Monday Jun 24, 2013
- Tuesday Jun 25, 2013 -
Philadelphia, Pennsylvania - USA
Data Informed´s Marketing Analytics and Customer Engagement provides marketing, sales, and customer support managers with the information they need to create an effective data-driven customer strategy. more...
We know you have something to say!
There is an immediate need for articles on
the hot topics in the Power Industry!
EnergyPulse, like no other publication,
also provides a means for our readers to
immediately interact with experts like you.
I would like to begin by stating that while the subject of energy economics has still not attained its 'critical mass' where book-length literature is concerned, there are an increasing number of short, non-technical papers that everyone should attempt to read and understand. Where my energy economics students are concerned, I mean read and understand perfectly, especially if they prefer a passing to a failing grade.
I can name three extremely valuable contributions. Their authors are Ronald R. Cooke (in '321 Energy'), John Lounsbury (in 'Seeking Alpha'), and Peter Huber (in 'City Journal'). Eventually I also plan to force my students to examine a few chapters in my energy economics textbook (2007), but one has to be careful here, because as the actress Joan Collins once indicated, people who spend a large part of their time in a Facebook or Twitter mode are generally not strongly interested in academic offerings.
Ronald Cooke's position is that the Waxman-Markey ('Clean Energy') Bill that was recently passed in the U.S. House of Representatives, and which is intended to resuscitate the U.S. energy economy, may instead contribute to an industrial demise of that country. I know precious little about that piece of legislation except for its promotion of the cap-and-trade approach to reducing CO2 emissions; but since Cooke -- like myself -- regards cap-and-trade as a malicious scam, I can only hope that I never come into contact with its half-baked supporters in an academic milieu.
John Lounsbury's important article covers about the same ground as Mary J. Hutzler's short paper in the latest IAEE Energy Forum. (2009). Lounsbury makes it clear though that the attempt to convince legislators and motor vehicle operators and owners that they should be enthusiastic about replacing gasoline with e.g. natural gas has to do with strategic issues (e.g. lobbying) that in game theory are associated with the manipulation of information. Screening and Signaling are the applicable technical terms, although lies and humbug sound better to me. For instance, the bus that carried me to the jazz and dancing at Stockholm's 'Skansen' a few nights ago had a notice on its side which stated that its fuel was ethanol, just as the bus carrying me to Uppsala University often displays information designed to suggest that natural gas should be thought of as the fuel of the future for public transportation.
Unless I am mistaken, natural gas made its appearance as a desirable transportation resource because in this manipulation of information game, the superficially intelligent players possess a substantial advantage over the resolutely ignorant. In game theory this is called information asymmetry.
Both Lounsbury and Hutzler deal with investment and conversion costs, however my position has been -- and remains -- that in addition to these expenditures, the availability of natural gas is not very different from what it was several years ago, when people like the former Federal Reserve Chairman Alan Greenspan, as well as a number of corporate executives, suggested that gas-intensive U.S. industries and activities could expect some very bad news in the near future if large quantities of new gas reserves were not discovered -- and produced -- in North America. Some observers seem absolutely certain that an augmentation of reserves has come about (because of such things as shale gas), but as far as I am concerned it is too early to consider this issue settled.
Peter Huber's brilliant short paper is the kind of document that I inform my students in advance that they will encounter in the final examination. Among other things he points out that China is adding 100 'gigawatts' of coal-fired electric capacity a year -- which is one third of the total coal burning capacity of the U.S. The bottom line here, according to Huber, is that the U.S. does not control the global supply of carbon, and I would like to make it clear that neither does e.g. Sweden and Denmark, despite their posturing and courting attention as environmental know-it-alls and icons in the corridors and restaurants of the European Union headquarters in Brussels.
Regardless of the circus that will convene in Copenhagen this December, when experts and fellow travellers from every corner of the globe assemble for the purpose of improving the world's environmental health, as well as to drink a large amount of beer in Copenhagen's celebrated Tivoli, it would be nice if our famous patient began thinking in terms of an economically and technologically optimal energy sector, instead of one whose only merit is its popularity with the anti-nuclear booster club. One of the things this suggests to me is that energy should be considered a 'public good', because it is just as important as parks, street lights, and stupid wars thousands of miles away. In line with the title of this paper, it is very likely that the new doctor in the White House and his assistants know this as well as my good self, but unfortunately they have got to sell it to the TV audience, who to an alarming extent are increasingly captivated by phenomena without the slightest relevance for their future welfare.
References
Banks, Ferdinand E. (2007). The Political Economy of World Energy: An Introductory Textbook. London and Singapore: World Scientific.
Cooke, Ronald R. (2009). 'The clean energy act is not going anywhere'. 321 Energy (July).
Huber, Peter W. (2009). 'Bound to burn'. City' Journal (Spring).
Hutzler, Mary J. (2009). 'The Pickens plan: is it the answer to our needs?' IAEE Energy Forum.
Lounsbury, John (2009). 'Natural gas: another great thing from a lobby near you.' Seeking Alpha (August 02).
For information on purchasing reprints of this article, contact sales. Copyright 2013 CyberTech, Inc.
I sent a short letter to Jude Clemente a few days ago in which I suggested that he look at a very brief article by someone who calls himself 'Mark Anthony' on the site/forum SEEKING ALPHA. That article contains some very interesting and easily interpreted statistics about natural gas, apparently extracted from research by the EIA. As far as I can tell it matches some conclusions that were published in the best oil and gas publication a few years ago, THE OIL AND GAS JOURNAL, where the claim was that gas is not as plentiful as many persons believe.
Interestingly enough, many 'observers' seem offended by Mr Anthony's presentation. They were offended because they desperately want to believe nonsense, and for reasons that cannot be discussed here, they want others to believe nonsense multiplied by ten. Yes, there may be more gas available than believed by Mr Anthony, Jude Clemente, myself and others, but there is something very odd about the sudden increase in US gas reserves. So odd that I think that we should wait before we open the champagne.
Len Gould 10.13.09
"the TV audience, who to an alarming extent are increasingly captivated by phenomena without the slightest relevance for their future welfare." -- excellent.
By "odd about the sudden increases" (in gas reserves), I presume you mean that the timing is just TOO convenient? eg. If you were a PTB concerned about restlessness among the tv audiences due to excessive leaks into news articles about energy shortages, what remedy would you hope for?
Bob Amorosi 10.13.09
"which is intended to resuscitate the U.S. energy economy, may instead contribute to an industrial demise of that country".
This is an interesting prediction because the industrial demise in the US, and in Canada, was well underway already, and has been accelerated by the latest global recession. Untold numbers of factories and their jobs have disappeared in the US and in Canada, in many cases permanently. A big intention I suppose of the Clean Energy Bill is to eventually replace some of them with new industries catering to renewable energy source generation, and more efficient consumer products.
If in future many new factories and jobs appear making clean energy products in North America that domestic markets buy and that foreign countries will buy from us, the Bill will be viewed as a huge success. While I doubt very much the carbon cap&trade schemes in it will help achieve this, stimulating massive investments in new emerging companies and product research and developments can indeed achieve it big-time, particularly and especially if other countries all over the globe gradually FORCE their people to buy them.
In essence a coordinated international effort by other countries will literally create new mass markets for clean energy products. One just need look around and see that this is already happening. And in the US and Canada where industrial demise and desperation is becoming more apparent year after year, it has become obvious that, as they say, when in Rome do as the Romans do, or else you may get fed to the lions.
Ferdinand E. Banks 10.14.09
Bob, for reasons that I can't take up here, I can understand the U.S. going into the can, but Canada...no, no. That country has everything to work with, although I'm sure that if you tell Canadians that, many of them would think that you are crazy. This is why Sweden is up the creek. They think that the future belongs to Pago-Pago and Guadacanal, and Sweden is yesterday's news.
Jeff Presley 10.17.09
Fred,
Another fine article, though a bit shorter than your usual methinks. The issue with shale gas isn't a matter of quantity available, but quantity available at what economic cost? This discussion hits the nail rather squarely on the head concerning NG supplies vs drilling/fracturing costs etc.
For those buses that go round and round the tarmac at places like San Jose, CA, the idea of using NG powered vehicles is good, not so much for the mileage but because of the air pollution concentrations around modern naphtha burning airports. The key reason NG powered vehicles aren't hitting our roads anytime soon is the fact that the government has no means to tax the fuel as they do for gasoline. Therefore, when Boone Pickens said he was only paying the equivalent of $1.50 a gallon using his "filling station" at home from his home's natural gas pipe, he was neglecting to realize that if you took all the taxes AWAY from a gallon of gasoline, it would cost around $1.60 (remember there are additional taxes on the crude oil before it ever becomes gasoline). Remember that in Europe these numbers are dramatically higher, some governments over there derive no less than 25% of their ENTIRE budgets from petrol revenues.
The other reason buses that circle around do better than those that go cross-country is that the filling station can be some central location, versus the non-existent NG filling stations (not) across the land.
Jeff Presley 10.17.09
Bob, your post sounds marvelous, but unfortunately I don't believe reality is that kind. It would be WONDERFUL if America and its junior partner Canada got their respective acts together and began building things again, but my experience in these things is sadly different. For instance a company where I'm on the board of directors purchased millions of dollars of specialized equipment 5 years ago, all from American companies. This past year EVERY ONE OF THEIR SUPPLIERS WAS GONE!! They had to source 100% of the replacement equipment from China. Now some of this stuff was rather mundane, boilers and pumps, but even THOSE were manufactured in China, the "salesmen" were American, but the production workers were all overseas. Meantime, because it was sourced from the Chinese, there were numerous installation issues and problems with specifications not being followed properly along with delays getting equipment through customs etc.
This company happens to be on the forefront of eco-friendly building materials, right up your alley as discussed in your post. It has been proven time and again that companies who build using this material reduce their energy footprint by at least 30%. However, the writing is on the wall, even the company will one day see itself in foreign hands or simply out of business because it is simply too difficult to manufacture ANYTHING in this country anymore. Unfortunately there are far too many in the T.V. watching audience who see nothing whatsoever wrong with this scenario. :(
James Carson 10.17.09
Professor Banks, you need to get current on the state of the US natgas market and supplies. Natural gas costs one third that of fuel oil (spot month NG v HO contracts) on a per MBtu basis at the present time. The forward curves confirm considerably less than half for the next three years. THAT is why it is now being touted as a transportation fuel. It has nothing to do with lobbying acumen or humbuggery.
Perhaps you could bring yourself up to date by visiting the FERC Market Oversight, State of the Markets for natural gas web page, URL below.
The 'Estimated Recoverable NG for Select Shale Basins (TCF)' map is particularly illuminating. The estimates have more than tripled from 2006 to 2008 from 215 TCF to 742 TCF. Current annual consumption is less than 25 TCF. That is a LOT of gas.
Well James, you are correct when you say that something is very odd with oil and gas. Those BTU prices don't look right, although as a short term disequilibrium I wouldn't worry too much.
But in the long run some changes have got to take place, and I see the gas price rising.
Anyway, that is small beer compared to what Jeff is talking about. I mean, what the hell is going on here. The problems that we are facing now are due to the stupidity, ignarance and decadence of the governments of Clinton and George W., however I happen to be certain that it is possible to turn things around. This assumes, as Jeff points out, that the TV audience wants things turned around, and that isn't at all certain.
James Carson 10.19.09
Professor Banks, those markets have been in "disequilibrium" since April 2006 when the price of fuel oil reached 2x natgas on a per MBtu basis. Since then, three years, it has (almost) never fallen below 1.5x and reached over 4x briefly. The markets will not return to "equilibrium" until consumption rises. Natgas is cheap and plentiful. We should be aware of that and use that.
As to Jeff's concerns, when the American public realize the cost of the bill of goods they have been sold, there will be serious hell to pay.
Bob Amorosi 10.19.09
Jeff,
I have to agree with you it is very sobering to have witnessed the nightmare of untold numbers of our lost businesses to the far east over the past many years, for old or new industries in both the US and in Canada. It is no wonder it is so difficult now to attract investors for anyone with bright ideas for new manufacturing ventures (I could tell a story of my own on this topic).
I wish I had an answer to keep them here. Perhaps the only hope for future plants to stay here or new ones to set up shop is for our governments at all levels to provide massive tax breaks or other financial incentives like handouts. I can't think of any other ways because firstly workers in the US and Canada would never agree to the miniscule wages necessary to compete, and secondly our companies will never be allowed to pollute the environment here to the degrees they get away with over there.
Jim Beyer 10.19.09
Perhaps a bit off topic, but the only fair way to hold jobs in this country is to enforce tariffs on goods not produced under the same conditions (OSHA, EPA) that are imposed in this country. The same would go for carbon tax or whatever they decide to do in that regard.
Of course, the PRACTICAL implementation of such a strategy is suspect given that China is holding so much of our debt. On the other hand, if we shut-off the goods importing completely, China population might very well revolt over the failed economic promises given to them by their centralized gov't (in exchange for less political protest). So it's possible the U.S. and China have a MADE (Mutual Assured Destruction (Economic) ) situation in place. Cool heads might be able to negotiate a compromise path.
Ferdinand E. Banks 10.20.09
We have a small problem here. I have NEVER said that the BTU price of gas should be equal the BTU price of oil. But in the long run it is very likely that the difference cannot be as large as it is today - at least, if the statistics that I have been looking at have not been 'cooked'.
As for the "cheap and plenty" business about natural gas, I dont intend to buy that ....yet. Also, for this transfer of production assets from North America to 'elsewhere', one possible way to counter that would be to overnight double or triple or quadruple the population of North America, which is obviously the kind of craziness that some hi gh-flyers want, and have been trying to get for a few decades - and successfully. A better way though is to think long-term:, by which I mean...
Never change a winning game; ALWAYS CHANGE A LOSING GAME. You can elaborate on that.
Jim Beyer 10.20.09
It was my understanding that one of the attributes of the NG market is its boom/bust nature. I'm not sure exactly what drives it but perhaps industries that use lots of it (Ammonia manufacturing) can quickly move out if the price gets too high. I know that during the last bust a bunch of cheap NG power plants sprung up, only to get squashed when the price of gas rose.
I guess an economist would say that many potential users of NG have a low cost to enter. So a bunch enter quickly, the price goes up, and the cycle continues. (Looks like a dash pot is needed somewhere.)
Peter Boisen 10.20.09
Ferdinand,
In your article you write "the bus carrying me to Uppsala University often displays information designed to suggest that natural gas should be thought of as the fuel of the future for public transportation."
Well, you have not been very observant during your years in Uppsala. The closest point of the natural gas grid is Stenungsund, some 300 miles away. Instead the Uppsala buses run on biomethane produced from local organic waste resources (you are actually personally contributing). Buses marked "biogas" first appeared in Uppsala thirteen years ago.
I can agree with you that Swedes and other Scandinavian people have a tendency to take themselves too seriously, but give credit when credit is due.
Jeff Presley 10.20.09
James, Fred, the bill can be expected to come due sometime close to the "market equilibrium" resetting of the value of the good ole American dollar. When THAT bill comes due; hell will be paid, in full. The fallout could be pretty ugly though, and we won't get to live long enough to find out if the sky is falling AGW crowd was right or not.
Meantime I'm down here in Colorado rubbing shoulders with oil company players at the 29th Oil Shale Symposium. I've talked with some of these luminaries concerning NG pricing and they are fairly unanimous that the price has cratered because of the (anticipated) future supply due to enhanced fraccing in the various tight shale formations such as Haynesville et al. The bad news, which hasn't quite made it to all the wall street traders paying themselves $140 BILLION in bonuses this year (disaster, what disaster?) is that NG drilling rigs have virtually stopped nationwide except where they were fully contracted and the exit clauses are too expensive. What this will do to the supply chain, especially if we head into yet ANOTHER record winter season (5th year and counting?) remains to be seen. Personally I wouldn't want to be too long on my open contracts, if you get my drift.
Ferdinand E. Banks 10.21.09
Peter, you could be right and I could be wrong. Of course where this matter is concerned, natural gas or biogas, it doesn't make any difference. The amount of these items used in Sweden is a fraction of a fraction. All the talk about biogas, wind etc is just environmental pretentiousness. As for the natural gas grid, there shouldn't be more than a token natural gas grid in Sweden. What's the point? Instead, a new nuclear facility with the capacity of the one being constructed in Finland is what is needed.
As for giving Swedes credit, I have always given them more credit than they gave/give themselves, because if they had any self respect, THEY WOULD NEVER HAVE GONE INTO THE EUROPEAN UNION. This is the biggest mistake made in this country in modern times.
Peter Boisen 10.21.09
Ferdinand,
During the first half of 2009 the Swedish consumption of methane gas used in vehicles was 30.7 million Nm3 (whereof 65 % biomethane and 35 % natural gas). The gas voume supplied would be enough to fuel e.g. 60,000 Volkswagen Passat methane powered vehicles. Sales of this particular car model are now running at an annual rate of 8-10,000 units (or about 4 % of all passenger cars sold in Sweden).
A fraction of a fraction?
The Swedish government, on top of varioius schemes supporting conventional AD (anaerobic digestion) biogas plants, also two weeks ago provided a 23 million EUR support of a gasification plant opening in 2012 and processing low grade forest industry waste, This plant (a joint venture between Göteborg Enegi and E.ON) will on its own by 2015 deliver enough biomethane to fuel 80,000 cars of the Passat size. There are enough waste resources to allow dozens of such plants in Sweden.
A fraction of a fraction?
One of the leading Swedish retail chains for distribution of automotive fuels - OKQ8 - has just signed an agreement with E.ON to provide NG/biomethane refueling facilities at their filling stations, and are already using the added offer of biomethane in a television advertising campaign.
Jim Beyer 10.21.09
OK, dumb question.
If there is little NG infrastructure in Sweden, how do people heat their homes? Saunas? (OK, that's Finland...)
As renewable energy goes, biomethane is pretty good. Meaning its cost of production does not require any huge feed-in tariffs. More waste treatment plants in the US are considering anaerobic processing, which produces methane.
And as you know, nuclear can produce methane by electrolyzing water and then reacting the H2 with CO2 via the Sabatier reaction, producing a fuel 3.2X denser energetically than hydrogen. (No need for a hydrogen economy, given there is CO2 around, but I guess mother nature figured that out some time ago...)
I guess I'm a little annoyed with how automakers treat NG so tepidly. They bitch and whine about the tankage, but then are effusive about how the same tankage is quite viable for hydrogen, even though it is bulkier and even more expensive. If I were to follow the money, I'd suspect that there are long-term concerns about attaching road taxes to NG fuel. (PHEVs must have them shuddering, if that's true.)
Jeff,
If what you say is true, then the price of gold would be at RECORD levels. Oh, wait.... nevermind. :)
Ferdinand E. Banks 10.21.09
Peter, I stick with what I said, only I change 'fraction of a fraction' to TRIVIAL. I'm 100% in favor of Sweden producing and using alternative fuels, but THUS FAR the committment is TRIVIAL. In fact, I'm so much in favor that I would like to see some of the money going to stone age countries in the Third World to buy weapons and plane tickets given to Swedish enterprises producing alternative motor fuels. As for the money sent to parasites in Brussels, that should go to the Swedish health care system.
And speaking of parasites, Energimyndigheten needs to be pointed out, along with Naturvårdverket. When I came to this country, Sweden was setting an example for the entire world, and they could do it again, but they are going in the wrong direction now.
Jim Beyer 10.21.09
Fred,
Maybe Sweden should receive the first Nobel Prize in Energy Planning, for all the wonderful things they are GONNA do!!! :)
Peter Boisen 10.21.09
Ferdinand, Sweden has aroud 4.1 miilion vehicles with a life length of around 15 years.If MGV sales should level off at 5 % (the present new car market share) this means that we in the 20's would have more than 200,000 NGVs. However, there is no logical reason why market shares should not continue to grow. I do not agree that 200,000 plus vehicles is TRIVIAL.
I do not share your enthusiasm concerning nuclear power (considering unresolved waste problems) but I would like to introduce another natural gas potential.
The worlldwide use of bunker fuel is around 350 million ntonnes annually. Replacing 20 % with LNG would cover around 12 % of the worldwide CO2 emission reduction target of 2%. The technolgy is available, and so is the fuel. Nprway is leading new initiatives with sixteen coastal vessels burning 60.000 tones of LNG annually, and saving the same amonunt of CO2 emissions thanks to the shift from conventional bunkers to LNG, If all bunkker fuel used worldwide was replaced by natural gas we would cover 60 % of the present worldwide 2 % CO2 reduction target.
Techinically there are no problems.
Jeff Presley 10.22.09
Jim, there's another thing automakers won't tell you, which is that LNG vehicles have substantially LESS engine problems than their gasoline counterparts. There are some technical reasons for this, but suffice to say that LNG is a more homogeneous fuel and it is the fuel variabilities that cause all that knocking and pinging, which can lead to engine malfunctions.Why would automakers want their engines to fail you ask? Well, if they never have problems you never buy the new models do you?
As to your point about taxes, of course I agree, I'd already mentioned it I believe.
As to gold et al, you ain't seen nothing yet.
Ferdinand E. Banks 10.26.09
Peter
There is no room for natural gas in Sweden. Introducing it or just thinking about introducing it is crazy or crank. As for Norway and what they are or are not going to do, that is one of the richest countries in the world - in fact, together with Switzerland, the richest, although the Norwegians insist on being too dumb to realize this.
Where the nuclear thing is concerned, Sweden needs another facility about the size of the one they are constructing in Finland, but perhaps not just now. By the way, there is a meeting at HHS (Stockholm) on 9 November where the topic will be nuclear. If it were here at Uppsala I would be there with bells on in order to make fools of the nuclear opponents.
And I repeat. What has gone wrong in this country was going into the EU, and sending billions to stone age countries in the Third World. Correcting those mistakes could, in theory, solve EVERYTHING for this country.
Don Hirschberg 11.1.09
Perhaps some will be disappointed that the paucicity of my resent comments has been due to an extended cruise rather than my demise. As to Kyoto II upcoming in Copenhagen the facts preclude anything that can make a real difference. World population reduction and nuclear power (and the prospect of fusion) only make sense.
