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On How Painful Will the Coming Spike in Natural Gas Prices Be?

@Robert Rapier

There is more inertia than you think in the oil and gas markets. Do you really believe that producers will move drilling rigs back into gas production from oil production if there is just a small margin between cost and price?

Each barrel of crude oil contains approximately 5.6 MMBTU of heat. With a current WTI market price of $102 per barrel, oil is selling for $18 per MMBTU. Why would any driller shift capital resources from oil extraction to gas extraction if gas is selling for 1/3 of that market price? Historically, there has been only a 10-30% difference betwen the cost of oil and gas when compared on a heat content basis. Where is the financial incentive to shift resources from more lucrative oil plays? Who is going to provide the $5-$10 million in risk capital required for each drilling project?

In my opinion, the big players in the energy game are ready for their five-year-long price war against coal and nuclear to end. They want to start reaping the benefits of having pushed their competitors down far enough so that they will have a nice long period with substantial profits before overall supplies increase enough to lead to lower prices.

Natural gas prices must rise quite a bit higher than $7 per MMBTU to provide the incentive for a significant increase in production rate. I am betting that gas prices will begin rising this winter and that they will exceed $10 per MMBTU before there is any change in the upward slope.

Rod Adams

Publisher, Atomic Insights

 

October 10, 2013    View Comment    

On Population Growth: Addressing the Real Problem

@Robert Wilson

You have identified the primary reason why the US consumes more energy per capita than France, German or Switzerland and it is not because Americans are naturally more wasteful than residents of those countries. Instead, it is primarily based on the fact that our country is much larger, with a population density that is quite a bit lower than any of your examples. As you pointed out in your comment, if you draw circles around urban areas in the US, you will find that we walk, live in smaller spaces and take public transportation enough to lower our average energy consumption to something that is close to that in your example countries.

You also point to measures like life expectancy, child mortality and education as measures of wealth. You ignore measures that seem important enough to people to attract them to the US and cause deep queues waiting for permission to emigrate here. On average, Americans that do not live in dense, walkable cities live in larger homes, have more property between them and their neighbors, have the freedom to travel on their own schedule, and can take advantage of entertainment and employment opportunities that are not within walking or biking distance. Our freedom to move requires less efficient, but often more comfortable transportation in the form of personal automobiles. Our larger homes require more energy to maintain at comfortable temperatures. Our employment flexibility often comes with an energy cost.

I think many of us are less wealthy today than we were when I was a child and gasoline cost about 25 cents per gallon. I lived on a suburban street with teachers, engineers, mechanics, retirees and airline employees. Three of my neighbors owned their own plane. About half had a swimming pool and/or a powerboat. Most had cars large enough to drive a carpool so we could get to swim meets, baseball games and wrestling matches in nearby cities. Most of us took annual vacations lasting at least two weeks that involved thousands of miles of travel in comfortable automobiles or campers.

I've been fortunate enough so that I have been able to provide my own children with some similar experiences, but I would bet that most teachers, mechanics and engineers have not been as fortunate as their earnings have failed to keep pace with the cost of liquid fuels that enabled many of those "luxuries" to be affordable for the masses.

Rod Adams, Publisher, Atomic Insights

October 7, 2013    View Comment    

On Population Growth: Addressing the Real Problem

@Nathan Wilson

The unreliable nature of the wind and the sun is a huge contributor to their high cost. The other component is the fact that they are diffuse, weak energy sources. Their weakness necessitates very large collection systems, their unreliability means that those collection systems are often idle or producing at far less than their design capacity. Capital equipment that is idle does not produce revenue, so it must produce make up revenue at the times when it is not idle. If those productive times cannot be scheduled for times when prices are high, it adds to the challenge.

Coming up with process uses like ammonia production or water distillation does not solve the problem of unreliability since those processes are also dependent on capital investments and since most chemical processes are far more efficient if operated on a steady basis. Start up and shut downs of process equipment tend to be wasteful periods with poor quality output while piping is being warmed and flows are being balanced.

I am terribly sorry if pointing out these limitations offends people that promote unreliable power systems, but I do not expect to win any friends among competitors in the energy supply industry. Instead, I am aiming my messages at energy customers, the people that will benefit from making it easier to supply them with power that continuously falls in price per unit and that approaches a zero emission asymptote. Competitors don't like the idea of selling power at lower and lower prices; that harms their profitability because they have already taken about as much action as they possibly can to reduce costs.

In contrast, nuclear fission power plant designers, manufacturers, builders and operators have a tremendous amount of scope within which to improve their cost structure. Most of them have operated within a "cost is no object" culture of adding redundant layers of "safety" systems, even though nuclear fission power plants constructed with 1960s vintage design standards have an enviable record of protecting the public from harm.

Rod Adams, Publisher, Atomic Insights

October 7, 2013    View Comment    

On Population Growth: Addressing the Real Problem

@Robert Wilson

I am sorry that you find my accurate term for wind and solar energy to be "disagreeable". I cannot help the fact that systems using those naturally variable forces are inherently unreliable and uncontrollable by humans or human designed control systems. That is simply the way it is.

In contrast, our current prospects for using more nuclear energy are defined by human decision making in the form of either political or business decisions. Since the decisions are driven by humans, they can be influenced by humans. I will continue to believe that we can -- and must -- change course and speed in nuclear energy development.

I'm kind of a believer in the Serenity Prayer.

October 4, 2013    View Comment    

On Population Growth: Addressing the Real Problem

@Robert

You will get no disagreement from me on the following point:

However significant long term declines in carbon emissions in the eyes of some American climate change "skeptics" are going to lead to inevitable declines in quality of life. Yet if North America simply consumed and produced energy like France and Sweden its emissions would be three times lower. 

It is self evident that we need no technological breakthroughs to emulate the way that France, Sweden and Switzerland produce their power, though we need to recognize that our terrain limitations are more similar to France's than to Sweden and Switzerland. We use hydro where possible and should use reliable nuclear reactors for nearly all of the rest.

We should electify more of our transportation infrastructure, especially in the form of intercity rail (electric trains are a more useful investment than "high speed trains") and intracity subways and surface trolley systems. We should replace oil burning furnaces with electric heat pumps, perhaps supplemented with natural gas heat for the days too cold to allow heat pumps to be effective.

You and I agree. There are best practice examples that we can follow. It is past time to get started. It is a good thing that we started building commercially competitive nuclear electricity generation plants in 1963 and have learned to operate them quite reliably. It is a shame that we have lost several decades worth of building experience and infrastructure development to ill advised opposition efforts combined with really poor nuclear industry project management and promotional efforts.

Rod Adams, Publisher, Atomic Insights

October 3, 2013    View Comment    

On US Nuclear Energy Plant Performance August 2013

@Spec Lawyer

None of the shutdowns had anything to do with "hitting the right side of the bathtub maintenance curve."

At least three of them had a lot to do with wimpy management that rolled over and played dead in the face of politically/economically motivated maneuvers -- probably funded by energy market competitors -- to make it as expensive and uncertain as possible to satisfy an ever changing set of requirements for a restart.

Two of them had to do with attempting to compete in markets that were distorted by unfairly subsidized and mandated "renewable" energy sources. Supposedly, renewable subsidies are justified to help clean up our air and water - if those subsidies result in shutting down emission free nuclear, are they performing their intended purpose?

Rod Adams, Publisher, Atomic Insights

September 27, 2013    View Comment    

On US Nuclear Energy Plant Performance August 2013

@NNadir

I admire most of your work, but I think you are misinterpreting Job001 Gibson's position. I see him as being in favor of nuclear energy technology, but not so positive about the decisions made by the current business leaders in the "industry". I happen to mainly agree with his argument - the best way for nuclear energy to prosper is to pursue a low price strategy similar to the strategy pursued by hard disk and flash memory providers.

BTU prices will not fall as quickly as megabyte prices, but nuclear heat is a heck of a lot cheaper than fossil fuel heat, even with its huge advantages in safety and environmental impact. There is almost no way that an inferior product with a higher inherent cost structure can win in the market.

However, nuclear industry leaders have pursued a premium pricing model and allowed their competitors to layer more and more costs. I think that is almost completely explained by the fact that most "nuclear industry" leaders are actually just a part of the hydrocarbon establishment. They are willing to compete for a share of the growth in energy demand, but not willing to strive to displace fossil fuel from its existing markets.

The fossil fuel folks are savvy enough to recognize that they can effectively choke off nuclear energy at current nuclear energy prices if they can crush energy demand growth.

That strategy would fail if nuclear energy was actually cheaper in real dollars. Nature has given us the tools for prosperity, now we need to aggressively put them to use.

Rod Adams

Publisher, Atomic Insights. Host and producer, the Atomic Show podcast

 

September 26, 2013    View Comment    

On US Nuclear Energy Plant Performance August 2013

@Job001 Gibson

The average fuel cost for a US nuclear power plant was 0.75 cents per kilowatt hour in 2012, not 0.1 as you claimed.

http://www.nei.org/Knowledge-Center/Nuclear-Statistics/Costs-Fuel,-Operation,-Waste-Disposal-Life-Cycle

 

September 26, 2013    View Comment    

On Update on "Highly Radioactive" Water Leaks at Fukushima

Ms Sterrett

Can you quantify the danger that you see from water flowing from the mountains to the ocean? Are you aware that there are routine measurements being taken in the waters immediately off of the coast next to the power station and that they do not indicate any increases in radionucleid levels?

There is no cause for concern. There is no danger. No one will be harmed. Why shouldn't I be dismissive of fear mongering and get on with my life?

September 11, 2013    View Comment    

On Thoughts on Carbon Capture and Storage Coming from the European Parliament

@David

Do you have any opinion on including nuclear energy as part of your recommended "technology neutral" approaches to the Union's 2030 energy goals? It is, after all, an ultra-low CO2 power source with life cycle emissions that are roughly equal to wind turbines.

September 9, 2013    View Comment    

On Update on Fukushima Leaks: Unrepresentative Sampling Supports Fear Mongering

Why do you call dilution a hypothesis? It is an inevitable physical process when you have a finite quantity of material and a continually growing quantity of water.

September 7, 2013    View Comment    

On Update on Fukushima Leaks: Unrepresentative Sampling Supports Fear Mongering

The reference that Darrell provided exposes itself as misleading clap trap designed to spread irrational fear in the following sentence:

"Sadly, it is the gift that keeps on giving... gamma rays."

It might sound like I am picking nits to some people who do not understand how radioactive materials behave, but the 2,200 mSv/hr dose rate that is also reported in the scariest possible terms is nearly 100% BETA radiation, not gamma rays.

http://atomicinsights.com/another-update-highly-radioactive-water-leaks-fukushima/

That measurement is essentially what we call an "on contact" reading; it almost completely disappears when the probe is moved just 50 cm away from the concentrated source. If a reasonably thick sheet of paper is put between the source and the probe, the reading also falls off dramatically. Clothing is normally considered all the protection that workers need to ensure that they are not harmed by a beta emitter.

http://www.epa.gov/radiation/understand/protection_basics.html

The GAMMA dose rate from that same source - the one that reads 2,200 mSv/hr - is just 1.5 mSv/hr. It is a "hot spot", but it is not nearly as dangerous as financial publications like ZeroHedge, that want to make money by spreading fear of nuclear energy.

Here are a few example plays that might be peaking ZeroHedge's interest. Oil & gas companies have been making many tens of billions per year selling fuel to Japan to replace the output of their shuttered nuclear plants and contracting companies are chomping at the bit to be in on the many billions that some want Tepco to spend to attempt to stop water from flowing from the mountains into the oceans.

September 7, 2013    View Comment