Peak Oil- what it is and how it will impact your life

Re: Peak Oil; what it is and how it will impact your life

Yep, right up until the tires wear out --

MM, your comments are understood and pretty well reflect the gist of the Nat'l Geo article. Personally, I do not expect that loosening controls on drilling and production will do a lot of good, or for a long time, so far as price goes. I do think that short term relief could come of it, but result in either earlier arrival of the peak, or hasten the downslide post peak.

One thing to take away is that the Peak Oil discussion is now becoming more "in our face" from more than obscure (to most) publications. Nat'l Geo is not a main stream medium, and surely isn't read by those that whine the most. If the Wash Times or NYT says the sky is falling, go back to your coffee. If NG says so, at least go look.

 

Re: Peak Oil; what it is and how it will impact your life

Yep amen Brother

 

Re: Peak Oil; what it is and how it will impact your life

Nahhhh we don't have any of those types around here

 

Re: Peak Oil; what it is and how it will impact your life

Tango, you have just destroyed your very own tin foil hat. Back to the Alcoa roll --

 

Re: Peak Oil; what it is and how it will impact your life

Energy chief: Flat production behind oil prices

By JOSEPH COLEMAN, Associated Press Writer1 hour, 20 minutes ago

Nations should fight rising oil prices by cutting subsidies and vastly increasing investment in energy, while oil-producing countries need to ramp up output and divulge more information about how much they produce, the U.S. energy secretary said Saturday.

Samuel Bodman, attending two days of meetings in northern Japan among energy chiefs from Group of Eight industrialized countries and other top economies, said the surge in world oil prices was largely a simple problem of supply and demand.

Production has stalled since 2005 at 85 million barrels a day, while economic growth — particularly in China and India — has pushed demand ever higher, Bodman said before a meeting of ministers from the U.S., Japan, South Korea, India and China.

"We're in a difficult position where we have a lid on production and we have increasing demand in the world," he told a small group of reporters, dismissing the effects of speculation and unclear inventory levels and other factors on oil prices.

"I would devoutly hope we ... see a reduction of the use of oil in the world on the one hand, and an increase in the supply so we can see some mitigation in the pressure on price," Bodman said.

Oil prices made their biggest single-day surge on Friday, soaring $11 to $138.54 on the New York Mercantile Exchange, an 8 percent increase. That followed a $5.50 increase the day before, taking oil futures more than 13 percent higher in just two days.

While demand has increased as supply has stalled, analysts have also cited the decline of the U.S. dollar, fears about the long-term supply of oil, and aggressive speculation as factors in rising prices.

Bodman said he would likely urge China and other countries at the Japan meeting to slash fuel subsidies, which make gasoline cheaper for consumers — thereby giving them no reason to reduce consumption and allow prices to level off or drop. The International Energy Agency has estimated that oil subsidies in China, India and the Middle East in 2007 totaled some $55 billion.

At the same time, he urged nations to pay heed to an IEA report that the world needs $22 trillion investment in energy supply infrastructure by 2030 to meet rising demand, while developing alternative energy sources.

"We have a situation where we have these high prices and the only solution is to diversify your resources, diversify your sources of fuel," he said, listing nuclear energy, natural gas and renewable sources such as wind and hydropower.

Lack of transparency in the oil market has also been cited as a possible cause of higher prices. Bodman said that while the United States and host Japan have been "diligent" in disclosing production and consumption data, some other countries need to do more.

Proponents of such transparency, including the IEA, say greater disclosure of accurate statistics helps markets set prices that more precisely reflect supply and demand. Underreporting of production, for instance, can drive prices higher as traders think supply is lower than it actually is.

Rising prices were having a negative effect on world economies. The U.S. government, for instance, reported on Friday the nation's unemployment rate rose to 5.5 percent in May, a monthly rise of half a percentage point, the biggest in 22 years.

Bodman said economic troubles because of high prices would only hurt oil producers.

"It's not good for producing nations to see the U.S. struggling economically. They depend on us to be a significant engine in world economic activity," Bodman said.




A couple of observations here. First is the riots in India over high oil and gasoline prices. India gets exactly 0%, again that's 0%, of thier oil from American international "Big" oil companies. So that in itself should be enough evidence to dispute this deluded "Big Oil is screwing us" or "raping our economy" nonsense.


The American Big oil companies only control about 6% of the worlds supply of oil. They lost thier ability to unduly influence oil production in the 70's when the oil producing nations of the world started to nationalise thier oil industries and kicked the majors out.
Over 90% of the worlds oil supply now comes from state owned oil companies .


Secondly is this. My biggest concern now is not the peak of production or the rising prices. The thing to watch for, that I believe we will soon see, with the weakening dollar, the nations of the world will soon be calling for oil to be switched to another currency, probably the Euro.
Do a Google search on "Petro-Dollars". All oil is traded around the world in dollars. This made sense when the dollar was the pre-emptive world currency. But as it declines it will be harder for the rest of the world to support it. If oil was taken off of the dollar it would gut our economy.
Saddam Hussien threatened to take Iraqi oil off of the dollar standard and switch to the Euro. We invaded his country and removed him from power.
Ahmadinajad in Iran is calling for the removal of oil from the dollar.


The move from petro dollars to petro euros would be the final nail in the coffin of American prosperity. Watch for it. I have never hoped I was wrong so badly on anything before, but I don't think I will be.

 

Re: Peak Oil; what it is and how it will impact your life

The real villains?


The Gas Prices We Deserve

By George F. WillThursday, June 5, 2008; Page A19

Rising in the Senate on May 13, Chuck Schumer, the New York Democrat, explained: "I rise to discuss rising energy prices." The president was heading to Saudi Arabia to seek an increase in its oil production, and Schumer's gorge was rising.

Saudi Arabia, he said, "holds the key to reducing gasoline prices at home in the short term." Therefore arms sales to that kingdom should be blocked unless it "increases its oil production by one million barrels per day," which would cause the price of gasoline to fall "50 cents a gallon almost immediately."

Can a senator, with so many things on his mind, know so precisely how the price of gasoline would respond to that increase in the oil supply? Schumer does know that if you increase the supply of something, the price of it probably will fall. That is why he and 96 other senators recently voted to increase the supply of oil on the market by stopping the flow of oil into the Strategic Petroleum Reserve, which protects against major physical interruptions. Seventy-one of the 97 senators who voted to stop filling the reserve also oppose drilling in the Arctic National Wildlife Refuge.
One million barrels is what might today be flowing from ANWR if in 1995 President Bill Clinton had not vetoed legislation to permit drilling there.

One million barrels produce 27 million gallons of gasoline and diesel fuel. Seventy-two of today's senators -- including Schumer, of course, and 38 other Democrats, including Barack Obama, and 33 Republicans, including John McCain -- have voted to keep ANWR's estimated 10.4 billion barrels of oil off the market.

So Schumer, according to Schumer, is complicit in taking $10 away from every American who buys 20 gallons of gasoline. "Democracy," said H.L. Mencken, "is the theory that the common people know what they want and deserve to get it good and hard." The common people of New York want Schumer to be their senator, so they should pipe down about gasoline prices, which are a predictable consequence of their political choice.

Also disqualified from complaining are all voters who sent to Washington senators and representatives who have voted to keep ANWR's oil in the ground and who voted to put 85 percent of America's offshore territory off-limits to drilling. The U.S. Minerals Management Service says that restricted area contains perhaps 86 billion barrels of oil and 420 trillion cubic feet of natural gas -- 10 times as much oil and 20 times as much natural gas as Americans use in a year.

Drilling is underway 60 miles off Florida. The drilling is being done by China, in cooperation with Cuba, which is drilling closer to South Florida than U.S. companies are.

ANWR is larger than the combined areas of five states (Massachusetts, Connecticut, Rhode Island, New Jersey, Delaware), and drilling along its coastal plain would be confined to a space one-sixth the size of Washington's Dulles airport. Offshore? Hurricanes Katrina and Rita destroyed or damaged hundreds of drilling rigs without causing a large spill. There has not been a significant spill from an offshore U.S. well since 1969. Of the more than 7 billion barrels of oil pumped offshore in the past 25 years, 0.001 percent -- that is one-thousandth of 1 percent -- has been spilled. Louisiana has more than 3,200 rigs offshore -- and a thriving commercial fishing industry.

In his book "Gusher of Lies: The Dangerous Delusions of 'Energy Independence,' " Robert Bryce says Brazil's energy success has little to do with its much-discussed ethanol production and much to do with its increased oil production, the vast majority of which comes from off Brazil's shore. Investor's Business Daily reports that Brazil, "which recently made a major oil discovery almost in sight of Rio's beaches," has leased most of the world's deep-sea drilling rigs.

In September 2006, two U.S. companies announced that their Jack No. 2 well, in the Gulf 270 miles southwest of New Orleans, had tapped a field with perhaps 15 billion barrels of oil, which would increase America's proven reserves by 50 percent. Just probing four miles below the Gulf's floor costs $100 million. Congress's response to such expenditures is to propose increasing the oil companies' tax burdens.

America says to foreign producers: We prefer not to pump our oil, so please pump more of yours, thereby lowering its value, for our benefit. Let it not be said that America has no energy policy.
georgewill@washpost.com



At $4, Everybody Gets Rational

By Charles Krauthammer
Friday, June 6, 2008; A19

So now we know: The price point is $4.
At $3 a gallon, Americans just grin and bear it, suck it up and, while complaining profusely, keep driving like crazy. At $4, it is a world transformed. Americans become rational creatures. Mass transit ridership is at a 50-year high. Driving is down 4 percent. (Any U.S. decline is something close to a miracle.) Hybrids and compacts are flying off the lots. SUV sales are in free fall.

The wholesale flight from gas guzzlers is stunning in its swiftness, but utterly predictable. Everything has a price point. Remember that "love affair" with SUVs? Love, it seems, has its price too.

America's sudden change in car-buying habits makes suitable mockery of that absurd debate Congress put on last December on fuel efficiency standards. At stake was precisely what miles-per-gallon average would every car company's fleet have to meet by precisely what date.

It was one out-of-a-hat number (35 mpg) compounded by another (by 2020). It involved, as always, dozens of regulations, loopholes and throws at a dartboard. And we already knew from past history what the fleet average number does. When oil is cheap and everybody wants a gas guzzler, fuel efficiency standards force manufacturers to make cars that nobody wants to buy. When gas prices go through the roof, this agent of inefficiency becomes an utter redundancy.

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress. (Even Stalin had the modesty to restrict himself to five-year plans.) Just Tuesday, GM announced that it would shutter four SUV and truck plants, add a third shift to its compact and midsize sedan plants in Ohio and Michigan, and green-light for 2010 the Chevy Volt, an electric hybrid.

Some things, like renal physiology, are difficult. Some things, like Arab-Israeli peace, are impossible. And some things are preternaturally simple. You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Unfortunately, instead of hiking the price ourselves by means of a gasoline tax that could be instantly refunded to the American people in the form of lower payroll taxes, we let the Saudis, Venezuelans, Russians and Iranians do the taxing for us -- and pocket the money that the tax would have recycled back to the American worker.

This is insanity. For 25 years and with utter futility (starting with "The Oil-Bust Panic," the New Republic, February 1983), I have been advocating the cure: a U.S. energy tax as a way to curtail consumption and keep the money at home. On this page in May 2004 (and again in November 2005), I called for "the government -- through a tax -- to establish a new floor for gasoline," by fully taxing any drop in price below a certain benchmark. The point was to suppress demand and to keep the savings (from any subsequent world price drop) at home in the U.S. Treasury rather than going abroad. At the time, oil was $41 a barrel. It is now $123.

But instead of doing the obvious -- tax the damn thing -- we go through spasms of destructive alternatives, such as efficiency standards, ethanol mandates and now a crazy carbon cap-and-trade system the Senate is debating this week. These are infinitely complex mandates for inefficiency and invitations to corruption. But they have a singular virtue: They hide the cost to the American consumer.

Want to wean us off oil? Be open and honest. The British are paying $8 a gallon for petrol. Goldman Sachs is predicting we will be paying $6 by next year. Why have the extra $2 (above the current $4) go abroad? Have it go to the U.S. Treasury as a gasoline tax and be recycled back into lower payroll taxes.

Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand -- and bring down world crude oil prices -- the American consumer and the American economy reap all of the benefit.

Herewith concludes my annual exercise in futility. By the time I write next year's edition, you'll be paying for gas in bullion.
letters@charleskrauthammer.com

 

Re: Peak Oil; what it is and how it will impact your life

Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse
by William Clark

It is now obvious the invasion of Iraq had less to do with any threat from Saddam’s long-gone WMD program and certainly less to do to do with fighting International terrorism than it has to do with gaining strategic control over Iraq’s hydrocarbon reserves and in doing so maintain the U.S. dollar as the monopoly currency for the critical international oil market.

Throughout 2004 information provided by former administration insiders revealed the Bush/Cheney administration entered into office with the intention of toppling Saddam Hussein.

Candidly stated, ‘Operation Iraqi Freedom’ was a war designed to install a pro-U.S. government in Iraq, establish multiple U.S military bases before the onset of global Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency (i.e. "petroeuro").

However, subsequent geopolitical events have exposed neoconservative strategy as fundamentally flawed, with Iran moving towards a petroeuro system for international oil trades, while Russia evaluates this option with the European Union.

http://www.energybulletin.net/7707.html



petro-Euros versus petroDollars:
economic battle between Europe and US for global control
Iran's proposed Euro-based oil trading system is a factor behind the upcoming war on Iran

The Organization of Petroleum Exporting Countries (OPEC) is shifting away from total reliance on the dollar as an international currency - and adopting the euro as an alternative.

This is probably the US government's worst nightmare, economically speaking. Saddam Hussein's biggest crime in recent years - in the minds of the US elites - is his demand to be paid in euros instead of dollars for the oil that Iraq exports (it was a wise business decision, given that the dollar has dropped and the euro is now worth $1.10, as of March 10, 2003 - $1.20 reached in December, 2003)

These articles provide background and detail about the war between the dollar and the euro, which will be waged by proxy in Iraq (and Iran).

http://www.oilempire.us/euro.html

 

Re: Peak Oil; what it is and how it will impact your life

I have been watching the talking heads on the news and this article says it as good as I could. I wish they would find someone who actually knows the oil business. These speculators and Wall Street traders don't have a clue.



A Story Nobody Wants To Hear
By Chris Nelder | Wednesday, July 30th, 2008

As we prepared to tape the final segment of my interview with Aaron Task on the Yahoo Finance "Tech Ticker" podcast at their Times Square studio on Monday morning, the producer asked: If there is no hope of increasing the supply of oil from here, and prices are going to just keep going up, what changes did I expect in the future?

We both laughed. Aaron flashed me a knowing grin. "Does she really want to know?" I asked him. Yes, yes she did. The tape rolled, and I tried to tell it straight.

Not only does it mean the end of personal transportation using internal combustion engines, I told him, but much, much more. It means the end of cheap air travel. It means we won't be able to keep living in the suburbs and commuting to cities. It means the end of globalization, such that we will have to relocalize our production of manufactured goods and food. Eventually, it might even mean that if you didn't grow it yourself, you won't have anything to eat!

Being an old friend of mine (we used to work together at Microsoft, 11 years ago), Aaron has heard it all before from me, and has read my book, so he accepted my perspective with a certain panache. But when we encountered the producer again after the taping, he asked if she found it shocking.

Yes she did, she said, "but by the time it happens, I'll be dead."
Oh, if I had a dollar for every time I've heard that reaction...

Afterward, I retired to my hotel room and flipped through CNN, CNBC, and the other business news shows. I shook my head as I watched the pundits worry over the future of energy, and bemoan the impasse in Congress right now over the energy bill. If you've been following the news, you know the score: The Republicans want to open the remaining federal lands to drilling, and the Democrats want the oil companies to drill on the leases they already have.

If you have read my previous articles, you know that both sides of that debate are wrong if they think their proposals can alleviate high oil prices. If we started drilling ANWR and the OCS now, it would take on the order of 10 years-about 7 years after the global peak of oil production—to begin producing a very modest flow of new oil, at which point it will be too little to make much of a difference in prices at the pump. And the oil companies don't drill on their existing leases because they know there isn't enough oil there to make it worth their while!

It seems we are still firmly stuck in denial about the future of oil. (See "Peak Oil: Living on the Banks of Denial.") The buzz over the new USGS report on Arctic oil is just the latest example. I read that report, such as it was, along with whatever additional analysis I could find, and found absolutely nothing there to get excited about. If and when that oil does arrive on the world market, it will probably be another modest flow of the most expensive and difficult-to-get oil the world has ever produced...and that will be decades from now.

The truth, as best as I can make it out, is an ugly story. If you're still alive in 10 years, you will see the end of life as we know it, and the beginning of a long transformation in which we learn to live within an energy budget that shrinks ever year. No amount of new drilling can change that fact. And the long-term trend will be toward higher and higher prices for oil, at least until a global depression sets in and reduces demand.

I know it's a story nobody wants to hear, but I tell it because I have always tried to tell the truth as I see it. I could be wrong, and I hope I am, but I have seen nothing yet to convince me otherwise.
We can blame each other until the cows come home for failing to plan for this day, but that will get us nowhere. All of the solutions are on the demand side now. Instead of crossing our fingers for some new supply of oil, we should be driving less, driving more efficient vehicles, and investing in renewable energy and electric transportation. That is truly the only way forward, as far as I can see.

A side note: Since I am a big believer in rail as part of the solution to the peak oil crisis, it was a great pleasure for me to take my very first inter-city train ride in America after the interview, from New York City to Baltimore. (I have spent most of my life on the West Coast, where there is so little inter-city train service that it almost never makes sense.) It was clean, quiet, comfortable, and cheaper than driving. Here's hoping that the rest of the country can have such an option as soon as possible!

I may have a story to tell that nobody wants to hear, but those who long for sweet assurances can always flip on the TV and find some commentator to put their minds at ease, like the one I heard on TV the morning of my interview, claiming that oil would soon be back at $80 a barrel. There will always be analysts out there willing to tell you whatever you want to hear-that Arctic oil will prove the peakers wrong, or that drilling the OCS will bring gasoline back down to a buck a gallon, or that Saudi Arabia will always ride to our rescue.

No doubt they will be much more popular than me, too. But I'm not here to be popular. I value credibility above all else.

Maybe that's why I had an old Shel Silverstein poem titled "The Perfect High" stuck in my head all day, in which a thrillseeker named Roy seeks out a guru named Baba Fats who was said to know the secret to the perfect high. But the guru tells him that he must find it within himself. This makes Roy furious, and he insists that the guru tell him the secret. So Baba Fats makes up a wild story about a mythical magical flower, and Roy goes off in search of it.

The poem ends:
"It seems, Lord", says Fats, "it's always the same, old men or bright-eyed youth,
It's always easier to sell them some sh*t than it is to tell them the truth."

 

Re: Peak Oil; what it is and how it will impact your life

And I wish I had a dollar everytime I've that over the last 40 years.

 

Re: Peak Oil; what it is and how it will impact your life

Of Ghosts, Unicorns and Energy Policy

By Chris Nelder | Wednesday, August 6th, 2008

In my past life as a computer programmer, there were two classes of problems that particularly bedeviled me.

The first I called "ghosts," which are problems that don't exist. For example, I'd spend hours trying to find a bug in my code, not realizing that the reason it wasn't working was due to some bug in processes far outside my code. The wrong behavior would mysteriously appear and disappear, like a ghost, when I was running the exact same code.

The second I called "unicorns," which are solutions that don't exist. I'd spend hours or days attempting to devise a solution that ultimately could not work, for reasons that weren't apparent until I actually tried to build it, and realized it was a dead end.

Lately, evaluating our energy policy options has started to feel a lot like programming. It is getting increasingly difficult to determine which options are real, and which aren't, and when, and to what extent.

I have already addressed a few popular ghosts in recent columns, like those evil oil speculators, the non-existent Chinese oil drillers off the coast of Cuba, and the horrible Demmycrats who have stymied offshore drilling.

This week, we'll take a look at a few potential unicorns, and see if they're for real.

Arctic Oil Bonanza!

Two weeks ago, the USGS issued a press release titled "90 Billion Barrels of Oil and 1,670 Trillion Cubic Feet of Natural Gas Assessed in the Arctic," which claimed to be "the first publicly available petroleum resource estimate of the entire area north of the Arctic Circle."

Ever willing to jump at any bit of brightly-colored bait, the press swallowed it hook, line and sinker. "Enough supply to meet current world demand for almost three years," they gushed. "May hold one-fifth of the world's undiscovered, technically recoverable reserves of oil and natural gas," and "the race to claim territorial ownership of the resources already has begun."

Wahoo! Pack up the truck, Jed, we's a-goin' ta the North Pole!


More knowledgeable analysts who know how to dig for the details had quite a different view. When it comes to oil and gas production in the Great White North, my first call is J. David Hughes, a Canadian geoscientist with nearly forty years' experience. In this week's Peak Oil Review, he explicated the new study beautifully.

The real story is much more nuanced. Those of you who have read my book know that oil and gas reserves are estimated according to their probability. An "F95" estimate means that there is a 95% chance of the stated amount being found, and an "F5" estimate means there is only a 5% chance. (Sometimes a "P" is used instead of an "F.")

Detailed data stating the probabilities is only available on the USGS web site for 7 of the 25 assessment areas included in the Arctic report, which comprise about 32% of the oil and 17% of the natural gas in the whole. For those areas, Hughes calculated that the F95 estimate was 3 billion barrels, the F50 estimate was 11.8 billion, and the F5 estimate was 95.7 billion. Out of that, the USGS reported a "mean" estimate of 28.9 billion! It's not clear what their justification for that claim is, but that amount is clearly well above the F50 estimate.

Hughes cites the "West Greenland - East Canada" assessment as a particularly egregious example of fudging the numbers, where the "mean" estimate given had an actual probability of less than 10%!
Sadly, such shenanigans are common in oil data reporting. It takes a keen eye to sort out fact from fiction.

The real bottom line on the Arctic's resources will not be known until it is drilled. But it doesn't really matter that much. Even if it does turn out to contain three years' worth of oil and 16 years' worth of gas, those numbers are only useful as a rough way of estimating how much is ultimately recoverable. In reality, the production will be hardly noticeable, because it will take many decades to recover, at low flow rates, and it will be the most expensive oil and gas ever produced. And an unknown portion of it, perhaps 25%, might accrue to the U.S.

It might buy us a little more time to adjust to a post-peak world, but by that time I expect the world will either be panicking and disrupting normal commerce in oil and gas, or well on its way to switching over to renewables. Either way, the world's oil and gas markets will be very different from what they are today.

But you wouldn't know it from the breathless reports of "90 billion barrels!" in the press.

A 50% Increase in Natural Gas Reserves!

Next in our cavalcade of chicanery is the new report from the American Clean Skies Foundation, a natural gas industry organization founded by gas producer Chesapeake Energy (CHK).

The report claimed that the US has 2,247 Tcf (trillion cubic feet) of gas reserves in place, a 47% increase over the 1,530 Tcf estimate of 2006. They claimed that current technology and prices make it possible to recover much more gas than previous thought from domestic shales like the Haynesville, Marcellus, Barnett and Bakken formations.

"This study authoritatively refutes head-on the mistaken belief that we do not have sufficient supply," said Denise Bode, president of ACSF.

Again, the press jumped all over it. "Industry report says U.S. natural gas supply abundant," blared Reuters, and the rest of the press gang were quick to assert that the US now has enough gas "to last up to 118 years."
Chesapeake CEO Aubrey McClendon was all over the media in the wake of the announcement, and gave testimony before the House Select Committee on Energy Independence and Global Warming. Chairman Ed Markey asked him if natural gas supplies were adequate to reduce our electricity generation from coal to 35% from its current 50% share. "Today, I say yes," McClendon replied.

A closer look at the numbers reveals a slightly different story. A discussion thread on The Oil Drum pointed out that the 118 year estimate is based on our current production (not consumption) of gas, which is at the rate of about 19 Tcf per year. Our consumption is actually about 4 Tcf higher, at 23 Tcf, reflecting our continued reliance on imported natural gas.

So that 118-year assertion relies on several very questionable
assumptions: 1) that we will not increase our current level of natural gas consumption for over 100 years; 2) that we will continue to be able to import about 20% of our current gas supply for over 100 years; 3) that the price of gas will remain near or above its current levels. With natural gas, price is a key determinant in whether or not a given gas deposit is considered "economically and technically recoverable."

If we intend to shift electricity generation toward natural gas and away from coal, then we can already toss out that first assumption.

Now, I don't want to sound too critical of Chesapeake. I think it's a good company and a good investment, and I have owned it and promoted it myself. Nor do I want to appear unduly pessimistic about the potential of the shale plays. After all, we have promoted them vigorously here in the pages of Energy and Capital. I am only trying to put them in a realistic, credible, big picture perspective.

Is there gas in them thar shales? You bet there is. Is it profitable? At today's prices, yes, absolutely, much of it is. But one has to look carefully at the numbers to guess exactly how much, and realize that ultimately, it's not the recoverable total, but the flow rates that really matter.

The same is true, by the way, for the oil potential of the Bakken Formation. Truly, it is an enormous and profitable formation, and the companies we have picked out for the $20 Trillion Report are well positioned to profit from it. But ask yourself: do you really know the difference between the 500 billion barrel and the 4.3 billion barrel estimates usually proffered for it? What's the probability of the 4.3 billion number? Will it bring down US gasoline prices? (If you can't answer those questions, you should probably read up on our past [url][URL="http://www.google.com/se...OR=#0000ff]articles on the Bakken[/U][/COLOR] and check out the USGS survey reports.)

I hope this finally puts to rest the questions I keep getting along the lines of "But what about the Bakken?"

Boone's Wind Boom!

No doubt by now you have heard about the Pickens Plan, the initiative started by Texas oil billionaire T. Boone Pickens to promote his "bridge" solution to a post-peak oil future.

It's a reasonably straightforward and practical idea: take the 22% of our current electricity supply generated from natural gas, and replace it with wind over 10 years. Then we use the natural gas to run our vehicles, offsetting 38% of our demand for foreign oil. We could generate 22% of our electricity supply from wind with his plan, Pickens claims, and avoiding spending $266 billion a year on foreign oil. (If you haven't watched his presentation, check it out here. It's smart stuff.)

As usual, however, the crucial details remain to be explained. How and when will all those natural gas fired power plants, many of which were built in the last 10 years and are far from the end of their useful, fully amortized lives, be decommissioned? What is the cost and the time-to-market for millions of natural gas powered cars?

As I reported in my recent article on plug-in hybrids, the annual replacement rate for vehicles is slow, at somewhere between 3-6% percent. But that is with a normally functioning economy and a normal supply of cheap fuel and cheap steel, which is not an assumption we can necessarily make for the future.

Nor is the financing picture quite clear. On Larry King's show on Monday night, he claimed that the full $1 trillion cost of the program could be borne by private industry. But critics like Anthony Rubenstein, a sustainability consultant who was the force behind California's Proposition 87 in 2006, has raised questions about the $5 billion bond measure that Pickens has put on the November ballot in California to support his plan by providing incentives and rebates for natural gas vehicles.

There is another important question about the Pickens Plan: How does it square with the assertion that we have "118 years' worth of natural gas?" If we switch over to natural gas for vehicles, I think it's safe to say that we cannot make any of the assumptions that I discussed in the previous section. Our rate of consumption will almost certainly go up. Our natural gas imports are far from certain over the next 100 years, and our recently-built LNG import facilities are suffering badly from poor economics.

Nor can anybody predict what the plan would do to prices. Such a transition would almost certainly raise the price of natural gas to bring it into parity with oil, while at the same time depressing oil prices. Imported oil may continue to be attractively priced in such a scenario, making the possible offset of foreign oil less certain than Pickens claims.

Still, it's a reasonably good idea, and it deserves closer attention. It sure beats the pants off most of the ideas I've seen from Washington lately. But it could be a unicorn, if it's not done right.

MIT Hydrogen Breakthrough!

Finally, we must take a few minutes to take a closer look at the much-ballyhooed "breakthrough" announced by MIT last week, which made headlines like "MIT Scientists Unlock Nirvana of Solar Power Storage" and "'Major discovery' from MIT primed to unleash solar revolution."

The gushing press that issued from the announcement was enough to drown a sane man. "This is a major discovery with enormous implications for the future," enthused one analyst.

So what is this "major discovery?"

Remember when you studied electrolysis in school, hooking up a battery to a couple of probes in a glass of water to make hydrogen and oxygen?
Well, it's like that. Only the MIT design uses a catalyst made of cobalt and phosphate, so theirs is a "catalysis" process instead of electrolysis. The advantages of the design are that it can run at room temperature in regular water, using materials that are abundant and cheap, and that it is apparently more efficient (note: I have not been able to verify these claims).

The hydrogen thus produced can be stored and then consumed in a fuel cell to generate electricity, so it opens a path to storing energy without batteries.

Thus, the technology has been billed as a breakthrough for solar, because it could store energy overnight, when the sun isn't shining. But that's really a hyped-up misdirection. It's not about solar, it's about hydrogen.

Unfortunately, the crucial details here are still unexplained. What's the net efficiency of using this catalyst to generate the hydrogen? I was able to turn up one reference stating that it might be 80%, vs. 70% for standard electrolysis, but I wasn't able to verify that by press time. If you have read my article on the hydrogen economy last year, you know that losses in storage reduce the net energy of any fuel cell based system. Finally, the efficiency of the fuel cell stack-typically cited as 50% but variable depending on the conditions-must be taken into account.

Because this is strictly a laboratory development, and has not yet become an application in the real world, we also know nothing about the relative cost of the proposed system.

We do know however, without consulting any numbers, that using solar PV to generate electricity to drive off hydrogen from water, then storing the hydrogen, then using it in a fuel cell stack to make electricity again, will incur far more losses than simply collecting the original solar-generated electricity and storing it in a battery. According to the Second Law of Thermodynamics, every time you convert energy from one form to another, you lose a little, usually in the form of heat.

Without knowing the relative costs of each approach to storing energy, or being able to calculate how many such systems could be built and deployed, and when, it's impossible to say whether the MIT "breakthrough" is even interesting.

We can already deploy regular solar PV systems with battery backup in the field as fast as we can build them, which isn't nearly fast enough. And those systems are simpler, stabler, and have been proved in the field for over 30 years.

This new approach to the hydrogen fuel cell is unlikely to become commercial for at least another decade, and even then it will still be a more "lossy" approach to energy storage. It may work some day as small residential-sized energy storage system, but leaping from this process to fantasies about hydrogen powered vehicles makes no sense at all, when the efficiency of straight electric vehicles is practically and theoretically much higher.

Professor Daniel Nocera, who led the MIT project, dismissed the obstacles ahead blithely: "The basic science is done," he said, "now it's engineering."

That reminds me of another old saw from my software engineering days.

We rolled our eyes when some marketing type breezed in with an impossible-to-build idea, and then dumped it on us with the standard line, "Implementation is left as an exercise for engineering."

Lots of great ideas never made it off the shop floor, because in the real world, they turned out to be impractical or uneconomical. It's far too early to say if this MIT development is a unicorn or not, but I think I see a bump on its forehead.

Paris' Latest Score

On a lighter note, one of the most sensible energy proposals I have heard yet came out of the mouth of the unlikeliest of sources: Paris Hilton. If you're one of the six people who haven't seen it yet, you can watch it here.

If only our political leaders had as much sense as Paris does.

Until next time,
Chris

 

Re: Peak Oil; what it is and how it will impact your life

Price is falling like a turd in a toilet.

 

Re: Peak Oil; what it is and how it will impact your life

gasoline price marks biggest drop ever


NEW YORK (Reuters) - The average price of a gallon of gasoline in the United States recorded its largest drop ever as consumer demand continued to wane and oil prices slid, a prominent industry analyst said on Sunday.



The national average price for self-serve, regular unleaded gas fell 35.03 cents to $3.3079 a gallon on October 10 from $3.6582 two weeks earlier, according to the nationwide Lundberg Survey.

It was the lowest national average price since March 21, 2008. Since peaking at $4.1124 on July 11, the average cost of a gallon of gas has receded by 80.45 cents. Diesel fuel fell 21 cents to $3.95 a gallon, the first time since March that it has been below $4.00 a gallon.

"Plummeting oil prices and caving gasoline demand have combined to bring the biggest retail gasoline price cut in the history of the market," Trilby Lundberg, who compiles the survey, said in an interview. "We've been doing this 58 years. This is truly the biggest price drop."

On Friday, fears of a global recession helped drive down U.S. crude oil futures prices more than 10 percent to the lowest settlement since September 2007. U.S. crude for November delivery settled on Friday at $77.70 a barrel, down $8.89, or 10.27 percent, on the New York Mercantile Exchange.

Meanwhile, travel on all U.S. roads fell 3.6 percent, or nearly 10 billion vehicle miles in July, compared with the same period last year, according to the most recent figures provided by the Transportation Department. It was the ninth straight month of declining driving activity.

HOW LOW CAN THEY GO?

Lundberg said the average gasoline price could fall below $3.00 a gallon as early as December.

"If crude oil prices don't spike, we can expect further price cutting for two reasons," Lundberg said. "Gasoline demand will continue to shrink in our weak economic condition, and retailers, who have been receiving deep buying price cuts, will be anxious to pass through any further price cuts they receive quickly. They need the sales."

According to the Lundberg survey, drivers in Honolulu paid an average of $3.91 a gallon for unleaded gas, the highest price in the nation. The Wichita, Kansas, region had the lowest average price, at $2.79 a gallon.