THE NEW GILDED AGE (Part 2)
THE NEW GILDED AGE (Part 2)
27th May, 2010 0
I have to come clean on something. I spent the better part of two decades working in the chemical industry, most of that with the BP/Castrol group. This isn’t so much a confession before as it is a qualification. I learned a lot working in the industry and held almost every function you can in a chemical company. Everyone has opinions. It’s nice when it feels like you can offer an informed one.
The leaking BP well in the Gulf is just the latest environmental disaster to beset the companies that provide the fuels for our current combustion based economy. Unfortunately, BP has had a string of these types of catastrophes. Search youtube for “Texas City Refinery Explosion” for one chilling case study. “Leaking pipelines” provides another interesting glimpse into the realities associated with the oil business.
Oil has no stranglehold on this type of headline tragedy.
Coal mine accidents and the ensuing rescue missions are all too common news. It makes for compelling television and it’s been a problem from the minute men started tunneling underground to look for basic elements. It seemed worth the risk when the product was gold and, apparently, still worth the risk to extract the most common source of electrical power generation in the world. What is the life of a miner worth? A couple cents a ton? Apparently not by current norms.
It’s easy to understand why these events keep happening by applying some basic business principles. By any evaluation, combustion fuels like oil, coal and natural gas are commodities.
Fossil fuels as a whole have to be considered a product line that has peaked and is in the back half of its life cycle. In translation, this means pennies have to be pinched to be competitive.
On top of that, these companies have been bought and sold and the underlying assets written down and recapitalized so many times that even common rules of thumb like “keep capital expenditures equal to depreciation” become harder to understand, let alone implement. Corporate combinations are most often based on “synergy”, or savings. In practice this often means “maintenance” means “make it work” on a unit that has zero book value and no real budget for anything other than patchwork repairs.
It’s not intentional by any means, but shortcuts become a way of life.
And accidents happen. It’s a trade off that we have historically accepted to have a steady supply of cheap fossil fuels. It’s not just in the culture of these companies. At this moment, oil and coal and all of the risks involved are ingrained in our culture. We demand it at the pump and in our heating bills.
This is going to be a bigger problem the more we look to the ocean and not just because we all know oil and water don’t mix, but because it’s really risky business when you are drilling a mile below the ocean’s surface.
And there is never a good Plan B.
Add into this the fact that the vast majority of ships used to move oil around the world are commissioned out of second tier African nations that are notorious for their lack of standards, and it seems we should have plenty of opportunities for heroic clean up efforts in the near future, if we continue our current course of action.
Even the well publicized natural gas find and auction that reaped a windfall for the State of Michigan should come with some pause. I wonder how many people had the same reaction I did when they saw the story and the accompanying map that showed the northwest counties involved - right smack in the middle of one of the few thriving tourist destinations in this State.
Is this really how we want to use that land?
Just how will the landscape change?
What are the trade offs?
Or, I guess in more popular vernacular, what are the alternatives.
We need to fully understand the risks involved and the associated trade offs. In fact, we can start with one fairly simple rule of thumb when judging alternatives. Simply say them out loud. Sometimes the alternatives become more obvious. For instance:
“I am going to get in a $35,000 vehicle fueled by carbon pumped from well below the Saudi Arabian desert, shipped across the ocean, refined under high temperature and pressure from crude into high octane chains and delivered via a network of pipeline and tankers as my best method of getting a couple tomatoes for tonight’s salad”
Versus: “I could throw a planter on my window sill and have tomatoes all summer.”
Seems simple enough. Let’s try another one.
“We are going to redeploy large tracts of land currently part of the attraction for tourists (and celebrities) who are enamored by what is arguably Michigan’s best model for homegrown commerce”
Versus: “I could install something very similar to my Grandpa’s old septic tank and maybe supplement it with leaves, wood chips, cornstalks, hemp stalks or other sources of cellulose. This might allow me to generate a portion of my own energy as the mass decomposes, releasing exothermic heat, methane gas or, if I manage it right, maybe even biomass that can be burned as a renewable fuel.”
Hmm. Is it just me or does this get easier the more you do it? I’m not saying that energy problems are simple. But sometimes we have to look for little solutions that are part of the bigger puzzle that energy has and will become. And little solutions have to be simple. For instance, let me leave you with a “joke” that illustrates this point:
Q: What do you call a guy that’s stranded on a rock with a pile of corn and a pile of rope that burns the corn for heat and tries to eat the rope?
A: Umm. An idiot? Maybe a Republican? Certainly not a farmer or an engineer. Or anyone with any common sense for that matter.
It really is about trade offs when we talk about alternatives. And we are going to have to make some. So are we interested in trade offs that send oil splashing across our beach? Or tradeoffs like sending water to help people that have moved to the desert irrigate their golf course? Or tradeoffs like letting the neighbors place a small oil rig in their backyard? Or letting the big energy companies into ours by granting them drilling leases across the Upper Lower Peninsula? Or letting them deal for carbon emissions with companies located in underdeveloped countries?
Then take another look at the Gulf. And another look at Texas City. And say it out loud before you decide. Sometimes the better alternative becomes a little clearer.
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THE NEW GILDED AGE (Part 2)