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On IEA Sees Fundamental Shifts in the Current Oil Price Drop

Bob,

In other words the oil market might start to behave like a real market, rather than the hybrid of market and cartel-driven monopoly it's been for my entire career in energy.

I strongly doubt that "all the expensive production and exploration will stop," because OPEC can't produce enough to displace all of that from the market, and the price--in a real market--would be set by the marginal cost of the last barrel, which could be shale, oil sands or deepwater production. And yes, we could be entering a period in which the kind of price swings we're now experiencing occur more frequently, whle geopolicitally driven swings happen less often.

March 13, 2015    View Comment    

On IEA Sees Fundamental Shifts in the Current Oil Price Drop

Is it possible you are confusing the IEA, which serves the governments of the OECD countries and explicitly didn't forecast prices in the report I discussed, with the EIA, an arm of the US government that does forecast prices for oil and other energy?

 

March 11, 2015    View Comment    

On A Lesson in Oil Pricing

Joris,

Perhaps the expression, "Don't let the perfect be the enemy of the good", is found only in the US. Either way, characterizing a technology with the potential to reduce 90% of CO2 emissons from stationary sources as "not low-CO2" and a "desperate attempt" writes off in one stroke what could be one of the biggest of the necessary emission reduction "wedges.", because it is focused on existing infrastructure.. Take another look at the IPCC chart I referred Bob to, above. Is there a realistic hope of 450 ppm without it?

March 3, 2015    View Comment    

On A Lesson in Oil Pricing

It still comes down to dollars, in the sense that a combustion power plant with CCS will have a higher cost per net MWh of output than one without, and must compete on that basis, after accounting for any explicit or implicit (regulatory) price on CO2.

March 2, 2015    View Comment    

On A Lesson in Oil Pricing

Bob,

I was referring to Table SPM.2 of the WG3/AR5/Summary for Policy Makers:

http://mitigation2014.org/report/summary-for-policy-makers 

It indicates a 138% increase in mitigation costs to limit GHGs in 2100 to 450 ppm without CCS--far more than for the other 3 key technologies--vs. their base technology assumptions. That makes it a crucial technology in my book. The lower the cost of mitigation, the more we can afford to cut emissions.

And that seems like enough on CCS in a post on oil prices, don't you think?

March 2, 2015    View Comment    

On A Lesson in Oil Pricing

So why not apply your obvious creativity to come up with ways to close those potential loopholes?

February 28, 2015    View Comment    

On A Lesson in Oil Pricing

Andy,

That claim reflects a misunderstanding of oil market dynamics. It's all about which reserves you use, and who owns them. Would you disagree that it has made a significant difference in the last couple of years to use US shale reserves rather than Saudi reserves?

As for governments in the developing world--where 95% of oil subsidies are given--using this opportunity to reduce or eliminate them, that's happening and it's high time. Something we can agree on.

February 28, 2015    View Comment    

On A Lesson in Oil Pricing

The economics aren't easy, because as you note the parasitic cost (energy and financial) of capturing and storing CO2 cannot be reduced to zero. However, that does not prove your argument that the best form of sequestration would be leaving the resources in the ground. If the cost of CCS is $50/tonne of CO2, that's still less than $14/ton of carbon burned. The price of coal has dropped by more than that in the last couple of years.

February 27, 2015    View Comment    

On A Lesson in Oil Pricing

Bob,

Apparentlyl I did a poor job writing the comment to which you're responding, because based on what you've just said we aren't in agreement. In particular, I disagree wholeheartedly with your characterization of the achievability of verifiable CCS, based on my familiarity with key pieces of the technology. I would point out that any number of "colorless, odorless" gases are gathered, metered, shipped, stored and sold every day, on an industrial scale.

February 27, 2015    View Comment    

On A Lesson in Oil Pricing

Bob,

I don't see how CCS would be "an easily-circumvented scam" any more than the numerous emissions offsets and projects that underpin much of emissions trading in the jurisdictions where that is in place. The solution, just as for those, is reputable 3rd-party verification. That's not trivial, but it's not rocket science, either.

As for "profit-taking", it's hard to imagine enough emissions reductions occuring if someone doesn't figure out how to make a profit on the activity. FirstSolar's impressive 4Q earnings come to mind.

February 27, 2015    View Comment    

On A Lesson in Oil Pricing

The idea of "red hydrocarbon" is that energy production from oil, gas, or coal is balanced with carbon capture and storage (CCS). It's interesting but still needs a lot of work, as organizers of at least one of the conferences to which you allude explicitly admit.

The IPCC identified CCS as a crucial technology for minimizing the cost of meeting large-scale GHG reduction goals, though at this point the economic incentives for investing in industrial-scale CCS, rather than demonstrations funded as R&D, are insufficient. If a market could be created in which CCS-linked energy--"red hyocarbon" in this group's parlance--commanded a premium over other fossil energy, that might help close the gaps holding back CCS now.

February 27, 2015    View Comment    

On A Lesson in Oil Pricing

Bob,

I'm duly impressed with the scale-up plans of Tesla and other EV makers. However, it's not enough to build more factories. Consumers have to believe your products provide the same or better convenience, cost, and other attributes they care about as what they are using now. EVs are not at that point, mainly due to current limitations on battery storage density and charge/discharge rates. And while batteries are improving steadily, so is the efficiency of non-plug-in cars using liquid fuels. This won't be quick.

February 23, 2015    View Comment