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High Oil Costs May Advance Conservation Research

July 7, 2008 at 6:30 PM EST
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Car owners have been wincing in recent months as the price of oil has shot up well over the once-unimaginable $100-per-barrel mark. But an economist at Carnegie Mellon University believes that skyrocketing oil prices are a good thing, and will lead to necessary innovations in conservation and green technologies.
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TRANSCRIPT

PAUL SOLMAN, NewsHour economics correspondent: This guy is looking at us like we’re completely nuts.

DEBORAH LANGE, engineer: I told you these things weren’t meant to be on the road.

PAUL SOLMAN: Late 2004, at conservation conscious Carnegie Mellon University, where they looked at the giddy-high oil price of $40 a barrel as a positive.

DEBORAH LANGE: It’s great news, because that’s the catalyst that you need for us to put more investment into environmentally friendly solutions.

PAUL SOLMAN: At CMU, they were already fielding a fleet of electric and natural gas vehicles, campus power provided by windmills, green roof on a classroom building. Some faculty members had taken their own initiatives, as well, like the economist we dubbed the “Prince of Darkness.”

LESTER LAVE, economist: I usually don’t turn the lights on in my office because there’s quite adequate daylight outside to do everything. I don’t feel I’m deprived in any way.

PAUL SOLMAN: At the time, CMU’s efforts were still new enough to be news.

AL GORE, former vice president of the United States: The scientific consensus is that we are causing global warming.

PAUL SOLMAN: But that was before Al Gore’s film, his Oscar or Nobel, long before oil prices hit triple digits.

LESTER LAVE: When we talked three years ago, people thought they could go about their lives the way it is. When oil hits $115 a barrel and natural gas is going up very fast, then everybody understands that we’re going to need to do something.

Cost of living, fueled by oil

PAUL SOLMAN: "Something," like conservation, now the norm in other countries. At today's price of a barrel, even higher than the $115 of just a few weeks ago, it's a bonanza elsewhere in the world.

LESTER LAVE: Denmark has half the energy consumption per capita and per dollar of GDP that we do. But if you've been to Copenhagen, you see that the Danes live pretty well.

And so, if we were to adopt the efficiencies of Northern Europe and the lifestyles of Northern Europe, we could cut our energy use in half. So think about that: We could cut our energy use in half. That's our greenhouse gases; that's our oil imports; that's our use of coal. And it seems to me that's a worthy goal to strive for.

PAUL SOLMAN: Back in 2004, we also visited architect Volker Hartkopf and his energy-saving Intelligent Workplace, a penthouse addition to an existing campus building.

VOLKER HARTKOPF, architect: We have a very efficient building, you see.

PAUL SOLMAN: Hartkopf had been cobbling together off-the-shelf technology, like glass shelves outside and W-shaped blinds inside, to conserve both light and heat.

VOLKER HARTKOPF: This is a dynamic facade which now allows me in the summertime to reduce my heat gain and gives me good day-lighting control during the swing periods, as well as, of course, in the wintertime.

PAUL SOLMAN: Look, he pointed out, two-thirds of all our energy goes to light and ventilate buildings. Worse still, 95 percent of the energy in the original fuel is lost along the way: burning it, transmitting it, using it inefficiently.

Hartkopf's goal back then was the building as power plant, a structure that actually produces more energy that it consumes. We left him, something of a Don Quixote on wheels.

Today, he may still look quixotic, but he sounds as down-to-earth as, well, Sancho Panza with a German accent.

VOLKER HARTKOPF: You know, we have very simple rules. First, you conserve. You don't run a half-loaded dishwasher, for instance, or you don't let your heat get out of the wall, if you can insulate it, right?

Second, you then add to that a passive system that gives you more sunlight when you need it and less sunlight when you don't want it because of overheating, shading, light redirection, simple things we talked about last time, right?

Building as power plant

PAUL SOLMAN: Right. And now it's worth three times as much to us to listen.

And not just us. The U.N. has since made Hartkopf the first chairman of its new think-tank on sustainable building. He's put up government buildings in China. Al Gore has come calling. And today, Hartkopf is more excited than ever about a new solar experiment, a parabolic mirror solar reflector that focuses sunlight to heat liquid running inside a glass pipe.

VOLKER HARTKOPF: Inside the glass is a vacuum, and inside the vacuum is another pipe, which is highly absorbent. And through that highly absorbent pipe runs liquid. That liquid gets heated up to 180 degrees centigrade.

PAUL SOLMAN: By? Because the sun...

VOLKER HARTKOPF: By the sunlight.

PAUL SOLMAN: ... is bouncing off this parabolic mirror.

VOLKER HARTKOPF: Right, and focuses on this pipe.

PAUL SOLMAN: Something called an absorption chiller then converts the hot liquid into cold air for air conditioning, most needed when the sun is strongest.

So there's a mechanical...

VOLKER HARTKOPF: Chemical, mechanical process.

PAUL SOLMAN: OK.

VOLKER HARTKOPF: Simple. And it has another major benefit. It actually does not pollute the environment, because there is no refrigerant that is dangerous that could be released by the equipment and do an ozone depletion or some other environmental damage.

PAUL SOLMAN: Nothing wasted, energy gained. In fact, because of technology like this, the Intelligent Workplace consumes only one-tenth the energy it did just two years ago. As energy generation moves from fossil fuels to alternatives, the efficiencies will be even greater.

VOLKER HARTKOPF: And now you begin to export energy from your building, so every building becomes a power plant.

Innovation, child of high oil price

PAUL SOLMAN: No pipe dream, Hartkopf insists, as long as the price of fossil fuels stays up. Right now, OPEC -- and especially Saudi Arabia -- are playing along.

But what if the price begins to droop? What if speculators then sour on oil as quickly as they became sweet on it? What if the price drops by two-thirds, as it did after it last peaked and conservation was last big news in the 1970s?

GASOLINE ATTENDANT: We're all out of high-test and regular gas.

PAUL SOLMAN: Will promising projects peter out, as so many did back then?

LESTER LAVE: If you go back, the price of oil was down to $10 a barrel in 1998, so less than 10 years ago it was that low. So the price of oil has been cycling up and down.

PAUL SOLMAN: A low price would, of course, be good news for motorists, truckers, those who heat their homes with oil. But Lave thinks even a small price drop, like the gas tax holiday now being proposed in Washington and around the country, would send a dangerous signal.

LESTER LAVE: We ought to use more gasoline. We ought to import more oil. We ought to send more dollars to the Middle East. I think that's crazy.

PAUL SOLMAN: Lave is among the growing number of economists calling for a floor to the price of oil, beneath which it could not fall.

And how would it work?

LESTER LAVE: Well, one of the things that you could do is you could just have a tax on imported oil, so that, whenever imported oil fell below a level, then this tax would kick in, so that, for example, if the oil ever did fall to $10 a barrel, then you could have a tax which would bring it up to, say, $50 a barrel.

A price floor could protect change

PAUL SOLMAN: This idea has been around since the '70s. We heard it not long ago from biofuels venture capitalist Vinod Khosla, inspired in part by an ominous encounter he had at an energy conference years back.

VINOD KHOSLA, co-founder, Sun Microsystems: I was recently at a conference where one of the senior executives of a major national oil company from Saudi Arabia, Aramco, came up to me and said, "Be careful." It was almost a warning. He said, "Be careful, because if biofuels are successful, we will drop the price of oil."

PAUL SOLMAN: At the time we interviewed Khosla -- March 2006 -- oil was approaching $70 a barrel. He proposed a tax to kick in if oil fell below $40. Today those numbers seem ridiculously cheap, a price floor even at $70 politically feasible as never before.

LESTER LAVE: The problem is that everybody has agreed that we should be doing things. But as long as energy is cheap, we don't do them. And so we have to have the stimulus of a high price to do it.

PAUL SOLMAN: Lave's point, of course, is that, in an era of global warming and of oil dependency on Venezuela, Nigeria, Russia and the Middle East, a high price is a blessing in disguise. For without it, workplaces like those at Carnegie Mellon might be just as intelligent, but not nearly so economically viable.