Apollo, Forty Years Later

I couldn't let the 40th anniversary of the first moon landing pass by without comment, and not just because of what that event meant to a space-obsessed 11-year-old in 1969. Aside from numerous calls for an Apollo program for energy, or the periodic allusions to energy and climate change as the equivalent of the space program for our time, Apollo's extraordinary accomplishment might still have some lessons to teach us about what it takes to achieve goals of such a magnitude--as well as the proper limits of those lessons. It's also high time to give some serious thought to the role of space exploration in our future.

Although I had originally intended to post on this subject next Monday, on the anniversary of the day that Neil Armstrong stepped onto the lunar surface, it struck me as more appropriate to commemorate the entire mission and the enormous effort that went into planning and executing it. I was pleased to find a website called "We Choose the Moon" that will retrace the events of Apollo 11 in real time, beginning exactly 40 years after the launch on July 16, 1969. NASA has put up a 360-degree interactive panorama of the lunar landing site, and the New York Times has extensive coverage. As interesting as these sites are, however, none of them can recreate the feeling of that long-ago summer, when families and neighbors gathered around their TVs--many of them new color sets bought for the occasion. That cohesion proved fleeting, and it seems almost alien today. Sadly, so does the remarkable combination of urgency and patient, meticulous planning without which the moon landing would have remained as impossible as it must have seemed a decade earlier.

When President Kennedy made his speech to Congress in 1961 setting the goal of landing on the moon within the decade, the technology to deliver that outcome did not exist. The first American manned space flight by Alan Shepard had taken place just three weeks earlier, and the first unmanned Saturn V moon rocket wouldn't be flight-tested for another six years. The financial cost of the moon landing program was so high--roughly $150 billion in today's dollars--because so much of it had to be designed and built from scratch, from the vehicles to the entire infrastructure to assemble, launch, monitor and control them.

It was also high because despite the intense pressure of needing to pull off this feat within eight years, it involved the step-by-step incremental development and demonstration of the capabilities that would ultimately be required. For example, the Gemini Program, involving 10 manned launches in 1965 and '66, was mainly intended to test techniques such as rendezvous, docking and spacewalking that were integral to executing the Apollo concept for going to the moon. Then, between the disastrous Apollo 1 launch pad fire, which forced NASA to redesign the Apollo capsule, and "The Eagle has landed", there were four other manned Apollo flights, each testing incrementally more complex elements of the lunar mission. This was the epitome of combining bold strategic planning with planning by doing; that much, at least, seems broadly relevant to our current energy situation.

The US moon landing effort of the 1960s created a vast technical and industrial pyramid. At its apex was the delivery of a cumulative total of 12 Americans to the surface of the moon and their safe return home. If Apollo 13 had not experienced its well-documented accident, and if the last four missions hadn't been cancelled and recycled into the Apollo-Soyuz demonstration of US-Soviet Detente, plus three visits to the Skylab space station, that figure might have reached 22. Yet as impressive and unprecedented as that was, and in spite of a host of valuable breakthroughs and spinoffs in electronics, medicine, and other fields, this is precisely where all of the analogies between energy and Apollo break down. Remaking our energy systems to provide the safe, secure, affordable and environmentally-sound means of energizing the entire economy--national or global, take your pick--will be nothing like making a few trips to the moon and then turning our back on it for four decades. It will require a durable bi-partisan consensus in government for at least a generation and enduring public support of a kind that NASA was ultimately unable to sustain.

At the same time, the US manned space program has reached an existential crossroads. The shuttle is on its last legs, and its planned replacement, the Orion/Ares system won't be operational until at least 2015. The International Space Station could be "de-orbited"--allowed to burn up in the atmosphere--as early as 2016 if new funding and a renewed purpose aren't found. This is the context for a blue-ribbon panel that will advise the administration on NASA's future direction. Ambitious plans for a return to the moon and an eventual manned mission to Mars look vulnerable to budget concerns.

I would be remiss if I didn't also mention the enormous potential of space to contribute to solving our energy and environmental problems. Whether in the form of space-based solar power or potential deposits of exotic nuclear fuel on the moon, the long-term solutions to the earth's environmental challenges and resource needs must eventually capitalize on the boundless energy and materials available outside our atmosphere. I'm also mindful of the profoundly-expanded perspective that space exploration has provided us. The widely-recognized "Earthrise" photo from Apollo 8's trip around the moon in late 1968 probably did more to awaken our environmental consciousness than a thousand speeches and rallies.

With the economy sunk in a deep recession and the country grappling with the seemingly intractable issues of health care, gargantuan deficits, and a looming retirement crisis, I can't imagine a better time to recall a moment when we proved that we could accomplish almost anything, if we set our minds to it. I don't know how much the media intends to play up this anniversary. NASA certainly has big plans. Although 50th anniversaries tend to make bigger splashes, the ages of the Apollo 11 crew and the surviving scientists, engineers and others who made their journey possible preclude waiting another decade to stage a proper celebration of their achievement. I'm looking forward to explaining to my daughter just how thrilling it was to watch that first fuzzy broadcast from the moon.

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Is the Energy Crisis Over?

A quick check of Google Trends this morning confirmed my gut feeling that, other than from government officials, references to an ongoing energy crisis have fallen significantly in the last year. Google's statistics show that searches on this phrase have fallen back to about where they were in 2004 or 2005, though still somewhat higher than 2007. Their track of news references shows this trend even more strikingly. Without graphing the correlation, it appears to go hand in hand with energy prices that have fallen to levels that are no longer adding to our economic pain and in some respects provide significant relief. Does our waning interest in an energy crisis reflect the archetypal fickleness of the American psyche, or has the energy crisis that generated such a fever pitch of concern last year truly abated, and if so, will it soon return? A quick tally of some key statistics provides a mostly positive assessment, at least for now. While this doesn't justify complacency, it seems like a genuinely positive indicator at a time when good news has been in short supply.

The question I posed would have been a lot easier to answer if the Energy Information Agency's handy one-page summary of US primary energy production and consumption had been updated since 2007, when about the best one could say was that our net energy imports had stabilized at just under 30% of total consumption. But looking at the major components of US energy supply and demand in 2008, we see more than a few "green shoots." Net imports of crude oil and petroleum products, a much more useful measure of our dependence on foreign suppliers than just looking at crude oil imports, have fallen steadily from a peak of 13 million barrels per day in the summer of 2006 to around 11 million barrels per day. That didn't occur because US crude production was up--it's not--but because of the lagged but profound response of demand to higher prices.

Even if petroleum imports begin growing again as the economy recovers, they will do so in a global market that for at least the next several years will have ample spare capacity--a crucial measure of the market's ability to meet higher demand without creating another severe price spike. In a webcast earlier this week, Global Insight, CERA and IHS Herold (the sponsor of this blog) presented analysis suggesting that the combination of lower demand and higher output have lifted global spare oil capacity from its minimum of barely a million barrels per day in 2005 to more than 6 million this year, or nearly 8% of demand. Together with high oil inventories in consuming countries, this should cap the eventual recovery of oil prices well below the levels we saw last year. It remains to be seen whether $80 oil would prove as harmful to the weak economic recovery most economists expect next year as $140 oil did to an economy teetering on the brink of collapse.

Natural gas presents a remarkable and more uniformly positive story. A few years ago I was seriously worried that a steady decline in US gas output, coupled with strong demand supported by environmental regulations were setting us up to become major importers of gas from outside North America, putting the US in much the same position for gas as we were already in for oil. What a difference a couple of years makes. As detailed in a recent Wall St. Journal article, gas production has rebounded sharply as a result of the exploitation of enormous deposits of gas in deep shales that until recently had looked inaccessible. Marketed gas production last year was up 7% over 2007 and a whopping 13% above its 2005 trough. As a result, imports are down, especially in the form of LNG. This mini "gas bubble" could deflate, if the low gas price and tight credit continue to depress drilling activity, particularly by the independent gas producers who were mainly responsible for the recent surge in production. But as the Journal notes, the underlying resource looks robust enough to carry us well into the future. Whatever its other pitfalls, the Pickens Plan would not fail for lack of natural gas.

If anything, the electricity picture is even more encouraging. Demand in 2008 was essentially flat, compared to the prior year, and the composition of generation shifted modestly away from coal (down 1%) and other fossil fuels (down 4%), while electricity from nuclear, hydro and other renewables expanded by 2%, led by a 51% increase in wind power output. Wind, solar and geothermal power accounted for just 1.6% of all generation, but the broader group of low-emission sources, including nuclear, made up nearly 29% of the total. This looks set to continue growing, as long as the current nuclear fleet, which accounted for 2/3 of that figure, stays on line and eventually expands.

I recently ran across an interesting analysis examining the extent to which the economic crisis might have been precipitated by an oil price shock--the primary feature of the energy crisis that attracted so much attention in 2007-08. I expressed similar suspicions last December, if in less elegant economic terms. Which was the chicken and which the egg is of more than merely academic interest, because if the energy crisis was a principal contributor to the bursting of a financial bubble that couldn't last forever, rather than merely another manifestation of that bubble, then it seems that the chances of another devastating energy price spike in our near future ought to be a little lower. That would be another piece of good news to add to a generally positive current view of energy.

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Oil Shock II

As OPEC's members and friends meet in Algeria to agree on deeper cuts in oil output, the effectiveness of their actions will depend greatly on the nature of the demand slump to which they are responding. If it proves to be merely a dip in the long-term growth trend, similar to the one associated with the Asian Financial Crisis of the late 1990s, then their current decline in revenue will likely be short-lived. If, on the other hand, the response in consuming countries is similar to that following the energy crisis of the 1970s and early 1980s, then OPEC and indeed all oil producers face protracted problems. In that case, they might have to hope that the chief economist of the International Energy Agency is correct in his new assessment that the credit crisis will hasten an expected peak in global oil production, perhaps sending oil prices beyond their summer 2008 highs within a few years.

Although the narrative concerning the present financial crisis and global recession is bound up in the collapse of the US housing market and the vast global debt bubble that fueled it--a bubble that had to burst sooner or later--it seems remarkably coincidental that it would begin to deflate just as oil prices raced past their previous inflation-adjusted peak of around $90 per barrel. Because that price rise took place over several years and was driven as much by demand as by supply constraints, the resulting oil shock wasn't as sharp or obvious as the one triggered by the Arab Oil Embargo of 1973 or the Iranian Revolution of 1979. But between 2003 and 2007, the US net oil import bill rose from around $100 billion per year to $300 billion, based on refiner acquisition costs. It crested at an annualized rate of $500 B per year in July. This added significantly to the US trade deficit, and the resulting sustained double-digit inflation in consumer energy costs helped push the annualized consumer-price inflation rate past 5% this summer. With the energy spike having folded, the November 2008 annualized CPI rate has fallen to 1.1%.

If in retrospect these indicators describe a true oil price shock, then what might OPEC and other oil producers expect in the years ahead? Well, in the aftermath of the last oil crisis, from 1979-83 global oil demand fell by 10%, the current equivalent of over 8 million barrels per day (MBD), based on last year's global consumption of 85.8 MBD. It didn't reach its 1979 level again until 1989. The effect on OPEC was devastating. With demand lower and non-OPEC output expanding steadily, OPEC's oil was squeezed out, losing a third of its former market share. Oil prices remained low for another fifteen years, contributing to the growth of the exurbs and the SUV fad.

History rarely repeats exactly, and it would be simplistic to think that we're likely to replicate the oil price environment of the mid-to-late 1980s. There's no tidal wave of non-OPEC conventional oil coming from places like the North Slope and North Sea, which looked technically challenging at the time but seem relatively easy, compared to today's opportunities. Biofuels have added the equivalent of around 0.5 MBD in the last several years, and Canadian oilsands a similar amount, but production in most non-OPEC countries is peaking or in decline, notably in Mexico and Russia. And as the IEA's Dr. Birol notes, tight credit and low prices will slow additions to supply from all sources, while natural decline erodes today's base production. That makes demand the crucial factor, particularly the behavioral elements of demand. Although rarely discussed in these terms, vehicle fuel economy faces diminishing returns. Boosting US fleet average miles per gallon from 13 to 25 under the original CAFE standard in the 1970s and '80s saved three times more fuel per mile than the mandated increase to 35 mpg will--in fact more than moving the entire fleet to 100 mpg plug-in hybrids would. Vehicle miles traveled have recently declined in the US. Along with the appetite of Asian consumers for their first cars, this will have as much impact as fuel economy on total oil consumption, and thus on prices.

Although the oil price shock of the last several years can't be blamed for the full extent of the mess we're in, it is at least a plausible candidate for the trigger that caused the debt bubble to pop now, rather than a few years from now. That has important implications, because current conditions may be setting the stage for another, possibly sharper oil shock shortly after the economy begins to recover. Although we face a drastically altered set of energy concerns going into 2009, energy policies that promote both conservation and increased supply look just as essential as they did a year ago.

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