In his article, The Corrections: Jonathan Franzen’s Deeply Irresponsible Climate Change Article, Joe Romm, climate hawk, uses the nonsensical graphic shown below borrowed from U.S.News & World Report (also used here) in an attempt to stifle criticism of renewable energy.
One could predict that Franzen’s blasphemous epiphany in the New Yorker that we are not going to stop climate change by blighting “…every landscape with biofuel agriculture, solar farms, and wind turbines” would light Romm’s hair on fire. However, it was Franzen’s suggestion that conservation organizations like the Audubon society should be doubling down on what they do best, preservation of what remains, instead of diverting resources to climate change issues which they can’t do anything about, that got the Audubon society’s feathers in a bunch.
- Franzen is probably right about it being too late to stop climate change, although there is always hope.
- Because conservation groups tend to take their cues from the most vociferous climate hawks, who are also anti-nuclear energy, they are under the false impression that renewable energy can save the day.
Occasionally I am deluged with inquiries about a particular news story. That happened this week. As the inquiries mounted, I decided I better address the story. After I saw one more gushing, uncritical report on CNN, I knew a reality check was in order.
This week German car manufacturer Audi announced they can economically produce carbon-neutral automotive fuel from ingredients found in the atmosphere:
That article’s subtitle is “Carbon-neutral diesel is now a reality.” The article explains:
German car manufacturer Audi has reportedly invented a carbon-neutral diesel fuel, made solely from water, carbon dioxide and renewable energy sources. And the crystal clear ‘e-diesel’ is already being used to power the Audi A8 owned by the country’s Federal Minister of Education and Research, Johanna Wanka.
There is also an explanatory graphic that goes along with the story, and that’s where a few people might begin to ask some critical questions about this process: CONTINUE»
Last week the U.S. Energy Information Administration (EIA) released its Annual Energy Outlook 2015 (AEO2015). The report presents updated projections for U.S. energy markets through 2040 based on six cases, defined as follows:
- Reference — Real gross domestic product (GDP) grows at an average annual rate of 2.4% from 2013 to 2040. North Sea Brent crude oil prices rise to $141/barrel (bbl) (2013 dollars) in 2040.
- Low Economic Growth — Real GDP grows at an average annual rate of 1.8% from 2013 to 2040. Other energy market assumptions are the same as in the Reference case.
- High Economic Growth — Real GDP grows at an average annual rate of 2.9% from 2013 to 2040. Other energy market assumptions are the same as in the Reference case.
- Low Oil Price — Light, sweet (Brent) crude oil prices remain around $52/bbl (2013 dollars) through 2017, and then rise slowly to $76/bbl in 2040 while OPEC increases its liquids market share from 40% in 2013 to 51% in 2040
- High Oil Price — Brent crude oil prices rise to $252/bbl (2013 dollars) in 2040 while OPEC’s market share declines to 32%.
- High Oil and Gas Resource — Estimated ultimate recovery (EUR) per shale gas, tight gas, and tight oil well is 50% higher and well spacing is 50% closer than in the Reference case. Tight oil resources are added to reflect new plays or the expansion of known tight oil plays, and the EUR for tight and shale wells increases by 1%/year more than the annual increase in the Reference case to reflect additional technology improvements. This case also includes kerogen development; undiscovered resources in the offshore Lower 48 states and Alaska; and coalbed methane and shale gas resources in Canada that are 50% higher than in the Reference case.
I have been pretty adamant — some may say stubbornly so — about my expectations for crude prices this year. I have argued against the notion that oil prices were going to fall to $20 or $30/bbl for several reasons. In a nutshell, those reasons are:
- This is well below the marginal cost of shale oil production, and you can expect shale oil supplies to begin contracting in response to falling prices
- Growing crude oil inventories will peak soon for seasonal reasons
- Lower oil prices will spur demand
I have made this argument a number of places, including in a recent Wall Street Journal article. Noted oil analyst Philip Verleger made a comment following that article that those calling for collapsing prices are correct, and he patted himself on the back with the comment “A few of us who make a living in the field did (call the price collapse correct)” while arguing that those writing for the Wall Street Journal don’t “seem to understand what is going on” and are “in the dark ages.” Them’s fighting words! CONTINUE»
[Updated 5/4/2015 to delete potentially incorrect information about storage space and battery size.]
Nissan recently released the results of a five year study that found 99.99 percent of its battery packs are still operating as warrantied (battery not having less than 80 percent capacity after five years). Using that information, a study conducted by Warranty Direct (an independent British insurance specialist) found that the Leaf drive train is 0.255/0.01 =25 times more reliable than internal combustion engines. This is, however, somewhat misleading because today’s conventional cars are amazingly reliable, especially compared to a 1973 Pinto. They found that out of 50,000 conventional cars aged 3-6 years old, only a quarter of one percent “had an issue that led to an immobilization of the internal combustion engine.” This finding appears to have led Glass’s (Britain’s used car guide) to conclude:
“They [Leafs] are good enough that, as an expert in this field, we will be looking again at our residual value forecasts for LEAF and probably revising them upwards. Long-term battery life has been a definite concern for used EV buyers but the new figures from Nissan effectively remove this worry.
“Really, Nissan has gone through a process with the LEAF similar to Toyota with the first generation Prius several years ago, where the cars had to be proven in real life conditions before used buyers could feel confident. Now, the Prius enjoys excellent residuals and the LEAF should start to find a similar level of market acceptance.”
While U.S. crude oil inventories have been surging since last fall, I have argued that these inventories should peak off soon. There are several reasons for this, but the primary reason is that March is historically the month that refinery utilization is at its lowest, due to the popularity of performing refinery maintenance during the month. The difference in crude oil demand from refiners between March and July has historically been about 10 million barrels per week. This alone should be enough to halt the ~8 million weekly crude oil build that we have seen thus far in 2015.
Another factor is that the large capital spending cuts that have accompanied the oil price collapse will begin to negatively impact oil production. The Energy Information Administration reported 2 weeks ago that U.S. oil production had suffered a weekly decline for the first time since January. Last week, production was almost flat, up only 18,000 bpd over the previous week. Meanwhile, U.S. refinery inputs surged by 201,000 bpd, climbing back above 90% utilization for the first time in 2 months. This should have dropped crude oil inventories by more than a million barrels for the week, but the EIA reported a huge inventory build of nearly 11 million barrels for the week.
What is the explanation for this? CONTINUE»
In my last post, I showed that the highest levels of the American government have made engagement with the Caribbean a priority, and that they see energy security as one of the key ways to build that relationship.
But – what does that mean? Unlike the Venezuelan government, the US government is not about to provide subsidized oil directly to Caribbean governments: I’m sure that Congress would have something to say about that! When President Obama arrives in Jamaica on April 9, he will have a suite of options to present for how the US can help build energy security for the Caribbean, none of which will cost American taxpayers.
This is about U.S. government leadership and coordination. In a series of public-private partnerships, the US government will act more as a coordinator than a funder. There actually are many funders, whether its official development assistance from European, Canadian, or other governments, or whether it is non-profit foundations. However, there has been little coordination until recently. The unique convening power of the U.S. government can bring the right people to the table, who can then move projects from the planning stage to completion.
The energy revolution in the US – in both renewables and fossil fuels – also gives the US the market to provide the support for building energy security.
First, the Caribbean may be the world’s best natural environment for renewable energy. While the Caribbean islands may be short on natural resources in the traditional sense, they are rich in wind and sun. We know that the sun shine and the trade winds are consistent and predictable. When combined with the high prices for consumer electricity, the Caribbean is one of the few places in the world that renewable energy doesn’t need subsidies for operations.
In his latest in the series on Caribbean Energy Security, Andrew Holland details why American leaders see the need to build energy security in the Caribbean.
In my previous column – Is the U.S. Running Out of Crude Oil Storage? – I discussed the tightening crude oil storage picture in the U.S. That column has already generated the highest level of feedback and inquiries from readers and the media of any I have written in quite some time. So I want to follow up and drill down a little more, and show why this situation is more dynamic than is typically conveyed.
Since I wrote that article, there have been 2 more weeks of crude oil storage builds. Pundits continue to predict that crude oil prices have nowhere to go but down, because something has to give. Well, something is about to give. CONTINUE»
Update: See my latest article Crude Oil Inventories Should Peak Soon for an understanding of how important refinery utilization is in this picture.
No, despite the popular narrative that we keep hearing, the U.S is not running out of crude oil storage. Yet there are those who are predicting that oil prices are going to fall to $20 or $30 a barrel, pointing to the crude oil storage numbers and suggesting that we are near maximum capacity and therefore a price collapse is imminent. (Although Goldman Sachs did some backpedaling on their forecast this week).
The argument goes something like this: US running out of room to store oil; price collapse next?
“The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months. For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country’s main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.”
At first glance, the argument seems to be pretty straightforward. But let’s dig into the data a bit. Admittedly, if you look at the storage numbers in the nation’s most important oil storage hub (and the price settlement point for West Texas Intermediate on the New York Mercantile Exchange) in Cushing, Oklahoma, it’s easy to form the impression that storage is filling up and an oil price crash is inevitable: CONTINUE»