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Opec Meeting Reveals Further Degeneration of the MENA Region
Posted by aeberman on July 1, 2011 - 10:52am
This is a guest post by Derik Andreoli, Senior Analyst Mercator International, LLC
Upon exiting the most recent Opec summit, the visibly frustrated Saudi Oil Minister, Mr. Ali Naimi, proclaimed it to be “one of the worst meetings we have ever had.” In the lead up to the meeting, oil traders had come to believe that Opec would increase production quotas to cover the shortfall of light, sweet Libyan crude going into Europe’s peak demand season. This led traders to the conclusion that tight markets would loosen (relatively), and as a consequence, oil traders bid down the price for ‘paper barrels’ (oil futures) by a couple of dollars.
While hindsight may be 20/20, foresight is rarely better than 50/50, and in this case, the market was wrong. Opec failed to revise production quotas, and upon learning of this decision, traders quickly bid the price back up. A couple days later, Saudi Arabia announced that they would break with Opec by lifting production above their allotted quota. Oil traders reacted by bidding the price back down, and in the end, prices had settled back to previous levels as if the summit had never happened. But the story isn’t over until all the holes in the plot have been filled, and all the nagging questions answered.
Why, for instance, would Saudi Arabia announce that they planned to lift production above Opec’s stated quota? Why not just covertly lift production? After all, when it comes to the Middle East, oil markets are deliberately opaque, and in fact, Opec quotas are regularly flouted. Furthermore, from a purely financial perspective, such bold announcements make no sense at all. If we assume that Saudi Arabia exports somewhere around 6.25 million barrels of oil per day, we can easily calculate that at $100 per barrel, Saudi Arabia nets a daily petro-income of $625 million. If they were to covertly lift production by 200,000 barrels per day (as they and other Opec members have done in the past), Saudi income would increase by $20 million.
By announcing their intentions to lift production, however, the price slid $3 per barrel, and the Saudi daily income was reduced by roughly $19 million per day, a 3% decline (assuming exports at 6.25 mbd). To maintain a stable income under this scenario, Saudi exports would need to be lifted by roughly 200,000 barrels per day. Hence, the Saudi announcement makes little sense from a business perspective. Of course the Saudi Arabian Oil Company is more than a business, it is the fulcrum of Saudi Arabia’s geopolitical power, and being the only nation with significant spare production capacity provides the Saudis with a point of leverage which they use to their political advantage.
And there is no more important time to manipulate these geopolitical levers than now. Saudi Arabia is not immune to the wave of populist uprisings sparked by high food prices, high unemployment, and corruption that has crashed onto the shores of Egypt, Libya, Yemen, Bahrain, Syria and so on. In fact, Saudi Arabia shares a common border with Egypt, Yemen, and Bahrain, and is situated just across the Arabian Gulf (Persian Gulf in the West) from Iran. While geographically proximate to Shia-ruled Iran, Sunni-ruled Saudi Arabia could hardly be more distant in ideological/theological terms.
The Shia-Sunni rift dates back to the death of the Prophet Muhammad and the disagreement over successorship which followed. The Shia believed that the leadership should stay within the family while the Sunnis believed that a group of elites should decide who the rightful successor should be. Over the years, Sunni and Shia elites have fanned the flames of division for political gain, and the fire has become so hot that there is little hope that the flames will be extinguished any time soon.
Though the majority of the Saudi population is Sunni, Shia predominate in the oil-rich Eastern section of the country. Similarly, Shiites comprise the majority of the populations of Kuwait, the UAE, and Bahrain, yet these border states are, like Saudi Arabia, ruled by Sunnis.
This is of particular concern because the flames of the populist uprisings are being stoked by Shia- dominated, Shia-ruled Iran that hopes that the populist uprisings will create a power vacuum that will be Shia-filled. This is why Saudi Arabia sent troups into Bahrain. This is also why Yemen President Ali Abdullah Saleh was evacuated to Saudi Arabia after being wounded in a rocket attack after months of peaceful protests gave way to violence. The threat of regime change in such a geopolitically charged environment also explains why Riyadh has committed to doling out over $130 billion for housing and social programs aimed at easing rising domestic tensions (and why the Saudis require high oil prices to balance their federal budget).
In order to buttress their regime, Saudi rulers have maintained ties with the U.S., despite the entrenched divisions between the House of Saud and the United States. These divisions are rooted in the U.S. support of Israel, and the U.S. overthrow of Saddam Hussein, which resulted in the installation of the first Shia government in Iraq.
On the other side of the coin, access to oil is why the U.S. has supported, and continues to support, the Saudi rulers and similar regimes in the MENA region despite known links to al Qaeda and other extremist groups. Preserving the power relations that secure the flow of oil further explains why in October of last year, the U.S. penned an arms deal worth $60 billion (the largest single deal ever) with Saudi Arabia and have been training an elite Saudi military force tasked with protecting vital oil infrastructure. Perhaps more importantly, the rising threat to the House of Saud has, in fact, granted the Saudis an important bargaining chip in the debate over the establishment of an internationally recognized Palestinian state. Riyadh has threatened ‘disasterous consequences’ should the U.S. veto the UN recognition of a Palestinian state. Such a recognition, however, would significantly weaken U.S.-Israeli relations, and one might go so far as to interpret this as a divide-and-conquer strategy. At any rate, for these and other reasons, the Saudi-U.S. relationship remains tenuous at best.
To bring this back to point, regime preservation explains why Mr. Naimi left the June Opec meeting visibly frustrated, proclaiming it to be the worst meeting ever, and why Saudi Arabia announced that they were going to break with the Opec quota system.
Though the decline in oil prices brought about by the Saudi announcment hit their own bottom line, it also hit Iran’s bottom line. This is a small price to pay, however, given that Mr. Al Naimi’s words and actions buttressed the U.S.-Saudi relationship while at the same time driving the wedge between the U.S. and Iran ever deeper. But don’t take my word for it, consider instead the reaction of Congressman Edward Markey (D) who proclaimed, “Opec, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the western nations.”
Of course the situation in Syria highlights the fact that Iran faces a similar threat to the one faced by Saudi Arabia. In both countries, domestic discontent and a yearning for democracy threatens to topple the ruling regimes. Consequently the U.S. finds itself confronted with competing objectives and mired in the complexities of Middle East geopolitics. We feel compelled to support the pro-democracy movements, but require the unperturbed flow of oil out of the region. We need look no further than to Libya to see that regime change – be it to a functioning democracy or from one authoritarian regime to another – threatens the flow of oil. Hence, reconciling these competing objectives requires finesse and more than a bit of luck.
Bringing this argument full circle, while the most recent Opec meeting had little lasting impact on oil prices, the real story is found in the analysis above. A troubling truth is revealed by considering Mr. Al Naimi’s words and actions in the context of the ongoing MENA crisis. As an x-ray reveals asymptomatic osteoporosis, Mr. Naimi’s words and actions reveal just how fractured and fragile the Middle East has become, and by extension just how perilous our economic recovery remains.
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gailtheactuary says:
The issue is timing. I see our backs up against the wall now. The financial problems for quite a few countries are immediate. If we had 50 years, or even 20 years, for scaling up renewables, then the situation would be different. We are probably talking about something more like 6 months to 2 years.
http://ourfiniteworld.com/2011/06/29/how-can-a-government-fix-its-debt-p...
"Our backs up against the wall " says it all, but most of us are not yet ready to face up to this ugly truth.
I try to share Greenish"s "alien biologist " perspective when thinking about what might happen in terms of geopolitics.
The world will be going to war in a serious way within the next few years, barring some very lucky breaks.
It's what we have always done when confronted by a grave resource crisis, and other than wishful thinking, there is no reason to think things will be different this time.
I want to compliment the author on packing the most useful information about MENA politics I have ever encountered in such a short article.
Obviously he has a far deeper and more nuanced grasp of MENA politics than the vast majority of people who write about the subject.
mac - My untrusting nature sees another explanation. Let's say you can make a public statement that can swing the oil future market $2/bbl. Not much of a change, eh? But given that NYMEX alone trades around 1 billion paper bbls every day your statment can produce a $2 billion wealth transfer. And that's not counting other markets. So lets assume you have the bucks to pick up 5% of the trades. Pick right and you could make $100 million in a few days. And if the market swings $10/bbl...now you're making half a $billion. Then you can take that $500 million and buy more futures betting on an opposite move (thanks to a public reversal of your previous position) and now you might make $5 bilion on the next futures swing.
Essentially insider trading in the eyes of most. But I doubt the king is worried about the KSA SEC coming after him.
The issue of paper barrels and real barrels has been talked about here quite a bit lately, and it seems that your explanation fits better than most. I don't see that a change in the futures price of a barrel is affecting the actual price that much, so even if the future price goes up $10, how does that change what KSA can sell a physical barrel for today?
The same can be argued for the announcement of the SPR/IEA release. This is supposed to happen sometime in July, and the reported price dropped on the news (and then went right back up later). How could the announcement of a release of 60 million barrels in July make any difference to the price of an actual barrel in June?
Let's imagine you are selling tomatoes at the village market. You get a very good price for your tomatoes, as the townspeople need a lot of tomatoes for their salads. You have a lot of tomatoes to sell this summer, and plan to make a lot of money. But then you hear the news that someone from outside the village is coming next month to sell 60 cartloads of tomatoes in a very short time! He's going to flood the tomato market! You had better sell as much as you could before that happens! It would probably be better to lower the price before he arrives!
Ok, good point. But in the case of the SPR/IEA I'm selling 85 cartloads every day and the outsider is coming with 60 cartloads that he's going to sell over the entire month, or two cartloads a day. I can see that the futures market might jump around all over the place no news like this, but the real market seems like it shouldn't be overly affected.
My - That's certainly one angle. But let's use rocks as an example. Right now the village has a big demand for rocks and mine are selling nicely. But some damn geologist is coming to town next month to sell one load of rocks. So I keep selling my rocks at the same price because the town folks need them right now...his aren't on the market yet. So when the guy shows up to sell his rocks I keep selling mine for the same price. And guess what? he's selling his rocks for about the same price as mine. Of course, he and I have more rocks to sell then the town needs this month. But no problem for me: this guy will have sold all his rocks by the end of the month and mine will be back in high demand. Maybe even higher if I decide to reduce my rock sales by the same amount he's offering. Folks know he won't be here next month selling and I'll be the only one with rocks. Make me angry and I might not sell you any rocks next month when I don't have the competition.
My rocks doesn't spoil if I don't sell them next month. In fact, not too far down the road those rocks I don't sell might be worth more when the rock supply starts to dry up as I know it will.
If you can influence prices in the rocks market, then you should be able to make money in the 10 times larger market for rocks futures, where you only have to put up a small percentage of the value of the rocks futures contract. Or even less capital is needed to play in the even larger market for options on rocks futures contracts
Merril - Exactly. Some folks may think they're just a bunch of fat sheiks sitting around eating couscous with their fingers and don't know how to work the markets. I've heard stories about the folks advising the KSA on engineering and financial matters. No one is going to beat those folks at this game. Just look at some of the suspicious activity in our market right before the SPR release was made public. And I consider our players underfunded amateurs compared to the KSA.
The geologist is coming to town next month to sell his rocks, and these prices are on futures contracts for 30 days from now. I don't think the Saudis lost anything on the sales they made today for their R.O.T. (rocks, oil, tomatoes), but I have no expertise in this area, so please enlighten me if I'm completely wrong about this.
EA - And to add to the confusion you've pointed out we don't know how much oil the KSA has sold since the announcement of the release. Even more important: we don't have a clue at what price they sold any of that oil. Much of their oil is sold on long term contract and some on the spot market. But those are all state secrets. And you won't find any of the buyers blabbing either if they want to keep buying.
And I think it would be very naive to think th KSA was working the futures market to their benifit.
Escape Artist, news moves the market. If there is news that a a large amount of any commodity will be dumped on the market next week, it will drive the price down today. It will affect not just the futures market but the spot market also.
If there is a storm over wheat growing areas that will cause less wheat to be on the market next month, that will drive up the price of wheat today as people start hoarding and sellers will ask more for their wheat because they know there is going to be a shortage in the future. And it works the same if they know there is going to be a glut in the future.
Sellers ask more if there is going to be a shortage and ask less if they know there is going to be a glut. And buyers will pay more if there is going to shortage and they will pay less today if there is going to be a glut next month. In that way news affects supply and demand.
It's no great mystery, it is nothing more than common sense.
Ron P.
Hi Gail,
The Middle East has always been seen as a bit of a basket case hasn't it.
My thinking on the affects of Peak oil have changed a bit over the years of coming here. I used to read in horror sites like "LifeAftertheOilCrash" saying we will have a few months once things get bad, only to realise it was basically an advert for food/survival rations and the like...
I think the system has a huge amount of momentum in it that will sustain it for a very long time. That's not to say things won't get worse if the spigots output reduces, just that I don't expect the worst of the doom-mongering to come to fruition. Humans have a very large capacity for change and survival and we havn't yet begun to scratch the surface of what may be possible, we are so far over our basic needs for survival that there is a huge amount of fat to trim before we get down to essential muscle.
I think the worst outcome is that all these 'artifacts' of increasingly expensive energy are not recognised as such and that governments do not prepare (I don't really mind if they do it by stealth or other ways to avert panick -e.g. "Greenhouse warming"/"low carbon initiatives"/"better competition against Japanese/German efficient auto-makers"/etc.)
As far as scaling up renewables it looks like China, Japan and Germany are going to go all-out down that route. This has major implications for the usage of certain commodities like REEs and Silver. Financial problems (like debt) will be dealt with by inflating the problem away or default followed again by inflation, both look to make citizens poorer.
Nick.
It’s all a matter of perspective really it may be a pleasant sunny day in Putney, but I fear there are metaphorical storm clouds on the horizon. In 2008 the worlds banking system was really on the brink of collapse, food prices hit a new record. Two years and several trillion dollars later and food prices are again shooting to the moon, the middle east is in turmoil none of the debt problems have been extinguished. Europe is insolvent and kicking the can down the road without solving any of the underlying debt problems American banks have underwritten the credit default swaps on the bonds of the European periphery so after the German & French banks absorb the massive losses of Greece, Belgium etc and England drowns after Ireland, Portugal and Spain default, Asia over heats... in short I think the doomsday predictions could well come true in as little as 2 years.
To me, it depends on how well our current system "stays together". As long as it stays together, we are OK. But once we start having pieces fall apart--stop working--then we have real problems.
One of the vulnerable areas is in the MENA region. Overthrow of governments can have a bad outcome. It is hard to get a new government formed that works any better. Oil exports can be cut off all together. With high food prices and high unemployments, and examples showing that revolutions can work, this is a vulnerable part of the world.
Another vulnerable area is EU, with the various countries with debt crises. It is not inconceivable that the EU fall back to its member countries again at some point.
Even the US has some vulnerability in this area. With all of its debt problems, and over-promising of future benefits (social security, medicare, and insurance on bank accounts and pensions), it will have terrible choices to make. Should politicians cut programs, and lose on re-election? Should they raise taxes. We know what happened in the case of the FSU. It became "former".
In order “to stay together” does our current system not require growth? At the very fundamental level all money is created as debt which must be paid back with interest. Perhaps a steady state system can be entertained as a utopian ideal, but I do not see it even being seriously contemplated by either politicians or the finical elite. It is surely not a matter of if, but when the system collapses. In many ways the problems in Europe are somewhat mirrored in the US if you exchange failing cities and states in America for failing countries in the EU as debt is transferred from the banks to the states/countries and then to the Fed/ECB. The future will resemble very much the past I fear.
"In order “to stay together” does our current system not require growth? At the very fundamental level all money is created as debt which must be paid back with interest."
Try applying your analysis to risk vs interest in an opaque market, and you'll see who's getting all the money.
Government guarantees give you dirty money. It's a rigged game. The banksters own the government, and so they own us.
One of the issues I see is sort of buried in this post: How can a government fix its debt problem? on Our Finite World.
It talks about the central government of a country being dissolved, and a new government possibly not being formed. It applies to MENA countries as much as much larger countries, like the Former Soviet Union.
Belgium has been without a central federal government for months now
Belgium's unelected prime minister marks one year in the job
http://www.belgium.be/en/
They have a king, a prime minister, a cabinet, and a web site. What more do they need?
I recently reread Yergin's, The Prize, in anticipation of the sequel which is supposed to come out this Fall. The Saudi comments/break with OPEC reminded me of what happened to The Texas Railroad Commission once there no longer was a surplus of oil -- it disappeared. Since OPEC was more-or-less based on the Texas Railroad Commission, this may be an acknowledgement that the surpluses are no more, or so one might think (if history repeats).
The 1972 Texas crude oil peak (C+C, RRC), in black, lined up with Saudi crude oil production (C+C, EIA) through 2005 (different vertical scales):
t - You make a valid point about the TRRC losing its ability to effect oil prices. But it hasn't disappeared by any means. It still regulates the oil patch with an iron fist. It also provides complete public transparency to oil/NG production in the state. In fact, the monthly allowable system the TRRC dictates is still the law but has been set at 100% since the 1970's. And if for some imaginable reason the TRRC wanted oil production to be reduced 50% in the state all they need do is vote so at their regular monthly meeting.
Whether the KSA has any spare capacity or not they still have absolute control over their output. The TRRC lost its control because others could flood the market. That possibility appears to be gone forever. So, ignoring political/military aspects, both the KSA and TRRC can have a significant impact on future prices. But not so much setting the high limit but the low end. As long as the KSA accepts less potential cash flow they can maintain prices over $100/bbl. Even if the world goes into a major depression and demand is cut significantly the KSA can reduce production. Granted they would be selling a much smaller volume and thus seeing less income. OTOH the KSA knows better than anyone else what their future production decline will be. They may like to keep the world guessing but they have the most sophisticated reservoir management system ever seen on the planet. The TRRC doesn't have that capability to reduce rates: we have tens of thousands of operators and royalty owners that wouldn't tollerate such actions. OTOH KSA policy is controlled absolutely by the royal house and thus are free to act in their best interest.
Actually in 1976 the TRRC trimmed the allowable - to 99% - purely as a gesture, of course. Story here: The Victoria Advocate - Nov 18, 1976
Dallas independents William Burrow and HS Bennet suggested trimming the allowable 10% in late 1986 - an idea which was apparently almost universally condemned. They were following up on a suggestion from who else but T Boone Pickens. The Victoria Advocate - Nov 13, 1986
Rockman,
don't quiet understand what you are getting at, if you can't inject more oil into the market, because of PO, how can you affect it? if you can't turn on the tap how can you affect the volume of oil on the market, which determines price, if you can;t determine price then your political clout is diminished. If the rest of the world is in the same position what then? It seems to me that we are nothing more than onlookers with no ability what so ever to control the price of oil until the price rise to such heights that it triggers a world wide recession. Spare capacity is what gives you real power in the market and if you haven't got it, then as far as I see it, you best bet is too, go along with the customer that buys your oil that will cover your back. Remember a few years ago KSA had the capacity to flood the market and force the prise up or down now they don't. I have watched the farcical dance of the OPEC meeting over the last couple of months with a sense of cynical pleasure and despair, pleasure because I think Islam is a threat too the world and despair because there ineffectiveness will lead to a world recession because they will not be able, to control oil prices.
Deep Regards
Yorkshire Miner
yorkie - I probably explained too quickly: the KSA has the ability to maintain high oil prices at current levels regardless of the SPR release or even a global recession. All they need do is to cut back significantly on their production. No one, including the worlds SPR reserves, can make up for this volume for very long.
Now would the KSA ever make such a drastic play? Don't ask me...I don't make prediction. But I do offer possible scenarios. And this is a possibility IMO. Perhaps not a strong possibility today but somewhere down the road it might be.
I think it's important to recognise that it's not democracy as such that's being yearned for (a US/Western conceit), but lack of controlling shackles and the desire for a better life. Democracy, as practised in the western world, is only an alternative mechanism for control of the masses. As such it's quite as capable of snapping on the controlling shackles to its members; just it tends to make them see-through.
Why does this matter?
Well, fast-forward to an obviously post-peak world. Standards of living will have to fall, matching both energy and a system that can't cope with the necessary rate of change / doesn't have a clue. Soon we have large groups, be it in a democracy, that have nothing left to lose. There is no functional difference between what the dictator or the democratic leader will do in response.
What is being played out in the MENA countries is once again the age old story of disaffected groups and controlling oligarchies - not a yearning for some democratic model fashioned on the west. People will seek to usurp existing structures to claim, or reclaim, a world they think they are entitled to.
And they won't be too smart, strategic, or forward looking about it. And they won't take resource limits or the need to transition into account.
well said garyp.
Democracy is an anomalous form of government that only works during periods of high resource availability and low social stress.
Normally governments are of two types, and countries and regions have tended to alternate between them.
- Monarchic, where a powerful executive purports to act on behalf of, and is supported by, the lower classes.
- Oligarchic, where the executive is weak and power is distributed among the class of landowners, merchants, financiers and military leaders.
Wars and revolutions tend to establish the monarch. Periods of peace see the erosion of central power and eventually result in an oligarchy. For example, in China we are seeing the transition of the monarchic form under Mao to the oligarchic form of today. A similar process is happening in Russia.
Indeed, it takes our collectively inflated ego to believe that starving people are revolting because they want "democracy". Yet I have rarely seen it questioned openly.
You also don't need to fast-forward, just look at what occurred in France a few years ago. Not that different really and bound to happen again in another democracy before too long.
Excellent post on possible Saudi thinking on their output decision and as usually the case, comments are sharp and to the point. The previous article on OPEC oilrig counts was brilliant and extremely insightful – really puts the possible idea of these OPEC countries having had reached their production limits due to declining yield of existing fields in frightening perspective.
The more articles I read on this site, the more myopic I feel it is.
Who are the best negotiator's in the word?
That Arabs and Israelis.
There are a lot of assumptions going on here.
Living in KSA as a kid and being connected to them ever since, there has been no change in their behavior for 30 years. They have ALWAYS spent billions on their people and internal projects. They have always smashed any Shiite rebellion that popped up in Qatif with their own troops. That city has always been the center of whatever activist existed. Which is not much.
Every 20 years or so, a bunch of Saudi women get in cars and drive around. They are promptly arrested and released with some hand slapping going on.
The Palestinian state? HAHAHAHAHAHA
The Saudi's look down on the Palestinians and only GRANDSTAND this issue to appease the ignorant of the Arab world. Master negotiators to the end. I don't think they have done much Palestinian Rah Rah since the 6 day war, that scared the hell out of them.
An Elite Saudi Military force, now that is an oxymoron. During the Iran-Iraq war, I remember this entire elite Airforce made up of many of the House of Saudi's princes, to all be sick with the flu when they had to scramble to the border of Kuwait. Our AWAC's and own Navy jets were instead making sure the battles did not spill over in Saudi. When the Iranians stormed Mecca during the Ramadan, they had to call in the French Foreign Legion to take care of things. Their culture is not a violent one, although, the press and movies present a different scenario.
I am curious as to what divisions there are in the House of Saud? It seems they always take our money, our military, and if I am not mistaken, ARAMCO is 100% American. I guess if the House of Saud is 10,0000 children, there are bound to be some that think Iran is a great place.
A stable income? If you are making Trillions and you make a billion less here and there, I guess that is not stable enough?
I do agree with you on why they are breaking the Opec quota system. It's because they can and the others do not have spare capacity to do it. It is of little benefit to the Saudi's to worry about Opec anymore. It is actually in the Saudi's best interest for the Opec countries to be in turmoil to drive oil prices higher if that was all they are about. But it isn't, they are far more intellectual and complex than that. They know the oil shocks cost them money and long term problems. They prefer stability as do most countries.
brian - Thanks. Good to hear a non-US perspective. Keep it up.
ARAMCO may have been essentially 100% American for a period of about 40 years (1933-1973) when it was controlled by a consortium of four American oil majors (Chevron, Texaco, Exxon and Mobil). But by 1973, the Saudi state had taken a 25% interest in ARAMCO, and in 1980 the Saudis made it a 100% interest, taking full control of their nation's oil enterprise.
Prior to 1980, ARAMCO meant 'Arabian American Oil Company'. Now the full name is 'Saudi ARAMCO', which stands for the 'Saudi Arabian Oil Company'. And even though the company name no longer includes the word 'American', the Saudis have still retained 'AM' in the ARAMCO acronym. Perhaps they were being diplomatic (or even sentimental ;) but I think it would have been perfectly logical if the new official name had become 'Saudi ARABCO'.
Stoneleigh's latest, from yesterday: how peak oil is mostly going to be financially driven, near term. A race to the bottom between finance and resource availability.
She discusses peak oil beginning about halfway through, but don't miss the earlier part about the looming mother of all depressions ;-)
There is another interview TRANSCRIPT to check out. Excellent presentations, but she never quite pinpoints the real problem: predatory financiers and their cute credit swaps, contangos, and high-speed untaxed trades.
Ah, for a Tobin Tax.
I haven't read Stoneliegh lately, as I am personally convinced that there will be no cosmic scale deflation-it's simply to easy to create inflation in a fiat money world, and when the politician's backs are to the wall, they will go with whatever methods are necessary to create that inflation.
Stoneliegh's mistake is to ASSUME that existing banking institutions will continue to exist in more or less thier present day form.
When I was a tenth grader taking my first ag class at the consolidated county high, the teacher took me aside and printed ASS U ME on a piece of paper and ask me to read it aloud.Assumptions are apt to make asses of all of us.
When the shit is well and truly in the fan,congress and the executive branch will burn the heads of the federal reserve banks at stakes if that is politically expedient, or more likely, simply repeal existing banking laws and arrangements, instituting new ones as necessary.
The old rules will go on the trash heap with the old banking system.
I am under no illusion that such drastic actions will actually solve our problems;but they WILL temporarily postpone the day of the final reckoning, just as burning the furniture and eating the seed corn will postpone the day a peasant finally freezes or starves.
The electrons that supposedly couldn't produce inflation have apparently scared tptb enough that they aren't willing to hit the print key again-FOR NOW.
The costs of the pesticides I use are up twenty five percent this year.
Rockman has made some great points today, and there is noboby whose opinion , in respect to the oil industry, I hold in higher esteem.
Perhaps(probably?) he is right about the Saudis, and possibly other producers, when he speaks of manipulating the market in order to run prices up -or down.
I do not doubt that the Saudis have done both before, and will again, if it suits thier ends.
But personally I, like Rockman and Darwinian, do not believe "speculators" can significantly influence oil prices-UNLESS we happen to define some of the actual physical players in the market, such as the Saudis, as being speculators-which seems to be consistent with what both these guys have to say.
I WILL be the first to admit that either of them has forgotten far more about oil than I will ever know.
My one question argument in respect to "speculators" controlling or significantly influencing the price oof oil has been and remains as follows:
Just how is it that these speculators have managed to insert themselves between the incredibly hard core, financially sophisticated folks who are in control of the oil industry, from exploration to retailing gasoline, and the public, thereby skimming off a fat profit that these figurative great white oil sharks regard, from thier pov, as rightfully being thier own?
Rockman speaks above of ( oil) supplies drying up.I have no doubt he is correct, or that the large majority of regulars here agree on this point,the only real question being how fast and when.
I'm a generalist in a world of specialists,and as such, unqualified to say much about the oil industry.
But sometimes specialists are blinded by thier own expertise.As a generalist who has read and studied a LOT of history, I can say with complete confidence that one, REAL oil wars are on the horizon, and can be avoided only if we are incredibly lucky.(The wars currently going on are merely a prelude , a warm up show.)
I can also say with complete confidence that politicians will ALWAYS opt for A solution-ANY solution- that postpones an eminent disaster, once they are convinced the approaching disaster is a foregone conclusion.Inflation is such a solution, and probabl;y the one to implement.
If any body has a problem visualizing how Uncle Sam can create inflation, let him ponder this:
What -when the pressure is high enough- is to stop him from writing every body in the country who has a job making say under forty thousand a "making work pay" check for another ten thousand?
I know several people who got such a check a year ago for four hundred dollars.
As I said before , this won't fix the economy, BUT it will postpone the final day of reckoning for some time- concievably for years, but not many years imo.
mac - I see nothing wrong with your thought process. Also, even if the KSA was manipulating the futures market with their public statements I'm not sure we would call them speculators as many define the term. The oil is theirs and they are free to handle it as they chose. Oddly, despite the administration pointing a finger at "speculators", it's not too much of push to accuse them of speculating via their use of the SPR. Whether the speculator is pushing the price up or down they are damaging the financial position of one group or the other: buyers or sellers. Is one group more deserving of protection than the other? Of course, if you're a consumer your answer doesn't count. LOL.
Not much of a push at all. The futures speculators make opposing bets on paper barrels, bets that more or less cancel each other out except in the very short run (and, I suppose, drag prices around a bit - assuming that the futures might influence spot traders psychologically to some degree, and/or some long-term physical contracts might be indexed in some manner to the spot price or the futures, since one could hardly enter into a 30-year contract for a fixed number of currency units per barrel.) But the government actually holds a large physical inventory, so they can diddle the real market, just as a very rich individual or a hedge fund might diddle the real market in some metal that trades on a small enough scale.
Well, thew $700bn in TARP money could have been used for just that, and assuming there were 150m people who qualified, that would have $5k to each of them. Probably would have done more good to save the main street folk and let the Wall street folk sink on the ship they created.
Well there was some main street in there, tho you could argue who the measures were intended to benefit. The initial home buyer tax credit proposed in the Senate was 15,000 for ANY buyer, but that got trimmed back as overly ambitious.
Then you had home weatherizing, hybrids, and a grab bag of other funds set up.
A friend got $3000 to buy a new Camry, and most everyone got the $400-800 stimulus back then, except for the highest earners.
A chicken in almost every pot?
WestTexas, your graph is somewhat deceptive because of scale.
Saudi Arabia's 5-year "decline" is ~5%. Texas' was about 11-12%.
we don't know yet if SA's is a blip or not.
First, the EIA data show about a 7% decline in Saudi C+C production from 2005 to 2010, an annual decline rate of 1.4%/year. However, the key point is the 2005 inflection point. At the 2002 to 2005 rate of increase in Saudi crude oil production, about 8%/year, they would have been at about 14 mbpd in 2010, versus the 8.9 mbpd that the EIA currently shows for 2010, versus 9.6 mbpd in 2005. The initial five year decline rate in Texas crude production was 2.7%/year.
Second, for what it's worth, we posted the original graph five years ago in the following paper, using Saudi production data through 2005:
http://www.energybulletin.net/node/16459
Third, as I have occasionally opined, what really counts is net oil exports, and following is what BP shows for the 2005 to 2010 simple percentage changes in production, consumption and net exports along with the exponential rates of change per year (BP, total petroleum liquids):
Production: -10% (-2.1%/year)
Consumption: +41% (+6.8%/year)
Net Exports: -21% (-4.7%/year)
BP's data base shows year over year declines in Saudi net oil exports for four of the past five years, and at Saudi Arabia's 2005 to 2010 rate of increase in their ratio of consumption to production, they would approach 100%--and thus zero net oil exports (consumption = production)--in only 14 years, around 2024.
Sam Foucher's most optimistic projection is that the top five net oil exporters in 2005, inclusive of of Saudi Arabia, will have shipped half of their post-2005 CNE (Cumulative Net Exports) by the end of 2014.
Characterizing a 10% decline in Saudi total petroleum liquids production and 21% decline in Saudi net oil exports in five years as a possible "blip" in my opinion is analogous to the Monty Python skit where the Black Knight calls the loss of limbs nothing but a "flesh wound."
Folks,
A few notes. Kuwait is predominantly Sunni, not Shia. Bahrain is an island.
With all this concern over dwindling oil supplies and rising oil prices potentially crashing our economy why do I not hear people on this site working on solutions to get us past this problem?
Do you not read the Drumbeat comments?
Some people here are engaged in oil and gas production, so are trying to find more. Some others of us are engaged in energy conservation, so are trying to find ways to use less. A few are also involved in alternative energy development, from ethanol to biofuels, so are trying to find substitutes. And some are involved in alternative transport, from rail to EV's to bikes.
However, none of us here represent (officially) large companies, research institutions or government, so we, individually, can only do so much.
And none of us can really do anything about rising prices - there is no "solution" to that.
And, really, this is not a "problem" , it is a "predicament", there is no "solution", only "coping strategies", though many people are holding out for a black swan solution - that is not a great coping strategy, IMO.
So what would you have use do that is not being done?
TOD strength has always been in the science of oil. The experts on this board can look over any solution and put it through an intellectual torture test with a strong look at the thermodynamics of any solution(s)
Bob - Perhaps because there are no solutions that will get us past our problems. You've probably read countless ideas on TOD how we might REACT to the situation...some plausible and some down right goofy. But for the most part none very applicable IMHO and usually due to lack of political will. A simple example: Cut gasoline consumption? Easy solution: raise fuel taxes $2/gallon. Would this ever happen? Absolutely zero chance IMHO.
But maybe my doomer side has blinded me to some possibilites. So I anxiously await to hear about the "solutions" you're working on.
I'm not working on any solutions, except to talk about the solutions we already have at hand.
We've got the Nissan Leaf, a vehicle 100% powered by electricity.
We've got the Chevy Volt, a vehicle which can drive 30-40 miles powered by electricity and then switch to gas if more range is needed. Volt drivers are reporting that they purchase about one 9.3 gallon tank of gas per 1,000 miles. (That's 108 miles per gallon of gas purchased.) They drive the rest using electricity.
Is it not reasonable to assume that more than 50% of all American (and world) drivers could easily use either an EV like the Leaf or a PHEV like the Volt for their personal driving needs? Who commutes or runs errands that couldn't get 'er done with a 100 or 300 mile range? Couldn't almost all business driving now done with ICEV cars be done with an EV or PHEV?
Were we to switch 75% of our personal cars to EVs and PHEVs we would save at least 50% of the gasoline and diesel we now use for cars. How much of that 50% or less could be provided by domestic-sourced petroleum?
Ford already makes an electric delivery van. UPS and other companies are already using electric delivery trucks for in-city deliveries. The US Post Office is already using electric mail trucks. We could probably save 25% or more of the gas/diesel we now use for commercial vehicles by using EV/PHEV trucks where possible.
Trains are greatly more efficient than 18-wheelers. We could switch more of our freight to rail, using containers to efficiently moving it from truck to rail to truck and using EV/PHEV trucks to shuttle between origination and destination.
All of this is technology on the road right now. Nothing needs to be invented. No 'breakthroughs' needed.
We are making the electricity we need to power these vehicles right now from sun and wind and making it at a very affordable price. Wind costs about $0.05/kWh to produce with current wind turbines and solar-produced electricity is now $0.16/kWh from larger installations. Solar panel prices are rapidly dropping, we should hit a wholesale price of $1/watt this year. The sixteen cents per watt price will significantly drop over the next couple of years.
A Leaf uses about 0.35 kWh per mile. At $0.16/kWh that means driving for $0.56/mile. At $0.05/kWh it would cost $0.018/mile.
A 44 MPG Prius burning $4/gallon gas costs $0.09/mile to fuel.
Yes, wind and sun do not furnish 24/365 power, but driving with an electric vehicle does not require 24/365 power. Cars sit parked for 90%+ of their existence. Leave them plugged in when they are parked at they will be extremely valuable additions to the grid as loads which can be serviced when power is available. Dispatchable loads are needed for the future grid.
Yes, 100 mile ranges for EVs are limiting but battery capacity will quickly improve. China's BYD auto manufacturer has a 200 mile range EV on the road and has been using them as taxis in test fleets for over a year. They've averaged 36,400 miles per year with one reaching over 60,000 miles. They've mostly been recharged with 'rapid chargers' and the batteries have shown no decrease in ability to hold charge.
We've got "Level 3" chargers being installed which will charge an EV to 80% of maximum range in less than 15 minutes. With rapid charging even a 100 mile EV becomes a usable vehicle for infrequent modest distance trips. A 200 mile EV becomes a 'drive all day vehicle' - 520 miles with two pee stops.
The cost of EVs is currently high, although they are cheaper than ICEVs over a 10-12 lifetime, even without any subsidies. Prices will come down as manufacturing volumes increase. There are no extremely expensive materials in EV/PHEV batteries, it's an issue of manufacturing in specialized factories, using appropriate technology and establishing supply streams. EVs should become as cheap or cheaper than ICEVs.
The solutions I see are to aggressively move as much of our vehicle fleet as possible to electricity and create that electricity with renewables.
If we move rapidly to electricity we can solve so many of our problems. We avoid any steep oil peak down slope. We avoid future oil wars. We help our international balance of payment problems. We create more good US jobs.
The downside of moving to electricity? I can't think of any. There will continue to be some places where liquid fuel vehicles will still be needed. My friends who tow large cattle trailers and backhoes will need large pickups and a good portion of our 18 wheeler fleet will still be required, but we can fuel them mostly with domestic oil
and oil substitutes as/if we develop them.
Here are some summaries from a spreadsheet I made which compares the cost of owning a Leaf EV, Prius hybrid and gas Ford Focus over 12 years...
Here's the spreadsheet. (Errors possible, corrections appreciated.)
https://spreadsheets.google.com/spreadsheet/ccc?key=0Akc8l3C_MXzwdFBjNXN...
Here are the problems with personal electric vehicles the size of
a car as a solution to our peak oil and climate change conundrums
compared to investing in public transit:
1)with current electric generation primarily from coal the Nissan Altima (gas powered) vs the Nissan Leaf (electric) only saves
about 33% of greenhouse emissions i.e. 90.5 vs 63.6 lbs for
operating gas vs electric car.
See the NY Times:
http://www.nytimes.com/interactive/2011/05/29/weekinreview/volt-graphic....
NOTE this comparison ONLY counts actual energy for running electric cars and ignores lifecycle production costs, and most of all the huge costs for road maintenance, 30,000 auto deaths, the huge wastes of land to run 4/6/8 lane highways, ambulances, traffic cops, traffic courts which are enormous.
2)Car fleet turnover typically takes about 5 years but has been
taking longer and longer with the Great Contraction as people hold onto used cars longer
Now compare this to Green public transit:
1)According to a Brookings study May 12th, 70% of working age Americans in 100 US Metro areas already live only 3/4ths mile from
a transit stop
http://www.brookings.edu/reports/2011/0512_jobs_and_transit.aspx
Yet since 2008 while billions have been spent on "cash for clunkers", highway and road expansions as part of the Stimulus,
and $7500 tax credit for the affluent to buy electric cars, public
transit has been decimated.
Over 150 transit systems have faced service cuts and major fare hikes:
http://t4america.org/resources/transitfundingcrisis/
http://www.brookings.edu/reports/2011/0512_jobs_and_transit.aspx
We can get trains, buses, light rail and shuttles working on
existing routes with existing equipment in a matter of months.
This saves a lot more oil and greenhouse emissions than electric
cars ever will almost immediately.
When WW II began almost no cars were sold and a concerted effort to
boost public transit increased ridership within months.
Up until Reagan (nothing new there!) public transit operating
budgets to actually run public transit were federally funded.
Instead of subsidies to electric cars it would be a far better investment to actually run public transit not just for commuters.
And then add shuttles for the last mile connections to key points
like offices, shopping malls etc.
Finally running the trains, buses and shuttles would bring
immediate fulltime employment which could not be offshored.
Yes, in several ways public transportation is better than personal vehicles running on electricity and we should aggressively improve public transportation. (As well as walk-able cities and neighborhoods and better bike lanes.)
But lots of people for a variety of reasons are going to demand personal vehicles. Try to pry people out of personal vehicles as a solution to "peak oil" and you will fail. We need multiple solutions and EVs/PHEVs are part of the fix.
As far as EVs and coal, the NYTimes had its head up its butt. The US grid is 44% coal and we have 190 existing coal plants scheduled to close in the next few years. We have not permitted a single new coal plant in the US for over two years. Coal, as Deutsche Bank said, is a dead man walking.
At the same time we've increased electricity produced by wind and solar for the last three years in amounts which would power four million new EVs on the road each year.
We sell somewhere between five and eight million new cars per year. It would take only a modest effort to install enough new wind, solar and geothermal to power 100% of those cars each year were they EVs/PHEVs.
And, don't forget, each mile driven in an EV is a mile not driven using oil. Each of the miles driven on 44% coal/26% natural gas reduces overall CO2 output. One hundred percent of the oil-produced CO2 goes away, replaced by approximately 50% as much CO2 from electricity producing fossil fuels. And that 50% will shrink as we install more renewable generation.
Roughly 50% of all US driving is done with cars five years old and newer. If we decided to we could move a large number of new car drivers to EVs and PHEVs rather than 'letting the world collapse as oil disappears' or whatever version of disaster one favors.
If you make Green public transit a viable option then people will use it as illustrated by the significant increases in public transit usage of 38% cited by t4america.org.
Here are the results of a recent poll:
http://t4america.org/blog/2011/06/21/republicans-and-independents-suppor...
So WHY should we waste $7.5 Billion directly on electric car subsidies instead of following the wishes of 80% who support more
public transit, especially when they already have it available and
service has been cut?
IF public transit is frequent, reliable, and time competitive it
will be increasingly used.
In case after case, public transit projects have outstripped
projected ridership.
When the Meadowlands train service was finally opened decades after
its obvious need, the ridership of thousands of riders was so high
on the very first day of service for a concert that it created
a major problem for overwhelmed NJ Transit staff.
Recent projects here in New Jersey, the most densely populated
state in the US, more densely populated than China, have had
overwhelming success such as the Hudson-Bergen Light Rail, the Riverline Light Rail and Newark Light Rail.
Jersey City and Hoboken, once down in the dumps and in slum conditions,
are now called the "Gold Coast" as so many businesses have setup
shop and luxury condos have proliferated along the Light Rail route.
Despite the Auto/Oil Lobby incessant propaganda about the "vastness
of the US" in fact according even to the Federal Highway Administration, 79% of the US population already lives in
urbanized areas. So that is where the most rapid improvements
in transit efficiency can take place.
Yes, in truly rural areas there will always be demand for autos and trucks. But why fashion a transportation policy to serve only
21% of the population versus 79% at huge costs?
For example take Vermont which I frequently visit.
Paralleling I-91 which cost millions of dollars to repave with
Stimulus dollars there is a train line which runs tourist trains and freight 5 days a week, I.e. a fully functional rail line
which could be brought into service for far less cost than forever
repaving I-91 and in the past had 16 passenger trains a day to
town centers.
In Louisiana they are adding more lanes to I-10 connecting Baton Rouge to New Orleans even though once again there is a rail line
which parallels the whole route with fully functional tracks.
Of course Gov Jindall killed the project to restore active local rail service from Baton Route to New Orleans even though there is
a major dearth of parking once you reach New Orleans.
If people want to buy electric cars fine!
I bought a Prius last year myself since given the realities of
public transit frequency in New Jersey it is pretty much a necessity to own a car.
But it is utterly foolish to waste the resources we have for the
government to continue to subsidize this anti-planet investment.
Recall the Interstates were built with 90% of Federal funding and
autos all over the country would need major increases of at least $1-2 in gas tax to pay their full costs.
Unfortunately Bob, according to Lester Brown and other evidence
the US has already reached "peak cars".
Car ownership is already declining since the Great Contraction in 2008:
http://www.autoblog.com/2010/01/04/report-number-of-cars-in-the-u-s-drop...
So why invest in unsustainable auto addiction?
It makes no sense to me when the same $7500 per electric car plus
other subsidies for charging stations could be used to provide
Green public transit for those opting out of cars altogether and
saving far more oil and greenhouse emissions.
When my mother grew up in Washington, DC, from the age of 12
she could take trolleys everywhere safely and conveniently without
driving before they were destroyed by the GM/Firestone/Chevron conspiracy.
We need to make PUBLIC TRANSIT and liveable cities first and foremost, not an afterthought so we can continue to run our cars
forever, electric or otherwise.
By the way light rail and a lot of rail is ALREADY electric!
If we want to subsidize electric buses or shuttles that might make
sense.
To subsidize private electric cars costing $40K for the affluent
is a gross disservice to the increasing numbers who cannot afford cars and the 30% of the population who cannot drive.
Here is another bit of evidence about "electric" or non-oil cars and carbon emissions -
http://www.commondreams.org/view/2011/06/10-3
Fact is, Americans want cars. Some Americans really need cars.
People are not going to give up their cars. Logic will not get them to do it.
You can beat on your public transportation drum all you want, but there is still going to be a very large number of people who are going to own and drive personal vehicles. It will be possible to move some portion of car owners to public transportation, but 100% will simply not happen.
Yes, young city dwellers are more into bikes and public transportation. But as they age and become more affluent they are likely to leave the city to raise their families and give up their bikes to bad knees and weather intolerance. Many will want cars.
(Something stinks with your Sweden 'data'. Swedes have not moved to EVs and PHEVs. They've moved to "hybrids, clean diesel vehicles, cars that run on ethanol" and none of those are electric vehicles, all their power comes from burning fuel.)
So in rough numbers, 50% of 250M passenger fleet = 125M * 40K MSRP Chevy Volt = $5 trillion
Even give or takes rebates and whathaveyou, That's a lotta car!
You're making the assumption that EV batteries will continue to be expensive.
That is not an assumption car and battery manufacturers are making. In the auto manufacturing business it is expected that EV prices will fall to, or below, ICEV prices over the next few years.
Just a small addition - thermo-nuclear fusion is possible. Ignoring NIF which is 100% a weapons program with zero chance to produce energy, there are two programs that could produce power plant level fusion. The first is a gamble but has great potential - the Canadian (private) group General Fusion and their incredibly ingenious idea of using a liquid metal containment jacket (with a spinning sphere of liquid Pb/Li leaving a small vortex free column section) to hold a plasma (D/T mix) and a stream(!) powered shock wave generating system to direct drive the plasma to fusion temps. The other (a very mature system but far too small) is the US Navy Nike direct drive KrF laser system (8% wall to target efficient system) that could create power plant level energy if scaled up. While no sure things, both these approaches are highly viable and cost little compared to NIF or ITER. Aside: both systems have been reviewed by outside experts and these reviewers (a large group including international experts for Nike, only a few US experts for the Gen. Fusion approch) have concluded that these approchs can work as designed but need to be scaled up to prove viability - cost for 1000 MW plant: either one under 1/2 billion dollars (of course, that will always balloon up if built ... .)
Cermet - Not pcking on you in particular but that is exactly my point. Yours might be a practical "possibility". It certainly sounds like you have a great grasp of this techno;ogy. But it isn't being done now on a significant level, is it? Maybe it will be...in time. There's no lack of responses that could impove the situation. Unfortunate either the capex needed for scaling up won't be available or the political will is lacking.
As Big D just pointed out we've talked about many hundreds of "solutions" on TOD over the last few years. And nothing has changed. IMHO so far the only major response has been to swap blood for oil. Our latest expansion of this approach is now centered in Libya.
Don't worry, I don't feel you are in any way - also, your points are 100% valid. You are exactly right and it is amazing that so little is being done or has even been talked about in a serious way (and the baby steps are ridiculous) - mine was merely meant as just possibilities that are being looked at and if they work, would supply multi-mega watt electric power sources. The General Fusion is starting to build a 100 MW reactor but they are really rolling the dice there since issues of plasma recombination is a total unknown (most of the rest of their approach is really on fairly sound ground (as far as my reading of their peer reviewed papers) but that issue would be a killer.)
Cermet - And that's exactly what frustrates me to tears. I've reached the point where I don't really care to hear about clever ideas like yours. If you don't know I'm one of the ultimate doomers around here. Not that I have a bunker in the backyard and await a Mad Max world. My doom vision is a society (along with its political leadership) unable/unwilling to accept our situation and begin to move towards anything close to a reasonable response.
With leaders and congress 100% owned by banks/wallstreet, your attitude is more reasonable than mine - I guess I just want to believe that someone, somewhere will succeed; from my own experience, impossible can be done but it takes effort (and also, and this part is were I always fail) of exstablished people to support any new approch.
Bob, I have been a member of TOD for over five and one half years. In that time I have heard hundreds, perhaps even thousands, of solutions that would "get us past this problem" as you put it. And of course we are no closer to "getting past the problem" than we were before the first "solution" was posited.
Think about that for a few minutes. What does that tell you?
Ron P.
Read my posts up page a bit.
The solutions are on the road right now. They've arrived in the last few months.
Bob - Assuming you mean e-cars than I would agree that the POTENTIAL solution is one the road now. But until a large portion of the existing motor fleet is replaced they will remain only potential solutions. Not saying whether it will ever happen or not, just that it ain't happened yet.
If the solution was on th road today then come tomorrow morning we would be importing less than half the oil we did yesterday.
No, I mean the solution is now driving on our roads.
All that is needed is to scale it up.
We are not looking at something that is a "potential" solution, something in the lab which we don't know whether or not it will work in the real world. That would be a "potential solution".
It's like a cure for an illness that was 100% fatal. A new drug which knocks out the disease is a solution to that problem. In order to stop people from dying of that disease we simply have to distribute and deliver the drug.
Now, let me ask - doesn't it make sense to start getting the solution in place?
-------
(And before someone goes off on how the solution does not work for them, let me ask you to look back ten years at just about any technology and see how it has improved. You might be part of that 10% to 50% who couldn't use a Leaf or Volt for your driving, but that does not mean that a usable version won't be coming your way before long.)
The best "solution", as it were, would be to finally tackle the battery/capacitor problem.
Once we can store large amounts of electrical energy in a portable way for large amounts of time, we could access many different types of energy (geothermal, nuclear, NG, etc) and power things electrically.
The battery issue is, IMHO, the one critical area where a breakthrough could help many of our problems.
Not an end-all be-all, of course.
People are tackling it, but it's a hard problem. A capacitor close to the size of a gas tank and capable of storing a gas tank's worth of energy would be a very hazardous object indeed - a standard property of capacitors is the ability to release essentially all of the stored energy almost instantaneously. Should such a capacitor be invented, some years of effort will need to go into making it, and the overall assembly it is used in, non-exploding.
A battery is hazardous differently - it contains lots of oxidizer in extremely close proximity to lots of reducer. Get those much closer and we'd call it an explosive instead of a battery. One of these days, a lithium-based electric car located in some peculiarly inconvenient spot will somehow become involved in a fire. Even if it doesn't explode, the fire department won't be able to put it out, and then the legal mess will really begin. Never mind that the risk might be very small, people will nonetheless go ape over the hazard, and the Luddites will be more than happy to egg them on.
There's a lot of new battery technology in the pipeline. Some of it is likely to prove out and give us better batteries.
But without better batteries we still could shift more than 50% of our driving to electricity if battery technology stood still.
And, I just ran across this...
Five minutes is not enough time to get out and pee. It's a cruise through for a quick full charge and get back on the road. With these chargers in place along the interstates one could drive their 100 mile range Leaf 500 miles to Granny's for Thanksgiving almost as fast as they could drive their gasmobile.
BobW, What time frame are you thinking of for your grand transition. What year will we get to 50% of cars as EV. Please do not just think of the US, but of the whole world in terms of numbers.
If they are all to be powered from renewaable energy, can you please show the big numbers, the whole picture. Recently I clearly showed that we cannot get to just the growth in total energy use with renewables, let alone replace existing FF use.
Just to run through the figures for you, by 2020 the growth in energy use based on the past 20 years growth, will be 3500TWh per annum. To generate this power would need an increase in PV of about 8000 sqkm, or ~540,000 3MW wind turbines or 400 1000MW nuctear reactors, just in the year 2020 (or some combination of these). In 2021 we would need more built.
We would be using all of the worlds current production of aluminium, silver and probably copper just for the above, before we include the components of the EV vehicles. Of course we could ramp up the production of the needed minerals, yet that would require even more energy to do so, which would require more renewables....hence a catch 22.
It is not my "grand transition". It is something that we could do to prevent the problems of peak oil if we choose.
I don't know how fast we could get to 50% EVs/PHEVs. If we were really scared like we were in the early 1940s we could get there fast.
It would take a number of plants to manufacture the batteries. We have several battery plants being constructed at the moment, seven in Michigan if I remember correctly, and many more around the world.
It would take multiple manufacturers tooling up for production. Nissan is getting ready to manufacture 500,000 Leafs next year. GM is planning on 60,000 Volts. Ford is releasing their EV Focus this fall and has a dedicated assembly line for manufacturing them. Ford is running parallel lines for the Focus EV, diesel and gas and has said that if demand for their EV is high they can produce it on the other lines as well.
Many other manufacturers have EVs ready or close to ready for the market. I would guess that if we wanted to switch half or more of our passenger car manufacturing to electrics we could do it in three to five years.
It's not that we have to make 50% of our vehicles electrics, only a large portion of the new ones. About 50% of US driving is done with vehicles five years old or newer. Turn half of new vehicles into electrics and you will cut petroleum usage roughly 25% even though the vast majority of vehicles are still ICEVs.
(A 25% reduction in petroleum usage in five to ten years would be a big help with declining oil supplies, would it not?)
---
US drivers average a bit under 14,000 miles per year. The Nissan Leaf uses about 0.35 kWh per mile. That works out to 4,900kWhs or 4.9MWhs per EV per year.
In 2008 we increased our electricity output from wind, solar and geothermal by 21,369,000 MWhs over 2007 renewable production. That is enough new generation from renewables to charge 4,361,020 EVs.
In 2009 we increased our electricity output from wind, solar and geothermal by 187,200,000 MWhs. That is enough new generation from renewables to charge 3,820,408 EVs.
2010 will likely be in the same range. The numbers should be out in a couple of months. 2009 and 2010 are likely to be a bit lower than 2008 due to the recession. 2011 is on track to better 2008.
That's enough new renewable production each year to 'fuel' half of the new passenger vehicles we sell per year.
Remember, if we use all the new power for electric vehicles we are replacing fossil fuels. We might or might not get as much CO2 reduction, I haven't seen that math. But the reduction would be significant, especially when you consider the fossil fuels consumed in extracting, refining and distributing liquid fuels.
If we wanted to get the job done in a hurry we might have to ramp up copper, aluminum, and other mineral production. But all those things are recyclable, once in play they largely stay in play. And remember that much of the extraction and refining is done/can be done with electricity. Once we power those processes with renewable electricity carbon drops out of the equation.
Once we install a wind turbine it will continue to produce electricity for 30 years or more. A solar panel should produce for 40 years, possibly significantly longer. These devices can be recycled, using electricity, and returned to service. We will have broken the fossil fuel dependency.
We might cause a short term bump in CO2 production, but what we would create is a long term, permanent, major decrease in CO2 production as soon as we quit burning petroleum to power our transportation.
BobW,
As part of the big picture, I really hope you are correct and I am wrong.
However in the big picture, by using ~18,000,000 bbls a day of oil, the US goes through 11,169 TWh of oil energy a year. Your number for some EV and average use come to 21.36 TWh a year from renewables. To make a meaningful contribution the EV will have to replace a lot more than 00.19%.
Five years to replace one percent of oil use at those rates. Sure there is great inefficiencies in current oil use, but I expect the same with EV, human nature and all.
Another problem is that the "average" drive of 14,000 miles is not spread evenly throughout the year, and the renewable energy cannot be stored like oil in tanks, therefore much more capacity would need to be built for the driving season.
Redo your totals to reflect the energy which is actually used and the energy that is wasted in ICEVs. And the amount of energy wasted in refining that oil into gasoline and diesel. There's about 3kW of energy used to refine a gallon of oil, enough to power an EV about nine miles.
(I've seen an estimate of around 6kW used per gallon of gas to extract, refine and distribute that gallon.)
In a gallon of crude there is 138095BTU or 40.4kWh of energy. That's enough energy to drive an EV 115 miles and EVs would be replacing a US fleet that averages 22.6MPG (2008).
Much of the US population lives in places which are sunny year round. And much of our population lives close to shores and the wind is very regular offshore. Additionally we're building transmission to move electricity from places where the wind blows strong to where people live. We're installing more geothermal and seem to have figured out how to harvest energy from the tides.
EVs don't care when they charge as long as they have enough range when it is needed. Some people drive little and could easily go for a few days without charging and then fully charge on a sunny winter day or windy night, carrying them for a few more days. EVs on the grid actually make it easier to deal with the intermittent nature of wind and solar, we can build more capacity, use it to power needed demands when supply is low, and pump the extra into waiting EV batteries when supply is high.
I'm not saying that the job would be easy. I'm just saying that we have a workable option other than collapsing into the doomsday life that some envision and we have a workable option other than allowing our lifestyles return to something like that of the 1800s.
To add to Bob's comments,even if battery tech doesn't improve much or not for a while we can still go to battery switching stations.The first battery switching station has been installed in Copenhagen Denmark recently and will go commercial later this year.Another 19 stations will be installed real soon and with a battery swap only taking a few minutes I think we can easily put up with switching.There are a handful of places that are very serious about wind,solar,EV etc and as it should be.Check out the press release from the company Better Place.
June 28,2011 Press release. http://tinyurl.com/3bo8l5p
Yes, that's another solution. Sorry I failed to mention it.
Battery swap stations are fully automated and can swap out a discharged battery for a charged one in less than two minutes.
Renault is making EVs with replaceable batteries. These systems are also being installed in Israel.
(I believe the Tesla S, with ranges of 180, 240 and 300 miles depending on which battery size you purchase, is also switchable. That suggests that one might buy a 180 mile battery but rent a 300 mile battery at times. (Pure speculation on my part - the renting up bit.))