The Peak Oil Catastrophe-In-Waiting

The Peak Oil Catastrophe-in-waitingBy Tam Hunt, Contributor   |   January 24, 2011   |   88 Comments

The United States continues to slumber while a catastrophe lies in wait. Increasing numbers of analysts and policymakers are warning of another super price spike for oil and the likelihood of "peak oil" more generally.

Peak oil is the point at which global oil production reaches a maximum and then declines. The speed of the decline is a key unknown and if it is relatively fast, the results could be truly dire for economies around the world. 

We saw prices as high as $147 a barrel in mid-2008 (the dominant factor for gasoline prices well over $4 a gallon), which played a strong role, perhaps the dominant role, in the global Great Recession -- as high oil prices have in most recessions over the last fifty years. Once the recession hit, oil demand dropped and prices plummeted as low as $33 a barrel.

Prices steadily recovered since their low in early 2009 and are back to dangerous levels in early 2011 (about $90 a barrel). We can expect far higher prices as the global recovery continues. An increasing number of analysts are projecting prices as high or higher than the 2008 peak in the next couple of years.

More importantly, global net exports of oil continue to drop as major oil exporters increase their own consumption at the same time as their production is stagnant or falling. As a major oil-importing nation (about 2/3 of our oil is imported, by far the largest import dependency in the world), net oil exports are far more important to the U.S. than total oil production. Even if global oil production increases in the coming years, if there is less available for oil-thirsty nations like ours the situation will be far worse than total oil production figures would otherwise suggest. More on this below.

It is time for public discussion of this issue to reach the same prominence as climate change. Indeed, many solutions to these “twin crises” are the same because reducing petroleum dependence will ameliorate peak oil and climate change.

This article is an update on the peak oil situation at the beginning of 2011 and a follow-up to my many previous pieces on peak oil (one with Nobel Prize winner Walter Kohn). First, some facts.

Global oil production has plateaued since 2004, despite the fact that oil prices have risen dramatically. Figure 1 shows this history, demonstrating that oil production has not been very response to market forces, suggesting strongly that we are at a global peak.

Figure 1. Global oil production and oil price 2004-2010. (Source: EIA, chart courtesy of www.TheOilDrum.com).

Bloomberg reported a summary of oil price forecasts for 2011, selecting for their summary those forecasters who have the most accurate track records. The dominant view was that average oil prices will rise almost as high in 2011 as seen in 2008 – to $87 a barrel for the year as a whole (the average price for 2008 was $99). It’s likely, however, that the actual average 2011 price will be significantly higher because we are already over this price at about $90 a barrel in early January and the large majority of economic forecasts project a robust global recovery this year, with attendant increases in oil demand.

More anecdotally, but with perhaps more impact because of its source, Shell’s recent ex-president John Hofmeister predicts $5 gas by 2012 due to the global economic recovery and very tight supply.

A number of comprehensive reviews of the global oil supply situation have appeared in the last year.

• Lloyds and Chatham House: “We are heading towards a global oil supply crunch and price spike.” “A supply crunch appears likely around 2013… given recent price experience, a spike in excess of $200 per barrel is not infeasible.”
• The U.S. Department of Defense issued a stark warning in its 2010 Joint Operating Environment (JOE) report, including discussion of “peak oil”: "By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.”
• Similarly, the German military is taking peak oil very seriously, made clear by a report leaked to Der Spiegel in 2010: “[The report] warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the ‘total collapse of the markets’ and of serious political and economic crises.”
• The same article reports on secret British government planning for peak oil: “The leak has parallels with recent reports from the UK. Only last week the Guardian newspaper reported that the British Department of Energy and Climate Change (DECC) is keeping documents secret which show the UK government is far more concerned about an impending supply crisis than it cares to admit. According to the Guardian, the DECC, the Bank of England and the British Ministry of Defence are working alongside industry representatives to develop a crisis plan to deal with possible shortfalls in energy supply.”
• The UK’s Industry Task Force on Peak Oil and Energy Security (a non-governmental group) issued its second major report on peak oil in late 2010, concluding: “[W]e face a situation during the [next few years] where fuel price unrest could lead to shortages in consumer products and the UK’s energy security will be significantly compromised. This has the potential to hit UK business and commerce as well as the most disadvantaged in society with yet another crisis.”

In August of 2009, the International Energy Agency (IEA), the official energy watchdog for the western world, was even more strident in its warnings. The UK’s Independent newspaper reported:

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

Later in 2009, two IEA whistleblowers went public and claimed that the situation was even worse than the IEA was stating publicly. The UK’s Guardian newspaper reported in November of 2009: “A … senior IEA source, who has now left but was … unwilling to give his name, said a key rule at the organization was that it was ‘imperative not to anger the Americans’ but the fact was that there was not as much oil in the world as has been admitted. ‘We have (already) entered the ‘peak oil’ zone. I think that the situation is really bad,’ he added.”

IEA has changed its public tune yet again, however. IEA’s 2010 World Energy Outlook (WEO), a major forecast released each year, apparently ignored the IEA’s own previous analysis by reverting to its previous policy of simply assuming – literally – that projected petroleum demand will be met with the needed supply. IEA states in WEO 2010: “Energy prices ensure that projected supply and demand are in balance throughout the Outlook period in each scenario….”  In other words, IEA simply assumes that supply will meet demand due to market forces. This is obviously true at a very basic level: supply will always match demand if we define demand as that which is actually consumed. But if we define demand instead as the desired oil consumption, all else being equal, we reach a very different conclusion – far more in line with the US JOE report that projects a possible 10 million barrel per day shortfall by 2015.

WEO 2010 does, however, include some discussion of peak oil and it projects that the 2006 peak in global conventional oil production will never be exceeded (p. 8 of the Exec. Summary). That is, IEA has officially concluded that 2006 was the annual peak for conventional oil production. We are, accordingly, past the point of peak oil if we define this term to include only conventional oil.

Even based on official IEA projections (which are likely far too rosy considering the whistleblower claims), we have a major problem facing us, made clear by the chart below. The key point from this chart is that IEA thinks we’ve already passed the peak for global conventional oil production, as just mentioned. As a consequence, a huge amount of new oil must be found to replace declining conventional oil production – a deficit of about 75 million barrels per day by 2035. This is equivalent to nine new Saudi Arabias coming online by 2035 (Saudi Arabia currently produces about 8 million barrels per day).

IEA projects (Figure 2) that this new oil will come from a combination of new conventional oil production, from known fields yet to be developed and fields not even found yet; from natural gas liquids; and from unconventional oil like tar sands and oil shale.

Figure 2. IEA projections for oil supply through 2035 (Source: IEA WEO 2010.)

For those who worry about national security and energy dependence, the report offers an even more worrying conclusion: the large majority of new oil will come from OPEC nations, with only Brazil, Canada and Kazakhstan as non-OPEC nations projected to have significant new production (Figure 3).

Figure 3. Sources of new oil by 2035 (Source: IEA WEO 2010).

We must keep in mind, however, that these new production figures don’t take into account the growing petroleum demand in these producing nations. The key issue, from a U.S. national security and energy dependence perspective, is not oil production itself but “net oil exports.” The public version of the 2010 WEO does not discuss net oil exports, but private analysts Jeffrey Brown and Samuel Foucher have produced forecasts of net oil exports, concluding that the top five oil exporters will have literally zero oil for export by 2030. Even if, for some reason, their model is substantially off the mark (it’s not been peer-reviewed, to my knowledge), we must consider the net export issue in our analysis because any analysis that ignores rapidly growing consumption in oil-producing nations will be highly inaccurate.

Figure 4. Brown and Foucher’s 2008 projections for top five oil exporting nations’ net oil exports by 2030, in millions of barrels per day (mbpd).

It’s not all bad, however. A more encouraging forecast from the IEA report can be found in their cost savings projections. They conclude that the “new policies scenario” (what used to be called the “reference scenario,” which codifies existing policies) and the 450 parts per million of carbon dioxide equivalent scenario (which codifies new policies required to prevent atmospheric emissions from reaching this level) result in very substantial net cost savings on a global basis and, in particular, for oil importing nations. This is the case because fossil fuel demand is dramatically reduced in these scenarios. This reduction in demand lowers both average prices for fossil fuels and the amount of fossil fuel that needs to be purchased.

Figure 5. Oil-import bills as share of gross domestic product in selected countries (Source: IEA WEO 2010).

It is time to get very serious about managing a reduction in petroleum demand in the U.S. and around the world. I write “managing” because it is my view that this reduction in demand will happen whether we want it to or not due to declining oil supplies. The question, then, is how we best manage this decline. A high quality analysis of the possible scenarios for an oil-constrained world, by Oxford University professor Jörg Friedrichs, appeared in 2010. Friedrichs examines three possible trajectories: “Predatory militarism,” “totalitarian retrenchment,” and “socioeconomic adaptation.”

At least two rigorous policy solutions have been offered in recent years. The Rocky Mountain Institute completed Winning the Oil Endgame in 2007, suggesting a suite of policy and technology solutions that can get the U.S. off oil, “led by business for profit.” Richard Heinberg offered his own book-length solution, The Oil Depletion Protocol, in 2008, suggesting how the U.S. and other nations could manage declining oil supplies by achieving a three percent per year reduction in demand through various policies.

As we continue a global economic recovery in 2011, higher oil prices are inevitable, super price spikes are a strong possibility, and even shortages are not out of the question. We must ask ourselves: should we manage the decline in a way that avoids economic catastrophe or do we continue our generally laissez faire attitude toward this major problem?

Tam Hunt is president of Community Renewable Solutions, LLC, a renewable energy consulting and project development company. He is also a Lecturer in climate change law and policy at UC Santa Barbara’s Bren School of Environmental Science & Management. His blog, Thought, Spirit, Politik, is at www.tamhunt.blogspot.com. 

The information and views expressed in this article are those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on its Web site and other publications.

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Add Your Comment 88 Reader CommentsComment
1 of 88fireofenergy-150745January 24, 2011The ONLY solution (other than closed cycle nuclear) that can sustain Billions of people is the ROBOTIC SOLAR PV FACTORY.
The following link points out that China already have them.

http://www.youtube.com/watch?v=i5nJjlbU5lM

ONLY the robotic solar PV factory could ever boost solar from 1 sq mi to the tens of thousands of sq miles needed to overcome oil decline caused famine, not to mention GW.
Thus it is the most important "thing" we need.

Oil decline is such an obvious event, about to happen, that it should be considered mandatory to teach every one about it...Comment
2 of 88glenn-doty-175949January 24, 2011This is a good article Tam,

I'll put in my plug for a cost-effective long term solution here:
www.WindFuels.com

and then respond directly...

Yes, we will see a very sharp price spike. Obviously. I basically only read the EIA and IEA outlooks as something to laugh at; but I was absolutely floored when the EIA came out with a prediction of only a 6% increase in price for this year. They're likely off by $20/bbl.

Fatih Birol, also showed that current fields are seeing a depletion rate of 6.2%/year, more than twice what was expected in 2008, so the near-term situation should positively scare the hell out of any thinking person that is aware of it. Long term, however, the non-conventionals have a price point at which they are competitive, and once the price of oil exceeds that point on an average annual basis then those products will be ramped up aggressively.

The problem is that the average price never gets high enough because even the $147/bbl killed the economy so quickly that the average price for 2008 didn't even exceed $100/bbl.

I still don't see electric vehicles as ever being viable, though prices might hit a break-even point for a few months/year until ~2018 or so (by then the tar sands, shale oil, and CTL products would have ramped up and stabilized the oil market between $150-$200/bbl).

But we agree that oil prices are going to raise quickly, and that's going to suck for our economy.

But WindFuels aren't that far from deployment, so at least there is a long-term VIABLE answer in the works.Comment
3 of 88AnonymousJanuary 24, 2011A significant price shock is inevitable but liquid transportation fuel supplies will eventually stabilize because lots of alternatives will become profitable well below $200 per barrel. These include nontraditional sources such as tar sands, production from coal, and various types of biofuels. Part of transportation fuel needs will likely be transitioned to natural gas. The consumption subsides for oil that are in place in much of the developing world will become unsustainable and when these are finally reduced more efficient usage will lead to some easing in supply constraints.

If the government had been at all serious about easing this transition we would have seen better funding for biofuels and drilling in the Arctic wildlife refuge (AWR). Reserve estimates for the AWR are in the ballpark of 1 Trillion dollars worth of recoverable oil and the impact on the environment from such drilling would be quite modest (almost certainly much lower than that from mining tar sands). Foresight would have been helpful, but the market place will sort this out for us too, albeit less gently. Tam occasionally remarks that he is less concerned about global warming than peak oil, but unfortunately market forces won't necessarily solve the climate change problem because we probably do have enough cheap coal and natural gas to significantly alter the climate.

When Glenn (in comment #2) says that WindFuels offers a "long-term" solution I suppose he has a different view of what long term is than I do. This process requires a ready source of CO2 as a feedstock. While we still generate electricity from coal and natural gas such a supply exists, but ultimately we need to ween ourselves off of such fuels and in the longer term environmentally friendly sources of CO2 to turn into transportations fuels are going to be harder to come by.
StevenComment
4 of 88John-BronsonJanuary 24, 2011In addition to the oil supply problem, the US has an increasing budget deficit. This requires the federal reserve to create more money, devaluing the dollar. This puts upwards pressure on oil prices. While I believe EVs are the long term solution. In the short run, the US should allow increased offshore drilling, open up ANWR and commercial oil shale production. Current policy has the US heading toward default.Comment
5 of 88fireofenergy-150745January 24, 2011I just wanted to say "thanks" for the info. I like to get carried away with the thought of PV factories and wanted to acknowledge that such is not "the only way out".

I liken global warming as a ball being thrown off a cliff. The "throw" is time and gravity is the accelerating CO2 count. It's going to fall at an exponential rate but we are still just starting to pass the edge, thus can't (really) notice the effects. Using the weather (as a proof or disproof) is still pointless.

The solution will also have to be exponential as well, hence such ever expanding (and competing) robotic factories for solar. The ball all of a sudden becomes a spaceship and is held up by the forces created by the exponential solution.

Dr. Steven Chu said that we are working on a battery that is 5 times better and 3 times cheaper than lithium. There is no doubt in my mind that if only half of that turns out to be true, electric cars will still take off almost as fast as the proverbial Tesla roadster (if politics didn't get in the way)!Comment
6 of 88glenn-doty-175949January 24, 2011@ Anonymous,

I think that trying to predict the cost-benefit of various technologies in the future is difficult-to-impossible as we look more than 2 decades out, but within the next decade I see no compelling argument that the overall carbon emissions of the grid will reduce significantly. Wind is steeply limited in its growth capability without grid stability, which is not remotely competitive in any form throughout the Midwest (where we have the cheapest wind potential). Wind will not likely exceed 20% of the total electricity profile by 2030, without full deployment of WindFuels or a currently undiscovered competitive grid stability mechanism.
Solar will remain a specialty market for enthusiasts for at least a decade, and will likely not comprise more than 5% of the total energy portfolio by 2030.

Hydro has long been the most competitive renewable, but most really good dam spots have been dammed, and run-of-the-river isn't competitive yet, so hydro is unlikely to expand by more than 5% of the total electric profile.

However, nuclear power is waning. It's unlikely that a new nuke will be completed in this country before 2017, and it's highly unlikely that more than 16 new nukes will be built before 2030... in that time, more than 100 GWs of nuclear capacity will be decommissioned. That loss, combined with a reasonable assumption of ~1%/yr increase in demand for electricity, should result in the net amount of fossil power CO2 emissions to remain the same by 2030 as it is now. In that time, we're likely to see another doubling of ethanol yields, increasing the point-source emissions of CO2 by another 100 million tons-CO2. And EV's might make up 1% of the fleet by then, increasing point-source emissions by ~50 million tons-CO2.

Sure, by 2050 we might see less point-source emissions, but even now it would be cheaper to extract CO2 from the atmosphere and recycle it to fuels than it would be to buy an EV and power it. *Shrug*Comment
7 of 88fireofenergy-150745January 24, 2011Solar will not "make it" because people say it won't! I thought I posted the link that proves that China has a robotic solar factory. I have to argue because without people like me who sticks up for it, it will never make it.

Please try to understand the nature of "exponential growth"...

Solar panel should be as cheap as dirt once... Same with the battery tech. NO reason why it should "remain expensive", other than politics.Comment
8 of 88fireofenergy-150745January 24, 2011Faith in projections could be devastating...Comment
9 of 88AnonymousJanuary 25, 2011Concerns about peak oil are, in a word, silly. Even more ridiculous is the New Deal type assumption that the government is needed to "manage" our way thru. That laissez faire approach is actually a free market approach and the only way
adjustments can be made, as they always will, from pricing. The fallacy in this article's logic is that only pin headed college professors know best. We all know what happened during the 1930s when those same college professors decided that the economy needed to be "planned." They planned our nation into the longest depression in history, in any country. There are several likely scenarios that may appear should oil prices rise sharply due to inadquate supply. The first is that technologies of oil extraction that were formerly not practical, suddenly become so. That's how offshore oil wells originally came about. Nowadays, it is claimed that $80 oil will make shale oil extraction in situ very attractive and there is a WHOLE lot of oil in U.S. shale deposits. So much so, that talk of peak oil shortages seem rather nutty.
Actually, there is a movement underway that promises that oil will be far less necessary in the future. Roughly 50% of oil is for transportation. Anyone who thinks electric cars are a long way off will, in my opinion , be surprised. The upcoming Tesla Model S will demonstrate that battery prices nowadays allow a company to build a completely competitive high end performance sedan that can handle long trips with its 300 mile driving range and 1 hour rechargeability. The way battery prices are dropping, we won't apparently need any really big advances in battery technology in order to provide lower cost electric vehicles. With level 3 charging stations, a car obtains enough charge in 10 minutes to travel 45 to 50 miles.Comment
10 of 88AnonymousJanuary 25, 2011Glenn,
I generally agree with your estimates for how rapidly wind and solar scale (Tam is an incurable optimist and predicts much larger percentages from these sources by 2030). Of course, if the "WindFuels" plan is to use off peak excess wind power to make transportation fuels, and wind is only going to have ~20% of the market in 20 years and only a modest portion of that will be excess power, the amount of transportation fuels you will make will only displace a small percentage of oil consumption. In the longer term, say circa 2050 coal generation is going to be gone and ready sources of CO2 are hopefully going to be scarce (and hopefully sequestration will be prevalent before then). Thus, while there may be a modest niche for using electricity to convert CO2 to transportation fuels I only see this as a small portion of the solution.

Extracting CO2 directly from the atmosphere would be wildly expensive so your last remark of comment #6 I am going to assume was intentional hyperbole.
StevenComment
11 of 88jerry-mayeux-172589January 25, 2011Powering the Economic Pyramid
_____________________CONSUMER
___________________RECREATION
_________________COMMUNICATION
_______________TRANSPORTATION
_____________BUSINESS
___________INDUSTRY
_________AGRICULTURE
|SOIL-MINERALS|FOREST|WATER|WILDLIFE|WIND|
|SOLAR|GEOTHERMAL|BIOMASS|OTHER__________|
Conservation is the wise-use, management, and development of the Earths natural resources.
Oil is a non-renewable natural resource!
Renewable natural resources & conservation are needed to power the Economic Pyramid!Comment
12 of 88AnonymousJanuary 25, 2011Good stuff, Tam.Comment
13 of 88glenn-doty-175949January 25, 2011Steven,

I stated that without WindFuels I see wind generating no more than 20-25% of the grid energy by 2030, I did not say that is what I anticipate will be the case if there is a grid stability solution.

As for the cost of removing CO2 from the atmosphere, it can be done with modern membrane technology for ~$250-$300/ton. That is indeed "Wildly expensive", but that works out to almost exactly $2.50 - $3.00/gallon of sythesized fuels, as opposed to today's market price of $75/tonne, or $0.75/gallon of sythesized fuels.

So, the cost of synthesized fuel would be $3.75 - $4.25/gallon if your sythesized fuels were derived from CO2 extracted from the dilute atmosphere. That's not competitive now (though it's HALF the price that gasoline would have to be in order for an EV to make sense), which is fine because that's not important now... we have ~5 billion tons of point-source emissions in this country alone, and that is likely to INCREASE over the next 20 years...

However, after 20 years of further development in membrane technology and CO2 related chemistry, when point-source emissions do start to fall (this may be longer than 20 years), there will be commercially viable means of securing more CO2...Comment
14 of 88mpatinJanuary 25, 2011If we want serious attention paid to any looming peak oil economic disruptions, we should first think of decoupling that issue from climate change. The global warming/climate change debate has become so twisted that it will never be politically resolved until the Greenland ice shelf actually does slip into the ocean and Miami looks like Brisbane recently, only permanently so. Mentioning the two in the same breath is sure to condemn the peak oil issue to political purgatory.

As for the free market. Free markets are notoriously flawed when it comes to the pricing and allocation of resources for long-term economic stability. Typical short-term market mentality is especially dangerous when applied to an essential input to production like energy, where supply can very suddenly become constrained. After all, every sip at your can of Pepsi is just as full and satisfying as the last until you suddenly reach the bottom of the can and all the pleasure you've been having up to that point becomes nothing but a memory.Comment
15 of 88douglas-meyer-168226January 25, 2011We are not remotely near a peak oil problem with respect to reserves. Peak oil pricing and volume are driven by a virtual monopoly (i.e. the OPEC cartel) and a general agreement among Big Oil (Shell, Exxon Mobil, BP, etc.). You can forget about "market forces", "supply and demand", "market elasticity", and other free market economic theories in such an environment.

The good news is that biodiesel can provide all the portable liquid fuel we need, at >50mpg too, without the need for hybrid vehicles. It's only politics and lobbyists that stand in the way of US energy self sufficiency.

Do you buy an electric car with a 100 mile range, or a diesel engined car with a 500 mile range? Easy answer.Comment
16 of 88JimWJanuary 25, 2011Scientific American says Peak 2014. How do we get past peak??
Wind and solar will help if coupled with GreenNH3 or GreenGas.cc
Nuclear is a necessary evil.
Algae ?, cell ethanol?, pyrolisis?, too much in, dont work.
Batteries wont move big trucks but GreenNH3 will.
There is a ton of late night electric going to waste, that could be stored in GreenNH3.. Readers,, time to get involved..Comment
17 of 88KJMClarkJanuary 25, 2011As you can see from the comments, well over half the population doesn't know about the problem or doesn't think it's a problem. I think the best thing we can hope for is for prices to rise quickly. The only thing we'll respond to is the price signal. Even given that, the first response will be to kick whoever's politically in charge out of office. The second response will be much gnashing of teeth and another recession. The third response will be to look for some country to invade. The fourth response will be a decrease in sales less fuel-efficient motor vehicles. Fifth, we may invade the country in #3. Sixth, we'll increase sales of fuel-efficient motor vehicles. Seventh, we'll improve public transit. Eighth, we'll move to more transit/pedestrian/bicycle oriented development.

Notice that in the US, at least, we'll do things in pretty much the least effective order. As Churchill said, "The Americans will always do the right thing . . . After they've exhausted all the alternatives."Comment
18 of 88KellerJanuary 25, 2011I agree with "mpatin", the problem is transportation fuels, not global warming.

By spending inordinate amounts of money and time on inherently poor solutions to a perceived problem, the actual problem only becomes catastrophically worse.

We need to increase the efficiency of energy use for transportation while also increasing the use of cost effective energy supplies that actually reduce oil use. By attacking the root cause, the secondary issue (global warming) is solved as a by-product of the primary effort.Comment
19 of 88AnonymousJanuary 25, 2011"Concerns about peak oil are, in a word, silly."

Hmmm...

If by concern you mean porn doom scenarios, yes, you're probably right. If by silly you mean that everything will be OK, that 7B world inhabitants and 300M Americans will emerge on the other side of PO with a few cuts and a headache, you've got another thing coming.

Oil touches 99% of our lives. Affordable, readily available oil is indispensable. The moment it isn't, there will be a total different life style, one that you and I aren't accustomed to.Comment
20 of 88douglas-prince-175356January 25, 2011Well, maybe we'll all get lucky and we'll dig up some horrendous airborne virus out of South America or Africa and it'll quickly wipe most of humanity. Something so terrible even the rats won't eat the carcasses rotting in the streets.
Then, everything will be fine and we can start over.
Hey, it's just a thought...Comment
21 of 88AnonymousJanuary 25, 2011Hey, Doug.

I don't pay much attention to the apocalyptic scenarios. Hollywood does a good job at it already. No need to fuel the fire.

That said, the transition from oil to post-oil will be hard from millions, most certainly myself included.Comment
22 of 88Tam_HuntJanuary 25, 2011To respond to some comments and to provide a bit more hopeful tone than my generally gloomy piece provided, here are a number of links painting a picture of how I see the next 20 years unfolding:

Price-induced conservation and energy efficiency will continue the dramatic improvements in energy and emissions intensity in the US economy. See this link from the EIA early release WEO 2011, projecting that energy intensity will drop by almost half by 2035, a VERY encouraging trend, which will surely be even more pronounced energy prices rise as high in the next few years as many analysts are now predicting:

http://www.eia.doe.gov/forecasts/aeo/early_intensity.cfm

Renewable energy will continue to grow at a dramatic pace. Solar power in the US grew at 50% last year and has sustained a 35-40% pace of growth over the last decade:

http://www.renewableenergyworld.com/rea/news/article/2010/01/exotics-and-the-march-of-technology

And in terms of federal policies, I think Obama has generally the right idea despite failure to enact what would be a very helpful national RPS:

http://www.renewableenergyworld.com/rea/news/article/2008/11/november-4th-was-a-great-day-for-renewable-energy-54034

And with respect to renewables I'm not that bummed about the failure of climate change legislation b/c I think a carbon fee approach would be far superior and this may eventually have some traction in Congress:

http://www.renewableenergyworld.com/rea/news/article/2008/06/forget-cap-and-trade-a-carbon-tax-is-better-52717

So even though we're facing perhaps a tsunami in the form of peak oil-induced super price spikes and perhaps a cyclical recovery/recession cycle for the next 20 years or so, I do believe the long-term is probably going to be good as we become much more energy efficient and most of our energy comes from renewables. That's my story and I'm sticking to it...Comment
23 of 88fireofenergy-150745January 25, 2011Tam, excellent article for awareness!
Solar has grown only because of the "cool" factor. (bear with me, though). It still takes too long to recoup for most. It also has plenty of room to continue growing at its exponential rate - until it hits the "too expensive to be cool" factor that we all already know about.
Then, that wonderful exponential growth will slow down to just a "steady and boring, not doing any good" lineal growth. Instead of taking 20 years to power over 66.5% of all global energy needs, it will take, like "never" just to get to 1 or 2%!

That is why I'm so pressing on ROBOTIC SOLAR PV FACTORIES. In that is the ONLY way solar can CONTINUE exponential growth well into the bounds of its FULL POTENTIAL. (And it is a matter of national security because we don't want to "have to rely on China" for our solar fields...Comment
24 of 88AnonymousJanuary 26, 2011Tam, good article. Your right that there are signs here in the UK the British government is concerned. Labour didn't seem worried about this but the peak oil task force managed to get a meeting with senior minsters in DECC just before they lost power. I have made an FOI request to DECC just after the tory led coalition came to power for any policy documents relating to peak oil. My request was refused for reason that the number of documents to be searched through was "substantial". So it appears the last government was more worried than it let on. Chris Huhne the UK energy minister also mentioned peak oil in a radio interview on the today programme just before Christmas when plugging his energy bill. This is the first time I've ever heard a serving minister mention this topic at all!Comment
25 of 88a-b-24958January 26, 2011From Fireofenergy :" I thought I posted the link that proves that China has a robotic solar factory. "

here's what is happening in Europe. The Chinese don't have that, they power their automated PV panel producing plants using US coal energy . . .

http://www.pv-tech.org/news/_a/solarworld_places_faith_in_competitive_manufacturing_in_germany/?utm_source=PV+Tech+-+Newsletter&utm_campaign=4994ccdf7a-PV_Tech_Newsletter01_06_2010&utm_medium=email

SolarWorld is investing € 350 million in the new production facility and brings internal solar wafers production to 750MW by the end of the year. To remain competitive with low-cost regions in Asia, SolarWorld has automated the entire manufacturing process as well as built facility systems that use less energy and water to reduce costs. An example of cost reductions is the use of waste heat from the crystallization process to heat the entire building, according to the company. The facility also includes approximately 1MW of solar modules on the rooftop.
Mr Röttgen said, "The constantly progressing climate change is forcing us to make our energy supply more and more carbon free. My idea is that by 2050 the renewable energies will cover our energy needs almost completely. A new market is emerging, in Germany and worldwide."

http://www.pv-tech.org/news/_a/project_focus_first_solar_installs_1.3mw_system_on_oder451_facility456_roof/?utm_source=PV+Tech+Newsletter+-+Thin+Film&utm_campaign=5a48eb134b-pvtech_newsletterTF_08_07_2010&utm_medium=email

First Solar has begun the operation of a 1.3MW solar power plant on the roof of its production site in Frankfurt (Oder). The company now represents the entire value chain of photovoltaics, from manufacturing of the solar modules and power generation to recycling. "We are therefore pleased that First Solar is now using solar energy to manufacture its modules"Comment
26 of 88JaertXJanuary 26, 2011The Peak Oil scenerio is good for the oil business' profits and good for renewable energy business' profits. Good article.Comment
27 of 88e-patrick-mosman-41976January 26, 2011In 1980 Brazil had ZERO oil reserves and was processing one million BBLs per day of imported crude oil. After the initial 'ethanol will reduce imports' disaster, Brazil initiated a massive exploration program and today Brazil has the third largest reserves in the world and processes more than two million BBLs per day of their own crude.So much for the peak oil scare story.So what is the Obama plan to deal with reducing the need for importing crude oil from Canada, Mexico,NAFTA partners Saudi Arabia,joint venture with Shell uSA, Venezuela, owner of Citgo and Nigeria the top five suppliers.Complain,complain while stopping offshore and onshore exploration in the USA while other nations are exploring, drilling and finding oil.Comment
28 of 88aangelJanuary 26, 2011Tam, the article is a very good summary but it misses something rather large...the world financial system is not designed for extended contraction.

For example, the banks are allowed to issue more money than they have on hand via fractional reserve banking. This sets up an extremely unstable situation.

Making things worse, the whole financial system is supported by asset values that will decline as oil declines. Hirsch estimates in his paper published in Energy (http://tinyurl.com/shortagescenarios) that world GDP will decline at approximately a 1 to 1 ratio as oil declines. (Oil makes up the largest share of primary energy at ~34% and is like blood to the world economy.) However, Hirsch does not take into account the impact cascading debt failures and collapsing banks will have on that rate. The impact will be worse.

Pay attention only to the technology and you will get sideswiped by a collapsing financial system. Any projection that assumes we will have the credit to roll out these wonderful technologies is not taking into account that we are going to be in a contracting credit environment (think Great Depression but worse).Comment
29 of 88john-liebendorfer-128603January 26, 2011Peak oil is all good. Will only speed up the development of bio fuels - particularly salt water algae. As oil get more expensive and algae fuels get cheaper the cross over point get evercloser. Perhaps by the end of this decade bio fuels will be cheaper than petroleum.

Since there is no resource constraints on salt water algae fuels - only technological - they will get cheaper as time goes on. We will wind up leaving oil in the ground because it has no value.

Yes there will be major disruptions as we make the transition this decade but it will be short lived.

Finally, while I am a huge supporter of solar and wind they are not transportation fuels. Even with the current push for electric cars I don't believe they will come on fast enough to change the basic dynamics of peak oil and the rise of algae this decade.Comment
30 of 88robert-fiske-166180January 26, 2011John Liebendorfer;
The Algae Biofuel challenge is 'only technical' .. so just like nuclear fusion, then. Close, but no cigar.

We have our work cut out for us. I hope most of you aren't sitting there betting the farm all on one tech or another.. this will hit Everything in our lives. Food, All Prices, Jobs, Real-Estate saleability. As the venerable Jeffrey Brown (mentioned in the article) likes to say, 'Get thee from the discretionary side of the economy! ECONOMIZE, LOCALIZE, PRODUCE.'

Bob

"If you bought it, a truck brought it."Comment
31 of 88John-BronsonJanuary 26, 2011@robert-fiske-166180

I agree that the oil supply problem will hit the financial system first. The US will have 16 trillion in government debt this year. How much money is being sent out of the US for expensive imported oil? And the riots in Mexico and Africa because of high food costs, caused by high oil prices.Comment
32 of 88Mark_DeTrayJanuary 26, 2011Well-put, Tam!

(Though I may give more credit -- no pun intended -- to financial institutions for the current state of the global economy than I do to oil prices).

As you and your readers probably know already, there is an extensive piece on peak oil on Wikipedia that provides additional information on the topic:

http://en.wikipedia.org/wiki/Peak_oil#Concerns_over_stated_reserves

In terms of finding solutions, Google -- and this may be old news to you and your readers -- has put out a proposal for how the US might achieve a renewable energy economy by 2030:

http://knol.google.com/k/clean-energy-2030#

http://googleblog.blogspot.com/2010/12/going-green-at-google-in-2010.html

Keep up the good work!Comment
33 of 88coenraad-pretorius-176946January 26, 2011OK Tam,
I think your comment (#22) was a bit more sensible than the article itself. Several issues come to mind:
1. The prediction that oil exporting nations will export no oil by 2030 rests on many assumptions. The first would be price. Put it this way: @$500/bbl they'll find some oil to export. @$1,000/bbl they'll find even more. Of course, @$1,000/bbl the USA would suddenly NEED a lot less imports...
2. Defining Peak Oil as the day when maximum oil is pumping is silly and just confuses the issue. Who knows when that day would be? Even with supplies in rapid decline, a high enough price may cause a HUGE (short term) bump in production, moving the date way into the future.
3. If you are concerned that high oil prices are going to destroy the US economy, there is a simple solution: Move to an oil exportinh country, like Canada.
4. The whole idea that Peak Oil needs to be "managed" is crock. I certainly don't want the elected prostitutians to get any further involved in distorting energy markets. They've done enough damage with corn ethanol. I'd rather trust the free market, thank you. In spite of its many shortcomings, including OPEC. If supplies drop far enough, OPEC has no hand to play, and they become irrelevant. Like the Texas Railroad Commission...Comment
34 of 88Mark_DeTrayJanuary 26, 2011@ coenraad-pretorius-176946

Are you for complete deregulation of the energy sector?

If so, how does ENRON and the rolling blackouts they induced in CA (2000 - 2001) fit into your calculus?Comment
35 of 88thomas-pritchett-23668January 26, 2011"As for the cost of removing CO2 from the atmosphere, it can be done with modern membrane technology for ~$250-$300/ton."

The reason that is outrageously expense is the sheer scale of the problem. Every ppm of CO2 roughly translates into 2 gigatons of carbon. At even $100/ton removal costs, removing enough CO2 to lower the CO2 concentrations by even 10 ppm could require up 10% of the U.S. annual GNP and that is without considering new carbon being added each year by humans which is in the order of 7 gigatons carbon.Comment
36 of 88coenraad-pretorius-176946January 26, 2011Mark,
You're right: government has a role as a referee. But government should NOT (try to) assume the role of MVP, as all too often happens.

I'm even open to (carefully selected) government-sponsored incentives, as long as these are limited and frequently reviewed to determine if it remains efficient and/or necessary.

BTW, Tam, I'm not sure what the point of "desired" oil consumption is, as that would always be unrealisticly high: one could argue that everybody on the planet "desires" to own an SUV and also "desires" to drive unlimited miles each year, if only gas was @ a "desired" price of $0.001/gal.

The free market has a way of helping one to prioritize...Comment
37 of 88e-patrick-mosman-41976January 27, 2011Mr.Bronson asks "How much money is being sent out of the US for expensive imported oil?" but doesn't clarify what this means.When the US government buys foreign oil to replenish the strategic reserves the cost adds to the balance of trade deficit and the money is borrowed which adds the the nation's financial deficit.When oil companies import foreign oil, primarily from Canada and Mexico the cost effects the balance of trade deficit but has no effect on the nation's financial deficit,companies pay for their imports from earnings.Some of the products produced from foreign oil are exported, jet fuel, marine fuel, diesel fuel and lubricants, gasoline and products manufactured from petroleum feed stock all of which bring a higher price than imported crude and should provide some improvement to the balance of trade.That is assuming that such sales are counted as exports by government bureaucrats.Comment
38 of 88Tam_HuntJanuary 27, 2011To all the free-marketeers, a few words of caution. It takes many years for oil production to ramp up after new finds. And when we look at IEA's projections for today's oil fields declines - about 7% per year and possibly higher - they drop off quickly. As I mention in the article, we will need NINE NEW SAUDI ARABIAS by 2035 to meet projected demand. Again: Nine new Saudi Arabias.

Bottomline: it's NOT going to happen.

And this ignores the more important problem of net oil exports going to zero over time.

We will have to manage our decline or face "free market" induced super price spikes and possible shortages for decades. I urge all the free marketeers to read the Friedrichs paper and start thinking about how the US and other countries may respond to severe and extended price spikes and declines in net oil exports.

US predatory militarism, to use the phrase Friedrichs uses, is a very strong possibility given our aggressive history. And is this the kind of future we want?

Think about it.Comment
39 of 88AnonymousJanuary 27, 2011"In 1980 Brazil had ZERO oil reserves and was processing one million BBLs per day of imported crude oil. After the initial 'ethanol will reduce imports' disaster, Brazil initiated a massive exploration program and today Brazil has the third largest reserves in the world and processes more than two million BBLs per day of their own crude.So much for the peak oil scare story."

Finding and processing oil doesn't mean world wide reserves haven't reached the peak point. There are billions and billions of barrells to be discovered, extracted, processed, and consumed until the tub is dry.

The questions are: how much is really left, what's the declining rate, what's the retail cost? That's peak oil.Comment
40 of 88e-patrick-mosman-41976January 27, 2011Mr.Hunt,
Referencing your warning"To all the free-marketeers, a few words of caution.", who exactly are the free-marketers and who are the good guys, government run energy bureaucrats, commissars or even czars, Hugo Chavez is a current example dictating energy policies and picking winners.The availability of a convenient, affordable, high energy material from any source has never been the wrecking ball of any economy.
In fact right now the Obama administration's ExIm bank is loaning Petrobas, the Brazilian oil company, two(2)billion dollars for their deep water drilling project offshore Brazil and one(1) billion dollars to Mexico to support/fund offshore drilling in the Gulf of Mexico.This is your tax dollars at work to explore and produce oil in countries while prohibiting exploration and drilling offshore in USA waters,the hypocrisy is monumental.Comment
41 of 88Tam_HuntJanuary 27, 2011@#39: the IEA report, which is considered quite conservative, includes new finds in the "crude oil: field yet to be found" category, which they project will be about 20 million barrels per day by 2035. This is less than 1/3 of the projected 72 mbpd needed to make up for declining supply from existing fields and increased demand. And it is in my view and many others' view quite optimistic to suggest that fields not even found yet will produce 20 mbpd by 2035.

This is the case because global oil discoveries peaked back in the 60s (this is an uncontroversial conclusion) and we are now seeing the consequences more than 30 years later.

Why do you think militaries around the world are starting to get very worried about peak oil? Why do you think governments are increasingly starting to (generally secretly) plan for peak oil? There is the potential for major catastrophe due to the decadal time spans required for major new oil development. Yes, we could in theory do what South Africa did during apartheid and massively ramp up coal to liquids production. But this kind of thing takes decades and it is NOT in the works now in the US, so if we start to see super price spikes again in the next couple of years, we'll have to grin and bear it. And as net oil exporting nations continue to reduce their exports we won't have time to ramp up alternatives quickly enough - unless we get very serious about this problem now.

The saving grace is that there is probably a lot of room for conservation and increased efficiency in how we use energy. My educated guess is that we could probably get by okay (with massive recession, but still a functioning economy) with about half the oil we use today. But we'll see...Comment
42 of 88John-BronsonJanuary 27, 2011e-patrick-mosman-41976 wrote:

"When oil companies import foreign oil, primarily from Canada and Mexico the cost effects the balance of trade deficit but has no effect on the nation's financial deficit"

You are incorrect on both points.

2010 EIA figures show 2.4 MBD from Canada, 1.2 from Mexico, 1 Saudi Arabia, 1 Venezuela, 1.1 Nigeria, .6 Russia, .5 Algeria, .4 Iraq, .4 Angola, .3 Colombia, and another 4 MBD from various other countries. Canada and Mexico only supply a small fraction of total US imports.

Also, the trade deficit affects government deficits because of the lost revenue, and the increasing number of people on entitlement programs. Oil produced in the US can provide lease revenue, corporate taxes, and personal income taxes on industry workers. The genius economists have been saying for a long time that the trade deficit didn't matter. Because the dollars sent out of the country had to come back to pay for exports. The reality is, those dollars are coming back to finance government debt. The trade and government budget deficits are intertwined and feed off each other. The US cannot just import products and print money to pay for them indefinately. The oil supply problem (I don't like to use the term "Peak Oil"), will manifest itself as a US financial collapse much worse than the subprime mortgage collapse. IMO.Comment
43 of 88e-patrick-mosman-41976January 28, 2011Mr.Bronson,
According to your import numbers Canada and Mexico supply approximately 63% of the imported oil,which makes them primary suppliers. Saudi Arabia has a joint venture refining /marketing company with Shell USA and a contractual commitment to provide crude oil,at one time 600,000 Bbls/day and Venezuela's oil company PDVSA owns CITGO and provides their company with one million Bbl/day. The only entity printing money to pay for imported oil is the US government itself when it imports oil for its strategic reserves. Oil companies pay for the oil from their earnings, cost of doing business, there is no need to print money. A considerable amount of those dollars are used to buys interest in US companies,banks, property and even to start companies not simply to buy US treasuries to fund deficit spending which is, regrettably, a large part.The US governmemt is the road block to developing our own oil and gas production while funneling billions in subsidies to farmers and ethanol producers which Al Gore recently admitted had no scientific reason strictly political.Comment
44 of 88AnonymousJanuary 28, 2011Tam writes in comment #38:
"US predatory militarism, to use the phrase Friedrichs uses, is a very strong possibility given our aggressive history. And is this the kind of future we want?"

We don't conquer nations to seize their natural resources--we just purchase such commodities at fair prices on open markets, which is far cheaper. Our history may not be one of totally selfless virtue, but our military has far more often been called upon to defend AGAINST aggressive militaries of nations that would seek to conquer others. I am amazed that Tam does not recognize that....
StevenComment
45 of 88Tam_HuntJanuary 28, 2011Steven, read Stephen Kinzer's book, Overthrow, for a good history of US regime change around the world - 14, by his count, which includes only those efforts where the US was the leading or only nation behind the coup or invasion, starting with Hawaii in 1893. We have of course invaded far more nations than this in our history, but these are the ones in which we have actively worked to overthrow governments, many of them democratic nations like Guatemala, Iran (in 1953, which was then quite democratic) and Chile.Comment
46 of 88coenraad-pretorius-176946January 28, 2011Tam,
With all due respect, I think you demonstrate a lack of understanding of free markets.

"We will have to manage our decline or face "free market" induced super price spikes and possible shortages for decades."
These two conditions are mutually exclusive: in a totally free market super price spikes is what brings more product to market and kills demand until supply and demand are in balance. It's that simple. Shortages only happen when the prostitutians - remember Mr. "I'm not a crook" Nixon? - interfere, and try to control prices.

There is no way this process can be managed: If the only thing the president wanted to do was to mitigate Peak Oil, he STILL couldn't do it: there is no way to calculate what the right price of oil (or gasoline and other oil products) should be to head off the conditions you fear so intensely. If the president set the price too low, he makes little or no difference. If he sets it too high, he is toast: he'll be attacked from all sides for killing the US economy for no apparent reason - assuming he succesfully steered the US away from the effects of Peak Oil. So for the US president, or any other politician, addressing Peak Oil is a lose-lose project. And that's assuming these guys had a spine...

The free market is the ONLY way to go. At worst it means we all start working for our allies in Saudi Arabia and Diablo in Venezuela. They'll have the money to spend. If we behave ourselves nicely, they might even pay us in oil.

"Again: Nine new Saudi Arabias. Bottomline: it's NOT going to happen."
Quite right. That demand will evaporate before your eyes. As soon as prices are high enough to convince us all to conserve.Comment
47 of 88John-BronsonJanuary 28, 2011@e-patrick-mosman-41976

3.6 (Canada and Mexico) is 28% of the 12.9 million barrels/day in imports, not 63%. In addition to the SPR, US government agencies use a large amount of oil for the military, and other federal, state, and local agencies directly. The trade deficit feeds the budget deficit because of lost revenue. The US tax system is primarily from income, not sales. 1/2 of US treasuries are printed money. The 1/2 that actually gets sold are mostly held by foreign investors. Foreign investors get those dollars from the trade deficit. Al Gore is not a scientific authority.Comment
48 of 88John-BronsonJanuary 28, 2011@coenraad-pretorius-176946

The gas shortages in 1973 were caused by the Arab oil embargo, not by Nixon's price controls. With so much reliance on foreign oil, the US is more vulnerable than ever to foreign interests.

And yes the government could do a lot to help with the oil supply problem. 80% of offshore oil is off limits. So is ANWR, the arctic, and 1 trillion barrels of shale oil. Incentives could also be made available for hybrid, flex-fuel, hydrogen, and CNG vehicles.

The current goal of 1 million plug-in vehicles by 2015 is a small drop in the bucket. A very small drop.Comment
49 of 88coenraad-pretorius-176946January 28, 2011"Al Gore is not a scientific authority."
Agreed. But he is right (recently) about ethanol.

"The gas shortages in 1973 were caused by the Arab oil embargo, not by Nixon's price controls."
That's not how the free market works, John. The free market could have handled the Arab oil embargo, no problem. Gas lines only formed when Nixon tried price controls. As summarized by Wikipedia: "Government price controls further exacerbated the crisis in the United States, which limited the price of "old oil" (that already discovered) while allowing newly discovered oil to be sold at a higher price, resulting in a withdrawal of old oil from the market and the creation of artificial scarcity. The rule also discouraged alternative energies or more efficient fuels or technologies from being developed. The rule had been intended to promote oil exploration. This scarcity was dealt with by rationing of gasoline (which occurred in many countries), with motorists facing long lines at gas stations beginning in summer 1972 and increasing by summer 1973."

In a free market, John, demand (and supply) is a function of price. If you leave it to itself, the free merket always find the price where supply matches demand, in spite of external interruptions such as the Arab oil embargo. Peak Oil will be the same.

"80% of offshore oil is off limits."
One could argue that the wise course of action is to leave it be, until that oil has more value. Eventually the "drill, baby, drill" crowd will get their way. Whether it will make a difference remains to be seen.Comment
50 of 88coenraad-pretorius-176946January 28, 2011"US predatory militarism, to use the phrase Friedrichs uses, is a very strong possibility given our aggressive history. And is this the kind of future we want?"
It may well be asked if we can afford the so-called "predatory militarism". As recent events in the ME illustrated, it costs a lot of money to send in the Marines. And then we haven't even mentioned the much higher human cost.

And as 2008 illustrated so well: just because you have an army in the ME does NOT mean you get cheap oil out of the deal.

I guess the real question is: Where will the witch hunt lead in case of a super price spike? If I was a Wall Street bankster I'd be very concerned, since the dimwits in Congress have taken a liking to blaming speculators for all high prices.

I hope that most Americans would understand that invading an oil producer is more likely to interrupt supplies.

"Yes, we could in theory do what South Africa did during apartheid and massively ramp up coal to liquids production. But this kind of thing takes decades..."
Don't be ridiculous! Years, NOT decades. From Wikipedia: "Erdos CTL is a coal liquefaction plant at Ejin Horo Banner in Inner Mongolia, China. It is the biggest coal-to-liquids complex outside South Africa with a capacity of 20,000 barrels per day (3,200 m3/d). The project is developed by Shenhua Coal Liquefaction, a subsidiary of Shenhua Group. The plant will use a direct coal liquefaction technology developed by Shenhua Group.

Construction of the plant started in 2004 and it was commissioned in 2008. Trial operation started in mid-2009. In the first phase, three production lines were installed. The coal liquefaction reactor was manufactured by China First Heavy Industries. Dedicated steel belt cooling systems for a coal slurry solidification were supplied by Sandvik Process Systems."
20,000 bbl/d day would supply the ENTIRE US demand. FOUR (4) years from start of construction to commissioning. I bet with the right motivation($) we can beat it.Comment
51 of 88glenn-doty-175949January 28, 2011@ Tam,

9 new Saudi Arabias isn't all that hard to imagine:
right now there is ~20 TWh's of wind energy that are curtailed nightly across the Midwest. That's enough to make ~700 million gallons of fuel through a WindFuels plant.

By 2017, when we are ready to deploy, there should be in excess of 150 TWhs. of curtailed energy/year throughout the Midwest. Our IPO should be sufficient for us to begin construction of at least 1000 WindFuels plants with an average nameplate rating of 20 MWs. This will take ~3 years for the average plant to come online, and will stabilize the grid for at least 60 GWs of new wind in what was once saturated markets... and will produce ~2.4 billion gallons of fuel/year.

Assume that, beginning in 2020, we experience a 30%/year global expansion, and we will see the following level of installations:
2021: 26 GW new install, 46 GW total, 5.52 billion gallons/year production;
2022: 33.8 GW new install, 79.8 GW total, 9.58 billion gallons/year production;
2023: 43.94 GW new install, 123.74 GW total, 14.85 billion gallons/year;
2024: 57.12 GW new install, 180.86 GW total, 21.70 billion gallons/year;
2025: 74.26 GW new install, 255.12 GW total, 30.61 billion gallons/year;
2026: 96.54 GW new install, 351.66 GW total, 42.19 billion gallons/year;

Ok, well... that's more than 9 Saudi Arabias, and that only took 7 years of rapid scale-up (though less than the scale-up seen by any number of new industries that had a strong market demand and strong profitability).

This is why it pisses me off to see government squander endless money trying to force-deploy non-viable technologies like the EV... That basically wastes the money we (and others) could use to develop NEW technology that could actually compete.

Our Round a investment needs are ~18 million. The government will spend more than that to push ~2300 useless EV's onto the market, saving ~1 million gallons of gasoline/year...

Novel technology is needed. It's being developed.
Fund THAT.Comment
52 of 88coenraad-pretorius-176946January 28, 2011Glenn,
Looks like you made an order of magnitude mistake there:
42.19 billion gal/year = ~1 billion bbl/year = 2.7 million bbl/d = 1/3rd Saudi Arabia @8 million bbl/d.

Other than that you make some great points about urinating away tax$$ on technologies that could never stand on their own legs...Comment
53 of 88glenn-doty-175949January 28, 2011@ Conrad,

I noticed that when I walked away... I'm just popping in here while babysitting 4 complex experiments in a catalysis lab, so this is not taking much of my concentration. I was off by ~42fold (bbls to gallons).

That said, we'd be well over "2 Saudi Arabias" by 2035, and we'd be at over "10 Saudi Arabias" by 2040 if we were to continue growing at 30% (this is actually a very modest average pace for industry-changing technology that sustains constant profitability with a constantly growing demand).

We've been seeking Round A financing or some form of investment support from both private or government source now for 3 years. That's 3 years of lab work that has constantly validated our simulations, 3 years of continued and more detailed simulation work, 3 years of corroboration of our evaluations of the non-competitive alternatives and corroboration of our understanding of the oil market... And 3 years without 1 SINGLE valid challenge to our proposed platform - either on a scientific, engineering, or economic basis.

But renewables cheerleaders like Tam won't even mention us. We're viable, but we cannot get published, and we cannot get a valid answer as to why (or a valid critique that shows even a high-school level understanding of thermodynamics).

So if one of these renewables advocates actually did give half a damn about either peak oil OR global warming; they would have sought to help us out rather than just constantly preach that America should throw good money after bad money after worse money on proven failures that have no chance of making any difference whatsoever.

I have no idea how many other companies are similarly suppressed, with good ideas and good technology; while they watch the renewables industry keep a stranglehold monopoly on the media, and continue to flush money away on completely non-viable crap.Comment
54 of 88coenraad-pretorius-176946January 28, 2011Glenn,
I understand your frustration. Uncle Sam loves to pour our tax$$ into the plotically connected boondoggles. And somebody 's got to get him off the booze!

I had one question about the WindFuel technology: where does the CO2 come from? Looks like your flowsheets are based on 100% CO2 coming in at 4bars. Does that mean you need to co-locate with conventional power plants? Other plants? Surely getting 100% CO2 @4 bars from air (380 ppm, right?) will take a lot of energy?Comment
55 of 88glenn-doty-175949January 28, 2011@Coenraad,

CO2 is pretty easy to find. High quality fixed sources include ammonia plants, chemical plants, cement plants, steel industrial facilities, biofuels refineries, paper mills, oil refineries, and of course... fossil based power plants (there are many others).

Right now there's over 300 million tons of CO2 contracted for high-pressure delivery across America, and more than 3000 miles of CO2 pipelines are laid, and that's growing by 30%/year.

There are even companies whose sole business is to set up emissions separations equipment, lay pipe, and bring the CO2 to your door at a long-term contracted price (Right now ~$75/t-CO2 is the going rate for beverage quality, which would work out to ~$0.75/gallon of synthesized fuels).

The best case would probably be to have an oxy-combustion ultra-supercritical pulverized coal plant hooked directly to a WindFuels plant, and allow the decommissioning of a regular coal plant of equal power on the same grid... the grid would be able to stabilize 4 times the rated U-SCPC plant worth of additional wind power, while the power plant produces less than half as much CO2 than the previous technology, and 100% of the emissions are fully scrubbed free of all contaminates (to sub-ppm), and converted into liquid fuels that have 0 additional carbon footprint...

But that's the most profitable case, not the only one. We could set up a 10MW WindFuels plant within 100 miles of a cement plant and pipe water directly from a sewage line (which would require double-RO) 100 miles in the other direction, and be located somewhere within the range of a saturated ISO... and we'd still be heavily profitable.

The most significant siting concerns would be attempting to locate within range for a local market for the co-produced O2, and if possible within range for co-produced H2 and/or within range for a contract for waste heat... but we could liquify and ship the O2 and still profit heavily, and the other possible markets are bonus profit.Comment
56 of 88John-BronsonJanuary 28, 2011@glenn-doty-175949

About your process - how much water does it take to make a gallon of fuel?Comment
57 of 88glenn-doty-175949January 28, 2011@ John-Bronson,
That depends on the fuel that is being synthesized, but it works out to ~1.2-1.3 gallons H20/gallon of oxygenate (methanol, ethanol, propanol, butanol, acetaldehyde, etc)... and ~1.4-1.5 gallons H20/gallon of straight alkane (propane, butane, gasoline, jet-fuel, diesel)... Olefins and other chemical feedstocks (ethylene, propylene, etc) all fall somewhere between.

100% of the water is either fully catalyzed into oxygen and product, or recycled. The water needs for the process work out to between 1%-10% of the water required for oil extraction, and ~1/300th the water required for bio-ethanol.Comment
58 of 88AnonymousJanuary 28, 2011Glenn:
How many kWh of electricity does your process need to make a gallon of fuel? Even with near perfect efficiency it seems you would need about 40 kWh and you don't have perfect efficiency....

You seem to assume that you will be able to get night time wind energy for virtually nothing even (as in comment #51) when you would need wind power to scale up enormously to generate the oil you envision. I don't see that as reasonable.

You also hope to sell O2 to generate a significant part of your income. How big is the O2 market? Would you saturate the O2 market long before you saturated demand for transportation fuel?

StevenComment
59 of 88glenn-doty-175949January 29, 2011Steven,

To answer your first question, we should get between 52-60% net system efficiency once we are fully developed and deployment ready, so a gallon of gasoline will take between 63 and 70 kWhs.

Wind energy is extraordinarily cheap in the wind corridor. The additional cost and limits to its growth stem from its variability. It cannot displace fossil fuel power sources because those need to be on hand in cases where the wind dies. The baseload sources cannot easily or efficiently be ramped up and tamped down to accomodate the variability of wind, so there are many instances where energy is produced in excess, switching stations become congested, energy prices turn negative, energy is grounded or directed through resistor banks, lights are turned on, heaters are ramped up, wind is curtailed... etc, etc, etc... only to have the wind drop, and the grid is suddenly faced with a power deficit and the whole panic/frenzy is repeated in reverse.

The electrolyzers in a WindFuels plant are solid-state switches. They can ramp up or power down in one half of a single cycle (~8 ms). So they can adjust in real time to the needs of the grid... instantly powering down when wind speeds drop, instantly ramping up to absorb excess energy as wind speeds increase. They have the ability to stabilize the grid from the demand side for up to 4 times their nameplate capacity in wind.

So every 10 MW of WindFuels that comes online within a given grid will stabilize another 40 MW of wind power. Remember, in this region wind energy is much cheaper than coal, and there's tons of federal, local, and private subsidies that are piled on to drive up profits. If we stabilize the grid for more wind, more wind will come. That's an economics-driven certainty.

As for the O2, the market is ~100 million tons, which will be sufficient for the first several thousand WindFuels plants. But there is a price floor. Sewage treatment and oxy-combustion systems that aren't feasible will become so.Comment
60 of 88AnonymousJanuary 29, 2011Glenn,
I understand completely the utility of storing excess wind energy in the form of H2 by electrolysis of water. This suggestion has been considered for quite some time. Certainly if you are the first ones to go into the electrolysis market in the wind corridor your initial plants will get electricity for next to nothing. However, if the wind industry grows as much as you would need it to, other markets for electrolysis generated H2 (and associated O2) would develop. Presumably turbines will be designed to be powered by combustion of H2, or the fertilizer business could use this H2 instead of producing in from CH4 feedstock, or a fuel cell industry would evolve, etc. Once there is a market for H2 your electricity prices are no longer going to be negligible as you will be competing in this new marketplace. Possibly your long term business model will still be feasible but it seems to me this is something that you should address when hunting for investment capital--maybe you have, but I did not see this information on your web pages when I took a quick glance....
StevenComment
61 of 88John-BronsonJanuary 29, 2011Using excess wind to produce hydrocarbon fuel is nothing new. The Germans have had a demonstration plant operational for a few years:

http://www.scientificcomputing.com/news-DS-Storing-Green-Electricity-as-Natural-Gas-051110.aspx

The problem I see in trying to replace oil use in the US with this process is the amount of water used. 30 million barrels/day out of the fresh water supply is quite a bit. EVs do not need oil or fresh water.Comment
62 of 88AnonymousJanuary 29, 2011John-Bronson writes in comment #61:
"The problem I see in trying to replace oil use in the US with this process is the amount of water used. 30 million barrels/day out of the fresh water supply is quite a bit. EVs do not need oil or fresh water."

On a per capita basis the amount of water that would be needed in these types of energy conversion schemes is trivially small--per capita urban water usage (thus, neglecting agricultural usage which is another large amount) can be ~100 gallons/day. Furthermore, to the extant that these would facilitate greater use of wind power, which would reduce stream turbine usage, it would reduce problems such as thermal pollution in streams, etc., near power plants. The important question is whether or not they would be cost competitive with other energy schemes.
StevenComment
63 of 88Tam_HuntJanuary 29, 2011coenraad, you've misunderstood my position and I think you are seriously mis-gauging the ability of markets to respond adequately to price signals.

By "manage" I don't mean impose prices by fiat. By managing a decline in oil consumption in the US and other countries, I mean something far more like the recommendations in the plans I mention in my article: RMI's Winning the Oil Endgame ("led by business for profit") and Heinberg's The Oil Depletion Protocol.

These solutions call for dramatic ramp ups in efforts to reduce our petroleum demand, with RMI's effort far more market-oriented than Heinberg's. The key point is that we shouldn't rely only on free markets when the potential risk is so high. You yourself discuss how super price spikes will act as a market mechanism - but the point is to AVOID super price spikes, which were a key contributor to the worst recession since the Great Depression.

More importantly, the point of managing a decline in oil consumption is to help avoid the even more serious risk of shortages. By expanding our strategic reserves and by conducting an effort akin to the Apollo project (an analogy Obama himself used recently with respect to energy transformation) or even World War II, we would not only improve our economy in the short term through expanded job creation we would also help protect against shortages and super price spikes.

I agree with you, however, that a key market effect will be price-induced conservation. We've already seen from recent history that oil demand is not, contrary to the general view, inelastic with respect to price. $4 a gallon seemed to be the magic number in the US when consumption started to decline.Comment
64 of 88Tam_HuntJanuary 29, 2011Glenn, I do in fact support your efforts, and the efforts of others like you, to find innovative solutions to our current and pending energy problems. As others have mentioned, it is not a new idea to use off-peak or curtailed energy to create fuels. Also note that wind power is not the only technology that occasionally sees negative pricing (that is, companies will literally pay offtakers to use their power): in Texas, natural gas plants also offer negative pricing occasionally b/c this can cost less than shutting the plants down. So I agree with you that there is potential in this sector.

I'm glad that coenraad pointed out your math error: 9 Saudi Arabias is equivalent to the entire global conventional oil production today (literally). No amount of wind power, let alone curtailed wind power, is going to come remotely close to supplying this shortfall.

So I applaud your efforts but I would advise you to consider my comments in other threads about your EV calculations. It is simply not the case that spare capacity is the correct metric for judging EVs' net impact. You come across as a bit of a crank when you argue this point so stridently, in opposition to every LCA method used today.

EVs are part of the solution moving forward, as is your technology hopefully, and conservation and increased efficiency, 2nd and 3rd gen biofuels, etc. We need them all but I do agree with you that some solutions should just be jettisoned: hydrogen vehicles are just never going to make much sense and this conclusion is slowly pervading even government circles.Comment
65 of 88glenn-doty-175949January 29, 2011Tam -
The demand will be balanced. I'm projecting price spikes of over $200/bbl, but an annual average of ~$180/bbl. At that point, tar sands and CTL will become far more competitive (though EV still will not be). 9 Saudi Arabias won't be needed, and I'm distracted.

I am a crank, I'm tired of the BS. You are blatantly lying to yourself, and to your readers, if you claim that you cannot understand very basic impacts of marginal changes in supply and demand vs. spare capacity. To suggest that: when you plug in some entirely new device and they have to ramp up the COAL POWER facility to power it, so your new device should get credit for hydro power is simply childish.

You cannot be that stupid (it's nearly impossible), which means that you are merely being dishonest.

Let it go, and stop lying.


As for the statement that "other companies are trying it", no. Other firms have suggested CO2-to-methane route, which is more efficient conversion and of absolutely no market value (methane is simply too cheap to bother with, we plan to simply burn our co-produced methane for heat). Some companies have tried and failed to synthesize methanol, which again has limited value and market, and the synthesized CH3OH couldn't hope to compete with coal-to-methanol processes.

We're making GASOLINE, that has a viable market and is a profitable product. PROFITABILITY is the key.


@John
As for water, a typical nuclear power plant will use 10-20 gallons of water to generate enough electricity for an EV to travel 20 miles. A coal plant will use more, and contaminate the water for hundreds of miles radius. To power an EV with concentrated solar more than 40 gallons of water will be needed.
To generate fuel from corn, more than 300 gallons of water are needed/gallon of ethanol; and to extract good old fashioned OIL you'd need ~6-10 gallons of water per gallon.

I think you are a little overly concerned about our ~1.5 gallons H2O/gallon gasoline.
;)Comment
66 of 88Tam_HuntJanuary 29, 2011You're not helping your case Glenn. If you're trying to win converts, some tact may come in handy. As for the substance, I'm not going to rehash this argument other than to point you to my previous comments where I thoroughly considered (and rejected) your arguments.Comment
67 of 88glenn-doty-175949January 29, 2011@ Steven,

The issue is one of scale. As a multi-MW facility, a WindFuels plant would be able to negotiate well with local power companies, or (after a few hoops and fees) purchase directly from the local ISO.

If your company has a few KWs of electrolyzers, that negotiating power will not be available. Granted, there are some fertilizer companies that may compete for off-peak energy to power electrolysis (it was actually our advocacy of this at a U.N. climate change abatement workshop in 2002 that eventually lead us down the path to developing WindFuels), but the scale of that is insignificant compared to the opportunity and the supply.

H2 Fuel cells are a farce, there will never be economically viable fuel cells for mass energy consumption. There place will always be regulated back to special/custom needs.

Again the O2 will not be vital for the profitability of a WindFuels plant (at least not once oil has settled comfortably over $100/bbl, which it will before we are ready to deploy), and the current O2 market can handle the output from several thousand WindFuels plants (which will displace O2 generated from fractional distillation - a very carbon intensive practice). Once the market is saturated, and the price (and hence revenue) begins to fall, we see higher-efficiency waste treatment facilities and oxy-combustion power plants becoming economically feasible, which will put a solid floor on the market price of O2 (likely in the neigborhood of ~$50/t.)

But this is a discussion of bonus profit. If 1000 WindFuels plants are in full production and have extremely high ROI's, then WindFuels will be quite capable of finding or creating new markets for O2. If not, it will be engineered to improve the efficiency of the cryogenic separations loop (for a ~0.4% higher net plant efficiency) and then exhausted (oh-no!), and subsequent plants will have to suffer with merely high profit margins, rather than incredibly high profit margins.
*shrug*Comment
68 of 88glenn-doty-175949January 29, 2011Tam -

You never even engaged the argument. You kept appealing to the authority (as you have here) that "the renewables lobby which is championing EVs says something else... so I don't care what math or logic reveals."

I was polite when I tried to explain the math to you. I became rude when you ignored the logic of the argument and clung to your precepts (without a single valid rebuttal) like a religious zealot.Comment
69 of 88John-BronsonJanuary 30, 2011Glenn,

How do you explain the fact that so many major auto manufacturers have invested so much money to bring EVs to market? Surely that many highly trained engineers, and highly paid execs couldn't be that bad at math and logic.Comment
70 of 88glenn-doty-175949January 30, 2011John -

The snarky answer would simply be to say "ask GM and Chrysler".
:)

But the truth is more than that. Every single major car dealer in the world spent fortunes developing a hydrogen car, even though only the uninformed or great fools could ever even imagine that there is a viable likelihood of a future "hydrogen transportation system". But the politics were there, and the hype was there... so these companies all devoted hundreds of millions of dollars into a certain failure. They did so because they didn't want to be seen as the anti-technology/environment/hype (whatever) company that was not interested in developing "the future".

These companies consider developments like this to be a kind of advertising.

When GM started working on the Volt, it was sold to the board as greenwashing. Literally.

The communications that were released discussed how Toyota has effectively given itself a "green halo" by producing the Prius, even if it sold for a loss for half a decade and produces very marginal profit now... but environmentalists RESPECT Toyota because they have the Prius; so even though they also have some of the biggest SUV's and trucks on the road, Toyota is loved as a "green company", and gets a lot of product loyalty from people who cannot afford or choose not to buy the Prius itself!

I'll admit that is true for me. The Prius is still my dream car, and I have an irrational respect and automatic defense reaction for Toyota, even though some of their products do have problems... But I've never been able to afford a Prius, (and likely won't until Round B of financing for WindFuels is secured).Comment
71 of 88Tam_HuntJanuary 30, 2011Glenn, check again: I responded substantively to your arguments in two or three different ways (recall the punchbowl metaphor?).Comment
72 of 88glenn-doty-175949January 30, 2011Tam,
You responded by ignoring the substance of the metaphor. Prior to that you responded by ignoring the simple logic of accommodating new demand of spare capacity.

So if you want another chance, here you go (the following is one of many specific posts that you blythely ignored in an attempt to live in your fantasy world where new demand can be met with 100% utilized resources).

So if, during any given hour, a local grid is consuming 1 MWhs of hydro power; 2 MWhs of nuclear energy; 200 kWhs of wind energy; and 20 kWhs of solar energy... as well as 7 MWhs of fossil energy... that grid essentially has a carbon emission of ~6 t-CO2/hr, or ~600 kg/MWh.

However, if 1000 people plug in their shiny new EV's to draw an additional 2 MWhs of power for an hour, then there's no more hydro, nuclear, wind, or solar generation potential to draw upon... so the local power plant has to power up its inefficient peaking plant to handle the load, increasing the net carbon emissions by 1.73 t-CO2. Now the local grid is emitting a total of ~7.73 t-CO2/hour, or 644 kg-CO2/MWh. The EV owners may try to pat themselves on the back for only using 644 kg-CO2/MWh in this scenario... but the truth of the matter is that when they plugged in their cars, the additional power to handle that load had a carbon intensity of 865 kg-CO2/MWh, and had they spent their money more wisely and bought a Prius, there would be 865 kg-CO2/MWh less emissions... so the net effect of their purchase is an increase in atmospheric concentration of CO2 of 865 kg/MWh.

I'm sorry if you cannot comprehend this, but your refusal to engage this fact doesn't make it any less true.Comment
73 of 88glenn-doty-175949January 30, 2011Tam,
This was a separate post in the same thread - which answers your first objection of "there will be more energy"... this post is one of the many others that you ignored:

I don't make that assumption. It doesn't matter what the actual amount of renewable energy on the grid is, what matters is spare capacity.

Let's take the ultra-simple grid that I outlined in my last attempt to explain this concept to Tam: We start with 1 MW hydro, 2 MW nuclear, 200 kW wind, and 20 kW solar.

Now let's assume that over the next 10 years solar expands to 300 kW and wind expands to 11 MW, and no nuclear power is decommissioned on that grid : If there is still the same amount of demand (10.22 MW), then the grid carbon intensity will now hover ~5 t-CO2/hr, or ~493 kg-CO2/MWh.

If a more reasonable estimate of 100 EV's plug into that grid, drawing an additional 200 kW's of power (far less than the growth of wind and solar in this very optimistic scenario), then there's still no spare capacity in wind or solar power, so the power company still has to ramp up one of its fossil generators in order to meet this new demand... which means that the now 10.42 MW of demand will be met with 6.02 MWs of fossil generation, for a total of 5.21 t-CO2/hr. So the grid would then be ~500 kg-CO2/MWh, but the impact of adding the 200 kWs of demand onto that grid would have changed the grid emissions by ~176 kg-CO2, which works out to 865 kg-CO2/MWh.

Whatever your prediction for grid energy is, the math can only change if you assume there will be a massive build-out of UNUSED renewable energy. Otherwise, people like Christof who have solar systems will be taking exactly as much renewable energy off the grid (energy that would elsewise have contributed to the grid), to charge their EV... which means that much fossil energy must then be generated to compensate.Comment
74 of 88John-BronsonJanuary 30, 2011Perhaps EV ownership will inspire more people to install PV. "Solar Carports" etc.

http://www.sunpartner.com/about-us/Comment
75 of 88Tam_HuntJanuary 30, 2011Glenn, like I said I'm not going to re-hash this argument: I've already addressed all of your points previously.

They problem in your analysis is reflected in your statement above:

"It doesn't matter what the actual amount of renewable energy on the grid is, what matters is spare capacity."

Spare capacity is not what matters: what matters is what energy appliances like EVs actually use. Think about it.Comment
76 of 88fireofenergy-150745January 31, 2011Solution to 80% clean energy independence by 2035...
Natural gas alone would cut it down by over 50%...
Couple that with about 10,000 to 20,000 sq mi of mirrors and molten salt tanks (for energy storage), and viola, we're there! (Imagine all the jobs).
So how do we {do that}? Tax oil a little and tax coal a bit more. Tax foreign oil by 10 times that! and best yet, put a tariff (just a small tariff) on ALL imported goods. Stop subsidizing the rich (tax cuts to the tune of trillions), and viola, we would have the money to subsidize our entire energy infrastructure and still maintain the social security.

Yep, mass produced solar mirrors and motors, etc would solve most ALL the problems. The only expense would be a rather small percent of our land. Mirrors can be post mounted, thus backlash from environmentalists should just be considered gibberish bought by competing energy interests.Comment
77 of 88AnonymousJanuary 31, 2011Glenn:
If I have the numbers right I estimate:
US oil consumption ~20268000 bbl/day
42 gallons/bbl
~70 kWh/gallon electricity to fuel costs

So to supply what would be all our oil needs would take ~2.2 * 10^10 MWh /year of electricity.

Our yearly electricity use now is ~4.1 * 10^9 MWh/year, so generating 100% of our oil via electricity would require about 5.3 times as much electricity as the US uses in a year now. It would be asking a lot, even in the long run, for WindFuels to source 100% of demand, but even 10% would require electricity equal to ~50% of yearly generation. You cannot purchase that much electricity at off peak pricing! At large scale your electricity costs become the costs of normal wind generation without government subsidies (at these magnitudes the government cannot continue a production tax credit). Perhaps this is 7 cents/kWh (?) or $4.90 / gallon just in electricity costs. You also have a CO2 feedstock issue, which is small at small amounts of production but at large scale would exceed what you could get from a declining coal power generation industry. You claim that you can get CO2 from the atmosphere for ~$3/gallon of produced fuel, which would bring costs to $7.90/gallon. Then you have the costs of production and distribution, plus a bit of profit, and the government will add on its usual taxes on transportation fuels and pretty soon you are in the ballpark of $10/gallon. Lots of processes would compete at well below even the $7.90/gallon level of electricity and CO2 feedstock costs. We could quibble about various costs here: maybe wind electricity drops to 5 cents/kWh, maybe CO2 collection technology improves, maybe the O2 market really can give a nicer offset than I would guess, etc. However, you say you can solve our oil supply problems and it will cost ~ $0.75/gallon. I view this claim as dubious. Have I missed something?
StevenComment
78 of 88AnonymousJanuary 31, 2011Glenn,
In my comment #77 I suggest that at very large production volumes WindFuels won't be able to produce transportation fuels except at MUCH higher costs than the $0.75/gallon that you claim. My point here is not that the process is entirely without merit but that your claims seem way too rosy to be believable. The value of intermittent H2 generation (for any number of possible uses including transportation fuel production) as a way of providing stability to the grid in areas where wind is cheap seems like it should be a viable niche market--possibly a very profitable one even at scales that are significant compared to US electricity consumption (which is no small market), but not at the scale sufficient to supply a large fraction of our oil needs. I would think that seeking investors for that goal would be easier than trying to convince investors you are going to provide "Saudi Arabia" sized transportation fuel production....
StevenComment
79 of 88glenn-doty-175949January 31, 2011Tam -

I HAVE thought about it, I am correct, and once again you're running from the argument rather than attempting to engage it.

You are a fool.Comment
80 of 88glenn-doty-175949January 31, 2011Steven -

You're numbers are largely correct, for now. But that won't reflect what is or is not the case for the future.

The business model for WindFuels will only allow for plants to be built in regions where they can get long-term off-peak contracts (regions dealing with excess off-peak energy problems).

So effectively you're envisioning the cart before the horse in this case.

Right now, there's enough curtailed wind to power hundreds of these plants, but the wind industry in markets that are seeing curtailment issues is saturated. We will go to these regions and put up a plant... then wait for basic economics to do its thing. ;)
More wind WILL be built out in any region that we stabilize the grid, so more excess off-peak energy will be available... which will enable more ultra-cheap energy to be contracted by another WindFuels plant.

As long as the economics are what they are, it's worth it for wind farms in good wind regions to sell 1/2 of their energy a $10/MWh if they can sell the rest at peak rates. The energy landscape will evolve.

I imagine your response here was motivated largely by my comment #51, in which I outline a very rapid potential ramp-up... but in that case I'll have to remind you that there are quite a few other countries out there with good wind resources and plenty of CO2... and some countries have spare or ultra-cheap hydro capacity.
There's plenty of cheap clean energy out there, which is often not developed for lack of demand or fear of grid instability. We've got a lot of room to grow.
:)Comment
81 of 88glenn-doty-175949January 31, 2011@ Steven, continued...

There will, of course, be a point where WindFuels plants will have to start building out their own wind farms in order to provide their needed energy. But this is not out-of-bounds.

In the best wind zones in America - ND, SD, WY, MT - land is inexpensive enough that it is nearly free. In these regions the capacity factors for wind can exceed 50%, giving an LCOE of ~$25/MWh, which works out to ~$1.75/gallon of gasoline rather than ~$0.70/gallon using the off-peak options, but that will reduce the two biggest capital cost items of the plant - electrolyzer stack and hydrogen storage - by half... so the total loss in competitiveness isn't quite that high. By then the cost of CO2 should have dropped by more than half as well.

There will not be a significant reduction in fixed CO2 emissions for at least 30 years. If the world runs out of fixed CO2 emissions (we could only hope), the first and cheapest option would be to build an oxy-combustion biomass power station very close to a new WindFuels site, and absorb scrap biomass, or even harvest low-cost biomass (which will also serve to offer some lower-cost power while making the CO2 completely free).

It will be at least 25-30 years before we have to start pulling CO2 out of the air, and that's a problem for the next generation. By the time we get there, we'll be a hundred-billion dollar enterprise that will have lowered net global CO2 emissions by more than 10 billion tons-year while virtually eliminating most sulfur and mercury emissions worldwide.

It's a pretty nice short-term outlook, even if there are going to be some scaling obstacles once we tap all the fixed CO2 emissions.Comment
82 of 88coenraad-pretorius-176946January 31, 2011"The key point is that we shouldn't rely only on free markets when the potential risk is so high. You yourself discuss how super price spikes will act as a market mechanism - but the point is to AVOID super price spikes, which were a key contributor to the worst recession since the Great Depression."
The link between oil prices and the Great Recession is debatable, at best. Even if you viewed economic activity as a zero-sum game (an overly negative view), you'd have to conclude that recession here would be balanced by great economic growth in oil producing countries. And if oil prices are so central to the economy, why didn't economic growth explode when oil hit $30/bbl?

"By "manage" I don't mean impose prices by fiat. By managing a decline in oil consumption in the US and other countries..."
OK, but any meaningful action by the administration will have a real impact on consumer energy prices. And if you think a lot of people are screaming that Obama wants to destroy America now, imagine what will happen when his policies result in $5/gal!

"More importantly, the point of managing a decline in oil consumption is to help avoid the even more serious risk of shortages."
Again: in a free market there is no shortage. Crazy prices, yes, but no shortage.

Fundamentally, I think the difference between our POVs boil down to this: I don't see how the government gets this right, even if this is their only priority and they apply their considerable talents in an honest and selfless manner. So much the worse in the real world. I think recent boondoggles, including the corn ethanol scandal, proves my point.

I see the free market as our only hope. The invisible hand and all that. High oil prices will help everybody to focus. Will it be painful? Sure. But painless is no longer on the menu.Comment
83 of 88glenn-doty-175949February 1, 2011@coenrad -

The best way to avoid price spikes is through price manipulation. We all know that price regulation doesn't work, and I wouldn't advocate that. But there are plenty of resources that would be profitable if oil was to hold at $3.00/bbl, but those resources are not being developed because the developers rightly fear another recession/contraction which leaves them holding the bag... Those resources won't be developed until gasoline is over $4.00-$5.00/bbl, which in turn increases the likelihood of another recession/contraction.

What government should do is buy fuel from any American supplier at price=($0.04/MJ of liquid fuel - $0.10/kg-CO2 lifetime emissions), and then sell that fuel at $0.035/MJ if the market wants it. No more price spikes, no more market irregularities, strong incentive for American suppliers (especially lower carbon and 0 carbon options) to increase productivity, and a level playing field as far as subsidies go.

That's how government can truly fix this, and keep it fixed.

But that's never been suggested by anyone in government... *shrug*Comment
84 of 88Tam_HuntFebruary 1, 2011coenraad, I agree with your last point: "painless is not on the table." I disagree with your other points.

Again, look to RMI's and Heinberg's suggested solutions for managing a decline in oil. They've worked out many details that I don't have space to go into here.

You ask why didn't high oil prices prompt growth in oil-producing nations and low prices prompt economic growth in consuming nations? In a phrase: they did. OPEC nations have not generally been hurt by recession except insofar as their non-oil exports have diminished in some cases because of recession in importing nations. And oil prices plummeting back to $33/barrel and staying fairly low for a year was a key reason for the recovery. Yes, these kinds of trends are debatable but if you do the math (as Rubin does in the link in my article) you'll see that higher oil prices acts as a very significant energy tax. And vice versa.

As for government actions that might induce price hikes in oil, you've missed my point: helping to induce conservation, greater efficiency and alternatives to oil will LOWER prices not increase them. Just look at the last chart in my article: aggressive policies to mitigate climate change (and by extension peak oil) lead to lower energy costs for all nations, according to IEA. This is because demand drops and thus prices drop. (LBNL has looked at the impact from renewables on the price of natural gas in the US, finding similar conclusions).

You write that in a free market there is no shortage. I don't know what world you live in, but commodities are finite products, both globally and more importantly regionally. The whole point of the peak oil discussion is that oil is a finite resource and will thus one day disappear. That will be a long time, to be sure, but the more immediate risk is higher prices as supplies diminish. The more stark risk arises from the net oil exports debate that I mention in my article: we are very vulnerable because we import so much.Comment
85 of 88Tam_HuntFebruary 1, 2011cont. A very telling analogy can be found in looking at what Thailand did with its rice exports when rice prices spiked in 2008: they cut off exports overnight. Literally. No more exports. They were the 2nd largest exporter of rice at the time. Why couldn't this happen to oil? Saudi Arabia's king has said many times on record that they're going to leave some oil in the ground for future generations. If prices rise to $200/bbl and geopolitical tension grows high due to this rise surely some nations will consider the rational strategy (from their point of view) of reducing or even cutting off oil exports. Yes, they'd lose revenue but if it's revenue vs. having oil to run your own economy it's not beyond plausibility to suggest that exports might be cut off, at least temporarily, as happened with Thailand's rice exports.

More generally, there are many other scenarios in which shortages could occur, as they did with OPEC's embargo. The Oil Shockwave group has been highlighting the risk of major oil shocks due to any of a number of scenarios, such as the Bosporus being shut down or, more timely, the Suez Canal being shut down.

My point is this: shortages could occur in any number of scenarios and it would very much behoove us and other countries to have more robust contingency plans (beyond the SPR) and long-term plans to dramatically reduce reliance on oil.

Last, I see the free market as a major tool for adapting to a low oil future through price-induced conservation and increased energy efficiency. But if we're going to be serious about the long-term transformation away from oil there is a strong role for government in using bigger carrots and sticks to promote alternatives to oil, setting RPS mandates (a national mandate) and a modest carbon fee.Comment
86 of 88AnonymousFebruary 1, 2011"Peak oil" supply issues are going to be more gradual than the supply shock of an embargo or the Suez canal being closed. Energy efficiency, especially in the developing world where gasoline prices are now subsidized internally, will absorb some of the shock. Nonconventional sources of fuel and transitioning to other fuels (e.g,. methane for transportation), will provide a price ceiling for oil. The ceiling is going to be uncomfortably high--that is what is takes to spur conservation and make alternatives financially feasible--but society is not going to collapse and the US military is not going to start invading other nations to plunder their oil supplies (as Tam seems to worry about in comment #38).

Tam's call (in comment #85) for RPS standards and a modest carbon fee are not going to greatly influence oil consumption (even a very large carbon fee would be small compared to taxes that Europe now places on gasoline). These things may have some impact on global warming concerns (the electricity market is easier to modify than the transportation fuels market), but that is a separate issue. We should try not to conflate the two problems, which are only weakly coupled.

StevenComment
87 of 88crash_watcherFebruary 2, 2011Nice article Tam. You said:

"The public version of the 2010 WEO does not discuss net oil exports, but private analysts Jeffrey Brown and Samuel Foucher have produced forecasts of net oil exports, concluding that the top five oil exporters will have literally zero oil for export by 2030. Even if, for some reason, their model is substantially off the mark (it's not been peer-reviewed, to my knowledge), we must consider the net export issue in our analysis because any analysis that ignores rapidly growing consumption in oil-producing nations will be highly inaccurate."

Maybe peered reviewed in that one blogger is reviewing and confirming the work of another blogger, but perhaps not peer reviewed in the academic sense.

I have done an independent analysis of the Export Land Model (ELM) for the USA, which I am currently publishing as a multipart series here: http://crash-watcher.blogspot.com/. I discuss in detail the assumptions made as part of the ELM analysis (i.e., much more than an academic publication would allow the space for) so that the reader can judge the merits of the analysis merits on their own.

Bottom line: I think that a model of -6.2%/yr decline in exports is probabably a bit too pessimistic, as it pertains to the USA at least, but I do agree that the impending decline in oil exports is a much more immediate concern than the peak in oil production itself.Comment
88 of 88Tam_HuntFebruary 2, 2011Thanks crash_watcher. Can you summarize your findings here? I reviewed your blog quickly and wasn't able to get the key conclusions without reading in detail.