A Lesson Learned
If there’s one thing billionaire venture capitalist Vinod Khosla has learned over the past decade, it’s that the oil companies aren’t as stupid as he thought. In 2004, Khosla was telling anyone who would listen to him that the only things standing in the way of running the entire country on biofuels were the oil companies, and a lack of funding. He set out to change both of those things, vilifying the oil industry at every turn, and convincing Congress to shell out tax dollars so he could show the dinosaurs in the oil industry how Silicon Valley rolls.
The result has been a debacle, with billions of investor dollars and tax dollars flushed down the toilet. What Khosla didn’t appreciate is that he isn’t smarter than the people in the oil industry. It’s just that the computing and information technology industries were still relatively new, and a great deal of innovation was still taking place in a young field with lots of room for innovation. The oil industry is 150 years old, and while the fracking boom shows that innovation still takes place in the oil industry, it is a very mature industry. Thus change tends to be incremental, not exponential. Almost everything that appears novel to an outsider like Khosla has almost certainly been investigated by multiple companies.
But Khosla convinced a lot of influential people that the energy industry just needed a visionary like himself to shake things up. He gave lots of talks and testified before Congress. He created ludicrous projections for how quickly cellulosic ethanol could scale up. (See my article “Vinod Khosla Debunked.”) Investors (including taxpayers via Congress) couldn’t give him money fast enough, and he proceeded to blow through it as he learned some hard lessons in the energy business, sometimes “inventing” things that had been around for a long time. CONTINUE»
The Ban on Crude Exports
One of the 2014 predictions that I made back in January was “The crude oil export ban will not be lifted in 2014.” The present ban on US crude oil exports dates to the The Energy Policy and Conservation Act (EPCA) of 1975. The act effectively bans crude oil exports to all countries except Canada. The export of refined products, such as gasoline, diesel, and jet fuel is allowed.
But given that the US is still a net importer of crude oil to the tune of ~5 million barrels per day (bpd), on the surface it seems silly to entertain the notion of exporting crude oil. The problem essentially comes down to the location of the crude being produced, and the configuration and location of US refineries. Prior to the shale oil boom, crudes processed by refiners had been getting heavier and more sour (i.e., contained more sulfur). As a result, refiners had invested heavily in equipment that could process these types of crudes.
Enter the shale oil boom, which has been producing ever-greater volumes of light, sweet crude since 2008. There is a limit to how much of this crude can be processed by refineries that have been configured to process heavy, sour crudes, and as a result some areas of the country are oversupplied with lighter oil. This in turn has led to discounts — sometimes very large — of light, sweet crudes relative to heavier crudes that are internationally traded. CONTINUE»
This is the 4th installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous posts covered the world’s growing fossil fuel consumption:
- World Sets New Oil Production and Consumption Records
- The US and Russia are Gas Giants
- King Coal Deposed in West, but Reigns in East
Today I examine the implications of that growing fossil fuel consumption by looking at carbon dioxide emission trends. The key points in the report include: CONTINUE»
This week we have a guest post for readers. The following article was written by S. Michael Holly, the Chairman of Sorgo Fuels & Chemicals, Inc. Sorgo has developed technology for the production of ethanol, electricity and protein from sweet sorghum. Mike was formerly an alternative energy engineer and business analyst with the Minnesota Department of Energy and Economic Development. He holds masters degrees in chemical engineering and business administration from the University of Minnesota.
My standard disclaimer applies: Publication of a guest post does not imply endorsement. Rather it indicates that I think the subject matter is worthy of debate and discussion. However it is clear the the US government discriminates against various energy sources. Among renewable electricity producers, some receive higher tax credits and subsidies than others. This has long been the case with biofuels as well. Governments preferentially subsidize certain pathways that in many cases have little chance of commercial success, yet they have allowed themselves to be fooled by vested interests. CONTINUE»
Introduction to the GSR
Today I want to take a deep look at the global biofuels picture, drawing mainly from the Renewables 2014 Global Status Report (GSR) that was released in June by REN21, the Renewable Energy Policy Network for the 21st Century. I had intended to draw data primarily from the recently released Statistical Review of World Energy 2014, but I believe that the GSR is the most comprehensive report available when it comes to the global renewable energy picture. The GSR has more complete renewable energy data than the BP Statistical Review, but both reports complement each other. Full disclosure, however, I have been a contributor to the GSR for the past five years.
Before I begin, let me introduce REN21 and what are they trying to achieve. From the foreword to the 215-page report: CONTINUE»
Over the course of the next two columns, I plan to finish up the recent look at BP’s Statistical Review of World Energy 2014. The final two columns will focus on renewable energy, and carbon dioxide emissions.
Today I want to provide an update on the natural gas picture, as prices declined sharply at the end of July. I have laid out the argument since last winter that because of the deep inventory hole that developed over the course of the exceptionally cold winter, natural gas prices would remain high relative to last year, and that as a result natural gas producers would likely report higher year-over-year profits. (For background on the inventory picture, see my February column Natural Gas Inventories are Headed Toward Zero). CONTINUE»
This is the 3rd installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous posts – World Sets New Oil Production and Consumption Records and The US and Russia are Gas Giants – delved into world oil and natural gas production and consumption figures. Today’s post looks at the global coal picture.
In the US, coal consumption has been flat to declining for the past 20 years. Just since 2007, US coal consumption has fallen by more than 20%. This is the primary reason the US leads all countries in reducing carbon dioxide emissions over that same time period. (This will be covered in an upcoming article). Still, the US accounted for 11.9% of the global demand of coal in 2013. This was good for 2nd place globally among countries for coal consumption, but the 455.7 million metric tons of oil equivalent (Mtoe) that the US consumed in 2013 was roughly the amount we consumed in 1987.
The declining demand story is the same in the European Union (EU). Since 2007, coal consumption in the EU has fallen by 12%. While the consumption decline since 2007 is not as dramatic as that in the US, the decline in EU coal consumption since the late 1980s has been greater. In 1989, US and EU coal consumption were almost identical (480.5 Mtoe for the US versus 487.6 Mtoe for the EU), but then consumption in the EU fell sharply during the 1990s. Today the EU share of the world’s coal consumption is 7.5%.
This is the 2nd installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous post – World Sets New Oil Production and Consumption Records – delved into world oil production and consumption figures. Today’s post looks at the global natural gas picture.
In 2013 global natural gas production advanced 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). Except for a one-year decline in 2008-2009, global gas production has risen fairly steadily for about three decades, and production has more than doubled during that time span:
Last month BP (NYSE: BP) released the Statistical Review of World Energy 2014. This report is one of the most comprehensive sources of global and country level statistics on production and consumption of oil, natural gas, coal, nuclear power and renewables. Right after the release of the report, I wrote a short post discussing the highlights. Today I will take a deeper dive into oil production and consumption figures. In coming weeks, I will delve into the rest of the report.
First a note about BP’s definitions. “Oil” in the BP Statistical Review (BPSR) is defined as ”crude oil, tight oil, oil sands and natural gas liquids”, but excludes biofuels and liquid fuels produced from coal or natural gas. Consumption numbers do include all liquid fuels, so consumption numbers are always greater than production numbers, but this is merely an artifact of BP’s definitions.
Global oil production advanced in 2013 by 557,000 barrels per day (bpd), reaching a new all-time high of 86.8 million bpd (an increase of 0.6 percent over 2012). After declining in 2009, global crude oil production has now increased 4 years in a row. But as I noted in last month’s short article, while global oil production did indeed set a new record, the US production increase alone was 1.1 million bpd. Thus, outside the US global production actually declined by 554,000 bpd. CONTINUE»