There seems to be an assumed correlation between those who have some concerns over the accuracy of the theories of climate change (shall we call them the doubters for today’s discussion) and those who believe that there is a plentiful amount of fossil fuel available that will see us properly provided for well into the future. This is in contrast with those who are actively pushing the agenda associated with remedial matters that might affect the climate, and who also assume that there remains a plentiful sufficiency of fossil fuels, but are anxious for the world to change to alternate sustainable and renewable fuels to reduce our dependency on fuels that generate carbon dioxide.
Discussions of peak oil, the limits to natural gas production, and concerns as to when, this century the currently abundant coal reserves (not to mention the resources beyond them) will run out are dealt with as an increasingly irrelevant topic for discussion. The current adequacy of supplies is assumed as likely to persist, and neither camp is much inclined to argue the issue. Which is unfortunate, since this lack of real interest is taking place at a time when the dominoes are lining up toward a series of cascading falls, when the rather glib commentaries of the past will lie forgotten, and concerns over national fuel resources will be topics for discussion in many more nations around the world than now even talk about it.
One of the most quoted remarks that epitomizes the blindness of many to the coming problems is that of Sheik Yamani "The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.". Unfortunately for the applicability of this analogy, we have seen, in the past, times where technology disappeared under the assaults of external forces, wiping out civilizations around the world.
I recently mentioned the book "1491" by Charles C. Mann – who covers some of the civilizations that thrived and fell in the Americas before the arrival of Columbus. At some point or other some resource, vital at the time to each civilization proved inadequate. For example the Mayan Civilization collapse has been blamed on a prolonged series of droughts that made the centralized city life impractical. Richardson Gill, for example, in “The Great Maya Droughts: Water, Life and Death” points out how very short a distance a city worker can travel to find food for his family, if he has to go on foot. It is an argument that likely also held true, in its time, in Mesapotamia. Yet, in the short term, there was nothing apparently that the rulers of the time could do to achieve an adequate supply of water. The transient shortages were, however, sufficient to doom those civilizations that suffered (and that includes those along the West Coast of the United States in about the same period). We still have to rely on water, but that doesn’t mean that the times where it fell short were not locally catastrophic and destructive of civilization.
And that is the problem with Sheik Yamani’s analogy between the supply of liquid fuels and the Stone Age. We can look outside and see stone in abundance all around us. Yet we have moved on to rely on other materials. Even in a drought in California, they have a huge amount of water right beside them. It is merely the wrong sort (sea water) and they are only slowly coming to recognize that perhaps they are going to have to bite the bullet of desalination, if the problem is not going to get recursively worse.
There will always be some form of energy available. We have, in large measure, moved away from dung fires for heating and cooking in North America and Europe and it is unlikely we will return to those days. But what is often missed in the assumption that we can switch from one resource to another in times of shortage, is the time that it takes to make the change. That wasn’t too hard to do, if the switch was from gathering dung to gathering wood, but it gets more complicated if the two alternatives are coal and, for the sake of discussion, wind energy.
When coal-fired power stations are closed and demolished they cannot be turned back on if wind energy proves to be an inadequate reserve. Arranging for coal mines that will supply the coal, railways to ship it, and power companies to acquire the permits to build and then burn it takes years. Nuclear power takes even longer, and even running a new pipeline can (in the case of Keystone) drag on for seemingly ever without a decision. The changing picture of energy subsidies for wind and solar are also raising concerns over the reliability of return on investment in those industries. Small, local solar operations (as with the dung fire) can move relatively quickly. Individual houses can be retrofitted within a few months – but for an effort with national impact, the small-scale is likely to be inadequate in overall size to match the power output from major coal-fired stations now on the block.
We are marching to a set of drums that beats out the message that there is no problem, even as the signs of a slowing oil production increase are appearing, and none of the global signals is very reassuring. Those European nations dependent on Russian oil and gas are discovering that, perhaps there really isn’t a practical alternative to that supply, and so speak more quietly about Ukraine and the Baltics. Any tightening of global supplies (a likely event in the next couple of years) will only make that situation worse for those customer nations, and serve to strengthen the national stature of the Russian President.
It is worth remembering that those of us who talk about peak oil are not talking about a resource that will suddenly disappear. No, we are merely projecting that sometime in the near future there will come a time when that year’s overall crude oil production will be a little less than the year before, and similarly in the following years. (Projections for future drilling operations in North America are receiving increasing scrutiny). There will still be a lot of oil around, but as demand exists so the price will start to steadily increase in an continuing rebalancing of price, cost and supply that will increasingly roil the global marketplace. Unfortunately in an increasing number of cases the need for money is an upfront and increasingly expensive one, to pay for the exploration and development, with only some assurance of a payback. And as more money goes into a smaller return in volume, the mandatory prices needed to continue that progression will continue to rise, even as gains diminish.
In the interim the EPA has cut the targeted production of cellulosic-ethanol yet again.
Showing posts with label peak coal. Show all posts
Showing posts with label peak coal. Show all posts
Tuesday, April 29, 2014
Sunday, June 26, 2011
A Panel on Peak Coal and Natural Gas Viability
For the second week running I am participating in a panel for the Focus group tomorrow. The title is
The Viability of Coal and Natural Gas as Alternative Fuel Sources
Given the NYT story on oil industry e-mails that came out today, and the challenge it provides to the prevailing view on our entering "The Golden Age of Natural Gas", I'll write a further post on this later in the week, but it is hard to imagine the topic won't be coming up tomorrow. That is especially true since Art Berman (quoted in the story) will be taking part, as will Gail Tverberg, and (arguing more for peak coal) David Rutledge and Tad Patzek.
It starts at 2 pm Eastern, 11 am Pacific
You gain access to the discussion by going to the site reached by clicking on the above title. The recording of the discussion will be reached through the above site in a couple of days, followed by a transcript about a week later. Listen in, it could be fun.
The Viability of Coal and Natural Gas as Alternative Fuel Sources
Given the NYT story on oil industry e-mails that came out today, and the challenge it provides to the prevailing view on our entering "The Golden Age of Natural Gas", I'll write a further post on this later in the week, but it is hard to imagine the topic won't be coming up tomorrow. That is especially true since Art Berman (quoted in the story) will be taking part, as will Gail Tverberg, and (arguing more for peak coal) David Rutledge and Tad Patzek.
It starts at 2 pm Eastern, 11 am Pacific
You gain access to the discussion by going to the site reached by clicking on the above title. The recording of the discussion will be reached through the above site in a couple of days, followed by a transcript about a week later. Listen in, it could be fun.
Read more!
Wednesday, October 13, 2010
ASPO Conference- last day
One of the helpful aspects of the ASPO-USA organization is that they post the videos and presentations that were given at their conferences. Obviously these need to be tweaked after being recorded, and so do not go up immediately but, for example, they have just posted the video of the Jeff Rubin talk on their site. I am going to conclude my summary of the conference itself with this report. I was not able to stay for the final afternoon, and so Gail has kindly furnished a summary that I will add to cover that section of the Conference. As usual I will then give a short summary of what I felt were the highlights, but which is more opinion that content – the goal of these initial posts.
Turning therefore to the Saturday morning meetings, these began with a slight change, since Terry Backer the scheduled speaker was, unfortunately, ill. Paul, one of his advisors, spoke on his behalf, noting that Connecticut – where they are from – has no indigenous coal, oil or natural gas. They had a plan for moving forward that had received support for a significant effort to insulate houses, but unfortunately even though it would have provided a number of jobs, it fell victim to the recession. They are now looking to see the potential for micro-hydro in the state.
The first session was chaired by Ted Patzek and was focused on the Gulf oil spill and the likely consequences.
I led off with a chronological review of the events that occurred through the course of the spill until the time that the well was declared dead. This covered the initial completion of the well, the kick and explosion on the rig, and the sinking of the well. I then went through the stages of the capture of oil, and the capping of the well. This also covered the assumptions that led to the location of the relief well and what was found when it hit the well. Very largely it was a summary of the posts that were written at the time, with the aid of some photos that others had posted.
After my talk, Art Berman spoke of some of the errors that culminated in the failure of the well and the consequent disaster. He began by pointing out that the energy resource of the Gulf is much larger than that of shale gas, and in the deep water is likely the last great hope of American production. From that point of view the shut down (which has nominally now been lifted. He described the number of wells in the gulf and pointed out that the Macondo well was not an exception.
In reviewing the causes of the disaster he started with the problems that arose when the initial float collar, used in the injection of the cement to hold the production casing in place, did not properly function. To get to work the crew used a pulse of high pressure down the well, and then only cemented part of the lowest section, rather than injecting sufficient cement to fill the annulus up to the level of the previous casing. Because there was a considerable washout of the reservoir, the crew then chose to use a foam cement. Tests have shown that this takes some 24 – 48 hours for this cement to set, and yet they began displacing the mud holding the oil and gas within the reservoir after only 16 hours.
Because the well was drilled with an oil-based mud (rather than the more conventional water-based) natural gas will not come out of suspension at the same depth, but rather remained in suspension in the oil until very close to the surface. At that point it would expand, so that one cu ft of gas at depth would occupy some 800 cu ft and so the onset of disaster came very suddenly.
A problem that continues to face drilling and production companies has to do with experience. There is not a large cadre of well-qualified managers, since the highly cyclic nature of the industry means that many of those who would occupy such ranks were let go in the bad years, and are now otherwise employed. Thus the onus of management is falling to people that do not have the necessary experience and knowledge.
Rick Munroe brought the debate into the larger picture of the Peak fuel debate. Ho pointed out the considerable difference between the military view of the coming crisis, in contrast with the more complacent civilian government point of view. The Energy Bulletin lists over 40 papers from military groups that have highlighted the coming problems of fuel availability. In contrast it was only in 2008 that the IEA began to express similar concerns. Yet, as a paper in 2009 from the war college noted, while these strategic shocks are predictable, they are either not prepared for, or inadequately addressed. The plans that do exist are over 30 years old, dating from the last time we had such a event.
On July 25th the Energy Bulletin carried a review of the Peak Oil situation by the German military. The response to the crisis, because of this lack of preparation, will not be stable, but chaotic. This instability will increase with time as economies shrink. The result will be unprecedented in its severity.
He pointed out that, by and large, these reviews are not individual opinions, but rather the consensus of qualified analysts and it defines a comprehensive domestic external threat to the point that peak oil can be seen as a weapon of mass destruction. In earlier exercises it was projected that if 4% of the world supply was removed from the market then prices would triple.
Yet with all this information available he was unable to find any significant interest in the topic either in Canada or the United States. There is no planning for the impact of oil shortage on the agricultural production of either country, and the GAO noted that planning on the topic ceased about 20 years ago. It is only, apparently, in the UK that plans for a Liquid Fuel Emergency exist. And yet a fuel crisis will, in very short time, transform into also being a food crisis. The problem is, in part, that while the response of many in government is to ration by price, but to give farmers priority, most operate on the margin and a trebling of fuel prices would put them out of business. It is a complex problem, and thus no-one wishes to address it.
In introducing the second session of the morning Ron Swenson said that one of the goals of ASPO-USA was to bring people together in such a way as to leave a world worth inheriting. The session was on the Laws of Energy, Technology and Scale.
Tad Paczek talked of scale, and that the critical metric is the rate of production. He sees peak oil in 2 – 3 years; peak coal soon and peak NG in 20 – 30 years. But while there is still lots of fuel underground it is the rate of production, and the scale of production that are constrained and that drive us into these peaks. If, for example, oil lies in a piggy bank, and we can’t break down the walls, then the rate at which we get money back out depends on the size of the slot in the top. But we should also remember that, on average, we leave 2/3 of the oil in the ground and only recover 1/3.
We use 100 times the amount of energy we have to eat to survive. The world eats roughly 1 Exajoule (EXJ) and we turn fuels into 39 ExJ of energy. One of the more promising techniques for enhanced oil recovery (EOR) is to inject CO2 into the field. This is already in use in the United States and might be able to increase production by 10%, but this comes at the end of field life. In total it might be possible to get up to 2.5 mbd of EOR oil (remember that Ghawar is producing in the 4-5 mbd range), but to get to that level will require lots of money and engineering expertise – and he is not sure we have enough of the latter. He anticipates that Canada may be able to grow tar sand production to 3 mbd by 2020.
In discussing future energy projections he said that many companies will list the prospects that they are considering drilling into – but for budget and other reasons will only actually work a fraction of those lists. Thus those who rely on the projections paint an unrealistic view of what the future will bring. We are, therefore, not in as good shape as most predict.
Ken Zweibel spoke about the Solar Grand Plan. Current development of solar has not developed under any of the pressures that will come when supply as seen as an “emergency need.” Yet overall production gas reached 10 GW and so he is optimistic of the future. Because the liquid fuels supply problem is so tied to transportation the we need to see how the use of solar energy can feed that market. This will require evolution of the Smart Grid, and means for solar forecasting and balancing of power. Unfortunately solar distribution varies – the Southwest gets 30% more photons that the DC area, for example. But, on the other hand, wind is like the measles.
We have gone from $30 a watt to $1.50 a watt, but this only covers the module cost. That is no all the costs since installation and maintenance must also be included and these will likely double the module costs. However while one can pay back the cost of the module in 1.5 years, it might take 15 years in energy savings to cover the whole cost of the installation.
He covered the current costs of some of the major systems that we will likely see grow to dominate the market. The costs have dropped 40% of the last four years, but to go lower they need (and deserve) the lowest interest rate for loans. And he moved on from there to discuss payback on the different systems., though he noted that many costs are based on out-dated methodologies. Cadmium telluride is a promising new candidate, and is not that polluting. And he noted that, in contrast to most conventional systems solar does not use significant water. (A little for cleaning). He pointed out that of the 17 Quads used in transportation only 3.4 Quads (quadrillion Btu’s) do the effective work of moving the object. Electric powered vehicles are thus a more viable alternative.
He said that only 15% of the Canadian tar sands could be recovered by surface mining, and hat the energy costs are 15 – 50% of the recovered and useful energy. For the remainder it might be possible to get 80% of it out, but at a 40% energy cost.
On the other hand vehicles will not, in significant numbers, switch from liquid fuel to solar powered in the near future. There is also not enough lithium for batteries, so realistically the answer hans to be in electrified trains. He seen the end of fossil fuels marking the beginning of a slow-down in economic growth. So the meeting slowed down for lunch.
Lunch began with a tribute to Matt Simmons. Chairman of the ASPO-USA Advisory Board and featured speaker at many of he events. A check to support the Ocean Energy Institute was presented to his daughter Abbie, on behalf of ASPO.
The noon speaker was Ralph Nader who took his quota of time, and more, to discuss Energy and Policy. He proclaimed (just having written a novel on the subject) that “only the super-rich can save us.” The main form of censorship is self-censorship. Why do we do it? It encourages a stagnant society. It builds the blocking of technological advance through the creation of mind sets. Secretary Chu advocates nuclear power and refuses to meet with opposition groups on the topic.
Mr Nader does not see a correlation between energy and economic growth. We have passed the diagnostic phase of energy future analysis, but there has been little prescription for future action and the path forward is obscure. We must mandate changes to buildings, vehicles and connect them to jobs programs. And we must make the jobs local so that they cannot be exported to China. He sees innovation as dramatically higher than it was 10 years ago. , and expects that stimulus funds will lead to innovation. But he gave the example of Evergreen Solar which had intended to stay in the US, having 800 employees here, but found that all its competition is moving to China, so they are too. Then he quoted the example of the “largest tile carpet manufacturer” in the US who has chosen to stay, and through innovation keep costs down low enough that he can remain in business.
Unfortunately as this talk drew to a close I had to leave. Gail Tverberg remained and was kind enough to supply me with her notes, which follow.
Anthony Perl, author of "Transport Revolutions: Moving People and Freight without Oil" and fellow of the Post Carbon Institute talked about ways to reduce oil used in transport. In his view, we have lots of technology, but not much time. Emphasis needs to be on proven, robust technologies.
One thing he talked about was electric motors to replace internal combustion engines, particularly for trains. Also expansion of the use of trains. One issue, though, is the fact that most rail track is privately owned. Perhaps some approach can be used that would allow double tracking with government somehow paying for/receiving ownership of the additional track.
Another possibility is "sky sails", which can reduce fuel use by ships by 50% to 80%. Water transport is already the most efficient mode of transport, and sails would improve it further.
He believes it will cost $1 trillion for passenger rail and $1 trillion for freights train needed changes / improvements. He also pointed out that GM used to build trains and busses, and asked why they couldn't again.
Dr. Charles Schlumberger, Principal Air Transport Specialist, Transport Division of the World Bank, pointed out that from the airline's point of view, it was the recession, and not the price of oil that was the problem. He felt this way, because he felt the airlines had pretty well hedged the price of oil. Its problem was a lack of passengers and cargo, because of the recession.
He pointed out that air transport is the catalyst for modern globalization. For example, he pointed out that without access by air, there is little chance of foreign direct investment in a country.
He also pointed out that at $80 a barrel, fuel cost exceeds personnel costs. He believes that above $80 a barrel, airlines cannot be profitable.
Regarding fuel efficiency, there have been improvements, but these are becoming smaller as the low-hanging fruit have already been found. Some additional changes may be difficult. For example, if changes are made that cause the size of engines to be bigger, these might necessitate completely redesigning the aircraft. One possibility is to use "Air Ships" or dirigibles for moving freight long distances.
Biofuels are being investigated, but progress is slow--perhaps 1% replacement of fuel by 2015. One issue is the huge land area that would be required. According to his calculations, algae would require the least land area, but even so algae would require an area the size of Ireland to replace existing airline fuel.
At this point, it looks like there is a possibility that airline use will need to be significantly scaled back, but if this happens, there will likely be big social and political impacts.
Next, Sharon Astyk, ASPO-USA board member and writer, talked about the world food situation. In 2008, there were 1 billion people who were seriously malnourished. The number is perhaps a bit lower in 2009, but not a lot. While oil prices have backed off a lot from their highs, some food prices are still not too far from their 2008 highs. She pointed out that high prices are a real issue for many, since almost half of the world's population spends 50% or more of its income on food.
Now China is buying land around the world, so as to be able to feed its people. This is likely to present problems for people who live in the area, and need the farmland themselves. Sharon also talked about there likely being an "Export Land" land for food, with countries cutting back on food exports, either as their own population grows, or if crops fail.
She talked about food insecurity being a problem even in the US. One in seven people is on food stamps; one in four children receives food stamps. Children who are hungry are likely not to do well in school.
There is a close tie between food and energy, so reduced food supply in the future is a concern. There are other related issues, like phosphorous supplies, which are already getting short. Lesser energy availability is likely to make the situation worse. There is also the issue of biofuels competition with food for land and water.
The last speaker was Brian Czeck, President of the Center for the Advancement of the Steady State Economy. He talked about the need for governments to scale back their expectations from everlasting growth to a steady state economy.
Turning therefore to the Saturday morning meetings, these began with a slight change, since Terry Backer the scheduled speaker was, unfortunately, ill. Paul, one of his advisors, spoke on his behalf, noting that Connecticut – where they are from – has no indigenous coal, oil or natural gas. They had a plan for moving forward that had received support for a significant effort to insulate houses, but unfortunately even though it would have provided a number of jobs, it fell victim to the recession. They are now looking to see the potential for micro-hydro in the state.
The first session was chaired by Ted Patzek and was focused on the Gulf oil spill and the likely consequences.
I led off with a chronological review of the events that occurred through the course of the spill until the time that the well was declared dead. This covered the initial completion of the well, the kick and explosion on the rig, and the sinking of the well. I then went through the stages of the capture of oil, and the capping of the well. This also covered the assumptions that led to the location of the relief well and what was found when it hit the well. Very largely it was a summary of the posts that were written at the time, with the aid of some photos that others had posted.
After my talk, Art Berman spoke of some of the errors that culminated in the failure of the well and the consequent disaster. He began by pointing out that the energy resource of the Gulf is much larger than that of shale gas, and in the deep water is likely the last great hope of American production. From that point of view the shut down (which has nominally now been lifted. He described the number of wells in the gulf and pointed out that the Macondo well was not an exception.
In reviewing the causes of the disaster he started with the problems that arose when the initial float collar, used in the injection of the cement to hold the production casing in place, did not properly function. To get to work the crew used a pulse of high pressure down the well, and then only cemented part of the lowest section, rather than injecting sufficient cement to fill the annulus up to the level of the previous casing. Because there was a considerable washout of the reservoir, the crew then chose to use a foam cement. Tests have shown that this takes some 24 – 48 hours for this cement to set, and yet they began displacing the mud holding the oil and gas within the reservoir after only 16 hours.
Because the well was drilled with an oil-based mud (rather than the more conventional water-based) natural gas will not come out of suspension at the same depth, but rather remained in suspension in the oil until very close to the surface. At that point it would expand, so that one cu ft of gas at depth would occupy some 800 cu ft and so the onset of disaster came very suddenly.
A problem that continues to face drilling and production companies has to do with experience. There is not a large cadre of well-qualified managers, since the highly cyclic nature of the industry means that many of those who would occupy such ranks were let go in the bad years, and are now otherwise employed. Thus the onus of management is falling to people that do not have the necessary experience and knowledge.
Rick Munroe brought the debate into the larger picture of the Peak fuel debate. Ho pointed out the considerable difference between the military view of the coming crisis, in contrast with the more complacent civilian government point of view. The Energy Bulletin lists over 40 papers from military groups that have highlighted the coming problems of fuel availability. In contrast it was only in 2008 that the IEA began to express similar concerns. Yet, as a paper in 2009 from the war college noted, while these strategic shocks are predictable, they are either not prepared for, or inadequately addressed. The plans that do exist are over 30 years old, dating from the last time we had such a event.
On July 25th the Energy Bulletin carried a review of the Peak Oil situation by the German military. The response to the crisis, because of this lack of preparation, will not be stable, but chaotic. This instability will increase with time as economies shrink. The result will be unprecedented in its severity.
He pointed out that, by and large, these reviews are not individual opinions, but rather the consensus of qualified analysts and it defines a comprehensive domestic external threat to the point that peak oil can be seen as a weapon of mass destruction. In earlier exercises it was projected that if 4% of the world supply was removed from the market then prices would triple.
Yet with all this information available he was unable to find any significant interest in the topic either in Canada or the United States. There is no planning for the impact of oil shortage on the agricultural production of either country, and the GAO noted that planning on the topic ceased about 20 years ago. It is only, apparently, in the UK that plans for a Liquid Fuel Emergency exist. And yet a fuel crisis will, in very short time, transform into also being a food crisis. The problem is, in part, that while the response of many in government is to ration by price, but to give farmers priority, most operate on the margin and a trebling of fuel prices would put them out of business. It is a complex problem, and thus no-one wishes to address it.
In introducing the second session of the morning Ron Swenson said that one of the goals of ASPO-USA was to bring people together in such a way as to leave a world worth inheriting. The session was on the Laws of Energy, Technology and Scale.
Tad Paczek talked of scale, and that the critical metric is the rate of production. He sees peak oil in 2 – 3 years; peak coal soon and peak NG in 20 – 30 years. But while there is still lots of fuel underground it is the rate of production, and the scale of production that are constrained and that drive us into these peaks. If, for example, oil lies in a piggy bank, and we can’t break down the walls, then the rate at which we get money back out depends on the size of the slot in the top. But we should also remember that, on average, we leave 2/3 of the oil in the ground and only recover 1/3.
We use 100 times the amount of energy we have to eat to survive. The world eats roughly 1 Exajoule (EXJ) and we turn fuels into 39 ExJ of energy. One of the more promising techniques for enhanced oil recovery (EOR) is to inject CO2 into the field. This is already in use in the United States and might be able to increase production by 10%, but this comes at the end of field life. In total it might be possible to get up to 2.5 mbd of EOR oil (remember that Ghawar is producing in the 4-5 mbd range), but to get to that level will require lots of money and engineering expertise – and he is not sure we have enough of the latter. He anticipates that Canada may be able to grow tar sand production to 3 mbd by 2020.
In discussing future energy projections he said that many companies will list the prospects that they are considering drilling into – but for budget and other reasons will only actually work a fraction of those lists. Thus those who rely on the projections paint an unrealistic view of what the future will bring. We are, therefore, not in as good shape as most predict.
Ken Zweibel spoke about the Solar Grand Plan. Current development of solar has not developed under any of the pressures that will come when supply as seen as an “emergency need.” Yet overall production gas reached 10 GW and so he is optimistic of the future. Because the liquid fuels supply problem is so tied to transportation the we need to see how the use of solar energy can feed that market. This will require evolution of the Smart Grid, and means for solar forecasting and balancing of power. Unfortunately solar distribution varies – the Southwest gets 30% more photons that the DC area, for example. But, on the other hand, wind is like the measles.
We have gone from $30 a watt to $1.50 a watt, but this only covers the module cost. That is no all the costs since installation and maintenance must also be included and these will likely double the module costs. However while one can pay back the cost of the module in 1.5 years, it might take 15 years in energy savings to cover the whole cost of the installation.
He covered the current costs of some of the major systems that we will likely see grow to dominate the market. The costs have dropped 40% of the last four years, but to go lower they need (and deserve) the lowest interest rate for loans. And he moved on from there to discuss payback on the different systems., though he noted that many costs are based on out-dated methodologies. Cadmium telluride is a promising new candidate, and is not that polluting. And he noted that, in contrast to most conventional systems solar does not use significant water. (A little for cleaning). He pointed out that of the 17 Quads used in transportation only 3.4 Quads (quadrillion Btu’s) do the effective work of moving the object. Electric powered vehicles are thus a more viable alternative.
He said that only 15% of the Canadian tar sands could be recovered by surface mining, and hat the energy costs are 15 – 50% of the recovered and useful energy. For the remainder it might be possible to get 80% of it out, but at a 40% energy cost.
On the other hand vehicles will not, in significant numbers, switch from liquid fuel to solar powered in the near future. There is also not enough lithium for batteries, so realistically the answer hans to be in electrified trains. He seen the end of fossil fuels marking the beginning of a slow-down in economic growth. So the meeting slowed down for lunch.
Lunch began with a tribute to Matt Simmons. Chairman of the ASPO-USA Advisory Board and featured speaker at many of he events. A check to support the Ocean Energy Institute was presented to his daughter Abbie, on behalf of ASPO.
The noon speaker was Ralph Nader who took his quota of time, and more, to discuss Energy and Policy. He proclaimed (just having written a novel on the subject) that “only the super-rich can save us.” The main form of censorship is self-censorship. Why do we do it? It encourages a stagnant society. It builds the blocking of technological advance through the creation of mind sets. Secretary Chu advocates nuclear power and refuses to meet with opposition groups on the topic.
Mr Nader does not see a correlation between energy and economic growth. We have passed the diagnostic phase of energy future analysis, but there has been little prescription for future action and the path forward is obscure. We must mandate changes to buildings, vehicles and connect them to jobs programs. And we must make the jobs local so that they cannot be exported to China. He sees innovation as dramatically higher than it was 10 years ago. , and expects that stimulus funds will lead to innovation. But he gave the example of Evergreen Solar which had intended to stay in the US, having 800 employees here, but found that all its competition is moving to China, so they are too. Then he quoted the example of the “largest tile carpet manufacturer” in the US who has chosen to stay, and through innovation keep costs down low enough that he can remain in business.
Unfortunately as this talk drew to a close I had to leave. Gail Tverberg remained and was kind enough to supply me with her notes, which follow.
Anthony Perl, author of "Transport Revolutions: Moving People and Freight without Oil" and fellow of the Post Carbon Institute talked about ways to reduce oil used in transport. In his view, we have lots of technology, but not much time. Emphasis needs to be on proven, robust technologies.
One thing he talked about was electric motors to replace internal combustion engines, particularly for trains. Also expansion of the use of trains. One issue, though, is the fact that most rail track is privately owned. Perhaps some approach can be used that would allow double tracking with government somehow paying for/receiving ownership of the additional track.
Another possibility is "sky sails", which can reduce fuel use by ships by 50% to 80%. Water transport is already the most efficient mode of transport, and sails would improve it further.
He believes it will cost $1 trillion for passenger rail and $1 trillion for freights train needed changes / improvements. He also pointed out that GM used to build trains and busses, and asked why they couldn't again.
Dr. Charles Schlumberger, Principal Air Transport Specialist, Transport Division of the World Bank, pointed out that from the airline's point of view, it was the recession, and not the price of oil that was the problem. He felt this way, because he felt the airlines had pretty well hedged the price of oil. Its problem was a lack of passengers and cargo, because of the recession.
He pointed out that air transport is the catalyst for modern globalization. For example, he pointed out that without access by air, there is little chance of foreign direct investment in a country.
He also pointed out that at $80 a barrel, fuel cost exceeds personnel costs. He believes that above $80 a barrel, airlines cannot be profitable.
Regarding fuel efficiency, there have been improvements, but these are becoming smaller as the low-hanging fruit have already been found. Some additional changes may be difficult. For example, if changes are made that cause the size of engines to be bigger, these might necessitate completely redesigning the aircraft. One possibility is to use "Air Ships" or dirigibles for moving freight long distances.
Biofuels are being investigated, but progress is slow--perhaps 1% replacement of fuel by 2015. One issue is the huge land area that would be required. According to his calculations, algae would require the least land area, but even so algae would require an area the size of Ireland to replace existing airline fuel.
At this point, it looks like there is a possibility that airline use will need to be significantly scaled back, but if this happens, there will likely be big social and political impacts.
Next, Sharon Astyk, ASPO-USA board member and writer, talked about the world food situation. In 2008, there were 1 billion people who were seriously malnourished. The number is perhaps a bit lower in 2009, but not a lot. While oil prices have backed off a lot from their highs, some food prices are still not too far from their 2008 highs. She pointed out that high prices are a real issue for many, since almost half of the world's population spends 50% or more of its income on food.
Now China is buying land around the world, so as to be able to feed its people. This is likely to present problems for people who live in the area, and need the farmland themselves. Sharon also talked about there likely being an "Export Land" land for food, with countries cutting back on food exports, either as their own population grows, or if crops fail.
She talked about food insecurity being a problem even in the US. One in seven people is on food stamps; one in four children receives food stamps. Children who are hungry are likely not to do well in school.
There is a close tie between food and energy, so reduced food supply in the future is a concern. There are other related issues, like phosphorous supplies, which are already getting short. Lesser energy availability is likely to make the situation worse. There is also the issue of biofuels competition with food for land and water.
The last speaker was Brian Czeck, President of the Center for the Advancement of the Steady State Economy. He talked about the need for governments to scale back their expectations from everlasting growth to a steady state economy.
Read more!
Sunday, October 10, 2010
ASPO Conference - second day after lunch
This is a continuation of a series of reports on the ASPO Conference on Peak Oil that was held in Washington DC this week. I had covered the first 24 hours in two earlier posts, and return to the meeting at the luncheon on the second day of the meeting.
At the beginning of the lunch the Association presented the King Hubbard Awards for excellence in energy education. These, deservedly, went to Colin Campbell, Tom Whipple and Art Berman. They were followed by the Tom Whipple Volunteer Awards, which went to Lt. Col. Davis and Greg Geyer.
The first speaker at the lunch was Jeff Rubin who pointed out that although the deepest recession since the second world war has been blamed on the housing bubble and the financial problems of the American banking system, the problem was really global in nature, and it is not difficult to show the correlation with energy prices.
Historically economists have always said that when prices go up, then more oil will be released to the market, meeting demand, and the price will fall. This time they were wrong. There was no Alaska or North Sea to provide that additional source, only tar sands. With prices escalating oil demand declined in only the USA, Canada and Europe, which group has historically bought most of the international trade, but which now only consume half of it. That group has not dropped demand, it is just that others are now gaining in consumption (China is now at 9 mbd). OPEC now consumes some 14 mbd, and this is largely because fuel is so cheap in those countries (at around $0.20 a gallon). The OPEC internal consumption (as the Export Land Model predicts) is used at the cost of supplies to the export market.
Oil prices and demand fell during the recession, but are now growing again, as we return to $80 a barrel. As a result he is anticipating triple-digit oil prices again next year. For as demand rises the world is no more capable of balancing supply and demand than it was two years ago. He mentioned the conundrum that price controls growth, the Government cannot bring back cheap oil, and the balance between affordable general yet sufficient supply and the price of that supply is becoming a more difficult balance to sustain.
The rise in fuel costs will change the paradigm for manufacturing. For while it is cheaper to makes steel in China and ship it when transport costs are low, as those prices rise the cost of shipping will become too high. The benefits of local manufacture will become more evident. These economics will kill the suburbs. That will not be controlled by Government fiat, but rather the principles defined in Econ 101.
As the high-prices bring our entry into the Apocalypse it will not, at least initially , be that grim. The price changes will force change and this may help local manufacturing. So we may be moving to a better world, at least transiently.
The second speaker was Bianca Jagger who might, at first, appear to be a strange choice for the conference. However, as she explained, she has been following the topic for many years and initially had just planned on attending the conference, until asked to speak. She spoke of the need for a new Copernican Revolution in the use of renewable technologies. With no treaty in Copenhagen there is less than a decade before we will see dramatic changes in climate, due to greenhouse gas effects. Further the dependence on oil, and our need to get it from deeper waters and arctic regions threatens even more devastation for future generations.
The interactions of 9 billion people with the environment by 2050 will also impose increasing demands on the energy infrastructure, and have their impacts, some of which we have seen this year already in countries such as Pakistan and Russia. We must hold companies responsible for their damage, and she expressed concerns over the tar sand mining in Alberta.
She noted how the subject of Peak Oil had been considered a myth, but that the JOE Report showed that it was not, and she cited other reports that concurred. With the peak arrival we need the President to waken us from our current sleepwalking into disaster. We must democratize and decentralize energy production and if the Federal Government does not do this, then states and local government must act. We cannot compartmentalize the effort as the effects will impact us all, and we must make the investments to replace fossil fuels.
In the following question period the speakers pointed out that we should not expect the Administration to move until the point is reached where we really won’t have many choices left. But we have a greater capacity for change than the government gives us credit for. The problem is that with only 4 mbd of spare capacity, which may come at an increasing price, the balance between stability and recession will be small. We are, perhaps, at the bounds of affordable oil.
The worse the price rise, then the worse off the poorer segments of the community become, but it will become a zero sum game as oil production is bounded. It can be resolved by price – more bicycles are used in Copenhagen, for example, because cars have a 180% surcharge, and power is used economically because it costs $0.30 a kWh.
I chaired the coal session immediately after lunch, and briefly referred to my experience in hand-mining coal in a seam about 20 inches high, and the difficulties King Edward I had in banning the burning of coal. I then introduced Kjell Aleklett who paid tribute to Matt Simmons, and talked of the formation of ASPO – in which Matt played a part, before turning to the topic of coal supply prediction. In the IPCC reports there is an anticipation of coal use rising by 500% by 2100. But his group have been studying the likelihood of this happening and have written several peer-reviewed papers on the topic. (For example Dr Michael Hook nailed his dissertation on the topic to the wall last month, an Uppsala tradition.) He noted that there is a difference in the relative ranking of the worlds largest coal reserve holders and those that mine and export the most coal. China, for example, has 14% of the world’s reserves and yet mines 45% of the world’s coal. (These may be a little off due to my slow transcription of his table). There are only 10 nations that can be considered, as exporters, the “drug dealers” of the planet.
Global production is dominated by the big 6 (USA, China, FSU, Australia, India, and S. Africa) but the world is changing and increasing competition and regulation is changing the use and availability of coal. It is a fuel where there is no correlation between price and reserves, but we are now seeing a decline in coal quality to the point that we are at a peak in the energy level that can be produced from American coal. There are small changes that can occur (it is possible for Pennsylvanian Anthracite, which has peaked, to recover) depending on price but in general this is true. American hopes lie in the reserves of states like Montana, but local opposition, due to the sodium content of the water, makes this mining unlikely.
He then looked at production from the other large producers, and stated conclusions on their future performance, leading to the overall conclusion that coal will peak globally in 2030. He was not favorably impressed by the chances for coal-to-liquid (CTL) plants, and they may only possibly play a part in the future. None of the IPCC models consider peak oil, gas or coal, yet we cannot assume a business as usual (BAU) future, as fossil fuels run out. Concerns at the moment in Sweden are more related to politics than geology. And while coal will remain important, it will not be an answer to the energy challenge.
In questions one of the audience from Montana challenged the assumption that coal is unpopular in the state, and noted that it is likely that there will be considerable coal production in the future. Dr. Aleklett also noted that coal production is limited logistically and by infrastructure, rather than resource. And coal does not contribute to solving the liquid fuels problem.
David Rutledge discussed coal production in terms of the IPCC report, noting that the 2007 report showed oil production rising to 2100 in all 19 models that they ran in predicting future trends. His goal became one of reducing uncertainty in the predictions, and he began by explaining some of the statistical methods he used. He exemplified this by showing that UK coal production peaked in 1913, and is now down to what it was in Napoleonic times. Using statistical methods he was able to predict the likely total UK coal production over time, at around 27 billion tons. Future reserve estimates collapsed in the 1960-70 period as evaluators realized that reserves could only be coal that could be economically mined.
He looked at four regions, UK coal, Pennsylvania anthracite, France and Belgium, and Japan and South Korea. In all cases he found that mining will only extract about 25% of what was once considered a reserve. He tried to look at Chinese coal but had problems getting reliable statistics. While he was able to get good agreements between his plots and predictions and historic numbers his results were incompatible with IPCC coal presumptions.
Coal does not have the global fungibility that oil has and is more of a regional market commodity. He used Tom Wigley’s MAGICC computer model, but in trying to evaluate future temperatures he noted that, as a result of the Climategate incident, that the British Met Office are redoing their temperature records. He discussed some of the problems in assuring accurate temperature records. But overall he was confident of the IPCC predictions and those on the future rise in sea level, quoting Stefan Ramstorf.
Following a break Dr Robert Hirsch chaired a session on the link between Energy and the Economy, and it was possibly the bleakest of the meeting. Chris Martenson talked about looking at the economy as a straight highway, and then hitting a bend. While models often see progress in linear terms life does not turn out that way. Money is loaned into existence and credit (and thus debt) has increased over time. Since 1970 it has doubled five times. Money and energy have been tied, but while money must continue to grow, energy cannot. Credit market growth (with an R^2 of 0.98) has an exponential relationship with time. He sees the problem not with the individual smaller bubble causes of housing, etc but rather the overall credit size itself.
He sees the problems coming in the 2014-2015 time frame when Peak Oil will be recognized and while growth may continue, prosperity may not.
He was followed by Nicole Foss- who many of us have read under the pen name Stoneleigh . She sees fossil fuels as generating the largest bubble in history. The economy has been driven up by energy, but as that declines what will take its place? In the sense that bubbles are Ponzi schemes where only early investors make a return on their investment, as this one comes to an end as the largest suckers get fleeced, so they collapse to general hurt.
Markets are driven by perception rather than reality. But by the time the general public hears of “a good thing” it is generally over. Hearing the “it’s a new paradigm” should warn you to sell the stock. But the world is driven on emotion. And when there is a collapse it is often sudden, bringing the value down below what it was before the bubble began. (And oil prices are following this model). From this she could see nothing ahead but progress into a deflation and depression. We are already in a large debt and liquidity trap and as credit disappears the depression will develop and be sustained. The huge derivatives market may be the first to go, given its insignificant intrinsic value.
The problem is in part that it will be based on reducing volumes of oil, and with that reduction there is no possibility of a rebound, since the resource is not there to develop it. Oil has thus hegemonic power. The depression will, however, sustain its dominance since reduced demand will allow it to remain dominant.
The final speaker of the evening was Robert Hirsch, who has also recently co-authored a book – The Impending World Energy Mess which was available in signed copy at the meeting. In large measure his talk followed the book (from which you may gather that I did buy, and have half-read, a copy – and it is worth doing so, I may do a review later). He noted that the economy depends on energy, not the other way around. Further we should expect that the general public will still be surprised when oil supplies start to decline in the next 2 – 5 years. From then they will continue to decline for at least a decade, until alternate sources of fuel become sufficiently available. He covered the oil problem their forecast of how it will develop, and what an individual could do about it.
The story is a familiar one to the peak oil community, we are over reliant on a few giant oil fields that are depleting and not being replaced. We have been sensibly in a production plateau since 2005, something not predicted by earlier models, but there are an increasing number of reputable sources that see an end to the plateau, and the consequent decline, coming relatively soon. This will impact GDP and hurt national economies. The recent recession and drop in oil demand may have only shifted the onset of the decline by a few weeks.
It is unrealistic to expect a rapid answer to the decline from politicians. Looking at the likely rate of decline, a 2% fall could be easily handled, a 4% fall could be handled with difficulty, but at 6% it is going to be bad. They have had to guess, and think, at the moment that it will likely be at around 4%.
China, having foreseen this problem, are doing smart things to prepare for it. We in the West are not. It will lead to increased tensions – though they did not look at the potential for resource wars, or the likelihood that producers would withhold production for political or economic reasons.
Looking at individual response, we should all expect to be impacted, and because of the lack of political ability to resolve the issue (or even to address it yet) we should expect that the result will be very similar to the oil shortages of the 70s. There was a degree of panic – this will happen again. This time, however, there will be no North Sea or North Slope to come to the rescue. Nor can the oil taps be opened wider to remediate the problems. As a result he has got out of the market – since good stocks and bonds will be hurt as well as bad. He has added annuities to his portfolio, bought some gold, and moved closer to mass transit and the shops.
He reminded us that this is a liquid fuels problem, while most renewables (wind and solar and hydro) deal with the electricity supply, which is not helpful to the crisis. We also have enough food. The issue is in transportation where we need a substitute for oil.
In questions he was asked about rationing. He fully anticipates it happening, but it will be very complicated to develop and impose. Countries will respond in different ways and become more independent. The United States will have to reindustrialize, since it will not be able to rely on foreign manufacture. We increased productivity by having oil help labor. Now this must reverse.
He did not see the problem being deflation, but rather in the control of inflation. But then it is easier to write a history book than a forecast. He could only see that many people will get hurt in the coming years.
On which cheery note I went to find a drink, have dinner and retire for the evening. More later.
At the beginning of the lunch the Association presented the King Hubbard Awards for excellence in energy education. These, deservedly, went to Colin Campbell, Tom Whipple and Art Berman. They were followed by the Tom Whipple Volunteer Awards, which went to Lt. Col. Davis and Greg Geyer.
The first speaker at the lunch was Jeff Rubin who pointed out that although the deepest recession since the second world war has been blamed on the housing bubble and the financial problems of the American banking system, the problem was really global in nature, and it is not difficult to show the correlation with energy prices.
Historically economists have always said that when prices go up, then more oil will be released to the market, meeting demand, and the price will fall. This time they were wrong. There was no Alaska or North Sea to provide that additional source, only tar sands. With prices escalating oil demand declined in only the USA, Canada and Europe, which group has historically bought most of the international trade, but which now only consume half of it. That group has not dropped demand, it is just that others are now gaining in consumption (China is now at 9 mbd). OPEC now consumes some 14 mbd, and this is largely because fuel is so cheap in those countries (at around $0.20 a gallon). The OPEC internal consumption (as the Export Land Model predicts) is used at the cost of supplies to the export market.
Oil prices and demand fell during the recession, but are now growing again, as we return to $80 a barrel. As a result he is anticipating triple-digit oil prices again next year. For as demand rises the world is no more capable of balancing supply and demand than it was two years ago. He mentioned the conundrum that price controls growth, the Government cannot bring back cheap oil, and the balance between affordable general yet sufficient supply and the price of that supply is becoming a more difficult balance to sustain.
The rise in fuel costs will change the paradigm for manufacturing. For while it is cheaper to makes steel in China and ship it when transport costs are low, as those prices rise the cost of shipping will become too high. The benefits of local manufacture will become more evident. These economics will kill the suburbs. That will not be controlled by Government fiat, but rather the principles defined in Econ 101.
As the high-prices bring our entry into the Apocalypse it will not, at least initially , be that grim. The price changes will force change and this may help local manufacturing. So we may be moving to a better world, at least transiently.
The second speaker was Bianca Jagger who might, at first, appear to be a strange choice for the conference. However, as she explained, she has been following the topic for many years and initially had just planned on attending the conference, until asked to speak. She spoke of the need for a new Copernican Revolution in the use of renewable technologies. With no treaty in Copenhagen there is less than a decade before we will see dramatic changes in climate, due to greenhouse gas effects. Further the dependence on oil, and our need to get it from deeper waters and arctic regions threatens even more devastation for future generations.
The interactions of 9 billion people with the environment by 2050 will also impose increasing demands on the energy infrastructure, and have their impacts, some of which we have seen this year already in countries such as Pakistan and Russia. We must hold companies responsible for their damage, and she expressed concerns over the tar sand mining in Alberta.
She noted how the subject of Peak Oil had been considered a myth, but that the JOE Report showed that it was not, and she cited other reports that concurred. With the peak arrival we need the President to waken us from our current sleepwalking into disaster. We must democratize and decentralize energy production and if the Federal Government does not do this, then states and local government must act. We cannot compartmentalize the effort as the effects will impact us all, and we must make the investments to replace fossil fuels.
In the following question period the speakers pointed out that we should not expect the Administration to move until the point is reached where we really won’t have many choices left. But we have a greater capacity for change than the government gives us credit for. The problem is that with only 4 mbd of spare capacity, which may come at an increasing price, the balance between stability and recession will be small. We are, perhaps, at the bounds of affordable oil.
The worse the price rise, then the worse off the poorer segments of the community become, but it will become a zero sum game as oil production is bounded. It can be resolved by price – more bicycles are used in Copenhagen, for example, because cars have a 180% surcharge, and power is used economically because it costs $0.30 a kWh.
I chaired the coal session immediately after lunch, and briefly referred to my experience in hand-mining coal in a seam about 20 inches high, and the difficulties King Edward I had in banning the burning of coal. I then introduced Kjell Aleklett who paid tribute to Matt Simmons, and talked of the formation of ASPO – in which Matt played a part, before turning to the topic of coal supply prediction. In the IPCC reports there is an anticipation of coal use rising by 500% by 2100. But his group have been studying the likelihood of this happening and have written several peer-reviewed papers on the topic. (For example Dr Michael Hook nailed his dissertation on the topic to the wall last month, an Uppsala tradition.) He noted that there is a difference in the relative ranking of the worlds largest coal reserve holders and those that mine and export the most coal. China, for example, has 14% of the world’s reserves and yet mines 45% of the world’s coal. (These may be a little off due to my slow transcription of his table). There are only 10 nations that can be considered, as exporters, the “drug dealers” of the planet.
Global production is dominated by the big 6 (USA, China, FSU, Australia, India, and S. Africa) but the world is changing and increasing competition and regulation is changing the use and availability of coal. It is a fuel where there is no correlation between price and reserves, but we are now seeing a decline in coal quality to the point that we are at a peak in the energy level that can be produced from American coal. There are small changes that can occur (it is possible for Pennsylvanian Anthracite, which has peaked, to recover) depending on price but in general this is true. American hopes lie in the reserves of states like Montana, but local opposition, due to the sodium content of the water, makes this mining unlikely.
He then looked at production from the other large producers, and stated conclusions on their future performance, leading to the overall conclusion that coal will peak globally in 2030. He was not favorably impressed by the chances for coal-to-liquid (CTL) plants, and they may only possibly play a part in the future. None of the IPCC models consider peak oil, gas or coal, yet we cannot assume a business as usual (BAU) future, as fossil fuels run out. Concerns at the moment in Sweden are more related to politics than geology. And while coal will remain important, it will not be an answer to the energy challenge.
In questions one of the audience from Montana challenged the assumption that coal is unpopular in the state, and noted that it is likely that there will be considerable coal production in the future. Dr. Aleklett also noted that coal production is limited logistically and by infrastructure, rather than resource. And coal does not contribute to solving the liquid fuels problem.
David Rutledge discussed coal production in terms of the IPCC report, noting that the 2007 report showed oil production rising to 2100 in all 19 models that they ran in predicting future trends. His goal became one of reducing uncertainty in the predictions, and he began by explaining some of the statistical methods he used. He exemplified this by showing that UK coal production peaked in 1913, and is now down to what it was in Napoleonic times. Using statistical methods he was able to predict the likely total UK coal production over time, at around 27 billion tons. Future reserve estimates collapsed in the 1960-70 period as evaluators realized that reserves could only be coal that could be economically mined.
He looked at four regions, UK coal, Pennsylvania anthracite, France and Belgium, and Japan and South Korea. In all cases he found that mining will only extract about 25% of what was once considered a reserve. He tried to look at Chinese coal but had problems getting reliable statistics. While he was able to get good agreements between his plots and predictions and historic numbers his results were incompatible with IPCC coal presumptions.
Coal does not have the global fungibility that oil has and is more of a regional market commodity. He used Tom Wigley’s MAGICC computer model, but in trying to evaluate future temperatures he noted that, as a result of the Climategate incident, that the British Met Office are redoing their temperature records. He discussed some of the problems in assuring accurate temperature records. But overall he was confident of the IPCC predictions and those on the future rise in sea level, quoting Stefan Ramstorf.
Following a break Dr Robert Hirsch chaired a session on the link between Energy and the Economy, and it was possibly the bleakest of the meeting. Chris Martenson talked about looking at the economy as a straight highway, and then hitting a bend. While models often see progress in linear terms life does not turn out that way. Money is loaned into existence and credit (and thus debt) has increased over time. Since 1970 it has doubled five times. Money and energy have been tied, but while money must continue to grow, energy cannot. Credit market growth (with an R^2 of 0.98) has an exponential relationship with time. He sees the problem not with the individual smaller bubble causes of housing, etc but rather the overall credit size itself.
He sees the problems coming in the 2014-2015 time frame when Peak Oil will be recognized and while growth may continue, prosperity may not.
He was followed by Nicole Foss- who many of us have read under the pen name Stoneleigh . She sees fossil fuels as generating the largest bubble in history. The economy has been driven up by energy, but as that declines what will take its place? In the sense that bubbles are Ponzi schemes where only early investors make a return on their investment, as this one comes to an end as the largest suckers get fleeced, so they collapse to general hurt.
Markets are driven by perception rather than reality. But by the time the general public hears of “a good thing” it is generally over. Hearing the “it’s a new paradigm” should warn you to sell the stock. But the world is driven on emotion. And when there is a collapse it is often sudden, bringing the value down below what it was before the bubble began. (And oil prices are following this model). From this she could see nothing ahead but progress into a deflation and depression. We are already in a large debt and liquidity trap and as credit disappears the depression will develop and be sustained. The huge derivatives market may be the first to go, given its insignificant intrinsic value.
The problem is in part that it will be based on reducing volumes of oil, and with that reduction there is no possibility of a rebound, since the resource is not there to develop it. Oil has thus hegemonic power. The depression will, however, sustain its dominance since reduced demand will allow it to remain dominant.
The final speaker of the evening was Robert Hirsch, who has also recently co-authored a book – The Impending World Energy Mess which was available in signed copy at the meeting. In large measure his talk followed the book (from which you may gather that I did buy, and have half-read, a copy – and it is worth doing so, I may do a review later). He noted that the economy depends on energy, not the other way around. Further we should expect that the general public will still be surprised when oil supplies start to decline in the next 2 – 5 years. From then they will continue to decline for at least a decade, until alternate sources of fuel become sufficiently available. He covered the oil problem their forecast of how it will develop, and what an individual could do about it.
The story is a familiar one to the peak oil community, we are over reliant on a few giant oil fields that are depleting and not being replaced. We have been sensibly in a production plateau since 2005, something not predicted by earlier models, but there are an increasing number of reputable sources that see an end to the plateau, and the consequent decline, coming relatively soon. This will impact GDP and hurt national economies. The recent recession and drop in oil demand may have only shifted the onset of the decline by a few weeks.
It is unrealistic to expect a rapid answer to the decline from politicians. Looking at the likely rate of decline, a 2% fall could be easily handled, a 4% fall could be handled with difficulty, but at 6% it is going to be bad. They have had to guess, and think, at the moment that it will likely be at around 4%.
China, having foreseen this problem, are doing smart things to prepare for it. We in the West are not. It will lead to increased tensions – though they did not look at the potential for resource wars, or the likelihood that producers would withhold production for political or economic reasons.
Looking at individual response, we should all expect to be impacted, and because of the lack of political ability to resolve the issue (or even to address it yet) we should expect that the result will be very similar to the oil shortages of the 70s. There was a degree of panic – this will happen again. This time, however, there will be no North Sea or North Slope to come to the rescue. Nor can the oil taps be opened wider to remediate the problems. As a result he has got out of the market – since good stocks and bonds will be hurt as well as bad. He has added annuities to his portfolio, bought some gold, and moved closer to mass transit and the shops.
He reminded us that this is a liquid fuels problem, while most renewables (wind and solar and hydro) deal with the electricity supply, which is not helpful to the crisis. We also have enough food. The issue is in transportation where we need a substitute for oil.
In questions he was asked about rationing. He fully anticipates it happening, but it will be very complicated to develop and impose. Countries will respond in different ways and become more independent. The United States will have to reindustrialize, since it will not be able to rely on foreign manufacture. We increased productivity by having oil help labor. Now this must reverse.
He did not see the problem being deflation, but rather in the control of inflation. But then it is easier to write a history book than a forecast. He could only see that many people will get hurt in the coming years.
On which cheery note I went to find a drink, have dinner and retire for the evening. More later.
Read more!
Thursday, October 7, 2010
The ASPO Conference - first afternoon
One of the speakers commented, just at the beginning of the ASPO 2010 Peak Oil Conference, that we would be subject to enough information that it would seem that we were standing under a fire hose. Well the Conference has had its first day, or at least afternoon, our first fire alarm (we got to the top of the stairs before being told it had been dealt with) and our first reception is over, as is the evening keynote session. He was right.
I occasionally think that attending Conferences should be a biennial practice, since change in the papers is so slow – but so far that hasn’t been the case this year where the new information available is already evident, though some of the old lions are still roaring on the same topics. There were three concurrent sessions this afternoon, and so I can only report on one set – starting with the session on the Export Land Model (which just gets more worrisome); then the Oil Drum session (where I was a speaker) and then the session on Energy Alternatives (which mainly talked about EROI). This report is being written incrementally, and has been updated once, but I will add the evenings two sessions in a second post, given the length that this one has already.
Jeff Brown began the session on the outlook for exports. His Export Land Model is now well recognized within the community, and after paying a short tribute to the late Matt Simmons, always a friendly and helpful face at these meetings, he brought us more up to date on where the model predictions were being validated, and what they were showing. With lots of papers to cover I can only hit the very high points of the presentation, so this is a very short summary. After commenting on how production declines in major fields, he tied this in to the rising standards of the producing country, and showed that, in a base case a 5% decline post-peak production for a country’s oil, when matched with a 2.5% growth in that country’s consumption, driven by the oil, but continuing after it starts into decline, rapidly lowers exports. Simplistically within 3 years after peak the country will have exported half the oil it will export post-peak. He then compared this theoretical situation with the realities of Indonesia and the UK, where within 9 years for Indonesia, and 6 years for the UK, the countries stopped exports and became importers. Export declines in the final years were over 25% per year.
He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia) will stop exporting before 2030. Looking a the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.
While unconventional oil is supposed to be a positive contributor in the future, he noted that when Canada and Venezuela are combined, production is actually falling. The worrying factor is the combination of China and India, who have increased imports from 11.3% of the total in 2005, to 17.1% in 2009. If this continues they will consume 25% of global oil exports by 2015, which will significantly reduce the amount available to the rest of us.
With the first speaker having raised the problem of oil, it was Jonathan Callaghan who shifted the topic over to Natural Gas. Jonathan runs the websites on energy that I use as a reference on occasion, where there are very useful plots of the energy consumption, production and import/export balances for the nations around the world. These provide patterns for the various fossil fuels, by nation, and Jonathan used representative plots from the series for his talk, beginning with the UK.
Noting that the UK used town gas (made from coal) until 1959, when the first LNG was imported from LA, gas in the UK was privatized in 1986 and reached peak production in 2000, becoming a net importer of natural gas in 2004. This last winter it was necessary, on three occasions for the National Grid to issue “Gas Balancing Alerts”, where industrial consumers should reduce use to protect domestic consumers. The situation is anticipated to get worse.
He contrasted this way of managing a resource with that of the Dutch, who have the large Groningen Gas field but which they have managed in a much more conservative way. With their different management philosophy they have retained a considerable margin for the future, over the same time interval.
Presentation of the data in this way also allows judgments that are not otherwise immediately obvious. For example consider the data for Argentina:
Without looking at the export/import data it might be hard to decide whether it had peaked in production, but when that data is examined the conclusion is relatively obvious.
And thus he went through different countries showing how the analysis of the plots, with a little local knowledge, gives a global picture of what is going on. As South America moves to becoming an overall importer and China is adding compressors to the pipeline from Turkmenistan to increase the flow rates, the time before world production peaks may be considerably sooner than people realize, since most of the fields are being run on the British, rather than the Dutch model.
He then turned to coal, in what was really a second talk, looking at the amounts that are available (pressing the coal button on the website) allowed him to note how dominant China is becoming in coal consumption.
The problem, however, is while the condition of the industry is known in general, the behavior of China and India will likely govern overall future coal use in ways that we have yet to understand.
There was then a very short break, and the team from The Oil Drum took to the podium. Gail Tverberg began with introductory remarks explaining some of the factors, such as Geology, Technology, Economics and Timing that influence production and its impact on demand, and ability to respond to it. She noted the difficulty in justifying large investment for increasingly expensive reserves, and the problem in justifying the expense years in advance of production. Further when there are new crises, which could be created by one of several scenarios (including higher industry taxes) drops in production which can be relatively immediate cannot always be made up in that short a time interval. And sometimes those with the capacity might not be so inclined – particularly if the shortage drives up prices.
I spoke second and took as my theme that Technology, while it can come to the rescue on some occasions if needed (the horizontal well, slick fracture development of gas shales for example) requires considerable lead time and the solving of several technical problems if it is to succeed. Those solutions as has been stated in the Hirsch Report, can take 20-years to become a significant player. Thus while, for example, the “Green Hornet” flew with biofuel power this April, it used oil from camelina, which is not a popular agricultural product in the US. I then pointed out ( and I will expand this thought into a technical post, perhaps this Sunday) that those who anticipate Peak Coal in the next few years are likely going to be mistaken. The reason there has been no innovation in mining has not been because no one has thought of answers, rather that what is used today is too cheap to need replacing.
Dave Murphy then gave a discussion on the changes needed to move away from the classical economics theories toward recognition of other factors in societal health. He noted that national economies are tied to the consumption of oil (which is then tied to price) rather than to oil price itself. The variation between expansion (up 2%) and recession (down 2%) is not great. Though it is the provision of cheap fuel that has funded international growth. Every recession since 1970 has been preceded by an oil price spike.
We are now in an era where small fluctuations in flow (on the order of 1 – 2 mbd) can have a significant impact on price and economic stability. We are entering a period where the cost of production of oil begins to reach the point at which a recession is started, but the drop in demand in a recession would not justify the oil supply. And so this conundrum illustrates the world into which we are rapidly entering.
As the production of energy requires complex drilling platforms that rent for $450,000 a day (of the Deepwater Horizon ilk) rather than the wooden platforms used to drill Spindletop, those costs will only continue to rise.
With so much uncertainty it is, perhaps time to change economic models, from the neoclassical to bio-environmental. He noted that studies have shown that emotional happiness increases only until a person earns $75,000 a year. Above that there is no increase, and so perhaps we should be content when we reach this level, and stop the perpetual growth cycle.
The session closed with a talk by Jeff Vail, who talked of the “Rescuing of Suburbia.” Much has been written about the trouble that those communities are in, but does it really need rescue? Of the 150 million Americans living in the 40 million homes in Suburbia, how many would have the money to relocate and where? There are 5 million homes at risk of, or in foreclosure with that big a problem already how could one afford to abandon Suburbia.
Commuting costs are a real problem, but this is a low hanging fruit. But to save energy and cost, one must accept inconvenience. (The Admiral later in the evening talked of going to a child’s game and seeing all the neighbors there in there SUVs , all having driven separately an hour and forty-five minutes to get to the game, and the same back.) He talked of making other decisions, citing Brad Lancaster in Tucson who harvested rainwater to grow good to feed 50% of the needs for a family of four on what started as a barren lot. The open spaces also allow more effective installations of solar power.
The transition however must go beyond that, if we are to re-invent suburbia – and there are tools in development. Rapid prototyping equipment and early machines that can make 3-D objects from computer programs. This will allow small-scale manufacturing and construction, and distributed manufacturing decentralizing the process and empowering suburbia. Suburbia, it must be remembered, has need the greatest egalitarian land ownership movement in history. Unfortunately the transition, without significant help, will not happen fast enough.
We then took the break in which I started this post. I'll write on what came next in a second post.
I occasionally think that attending Conferences should be a biennial practice, since change in the papers is so slow – but so far that hasn’t been the case this year where the new information available is already evident, though some of the old lions are still roaring on the same topics. There were three concurrent sessions this afternoon, and so I can only report on one set – starting with the session on the Export Land Model (which just gets more worrisome); then the Oil Drum session (where I was a speaker) and then the session on Energy Alternatives (which mainly talked about EROI). This report is being written incrementally, and has been updated once, but I will add the evenings two sessions in a second post, given the length that this one has already.
Jeff Brown began the session on the outlook for exports. His Export Land Model is now well recognized within the community, and after paying a short tribute to the late Matt Simmons, always a friendly and helpful face at these meetings, he brought us more up to date on where the model predictions were being validated, and what they were showing. With lots of papers to cover I can only hit the very high points of the presentation, so this is a very short summary. After commenting on how production declines in major fields, he tied this in to the rising standards of the producing country, and showed that, in a base case a 5% decline post-peak production for a country’s oil, when matched with a 2.5% growth in that country’s consumption, driven by the oil, but continuing after it starts into decline, rapidly lowers exports. Simplistically within 3 years after peak the country will have exported half the oil it will export post-peak. He then compared this theoretical situation with the realities of Indonesia and the UK, where within 9 years for Indonesia, and 6 years for the UK, the countries stopped exports and became importers. Export declines in the final years were over 25% per year.
He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia) will stop exporting before 2030. Looking a the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.
While unconventional oil is supposed to be a positive contributor in the future, he noted that when Canada and Venezuela are combined, production is actually falling. The worrying factor is the combination of China and India, who have increased imports from 11.3% of the total in 2005, to 17.1% in 2009. If this continues they will consume 25% of global oil exports by 2015, which will significantly reduce the amount available to the rest of us.
With the first speaker having raised the problem of oil, it was Jonathan Callaghan who shifted the topic over to Natural Gas. Jonathan runs the websites on energy that I use as a reference on occasion, where there are very useful plots of the energy consumption, production and import/export balances for the nations around the world. These provide patterns for the various fossil fuels, by nation, and Jonathan used representative plots from the series for his talk, beginning with the UK.
Noting that the UK used town gas (made from coal) until 1959, when the first LNG was imported from LA, gas in the UK was privatized in 1986 and reached peak production in 2000, becoming a net importer of natural gas in 2004. This last winter it was necessary, on three occasions for the National Grid to issue “Gas Balancing Alerts”, where industrial consumers should reduce use to protect domestic consumers. The situation is anticipated to get worse.
He contrasted this way of managing a resource with that of the Dutch, who have the large Groningen Gas field but which they have managed in a much more conservative way. With their different management philosophy they have retained a considerable margin for the future, over the same time interval.
Presentation of the data in this way also allows judgments that are not otherwise immediately obvious. For example consider the data for Argentina:
Without looking at the export/import data it might be hard to decide whether it had peaked in production, but when that data is examined the conclusion is relatively obvious.
And thus he went through different countries showing how the analysis of the plots, with a little local knowledge, gives a global picture of what is going on. As South America moves to becoming an overall importer and China is adding compressors to the pipeline from Turkmenistan to increase the flow rates, the time before world production peaks may be considerably sooner than people realize, since most of the fields are being run on the British, rather than the Dutch model.
He then turned to coal, in what was really a second talk, looking at the amounts that are available (pressing the coal button on the website) allowed him to note how dominant China is becoming in coal consumption.
The problem, however, is while the condition of the industry is known in general, the behavior of China and India will likely govern overall future coal use in ways that we have yet to understand.
There was then a very short break, and the team from The Oil Drum took to the podium. Gail Tverberg began with introductory remarks explaining some of the factors, such as Geology, Technology, Economics and Timing that influence production and its impact on demand, and ability to respond to it. She noted the difficulty in justifying large investment for increasingly expensive reserves, and the problem in justifying the expense years in advance of production. Further when there are new crises, which could be created by one of several scenarios (including higher industry taxes) drops in production which can be relatively immediate cannot always be made up in that short a time interval. And sometimes those with the capacity might not be so inclined – particularly if the shortage drives up prices.
I spoke second and took as my theme that Technology, while it can come to the rescue on some occasions if needed (the horizontal well, slick fracture development of gas shales for example) requires considerable lead time and the solving of several technical problems if it is to succeed. Those solutions as has been stated in the Hirsch Report, can take 20-years to become a significant player. Thus while, for example, the “Green Hornet” flew with biofuel power this April, it used oil from camelina, which is not a popular agricultural product in the US. I then pointed out ( and I will expand this thought into a technical post, perhaps this Sunday) that those who anticipate Peak Coal in the next few years are likely going to be mistaken. The reason there has been no innovation in mining has not been because no one has thought of answers, rather that what is used today is too cheap to need replacing.
Dave Murphy then gave a discussion on the changes needed to move away from the classical economics theories toward recognition of other factors in societal health. He noted that national economies are tied to the consumption of oil (which is then tied to price) rather than to oil price itself. The variation between expansion (up 2%) and recession (down 2%) is not great. Though it is the provision of cheap fuel that has funded international growth. Every recession since 1970 has been preceded by an oil price spike.
We are now in an era where small fluctuations in flow (on the order of 1 – 2 mbd) can have a significant impact on price and economic stability. We are entering a period where the cost of production of oil begins to reach the point at which a recession is started, but the drop in demand in a recession would not justify the oil supply. And so this conundrum illustrates the world into which we are rapidly entering.
As the production of energy requires complex drilling platforms that rent for $450,000 a day (of the Deepwater Horizon ilk) rather than the wooden platforms used to drill Spindletop, those costs will only continue to rise.
With so much uncertainty it is, perhaps time to change economic models, from the neoclassical to bio-environmental. He noted that studies have shown that emotional happiness increases only until a person earns $75,000 a year. Above that there is no increase, and so perhaps we should be content when we reach this level, and stop the perpetual growth cycle.
The session closed with a talk by Jeff Vail, who talked of the “Rescuing of Suburbia.” Much has been written about the trouble that those communities are in, but does it really need rescue? Of the 150 million Americans living in the 40 million homes in Suburbia, how many would have the money to relocate and where? There are 5 million homes at risk of, or in foreclosure with that big a problem already how could one afford to abandon Suburbia.
Commuting costs are a real problem, but this is a low hanging fruit. But to save energy and cost, one must accept inconvenience. (The Admiral later in the evening talked of going to a child’s game and seeing all the neighbors there in there SUVs , all having driven separately an hour and forty-five minutes to get to the game, and the same back.) He talked of making other decisions, citing Brad Lancaster in Tucson who harvested rainwater to grow good to feed 50% of the needs for a family of four on what started as a barren lot. The open spaces also allow more effective installations of solar power.
The transition however must go beyond that, if we are to re-invent suburbia – and there are tools in development. Rapid prototyping equipment and early machines that can make 3-D objects from computer programs. This will allow small-scale manufacturing and construction, and distributed manufacturing decentralizing the process and empowering suburbia. Suburbia, it must be remembered, has need the greatest egalitarian land ownership movement in history. Unfortunately the transition, without significant help, will not happen fast enough.
We then took the break in which I started this post. I'll write on what came next in a second post.
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