1. Energy Volatility | beyondoilnyc

Part I: Preparing for Energy Volatility

PlaNYC is an excellent start, but there is more to be done. Carbon emission reduction goals must be adjusted to match the accelerating pace of global warming, so that world carbon dioxide emissions are reduced 80% by 2020, not by 2050. [1]

Also, PlaNYC must address energy volatility. World oil demand is surpassing supply, and world oil production will peak and begin decline within a few years, making sharp price increases unavoidable. Economic impacts will motivate change more effectively than the often abstract threat of climate change and will strengthen PlaNYC implementation. Both individual actions and massive municipal and national efforts are necessary. Portland, Oregon has assembled an energy volatility Task Force to prepare responses to sudden changes in energy price and supply.

Recommendation: New York City officials and civic networks should begin discussing energy volatility now, and incorporate the responses into PlaNYC.

1. Achievements so far

The forward-thinking Mayor Bloomberg and New York City Council have established New York as one of the nation’s greenest cities. [2] PlaNYC 2030, a work of extraordinary value and importance, will be the foundation for all future discussions of sustainability in NYC. As a work in progress, it will need to address new issues as they arise. [3]

2. Energy volatility increasingly likely

It’s widely agreed that rising demand from China and India is a key factor driving unprecedented energy price volatility. [4] Less widely discussed is that daily world oil demand now exceeds supply [5], spare production capacity is nearly gone, [6] and even slight disruptions to our oil imports can rapidly raise gasoline prices to over $5 per gallon. [7] Possible triggers include an attack on Iran followed by a blockade of the Straits of Hormuz, the shipping channel for over a third of the world’s oil, turmoil in Nigeria or Venezuela, terrorist attacks on Saudi oil infrastructure, or Gulf Coast hurricanes. [8]

Government and military analysts are taking these possibilities very seriously. The U.S. Government Accountability Office (GAO) reported that energy markets will be increasingly volatile, making supply disruptions more likely. [9] The International Energy Agency (IEA) is concerned that the growing gap between rising world oil demand and lagging production will lead to global oil shortages by 2012. [10] Reports from the Pentagon and the Army Corps of Engineers urge the U.S. military to transition to alternative fuels, or rising oil costs will make global response capacity “unsustainable in the long term." [11]

When half the world’s oil reserves have been consumed, worldwide oil production is expected to begin permanent decline. Oil is, after all, a finite natural resource. The remaining oil will tend to be increasingly difficult and expensive to extract. In the past, rising demand for fuel was always met by rising production capacity. When this is no longer possible, prices will tend to go up, perhaps abruptly. The U.S. Energy Information Agency (EIA) has predicted that world oil production will peak in 2037, [12] but the GAO expects peak “between now and 2040.” [13] As CNN and the Wall Street Journal report, a growing number of petroleum analysts say the peak will arrive before 2015, and some say it might have been passed already. [14] As a U.S. Department of Energy study explains, we must immediately begin a planned transition beyond oil. Market forces alone will be insufficient, and strong government action will be required. [15]

3. Reinforcing PlaNYC and City sustainability initiatives

Preparations for energy volatility will overlap and reinforce other City energy efficiency and conservation initiatives. For instance, congestion pricing, a central component of PlaNYC’s transportation strategy, could fund the expanded mass transit services needed when gasoline is much more expensive. This consideration was not addressed in PlaNYC, but reinforces its conclusions and makes its implementation even more vital. [16]

4. Encouraging both individual and national action

There’s not really a choice between promoting individual actions, such as the list of ten recommended by PlaNYC, or national legislation. Both are necessary. Individual choices must lead to cascading action on other levels if we are to succeed. [17] Also, “top down strategies must be concurrent with and redundant to bottom up strategies." [18]

Social scientists tell us that individual and policy actions reinforce each other. Individual behaviors build up and have significant environmental impacts, and research shows that people voluntarily taking pro-environmental actions justify those behaviors to themselves and others, creating more social pressure for environmentally sound choices at all levels. People taking many small actions are more likely to take bigger similar actions. Building individual, organizational, and community momentum for change is needed to get action at city, state, national and international levels.

Depicting worst-case outcomes as inevitable promotes fear, and leads to powerlessness and apathy. Informing people about the real risks of avoidable scenarios, along with ways to bring about better outcomes, may lead to uncomfortable realizations but can motivate action. [19] Many environmentalists criticized Al Gore for sugar-coating climate change by recommending small personal actions, but his mild-mannered presentation raised public awareness of the issue and a desire to take action.

In World War II, mandatory policies were combined with publicity campaigns encouraging voluntary actions. Enacting policies requires convincing people of the magnitude and urgency of the problem. Giving a menu of action options, starting with immediate, easy steps to fight climate change, may make people more willing to acknowledge the problem and cease denial. [20]

Individual actions can include:

NYSERDA Energy Smart tips [21]
100 tips from Con Edison [22]
10 tips from the Sierra Club [23]
100 tips from Our Victory at Home, including re-creating 1940s Victory Gardens [24]

5. Plans in other places

San Francisco [25] and Portland, Oregon [26] are already preparing municipal energy volatility responses. Portland’s City Council created a Task Force to identify short- and long-term energy vulnerabilities, based on a briefing book prepared by City agencies. [27] The Portland Task Force identified impacts of different scenarios on particular sectors and city operations. [28] Its recommendations included reducing total oil and natural gas consumption by 50% over the next 25 years, informing citizens about energy volatility, and preparing emergency energy shortage plans. [29] Locally, citizens in Tompkins County, NY drafted a similar plan [30] and a coalition of Connecticut lawmakers have issued an initial report about statewide oil shortage planning [31].

6. Beyond traditional emergency management scenarios

New York City has prepared for hurricanes, extreme heat and cold, utility disruptions and terrorist attacks. [32] Fuel price increases lasting for weeks or months are not included in existing Office of Emergency Management scenarios.

After the Northeast regional power outage of August, 2003, the City Council briefly considered an energy shortage contingency plan. The Council’s Environmental Committee staff reported in 2004 on the City’s growing demand for electricity and vulnerability to energy disruptions. [33] Intro. 374, Creating an Energy Shortage Plan, would have determined the vulnerabilities of City operations to energy volatility, compiled ways to cut energy use quickly, and set stages for emergency responses. [34] There was a hearing on the plan but no further action. (Click here for the original bill, and an upgraded version.)

Measures to reduce fuel use during periods of higher fuel prices are outlined in a pair of International Energy Agency reports. Saving Oil in a Hurry suggests highway speed limits, increased fuel taxes, reduced fees for public transit, car pooling, driving bans, telecommuting, and compressed work weeks of fewer but longer days [35]

Lessons learned from previous fuel supply disruptions are recommended in a report from the engineering firm Parsons Brinkerhoff, including transportation demand management strategies which quickly reduce fuel and oil consumption. The report uses the Seattle, Washington region as a case study. [36]

Higher energy prices could increase demand for non-emergency services at other City agencies, community groups and social services organizations. Officials distributing federal assistance to low-income households say that New Yorkers are paying more than ever to heat their homes. [37] The City’s Community Emergency Response Team program trains neighborhood-based volunteers in emergency preparedness. [38] Perhaps this model could be applied to non-emergency community impacts of higher energy prices.

7. Considerations for a NYC volatility task force

Post Carbon Cities: Planning for Energy and Climate Uncertainty offers detailed guidance for task forces. [39] New Yorkers might ask:

What challenges would the City face if oil gradually rose to $120 per barrel over the coming year?
How would those challenges be different if oil prices jumped erratically between $50 and $200 over the next ten years?
How would those challenges affect the City’s ability to provide essential services such as police, fire and emergency health care?
How would this affect fee-based services like buses and subways? When should constituents be alerted to possible service cutbacks and price increases? Will those price increases be affordable?
How long would it take for price hikes to impact City operations?
When would some services need to be cut? And which ones?
How would this affect fee-based services like buses and subways?
When should constituents be alerted to possible service cutbacks and price increases?
Will those price increases be affordable?

Government agencies and organizations assessing internal vulnerabilities can inventory energy use by department for the previous fiscal year to determine:

fuel use, by amount (in kilowatt hours, gallons or therms) and cost
cost, as percentage of each department’s budget
energy mix of departments with highest percentage use and cost [40]

Then the effectiveness of contingency plans can be assessed by:

evaluating future energy use and price by:
- examining current assumptions
- projecting scenarios of escalating volatile and increasing prices
performing a sensitivity analysis of impact of alternative scenarios
determining how long existing plans will keep systems running

8. Stimulating civic and business leadership

Interactive NYC community planning forums have successfully involved many stakeholders. After the events of September 11, 2001, the Municipal Arts Society coordinated 400 groups, involving over 3,000 people in 230 workshops about rebuilding downtown, creating a report with 49 vision statements. [41] More recently, there have been many forums connected with PlaNYC. Social scientists recommend the World Café process for community planning efforts. [42]

Businesses should prepare for fuel volatility with both short- and long-term energy and efficiency investments. Those most at risk from higher energy costs will have the greatest incentive to prepare in advance. Industry task forces would be especially valuable in offering expertise and experience to other community planning efforts.

9. Economic development opportunities

Major investments will be needed for new green building, for energy efficiency retrofits, for renewable power infrastructure, and for mass transit infrastructure. Morgan Stanley has estimated that global sales from sustainable energy sources could grow to as much as $1 trillion a year by 2030. [43] Former President Clinton says that fighting global warming is the biggest economic opportunity for the U.S. since mobilization for World War II. [44] McKinsey & Co. has found that a nationwide effort could stimulate business at low net costs. [45]

To date, the investment and entrepreneurial activity in these vigorously growing sectors has been concentrated in Massachusetts and California. These industries could bring economic growth to both upstate and downstate New York. State policy should expand from increasing use of clean technologies to supporting growth of such companies already in the state and attracting new ones. [46] Locally, the building energy efficiency sector offers excellent opportunities to create good jobs that cannot be outsourced. [47]

Much of our manufacturing, agriculture and food processing occurs thousands of miles from the consumer. Expanding regional and local production will spur local economies and reduce the fuel needs embedded in our long-distance economy. Building public support for energy volatility preparation and efficiency will grow all these markets.

10. Local leaders in organizational sustainability

One large institution making significant efforts to become more sustainable is New York University. In 2006 NYU made the largest ever purchase of wind power by an American university, hired full-time sustainability staff, and created a 45-member Sustainability Task Force, which set out a sweeping Green Action Plan affecting many campus operational areas. [48]

NYU and eight other City universities have agreed to accelerate PlaNYC goals by achieving 30% carbon dioxide emission reductions by 2017 instead of 2030. The Mayor and university officials have challenged other city institutions and other government entities to match their commitment. [49] Large organizations should gear up now to follow their example, as a pragmatic adaptation to the 21st century.

References

1. “Plan B.3: Mobilizing to Save Civilization,” EPI, http://www.earth-policy.org/Books/PB3/index.htm

2. “Working Towards a Sustainable City,” NYC Council, Sept. 2005,http://www.nyccouncil.info/pdf_files/reports/sustainable.pdf; “Mayor Bloomberg Announces Creation of Office of Long-Term Planning and Sustainability,” Office of Mayor Bloomberg,NYC.gov, Sept. 21, 2006.

3. PlaNYC 2030, http://www.nyc.gov/html/planyc2030/html/home/home.shtml

4. “Rising demand for oil provokes new energy crisis,” New York Times, Nov. 9, 2007,http://www.nytimes.com/2007/11/09/business/worldbusiness/09oil.html

5. Oil Market Report, IEA, http://omrpublic.iea.org/

6. "World Economic Outlook," International Monetary Fund, September 2006, chart 1.16,http://www.imf.org/external/pubs/ft/weo/2006/02/chp1pdf/FIG1_16.pdf

7. "Oil Shockwave: Oil Crisis Executive Simulation," Securing America’s Future Energy, 2005,http://www.secureenergy.org/reports/oil_shock_report_master.pdf; "Effects of High Oil Prices on the World Economy," Securing America’s Future Energy, 2006,http://www.secureenergy.org/reports/westcott_report.pdf.

8. “The breaking point,” Peter Maass, New York Times, August 21, 2005,http://www.energybulletin.net/8112/html; “Terror’s next target,” Gal Luft and Ann Korin, Journal of International Security Affairs, December 2003, www.iags.org/n0111041.htm.

9. “Crude Oil: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing the Peak and Decline of Oil Production,” GAO-07-283, Feb. 2007,http://www.gao.gov/new.items/d07283.pdf; “Oil output has stalled,” Eugene Linden, Business Week, June 25, 2007.

10. “IEA sees oil supply crunch looming,” Reuters, July 9, 2007,http://www.washingtonpost.com/wp-dyn/content/article/2007/07/09/AR2007070900432.html; “Oil supplies ‘face more pressure,’ BBC News, July 9, 2007,http://news.bbc.co.uk/2/hi/business/6283992.stm; “Medium-Term Oil Market Report - July 2007,”IEA, http://omrpublic.iea.org/mtomr.htm.

11. “Pentagon study says oil reliance strains military,” Boston Globe, May 1, 2007; “Transforming the way DoD Looks at Energy,” Office of Force Transformation, U.S. Dept. of Defense, April 2007;“Energy Trends and their Implications for U.S. Army Installations,” Donald Fournier and Eileen Westervelt, U.S. Army Corps of Engineers Energy Research & Development Center, Sept. 2005.

12. “Long Term World Oil Supply Scenarios,” US EIA, Aug. 2004,http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004/worldoilsupply/oilsupply04.html

13. “Crude Oil: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing the Peak and Decline of Oil Production,” GAO-07-283, Feb. 2007,http://www.gao.gov/new.items/d07283.pdf.

14. “Report: ‘world at peak output,’” CNN, Oct. 24, 2007,http://edition.cnn.com/2007/BUSINESS/10/24/oil.decline/index.html; “Oil Officials See Limit Looming on Production,” WSJ, Nov. 17, 2007, full article archived athttp://www.energybulletin.net/37382.html; “Is World Oil Production Peaking?” Lester Brown, Earth Policy Institute, Nov. 15, 2007, http://www.earth-policy.org/Updates/2007/Update67.htm

15. Dr. Robert Hirsch, biographical notes, http://www.d-n-i.net/fcs/hirsch_bio.htm; “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management,” Hirsch et al., Science Applications International Corporation (SAIC), Feb. 2005,http://www.bartlett.house.gov/UploadedFiles/the_hirsch_report.pdf.

16. "PlaNYC 2030,"http://www.nyc.gov/html/planyc2030/downloads/pdf/tech_report_transportation.pdf.

17. "PlaNYC 2030: Green Tips," http://www.nyc.gov/html/planyc2030/html/greenyc/greenyc.shtml

18. “Strategizing on the transition to organic agriculture,” Sharon Astyk, Energy Bulletin, Dec. 5, 2007; http://www.energybulletin.net/38234.html

19. “Can we use fear as a motivator for change?” Rob Hopkins, Transition Culture, March 28, 2006, http://www.energybulletin.net/14442.html.

20. "The power of voluntary actions," essay signed by social scientists and psychologists,Gristmill; http://gristmill.grist.org/story/2007/9/11/13338/9554.

21. NYSERDA, http://www.getenergysmart.org/Resources/Tips.aspx

22. Con Edison, http://www.coned.com/go_green/100tips.asp.

23. “Ten Things You Can Do to Help Curb Global Warming,” Sierra Club,http://sierraclub.org/globalwarming/tenthings/

24. Our Victory at Home, http://www.ourvictoryathome.com/thingsyoucando.html

25. "Resolution: Peak Oil Plan of Response and Preparation," Board of Supervisors, City of San Francisco, http://www.energybulletin.net/15086.html

26. “City of Portland establishes Peak Oil Task Force,” City of Portland Office of Sustainable Development, July 6, 2006, http://www.portlandonline.com/osd/index.cfm?a=122243&c=41625

27. “Peak Oil Task Force Briefing Book,” City of Portland Office of Sustainable Development, July 25, 2006, http://www.portlandonline.com/osd/index.cfm?c=edach

28. Daniel Lerch, Post Carbon Cities, 2007, P. 73-78; www.postcarboncities.net; “White Paper: Future Oil Price Uncertainty and Metro,” Daniel Lerch, Office of the Chief Operating Office, Metro, Portland, Oregon, April 18, 2006, http://www.metro-region.org/index.cfm/go/by.web/id=18966

29. “Descending the Oil Peak: Navigating the Transition from Oil and Natural Gas,” City of Portland, Feb. 2007, http://www.portlandonline.com/osd/index.cfm?c=42894; Executive summary,http://www.portlandonline.com/shared/cfm/image.cfm?id=150016

30. “Tompkins County Relocalization Plan,” Tompkins County Relocalization Project, March 2006,http://www.ibiblio.org/tcrp/doc/project.htm; http://tclocal.org

31. “Peak oil production and implications to the State of Connecticut,” Nov. 2007;
http://www.terrybacker.com/Peak oil and Natural Gas Report final 111607-1.pdf

32. NYC Office of Emergency Management, http://www.nyc.gov/html/oem/html/home/home.shtml;US Dept. of Homeland Security, http://www.ready.gov

33. "Environmental Protection Committee Report to NYC Council on Intro. 374," NYC Council, June 23, 2004, http://webdocs.nyccouncil.info/attachments/61517.htm

34. Text of Intro. No. 374, NYC Council; http://webdocs.nyccouncil.info/textfiles/Int%200374-2004.htm?CFID=42808&CFTOKEN=77756073

35. “Saving Oil in a Hurry,” IEA, 2005,http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1474;
“IEA Response System for Oil Supply Emergencies,” IEA, 2007,http://www.iea.org/textbase/nppdf/free/2007/fs_response_system.pdf

36. “Implementing the Most Effective Transportation Demand Management (TDM) Strategies to Quickly Reduce Oil Consumption,” Kathy Leotta, Parsons Brinkerhoff, Jan. 2007,http://postcarboncities.net/files/Leotta_ImplementingTDMtoQuicklyReduceOilConsumption.pdf

37. “New Yorkers Pay More to Keep Their Homes Warm,” January 11, 2008, NY Times,http://www.nytimes.com/2008/01/11/nyregion/11homeheat.html

38. NYC Office of Emergency Management, http://www.nyc.gov/html/oem/html/cert/cert.shtml

39. Post Carbon Cities, Daniel Lerch, Post Carbon Institute, 2007; http://postcarboncities.net//

40. "White Paper," David Room, Energy Preparedness, April 25, 2006,http://energypreparedness.net/resources/whitepaper/1

41. Imagine NY, http://imagineny.org/; Civic Alliance, http://www.civic-alliance.org

42. “Energy Descent Pathways,” Rob Hopkins, MSc dissertation, U. of Plymouth, 2006,http://transitionculture.org/?page_id=508; World Café, http://www.theworldcafe.com/; Open Space Technology, http://www.openspaceworld.org/cgi/wiki.cgi?AboutOpenSpace.

43. “$1 trillion green market seen by 2030,” Environmental News Network, Oct. 19, 2007,http://www.enn.com/business/article/23958.

44. “Clinton sees global warming fight as a way to create jobs, opportunity,” Seattlepi.com, Nov. 2, 2007; http://seattlepi.nwsource.com/local/337769_climate02.html

45. “Reducing U.S. Greenhouse Gas Emissions: how much at what cost?,” McKinsey & Company, Dec. 2007, http://www.mckinsey.com/clientservice/ccsi/greenhousegas.asp

46. “Cleantech: A New Engine of Economic Growth for New York State,” January 2007,Partnership for New York City and NYC Investment Fund,http://www.nycp.org/publications/CleantechReport.pdf

47. “Growing Green Collar Jobs: Energy Efficiency,” Urban Agenda, 2007,http://www.urbanagenda.org/pdf07/GGCJenergyefficiency5.pdf

48. http://www.nyu.edu/about/sustainability/; "NYU Green Action Plan Annual Report," June, 2007,www.nyu.edu/sustainability/pdf/annualreport07.pdf; CUNY Institute for Sustainable Cities,http://www.cunysustainablecities.org/

49. Office of Mayor Bloomberg, June 2007.

NYSERDA Energy Smart tips [21]

100 tips from Con Edison [22]

10 tips from the Sierra Club [23]

What challenges would the City face if oil gradually rose to $120 per barrel over the coming year?

How would those challenges be different if oil prices jumped erratically between $50 and $200 over the next ten years?

How would those challenges affect the City’s ability to provide essential services such as police, fire and emergency health care?

How would this affect fee-based services like buses and subways? When should constituents be alerted to possible service cutbacks and price increases? Will those price increases be affordable?

How long would it take for price hikes to impact City operations?

When would some services need to be cut? And which ones?

How would this affect fee-based services like buses and subways?

When should constituents be alerted to possible service cutbacks and price increases?

fuel use, by amount (in kilowatt hours, gallons or therms) and cost

cost, as percentage of each department’s budget

evaluating future energy use and price by:

examining current assumptions

projecting scenarios of escalating volatile and increasing prices

performing a sensitivity analysis of impact of alternative scenarios

determining how long existing plans will keep systems running