy story on the planet right now is the precarious situation for fuel rods stored in a damaged building at the Fukushima nuclear power station in Japan, site of the worst nuclear power plant disaster in history.

It's a story that has actually been important for a while because an earthquake--in a place prone to earthquakes--or a severe storm or perhaps another tsunami has the potential to dislodge these rods, expose them to air and begin a reaction that might release a radioactive cloud that would reach around the globe. Figuring out how to get the rods out of harm's way, however, has proven exceedingly difficult. But shortly, the plant's owner, Tokyo Electric Power Company, is going to try, and any mistake in moving the rods could be very, very environmentally damaging and dangerous to human health.

However, there is another story beyond the immediate danger that tells us something about how we think about risk and why such thinking is wholly inadequate to the risks we face in energy. Up until the accident at the Chernobyl nuclear power station in the Ukraine in 1986, nuclear advocates liked to say that no one had ever been killed by nuclear power. After Chernobyl that changed to very few people have ever been killed by nuclear power compared to the numbers killed, for example, in coal mining. And, of course, there is the damage done to human, animal and plant health by emissions from coal burning including respiratory disease, mercury contamination of fish and the degradation of forests due to acid rain. There is also climate change caused by emissions from burning not only coal, but other fossil fuels as well.

After Fukushima, even though nuclear advocates could still plausibly defend the same general claims about nuclear safety, they seldom do. Part of the reason is that we don't know the final toll of the Fukushima disaster because the disaster is still in progress and is likely to remain in progress for many years, if not decades. And, because there is so much more at the site to deal with, that time line holds even if the fuel rods are successfully extracted from the rubble of the building that currently houses them.

How could the world have misjudged the dangers associated with nuclear power, especially those from the light water reactors that so dominate the nuclear industry today? The simple answer is lack of experience. The nuclear power industry is only approaching 70 years old. That seems like a long time, but it isn't.

Nuclear power plants are one of the most complex systems ever devised by humans. Complex systems by their very nature have more failure points than simple systems. But this in and of itself is not the problem. Natural systems such as the ocean currents or a rainforest are exceedingly complex. But, they have been around for much longer and their processes have settled into much more predictable patterns. With nuclear power plants, we have little experience to go on in evaluating risks.

Man-made systems not only have much shorter histories to work from, but they can interact with natural systems in unpredictable ways. Recall what happened at the Fukushima nuclear plant: The tsunami was so high that it breached the plant's seawall, flooding emergency diesel generators located in basements, generators that were supposed to power pumps to cool the reactor core and fuel rods in the event of a power outage. Backup batteries for those pumps ran out of power within a day. And, that's when the trouble began that led to hydrogen explosions which damaged buildings--damage that ultimately compromised the fuel rod storage.

Let me quote from an earlier piece of mine, "Calculating calamity: Japan's nuclear accident and the 'antifragile' alternative":

Famed student of risk and probability and author of The Black Swan Nassim Nicholas Taleb tells us that in 2003 Japan's nuclear safety agency set as a goal that fatalities resulting from radiation exposure to civilians living near any nuclear installation in Japan should be no more than one every million years. Eight years after that goal was adopted, it looks like it will be exceeded and perhaps by quite a bit, especially now that radiation is showing up in food and water near the stricken Fukushima Dai-ichi plant. (Keep in mind that "fatalities" refers not just to immediate deaths but also to excess cancer deaths due to radiation exposure which can take years and even decades to show up.)
Taleb writes that it is irresponsible to ask people to rely on the calculation of small probabilities for man-made systems since these probabilities are almost impossible to calculate with any accuracy. (To read his reasoning, see entry 142 on the notebook section of his website entitled "Time to understand a few facts about small probabilities [criminal stupidity of statistical science].") ....Calculations for man-made systems that result in incidents occurring every million years should be dismissed on their face as useless.
Furthermore, he notes, models used to calculate such risk tend to underestimate small probabilities. What's worse, the consequences are almost always wildly underestimated as well.

We could conclude that nuclear power is unsafe or, at least, risky enough that we don't want to build more potential Fukushimas, and leave it at that. But, we would be remiss in not noting that the rest of the world's energy system, based primarily on fossil fuels faces risks of unknown proportions as well.

There are the obvious risks of climate change associated with the burning of fossil fuels. The risks are rising, and the consequences could be nothing short of catastrophic.

With regard to supply, despite all the handwaving about ample supplies of fossil fuels, an oil price hovering in record territory for the last three years tell us that limits for this fuel cannot be far off. The rate of production has barely nudged upward, just 2.7 percent since 2005 despite record investment by the oil industry. This compares with a nearly 10 percent rise in the production rate in the previous eight years. It's a significant slowdown, made all the more significant because it comes in the face of supposedly miraculous new extractive technologies that were supposed to reverse the declining growth trend in world oil supplies.

Natural gas production in the United States--still (almost certainly wrongly) touted as the world's next natural gas superpower--has been just about flat since the beginning of 2012. Coal supplies seem ample, but coal quality is declining virtually everywhere, and estimates of minable coal have actually been dropping for decades.

We think we know the future of these fuels. But only a decade ago, the same people who are trumpeting fossil fuel abundance today were telling us how prices would stay low for decades and supply would keep on increasing at a steady pace. For example, long-term forecasts for oil production made in the year 2000 were far too optimistic. In fact, the optimists have been wrong every step of the way as oil's price has increased 10-fold since 1998.

Coal prices leapt upward in the last decade though they have come down from their peaks. World natural gas prices remain high, though a local glut in the United States has lowered prices there--but only to levels that remain 70 percent higher than the average price in the 1990s. Why should we accept optimistic pronouncements about supply now?

We shouldn't because the perennial optimists don't know the future, and neither does anyone else. And, that should tell us right there that we cannot gauge the risks to fossil fuel supplies with any degree of certainty. Projections and forecasts that go out decades are guesses and little more. They have no force as probabilistic predictions because the probabilities of such forecasts cannot be calculated. And yet, most are presented as fact rather than the fiction that they are.

The fact is, we don't know what we don't know. In our energy policy and planning across the world, we act as if we know future fossil fuel supplies precisely--just as we acted as if we knew the risks of nuclear power rather precisely--that is, close to zero.

All this suggests that we ought to have a bias toward energy supplies that cannot decline in the long run, namely renewables--and that cannot create environmental havoc with just one accident. Strangely, this is a surprisingly tough sell in a world that has already been sold on the idea that we have precise knowledge of our energy future--when, in reality, all we have are risks, many of which cannot be even be remotely quantified.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.