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On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

Electricity isn't really the same whether it is made with coal, wind, or solar PV. Disptachable power has distinct advantages over intermttent sources, making dispatchable more valuable.

I would argue that the savings provided by intermittent renewables are much more comparable to the savings of fuel to fossil fuel powered plants than to the cost of electricity. If intermittent renewables are added to a system, it is not possiblle to reduce the amount of fossil fuel generation back-up by much, because required backup is determined by the annual peak in generation. Renewables typically do little to offset this peak, which is very often in the winter. Staffing of fossil fuel plants remains pretty much the same, and owners still expect to earn an andequate returen on investment. The fossil fuel plants are ramped up and down as much or more, so the wear and tear on them is not really lessened either. Transmission costs are the same or higher. So the savings are mostly fuel savings, perhaps offset by higher transmission costs.

I would agree with you that the cost of generation from coal plants is very low. The issues I raise make the difference between the value of generation from intermittent renewables and the value of generation from coal plants even greater than you suggest.

I suppose there should be an offset for higher carbon generation. But without the offset, the size of the difference is huge. Intermittent renewables are much more expensive. 


September 30, 2014    View Comment    

On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

See my comment to van Dorp above on nuclear. I think it has "issues" as well.

September 30, 2014    View Comment    

On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

My concern about nuclear is the issue of whether they can be safely operated in a world that is falling apart for other reasons--a financial system that is breaking; a system that provides too low a price for oil, natural gas, coal, and electricity.

In such a system, safeguards that we have been used to, including the availability of electricity going into a nuclear power plant may be lacking. The ability to pay workers may disappear. The ability to keep electrical transmission lines repaired is likely to decline over time, making electricity from nuclear less and less useful. The ability to decommission such plants will disappear, cleating a much higher hazard for nuclear waste problems. These plants have only a 60 year or so lifetime. They require fossil fuels to build, so it is unlikely that we can build replacements. 

Thorium reactors aren't really ready for prime time yet. I cannot imagine one being built in this country, without the process being tested more and perfected. The low cost idea is only in theory, until production can really be put in place.

Another issue is timing. We have a world of financial woes right now. We need a solution right now--not five or ten years from now.

A related issue is cost. Ramping up nuclear would take huge investment right now, at a cost that countries could not afford. You may think nuclear is cheap, but it depends on the amount of safety controls built in. The cost is quite high in the US. It is likely quite a bit lower is less saftety conscious parts of the world.


September 30, 2014    View Comment    

On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

Even if fracking reduces oil production costs for shale oil, this is only a small share of the world's production. As you indirectly point out, the cost of other oil production is still rising. We have (more or less) one world oil price. This price needs to be high enough for oil with the highest marginal cost of production. When you include the tax needs of governments of oil exporting countries, there are many countries with problems at current price levels--for example Russia and Venezuela. New Canadian Oil Sands production is becoming unprofitable.

Growth in fracked US oil helps pump up local US economies, but the low world oil price creates a problem worldwide. The economic growth related to fracked US oil relates mostly to the growing payrolls in areas with oil exctraction. We will have to see how long this growth lasts--quite possibly not very long.

US natural gas is cheap, but many producers are having problems with the price. Hence, all of the agitation for natural gas exports. The hope is that these would drive up US natural gas prices.

September 30, 2014    View Comment    

On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

The amount of a resource in the ground provides a very high upper limit for what can be extracted. A much more important limit is the fact that we need a whole system in place to get the resource out. Part of what we need is a high enough price to make extraction of the resource profitable for companies. In order for that to happen, workers need to be able to buy goods that require the use of the resource. Very often that requires debt, and in fact, growing debt.

Our problem now is very different from a "resources in the ground problem." It is much more a "young people don't have jobs, so they can't afford houses or cars" problem. When they cannot afford houses or cars, then the "demand" for oil drops below the cost of extraction. That is the problem we are encountering now.  

September 29, 2014    View Comment    

On Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

I agree with you that wealth concentration is now worse than what GINI coefficients show, because concentration of wealth in businesses adds to the concentration of wealth among individuals. 

I am not sure I follow some of your other points. Wages for "common workers" is down a lot, in part because of competition with wages in "warm" parts of the world, where workers can live pretty well, without heating their homes. Homes also don't need to be a sturdy, so living costs are lower. This wage competition doesn't make our cost lower, though. It just means that an awfully lot of young people are having a hard time finding good-paying jobs.

We also have a problem with diminishing returns, when it comes to oil, fresh water, and quite a few minerals. The cost of extraction keeps rising, whether or not workers can pay for the required higher cost of extraction. The big issue now is that companies are saying, "We will cut back on new development, because current oil prices are not high enough to justify the cost of extraction." The latest announcement in this direction came yesterday, when Norway's Statoil announced that it was cancelling a proposed Alberta Oil Sands development. You may claim that prices are high enough for shale extraction, but they clearly are not for other types of extraction. This is a huge problem.

The world is finite. As we approach limits of many different kinds (cheaply extractable oil, fresh water that can be obtained without desaliniation, metal ores of concentrations that we used to get in the past), economic relationships change. Economists have put together models as if the world has no limits. This is clearly untrue. It is the limits that make past models no longer work. We need models that reflect today's reality, but we don't have them.


September 27, 2014    View Comment    

On Update on US Natural Gas, Coal, Nuclear, and Renewables

Based on EROEI, coal is the best fuel, by a long shot. Natural gas comes in next. Imported oil from Iraq comes out a lot better than US produced oil.

It really depends on what you are trying to measure with EROEI.


August 29, 2014    View Comment    

On Update on US Natural Gas, Coal, Nuclear, and Renewables

The reason why wind and solar become high percentages of added capacity are

(1) Their units (espeically wind) do not last as long as fossil fuel units.

(2) The percentage of capacity they are operated at are low compared to fossil fuel plants.

So it is always necessary to add a disproportionate share of capacity for them, if any is to be used at all.

I understand that the current price of wind is about 2.5 cents per kWh. This is about right, relative to the fuel it is replacing. If wind can be produced for something like this price (without a lot of subsidies), we should be building more of it.  Everything I can see says it needs a lot of subsidies to be profitable at its true value to the grid, which is equal to the fuel it replaces. Solar is still a long ways away from being profitable at a price in this range.


August 29, 2014    View Comment    

On Update on US Natural Gas, Coal, Nuclear, and Renewables

Solar energy is diffuse. Photosynthesis is probably as close to as effient a use of solar energy as we are going to find--it has been evoloving for a very long time. We can eat food made with photsynthesis, and stay close to this chain. Or we can hope for much more.

Unfortunately, our current system is set up for very specific energy carriers--gasoline, or diesel or jet fuel, or electricity. Building a new system is extraordinarily expesnive and time-consuming. We can "beat ourselves up," for not doing more, but the truth of the matter is that now is too late to build a new system. Our financial system system is already showing huge signs of strain. Also, oil prices are not staying high enough for a lot of oil producers, adding strains to the system (contrary to be belief of many that oil prices will rise!). We need a different system now, not 50 or 100 years from now. To fix our problems, the new system needs to be cheaper than the current system using oil products. This makes the kind of change required especially difficutt.

August 28, 2014    View Comment    

On Making Sense of the US Oil Story

You are confused when you say 70% of energy is wasted. By the laws of physics, when you burn fossil fuels to get mechanical energy, you also get waste heat. If the heat is produced in a car's engine, it is pretty hard to make use of it, except perhaps for heating the car duing winter.

When fossil fuels are burned to provide electricity, waste heat is unavoidably produced. In some cases, it is possible to use this head as "combined heat and power," but to do this, it is necessary to have some use for the waste heat (like heating homes) nearby to the power plant. 

Most of this inefficiency is "baked in the cake." It is hard to get rid of it. Energy use is what provides our jobs, and allows us to get to work. It cooks our food. We cannot live on raw food (without a blender--which also requires energy use).

Renewables unfortumately don't work very well either. The are made using the fossil fuel system, and cannot be maintained without the fossil fuel system. In particular, the electric grid, to which so called renewables are often conected, needs the fossil fuel system to maintain it. We really need our whole syste, or the economy tends to collapse. This is very unfortunate.

August 20, 2014    View Comment    

On Energy and the Economy: Twelve Basic Principles

Matlhus theory would have been right, except for the ramping up of coal use. The use of coal greatly increased food production, because it allowed such innovations a steel plows in quantity, hydroeclectric (using concrete and steel) and the ramp up in the use of the steem engine, which allowed much better transport, both by ship and by rail. Caol also allowed the huge use of metal needed to make train tracks.

Bronze may have indeed helped end the "stone age," but the issue is that we have not learned to live without metals. Metals require a huge amount of heat energy to refine. We also need all kinds of other minerals.

Without heat to refine minerals, we are pretty much up a creek, without a paddle. We are without metals. In fact, we are also without plastics, and without all kinds of other moderns materials as well--synthetic fabrics, modern medicines, amd most everything else we need.

Solar and wind just plain don't have what is needed to continue to give us the heat energy that allows all of the "innovations" you talk about. They are too dilute for our needs. Their intermittency does not allow them to be scaled up well. Look at Germany, as it plunges into recesssion. Or Spain or Greece.

Solar and wind are extremely expensive ways to save on carbon.

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The article from the Economist is based on a Brookings Institution report. 

Innovation without materials to work with doesn't work. Broken supply chains are also huge problems. 

August 18, 2014    View Comment    

On Energy and the Economy: Twelve Basic Principles

You are right. Climate change could add to our problems. 

I haven't emphasized climate change as much as other issues, because current IPCC models (espcially the upper scenario, which is the BAU scenario) assume far more carbon burning that seems likely to be possilble with all of the other limits we are reaching simultaneously. We may very well have climate change--climate has been changing as long as the planet has been in existence. But I am less certain than the climate modelers seem to be about how much this will amount to.  The "2.6 scenario" seems far more likely to me, if their modeling is in fact correct, than the BAU scenario. 

August 17, 2014    View Comment