Tuesday, May 17, 2016

I am waiting
      -Rolling stones
Like desperados
waiting for a train
      - Townes Van Zandt


Bonus Feature:   A new Nate Hagens video.  A Guide to Being Human in the 21st Century  (This one is about ten times better than the others - he got an editor )

     OK  So perhaps we have come to fork in the road..   

     On the one hand we have, the opportunity to reduce consumption .  This is the most straight forward way to reduce carbon emissions.  And reducing consumption by the 20% that are responsible for 80% of the emissions would not have a significant effect on our quality of life.    Here is an article:   The historical ecological footprint : From over population to over consumption    , which makes very interesting reading.  One of the conclusions our move to overshoot in the 70's was caused by over consumption, not increased population. Interestingly they also assert that  if we had the continued the consumption pattern of the 50's we would still be using only one earth, despite the increase in population during the last 60 years!    Here are some hints on how to do that:   http://www.plancurtail.org

     In the Hagens video, you will see that he takes the position that reduced consumption is unavoidable.  As he points out for 95 percent of us, growth is over - as measured by income.   He suggests, we will go through some turmoil and re-set at a less complex society, one that uses 1/4 to 1/3 the energy.

      Nevertheless, this seems  we are not likely to take this road voluntarily.  Why?  Because,  as Hagens explains we are are "programmed, by natural selection",  to want to accumulate stuff in order to improve our status, to get more power influence,  (and opportunities for mating. !).   While some people can break free of that conditioning, especially when "all the cool kids" are still doing it.   see e.g. Evolutionary psychology and consumer behavior
 Another option is accelerated construction of renewable facilities, DC lines, and storage, as well as new electric based  transport options.    Some version of this will , no doubt, be what H. Clinton will be suggesting.  see here This seems to be physically possible.   Dave Roberts,:  "Here's what it would take for the US to run on 100% renewable energy   (based on this study)    and Ugo Bardi:   How much for the sustainable energy transition. (based on this study  A Net Energy-based Analysis for a Climate-constrained Sustainable Energy Transition. )  

       But its not free
"We said that we need to increase the installation rate of about a factor of 8 in energy terms. Assuming that the cost of renewable energy won't radically change in the future, monetary investments should of about the same factor. It means that we need to go from the present value of about 300 billion dollars per year to some 2 trillion dollars/year. This is a lot of money, but not an unthinkable: amount. If we sum up what we are investing for fossils (about $1 trillion/year), for renewables ($300 billions/year) and nuclear (perhaps around $200 billions/year) we see that we are not far from there, as we can see in the image below. The total amount yearly invested in the world for energy supply is about 2% of the Gross World Product, today totaling about US$78 trillion".

       Relying on the market will probably not do the trick.   Its interesting to note that while we continue to see headlines about how wind and solar are so cheap, and how they will naturally conquer the world,  investment in renewable energy (which had had been rising dramatically )  has plateaued  since 2011 at the 300 billion dollar level.  see here  Another issue is the cost of retrofitting or junking the current equipment which does not run on electricity.  Hagens estimates that 80% of our energy use uses such equipment, and would cost $100 trillion to replace

        So, whats left  ?   .Straight ahead, I suppose.  BAU - continued growth of consumption and the economy, as long as possible, ,  based mainly on fossil energy, with renewable power slowly added in to address growing demand, and to replace existing facilities as they decay.  ( i.e. Boardman).  Carbon emissions stay pretty steady, and the price of energy rises and the EROI declines. 

            So, how does BAU play out?    Hall and Murphy sketched out one model in their 2011 paper,    "Adjusting the economy to the new energy realities of the second half of the age of oil".  
     (1) economic growth increases oil demand, (2) higher oil demand increases oil production from lower EROI resources, (3) increasing extraction costs leads to higher oil prices, (4) higher oil prices stall economic growth or cause economic contractions, (5) economic contraction leads to lower oil demand, and (6) lower oil demand leads to lower oil prices which spur another short bout of economic growth until this cycle repeats itself
 We have seen this play out in recent years.  The economy crashed in 2008, lower demand, and  oil prices, then as demand increased, (thanks to record breaking debt), oil companies invested in high cost  and high EROI projects, (fracking and oil sands).  The resulting over supply crashed the price.  

         And many companies have also crashed.  Bloomberg reports
“Three bankruptcies this week shows that $45 a barrel oil isn’t enough to rescue energy companies on the verge of collapse…
…Since the start of 2015, 130 North American oil and as producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone. The tally doesn’t include Chaparral Energy Inc., Penn Virginia Corp. and Linn Energy LLC, which filed for bankruptcy this week owing more than $11 billion combined.”
Here's some interesting speculation about how this might develop.  (from a longish article here  
Jason Schenker, president and chief economist at Prestige Economics, says: “Oil prices simply aren’t going to rise fast enough to keep oil and energy companies from defaulting. Then there is a real contagion risk to financial companies and from there to the rest of the economy.”
Schenker has been ranked by Bloomberg News as one of the most accurate financial forecasters in the world since 2010. The US economy, he forecasts, will dip into recession at the end of 2016 or early 2017.
Mark Harrington, an oil industry consultant, goes further. He believes the resulting economic crisis from cascading debt defaults in the industry could make the 2007-8 financial crash look like a cakewalk. “Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel,” he wrote on CNBC in January.
“But in the past 24 months, they’ve seen their values and cash flows erode ferociously as oil prices plunge—and that’s made it hard for some to pay back that debt. This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse.”
Ratings agency Standard & Poor (S&P) reported this week that 46 companies have defaulted on their debt this year—the highest levels since the depths of the financial crisis in 2009. The total quantity in defaults so far is $50 billion.

An environment where prices are continually gyrating is not conducive to investment.  And without investment discoveries decline   IHS reports that conventional oil discoveries continue to decline from about 30 bbl in 2910 to about 3 in 2015.  They note that while high prices can stimulate prompt response in short term projects like fracking, the lead times for conventional projects are much longer.  But tight oil cannot fill the gap as it much smaller.
"North American tight oil alone cannot cover future supply gap—exploration will need to resume
According to IHS Energy Conventional Exploration and Discovery Trends analysis from our Upstream Industry Future Service, conventional oil and gas discoveries made outside onshore North America continued their multi-year decline trend last year, based on initial 2015 results. And the drop is dramatic:  Oil and gas volumes discovered in 2015 were the lowest since 1952, with oil finds setting a record low since the significant ramp-up of oil and gas exploration began following World War II. As anticipated, exploration and appraisal (E&A) drilling fell sharply in 2015, exacerbating the annual drop in resources found."
This comes as no surprise to Art Berman, an oil geologist  who, while the rest of the media was trumpeting the "Shale Revolution, pointed out,  in 2012,  that it was not a revolution but a "Retirement Party".  

"Oil companies have to make a big deal about shale plays because that is all that is left in the world. Let's face it: these are truly awful reservoir rocks and that is why we waited until all more attractive opportunities were exhausted before developing them. It is completely unreasonable to expect better performance from bad reservoirs than from better reservoirs."  from here 

    .  Berman also noted that it was clear from the public filings of the companies involved, that they wren't making money, even at $100 a barrel. But that thanks to cheap debt they still  make the payments, and keep the stock price up.

      So, what does Berman say now?  He says the price will not stay low, but will rise soon.  That in all likelihood it will rise sharply, and that thanks to years of little of no investment, it will stay high.  from here

   "Here’s what I see: I look at this chart and I talk about this in talks and I say “Hey look from 2005 to 2012 the world spent about three trillion dollars on upstream oil and gas exploration and production and basically got the same amount of crude and condensate out of ground for its trouble," right? We doubled our investment on a yearly basis from $300 to $600 billion and basically held production flat. I can only imagine what happens to production once you take a trillion in spend off of the top of that."

"And so if we get to a point— and we will, we almost certainly will—where suddenly everybody wakes up and says “Oh my God we don’t have enough oil." We’re now half a million barrels a day low, and what happens? The price shoots up, okay? That’s the way commodity markets work. And everybody says “Whoopee, let’s get back to drilling big time." Well there’s a big lag. There’s a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they’ve been asleep at the wheel for  how many months or years. You don’t just turn a valve and all of a sudden everything is okay again. 

  Are consumers preparing for a likely jump in oil prices?   Consumers not worried about energy.  See Gallup poll    In this low price environment, consumers tend to ignore MPG.  See here; and here
 "The overwhelming popularity of SUVs trumps just about any other trend in today's market," says Caldwell. "SUV sales are up 22 percent in the last five years, and almost every other segment has suffered as a result. It's especially true for hybrids and EVs, which generally don't offer the size that today's shoppers crave."
 "In fact, Edmunds found that a hybrid or electric trade-in is more likely to go toward the purchase of a SUV (33.8 percent) than another hybrid or EV. The trend is even more apparent when looking only at EV trade-ins — 25.7 percent of EV trade-ins went toward the purchase of a SUV, compared to just 4.8 percent that went toward another EV.

         So, what's Hagens' recommendation?    Not guns and gold.  But more of a mental attitude.  Reject the "consensus trance" (what the cool kids are doing.  Choose your own tribe wisely - people who won't try to draw you back in to the trance.  Go on an internet/electricity holiday.  Spend time in woods.  Work on your "meta cognition"  watching the thoughts and feelings that arise.  Which ones are useful?
     And above all, in the words of Bill and Ted  "Be excellent to one another!"

Labels: , , ,


Post a Comment

Subscribe to Post Comments [Atom]

<< Home