What Peaked at the Same Time as Oil Prices? Lots of things.
Posted by Gail the Actuary on October 9, 2009 - 10:40am
We know oil prices peaked in the third quarter of 2008--in fact in July 2008. But what else peaked about the same time? It turns out when you look at the data, lots of things:
It seems to me that the current crisis is credit driven, which is why it is so widespread. I had expected a credit crisis to result from the rising price of oil, because the rising price of price would choke back growth, and this would likely lead to debt defaults. But as I look at the data, I discover other relationships I didn't really expect.
It turns out that total US employee compensation peaked in the third quarter of 2008 (I don't have the data by month), so it peaked at the same time as peak oil. As I look at the breakdown of this, I find the government employee compensation has continued to rise since the peak.
What has really fallen since the peak is private industry wages. The above data also peaks in the third quarter of 2008. The amounts shown are annualized quarterly amounts (seasonally adjusted). In some sense, private industry wages drive everything, since without these, people would have difficulty buying anything, or paying taxes, or paying back debt. The fact that these are as small as these are-- only $6.6 trillion a year at their peak; now down to $6.2 trillion in the second quarter of 2009 is concerning.
We know that oil prices peaked. This is how the prices refiners paid for oil (including US produced and imports were affected). Prices dropped a lot, but it turns out they only dropped to about the price that was being paid at the beginning of 2005.
Gasoline prices rose, but they didn't rise nearly as much as did the price of oil. This is to be expected, because part of the price of gasoline is people's wages, and fixed expenses, and these did not rise nearly as much as the price of oil.
Natural gas prices hit their peak at about the same time. What is striking to me is the huge difference between what producers are paid at the well head and what residential customers pay. The peak gas price, from a residential point of view was about $20 per 1000 cubic feet. It is now down to $15 per 1000 cubic feet. But the price at the wellhead reached a peak of $11 per 1000 cubic feet, and dropped to something in the $3 to $4 range.
We hear that natural gas is selling at a low price per Btu relative to oil, and it is, at the wellhead. But for a residential customer, the price still isn't very low. There are a lot of costs in the production of natural gas, beyond wellhead costs. It seems to me that at least some of these costs are thanks to "deregulation".
One thing I had not expected was the extent to which electricity prices have been rising over time, and the fact that their prices, too, peaked in the summer of 2008. Electricity prices tend to be higher in the summer each year, because more natural gas is used in summer, and it tends to be more expensive than coal.
One of the things that is concerning to me is the rise of electricity prices over time that the above graph shows. In the paper Accounting for Growth, the Role of Physical Work by Robert U. Ayres and Benjamin Warr, Structural Change and Economic Dynamics, February, 2004), Ayres and Warr show a model that indicates that growing energy efficiency, together with greater energy inputs, explain most of the rise in GDP between 1900 and 1998.
In the same paper, they indicate that the declining real cost of energy, particularly electricity, and the rising use of the much cheaper electricity, fed economic growth in the 1900 to 1998 period. The problem we have now is that we are getting to precisely the opposite of this situation--electricity prices are now rising, and use falling. This is not normally a formula for economic growth.
There are no doubt several reasons for the rise in electrical prices:
• Deregulation. With many more players, each trying to make a profit, prices didn't go down, as many had thought they would.
• Rise in oil prices. Oil is used to transport coal, so as oil prices rise, electricity from coal can be expected to increase in price.
• Law changes to reduce coal pollution In order to reduce sulphur emissions, electricity producers bought lower quality coal that needed to be shipped longer distances. This reduced the efficiency of the electrical plants and increased transportation costs.
• Shift in mix. The shift in mix of electrical production has shifted to more natural gas and to more wind. These tend to be higher cost, and thus raise costs.
Going forward, there may be additional reasons for cost rises as well:
• Cap and trade laws. These will add costs and shift toward higher cost sources of generation.
• Cost of grid improvements These are badly needed, especially if wind is added.
• Declining demand. There are still huge overhead costs to cover, even as demand declines, as it has recently.
While the rise in electrical price may be inevitable, it can be expected to have a negative impact on economic growth, just as a rise in oil prices above a certain level stifles economic growth.
I might also note that coal prices (used in electricity production) peaked during the same period. On an annual basis, using actual sales prices (including contract prices), the EIA indicates the following average prices:
• 2005 $23.59
• 2006 $25.16
• 2007 $26.20
• 2008 $32.59
As everyone knows, stock market prices also declined in the same period, but their peak came earlier--back in 2007.
I haven't figured out a way to look at how people's incomes were affected by the many changes affecting them--falling stock markets, falling housing prices, declining debt availability, and declining wages. I did figure out a way to look at a couple of these things simultaneously--debt and income.
The Federal Reserve shows information on US domestic non-financial debt. This would seem to include mortgage debt, credit card debt, auto debt, and most other individual debt, but not debt used for, say, purchasing stocks and bonds, or debt of businesses or governments. It seems to me the increase in domestic non-financial debt gives a sense of how well off people feel they are. As the amount of debt increases, people can buy more and more "stuff". If we add the change in this debt to the amount of personal income, it gives a rough measure of how much a person had to spend in a year. (Of course, the number of workers was going up slightly during this period, so the per capita changes are a little lower.)
Looking over the long term, the growth in debt tended to increase funds available to the US population. The amount of debt added got larger and larger during the early 2000s, but then decreased in 2008.
If we look at recent quarterly data, one can see how the decline in personal income has combined with the reduction in debt to provide a "double whammy" to the individual. While personal income hit a peak in the summer of 2008, personal income adjusted for debt reached a peak earlier--back in the fourth quarter of 2007. As mortgage debt started to contract (lead partly by falling housing prices), this started to affect homeowners even before the drop in consumer credit (auto loans and credit card debt). So this graph helps show why people started feeling poor, even earlier. Of course, the drop in the S&P 500 didn't help either.
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Current weak US energy demand is really part of a multiyear trend, in response to annual oil prices rising at 20%/year from 1998 to 2008 ($14 to $100). In response, our total oil consumption in 2008 was down to the same level as 1999, 19.5 mbpd. However, many non-OECD countries showed huge double digit increases in total oil consumption in 2008, versus 1998. Two examples from Asia are China & India, and two examples from Africa are Morocco & Kenya.
I've compared our focus on US energy data to the old joke about a drunk looking for his keys under a streetlight late at night. He lost his keys down the street, but the light was better under the streetlight. We have great energy data in the US and other OECD countries, but that is not where the growth in energy consumption has been in recent years.
In any case, I think that the US is very poorly equipped to bid for declining net oil exports worldwide, given our recent 10 year track record versus developing countries. Absent the actual or threatened use of force, I think that we can look forward to the US headed toward freedom from foreign sources of imported oil, but perhaps not in the way that many people anticipated.
I'm wondering this morning after hearing that President Obama has been awarded the Nobel Peace prize if the people on the committee that awarded the prize saw it as an opportunity to push for world peace by making it more difficult for him to wage wars. Sort of a preemptive strike against his ability to so easily use his power to wage war thereby giving diplomacy a better chance at the tables where negotiations so desperately need to occur.
Best hopes for a more rational approach to world peace.
Pretty ironical if the guy who "wins" the Nobel Peace Prize turns around & authorizes a strike on Iranian nuclear facilities. Or tacitly allows the Israelis to do it. You may have a point. Maybe a canny choice by the Committee, after all.
Very prestigious award and Committee-after all, Kissinger was a past recipient and who has done more to advance world peace than good old Henry.
Kissinger getting the prize probably made Kafka blush in his grave.
I have two competing conspiracy theories about Obama's prize.
(1) This is part of a conspiracy to pretend that there really is a difference between the Dems and the Reps (as part of the wider international pretence of choice in "democratic" countries). As soon as O came to office, prominent changes were heavily publicised. Once the attention had turned away, O reverted to much the same agenda as Bush, even appointing many of the same chief officials. The "peace" prize would add to the spun falsehood?
(2) It's well known that in order to qualify for the peace prize you normally have to have been responsible for a large number of deaths first. Maybe the Nobel committee did indeed act in anticipation, knowing something....
I'll see your Kissinger and raise you an Arafat.
I saw Obama's speech @ 11 and he made a point to remind the world that there's a war going on and nuclear energy must be peacefull. He probably felt the committee's challenge as he didn't look completely happy about it.
Or maybe these days Obama's moves are as peaceful as one can hope for, creating a new floor for violent behavior? Appropos for a new era of diminishing expectations?
I was as cynical as anyone upon hearing of the award.
But really, I think it was given to the American people who elected him.
After a decade of being told that we were in a cultural war of the Enlightened Christian West against benighted terroristic Islamic culture, the American people elected someone named Barack Hussein Obama.
I think we in the US underestimate how much this impressed many in the larger world.
I had many of the same thoughts as those outlined in comments above. Particularly, the putting Obi-man on watch..
Then I remembered that the deadline for submission of names for the Nobel Peace prize is ... February. (Checked it on their site, it is so.)
Obama had been president for all of the blink of an eye. So dohboi's comment seems apt.
Of course the final decision is taken somewhat later, but one can see this nomination as dependent on the momemtum of Hopiness and Changiness, which didn't have time to sag or peter out.
I bet some of the 'judges' are unhappy with this choice today.
Gone are the days when america was capable of starting wars.
The more problems a powerful country has ,the more likely it is to start a war.
If you had any real understanding of international politics and history you would be thanking Allah this very minute that it is the US that is a super power and has armies on the ground in your part of the world.
If the Germans or the Japanese or the English of a century ago were there with modern day weapons you would all be in Paradise already.
If we weren't there you would be occupied right now by the Russians or the Chinese and they would not be building many schools or repairing many water and sewer lines.
The Russians didn't leave because you drove them out-they could haver killed all of you as easy as swatting a fly-Stalin killed over twenty million of his own people.
The Russians did not want the rest of the world -meaning the great satan America mostly-to see just how rotten and brutal communism is/was.Your lives were spared because Russia wanted trade with the west more than she wanted your country and feared not only the loss of trade but war with us.
You have remarked before that you "make software".If you are a programmer you must have some technical education.You should add to it by reading some western history.
While your best and brightest young men are studying religious texts , our mern and women are createing and discovering new knowledge such as the internet which enables me to communicate with you.
My country men are mostly "people of the book"-in a broader sense-not Jewish but Protestants, followers of a religion with Jewish roots that holds Abraham to be next to God second only to Jesus.They believe in Heaven just as you believe in Paradise.
If we fight to the finish they also will fight believing God is on thier side-just as you do.
Maybe we can still avoid a true war -one that kills by the thousands every single day, day after day for months or years.If it happens our men will die by the dozen.Yours will die by the tens of thousands until none are left to fight.
Our own newspapers and television call the conflict war- but really it is not -no more than a six year old boy is a man.
Oil is a curse-things would be better if there was no oil in your part of the world.You will have no peace until it is gone.
It is very ironic and quite sad.Though these religions claim that they follow the Bible i.e. Judaism, Christianity, and Islam - none of them actually do as God commanded and share the same ideology.
Why?
People who are not familiar with the Bible will often ask the proverbial question - What is God really like?What are His characteristics?The Bible states unequivocally that Jesus was the Son of God - God manifested in the flesh.Therefore, the lineaments that pertain to God would be seen in Jesus.What He taught is how He actually lived out His life to the point of death.His life is an example for those who would follow Him in truth.
First and foremost He said judge not least you be judged.Do unto others as you would have them do unto you - if someone strikes you upon the cheek turn to him the other, bless those who curse you and pray for those who despitefully use you.
These teachings were absolutely astonishing for their time, for the Jewish people were acquainted with the Torah which predicated an 'eye for an eye'.
It became axiomatic, however, that no man actually carried the righteousness and the understanding of right and wrong to pass judgment with equity and follow the Torah.
This is why God revealed Himself in this manner.
When Jesus was arrested and brought to the unfair kangaroo-court that He was subjected to He did not accuse or revile back at His accusers.He did not lift a hand against those who were striking him, infact, in the historiographical account of His life He never lifted a finger to hurt anyone.
This is why it is so ironic and the greatest oximoron of history that those who claim to follow Him and respect His teachings i.e. Catholics, Protestants, Muslims are some of the most violent people in recorded history.They were no more 'civilised' than the so called 'barbarians' they were trying to convert.
No...God is not concerned with our own religious theological points or our erudition of what we consider to be true - He is only concerned with real equity and tuth.
Remember, one mans terrorist is another mans freedom fighter.
We as Americans cannot pontificate and say that we were 'different' than the Japanese or the Germans.Imagine if Hitler had dropped a fission weapon on a city populated with women children and the elderly!?Would we perhaps look upon him as being infinitely more egregious than we already do?
Can we not see past ourselves and admit that we are just as inclined to share the very same Manichean tendencies that the Germans succumbed to? Maybe we also should be looking at history differently.
The Bible predicates clearly Jesus would not commit himself to any man (and by extension any religion) because He knew what was in the heart of man;He gives a good example to the term existentialism, and those who would follow what He actually taught would be wise to do the same.
Sampson,
We have not been put to the test in the way The japanese and the Germans have in the last century or so , but our imperialism is of a different stripe than that practiced by other countries-it's much milder, to say the least possible thing about it-for instance we actually pay for oil, and at the going rate, no less.
And insofar as the atom bombs dropped on Japan are concerned , that has been blown entirely out of proportion by people looking for an opportunity to bash either America or nuclear technology in general.
Any one who has trouble understanding this is invited to read any legit book on the history of the air war with Germany-we sent over whole fleets of planes and burned entire cities to the ground as a matter of day to day policy.
Nobody was interested in invading Japan and it is perfectly obvious that they would never have surrendered without a lot of further bloodshed if the atom bombs had not been used-most credible observers of the time put the "otherwise" deaths several times higher, which would have of course included many thousands of our own men.
And insofar as bloody religions are concerned, man is a bloody species, period-there are no noble savages, now, and there never have been any in the past-once we get to be fairly numerous, we start fighting for the space and resources we need to reproduce.
If there had never been a Jewish people to serve as the foundation stock of the "people of the book" some other dominant religion or philosophy would have occupied the void thus created and been just as bloody.
Give me an effing break. If we don't have a Kipling shooting elephants it's only because 1) our soldiers are number than hakes and 2) there are next to no elephants left. Our colonialism is in no way milder; it is total.
cfm, the growlery, gray, me
Just to tweak your tail ;) -
I was reading recently about the Nicene creed was changed in 381 AD, to include a definition of jesus as being goad and the son of god, or something like that.
The previous version (nicene creed version 0.9) had jesus as a seperate person... the eastern churches (including the russian orthodox) kept the old version.
One of the main innovations in christianity was that one could convert, rather than have to be born into it, unlike the preceding judaism, which was - and still is, more-or-less - restricted to an ethnic group.
I could also suggest that the notion of making reference to a text as the authority, as opposed to making reference to a cleric as authority, was actually an innovation of the middle-east around 630 AD.
In the western world, the cleric had final authority - until, beginning around 1400 AD there began movements to replace the ultimate authority of the ecclesiastical heirarchy, with the ultimate authority of the conscience of the reader of the holy text.
This was of course the appearance of protestantism, helped enormously by the spread of printing technology around about the same place and time.
You got it all wrong. Read about Ecumenical councils and don't mistake Eastern Orthodox for Oriental Orthodox. Also, Filioque clause was introduced much later than 381 AD.
I guess if I lived next to Afghanistan's Taliban and insurgents plus US troops, 1B Indians who are historic enemies, 1B Chinese who might need more space, and the Iranians who are finding themselves cornered between a rock and hard place, I might hope for the best too.
I think that we can look forward to the US headed toward freedom from foreign sources of imported oil, but perhaps not in the way that many people anticipated.
You Yankees allatime gotta be some sort of hot shot leaders don'tcha.
And hey that is a great idea they gave Obama the Nobel peace prize so quickly. Something learned via Kissinger?
In strange all this has me thinking of a poem, of Empire lost, that might be brushed and tidied to swagger again in our days.
In any case, I think that the US is very poorly equipped to bid for declining net oil exports worldwide, given our recent 10 year track record versus developing countries.
There's a more benign interpretation: the US has freer market pricing, so it uses less when prices rise. Countries that freeze energy prices (China, India, oil exporters, etc) are hurting themselves with excessive spending on energy that could be used better elsewhere. OTOH, it's only to be expected that developing countries' energy consumption will rise, while developed economies will reduce their energy (especially oil) consumption by improving efficiency.
Europe has already priced in the real cost of externalities with steep fuel taxes, so it's to be expected that the biggest declines would happen in the US, where prices are free to adjust and the biggest efficiency improvements are still very, very easily (and cheaply) available.
"Europe has already priced in the real cost of externalities with steep fuel taxes"
Not everywhere in Europe, Ukraine still imports gas at a higher price than it sells it domestically. Something to do with a dodgy political scene where no politician is prepared to make the hard decision, where have i heard that before?
That's too bad. You're talking about gasoline, not natural gas, right?
How much are prices below market?
Absolutely right, WT.
I love the comparison with the joke about the drunk. Indeed, we can only see what's happening where we have good data. But even the little data we have for the developing world shows, as you keep reminding folks, that consumption there is up and showing no signs of retreating, recession or no.
-- Jon
We can of course argue why, but the data are very compelling, a sustained increase in oil consumption in non-OECD countries, versus flat to declining oil consumption in OECD countries--as oil prices rose at 20%/year. I can't see how this is anything but a negative for the US in future years, at least in regard to the auto-centric suburban way of life in the US that we know and love.
This is why I usually finish my presentations with a "Desire Named Streetcars," i.e., a strong push for Alan Drake's recommendations.
I can't see how this is anything but a negative for the US in future years, at least in regard to the auto-centric suburban way of life in the US that we know and love.
Isn't that funny? I see it as only a positive for the US, as we wean ourselves off of dependence on oil.
A I noted elsewhere, personal transportation is about 50% of US oil consumption. If we raised the average MPG from 22 to 50 (just replace current vehicles with hybrids like the Prius, which costs less than the average US new vehicle) we could reduce overall US oil consumption by very roughly 30%.
That's before going to vehicles like the Volt, which would reduce fuel consumption by 90% over the current average.
Or...carpooling, which can be done in a matter of days.
Or better yet, largely abandon the auto-centric lifestyle. As someone said, "The American love affair with cars is a lot like Stockholm Syndrome."
I say we abandon the ICE powered auto-centric lifestyle and move to a human powered mode of individual transport. Well maybe an electric assist for the little old ladies that might need a boost to power up the hills.
http://velomobiles.ca/Borealis%20gallery.html
Sure, if you want to. I have - I drive about 1,500 miles per year. I enjoy urban living (my walkscore is 92%), and I like trains quite a bit more than driving.
Of course, I pay a large premium in living costs to do so, something most people can't do.
But, I don't see any reason why people will be forced to give up their personal transportation, if they don't want to or can't afford to. Driving will continue to be affordable, and can be made sustainable.
Have you read "$20 per Gallon?"
It's at least a little refreshing to read something positive for a change, from someone who accepts Peak Oil.
Thanks for the thought. I haven't, though I've read pretty good reviews.
I do work under the assumption that oil has plateaued, and will decline in 3-5 years. I guess you could say that I'm relatively optimistic, compared to many of those who accept Peak Oil.
I'll add "$20 per Gallon" to my list...
I've been focused on net export graphs in my spare time for the past two weeks, and they are not pretty pictures. Sam's best case is that the top five net oil exporters will have shipped more than half of their post-2005 cumulative net oil exports by the end of 2013.
Well, have you looked at the rate at which the top importers are reducing their imports? I'd be curious to see a comparison of the two. The US has reduced imports by what, 20% from their peak? Japan's imports are plummeting, and Germany's reducing them as well.
That's hopeful for the long-term trade deficits of the oil importers.
If I were a oil exporter, I'd be happily stocking up on all the t-bills I could, against the day when exports run out.
Nick, you are something else.
Are you claiming that exporters are increasing their consumption at the expense of their exports because importers are reducing their imports?
WT has identified a pretty clear cause and effect you here you are trying to turn that 180 degrees around.
Are you claiming that exporters are increasing their consumption at the expense of their exports because importers are reducing their imports?
Not at all. I'd say that increased oil prices caused importers to reduce their imports.
What I'm saying here is that the pace of import reduction is important. To focus only on net exports doesn't give us a realistic picture: we need to also look at the production and consumption in importing countries.
It's certainly true that OECD consumption and oil imports fell in response to oil prices increasing at 20%/year from 1998 to 2008, but it's also true that non-OECD consumption and oil imports increased in response to oil prices increasing at 20%/year from 1998 to 2008.
Again, that makes sense. It's only to be expected that developing countries' energy consumption will rise, while developed economies will reduce their energy (especially oil) consumption by improving efficiency.
The US has freer market pricing, so it uses less when prices rise. Countries that freeze energy prices (China, India, oil exporters, etc) are hurting themselves with excessive spending to buy energy - money that they could use better elsewhere.
Europe has already priced in the real cost of externalities with steep fuel taxes, so it's to be expected that the biggest declines would happen in the US, where prices are free to adjust and the biggest efficiency improvements are still very, very easily (and cheaply) available.
So, I guess we are in agreement that the developing countries will probably import a growing portion of a declining supply of exported oil.
Yes, indeed.
Some of them, like China, recognize the danger of this growing addiction, and some, like India, not so much.
I read $20 per gallon. I thought it was a crock! It pretended that as gas prices rise, all that happens is simple changes to the way we transport ourselves. It completely failed to recognize or address what would happen to the overall economy by way of fuel that was rising in price 2 dollars at a time. It took a cornucopian viewpoint of the positives of higher priced fuel as it pertained to health, from getting more exercise. If you are someone that is angled in a cornucopian direction, you'll love it, but if you are a discerning individual with a good understanding of Pead oil and how it will impact the economy, don't bother picking up this rag.
And that's coming from someone who has read Simmons, Defeyyes, Kunstler, Catton and the rest.
As a follow up to my reaming of $20 per gallon: If gas really did sell for that much a gallon, how much would a barrel of oil sell for? Well, if the average now is $3 a gallon and a barrel is $70, then every dollar of price per gallon of fuel is equal to 23.33 a barrel. So 20 dollars a gallon would mean a barrel costs 466.60
But as we remember from oil reaching 147, the economy collapsed and the price dropped to 30. Also, recent articles have supported the premise that historically above 4% GDP spent on fuel has caused recessions. So how are we going to get to 466.60? By the same token, even if fuel sells for $10 a gallon, that translates to approx. 233.30 per barrel. How is the economy going to support that price level?
So as we can readily see, this book is cornucopian - it does not take a responsible position on explaining how the economy will support such a high fuel or oil price. Ipso facto, the book is DOA.
Sounds like pre-2008 thinking IMO.
Recessions will now come more quickly as the oil price ratchets back up to "kill level" more and more quickly until we enter a period where the only thing that buys us a little more time is efficiency. The most efficient countries -or those still with oil to export or cheaper internal energy sources (China:coal, Norway:Hydro)- will probably be less affected. Those with greater imports or more leveraged to cheap energy -Poster child: USA- will be more affected.
Nick.
It pretended that as gas prices rise, all that happens is simple changes to the way we transport ourselves.
It's not clear to me how prices could rise that high. First, most uses of oil have substitutes at much lower prices (e.g., an EV is cheaper than an ICE, at $4 gas). 2nd, oil importing countries would see their economies slow down at oil prices over $100/bbl.
I really think many people are omitting the potential for dollar collapse/inflation.
A few years ago, I read a compelling argument that the massive US external debt could only be dealt with in one of two ways:
It became clear in 2006 that the inflatory path was preferred by TPTB, despite some hopes to the contrary, once bernanke realised what a mess the banks had gotten themselves into.
Assuming the Fed inflates it's way out of the debt, e.g. by halving it's value, oil would then go to $140/bbl, gold to $2000/ozt, and euros from $1.40 to $2.80.
In that scenario, US buyers would be handing over $140 for a barrel that would cost the europeans/chinese/etc the same amount as before..
How does reducing the exchange value of the dollar inflate it?
Who are TPTB?
TPTB=the powers that be; MSM=mainstream media; WTSHTF=when the sh*t hits the fan, BAU=business-as-usual, etc etc
monetary inflation is increase in money supply (M1,M2,M3 etc).
price inflation is increase in prices, through either increasing costs and/or increasing demand and/or reduced supply.
When bernanke speaks of 'dropping money from helicopters', he refers to anti-deflationary measures, =inflation.
'Printing money', i.e. increasing the supply, i.e. increasing the number of dollars (not yen or euros) in circulation, results in a situation where more dollars are available to swap for some import. therefore the import's price-in-dollars will rise - but not necessarily the product's price in euros, yen, rupees.
Therefore the number of dollars needed to buy some foreign currency would also be higher.
The British are also printing money ('quantitative easing') so thier currency is also increasingly worth less.
see here for more currency value comparisons.
I agree that money supply increase can affect exchange rates, assuming the additional money doesn't go into reserves (or get used to handle normal economic growth). It's not clear to me that the Fed is succeeding in increasing the money supply, given the recent problems with money velocity (i.e., banks not lending it, people not spending it).
You seemed to be suggesting that changing exchange rates would somehow reduce US debt. Unlike most countries, US debt is in it's domestic currency (the dollar), so this isn't clear to me why this would be so.
You seemed to be suggesting that changing exchange rates would be a form of inflation in itself (which I consider to be primarily price inflation).
It wasn't clear to me who you felt TPTB were.
There ya go again Nick, stupid and meaningless statements "if we", "we could", "which would", "which can"...................wouda, couda, shouda. You must be a politician because you obviously think we are all idiots.
"just replace current vehicles with hybrids like the Prius"......no need to read further than that, everyone knows by then that you are full of it.
Go and stand on a freeway overpass for half a day. Then come back and tell us "we can" replace "current vehicles" with hybrids.
Make yourself known to The Dallas Cowboys, they could use a good interference runner.
You're getting a little emotional and personal, there. Ad hominem attacks really don't convince anyone.
Yes, we have a lot of conventional vehicles on the road. OTOH, 50% of vehicle miles driven come from vehicles less than 6 years old, so it doesn't take as long to replace vehicles as you might think.
Don't forget, I was responding to the following:"I can't see how this is anything but a negative for the US in future years, at least in regard to the auto-centric suburban way of life in the US".
So, is there a solution for suburbanites? Yes, buy a Prius (or Honda Insight, or Ford Fusion). Of course, when gas prices rise those might get back-ordered. So, put in your order, and carpool. Carpooling will instantly reduce your fuel consumption by 75%. No investment needed, just a little bit of scheduling.
Now you flippantly declare that the "solution" for suburbanites is to buy a hybrid or carpool.........you make me sick.
Nick there is absolutely no reasoning with you so I wouldn't bother. You evoke all the characteristics of an evangelist, with faith alone as the guiding hope, like "I say mountain be moved"...............
Faith and hope won't pay for the cars people drive now let alone finance a changeover to hybrids. All, all your assumptions are apparently based on assumptions of BAU. You should acknowledge, clarify or allow for the possibility that, debt is a problem, that consumerism is falling precipitously, economic growth and taxation revenue is on the verge of collapse......resource depletion, unemployment, aged care, homelessness, pensions, health care, law enforcement and incarceration, climate change and so on are real, they are events and problems happening now and of course continue to be exacerbated not alleviated by a teetering financial system and peak oil.
And your beloved Prius
Toyota......
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As reported on its consolidated financial statements, Toyota has 540 consolidated subsidiaries and 226 affiliates.
Toyota Motor North America (100% - 2004)
Toyota Canada Inc. owned via Toyota Motor North America
Toyota Tsusho - Trading company for the Toyota Group
Daihatsu Motor Company (51.2% - March 31, 2006)
Lexus 100% (1989)
Scion 100% (2003)
DENSO (24.74% - September 30, 2006)
Toyota Industries (23.51% - March 31, 2006)
Aisin Seiki Co. (23.0% - September 30, 2006)
Fuji Heavy Industries (16.66% - June 28, 2008)
Isuzu Motors (5,9% - November 10, 2006)
PT Toyota Astra Motor (49% - 2003)
PT Toyota Motor Manufacturing Indonesia (95% - 2003)
Government bailouts
Toyota's financial unit has asked for an emergency loan from a state-backed lender on March 16, 2009, with reports putting the figure at more than $3 billion. It says the international financial situation is squeezing its business, forcing it to ask for an emergency loan from the Japan Bank for International Cooperation. It is the first time the state-backed bank has been asked to lend to a Japanese car manufacturer.
you flippantly declare that the "solution" for suburbanites is to buy a hybrid or carpool
Well, the original question was whether suburbanites would have to move out of the suburbs - I would suggest that if suburbanites can't afford a Prius, they can't afford to move. Further, carpooling is mighty cheap - if you carpool with 3 other people, you reduce your costs by 75% - who can't afford that?
Faith and hope won't pay for the cars people drive now let alone finance a changeover to hybrids.
And yet, hybrid sales are staying pretty strong. It's conventional vehicle sales that have dropped by 40%.
Yes, we have other problems - see my post just now to ccpo. It certainly looks like we're recovering from our current bank panic. Of course, we'll have another eventually - we always have.
That's interesting about Toyota's financial unit. As you note, Toyota has a lot of separate units - the overall company is doing just fine, though of course it's profits have disappeared for a few quarters.
You, and all those with a similar position, are in for a rude shock. You will find that weaning ourselves off oil will be a lot like weaning ourselves off food.
Ron P.
Not really. Reducing oil consumption is quite easy, once you decide to do it. As Nate Hagens has noted recently, the barriers aren't technical or economic (exactly), they're due to entrenched institutions who are fighting change.
See http://energyfaq.blogspot.com/2008/09/can-everything-be-electrified.html
I agree with you Ron. Everything is so inter-connected, that it weaning us off of oil wouldn't work. It would be a little like learning to live without blood in our physical bodies.
Gail, think of it this way: oil is used in a lot of little interconnected ways in our economy, but the majority of oil is used in a few, large ways. Reducing those is simple.
For instance, 25% of US oil consumption is commuting. Reducing that is really easy: just carpool in the short term (if needed for crises), and in the longer-term shift to hybrids, then PHEVs, and then to EVs.
Another 25% is passenger car travel, most of which is optional. In the short-term most can be foregone (if needed for crises), and in the longer-term we can shift to hybrids, then PHEVs, and then to EVs.
Not complex, really.
Huh. Tell that to the ice caps. And all the other resources that are depleting... like fish.
Simple is as simple does. Do some math on 7 billion people all living even a lower-middle class American existence and see how many Liebig's you come up against. (Let alone the 9 billion or so we're almost guaranteed to end up with in even the best of circumstances.)
Cheers
Tell that to the ice caps. And all the other resources that are depleting... like fish.
No, I agree that climate change is a big problem, and that fish stocks are being depleted. But those aren't what we're talking about here, and reducing oil consumption will only help climate change, right?
Do some math on 7 billion people all living even a lower-middle class American existence and see how many Liebig's you come up against.
Well, I see per-capita wild fish, meat eating and CO2 emissions as needing to be reduced - I don't see these as essential to "our way of life". What do you see?
No. 1) because we will burn coal, 2) because the push to "renewables" will trash every other form of concentrated emergy, and 3) because it is already too late.
Wild fish aren't essential to "our way of life" perhaps, only to the greater web of life itself. There's a lot of stuff our 8 year old children know that we adults seem to forget.
cfm, the growlery, gray, me
No. 1) because we will burn coal
I don't think the US will do CTL in any serious way. Coal to power EVs is better than oil in ICE's, CO2-wise.
the push to "renewables" will trash every other form of concentrated emergy
Could you elaborate on that? Wind in the US is cheap, overall.
because it is already too late.
Probably, but not because of any defects in wind power. No, it's just social resistance to change.
Wild fish aren't essential to "our way of life" perhaps, only to the greater web of life itself.
I meant that eating wild fish wasn't essential to "our way of life".
Just as every human roughly needs to inhale the same amount of oxygen, MPP says that eventually we will all get to use the same amount of daily exosomatic energy, except for those who can convince others that they are truly more deserving of a luxury-energy lifestyle.
Duncan's Olduvai Re-Equalizing rough scenario equalizes everyone about the Third Decade at approx 4 BOE/C [unless the planet's vast quantity of humans learns to hold hands and sing Kumbaya, thus moving ahead smartly with Non-BAU better ideas for long-term sustainability]:
http://www.theoildrum.com/files/DuncanFigure5.png
Oil and the USD...and our military machine...
http://www.informationclearinghouse.info/article23680.htm
Still Puzzling: Is money the real problem and can efficiëncy gaines (EG) save the day?
What are efficiëncy gaines?
Most of our industrialised time, it was just common sense to keep big stockpiles (let's say one month) all across the production line. If one machine broke down, nothing else was effected, until that machine's stockpile run out. Nobody panicked because you had one month to repair it.
In the 70's alot of things happened and the need to do more with less arised.
A new way of thinking entered the workforce and we just called it managing. These guys just sold the stockpiles which created a quick buck and a bonus for them. They kept trimming (bonus) the proces until the machines were sold (quick buck) to some undeveloped country, and we build new more automated machines.
At some point, these so called "undeveloped" countries could produce cheaper with our old machines than we could with our new machines. So the managers again made a quick buck by selling the new machines.
From a money perspective EG are a real money maker.
What would you rather have?
1 high tech 3MW windturbine (very efficiënt?) or 15 low tech windmills with 4 rotating shafts at the bottom.(thanks Gail for this eyeopening idea)
So EG can save the day! But what about tomorrow?
(If the TOD mods think this isn't the right place for stuff like this, please delete it.)
Efficiency gains in the past led to lower prices. What we are seeing now is higher electrcity prices, so the efficiency gains aren't in the production of electricity.
One place we might theoretically make efficiency gains is in manufacturing, but we aren't manufacturing much now. It seems like we would need changes in equipment for efficiency, so this won't be cheap.
Another place there would be room for efficiency is appliances and light bulbs. This requires new ones, so is cheap for light bulbs; not so cheap for appliances. (Having recently cleaned up a mess from a broken florescent light bulb in a carpeted bedroom, and read the directions about possibly replacing carpeting and bed clothes, I am not convinced this approach is as cheap as it is claimed to be, however.)
Another place for efficiency is in tighter buildings and better insulation, for heating and cooling with electricity.
Not too many years ago, we got an efficiency improvement of about 1% a year. With the recent rise of electricity costs, it looks like we will need a lot bigger improvement than that to keep electricity costs flat or decreasing.
Hi Gail
I wonder if you have seen this lecture, Elizabeth Warren covers a broad spectrum of issues such as inflation adjusted wages, costs of living, health insurance, housing etc.
http://www.youtube.com/watch?v=akVL7QY0S8A&feature=channel
Due to family income being so overstreached, energy price increases will have a serious effect, but I feel that this will drive house prices down to historical median levels. This could actually help mitigate some of the worse effects of oil prices. For a time at least.
Yes, I have seen Elizabeth Warren's lecture. It is very good.
I agree that housing prices will drop more. The catch is that interest rates are very low now, and it is doubtful that they can really be kept this low long-term. With rising interest rates, there still will be pressure on homeowners (especially those who do not have low interest rates locked in).
They've been making this electricity thingy for more than a hundred years so i doubt huge efficiency gains are possible:-(
..
Why have you left out transportation?
With the normal US transport mode being single driver, and the average US car weighing 2 tons, and lots around 3 tons (or more!), and the average person weighing maybe 150 lbs (okay, maybe hopeful in the McDonalds age... but stil), we are carting around 25 to 40 times the mass we need moved for commuting, much of it dead weight.
Huge gains possible there.
So the goal should be to reduce the mass of the car and increase the mass of the driver, to maximize efficiency? :)
Palecon,
Sarcasm doesn't go over too well here even with the smiley face-but I did get a good and much needed laugh.
There is one bright spot as far as the car fleet is concerned that I think has been overlooked-just judging from my personal observations.
This is that older and larger cars are going to be scrapped much faster than expected-the cost of repairing these old dinosaurs has jumped beyond belief in the last year or two and now when one needs a serious repair it seldom gets it unless it's a classic or collectible.
I find it hard to understand why auto parts prices have climbed so fast but lots of commonly needed parts have doubled in two years and almost anything I 've bought is up fifty percent or more.
Working guys and girls are catching on fast to the fact that a set of tires for an old Escort cost only a little more than half as much as a set for a Crown Vic,and that the Escort has only four spark plugs to the Crown Vic's eight.
You can buy a serviceable middle aged Cavalier in pretty decent running order (maybe a little shabby from normal wear and tear) for about the same money as it costs for a transmission overhaul if you're driving a full size Chevy or Ford car or truck.
That will save you fifty or a hundred bucks on your insurance every six months,and cut your gas bill by at least a third, probably more.
Even folks who live only four or five miles from work are getting rid of thier old dinosaurs once they have a problem,even though they don't buy a lot of gasoline.
Here's some irony: My 4-cycliner car developed some fuel supply problems last year, and so, due to a growing rust problem (fixable) and a water leak (also fixable), I parked it, reasoning that I could get along just fine without a car of my own.
And I did. I walked wherever I wanted to go, or borrowed a car, or got a lift with someone. Eventually, family pressure effectivly forced me to get a car on the road (irrational fear of me being assaulted while walking etc). I reasoned that a cheap station wagon that was sitting in the yard (we were 'storing' it for a friend) was a better option that fixing the old car, so I got it up to registirable condition, and started driving it. It never idled properly, drinks fuel like a 18yo girl drinks Vodka Shots at Spring Break, and most of the under-bonnet cabling and hoses are either not there, or are just skew-iff. Just last week, it developed it's own problems with fuel, by stalling at the traffic lights and not starting again.
On a whim, I charged the battery in the old car, connected it up, and turned it over. Despite being left, unloved, for 8 months or so, it started first time...
What we are seeing now is higher electrcity prices, so the efficiency gains aren't in the production of electricity.
U.S. nuclear plants have been paid off for a long time. They make electricity at a cost of 2 cents per kWh.
http://www.eia.doe.gov/cneaf/electricity/epa/epat8p2.html
Vermont gets 80% of its electricity from nuclear, yet customers pay 13 cents per kWh, so why do they charge so much?
Connecticut gets half its electricity from nuclear, yet customers pay 17 cents per kWh, so why do they charge so much?
Saudi Arabia pumps oil out of the ground for $8 a barrel, yet last year they charged $150, so why do they charge so much?
The answer is the same in each case, because they could. Low cost energy sources do not produce cheap energy unless the capacity to supply energy exceeds demand.
The U.S. completed about 5 reactors per year for 20 years at a time when fossil fuel was cheap and global warming was relatively unknown. Had we continued to build reactors at that rate we would have clean abundant cheap electricity. We would be more competitive in the world marketplace and more Americans could have high paying jobs and a lower cost of living.
Windmills and solar cells cannot do that because their kWh’s are very expensive when storage, transmission, backup power and frequency and voltage regulation are factored into the cost.
The U.S. spends $1,000 billion per year on energy. We should spend 10% of that amount to develop technology that can be mass produced that will produce energy that is cheaper AND more abundant than fossil fuel.
Massive feed in payments to reproduce large numbers of inefficient machines that produce limited expensive energy is a waste of money, raw material and human resources.
Windmills... cannot do that because their kWh’s are very expensive when storage, transmission, backup power and frequency and voltage regulation are factored into the cost.
Have you seen good calculations for that? As far as I can tell, that's not the case. The current grid doesn't need storage or backup to deal with wind up to about 15% KWH market share; geographical dispersion together with a modest amount of long-distance transmission, and Demand Side Management (especially with EVs and PHEVs) will allow rather more than 15%.
Denmark has pushed wind harder than any country for over 30 years. They have the most expensive electricity in the world, they export about half their wind power because of its intermittency, and they still burn a lot of fossil fuel.
Yes, all that is true, but it doesn't really matter.
Denmark is tiny; has a poor wind resource; chose coop-based decentralized generation (which is much more expensive); and wants to reduce oil imports but doesn't care how much coal it burns. So, those problems are to be expected.
Wind is much cheaper in the US.
Wrong. A single branch falling in Ohio proves that. By your logic, a generating system that did not work at all and cost $0 would be the best.
Good thought.
But, that's not why Denmark decentralized - they did it for social reasons, not for system reliability. It may have been the right choice, but it had a cost.
Wind power does need a complex grid, and bigger installations do work much better.
If a 1 GW nuclear plant received the 2.1 cent PTC wind gets it would make an additional $166 million per year. Add in the cost of tax breaks, renewable mandates, accelerated depreciation rates, storage, transmission lines, backup power and frequency and voltage regulation, and we see that wind is very expensive.
More importantly, wind cannot provide reliable capacity that exceeds demand, a necessary condition to actually drive prices down below those of fossil fuel.
The next 6 nuclear plants will get the credit.
OTOH, don't forget that the PTC is only for the first 10 years, so you really have to discount it by about 50% for lifecycle costing.
Add in the cost of tax breaks,
What are you thinking of?
renewable mandates
Those don't create hidden costs, just additional demand
accelerated depreciation rates,
Yes, that's a subsidy. Not an unusual one, or all that large, but it's real.
storage, transmission lines, backup power and frequency and voltage regulation,
Those mostly aren't real. Nobody's building storage for wind, yet. Transmission lines are perhaps $.25/Wp, which isn't that large. Backup? What backup? Other sources of generation get paid for availability - if wind can't, it doesn't get paid for capacity credits.
wind cannot provide reliable capacity that exceeds demand, a necessary condition to actually drive prices down below those of fossil fuel.
Not really. First, you have to separate KWH and capacity credit payments in your mind. They're separate things, and get reimbursed separately. 2nd, wind can indeed provide some reliable capacity - it just takes some size and geographical dispersion.
Fully loaded wind KWHs are often less expensive than FF, and of course, they're always the cheapest in the hourly market.
Of course, who can compete with old dirty coal plants, or old nuclear plants that have been fully amortized and now just have $.02/KWH operating costs?
More importantly, what about the opportunity cost of money spend on nuclear, that could be building wind and solar, with it's zero risk of weapons creation? How much would we have saved (and save in the future) if the Shah of Iran had invested in the 70's in a domestic wind & solar industry, instead of nuclear?
The next 6 nuclear plants will get the credit… don't forget that the PTC is only for the first 10 years, so you really have to discount it by about 50% for lifecycle costing.
Was the PTC cut off after the first 6 wind farms, why not? $166 million for 10 years is $1.66 billion, a lot of money.
But the nuclear PTC is not as good as it is for wind mills.
The production tax credit (PTC) for new nuclear generation allows 6,000 megawatts of new nuclear capacity to earn $18 per megawatt-hour for the first eight years of operation. The maximum tax credit for any one plant is capped at $125 million per year. In 2005, $18 per megawatt-hour was comparable to the PTC for renewable resources. However, unlike the renewable PTC, which increases annually with inflation, the nuclear PTC does not escalate.
New plants will average well over 1 GW, so the credit per kWh is much lower than for wind.
I recommend a totally level field.
renewable mandates, Those don't create hidden costs, just additional demand
Mandates for some percentage of “renewable” energy force utilities to pay whatever cost developers charge to avoid violation. Nothing hidden, it is a naked extortion of money that is passed on to the rate payers and spread over all kWh’s to hide the true size of the subsidy to wind.
storage, transmission lines, backup power and frequency and voltage regulation, Those mostly aren't real. Nobody's building storage for wind, yet. Transmission lines are perhaps $.25/Wp, which isn't that large.
No way. For how many miles? Grand renewable plans always call for thousands of miles of new supergrid, paid for by others, to subsidize wind and solar.
Show us some recent power line completions in the U.S. for the cost you claim.
Backup? What backup? Other sources of generation get paid for availability - if wind can't, it doesn't get paid for capacity credits.
Show us some examples of utilities paying independent producers to standby while wind is up.
wind cannot provide reliable capacity that exceeds demand, a necessary condition to actually drive prices down below those of fossil fuel… wind can indeed provide some reliable capacity - it just takes some size and geographical dispersion.
Evidence that wind can reliably and consistently exceed demand?
Fully loaded wind KWHs are often less expensive than FF, and of course, they're always the cheapest in the hourly market.
Why do the countries with the most wind have very expensive electricity and high carbon emissions?
“More importantly, what about the opportunity cost of money spend on nuclear, that could be building wind and solar
If the U.S. had built wind and solar in the 70’s-80’s instead of nuclear they would have failed miserably and filled landfills long ago, as the few wind farms of that era did. We would have hundreds more coal plants.
with it's zero risk of weapons creation?
Which countries developed a real commercial nuclear power industry and than used it to make nuclear weapons disregarding the far easier faster and cheaper paths to nuclear weapons?
the nuclear PTC is not as good as it is for wind mills.
Interesting - thanks for the info.
I recommend a totally level field.
Sure, but to do that we'd have to eliminate Price-Anderson for nuclear, and tax carbon heavily for fossil fuels. That doesn't seem likely any time soon.
Nothing hidden, it is a naked extortion of money that is passed on to the rate payers and spread over all kWh’s to hide the true size of the subsidy to wind.
Well, if it's not hidden, it's not hidden, right?
Grand renewable plans always call for thousands of miles of new supergrid, paid for by others, to subsidize wind and solar.
Sure, some people talk about that, but it's not necessary or likely.
Show us some recent power line completions in the U.S. for the cost you claim.
There have been two recent projects, in S CA and W TX, and the cost was about $.25/W.
Show us some examples of utilities paying independent producers to standby while wind is up.
I'm not sure what you mean. The basic structure of the industry is that KWHs and reliable capacity are paid for separately. If wind doesn't provide reliable capacity, it doesn't get paid for it. OTOH, some nat gas generators run about 100 hours per year, but make a profit with the capacity payments.
Evidence that wind can reliably and consistently exceed demand?
Again, I'm really not sure what you're talking about. I don't think anyone is suggesting a grid composed only of wind.
Why do the countries with the most wind have very expensive electricity and high carbon emissions?
You're mostly talking about just Denmark, and I explained that before. Germany also has a poor wind resource (average capacity factor is 50-60% of the US), very unlike the US.
If the U.S. had built wind and solar in the 70’s-80’s instead of nuclear they would have failed miserably and filled landfills long ago, as the few wind farms of that era did. We would have hundreds more coal plants.
Sure, wind wasn't really ready back then, but you're missing my point about Iran.
Which countries developed a real commercial nuclear power industry and than used it to make nuclear weapons disregarding the far easier faster and cheaper paths to nuclear weapons?
That's not what I said: it's pretty clear that Iran is using their plans to develop a commercial nuclear power industry to cover up development of weapons. You really can't ignore that.
Sure, but to do that we'd have to eliminate Price-Anderson
Price Anderson is not a subsidy, it is a handicap no other industry has to carry, it should be eliminated.
http://www.theoildrum.com/node/3877#comment-335609
There have been two recent projects, in S CA and W TX, and the cost was about $.25/W.
How many miles, what cost, does it account for the lower capacity factors transmitting intermittent power?
Links please.
Why do the countries with the most wind have very expensive electricity and high carbon emissions?
You're mostly talking about just Denmark, and I explained that before.
So what countries are success stories? 50-80% renewable with low cost low emission energy, comparable to Switzerland or France?
it's pretty clear that Iran is using their plans to develop a commercial nuclear power industry to cover up development of weapons. You really can't ignore that.
I have no problem with Iran having commercial nuclear power.
Enrichment and reprocessing are the two easy paths to weapons, and that is true with or without commercial nuclear power. Those two functions should be limited to large stable countries and be under full oversight by IAEA. Enrichment is a tiny fraction of the cost of nuclear power.
Irans nuclear weapons program hides behind a transparent fig leaf. Using that to oppose commercial applications of fission is like being opposed to fire because it enables napalm bombs.
Price Anderson is not a subsidy, it is a handicap no other industry has to carry, it should be eliminated.
Wow. Do you feel that's a view that's widely shared in the nuclear industry? Has there been an official initiative to eliminate it?
How many miles, what cost, does it account for the lower capacity factors transmitting intermittent power?
They're long - designed to move things maybe 1,000 miles, IIRC.
Links please.
I'll look. You know, you brought that point up - it would be reasonable of you to do a little research.
So what countries are success stories? 50-80% renewable with low cost low emission energy, comparable to Switzerland or France?
Now you're just being difficult - you know that wind is too new as an industry for that.
Enrichment and reprocessing ... should be limited to large stable countries and be under full oversight by IAEA.
Do you see any prospect of the world moving to that kind've program?
Irans nuclear weapons program hides behind a transparent fig leaf.
Well, I've kind've thought so - I wondered what I was missing. Why do you think they're getting away with it?
Using that to oppose commercial applications of fission is like being opposed to fire because it enables napalm bombs.
I know what you mean...yet....nuclear weapons are a whole level beyond napalm bombs. They're the one thing that humankind truly could use to take us back to cockroaches being the dominant species with the weapons that we have now, 30 minutes away from being used. That's a threat that's even worse than climate change, even though everyone seems to have forgotten about it lately.
Wow. Do you feel that's a view that's widely shared in the nuclear industry? Has there been an official initiative to eliminate it?
Most knowledgeable people exposed to my view agree with it. The nuclear industry puts up with a lot of c**p resulting from fear and ignorance. It does not see Price Anderson as an issue worth fighting.
You know, you brought that point up - it would be reasonable of you to do a little research.
I have. Transmission costs for renewables will be much greater for proposed massive renewable grids due to much longer average travel distance for renewable kWhs, and resulting low capacity factor for new renewable transmission lines. I am on travel now, so away from links.
Pro wind folks compare existing grids as they are now against existing grids with windmills added and show that it saves fuel cost and emissions. But the real comparison is existing grids with the same investment in new nuclear power analyzed over the next 60 years.
Now you're just being difficult - you know that wind is too new as an industry for that.
Wind has been around for over 300 years and has evolved much more than primitive reactor technology. Windmill efficiency is near theoretical max 60% while steroidal submarine reactors split only 0.6% of mined uranium. There is far more room for improvement in fission than in wind.
Enrichment and reprocessing ... should be limited to large stable countries and be under full oversight by IAEA.
Do you see any prospect of the world moving to that kind've program?
Not overtly, but the percentage of enrichment capacity in large stable countries under IAEA oversight is very high, much higher than during the cold war. Obama wants to eliminate nuclear weapons, as do I. Strict controls on enrichment and reprocessing should be part of that.
Why do you think they're [Iran] getting away with it?
So far nobody has the guts to stop them, that may change.
nuclear weapons are a whole level beyond napalm bombs. They're the one thing that humankind truly could use to take us back to cockroaches
Under the light of serious research nuclear winter became nuclear fall. The southern hemisphere would be habitable, especially with smaller arsenals today. But this issue is not applicable to nuclear power except to say that a world with abundant energy would be less likely to go to war over energy.
Many solutions are proposed to solve our energy problems, at best only one of them is best. My recommendation is to push every technology as hard as possible and pick the best technology
http://www.theoildrum.com/node/5144#comment-476522
This is the only strategy that guarantees the best solution will result. I urge you to adopt this recommendation.
Re: Price-Anderson - do you feel that the industry could now get the liability insurance that was unavailable in the 50's? Have you seen any evidence of this you could pass along?
Transmission costs for renewables will be much greater for proposed massive renewable grids due to much longer average travel distance for renewable kWhs, and resulting low capacity factor for new renewable transmission lines.
It makes sense that wind transmission costs would be higher due to longer distance and lower capacit factor, but the other important part is how large transmission costs are as a % of the overall project - IOW, is this a really significant difference? It doesn't look like it, to me.
Ah, here's estimates for transmission costs in Texas of $.26/nameplate W: http://www.cnbc.com/id/25708335
Wind has been around for over 300 years and has evolved much more than primitive reactor technology. Windmill efficiency is near theoretical max 60% while steroidal submarine reactors split only 0.6% of mined uranium. There is far more room for improvement in fission than in wind.
But conversion efficiency matters very, very little, as the fuel is so cheap, in both cases. What matters is the capital & operating cost per KWH output, and both wind and nuclear are good enough. It doesn't matter that much if one is slightly better on cost - other things that are harder to quantify (such as weapons proliferation) begin to matter more.
the percentage of enrichment capacity in large stable countries under IAEA oversight is very high, much higher than during the cold war
I'm not especially doubting you, but I'd love to see a link on that for future reference.
So far nobody has the guts to stop them, that may change...Under the light of serious research nuclear winter became nuclear fall. The southern hemisphere would be habitable, especially with smaller arsenals today.
I have to say, neither of those reassures me. No one is willing to stop weapons proliferation, and only half the planet would uninhabitable...!
Those countries that import everything one day have to import their govt too.
Is money the real problem and can efficiency gaines (EG) save the day?
Ayres-Warr's papers show that thermodynamic eficiency has increased by a factor of 10 since the early steam engines. Electrical generation today is 35% efficient for coal, with best practice being 45%. Comined cycle natural gas is 60% efficient. Thermodynamic efficiencies cannot even equal 100% because thay have to use real cycles, not "ideal" ones. Also, they have to use real materials, as in boiler tubes and turbine blades.
This implies that economic growth will be lower in the future. At some point declining resource quality will overtake economic growth and the economy will turn down.
The highest growth in the US economy occurred from about 1880 to 1910, due to Bessemer steel making, railroads lowering the distribution cost of goods and to electrification.
China has all the driving force of going from a pre pre-industrial to a 21st Century economy, allowing 12% growth. China will continue to drive down wage rates and put upward pressure on raw material prices until the developed world economies collapse.
This implies that economic growth will be lower in the future.
Not really. There are many cheap, effective ways to increase efficiency or "work done" without worrying about thermodynamic heat-engine efficiency.
For instance, I can go from a 15MPG SUV to a 50MPG Prius, and be 3x as efficient at solo commuting (at a lower purchase price!). The Prius engine is maybe 30% more efficient, but that's by far not the most important thing: more important are better aerodynamics, regenerative kinetic energy recovery, and a host of details.
I added laminate panes to my existing windows, and don't have to use heat until it gets below freezing. The most efficient energy is the energy you don't need.
We can convert from heat engines to wind turbines, and then the efficiency of conversion is irrelevant, because the "fuel" is free and abundant.
Not to mention that knowledge work doesn't really need much physical "work" done.
Or you could move closer to work and walk your ass there. I don't know why this is so hard to understand. Most of the energy we produce, no matter how efficiently, is USED inefficiently.
There is a minimum level of energy use we need to run an advanced society. It's no where near what we use in the US... or anywhere in the West.
This isn't to say that resource problems are no big deal... adjustments like that are hard, which is why they aren't done, and rich people will try to do each other to stay in their SUV and suburban home... but that doesn't mean change is impossible because we have nearly maxed out thermodynamic efficiency of the ICE.
Or you could move closer to work and walk your ass there. I don't know why this is so hard to understand.
Because it's much, much cheaper for most people to buy (or rent) something cheaper, and commute farther.
Which is makes more sense: paying $3k more for a hybrid, or paying $100K more for your home?
Heck, just the process of moving costs more than $3k!
Up until recently, most people would have answered "paying $100K more for your home! Duh!" Maybe most people still would say that.
Just sayin' ...
Which is makes more sense: paying $3k more for a hybrid, or paying $100K more for your home?
Heck, just the process of moving costs more than $3k!
Precisely! One thing I just don't get about New Urbanists and suburb-haters (including Kunstler) is how they think the Newly Impoverished class can somehow afford to abandon their already built (and still perfectly servicable) homes and all just move to the city. And pay 3-4X current rents or mortgage payments. Coming up with almost *any* type of more efficient transport, whether it takes the form of hybrids, all-electrics, light rail, or human powered trikes is FAR less expensive than abandoning all suburbs/exurbs wholesale and cramming into the cities. Not to mention, if everyone did that, the already high cost of living in cities would skyrocket as demand would far outstrip supply... thus leading to an urban building boom, more consumption of scarce resources, etc.
Precisely. I am a present suburb hater, but when it gets down to it, I have no choice but to accept that I made a bad decision some fifteen years ago to buy in the Sacramento suburbs. A bad decision on a number of levels, levels that I was ignorant of for a great many years, but most certainly not a bad decision based on the cost of living. It will be far, far, far less expensive to continue to bus and to bicycle and to drive the 15 miles to work, no matter how expensive energy becomes. Call it mis-investment, OK...but I am constrained to live in suburbia in my [almost] paid for housal unit.
There are pre-WWII developments in the Sacramento core, yes. There are quite a few places in the core where basic services are close enough to walk to, or to transit to with relative ease. They are also twice as expensive. On a property tax basis alone, it would cost me an addition $85,000 over the rest of my life if I moved to such an area...to live in a community whose design I now recognize the value of.
Moving to any existing TOD neighborhood would be financially unwise. I live less than a mile from Calthorpe's Laguna West, the supposed TOD neighborhood that Kunstler praised in Geography Of Nowhere but recognized its failure in Home From Nowhere. We aren't anywhere close to following through with old TOD designs here in my region, let alone capable of building any new TODs.
At this point I am stuck in suburbia, and I have found ways to [mostly] eliminate my exposure to energy volatility. I cannot say what depleting energy will do to suburbia in general; perhaps it will force us to build correctly. But I most certainly understand the issues that are raised here on TOD, and I believe my future efforts will be much better spent learning to persevere through future energy calamities rather than absorbing the extreme cost of living in a better, correctly built, less energy intensive neighborhood.
There are many cheap, effective ways to increase efficiency or "work done" without worrying about thermodynamic heat-engine efficiency.
Of course there are other ways to increase "work done" efficiency besides thermodynamics. We made a serious effort to do those after the 1973 oil price shock and have decreased our $GDP/BTU by about half by thermodynamic and other means since then.
Hybrid and PIEV's will cost a lot more than IC engines, reducing consumers' expenditures on other items. Same with wind and solar energy. Wind "fuel" may be free, but wind turbines, transmission lines and storage are not.
Hybrid and PIEV's will cost a lot more than IC engines
A Prius costs less than the average new vehicle.
Same with wind and solar energy.
New coal generation is as or more expensive as wind.
Wind transmission is about 12% of overall project costs - not a really big deal. Storage isn't needed yet, and likely never will be - Demand Side Management, esp with PHEV/EVs will fill the need.
I meant to say BTU/$GDP
As oil is the lifeblood of the economy, all credit is essentially based on future oil production. You take out a loan, you're borrowing against the future oil production. When oil production no longer can pay the interest on all those loans taken out against it, everyone goes into default, credit dries up, and the economy goes into a tailspin.
Here we are.
~wildeyes
Wildeyes-not bad for a down and dirty summary-
and as for what peaked with oil prices?
Our current way of life, in a nutshell.
oil is the lifeblood of the economy
Not really. Oil is only about 40% of US energy, and declining (see my note to Westexas).
Eventually oil will be obsolete, just as it is for lighting. In the 1880's, kerosene for lighting was the main use for oil, and electrification made that obsolete - if gasoline for vehicles hadn't come along, oil exporters (like Pennsylvania) would have been in real trouble.
Too bad electrical costs seem to be on almost the same trajectory as oil prices--with not as much drop as oil after the peak.
Well, I don't think it's a cause for concern.
1) US electricity is still dirt cheap - compare to most other places in the world, like Germany and Japan, who've been thriving for decades with much more expensive electricity.
2) It's only risen about 15% in 3 years (after adjusting for inflation), which isn't much.
3) It's domestically produced, so it doesn't create trade deficit and credit problems, like oil.
4) much of the increase was due to the spike in nat gas pricing, which has since mostly reversed itself - do we know 2009 electricity prices?
It's really a very tiny problem.
Electricity prices are not a cause for concern if you have a little discretionary income that can be diverted to pay more for your juice.
About half of all the people I know have hardly any discretionary income at all.
I agree that electricity is still a bargain.
From the Energy Export Databrowser:
If oil prices continue to rise (talking about yearly averages here) while natural gas prices remain subdued I expect that oil and natural gas will switch places on this chart over the next decade.
It seems that we could reduce oil consumption by 1/3 over a decade by driving less, driving smaller cars and replacing much of that mobility with electrically powered transit. Assuming that we can produce natural gas in sufficient quantities over the next decade, we can get close to living within our nation's ability to produce fossil fuels while retaining a modicum of personal mobility and a fully Western lifestyle.
And all of this is predicated on an abundance of natural gas being produced in North America. It seems possible based on some of the recent claims but the jury is still out.
Happy exploring!
-- Jon
I agree.
It's worth noting that personal transportation is about 50% of US oil consumption. If we raised the average MPG from 22 to 50 (just replace current vehicles with hybrids like the Prius, which costs less than the average US new vehicle) we could reduce overall US oil consumption by very roughly 30%.
That's before going to vehicles like the Volt, which would reduce fuel consumption by 90% over the current average.
Or...carpooling, which can be done in a matter of days.
Are you forgetting about water, lithium, metals, minerals...?
Not at all. We have plenty of lithium ( http://energyfaq.blogspot.com/2009/02/could-we-run-out-of-lithium-for-ev... ).
Of course, we have plenty of iron & aluminum, and metals in vehicles are essentially 100% recycled.
Hybrids use no more then conventional ICE vehicles of other resources, such as water and minerals. Now, I suppose that doesn't address the overall question of the sustainability of manufacturing, from the point of view of water and minerals, with which I'm not deeply familiar: could you elaborate on your concern about water and minerals, as they relate to hybrid/PHEV vehicles?
Nice blog, Nick. Level-headed, fact-based, concerned without being alarmist.
Kudos!
-- Jon
Thank you very much!
Please feel free to comment, if there's anything you'd add or change.
Loremo...100+ mpg, no hybrid necessary.
Loremo: http://evolution.loremo.com/content/view/13/47/lang,en/
VW 1 litre...200+ mpg, no hybrid necessary
http://en.wikipedia.org/wiki/Volkswagen_1-litre_car
VW Lupo...70+ mpg, no hybrid necessary
http://www.usatoday.com/money/consumer/autos/mareview/mauto497.htm
Other honorable mentions:
Geo Metro XFi
Honda Civic VX and HX
Its not production capacity and consumption capacity that drive an economy, its logistics. There are two parts in logistics: willingness to transport and ability to transport. Transport people, materials, demand and supply. Without oil the current transportation system of world will collapse, the production capacity and consumption capacity is not enough in itself. Oil is the key to join the dots in the matrix.
Not really - oil isn't that hard to replace.
See http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html
So? Your body's lifeblood is much less than 40% of your mass, Nick. It's still your lifeblood. Arguments from relative size don't refute assertions of importance.
Maybe some uses of oil will decline. But others are likely to persist for quite a while. Oil's used daily for emergency electricity generation, and in quite a few countries, for routine electricity generation. Without demand from cars, oil would be cheap enough to supplant coal in power stations. We won't even bother talking about shipping, air transport, or chemical feedstock uses. I very much doubt oil producers would have been in trouble for long.
And the "obsolescence" of oil for private passenger vehicles is moot. Tell me again - what powers those 12-million-a-year new Chinese cars, nearly all of them additions to the global fleet? When do you see that changing? IMO the change will happen only when it's forced on everyone.
Arguments from relative size don't refute assertions of importance.
True, but the blood analogy is false. Sure, if the straits of Hormuz were to be permanently blocked tomorrow, we'd have an oil-induced economic heart attack, but oil is only one of many things that could induce that, and in the longer-term it can be replaced.
Other energy sources, like nat gas and coal, are just as valuable to the US - they just don't cause us nearly as many problems, so we take them for granted.
Maybe some uses of oil will decline. But others are likely to persist for quite a while.
Sure - oil will be around for a long time, just like coal. If it stays expensive, though, (as is very likely) substitutes will gain ground very quickly.
Oil's used daily for emergency electricity generation, and in quite a few countries, for routine electricity generation.
Yes, about 5M bbl/day. The US is the single biggest country for this, though the % is tiny - Hawaii, parts of New England. It is to be hoped they'll see what a bad idea it is...
what powers those 12-million-a-year new Chinese cars
It will be electric, pretty quickly. Chinese MPG standards are substantially higher than those in the US; Chinese companies like BYD are producing EVs and plug-ins; China sells more electric bikes than it does ICE cars. The Chinese get this even better than other countries.
Embroidering following wildeyes.
Glad to see that Gail apparently no longer considers that rising oil prices created the ‘economic meltdown’ in a sort of unidirectional scheme. Preemptive apologies if that is a bit bald and ignores original nuance, or is even a misreading on my part.
Gail presents curves in concordance (a Frenchism, but never mind.) That is, some correlation between them all would seem to pertain. (Some other commodities, like wheat, might be added, see link, peaked just a little earlier.)
It is eyeball stuff, cherry picking, and going deeper into it without a lot more work and possibly even different numbers is not useful. That is not a criticism, it was very informative and interesting seeing them one after the other, rigor is overrated anyway when exploring in this way, it becomes hysterical pseudo-science, delving into unnecessary and possibly irrelevant or erroneous detail.
So putting that all together it is tempting to see rise and slump for all the ‘price’ areas quoted as driven uniquely by a *credit bubble* .. either care of Wall Street or linked back to the real world in a tautology that I can’t grasp.
wheat US prices from farmdoc, chart:
http://www.farmdoc.uiuc.edu/cfxtemp/CFT1010_1135351ED.jpg
OK, we're crashing into the wall. The fact that our left arm is crushed does not mean the crushing of the left arm caused the crushing of the right arm and every other bit of the body. But clearly they are related.
Why not blame it on the wall?
cfm, the growlery, gray, me
As a way to read the tea leaves, let's not forget that the classic "up and down" squiggles that we see on gasoline and natural gas price are often caused by the time derivative of an underlying supply/demand bubble.
The blue line below is the scaled time derivative of the red line
Compare that against the two curves that Gail shows:
Note that right around October 2008 did we see the inflection point of the transient demand (due to credit crunch?) bubble. My point is that these indicators are potentially just derivatives (in the mathematical sense and otherwise) of other indicators. A real derivative can reach a very high value simply due to the steepness of the underlying change. In general, that is why these curves are so noisy. Derivatives act as low-pass filters and they pass all the high frequency noise and jitter right through.
Interesting!
Mathematical derivatives ("differentiation" like), whether interesting or not may be off the point. More cause of instability is that one was dealing with the see-saw balance around the marginal supply and marginal demand -- one moment there's too much, next moment too little, and the price jerks accordingly.
More cause of instability is that one was dealing with the see-saw balance around the marginal supply and marginal demand -- one moment there's too much, next moment too little, and the price jerks accordingly.
It's like the slack in a freight train. Speeding up and slowing down repeatedly. A violent reaction whenever the slack is taken up or let out. If you been in the rail yards, you can hear it, bam bam bam as each car reacts. Mimics the effect of the market reaction to drastic price changes.
and the price jerks accordingly.
Just like the slamming of the boxcars
Perfectly appropriate analysis WHT.
The "other indicators" are of course the various forms of credit. If you think of the price signal as a transient phenomenon related to the velocity of money rather than a static measure of demand / supply then it makes perfect sense that:
Price = d/dt Credit
which generates exactly the graphs you describe.
Yay Physics! Boo Economics! ;-)
-- Jon
To bring some other engineering to this, there is what amounts to a 90 degree phase shift or half-a-cycle lag in the response on the downturn. So even though something looks like it is bottoming out, the overall bubble is simply slowing down or simply decelerating. This can generate all kinds of overshoot and oscillations as people chase the indicators instead of some other fundamental. (please shoot me if I start to sound like a financial advisor)
Price = d/dt Credit
Nice point. If the energy use slows, the velocity of money slows. And increasing rates of change cause increasingly volatile shifts in price.
Since 9/10 of our global monetary system now consists of worthless chits sitting in off-balance sheet black holes of banks, pension funds, and treasuries of various countries, we're headed into a pretty interesting and unusual year.
I think I was saying something else.
In our current environment, it is the change in the availability of credit that determines price, not the availability of energy resources. We are in a titanic struggle between the irresistable force of debt deflation and the so far unmovable rock of inflationary Fed policy. (Or do I have the metaphor switched?)
I think the amount of credit in the system or, more importantly, the perception of the amount of credit is going to move around a lot. (When did we ever hear the word Trillion used before?)
If you're going to bet on anything -- bet on volatility.
Is there such a thing as VIX futures?
An economy should never try to avoid or decrease depression. Depression is the natural anti-biotic to excessive resource consumption, excessive pollution, excessive differences between rich and poor; it restores natural environment, kill the greedy, reward the hard-worker and saver through falling prices and overall create a better, fairer field for future economic activities.
That not holds in a true economy. True in the natural way of doing things sense. Credit is a net used for trapping not just individuals but the entire economies and empires. Credit is easy money in short term, easy come easy go. It increase short term consumption level but drastically decrease long term both consumption and production levels.
The orange peaking curve in WebHubble's graph is the extra expenditure per barrel of a refinery relative to an avergae oil price before and after a price shock, as a function of time.
You will need to multiply that with petrol sales as a function of time in order to know when turnover peaked.
Good stuff, WHT!
I struggle to intuit the relationships between physical production, demand, price, and other "economic" factors like interest rates and credit standards as a combined system. Cross-discipline simulations (multi-physics) are all the rage in product design these days, but it seems like they'd have more value here. While any controls engineer knows about feedback loops and potential for instability and oscillation, it's hard to see where these fit into the economic system.
There is every chance that instability hides in multiple places within our current system, just waiting for a transfer function to slide just across a boundary and then everything falls apart until somebody somehow re-damps the system.
A day or two ago you discussed "shock theory", and IIR filters. I wonder if there is a way to monitor the impact of various shocks on the financial system to see how badly it "rings" and to attempt to divine its character? It may be that the Lehman failure wasn't actually driving an incipient system crash but just giving the system a heck of a ring, and we're now back up one full cycle of its natural frequency...with another drop about to come. Or maybe the system is nicely damped and your oil price spike is all there is to it? I can't help but think that computerized trading, high leverage, and low interest rates are increasing gain and decreasing time constants, such that stability should not be considered a "given".
Many of the financial quants on Wall Street are theoretical physicists by training. They do not do so much of the engineering analysis as apply statistical ideas such as random walk to the problems at hand.
The one thing that I caution against in applying control theory is the concepts of observability and controllability. In many cases, we have no idea what the observables are and they may in fact be hidden from measurement, and so we have no way of controlling the system in any predictable way.
In contrast, I am trying to keep the oil depletion modeling in as concrete terms as possible and driving the system without a lot of feedback loops. Every parameter included has a physical interpretation and the statistical variances have a maximum entropy. The IIR filter in the shock model just models first-order lag terms in drawing oil from one compartment to another. There is no real feedback so to speak.
This can be done because oil depletion is a bean counting exercise (IMO), whereas general financial systems have layers of indirection and reverse psychologies and other smoke and mirrors that really prevent anyone from getting a concrete handle on the situation.
And now coal is back to about $50 a ton which, at a conversion rate of five or more barrels to a ton, puts it at $10 a barrel. Oxidize that! And it 'seams' to me that the price could go to $300 a ton and still be an economically viable and abundant fuel source, unfortunately. How much coal 'reserve' is there at that price to plug our new and improved electric cars into?
If we listen to Dave Summers (Heading Out), there is likely quite a bit of coal available. Now, nearly all of the coal we are using is for electricity, and there have been very few new coal fired plants built in many years. So demand has been essentially flat for years. Reserves are based on places where actual mines are in place, and a determination has been made of the coal available. There are other places in the US (often not near roads) where coal is available, but there are no mines in place. This is also true in Canada.
Also, within existing mines, the amount available varies considerably, depending on the price of coal. If the price is higher, it is cost effective to mine thinner and deeper seams.
There are other places in the US (often not near roads) where coal is available, but there are no mines in place.
The Illinois coal basin is the most important in this regard - the mines are there, and Illinois is eager to produce it (for better or worse...).
From a climate standpoint this is precisely the wrong approach as CSS won't scale and surface mining is "the pits" but is the likely scenario as oil becomes harder to source for a thisty nation. But as you begin to replace liquid fuel with CTL, the resource will be depleted faster and in the long run we're still headed for the wall and when we get there we'll arrive, worse off, with a lot of good land in the trash heap. What was the post a while back about starting from zero? CTL is one of the strategies that leaves us starting from below zero.
I agree that coal is terrible.
It's important to be clear though: no country in the world will allow the lights to go out when coal is available. That means we don't face a peak energy problem (at least in the medium term), we face liquid fuel and climate change problems.
I don't the US will go to CTL in a significant way: it's capital intensive and risky, and it won't get government guarantees due to it's CO2 problems.
The clear strategy is to electrify transportation, and build wind power. We're going in that direction, if not as quickly as would be ideal.
likely quite a bit of coal available
But what energy density and at what EROEI? The historic canals of Birmingham now go to empty mines.
Huge artificial valley, world's largest earthworks at the time (151ft x 1.5 miles):
(Not to mention four tunnels each near 2 miles long.)
Out of curiosity: How was that excavated back then and what time-period, too?
1.Pick/shovel/wheelbarrow, and/or donkey carts [WOW!]?
2.Shoveling coal into steam-powered shovels and steam locos & railcars to move the dirt, like the Panama Canal was built?
3. ICE-powered bulldozers with rippers, ICE-dumptrucks, electric draglines powered by coal genplants?
Thxs for any reply.
The early canals were dug with manual labor. Italians dug a canal in New Orleans circa 1840 that I am aware of.
The canal boom began in the 1760's and ended around 1840, except in Russia. Canal infrastructe building ended around the time railroads bagan, mainly because most of the good locations were developed.
Steam shovels probably didn't exist during the canal building age.
See: The Rise and Fall of Infrastructures (Available as a free download. E-mail them for the link.) http://www.iiasa.ac.at/Research/TNT/WEB/Arnulf-flyer.pdf
But what energy density and at what EROEI?
Both are still high. The UK has quite a bit of coal left - it's just been a bit cheaper to import it, or use oil & gas.
See http://energyfaq.blogspot.com/2008/06/are-we-running-out-of-coal.html and http://energyfaq.blogspot.com/2009/02/are-we-running-out-of-coal-part-2....
RobinPC’s post showing the coal barge canal highlights one of the most important events in history, the first infrastructure boom. Before these canals were built most coal deposits were un-exploitable if they were even a few miles from a navigable waterway. With a canal barge a horse could pull 30 tons of coal, versus less than one tenth that by wagon.
The Bridgewater canal cut the cost of coal to the factories it served in half.
http://en.wikipedia.org/wiki/Bridgewater_Canal
Early investor’s in canal companies sometimes earned annual dividends from 70-150%.
Thxs for the link--it led me to the Falkirk Wheel--way too cool!
http://www.youtube.com/watch?v=HmOZwB20rOM
But the CO2 absorption capacity of the atmosphere and the oceans is already depleted. The coal problem is not on the resource side but on the sink side of its waste product after burning it.
According to
http://www.sourcewatch.org/index.php?title=Existing_U.S._Coal_Plants
the US has 335 GW of installed coal fired capacity. That would require the continuous processing, transport and safe disposal of 335 x 150 kb/d = 50 mb/d of liquid CO2, in volume 6 times the current US oil production.
That is the magnitude of the problem
Again I refer to all work done by NASA climatologist James Hansen
http://www.columbia.edu/~jeh1/
who says we must go down with CO2 concentrations in the atmosphere to 350 ppm at most while we are now approaching 390 ppm.
No question.
OTOH, it's important to know that we have liquid fuels and climate change problems, not a peak energy problem. Also, it's important to know that we have to put an end to coal: it won't die a natural death.
That would require the...disposal of ... of liquid CO2...That is the magnitude of the problem
Far easier just to replace it with wind power: see http://energyfaq.blogspot.com/2009/09/how-expensive-is-wind-power-needed... and http://energyfaq.blogspot.com/2009/09/how-expensive-is-wind-power-needed...
A feature of the promotion of coal as The Fuel after Oil is that it ignores the sensitivity of coal to oil shortages.
While in the past (<1900) coal production relied pretty much on manpower and a bit of horsepower, to sustain even a useless fraction of todays coal production and use requires continued use of oil for lubrication of coalface machinery, stripping overburden, digger operations, coal-train movement, truck movement etc, not to mention the reliance of all the other elements to the complex industrial chain that enables and facilitates coal production.
Basically without oil, coal production and delivery stops, no matter how much coal is left in the ground.
There are precious few coal mine headworks that are powered by coal from the same mine, precious few tonnes of coal carted by coal-powered steam engines or ships, precious few factories or power-stations where the coal is not transferred from rail or ship into the plant by machines powered by oil.
No oil, no coal. No doubt.
I expect we could have coal fired locomotives pulling coal trains again within a year if we really need to-and we can manufacture enough synthetic diesel to run our essential industrial transportation system if we absolutely have to.Any body who thinks that co2 legislation is going to stand in the way of keeping the lights on in America has a very dim understanding of American politics.
I am all the way in favor of electrifying rail,getting a fifty mpg minimum fuel standard in place for cars,a war effort buildout of wind and solar, and so forth.
But if it takes rationing gasoline down to a couple of gallons a week to have the fuel and lubricants needed to run the coal mines there is no doubt that the cars will be parked and the mines kept running-the electricity is much more central to the economy than the personal car-people can carpool, move closer to work, double up in apartments, move in with thier folks to avoid driving-but the electricity simply MUST stay on-there is no way around this fact.
Water and sewer, schools, supermarkets, offices and factories and stores are things we CANNOT do without.
If push comes to shove we will burn the coal.Regardless.
Of course if the bau economy simply collapses we will be too busy rioting, starving, looting, and shooting each other and the co2 problem will be taken care of pdq, insofar as it can betaken care of-likewise the population problem.Ammunition is selling so fast local stores are limiting sales to a box or so per week to thier regular customers.
Of course if the anti nuke folks would stop and think about just how bad things can get, and just how fast they can get that way, we could probably finish up a few dozen new nukes before tshtf, thereby possibly avoiding some of the worst aspects of a crash.
Maybe we can keep the grid up with ng long enough to build out the wind industry and allow the solar industry to grow up cost wise.I certainly hope so-although I do live on high ground far enough north of the equator that things shpuld stay fairly comfortable around here-at least for the decade or two I have left if my luck holds.
More baloney, you silly Malthusian you!!!....Just gassify enough coal to liquid form to run the machines to dig and transport the coal!!!...And before you get into another silly, silly discussion about EROI...Here is one brain tickler...Imagine it is 1810...No oil then...How did the farmers plow, plant and harvest their fields???...There were these creatures called horses!!!...And what did they eat??...Hay!!!...Guess how much of the total food production of the farm THEY ate???...Just about 25%....
See the discussion below: coal only needs about 2 gallons of diesel per ton, and coal companies would easily outbid other consumers for the fuel they needed.
As Oldfarmermac notes, any rationing scheme would give utilities priority.
Nice try guys, and your optimism is appreciated. But the whole of our society is so glued together with oil that it will simply dissemble when TSHTF.
Assume (big ask - show me one!) you have a coal-powered coal mine, and you manage to make a few decent steam trains, good, but lets run along a few threads that make that happen. Train needs staff. Staff drive to work, not any more. So oil ration (Rat) extended to staff of critical industries. Staff need to eat, so Rat extended to food production and transport. Food needs fertilisers so Rat extended to fertiliser producer. Fert needs staff, so Rat extends to Fert Staff. Fert needs power so Rat extended to power utility staff and ops. And so on until the it all goes around in circles and NO ONE is declared non-essential.
Look at the development times for all the smart solutions you are suggesting. Way too long to get useful numbers of the clever machines on the road and railways. Where is the expertise?
Nukes are gonners as uranium production is insufficient to even produce the first load of fuel for a swarm of new nukes let alone fuel them sustainably. Ports using electricity - great - where from again? Oh yes, from the substation that is now manned by staff who now walk to work?
I once worked at a fiber-board plant. A chip on the motor controller for the variable speed drive on the chip bin feed screw died and the drive ate the three spare belts we had in 6 hours. No more belts in the country, and no circuit board either. We (boiler attendants to managing director) stood in the chip bin showered with incoming chip and shoveled wood chip onto the plant feed belt for 6 days and nights before the spares were air-freighted across the Pacific. Very tenuous, and its all hung off the weakest link.
My examples are puny, but such is the complexity of all our western systems - such is the number of links in the chain that it is impossible that every link in the chain can be sustained within anything like present levels of activity. We might manage to keep 5% capacity, but that is far enough away from BAU as to be the end of our way of life.
the whole of our society is so glued together with oil that it will simply dissemble when TSHTF
This seems to be a common assumption for those who are concerned about PO. I can't tell where it came from - Heinberg,perhaps? I've read his writings - I can't tell where he got it from. Just an assumption.
Assume (big ask - show me one!) you have a coal-powered coal mine
Most underground coal mining is electric. Of course, 48% of US electricity is from coal.
Rationing: we probably won't have rationing. Instead, crucial users like utilities will be willing to pay more for fuel than recreational users and commuters. Commuters might have to carpool (the horror!).
Look at the development times for all the smart solutions you are suggesting.
Most of these things are here. The Prius is here. The Chevy Volt will be in production in a year.
the spares were air-freighted across the Pacific. Very tenuous, and its all hung off the weakest link...such is the complexity of all our western systems
Fedex will successfully outbid other fuel users, such as car recreational users and commuters, as well as recreational fliers (60% of passenger flying).
And there won't be any airports for FedEx to land at.
Look at the complexity and emergy of the FedEx system. The more efficient they make it the faster FedEx will break. [Bear in mind they have lots of ground traffic now.]
LOL! Yes, there is indeed a lot of
dissemble-ing going on, now that TS has already started to HTF.
Not too much disassembling as yet, but that may come later.
nigwil, good post. As Heinberg recently wrote people are trying to solve problems when what we are in a dilemma. http://postcarbon.org/article/dilemma_and_denial
Nick must have read only a tad of Heinberg because he doesn't assume anything. He is well documented and writes very clearly and is one of the very sane voices on peak oil.
Oddly enough, Heinberg appears to have only a superficial knowledge of wind & solar, as revealed in the following quote from the article referenced:
"the relatively high cost of commercial solar panels is a problem that probably can be addressed with further research, as is bird and bat mortality from wind turbines"
Solar panel cost has plummeted recently to below $1/watt. Bird and bat mortality from wind turbines are relatively trivial, isolated problems.
Nick maybe you should read more than headlines and more than one article....
"Right now the cost of making panels accounts for a little less than half the total cost of installation. The company estimates that it needs to get manufacturing costs down to $0.65 to $0.70 per watt, and other installation costs down to $1 a watt in order to reach grid parity—goals First Solar plans to reach by 2012."
Oh,$1 is the cost per watt of making the panel, not of making the panel and installing it. Sort of like burning coal but not counting the cost of the power plant. So the price now, if their claims are accurate is $2 a watt
Other articles indicate government subsidies - how much does this play into the price?
Other problems are addressed in the article
And when you use electricity to power vehicles what is lost and how does this then compare to gasoline.
You are trying to show solutions to problems as if they are isolated. They are not. We are truly in a dilemma which will become clearer as time goes on.
http://www.popularmechanics.com/science/research/4306443.html
Solar Panel Drops to $1 per Watt: Is this a Milestone or the Bottom for Silicon-Based Panels?
A solar power milestone was reached on Tuesday when First Solar Inc brought its manufacturing costs for solar panels down to $1 per watt. But a study from the University of California and Lawrence Berkeley National Labs suggests that this might be the bottom for a price-point—if solar power is ever going to scale up to become competitive with other forms of energy. Here are the new challenges facing the solar industry and some suggestions to make a brighter future.
By Alex Hutchinson
Published on: February 26, 2009
A long-sought solar milestone was eclipsed on Tuesday, when Tempe, Ariz.–based First Solar Inc. announced that the manufacturing costs for its thin-film photovoltaic panels had dipped below $1 per watt for the first time. With comparable costs for standard silicon panels still hovering in the $3 range, it's tempting to conclude that First Solar's cadmium telluride (CdTe) technology has won the race. But if we're concerned about the big picture (scaling up solar until it's a cheap and ubiquitous antidote to global warming and foreign oil) a forthcoming study from the University of California–Berkeley and Lawrence Berkeley National Laboratory suggests that neither material has what it takes compared to lesser-known alternatives such as—we're not kidding—fool's gold.
Even if the solar cell market were to grow at 56 percent a year for the next 10 years—slightly higher than the rapid growth of the past year—photovoltaics would still only account for about 2.5 percent of global electricity, LBNL researcher Cyrus Wadia says. "First Solar is great, as long as we're talking megawatts or gigawatts," he says. "But as soon as they have to start rolling out terawatts, that's where I believe they will reach some limitations."
Even the current rate of growth won't be easy to sustain. Despite the buck-per-watt announcement, First Solar's share price plummeted more than 20 percent on Wednesday, thanks to warnings from CEO Mike Ahearn about the effect of the credit crisis on potential solar customers—as much as 10 to 15 percent of current orders might default. He recently told analysts in a conference call that "as good as things look for the mid-term and beyond, the short-term outlook for the solar industry in our view has never looked more difficult." (A transcript is available at SeekingAlpha.)
First Solar's eventual goal is "grid parity," a phrase that refers to making solar power cost the same as competing conventional power sources without subsidies. Right now the cost of making panels accounts for a little less than half the total cost of installation. The company estimates that it needs to get manufacturing costs down to $0.65 to $0.70 per watt, and other installation costs down to $1 a watt in order to reach grid parity—goals First Solar plans to reach by 2012.
The question, though, is whether First Solar or any other solar manufacturer would be able to handle the flood of orders that would ensue if they reached competitive cost. At that point, it comes down to a matter of having enough of raw materials. That is where the real limitations come to bear, according to a paper that will appear in the March issue of the journal Environmental Science & Technology. In the paper, Wadia and colleagues Paul Alivisatos and Daniel Kammen evaluated the global supplies and extraction costs for 23 promising photovoltaic semiconductor materials and found that the three materials that currently dominate the market—silicon, CdTe and another thin-film technology based on copper indium gallium selenide (CIGS)—all have limitations when ordered in mass. While silicon is the second-most abundant element in the Earth's crust, it requires enormous amounts of energy to convert into a usable crystalline form. This is a fundamental thermodynamic barrier that will keep silicon costs comparatively high. Both CIGS and First Solar's CdTe rank poorly in abundance and extraction cost, with CdTe ranking dead last in long-term potential based on current annual extraction rates.
That doesn't mean these materials won't play a significant role, Wadia says. "It's great to see the success the thin-film and silicon companies have had in pushing the limits of how fast and how cheap they can make panels." But it may also pay to devote some federal R&D funds to research on alternative materials that are abundant, nontoxic and cheap.
To that end, Wadia and his colleagues found that iron pyrite—better known as fool's gold—was several orders of magnitude better than any of the alternatives, based on both cost and abundance. Copper sulfide and copper oxide were also attractive candidates. The problem with these materials is that they're less efficient in converting the sun's rays to electricity, and as a result have been the focus of considerably less research. But the Berkeley study accounts for this fact, and concludes that lower-efficiency materials that are cheaper and more abundant will ultimately serve the alternative energy market better.
Kammen, who is the founding director of Berkeley's Renewable and Appropriate Energy Laboratory and advised the Obama campaign on energy issues, still considers the First Solar dollar-a-watt announcement to be an exciting development. "It shows that the rapid and important expansion of the solar industry needs the sustained research and manufacturing expertise of globally leading companies like First Solar," he says. "It also sets a new and critical bar for all companies to work to achieve."
That good news wasn't enough to save First Solar's share price on Wednesday. But the message of the Berkeley study is that unlike the stock market, we need to think long-term, and plan for the solar power we want to see a decade or more in the future. And that means doing some painstaking basic research on neglected materials that, for now, cost a lot more than a dollar a watt.
maybe you should read more than headlines and more than one article
FWIW, I've been following these industries for 30 years.
We can talk about PV if you'd like, but I think it's a bit of a distraction.
There are two questions here: are wind and solar viable replacements for FF, and does Heinberg know what he's talking about when he says no.
There's no question that the answers here are yes, and no, with wind being much cheaper and "here" than solar, though solar is clearly close behind.
Look at what Heinberg said about wind (birds and bats): these are old, long-debunked myths, still talked about only by knee-jerk anti-wind organizations.
Nick, I was talking about PV because YOU brought it up. I have noticed that whenever I effectively address a point you raise you say that the point is a distraction or some similar phrasing even if it was you that raised the point.
My comment about headlines is a bit unfair. What I should have said is that you are being deceptive by quoting a headline of $1 per watt as though that effectively counteracts what Heinberg said about the cost of solar being a problem. As the article quotes the total price, PV and Installation need a further reduction to reach grid parity. The article that right now the cost of making panels is a little less than 1/2 the installation costs, meaning the cost per watt is $3. $1.65 per watt total is needed for grid parity thus these $1 per watt solar panels are still far from grid parity and thus Heinbergs point stands. Additionally the article points to the impossibility of the $1 solar panels being scaled up to meet BAU needs. So even if they do get the costs of installation down they have not solved the problem of propping up Western lifestyles.
Your assertion that the bats and birds problem is a long debunked myth does not match my web searches of current articles on the problem. I find rather a mixed review of whether or not it is a problem. If we go into wind in a big way more and more birds and bats will die. Perhaps that will turn out to be trival for humans (tho not for birds and bats) but WE DON'T KNOW that. Many things we thought were trival turned out not to be trivial, especially when done in a large manner. Chlorofluorocarbons were a trivial addition to the atmosphere in PPM but turned out to be far from trivial when we discovered that we were about to fry ourselves by destruction of the ozone layer. We still cannot be sure that that disaster has been averted. Bats and birds are part of "what is". Do you know what parts of "what is" can be removed without serious consequences for humans? Do you know how many parts of what is can be removed before the whole collapses? I would add to the birds and bats problem that we do not know what we will do to weather patterns if we harness large amounts of wind energy and remove it from the natural system. We have done enough harm and may have already sowed the seeds for our destruction as a species.
It seems to me that solving problems creates new and often more troublesome problems. Solving problems requires energy of some sort and I don't think we have enough energy left to solve the problems we will solve ourselves into by trying to maintain BAU. We need to begin to power down now. I don't share Heinberg's optimism that we can much less will do it but I respect him for trying. How much we invest in trying to keep BAU going will probably affect negatively how bad we crash. Too bad for us....
I was talking about PV because YOU brought it up.
I'm trying to actually make progress in this discussion, instead of getting lost in details. Are you really listening, and trying to think this through, or is this a game-like sterile debate, where we're just trying to make points?
I have noticed that whenever I effectively address a point you raise you say that the point is a distraction or some similar phrasing even if it was you that raised the point.
I think if you really went back, you'd find this wasn't the case.
solar panels are still far from grid parity and thus Heinbergs point stands.
Not really. Heinberg said that "panels" were too expensive - I think he's wrong. As you note, the overall cost is still high, but panels are increasingly not the main focus of cost reductions. Further, he called for further research, and if he really understood the industry he'd know that the era in which long-term basic research needs to be the central focus is over.
the article points to the impossibility of the $1 solar panels being scaled up to meet BAU needs.
Yes, the article says that. I think it's wrong: 1) the amounts of things like indium, cadmium and tellurium needed are very small due the roughly micron thickness of these films, 2) the supplies are larger than they think, and 3) most importantly, silicon producers are following closely behind with similar cost reductions: google Sharp and "grid-parity". I realize that's frustrating to have me just reject an article you found, but as you point out, one can't rely on just one article.
Your assertion that the bats and birds problem is a long debunked myth does not match my web searches of current articles on the problem.
Sure - there's a swarm of anti-wind activists who keep the silly thing alive. The fact is that the only wind-farm to have a really serious bird problem is Altamonte, CA. Bats are a recent problem, mostly in a very few places in the US east. People who've been dealing with this for a while recognize it as unrealistic.
We need to begin to power down now.
I certainly agree with you that we need urgent action. It seems pretty clear to me that a very large program of wind-power is the obvious way to go.
Nick document your points.
What price per watt is grid parity.
Show me another source that shows the installation cost per watt for these $1 per watt panels so I can actually know how far they are off from grid parity.
You sought to discredit Heinberg because he said this "Now, it is true that within our overall dilemma there exist many problems (the relatively high cost of commercial solar panels is a problem that probably can be addressed with further research, as is bird and bat mortality from wind turbines). But we shouldn't let the existence of these "trees" distract us from the necessity of dealing with the "forest" in which they grow."
You will note that he says that the cost of commercial solar panels is a problem THAT PROBABLY CAN BE ADDRESSED WITH FURTHER RESEARCH. You attacked him unfairly on that point. In context it would seem that he feels that bird and bat mortality can also be addressed. But it is true that we don't know how big this problem would become with enough windmills to power our society and we don't know how that might affect our world. We won't know until we do it, and given our track record I would suggest we might just create a much bigger problem than we solve. Do you know how many and what species of insects bats eat? Do you know how many bats killed will lead to extinction? Do you know how that will affect humans? Did you know how much chlorofluorocarbons we could emit before we created a hole in the ozone layer?
So if you want to have a discussion, forget the distraction of these points which he stated in brief because he was writing an article not one of his very well written and documented books. If you want to have a discussion address the point he was making that we don't have individual problems to solve but a societal dilemma that had multiple interconnecting problems that together create a dilemma.
address the point he was making that we don't have individual problems to solve but a societal dilemma that had multiple interconnecting problems
This is, of course, his main point.
In order to come to this conclusion one has to look at each of the individual problems, add up all of the difficulties they create, and conclude that the sum of these problems is greater than the ability of the society to adapt to them. This depends on an accurate assessment of the individual problems.
Now, by far the biggest part of this is energy. Look at any of the analyses of our ecological "footprint", and you'll discover that energy comprises 50-80% of the weight of the various components of the analysis. When you combine the Limits to Growth problem created by Peak Oil and Peak other FFs, together with the Climate Change problem caused by FFs, you've got a big magilla. If our society solve these two problems, they've solved most of it's problems - the rest are challenging, but much smaller.
To assess how our society can respond to these problems, we have to evaluate the various proposed solutions. The problem with Heinberg, Hanson, Kunstler, et al? They don't understand wind and solar, and haven't taken them seriously. They've just assumed that they aren't adequate. Look through their writings and you don't find an accurate, detailed analysis anywhere.
His treatment of wind and solar in "Powerdown" is relatively undetailed. "The Party's Over" is a bit more thorough, with 4 and half pages devoted to wind, but there's still no detailed, quantitative analysis. It has some numbers, but they're oddly uneven, and ultimately it's overall conclusions don't follow. For instance, on page 152 he says: " Current storage batteries are expensive, they are almost useless in very cold weather, and they need to be replaced after a few years of use. Currently, there are no batteries available that can effectively move heavy farm machinery or propel passenger carrying aircraft across the oceans."
Well, with the exception of the last bit about aircraft, none of this is accurate (which he would have discoved, had he looked at the numbers). See http://energyfaq.blogspot.com/2008/09/can-everything-be-electrified.html .
Now, back to earlier details:
On birds, all I can say is that this has debunked thoroughly - why else do all major environmental organizations in general, and bird-oriented orgs (like the Audobon Society) in particular, strongly endorse wind power?
On bats - sheesh. This is FUD, spread in part by local Appalachian anti-wind organizations.
On grid parity - well, I'll try to find something. OTOH...you could do some research here - just google Sharp and "grid parity".
Show me a solar panel I can buy for $1 per watt, or even $2 per watt. What is the cheapest panel I can actually buy?
Well, call First Solar (the market leader in cost and price reductions), and give it a try.
I believe they're making them for about $.85 per watt. I believe they're selling panels for a little more than $2 W, and minting money: they don't have to reduce further, as they're still below the silicon-based competition's pricing. Nanosolar looks like they may beat them soon on price, but I'm sure Nanosolar isn't selling to individuals.
Ozy new motor vehicle sales peaked already in December 2007 at around 91,000 a month.
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/9314.0Main+Features1Dec%2...
They have bottomed out in February 2009 at 70,000 and were 75,000 in August this year
http://www.abs.gov.au/ausstats/abs@.nsf/mf/9314.0
My new incremental crude oil graphs (July 2009) are out:
http://www.crudeoilpeak.com
Read on this web site also my article "Too late for Sydney metro tunnels" and 8 recommendations from car pooling, light rail to electric trolley buses.
and "Australia in last quarter of its oil age"
The peak oil denial mode continues down under.
Things that peak at the same time do not necessarily mean a causal relationship. It could have been a casual relationship and all just market mania. Here are some other things that peaked at the same time as oil:
Corn: http://futures.tradingcharts.com/chart/CN/W
Soybeans: http://futures.tradingcharts.com/chart/SB/W
Milk: http://futures.tradingcharts.com/chart/DA/W
Ethanol: http://futures.tradingcharts.com/chart/AC/W
The title of this post could just as validly been "What Peaked at the Same Time as Ethanol?" for example. To my mind the drops we have seen in commodities and other things may have been related to Peal Oil or not.
The clue that it was Peak Oil that at least caused some of the collapse is that oil has made a rather sharp recovery from its low and has been able to maintain its price while the other commodities not so much. Oil had a terrific run up from $10 to $147 over the last 10 years.
If other commodities such as corn had done the same thing, corn would have peaked around $30/bu. and would now be trading at about $14/bu. instead of $3.50. That would not have the implications that oil has for the economy since we import most of our oil. The high price now even after the collapse means the economy is constantly being drained of dollars (credit) to pay for imported oil.
IMO this will continue as long as nothing is done about it. That means any recovery will be difficult and slow.
In a lot of ways I agree with you here. There is an element of Caesar's wife though in some of the connections.
as you say casual but not wholly unconnected (what is?)
Yeah, but food is a bit more complex; food prices are also affected by weather, and 2008 saw bad harvests as well as the oil price spike whereas I think I'm right in saying 2009 harvests have been pretty good.
The FAO food price index shows an 87% correlation with oil over the period Jan 2000 - June 2009 (I haven't worked out yet how to post a graph but I have one!), which to me is more than coincidence.
Cheers
GreenIan
Food is also affected by credit, and also by the price of fossil fuels.
Part of the reason I was doing this was just to see what, in fact, was happening, to try to understand better what is going on. The fact that electrical prices were increasing in the 2005 to 2008 period leads me to suspect that it was not just the squeeze in oil prices that was constraining the economy, it was also the run-up in electrical prices that was constraining the economy. Some of the increase in electrical prices was directly related to the run-up in oil prices--the cost of transporting coal was higher. But I really doubt this was the sole reason for the run-up in electrical prices. So the higher electrical prices have been another constraining factor affecting the economy.
Going forward, I see oil prices and electricity prices as the two levers that are important in keeping things going at a fairly steady keel. Increases in these prices will squeeze the economy badly--even if the reasons for the increases have the best intentions behind them-prevent climate change, etc.
At the same time, the amount of debt we had prior to this whole mess was unsustainable. M. King Hubbert spoke about the inherent problems of matching up finite resources with an infinitely growing money (debt) supply:
Two Intellectual Systems: Matter-energy and the Monetary Culture
The matter-system, which is dominated by oil, is now reaching the point where it cannot keep expanding, as Hubbert predicted. For the time being, we have sort of pasted together a method that is almost working to keep the international financial system working, with 0% interest rates, and with falling amounts of debt (except government debt, which keeps rising). But the system is not stable, as Hubbert pointed out many years ago.
it was also the run-up in electrical prices that was constraining the economy.
I would disagree. The key difference is that US electricity is domestically produced, so that cost increases are recycled throughout the US economy, while dollars paid for oil leave the country (and cause trade deficit and credit problems).
Increases in these prices will squeeze the economy badly--even if the reasons for the increases have the best intentions behind them-prevent climate change, etc.
Keep in mind that carbon taxes or cap and trade don't impose new costs, they just change prices. If carbon emissions are auctioned, and the income is rebated to taxpays, there is no net impact on the eoconomy (except to incentivize energy efficiency, which is a good thing).
This won't happen. All the money will go to various third party vendors who will claim they will save the world (or will take fees for making the cap and trade system work). I really doubt it will go back to the people. Why not just have a tax then, and reduce other taxes at the same time. It would accomplish the goals, without lining the pocket of a huge number of middlemen who are likely only out to enrich themselves.
I think you're exaggerating the transaction costs. Keep in mind that the planned participants are pretty large CO2 emitters, so the number of participants wouldn't be that large, relatively.
Cap and trade is modeled after the extremely successful system used for sulfur in the US. The industry originally projected that sulfur reductions would be very expensive, and that turned out to not be the case: the market trading turned up easy and cheap opportunities for reductions, as hoped. The hope is that the same thing would happen with CO2, and so the whole thing would be painless(!). This, obviously, helps sell the thing politically, and, who knows, there's probably some truth to it.
OTOH....I agree about taxes vs emissions trading, and most economists do too. Carbon taxes would be much simpler and more efficient. Unfortunately, they're politically more difficult, in part precisely because they're more comprehensive (everybody in the economy, not just large emitters) and effective (taxes are so direct and easy to understand)....
I strongly suspect this will work as well as state lotteries -- lots of private companies will manage to work their way in to make a very profitable cut, and then the state will get a little bit which will be fought over for a bunch of feel-good programs passed on the back of the overly-optimistic revenue stream.
Personally I think use taxes make the most sense, though energy takes could have a role. I'm hoping to be pleasantly surprised when carbon taxes appear, but I won't hold my breath.
The matter-system, which is dominated by oil
Oil doesn't even constitute the majority of BTU's, let alone commodities.
the system is not stable, as Hubbert pointed out many years ago.
What we're really seeing is a classic business cycle, complete with a bank panic.
Unless we move to a Soviet-style centrally planned economy (or replace humans with artificial intelligences....), we'll always have the potential for instability. People herd, they bubble, they get scared...we'll probably always have bubbles and panics.
We found ourselves a little more scared by our current bank panic, because we haven't had one in 80 years. Our 19th century ancestors would be puzzled by the idea that this was anything unusual.
IE: Colossus, The Forbin Project.
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In the comment on private industry wages at 6.6 billion dollars a year, I think you meant 6.6 trillion per year.
Thanks. Fixed it.
Energy = Capital.
This is very demonstrable considering the above data.
Capitalism is predicated upon constant growth for success - O% growth of GDP = failer of system - and as the above graphs demonstrate, a peak in oil extraction is concomitant with a peak in capital and or available credit.
And as the latest news hits the populace of America, i.e. Russia, China, Brazil et. al., and most importantly the Opec Cartel are devising a plan to abrogate the exclusivity of the petro dollar from their transactions;The unlimited credit card - financed by the rest of the world - is about to be summarily canceled.This is without controversy, a situation of Biblical proportions.
The entire world economy is on the precipice of collapse.
I feel tempted to mock all those profligate realators, lawyers, financial advisors, and careless pleasure seekers who would not listen to reason, but instead I feel compelled to mourn.
Well, my mourning period will definitely be quite short for the bankers, traders, mortgage brokers and realtors. There, oops, missed it.
If you play consumption of oil against per capita GDP in the Historical Oil Demand graph generator you will see examples of countries whose prosperity moves forward without additional demand for oil. France is a good example, the reasons why are familiar enough from Alan Drake's postings here documenting their commitment to expanding MT. Peruse my own EIA Percentage Consumption Change 1981-2008.xls spreadsheet to see more examples of same.
Having said that, I'm dubious about general economic growth in a world where supplies are falling short and substitutes are failing to come online at a timely enough rate, owing to the interactive nature of modern transactions - the Jeff Rubin theme. I don't think shipping will dry up, as bunker fuel is one of the simplest products to make, but supplies may be difficult to procure, owing to chaos alone. These above ground factors are potentially as bad as the fallout from reduced supply itself.
France, however, became very dependant on nuclear energy; perhaps they were the guinea pig nation to test the transition from an oil based economy to a nuclear economy.In the 50's there was all this excitement within the science community about the potential of nuclear energy, even to the point of proposing fission powered cars and passenger aircraft.Perhaps the thought of a plane crash or auto accident with a vehicle powered by plutonium brought them back to reality - it was entirely not feasible.
At any rate,Frances economy, though more socialistic, had to have an ever growing energy source non-the-less to manufacture goods to have a place within the globalizing-economy America was shoving down the throats of the rest of the world.Economies of antiquity obviously did not exploit oil to grow their respective economies exponentially, but there will always have to be an energy source to do so - whether it is slave labor or wood - it takes energy to cause growth and or ever increasing GDP.
As long as currencies are free to be exchanged, I don't see how it matters what currency oil is priced in. This meme has been used this week by the Financial Times, the Independent, and other news outlets that proclaim the imminent demise of the dollar. Every few years, I hear the same claim. That said, I worry often about inflation!
Yes.
There's some question whether the reports are accurate, as well.
OTOH, a gradual move away from the dollar is inevitable. That won't be the end of the world for the US, but it will reduce it's ability to run endless trade deficits. Not such a bad thing, really.
sampson... re: biblical proportions.
when i hear talk like this, i often wonder what it would be like if there was an all-out collapse. what are you imagining? i used to work for the red cross, and when major calamities strike, generally people look out for each other, the change happens, and human beings adapt to a new reality.
but then i wonder, will there even be an economy-wide collapse? maybe it will be more like a decade- or generation-long draining of the system of capital, whereby some groups are forced to adapt to new conditions before others. maybe it's happening like that right now.
even if oil were to stop flowing completely tomorrow, with mobility quickly curtailed. wouldn't electricity for computers and appliances and lighting and the rest still be available for a long long time? http://en.wikipedia.org/wiki/File:Sources_of_electricity_in_the_USA_2006...
maybe the government, recognizing that a major economic and cultural shift is taking place, would ease us into the process -- making food (in the short term) and land (in the longer term) available for the indigent. maybe they'd decide to trim the national workweek to 20 hours to allow families time to cultivate gardens and farms, all the while, pursuing new energy options.
the sun will still shine. bike tires will still roll. plants and animals will still grow.
Bert,
I believe you have a point worth serious examination.Doubtless we are in for some serious belt tightening but barring panic oor war -both likely , I'm afraid-we could actually make the necessary adjustments needed to get thru the next couple of decades without that much suffering.Life certainly should not be any harder than in an occupied coun try such as France during WWII and probably no harder than in England during the same period-except where the bombs were landing of course!
As I see it the biggest problem , really , is the employment problem.We can solve our transpoprt problems and our heating and lighting problems and keep the food coming too-by simply doing what's necessary.
But if we quit driving cars, auto workers ,car salesmen and mechanics are in the deep doodoo and the ripples keep on spreading.Soon the road maintainence workers and convenience store clerks are short of work ,and then the beer and potato chip truck drivers are in trouble....
But we CAN double up, we can car pool, we can lower thermostats,we can eat more chicken and beans.
We will , too , as soon as we have no choice in the matter.But doing so won't kill anybody -not more than a small handful in each town anyway as crowded and hard up people take thier frustrations out on each other.
We can get by without most of the junk we import.We can get by without flying coast to ocoast for holidays and driving from Chicago to Kitty Hawk for a weeks vacation.
So the question becomes-since it looks like we may have to-can we do it peacefully?
I 'm of the opinion that "powering down " peacefully is certainly possible-but I'm not at all sure that things will work out that way.
But how do we deal with the tens of millions of unemployed-not to mention social security, medicare ,etc?
farmermac, i agree in large part. while it's possible that a draining of the system of capital over a generation could be peaceful, it is within the range of possibility that civil unrest (what a funny way to understate a rather frightening concept) could spring up.
there was an article in the guardian this week, "Will California become America's first failed state?" people aren't killing each other; they are drinking to excess.
of course, maybe if the powering-down or draining of capital is recognized to be terminal, there could be strife... but i think in most places, even where large swaths of the population would near total hopelessness (due to homeless, foodlessness, joblessness) the country's institutions would respond. the country has a wealth of organizations with a history of serving as informal social workers - the churches, and schools, and local businesses, and non-profits. perhaps they could assist in shepherding the necessary changes.
and i feel like people who imagine 100% chaos and the bleakest outcomes forget that the government has tremendous physical resources to work with. even if you don't have K (capital) for some time, we still have a ton of the Ls (labor and land) to work with. it would take time to calm the people, and there would certainly be instances of individuals taking "frustrations out on each other", but i think with electricity still working and communication links nationwide still functional, we'd muddle through.
The trouble is the US doesn't just pay currency (exchangable for any other currency using FOREX) for it's various imports - it also incurs massively increasing dollar denominated debt which is mostly held by the nations it is importing from.
You are not the only one to worry about inflation, the creditors want their inflation proofed money at some stage, if these creditor nations won't give any more $ credit the US is in trouble, just like if you reach your credit card limit and you need to pay for a blood transfusion.
A note from the Housing Bubble Blog, from a gentleman who was happily renting for several years as the real estate market exploded and then imploded. He only bought a house because there was nothing suitable for rent in the area where they were moving to.
http://thehousingbubbleblog.com/?p=5673
Feeling A Bit Left Behind
by Englishman in NJ
Having lived in Alpine NJ for a few years....I understand this situation quite well.
Glad I left for Alaska.....
Gail,
Is the chart for coal prices from the spot market? It looks like it is. If so, you might want to note that, as it would make a big difference.
The vast majority of coal is sold on long-term contracts (unlike oil), so pricing really didn't fluctuate that much. Spot prices fluctuated due to arbitrage with oil & gas markets - the cost of rail diesel isn't a large % of the delivered price of coal.
You are right--the coal prices are spot prices. It is possible to find actual average prices by year paid by electric utilities and others. According to this exhibit, average coal prices were as follows (nominal dollars):
2005 $23.59
2006 $25.16
2007 $26.20
2008 $32.59
So prices seemed to rise for coal as well in 2008.
With respect to the cost of rail diesel, I think what you say is reasonably true, if you are talking about is high-valued Eastern coal shipped short distances. With respect to relatively low valued Powder River Basin coal that is often shipped long distances, the figure I have heard is that diesel costs typically make up two thirds of the delivered price.
the figure I have heard is that diesel costs typically make up two thirds of the delivered price.
Hmm. IIRC, I looked at Peabody's (the biggest producer) annual report and found that their average diesel consumption per ton was 2 gallons.
Some calculations support that:
Rail transportation is about 440 ton-miles/gallon on average, and coal is at minimum 500 tm/gallon (Coal trains are probably even more fuel efficient, because the ratio of load to tare weight is greater than most other rail freight (particularly intermodal). 600 tm/g might be a good guess). Low-sulfur coal in the US travels roughly 1,000 miles before being used. Dividing these tells us that transporting US coal requires roughly 2 gal/ton.
If PRB coal is at $20/ton, and diesel is about $2, that's about 20% for PRB and 12% for the industry.
Do you remember where you saw that figure of 2/3?
PRB coal is about $8 or $9 ton, not $20 ton (see graph above). If diesel is $2, then transportation is about 45% or 50%, rather than 20%. If diesel is higher than $2, or the distance is longer than average, you could get 2/3.
Ah, my memory was wrong. Yes, I can see how you could get to 2/3.
Wow - PRB coal is cheap! That's $9/ton, or about 50 cents per million BTU, compared to nat gas at $4-5/MBTU, and oil at about $12 per M BTU.
OK, diesel is about $2.50 right now. If the industry average coal price is about $33, that's 15% overall.
Now as far as the senstivity of electricity prices to diesel: A ton of coal generates at least 6,000 KWHs, so if the price of diesel was $4 in 2008, 2 gallons would have accounted for .12 cents per KHW from coal, or .06 for electricity overall. So, perhaps an increase of .04 cents/KWH from before the oil price increase.
That's not much.
Interesting info. If cars didn't have emissions requirements then a coal-powered Stanley Steamer might be the cheapest way to get around if you lived in the rural outback [off-grid] of the PRB region.
I'm collecting stuff to convert an older Ford truck to a wood burner mostly for the fun of it but also just in case she's needed one of these days.
I'm guessing, but it looks as if she will go at least eight miles on fifteen to twenty pounds of dry oak sticks and chips hauling a heavy load.
Of course that old truck will never have a baby truck but I could haul my produce to town with it cheaper than I could feed horses, and with less environmental impact, given that the horse eats every day,needed or not.
I expect that if it's ever actually needed tptb will find something to keep them busy somewhere else rather than worrying about my emissions,if they know what's good for them-namely, food.
Unless maybe they want to bike out to my place-about a twenty five mile round trip with lots of steep hills.
The euro peaked against the dollar then too
http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-usd.en....
Interesting!
I see efficiency vs carbon reduction as a kind of race. For example 80% CO2 cuts by 2050 suggests a reduction of around 2% a year. Can 2%+ efficiency gains be maintained for that long? It will have to because for practical purposes there will be negligible fossil fuels left by 2050. That is with positive net energy after extraction.
If the current economic system requires more energy input for more 'stuff' for more GDP then contraction is inevitable. Perhaps mid 2008 was the tipping point.
Can 2%+ efficiency gains be maintained for that long?
Sure, if we really want to: the Chevy Volt uses 80% fewer BTUs and 90% less oil than the average US vehicle; it's not that hard to do the same with buildings. Eventually, though, it will be much cheaper to generate new energy with wind, solar and nuclear.
I suspect if the United States (maybe the world) properly maintained its infrastructure, efficiency gains would be miniscule or perhaps non-existent. Maybe economies CAN be more efficient, but they aren't there yet.
I suspect if the United States (maybe the world) properly maintained its infrastructure, efficiency gains would be miniscule or perhaps non-existent.
I'm not sure what you mean - could you expand on that?
I am speculating that figures showing greater efficiency per dollar of GDP might not be as favorable if economic activity had been more focused on maintaining infrastructure instead of expanding (frivolous?) services. As we seek to do more with less, I am thinking that a better infrastructure is part of the deal. I readily concede many items are much more energy efficient than 20-30 years ago (like a refrigerator) but question whether efficiency can maintain anything close to BAU because so much infrastrucutre needs repairs.
I see substitution of new sources as inevitable but suspect many efficiency advocates are a little too optimistic on what efficiency can do (and has done).
Surprisingly, the USA had paved (mcadam type: gravel, crowned) roads long before the automobile, with a fairly good network in place 30 years in advance. There were also some concrete and asphalt roads.
http://en.wikipedia.org/wiki/Macadam
See: The Rise and Fall of Infrastructures
I suppose the question here is: how much more should the US be spending on infrastructure, compared to the actual current amounts?
Have you seen any good numbers?
I don't follow infrastructure spending and anything I know about it is from researching productivity.
My concern is that I do not see automobiles, hybrid, plug in or whatever, being affordable long term, due to deindustrialization and eventual currency collapse of developed countries, whereas streetcars are a lower cost option, long lasting option. Infrastructures displace one another, and sometimes rather quickly. So if there is a trend back toward streetcars, which I think is sensible, how much would we be willing to maintain roads.
Horses disappeared from the roads rather quickly after streetcars appeared, and much faster with the introduction of the automobile. Streetcars appeared around 1895, cheap cars 1910, horses gone 1930, most streetcars gone by 1940. Railroads did the same thing to canals in the 1800’s. The US inland waterways are in bad need of repair and upgrading, despite being the most efficient way of transporting bulk materials.
This is a very good overview of the inland waterways and a plea by the Corp of Engineers for support of this vital system.
http://www.iwr.usace.army.mil/docs/InlandNavigation.pdf
I do not see automobiles, hybrid, plug in or whatever, being affordable long term, due to deindustrialization...
Paul, I think it would be helpful for you to educate your intuition by looking at some numbers. For instance, there's much more car manufacturing in the US than you might think. The US still has quite a lot of manufacturing, even if a lot of it is owned by Toyota, etc.
The current US trade gap is only about 5% of GDP - if the US is forced to stop running a trade deficit by a currency collapse, that's a reduction of only 5% of US consumption. That will feel like a lot to US consumers, but it's not the end of the world.
Other developed countries, like Japan and Germany have trade surpluses, so this varies by country.
You're underestimating growth of Asian nations and their power to put downward pressure on our wages and to bid up commodity prices.
Have you seen the economic statistics on Japan lately? Absoutely worse than Great Depression of 1930's.
Germany has a national policy to support manufacturing and is doing better than USA, but not great.
Federal debt and unfunded laibilities (SS, Medicare) are estimated to be $1,000,000 per able to pay household.
A lot of foriegn cars are assembled here from parts made from around the world. Assembling a car takes surprisingly few work hours.
Oil imports are responsible for over half of our trade deficit. If oil goes to $300/bbl, what do you think the trede deficit will look like?
You're underestimating growth of Asian nations and their power to put downward pressure on our wages and to bid up commodity prices.
hmmm. What about comparative advantage - doesn't it still work if trade flows are balance? The US trade deficit seems to be shrinking with the dollar above 1.4:Euro.
Have you seen the economic statistics on Japan lately? Absoutely worse than Great Depression of 1930's.
Are you sure? Japan's GDP has been pretty stagnant for the last 15 years, but does that compare to the 25% drop in the Great Depression?
Germany has a national policy to support manufacturing and is doing better than USA, but not great.
I know their employment level isn't great.They do still have positive trade balances, right? That's not too bad.
Federal debt and unfunded laibilities (SS, Medicare) are estimated to be $1,000,000 per able to pay household.
Those aren't liabilities, they're projected benefits, susceptible to change at any time. The likely change is higher retirement ages - which would be an improvement in every way.
A lot of foriegn cars are assembled here from parts made from around the world. Assembling a car takes surprisingly few work hours.
True, but I believe a substantial majority of vehicles sold in the US have 75% or greater domestic content - have you seen stats, lately?
Oil imports are responsible for over half of our trade deficit.
Yeah. Not good.
If oil goes to $300/bbl, what do you think the trede deficit will look like?
For better or worse, that won't happen - we'll go into recession first. Also, efficiencies and substitutions will happen, which will be just behind economic slowdown in importance.
What about comparative advantage
Yes, cheap labor. The low wage countries can pay a worker $1 per hour to work in a modern factory that may be half as productive as one in a developed country. Result is 3,000,000 lost US manufacturing jobs (30%) in the seven years before the economic meltdown.
See: Manufacturing a Better Future for America
http://www.amazon.com/Manufacturing-Better-America-Richard-McCormack/dp/...
I no longer have the graph on Japan during the current crash. The graph in qusetion showed the comparison to 1930's, and Japan is below that in terms of drop in industrial output. John Mauldin had a recent article on Japan with a lot of good information, especially their dependency ratio, which will leave an unsupportable retiree population four decades out.
I think that the US manufacturing trade deficit is shrinking with the dollar above 1.4:Euro. IOW, the flow of manufacturing jobs outside the US stops and reverses a little with the dollar at this value. In the past, the dollar was stronger.
Re: Japan - I'd like to see that graph. I looked at data a little while ago, and my memory is that GDP didn't decline, overall.
Japan ... dependency ratio, which will leave an unsupportable retiree population four decades out.
It's a healthy retiree population! They just have to accept a later retirement age - it's a little like those norsemen on Greenland, who just had to accept a little social change to survive...
There's 40 years between now and 2050.
For r40 = 0.2, r= 0.9606, i.e. (1 - 0.96) = 0.04 = 4% compound "increase in efficiency" each year. (This - compounding - is the way GDP growth is measured, so it's appropriate here too.)
And that's minimum. If the economy (or population) grows, r has to get smaller - efficiency improvements have to happen faster.
Even 4% (per year for 40 years) can't be done in air travel. Can't be done in shipping. Can't be done in heavy industry, or chemical manufacturing. Can't be done in HVAC.
Nope. We need something besides "efficiency" alone. New energy sources, better design, new materials, and behavior change. Engineers can take care of the first three, given the chance. Let's hope mid 2008 was the tipping point for the behavior change, engineers get the green light, and NIMBYs get the shaft.
Ayres and Warr show a model that indicates that growing energy efficiency, together with greater energy inputs, explain most of the rise in GDP between 1900 and 1998.
What Ayres & Warr's paper does is revise the earlier economic model that showed economic output as a function of labor, capitol and a residual (called Solow residual). Ayres-Warr explains most of the residual, not the total increase in GDP, by energy efficiency. This is partly true and partly coincidence. Better "methods" (as in Money, Machines, Manpower, Methods) are also responsible. Methods can be better technology, dematerialization (using less material), use of computers, or just working smarter.
Ayres's-Warr's papers added some key insight into economics
True. Another way of looking at it is that Ayres & Warr measured the end-use consumption of energy and compared it to the energy inputs, and calculated the difference as energy efficiency, which technically it is.
The difficulty is attributing a causal relationship: there used to be a 1:1 correlation between physical work and GDP (though that's changing, with more and more knowledge work), but did that additional work cause the additional GDP?
Here's an example: if gasoline is cheap, and people become more affluent, they may take more long-distance driving vacations. If gas is expensive, they might take the same vacations, but closer to home. Both vacations would be pretty much just as nice, but one would use a lot more gasoline, and cause a false signal that affluence was correlated to gasoline consumption.
Jim Willie's latest missive is a good read-he was ahead of the curve on the plans to displace the dollar http://www.financialsense.com/fsu/editorials/willie/2009/1008.html
Jim is also a partner of the website ContraryInvestorsCafe.com he comments via audio every 3 weeks and is scheduled next week to comment on this topic. His audio archive is found here: http://www.contraryinvestorscafe.com/partners.php?pid=62242&page=0 He also addresses the collapse of Mexico in the second segment of this weekend’s Radio Zapata George posted here: http://www.zapatageorge.com/zapatag/web_radio
Thanks.
Then there's this:
There are others too, the peg the divergence of the whole system running pel mel toward collapse around then too... like:
When studying collapse you usually want to look for where the pump is not what bursts the containment. It's the pump that doesn't stop that causes bubbles to become "burstable", generally because that's their only way of turning off.
It's hard to explain how GDP can increase without wages going up, other than more people working.
People are questioning the numbers.
http://www.shadowstatistics.com/
This lecture does explain where the extra GDP has come from, also despite 2 income families being the norm why they are poorer than 1 income families 30 years ago.
Worth watching
http://www.youtube.com/watch?v=akVL7QY0S8A&feature=channel
Here is the shadow statistics site I meant to reference:
http://www.shadowstats.com/
This site uses old methods of calculating GDP and unemployment, giving lower GDP and higher unemployment. For instance, the unemployment method used until the Kennedy administration, termed U6, is around 17% today. SGS's own figure is above 20%.
SGS shows almost no GDP growth since 1990. This is consistent with what I have seen working as a consulting engineer in manufacturing. The US is deindustrializing at an alarming rate! Manufacturing once provided good paying jobs to high school educated workers.
http://www.amazon.com/Manufacturing-Better-America-Richard-McCormack/dp/...
I've read somewhere that employer's contribution to health care is rising fast and is squeezing wages... Haven't checked the numbers though.
Yes, health insurance costs have been rising above the general inflation rate. (My wife worked in healthcare insurance).
Productivity brought down the cost of almost everything we consume by a factor of 5 or more during the 20th Century, with some exceptions like crude oil. Better public health, like treated water and vaccinations, better nutrition, sanitation, etc. have prolonged our lives, but that is causing the problem of large older population.
The miracles of modern medicine, like saving premature babies, cancer treatment, and curing rare diseases, come at a high cost to society.
The miracles of modern medicine, like saving premature babies, cancer treatment, and curing rare diseases, come at a high cost to society.
That's not a bug, that's a feature. Our problem is that we haven't figured out that if people live longer, they need to work longer, so we have underfunded retirement systems, and too many healthy people playing bingo and bored out of their minds.
Eventually, retirement ages will have to rise, and that will be a good thing.
Maybe we should re-examine the shorter work week policy that was proposed during the last depression.
http://www.uiowa.edu/~lsa/bkh/lla/eosh.htm
http://groups.csail.mit.edu/mac/users/rauch/worktime/
If we lived a 1950's lifestile, the increase in productivity should alow us to get by on 11 work hours per week.
It's a shame but Nick has gone over to the dark side. I would guess he is among the most intelligent people posting on TOD but he uses his brain for evil.
He blocks (subliminally) economic information which conflicts with his perception of an evolution in technology and methodology which facilitates the future industrialized BAU world.
Well, if you disagree, say so. :)
Seriously - please be specific with how you disagree, and we can continue the conversation.
Who knows, you might learn something that changed your perceptions of the world...
Bandits, I disagree. Not the dark side. Nick like many on this site and even more so in the rest of the world is in denial. Those with high intelligence just do denial better. Our human brains are in fact can manufacture lies quite easily. http://cwx.prenhall.com/bookbind/pubbooks/morris4/medialib/readings/spli... . The major denial is the death denial. Ever been to a funeral where the wax like corpse is oohed and ahhed over as looking so good. Our elderly have been packed off to nursing homes and hospitals to die so that we don't have to witness it. Hospice has tried to reverse this for some who can move past the denial. The death of a way of life is perhaps even more frightening to people and so we use numbers and charts and promises and hopes to push the bogeyman back into the shadows. Anything that points to the end of BAU has to be ignored or argued away.
Death of each and every human is assured. All civilizations before our current global one have died. The "cures" just switch use of one finite resource to another finite resource. Even if they work as promised in the end we run up with the fact that we live on a finite planet with finite resources. And if you take each one separately you can imagine a way around the problem. But each one compounds the others. Oil, fresh water, phosphate, climate change, population growth, soil fertility, acid oceans, depletion of fisheries, tropical diseases moving north, economic collapse, political instability, etc, they all intertwine and take more and more resources, energy and ingenuity to solve. Treating them separately is both easier and assists in denial, but fails as they are not separate.
"The basic premise of The Denial of Death (Ernest Becker) is that human civilization is ultimately an elaborate, symbolic defense mechanism against the knowledge of our mortality, which in turn acts as the emotional and intellectual response to our basic survival mechanism. " http://en.wikipedia.org/wiki/The_Denial_of_Death
Nah. We just disagree.
If I too wanted to take an ad hominem approach, I could suggest that accusing those with whom we disagree of either evil or incompetence (psychologically based or otherwise) is also a classic denial mechanism.
But... I wouldn't want us to get distracted from the issues at hand: if you want to have a serious discussion, we can make progress. We might both learn something - I'm open to new ideas, if you are...
Yes, we could get along without SUVs and granite countertops.
OTOH, we still have a lot of unmet needs: childcare, eldercare, healthcare.
I'm not happy with 1950's health standards.
Here is the McKinsey report comparing USA's healthcare cost, broken down into a number of different areas and discussing the variances.
http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_Execut...
The summary is only a few pages and will give you a lot of insight into the problem. These are the details you will never hear on TV or in traditional print media.
Is your first chart adjusted for inflation?
Does it really make sense to look at median income per worker, and neglect the very large increase in the % of the population that's now counted as working?
Wouldn't you expect to see a curve like that, just because of women's greater participation in the dollar economy? How about median per capita worker?, or per household?
Agreed. Things don't look too good. We accustomed ourselves to a standard of living we couldn't really afford, when oil production was increasing. Now with oil production decreasing, we really can't afford our standard of living, and we can't borrow our way out of our increasingly poor circumstances.
In addition, our current productive capacity was based on years of increasing debt and is now way too big to be sustained with our new economic reality. What a tremendous waste of capital.
Sulfur fertilizer and a slew full of basic materials all peak sharply in 2008.
Sulfur in particular impacts basically everything.
http://www.theoildrum.com/node/5851#comment-549470
I'd argue that given all the interconnections even something as benign as sulfur to the rest of the world economy a crash in oil production has impacts all over.
And not this is not peak its the post peak crash that shocks everything.
I find the sulfur connection extremely compelling.
Tontellia where are you the key to food is sulfur !!!!
I am not at all concerned about sulfur because it is available as sulfate in salt lakes, salt flats, sea water and high sulfur coal.
Zinc is a much more serious limiting agricultural element. Worldwide about 50% of soils used to grow cerials are zinc deficient and this is causing nutritional deficiencies in humans and livestocks. Zinc is believed to be one of the early elements due for exhaustion.
As discussed in prior posts:
All farmers/gardeners need to be [PH-testing + soil chem & microbial sampling], then working their topsoil towards achieving a sustained Liebscher's Optimum [easier said than done, of course], which is far above any Elemental Liebig Minimum. I believe that soil-sampling and soil-research is woefully under-funded and under-utilized, thus leading to sub-optimal harvest yields. Zinc deficiency is just one Elemental exhibit of this poor trend.
Prior weblinks discussed global soil deficiencies due to lack of soil-sampling--Hopefully this will change as more Govts become aware of topsoil health requirements. Not only are topsoil depths & mulchiness levels decreasing, but the general affordability of getting the Big Three Elements NPK is decreasing globally, too. Zinc, and other trace Elements, including [S]ulfur, are just as crucial as NPK, but in smaller amounts--it is the overall balance than leads to a potential Libscher's Optimum.
Since bird & bat guano is essentially Unobtainium today: S is crucial for the [P]hosphorus beneficiation process in fert-factories for I-NPKS, and is also key for jumpstarting most industrial processes. As Memmel mentioned upthread, and I concur: it is a key flowrate indicator of trends. Just like water, geo-strategic control of S-flowrates [which yields I-NPKS ferts] would be an incredible weapon to wield against a regional area to decimate their ag-output & industrial capability. Until economic-exhaustion of any Element arises, I expect flowrate control methodologies to be the dominant postPeak theme.
Part of the sulfur problem is that it became so abundant as a byproduct of oil and gas processing that primary S mines closed. Freeport Sulfur had a mine south of New Orleans near where I lived that is no longer in use.
Some oil deposits have over 15% S, which makes them difficult to refine. Byproduct sulfur from Tenzig field was being piled in the desert: “sulfur (up to 17%), an estimated 6 million tons of sulfur byproduct were stored in the form of large sulfur blocks as of December 2002. At the time, about 4000 tonnes a day was being added”
See:
http://en.wikipedia.org/wiki/Tengiz_Field
Did you not look at the price for sulfur ?
Your not thinking this through. Right now its a very cheap by production available in large quantities from oil and NG. Its price went through the roof which means one of its major sources declined dramatically.
I'll let you guess which one.
And going back to the other sources of sulfur require much high prices and probably nothing like the volumes we have been used to.
No large amounts of super cheap sulfur no cheap industrialization food etc etc etc.
The end of cheap sulfur in large quantities is just as devastating as expensive oil.
This is a HUGE problem and be careful about dismissing it. I'd argue the sulfur price spike probably played as much of a role if not more in our economic collapse as oil.
And it suggest the claims of continued increases in oil production are probably bunk.
If I'm right and we are actually on a fast decline path for oil the sulfur side of the problem is far from trivial and its going to cripple our industries and farming.
How are you going to exploit all of these more expensive alternative sources as oil prices go sky high ?
Declining resource quality is a serious problem, but I do not know if S is the most important issue.
For substitution of sulfuric acid in P fertilizer, phosphate rock can be processed to available P fertilizer with phosphoric acid. Problem is that cheap phosphoric acid is made with sulfuric acid (wet process). Alternately, phosphoric can be made with electric arc elemental phosphate, of course being more expensive.
Longer term when elemental sulfur becomes a serious problem, perhaps we can use sulfate reducing bacteria, not to say that the process will be cheap. There might even be cheaper ways to produce S chemically, but they are uncommon because S has been so cheap.
Hydrogen sulfide, produced by bacteria, is extremely toxic, having killed many people in the pulp and paper industry where the bacteria produces pockets of H2S in stagnant pipes or tanks or when acid spills into pulping liquor.
http://en.wikipedia.org/wiki/Sulfate-reducing_bacteria
Sulfur for direct crop nutrition can be supplied with a variety of sulfate minerals, which the USGS calls "practically limitless".
Again your not looking at the price spike for sulfur and not considering what it takes to move to alternatives. Its not that other sources for sulfur don't exist but your simply guessing its not and issue.
If it was not a issue the price would have not spiked like it did and near as I can tell the price of sulfur has been rising steadily for quite some time before it spiked.
As a chemist I can flat tell you the world runs on sulfuric acid there is no real alternative its the critical basic acid in way to many processes.
As far as I know to reclaim it requires hydrogen so without abundant NG sources your stuck with sulfur as a non renewable resource.
If you actually take the time to look at sulfur and sulfuric acid on the industrial scale then I think your viewpoint would change the price spike alone should convince you its a non trivial and huge problem.
The fact that sulfur prices when insane scares the living crap out of me. Oil itself is almost a secondary issue vs sulfur. Your simply not understanding our industrial chemical infrastructure. I'm not joking in the least about how bad losing our cheap source of large amounts of sulfur will be.
This will cripple our industries. And as I said in a lot of ways far worse than oil.
A double blow of spiraling sulfur prices and spiraling oil prices is of course even worse.
This is what crashed us in 2008 it was not just oil.
to reclaim it requires hydrogen so without abundant NG sources your stuck with sulfur as a non renewable resource.
Well, the US has abundant NG sources for a much longer timeframe than the transition period from oil. Also, hydrogen from electrolysis, using wind generated electricity, is an obvious substitute - a little more expensive, but not that much.
Nick again your simply not understanding the problem.
This scares the living shit out of me. And I'm talking end of our civilization scared.
With oil I figured it would be hard but this is far worse.
Well, you'll need to explain further.
I have a hard time understanding how high sulfur prices will crash the economy.
The US imports about 1/3 of it's sulfur. At the price peak of sulfur, at around $600-700/ton, the cost of imports was only $300M, while the cost of oil imports was 2,000 times greater, at about $700B.
How could sulfur costs compare to oil costs in their impact on the economy??
Look sulfur is critical for many industrial process you must have X amount of sulfur to perform these processes. In many cases these are low margin high volume processes mining, paper basic chemicals etc. The to produce the same volume of goods we do today you need a certain amount of sulfur most of it from NG and oil these days. Going back to other sources of sulfur as oil declines means not only a price spike in sulfur but a fairly hard limit on the amount of sulfur thats available. Thus your industrial capacity is limited by sulfur.
Whats interesting is technically you can't really convert suddenly to say EV's over a short period of time and simply abstain from oil as you would quickly run out of sulfur as you need the sulfur from oil for as long as you can get it.
In general to convert and economy away from oil you need to make a large additional investment in the replacement infrastructure also you want to minimize how much you take away from the existing economy. Even if you managed to bring in new energy sources your still talking about needing to retain a fairly steady if not slightly growing economy or best on with real growth. This will require the flow of sulfur to remain near its current levels and near its current prices.
If sulfur becomes a limiting factor i.e the industrial base is forced to contract simply because of lack of sulfur then you have a real problem as your trying to transition using a shrinking industrial base.
When you have wars lack of critical basic material play a big role in deciding the winners and loosers as one simply can make as many bombs etc as the other.
After WWII sulfur a potential sulfur shortage was on the horizon but was offset by reclamation from sour gas.
http://books.google.com/books?id=O4rzzkUQyzIC&pg=PA144&lpg=PA144&dq=Sulf...
You can read the book I linked about sulfur issues in the 1950's.
More here.
http://www3.interscience.wiley.com/journal/120060078/abstract?CRETRY=1&S...
Its been a long time since lowly sulfur was a concern but if you go and read about the importance of sulfur before large scale desulpurization of oil and NG grew its crtical role was widely recognized even as late is 1960 serious government intervention has happened to ensure sulfur supplies for the military.
Go back and read about what happens when you start running low on sulfur things get very tense very fast. Its been a long time since sulfur was important and the only reason I looked in the first place is because its something that cannot easily be hidden if you don't believe the claims about world oil production. But once I say the dramatic increase in price I realized the implication it has on our future from the historical record.
And old article from WWII
http://query.nytimes.com/gst/abstract.html?res=980DEFD7103BEE3ABC4F53DFB...
Modern industrial process are very sensitive to shortfalls in sulfur availability.
The rising prices coupled with rising fuel costs sent a price shock through our most basic industries most of which are run on very thin margins. High sulfur prices are like power money bank reserves in a fractional banking system. They hit right at our core industries.
More links.
http://www.time.com/time/magazine/article/0,9171,805879,00.html
I'm saying the exact same thing that the president of Britain's board of trade said last time sulfur supplies became a concern its crippling to industries.
And obviously the best alternative sources had been fairly depleted by the 1950's as production of sulfur from NG and oil declines we don't have any ready replacement.
And even when alternative sources where being used they where hitting their limits by the 1950's consider how much larger the global economy is today vs 1950. A forced return to the economic output levels of 1950 as sulfur declines is non trivial to put it mildly.
I had my doubts already about how successful or easy a transition off of oil would be just because of the energy issues throw sulfur issues on top and the problem is exponentially harder to solve and intrinsically more destabilizing because of the critical role sulfur plays.
The historical record points towards concerns as strong as mine in the past when sulfur supplies became uncertain. As oil consumption falls in the overall amount of sulfur production declines sulfur quickly turn one of the least though of elements into a critical strategic material.
Memmel,
This needs to be a key post!
Chemical engineer here, so I have an excellent understanding of the chemical industry. Turned professional investor.
We had a generational spike in most commodities. New mines and chemical plants take years to build, once the decision is made. S, P, K, iron ore, nickel ore, Pt,Pd were off of everyone's radar after commodities hit all time lows around 2000-01. Even gold was down to $260. Rising demand from China was underestimated.
There was sulfur stacked in the desert when the price spike occurred.
"Since the oil from Tengiz contains a high amount of sulfur (up to 17%), an estimated 6 million tons of sulfur byproduct were stored in the form of large sulfur blocks as of December 2002. At the time, about 4000 tonnes a day was being added.[1] On October 3rd, 2007, the Kazakh environment ministry was reported to be considering imposing fines against TCO for alleged breaches in the way the sulfur is stored."
http://en.wikipedia.org/wiki/Tengiz_Field
If you are really concerned about scarcity of S then invest in getting it out of Kazakhstan. A couple of years ago they may have paid you to take it.
The highest sulfur oil and coal will be the last used, so look for increasing byproduct availability in the medium term. Beyond the mdeium term we will have scarcity of many commodities.
Shorter term food is going to be an issue. All it will take is one bad crop year worldwide with record low stockpiles of recent years.
The highest sulfur oil and coal will be the last used, so look for increasing byproduct availability in the medium term.
Illinois basin coal is, what, 5% sulfur? There's 150B tons of coal there, so that's a lot of sulfur. Of course, with luck we won't use it.
Beyond the mdeium term we will have scarcity of many commodities.
What are you most concerned about?
Silver, zinc, lead, copper, tin
Semiconductor doping materials, LED, PV and capacitor materials (germanium, gallium, thallium, selenium, tellurium, cadmium)
Indium
http://en.wikipedia.org/wiki/Indium
Rhodium, platinum
Metallurgical coal. China now produces something like 5 times as much steel as the USA.
Some rare earth elements.
Molybdenum
Some of these may be seriously depleted in a generation. Others just suffer from under investment.
Well, I hope I'm not imposing by asking: which ones appear to just suffer from under investment? That seems like an awfully important difference...
Underinvestment:
Rare earths
Some semiconductor materials (gallium)
Fertilizer: K, P, though new capacity under construction
Sulfur
Platinum. Recycling catylitic converters will reduce need, especially if internal combustion cars are peaking (assumes PIEVs will take market share, leading to shortages of lithium).
PV materials like cadmium, tellurium
Some rare earths. Known US deposits not being mined, but possibly reopening existing mine.
Copper-Supposedly there is ample copper, but we also hear that major new deposits are extremely hard to find.
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A lot of materials on this list had production curtailed because of the economic crisis.
So, by subtraction - the depleting ones are:
Silver, zinc, lead, tin
Semiconductor doping materials, LED, and capacitor materials (germanium, thallium, selenium)
Indium
Rhodium
Metallurgical coal.
Molybdenum
hmmm. Silver had a price peak long ago. Was it the Bass brothers who lost their oil billions trying to corner silver?
Lead production peaked long ago - I wonder about including that one.
Some of these will respond positively to increased price, while others won't, so even experts will be wrong (think shale gas). I do not profess to be an expert, so I can't confirm or deny.
Also, demand for these elements is growing at different rates. Molybdenum, lithium and the electronic elements have above average growth rates.
Gold is peaking, but there are relatively few uses for gold, besides jewelry, money, dentistry and upcoming as a catalyst.
Lead was used in plumbing, corrosion resistant coatings, paints and gasoline octane booster, but because of toxicity it was phased out of almost all of those applications, thus the peak. Lead storage batteries are one of the most efficient over the charge discharge cycle and have superior capacity for supplying current to start car engines without harming battery life. But batteries are largely recycled.
There were some great investment bargains a few months back. Teck Cominco (TCK) (metullurgical coal, copper, zinc) $3, now $30. Was $50 at high. Freeport McMoran FCX (copper, gold, molybdenum) $15, now $74, was $125, Thompson Creek (TC)(molybdenum) $2.5, now $12.8.
Interesting. Thanks. Here's a fun quote:
"So just what proportion of {rare metals} have we used up so far, and how much is there left to go round? Perhaps surprisingly, given how much we rely on these elements, we can't be sure. For a start, the annual global consumption of most precious metals is not known with any certainty. Estimating the extractable reserves of many metals is also difficult. For rare metals such as indium and gallium, these figures are kept a closely guarded secret by mining companies. Governments and academics are only just starting to realise that there could be a problem looming, so studies of the issue are few and far between." source
Do you see any one or two as causing more problems for the economy than the others?
I'm guessing here without doing any further research:
Molybdenum
Zinc
Semicinductor elements
This is not just based on scarcity but also on broader economic impact and lack of suitable alternates.
(sic)
Not including silicon, silicon dioxide, aluminum. Don't forget the dopants at 10e-16 concentration!
I don't know, but that has to cover about 99%. III-V elements and other conductors cover the rest.
FWIW, Syncrude up in the oil sands is stacking up large piles of sulphur blocks. If the price was higher, they would sell it. They are still selling some, but less.
A good link on this sulfur
http://folc.ca/sulphur_storage/sulphur_blocks_4.htm
The problem is of course right not its simply not economic to sell it from such a remote location and no sulfur using industry really exists in the area.
Same with Kazakhstan for that matter. I'd argue that if it became economically viable to ship sulfur by rail from such remote locations then we would have some serious problems.
Its a bit interesting that Syncrude seems unwilling to invest in expanding related chemical industries in the area given the size of the oil sand deposits.
And this sort of dynamic is not uncommon in the chemical industry one mans waste is anothers critical raw material. If you read the history of the chemical industry its not uncommon for waste byproducts such as gasoline which initially was burned or simply dumped when the primary product of crude distillation was for lamps to turn into a valuable product. Heck NG and even distillates are routinely burned off in many parts of the world simply because of the lack of ability to get them to market. That does not mean they have no value its its a bit disingenuous to point towards examples like this to prove all is well with the world.
The problem remains once sulfur supplies drop to the point that these remote sources and pyrites become economically valuable then we have serious problems as almost certainly the total production volume will be a lot lower and the prices a lot higher.
As oil production fall the sulfur from the remote stores would become viable to sell sure but then quickly exhausted as overall oil production falls and your looking at a fairly permanent sulfur shortage and steadily falling industrial output from that point forward.
I'm saying we wont have much choice but to reduce our industrial output to match the availability of sulfur. Certainly we can eliminate ares of waste or luxury items but paradoxically these are the generally the items that are least sensitive to increases in sulfur price far more likely is a significant curtailment in fertilizer sold in third world countries as American continue to get their bounty and toilet paper but fertilizer prices rise steadily. So the most probably outcome is of course that fertilizer will get expensive and then eventually have its export curtailed to protect American farmers.
When we hit the sulfur crises is unknown given the recent price spike without the economic pull back it looks like we already touched the beginning of it. It does not look like it will lag falling oil production by all that much if at all. Once supply is say 5% below demand then I'd argue sulfur will quickly become and issue. So shortly after oil becomes problematic for our currently reduced level of economic activity the sulfur issue should become a problem within say a year or so afterwards if that long. Longer term say five years farther out maybe shorter your probably looking at this effective cutoff of fertilizer sales to many third world nations along of course with and overall contraction of industrial output.
Out of the frying pan and into the fire or brimstone in this case.
http://www.oil-price.net/
The price of oil is creeping up with the Dow. Now at 72.29! Predicting oil over 75 when Dow breaches 10k.
A video on that behalf
Part1 http://www.youtube.com/watch?v=7P72DBplhdE
Part2 http://www.youtube.com/watch?v=tHq-ZxDHPz4