Posts by Robert Rapier
Sometimes the written word is easy to misinterpret. More than once I have written an article to find that some minor point I made became the focus, or that the point I was making was just lost. Most of the time that’s my fault, but sometimes it’s because an editor wanted to spice up the title and make it a bit more controversial. In that case, that can inflame the reader before they even begin to read, and they either make comments based on a misleading title, or they read the article with significant bias.
I think there is a risk of misinterpretation with today’s article, so I want to spell out my intent up front. This should not be read as a defense of ExxonMobil or their business practices, because that’s not what it is. It’s an attempt to get the reader to understand how they think, and why they do some of the things they do. Importantly, you may not be able to understand their actions given your view of the world. It’s not because they are simply denying reality so they can keep making money, they just don’t see the same things you see. Here is my attempt to explain that.
A Carbon Asset Bubble?
The 2009 Copenhagen Accord on climate change stipulated that if the worst impacts of climate change are to be avoided, we have to stop taking fossil fuels from the ground and burning them. Doing so has been increasing the carbon dioxide in the atmosphere for the past two centuries. Former Vice President Al Gore has been but one high profile voice advocating for leaving those fossil fuels in the ground, which would create a big problem for fossil fuel companies whose value is based on their fossil fuel reserves. Gore outlined his position last year in a Wall Street Journal editorial The Coming Carbon Asset Bubble. CONTINUE»
How We Can Industrialize the Internet of Things
By Kevin Klustner
A number of thoughtful people – including Cisco CEO John Chambers – believe that the Smart Grid will ultimately be bigger than the Internet, by a magnitude of 100 or 1,000.
That’s a fairly audacious prophecy.
And, if you asked a wide range of industrial companies with energy-intensive facilities right now, they might not necessarily agree with this prediction.
But their skepticism is understandable – and it’s also based on current reality.
Indeed, many energy-intensive businesses today aren’t able to interact fully with Smart Grid signaling and pricing for the highest cost efficiency because of a lack of real-time knowledge and a lack of technology integration with their automation systems. CONTINUE»
In January of this year, as I do each year, I made several predictions for 2014. One was that natural gas prices would be higher. That prediction is looking pretty solid, with natural gas inventories this week dropping below 1 trillion cubic feet for the first time since 2003 — 49% below the level of one year ago. As I have argued in recent articles, this is likely to mean a year of higher natural gas prices than what we have become accustomed to over the past couple of years.
Among the other predictions I made for 2014 was “KiOR will declare bankruptcy in 2014.” While it is still a bit early to write KiOR’s (NASDAQ: KIOR) obituary, the patient is looking pretty unhealthy. I have been getting a lot of emails asking for comment on their recently released annual report, and I would have had something posted already, but I was traveling during the first half of the week. So let’s dissect what has happened. CONTINUE»
Natural Gas Update
Two weeks ago I wrote about the abnormal situation with natural gas inventories in Natural Gas Inventories are Headed Toward Zero. I got a number of questions and comments about that essay, and since then we now have another two weeks of inventory data, let’s update the picture.
First, I want to deal with some misconceptions that a few people had. I don’t think we are going to run completely out of natural gas in storage. My point was that this winter marked the sharpest decline trajectory and we have made the largest ever withdrawals from storage in history, and barring a sudden warm spell we are going to go into injection season with very low natural gas inventories.
This has implications. Why? Because historically a significant deviation of inventories from normal will have a lingering impact on natural gas prices. CONTINUE»
I have gotten some inquiries about my status, as I don’t typically go two weeks between posts. I am fine, but it’s been a very busy two weeks. There was lots of travel, lots of deadlines, and in between I worked in a trip to Hawaii to spend a few days with my family. I got to be there for my oldest son’s 18th birthday, and then helped chaperone an overnight camping trip for my son’s 5th grade class on the beach in Hawaii. I must say I never got a school field trip like that in elementary school in Oklahoma!
This week I am back in Arizona, where I continue to work on a project. Next week I will be in Washington, DC to sit on a panel at the 2014 Methanol Policy Forum. My panel is called “Unlocking Our Vehicles to Methanol.” I just cleared my last pressing writing deadline, and there are two topics I want to write about. One is the situation with natural gas inventories. The next Weekly Natural Gas Storage Report will be released tomorrow (March 13th), and I will put up a short post following that. So today I will address the other topic that’s been on my mind.
The 60 Minutes’ Edits
During my interview with Lesley Stahl, we discussed a lot of things that I wish had been aired. In fact, I told one of the producers that I think they could have avoided a lot of the fallout if they had aired more of my interview, because I presented a more balanced view than was presented by the overall story. As I said during my interview, the issue of cleantech isn’t black and white, or good versus evil. It is a complex story with many angles, and an attempt to reduce it to black and white was certain to create controversy. CONTINUE»
This winter has been one of the coldest on record. It’s been the coldest winter in at least 30 years, and I saw a report today that there is a chance that this will be Chicago’s coldest winter on record. Presently it is the 3rd coldest on record for Chicago, but another blast of cold air is just moving into the Midwest and East Coast.
Natural gas is a major energy source for heating homes, and prices have been spiking periodically in recent weeks as the weekly draws on natural gas inventories are higher than normal. Natural gas consumption in the US is highly seasonal, so producers use a system of underground pressurized storage that builds inventories until mid-fall, which are then depleted through the winter. Natural gas can be stored in depleted oil or gas reservoirs, in natural aquifers, or in salt caverns.
The US has nearly 9 trillion cubic feet (tcf) of natural gas storage capacity, but only a fraction of that has ever been used. According to the Energy Information Administration (EIA), the actual amount in storage has never exceeded 4 tcf. Inventories will usually build to between 3 and 4 tcf by ~ November 1st each year, before being pulled down to under 2 tcf by the end of winter. So a typical winter season will see just over 2 tcf pulled out of storage — an amount equivalent to about 10 percent of annual US natural gas production. CONTINUE»
What Ethanol Problem?
If you live in the Midwest, you are in the midst of a thriving ethanol industry. But the Midwest does not control its own destiny when it comes to ethanol. That is still controlled by the federal government.
When I first started writing about energy nearly a decade ago, many of my early articles were addressed at the ethanol policies we were pursuing in the US. Even though I supported renewable energy, I felt like we were going about things in the wrong way. While I acknowledged that you could subsidize lots of ethanol production into existence, there needed to be a clear path for sustainability in the event that strong government intervention waned.
Today, nine years after I began writing about energy, we have an ethanol industry that has undergone rapid growth, but it is an industry that still relies heavily on the hand of government in the form of the Renewable Fuel Standard (RFS). One need look no further than the uproar over the Environmental Protection Agency’s (EPA) decision to lower the RFS for 2014. CONTINUE»
A Disproportionate Response
I had intended to write an article today outlining some potential solutions to the Midwest’s ethanol predicament, but some recent exchanges on Twitter prompted me to postpone that for a week.
The issue in question involves various comments I have made about the Keystone XL pipeline. I have argued that while Keystone XL has mobilized a lot of passion and energy, its threat is minuscule compared to the world’s growing carbon dioxide emissions from coal. Thus, I believe most of the effort being directed at stopping Keystone XL would be better directed at the world’s coal emissions.
Some took exception to this. Some who are spending their time and energy on Keystone XL argued that Keystone XL really is a big deal, while others noted that a heroic effort is being expended to combat coal consumption. So, I have done a few calculations to illustrate my argument. CONTINUE»
What 60 Minutes Got Right
Following the recent 60 Minutes story The Cleantech Crash, Katie Fehrenbacher at Gigaom wrote a very good article called What 60 Minutes got right and wrong in its story on the “cleantech crash”.
In contrast to some who reacted with righteous indignation against the notion of any troubles in the world of cleantech, Katie noted, “60 Minutes got some key things right in the story”, notably that cleantech HAS crashed from a venture capital (VC) perspective.
Cleantech often requires much longer time horizons and higher capital expenditures before a VC has a chance of seeing a return on the investment. And as I have explained in the past, you can’t really afford to have a 10 percent success rate if that entails building 10 capital intensive biofuel plants before achieving success. It’s a very different model than a couple of guys starting an Internet company in their garage. You run out of money pretty quickly when building plants that fail to perform. CONTINUE»
In the previous article, I graded the 2013 predictions that I made a year ago. I scored well on the direction of oil and gas prices, the shrinking Brent-West Texas Intermediate (WTI) differential, and continued growth in US oil production (although it grew even faster than I expected). My only complete miss was that I expected approval for the northern leg of the Keystone XL pipeline. (The southern leg, incidentally, is scheduled to begin shipping oil this week from the major crude oil storage hub at Cushing, Oklahoma to the Gulf Coast near Houston).
Today I offer up my predictions, and the reasoning behind them, for what I think will transpire in 2014. One thing I have learned in making predictions is that they must be specific, and not subject to interpretation at the end of the year.
“The US oil industry will continue to thrive” is much too vague. “The price of crude will rise” is also too vague, because perhaps crude rises for part of the year, or perhaps some crudes rise and some don’t. On the other hand, “The average price of Brent crude will be higher in 2014 than in 2013” is specific and measurable. CONTINUE»