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By Robert Rapier on May 14, 2012 with 23 responses

Book Review: A Thousand Barrels a Second

A Thousand Barrels a Second
I am way behind on reading books that have been sent to me for review by various publishers. The pile on my desk is growing, because I have a bad habit of starting new books before I finish the one I am reading. Currently I am nearly finished with Oil’s Endless Bid, am halfway through Oil: Money, Politics, and Power in the 21st Century, and had started Amory Lovins’ Reinventing Fire until someone borrowed it from my office.

However, I did manage to recently finish Peter Tertzakian’s A Thousand Barrels a Second : The Coming Oil Break Point and the Challenges Facing an Energy Dependent World. This one had been on my bookshelf for a while (as opposed to the growing stack of books I have been sent to review), but it has been pretty high on my list of books to read.

The book was written in 2006, and the author made what turned out to be some very accurate predictions about the volatility and higher prices ahead in the oil markets. (Here is an interview with Jon Stewart shortly after the book was published). His writing style is different from mine, but many of the themes he wrote about are the same themes I write about: Growth in developing countries, loss of spare production capacity — we even both talked about the transition from whale oil to crude oil in our respective books. However, he went into much greater detail on that topic, and I found that to be one of the most enjoyable sections in the book. The author shows that even in the days of whale oil, producers were trying to establish cartels to control prices.

One very interesting issue he writes about is the rate at which energy substitutions have taken place throughout history. Moving from wood to coal took 75 years, which was the fastest substitution in history. Coal to oil took 100 years (but of course coal never went away; it just lost market share to oil). The point is that a transition away from oil is likely going to take far longer than many people believe. There is no historical precedent that shows that these transitions can occur quickly.

The author also says that over the past 100 years, there has only been one new large-scale energy platform introduced: Nuclear power. He says that there have been eight large-scale platforms (although he does not define “large-scale”) in the history of energy: Wood, whale oil and animal fat, coal, oil, natural gas, water (hydropower), and uranium. He acknowledges that several renewable technologies could be added to the list, but argues that their lack of scalability will make it difficult for them to make a fast, large-scale contribution to the global energy mix.

He describes four phases that a society goes through as they undergo energy transitions: 1). Complain and pay up; 2). Conserve and increase efficiency; 3). Adopt alternative energy sources; and 4). Make societal, business, and lifestyle changes. When the book was written in 2006, he argued that the world was still solidly in the “complain and pay” stage. During this stage politicians will tend toward gridlock and finger-pointing, as pursuit of real solutions and a movement away from the status quo is politically risky. We are still very much in this phase, as evidenced by the political posturing over energy issues, but we have made some progress in Phases 2 and 3. Some might argue that we are making progress in Phase 4, but I think the sort of changes he is talking about are far greater than what we have seen to date. I expect the sort of change he is talking about might involve (as an example) an end to affordable commercial airline flights.

The core message of the book is one that is very close to my heart, and that is that we need a good dose of pragmatism. Yes, we always have to make trade-offs in our energy options, but these trade-offs need to be carefully considered. We can all name many negatives from our oil dependence, but then we generally take for granted the many positive impacts that oil has on our lives. Because of this, we may pursue impractical solutions that will be quickly tossed aside if they can’t fill the role that petroleum currently fills. The image of an oil-covered bird is very powerful, but it may push us into trade-offs that endanger far more that just birds.

Generally when I read a book about energy, I find myself making little notes on points of disagreement. I was about 90% finished with this book before I finally started to find some significant points of disagreement, and those were about some of the specific details of how the author feels like the future is going to play out. On this particular point, he envisioned himself in the year 2017, after we had gone through some very painful readjustments with respect to our oil consumption, and that he was purchasing one of the first commercially available hydrogen cell vehicles. I just don’t think that’s going to happen, and certainly not by 2017. But that’s a minor point, and one that does not detract from the strength of this book.

In summary, this was a really great book that doesn’t take political sides, and a book that has thus far stood the test of time. Many of the author’s predictions from 2006 have taken place or are in the process of taking place. If you want to have a better view of how the future is likely to unfold with respect to energy, I think this book does an excellent job of laying that out.

Link to Original Article: Book Review: A Thousand Barrels a Second

By Robert Rapier

  1. By Nick Grealy on May 14, 2012 at 9:07 am

    That was then, but if you did a cursory search on Peter T today you would see that he finds Peak Oil theory is entirely  dead thanks to shale gas and oil.

     

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    • By Robert Rapier on May 14, 2012 at 1:15 pm

      But if you were familiar with his book, you would know that Peak Oil is not a central thesis. His thesis is much more like my own: Peak oil or not, rapid growth in developing countries is going to keep pressure very high on oil prices.

      Regardless, I did a “cursory search” and did no find where he has changed his views. Could you provide a link? He did write another book in 2009 in which is reiterated his earlier views.

      RR

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  2. By Tom G. on May 14, 2012 at 10:52 am

    Good book review Robert and I also agree that a hydrogen society is not going to happen in the next few years.  I also believe we have a LONG way to go when it comes to Phase 4, what I would call social engineering.  

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  3. By Walter Sobchak on May 15, 2012 at 2:02 am

    Phase 4, what I would call social engineering.  

    And what the rest of us would call the imposition of communist tyranny.

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    • By anonyminious on May 15, 2012 at 11:33 am

      You equate reduction in energy usage in the face of scarcity as communist tyranny?

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  4. By Tom G. on May 15, 2012 at 12:25 pm

    The above posts by Walter and Anonyminous were excellent. One made me want to immediately write a followup and the other made me laugh. I can feel it now – it’s going to be a good day for blogging, LOL

    When I stated; we have a LONG way to go when it comes to social engineering; I guess I should have given some definition of what social engineering means. Lets start with two definitions from Wikipedia.

    1. Social engineering is a discipline in political science that refers to efforts to influence popular attitudes and social behaviors on a large scale, whether by governments or private groups.

    2. Social engineering, in the context of security, is understood to mean the art of manipulating people into performing actions or divulging confidential information.

     

    There are of course other definitions and meanings but for the most part; with the exception of my military service; definition #1 comes closest to representing my beliefs. 

    Have a great day everyone.

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  5. By Jim Takchess on May 15, 2012 at 2:15 pm

    When you do you post about MIT Nocera’s leaf (sp?) please comment what role Natural Gas plays in the process. 

    Thanks,

    Jim

     

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    • By Robert Rapier on May 15, 2012 at 5:56 pm

      Jim, in what sense do you mean? I am about to record the video, but I am not sure what you mean about the connection between the artificial leaf and natural gas. 

      RR

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  6. By Benny BND Cole on May 15, 2012 at 2:25 pm

    The price signal is a wondrous thing.  Innovation now takes place in Europe, Japan, China, and the USA. 

    I expect a brighter, cleaner and more-prosperous future. 

    Technical skill is not man’s problem—it is citizenries and a political systems unable to make sound choices, or corruption. 

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    • By mac on May 15, 2012 at 6:58 pm

      Couldn’t access Russ Findlays’ last e-mail on rare earths.  I guess you closed the comments section,

       

      Just to say, I think Russ has it right and that REMs (while somewhat problematic) are not a huge problem or hindrance for electric vehicles.

      mac

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      • By mac on May 15, 2012 at 7:11 pm

        Look Robert,

        You are the guy that wrote Obama a letter stating that that you believed in “electrification” of the transportation sector………….

        mac

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      • By Robert Rapier on May 16, 2012 at 12:10 am

        Couldn’t access Russ Findlays’ last e-mail on rare earths.  I guess you closed the comments section,

        There was a problem with one of Russ’s comments (formatting) so Sam may have done something. I didn’t close any comments.

        RR

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  7. By mac on May 15, 2012 at 7:35 pm

    Way ahead of you……..

    Simply, support what you said……………

    ………….., and stop trying to defend a dying oil paradigm

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  8. By mac on May 15, 2012 at 11:29 pm

    Glad to see you are reading some of Lovin’s stuff.  You might also read Ann Korins’ comments about an open fuel standard.

    The Gospel according to St. Paul ???

    Well. not exactly, but both Lovins and Korin actually have something to say,  if you will take the time

     

     

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    • By Robert Rapier on May 16, 2012 at 12:11 am

      You might also read Ann Korins’ comments about an open fuel standard.

      I can tell that someone has not read my book. :)

      RR

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      • By mac on May 16, 2012 at 1:33 am

        Okay…..

        Look………….Ann Korin is a bio-fuels advocate.  We all know this.

        What’s the point ????  Just like all the “truth” we get from  AWEA,  an avowed D.C .  Wind lobby.

        Or,  “all the truth we get from oil companies”

         

        We already knew this………………..

        I read some excerpts from your book on Amazon.

        Not bad………

         

         

         

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  9. By mac on May 16, 2012 at 12:49 am

    “I always thought the world was sweet and kindly until I invested in the stock market…..”

    Personally,  I have never lost a dime in the market because most participants are there because of fear.

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  10. By Jim Takchess on May 16, 2012 at 6:49 am

    Robert, 

    Does Nocera’s process require natural gas ?

     

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    • By Robert Rapier on May 16, 2012 at 12:47 pm

      Jim, not to my knowledge unless it is used in the production of the catalyst.

      RR

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  11. By FG on May 21, 2012 at 4:24 pm

    Full transition is probably very slow. But on a sectoral or national basis, it could be much faster.

    To take one example, France fully transitioned from coal and fuel oil to nuclear for electricity in a matter of 15 or 20 years, from the late seventies to the early nineties.

    I can fairly easily imagine a country transitioning out of petroleum based fuels for transportation also in a matter of 15 or 20 years, about the time it takes to renew most of the vehicle fleet.

    It really all boils down to an installed base effect. Cars and trucks are designed to run on petroleum-based fuels, hence all available fuels are based on petroleum, hence all new cars are designed to run on petroleum-based fuels, and so on and so forth. You need to break this loop, one way or the other.

    Free markets are really bad at those kinds of transitions. They work well for incremental changes but not when sharp breaks are needed. It has to be a political decision, coming from the top and imposed by legal fiat.

    A fairly easy path would be to mandate compatibility with pre-determined 2nd generation fuels for all new vehicles then stick to it, probably the most difficult part as RR exposes in another post, then start phasing the fuel in question at service stations, also though mandates and incentives. There will be some stragglers and special cases but, after one fleet life cycle, you can start phasing out crude-derived fuels from most locations. 

    By the way, each sufficiently large country can do it on its own. And at this point and prices, the competitive advantage of crude-derived transportation fuels against alternatives like DME (my favorite) is purely a matter of installed base, not price. So I doubt it would be very costly.

     

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  12. By Optimist on May 21, 2012 at 8:06 pm

    Phase 4, what I would call social engineering.  

    And what the rest of us would call the imposition of communist tyranny.

    Leave it to the free market. I’d rather not trust a government official, no matter how well meaning, with any of this…

    At an average of $40/week for fuel, we’re a L-O-N-G way from crisis. Just check SUV sales everytime gas prices pull back a few pennies…

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  13. By Optimist on May 21, 2012 at 8:15 pm

    Free markets are really bad at those kinds of transitions. They work well for incremental changes but not when sharp breaks are needed. It has to be a political decision, coming from the top and imposed by legal fiat.

    Have to disagree. Free market is our only hope when a big transition is required. Take the OPEC oil embargo of the seventies. Until Mr. Nixon had the bright idea of fixing prices, there was no shortage. Compare that to 2008, when for all the whining, there were no gas lines.

    The second problem would be this: what would you have the so-called benevolant dictator impose on the rest of us? Hydrogen? OOPS! BANG! Electric cars? Fizz goes the ancient electric transmission system. No dictator could get this right, even if dictators were momentarily assumed to be honest and clever.

    A fairly easy path would be to mandate compatibility with pre-determined 2nd generation fuels for all new vehicles then stick to it, probably the most difficult part as RR exposes in another post, then start phasing the fuel in question at service stations, also though mandates and incentives.

    That’s nice. What 2nd generation fuel are you referring to? Pixie dust?

    And at this point and prices, the competitive advantage of crude-derived transportation fuels against alternatives like DME (my favorite) is purely a matter of installed base, not price.

    That’s a brave statement. Got any data to back it up?

    What is used to produce that DME? Natural gas? Coal?

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  14. By FG on May 21, 2012 at 11:41 pm

    @Optimist

    On free markets, I won’t try to argue. Invoking Tricky Dick and fixed pricing as the inevitable outcome of anything but pure, unadulterated free markets is kind a conversation killer, I think. And I don’t do theology, anyway.

     

    That’s a brave statement. Got any data to back it up?

    Oil is about $20/MMBTU, gas is around $3/MMBTU in the US, or more realistically about $7 or $8/MMBTU world price . Coal is around $3/MMBTU, has been around that for pretty much ever and won’t go anywhere far in the foreseeable future, no matter what happens. It’s even cheaper if you process sub-bituminous coal at the mine mouth, essentially the cost of shoveling the dirt.

    So, if someone wants to argue in favor of the superior competitiveness of oil as a primary source of energy, that someone has some pretty heavy duty explaining to do (I know people at Exxon who will try to do just that all night long if you get them drunk enough…).

     

    What you are paying for oil is not its energy but its convenience of use in the existing installed base. And it’s probably a fairly acceptable deal, even right now.

     

    What is used to produce that DME? Natural gas? Coal?

    In practical terms, it’s made from coal or natural gas. Biomass is also a possibility but let’s be serious.

    It’s a syngas derived fuel. Actually, it’s probably the only one with methanol whose synthesis is sufficiently selective to make it really viable, as opposed to Fischer-Tropsch or gas-to-ethanol (**cough** Range Fuel **cough**) or higher alcohol synthesis. And all syngas processes lend themselves to carbon capture, to a cost, if addressing global warming is an concern.

    It’s produced either in two steps from methanol synthesis followed by a dehydration step , or through a slightly more efficient single step synthesis using bifunctional catalysts.

    It’s getting popular in China as a LPG substitute for domestic heat and about the same cost as LPG. A warning though against using that as a reference point for economic analysis. AFAIK, for the most part, DME plants in China are old, inefficient coal-to-methanol  from the communist era which desperately needed an alternative market … and successfully found one. Their economic viability largely rely on local conditions, in particular logistics, and are rather screwy.

     

    The main attraction of DME is that it works well as a VERY good, clean, high cetane straight diesel fuel and diesel engines are really nice and proven for high fuel efficiency.Volvo has engines under trial for heavy trucks and trailer tractors and someone else (can’t remember which manufacturer) for light duty utility trucks. Most recent news is that they are working like an absolute charm.

    But, what is not proven AFAIK, is the ability to run dual fuel. DME and petro-diesel fuel have radically different viscosity and volumetric characteristics and the fuel injectors must be designed accordingly. So, that’s the one nut that remains to be cracked for deployment outside of captive fleets.

     

    DME can also be mixed 30/70 with LPG as a gasoline substitute but then straight methanol is probably a better choice. Compressed natural gas is also a good option where it’s available.

    DME also has the benefit of being inherently sulfur-free, by virtue of its manufacturing process. So, projecting in the future, it would be a perfect feed for fuel cells in range-extended electrical vehicles.

    I let you search the intertubes to get more information. If synthetic fuels are to ever take off, it will probably be the methanol-DME duet, with CNG as a serious contender for private vehicles.

     

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