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Heinberg: Bursting bubbles
Richard Heinberg, Post Carbon Institute
Money-based economies have a tendency toward boom-and-bust cycles. The US in the 19th century saw a string of bank failures, financial panics, currency collapses, and depressions; in the 20th we enjoyed somewhat more economic stability, but still the nation had to endure the convulsions of 1907, the 1930s, and the 1970s.
We are now seeing the dire results of yet another bubble popping—in this case the real estate bubble. As home prices escalated during the early years of the new century, homeowners found themselves with new paper wealth, which they exploited by taking out new mortgages that left them with cash to spend. Creators of mortgages found new ways of selling their loans to people who really couldn’t afford to buy homes at inflated prices. Investment bankers found innovative means of leveraging the new money floating through the system. It all worked beautifully until home prices started to fall, effectively weakening the balloon at its most vulnerable spot so that it could not maintain its integrity.
Something similar is happening with energy. During the past couple of centuries we started using coal, then oil and natural gas—fuels that yielded an unprecedented energy profit from the enterprises of exploration, mining, and drilling. The pattern at first was to move from lower-quality fuels (coal) to higher-quality ones (oil and natural gas). All of this cheap, high-quality energy enabled us to build an industrial world of cars, trucks, airplanes, and tractors in which only a small portion of the populace needed to work at basic productive tasks, thus freeing up an enormous (and growing) work force that could leverage energy in a million ways through advertising, tourism, packaging, industrial chemistry, and on and on.
Now the energy bubble is bursting.
(2 October 2008)
Matt Simmons: Oil and Gas — The Next Meltdown? (video and audio)
Peak Moment via Global Public Media
Drawing parallels with the current financial meltdown, Matthew Simmons, the CEO of Simmons & Company International, expresses his alarm about gasoline stocks being the lowest in several decades and refinery production down following recent hurricanes. He warns that if there were a run on the “energy bank” by everyone topping off their gasoline tanks, the U.S. would be out of fuel in three days, and grocery shelves largely emptied in a week. In an interview plus excerpts from his presentation at the Association for the Study of Peak Oil (ASPO-USA) conference on September 22, 2008, Matt highlights the risks and vulnerabilities in the finished oil products system, and answers audience questions.
This is the first of several Peak Moment Conversations videotaped at ASPO-USA 2008. Coming: peak oil-savvy financial consultant Jim Puplava of Financial Sense, and Randy Udall, energy analyst and co-founder of ASPO-USA.
(2 October 2008)
Video starts with an interview with Simmons, and then ends with about 15 minutes of his talk at the recent ASPO-USA conference in Sacramento. -BA
Companies Scramble for Ever-Scarcer Resources
Wolfgang Kerler, IPS
As humanity runs out of oil and minerals, the extraction of previously untouched deposits suddenly pays off — financially. But experts warn that it will likely further accelerate climate change and seriously damage the environment.
Back in the 19th century it was easy to discover an oil well: one could accidentally step in a puddle of “black gold” — it made its way to the surface voluntarily. But with conventional oil wells running dry, the industry is shifting to so-called “unconventional” sources like tar sands — but not without problems.
“It takes two to three times more energy to get a barrel back from tar sands than from conventional crude oil,” said Steve Andrews, co-founder of the U.S.-based Association for the Study of Peak Oil and Gas (ASPO), in an interview with IPS.
Hand-in-hand with the needed large amount of energy is significantly more carbon emissions, which is counterproductive in the global fight against climate change.
Other unpleasant byproducts are vast ponds full of toxic water, such as are used during the production of synthetic oil from tar sands. Hundreds of waterfowl have already died in those contaminated tarns.
Nevertheless, as the price of oil has more than tripled in the last few years — it is now around 100 dollars per barrel — the cost-intensive mining of tar sands has become more and more profitable.
(1 October 2008)
Personal View of ASPO-USA – Day 3
Steve Balogh, Groovy Green
David Hughes, from the Canadian Geological Survey, started off the final day of the conference by speaking about coal. He called coal “a dirty four letter word”, and noted how the 19th century view of coal was “a wonderful resource…” and skipping ahead to the 21st century, “Coal is the enemy of the human race.” David noted that China has built 500 coal plants in 6 years, India 200, while 59 of 151 plants scheduled to be built in the U.S. were cancelled. U.S. continues to be a slight net exporter. However, the graph of exports showed a steady decline. Coal is the #2 energy source in the world – and is not going away any time soon. The average world citizen consumes the same amount per capita renewable resources today as they did in 1850 (11% renewable). The average world citizen uses the same amount of coal per capita as they did in the beginning of 20th century. Coal makes up 2/3’s of the world’s remaining hydrocarbon resource. Since 2002 coal use has grown 33% since 2002. Fastest growing hydrocarbon. 50% of coal used by human race consumed since 1972.
The energy content of coal peaked in 2006. David states that a study shows a world coal production peak in 2030, with a peak in China in 2025. Another study performed a Hubbert linearization for coal. There are 1.6 Tboe of coal remaining. 90% will be gone in 2076 if we burn hydrocarbons if we burn them as fast as we can produce them. EIA – coal will grow to 46% of world energy production in 2030 and will grow to 57% in U.S.
David spoke next about “clean coal” and ways that the efficiency of coal use are improving. He notes that “clean coal” technologies can clean up particulates 99%, NOx, Hg 90%, SOx 99% and get a 25% reduction in CO2. Denmark is a world leader in ultrasupercritical plants and utilizes them in district heating. Use of waste heat from coal plants dramatically increases their efficiency. IGCC plants have a 27 to 35% efficiency, Carbon Capture and Storage (CCS) plants are 31.2% efficient and require increased coal consumption to 124% of prior levels. David feels that the best way to get the most energy out of coal, and thus burn the least amount of it, is by using ultrasupercritical plants with their 43.3% efficiency and add waste heat use (district heating) to get an approximate 70% efficiency rating. Even old coal technology combined with heat capture improves efficiency to 51%. He notes that proponents of CCS often assume there is NO ENERGY PROBLEM.
Bottom line, the simplest and lowest tech method to reduce carbon emissions from coal is not to burn it. We have to use the highest efficiency we can when using hydrocarbons.
Robert Rapier spoke next on “Biofuels Facts and Fallicies”
(30 September 2008)
The Recurring Myth of Peak Oil
Ismael Hossein-zadeh, Payvand’s Iran News
The Peak Oil theory maintains that world production of conventional oil will soon reach a maximum, or peak, and decline thereafter, with grave socio-economic consequences. Some proponents of the theory argue that world oil production has already peaked, and is now in a terminal decline [1].
Although, on the face of it, this sounds like a fairly reasonable proposition, it has been challenged on both theoretical and empirical grounds. While some critics have called it a myth, others have branded it as a money-making scam promoted by the business interests that are vested in the fossil fuel industry, in the business of war and militarism, and in the Wall Street financial giants that are engaged in manipulative oil speculation.
Regardless of its validity (or lack thereof), the fact is that Peak Oil has had significant policy and political implications. It has also generated considerable reactions among various interest groups and political activists.
While environmental and similar activists have used Peak Oil to promote more vigorous conservation and more energetic pursuit of alternative fuels, the oil industry and its representatives in and out of the government have taken advantage of Peak Oil to argue in support of unrestrained extraction of oil and expanded drilling in the offshore or wildlife regions.
Because of its simple logic and facile appeal, Peak Oil has also led many ordinary citizens, burdened by high fuel bills during periods of energy crisis, to support unrestrained or expanded drilling. According to a recent Rasmussen poll, 57 percent of Americans favor more offshore drilling. Misled and misplaced popular perceptions, in turn, play into the hands of the oil industry and their representatives to lobby for the lifting of the Federal ban on oil production in hitherto restricted regions.
… Thus, Peak Oil serves as a powerful trap and a clever manipulation that lets the real forces of war and militarism (the military-industrial complex and the pro-Israel lobby), and the main culprits behind the soaring energy prices (the Wall Street financial giants engaged in manipulative commodity speculation) off the hook; it is a fabulous distraction. All evils are blamed on a commodity upon which we are all utterly dependent.
Not only millions of lay-citizens, but also many scholars and academics have taken the bait and fallen right into this trap by arguing that recent U.S. wars of choice are driven primarily by oil and other “scarce” resources. More broadly, they argue that most wars of the future, like the recent and/or present ones, will be driven by conflicts over natural resources, especially energy and water—hence, for example, the title of Michael T. Klare’s popular book, Resource Wars [4].
… The Peak Oil debate boils down, essentially, to natural versus social limits, or naturally-determined versus socially-determined limits. A similar debate erupted more than 200 hundred years ago over the limits of population growth, on the one hand, and the growth of food supplies, on the other. The debate was prompted largely by a 1978 essay written by the British economist Thomas R. Malthus, titled “An Essay on the Principle of Population.”
… What Malthus failed to see is the fact that growth rates of population and food supplies are not determined purely by nature as fixed, innate, or immutable rates. Instead, they are dynamic categories that can change drastically, depending on the level of economic development, social structure of production, and the state of technology.
Although not identical, the Peak Oil theory is similar to the Malthusian theory in that it too is based on natural, innate, or fixed and immutable limits. There are, of course, limits to everything—energy, food, water, population. But those limits are not absolute or pre-determined, as implied by the Peak Oil thesis. They are perhaps more social than natural limits.
This is why although the Peak Oil theory is not false in saying that there are limits to oil production, it does not explain much. In a real sense, it is a truism. It explains neither the current energy crisis nor any of the past ones. Nor can, therefore, its dire predictions about future global oil production be trustworthy.
… That oil companies would want to invest only in the narrow category of proven, or cost efficient, reserves is understandable; it is a simple business principle. But to base future oil supplies on the currently proven reserves, as Peak Oil theory does, is problematic. It represents a short-term, static view of future oil supplies that implicitly ignores the critical role of new investments and technological innovations that can make profitable, or cost efficient, what is currently considered unprofitable, or cost inefficient.
… A major flaw of Peak Oil, as already pointed out, is that it discounts the fact that energy-saving technologies have drastically improved (and will continue to further improve) not only the efficiency of oil production but also of oil consumption.
… Peak Oil is also subject to criticism because it pays insufficient attention to substitutes or alternative sources of energy, both actual and potential. These include solar, wind, non-food bio-fuel, and nuclear energies.
… Except for natural gas and nuclear energy, most of these alternative sources of energy are still highly costly, and are therefore used in only insignificant quantities. But, considering the ever evolving newer and more efficient technologies, they are bound to rise in significance. This means that the prospects of reaching a day in our search for energy sources when conventional oil is no longer the world’s dominant source of energy are quite realistic.
Ismael Hossein-zadeh, author of the recently published The Political Economy of U.S. Militarism (Palgrave-Macmillan 2007), teaches economics at Drake University, Des Moines, Iowa.
(1 October 2008)
Long essay. One of the better efforts by peak oil skeptics. Nevertheless:
- It’s a stretch to see the hand of the oil companies behind the peak oil movement. I have yet to see any evidence for this claim.
- The arguments about technology making up for oil depletion has been refuted by ASPO and The Oil Drum.
- The idea of ecological limits should be judged on its own merits, not on political considerations. There are both left and right wing responses to the idea of limits.
-BA
Complex issues in a world of soundbites
Daniel Lerch, Post Carbon Cities
How can planners and elected officials address incredibly complex issues like peak oil and global warming while juggling multiple stakeholders, competing priorities and limited resources? Some thoughts on talking about complexity in a world of soundbites and short attention spans.
—
… The problems we face in peak oil are so complex –and the concepts behind peak oil itself are so complex– that making coherent and, more importantly, useful observations is no easy task.
I deal with this in my presentations with the following progression of points (and a whole lot of detail in between):
- The fundamental factors of oil supply and demand are changing.
- “Peak oil” is a useful concept for understanding what’s happening and why.
- Peak oil creates system-wide challenges: it’s not just an issue of rising energy prices.
- These challenges can’t be addressed just by markets or by national governments; there are important challenges (and solutions) that only local stakeholders can identify.
That takes me about twenty minutes to go through, which is also the minimum time John Kaufmann, another lecturer on peak oil and cities, told me he needs to make an effective case. Less than that, and you leave too many loose strings and sound like a conspiracy theorist. This is a problem not just because we often have only the “elevator pitch” moment to bring up the challenges of peak oil to colleagues and officials, but also because folks in general tend to tune out of a complex argument unless they’ve specifically made the time and mental space to absorb it.
Fortunately the messaging gets easier as oil price swings make it more and more obvious that we’re no longer in the relatively stable market of the 1990s.
(2 October 2008)
