I remember the days of our dear Shake Ya Money - I always liked him. He has the best name of any one in the oil business. To a great extent the dumping of cheap oil has had the desired effect of pushing out the development of alternatives so, for now, the world appears to be dependent on the stuff. But that, I propose, is an illusion.

While it will not be an easy task, substitution of oil is not a technically mind boggling task. What stops it of course is that it is Governments that are hooked on oil and the nice tax rake off from it. Cars can run easily on methane and coal gas so there are plenty of fuels that can be used instead of oil. Electricity (the generation of which is almost exclusively NOT by oil) can easily be used to drive trains which is already the case in many countries (except North America which still insists on using diesel engines).

But it is all a game and has nothing to do with models or theories and alot to do with keeping those whose power depends on oil in power. That is what it is really all about.

There are many alternatives to oil. Sheikh Yamani knew it in the 70's and it is just as true today as it was then.

Good article Fred.

Malcolm

Malcolm

Rest assured that there is no need to worry. The TV audience will ALWAYS put its standard of living before renewable energy nonsense, although it may take them a little time for them to get the energy message. THAT IS 100% CERTAIN!. In the period before they wise up though, some income is going to be lost, but we can't help that, even though we also are going to lose a few dollars.

About this article. It is small beer as compared to Tam's article on oil.

Every stock trade looks pretty much the same, panic or not. A seller and a buyer. The number of shares sold equals the number of shares bought. I.e. number of shares = a constant. Nothing is “left behind.”

Be assured that when you are dealing in a listed stock you are not competing with idiots else all the non-idiots would be rich. I wish you and John continued successful investing.

For some reason, automakers are loath to embrace NG. They claim it is too costly, but I think a bigger issue is that NG and electricity cannot be easily assessed with road taxes. They really have to get off of this. For a vehicle using 600 gallons of gasoline per annum, that's $1800 per year at $3 gas, but $3000 per year at $5 gas. The latter level would be high enough to justify NG storage for vehicles. PHEVs would make more sense too.

When I was a child I seldom saw my father except at the dinner table because he was chairman of the draft board which was as a second (unpaid) job. But I saw the statistical data for US and our enemies. Japan had a higher literacy rate than the US; ethnic Russian had the highest IQs among our inductees (blue bloods from tsarist USSR no doubt), Iowa the only state with total literacy.

Not being able to reconcile current German attitude with nuclear energy is less disturbing than how Europeans, not just Germans, dealt with humanity issues in WWII. Such as railroad records seem to show that in all the countries Nazi Germany occupied the local citizens were quite willing to round up, supply and schedule for shipment Jews and Gypsies with no questions asked.

Few of us comprehend how recent Germany is. Germany as a nation dates from 1871 in Paris. This is when my grand parents were born.

Statisticians seem to measure “education“in terms of years of Schooling.” I am convinced this is specious.

A better question would be: Where do the reasonably priced batteries come from? The electricity can come from lots of places, nuclear power, coal, solar, wind. The point is that it broadens our options versus oil, which is concentrated in relatively few countries at this point.

To displace a gallon of gasoline, you need about 10-12 kW-hrs of electricity, depending on the charge efficiency, engine efficiency, etc. You could probably get that on most days with a 2 kWatt solar PV array costing maybe $4K-$5K. Now is that worth it? I dunno.

The panels last a long time, 20-30 years. Say it "generates"/displaces 6000 gallons of gasoline over its lifetime. Would I rather pay that money out to put something on my roof versus sending it to an oil producer that probably resides overseas? I think I would.

Seems we would want to be able to charge from the grid even if we had 2 kW panels. Several days, or more, in a row of cloudy weather are possible most anywhere. But having more panel capacity would seem wasteful of capital.

The overall efficiency of either scheme is in the same ball park. I said gasoline at 6#/gal, 20,000 BTU/# and e= about 25% for my engine. If we say charge/discharge e is 85% and motor e is 96 % we get 11 kW/ gal gasoline equiv.as did you (i.e.10-12). If we take from the present grid our e= .34 x .95 x.85 x .95 = .26. Close enough that I cannot tell the winner from my crude numbers.

I don't disagree with your numbers, and the grid is less expensive than Solar PV, definitely. The point I was making (I guess) is that gasoline is so expensive, that even Solar PV is competitive with it. [This is ignoring the added cost of the PHEV -- I realize that].

So if gasoline is already so expensive now, and there are myriad reasons (depletion, politics, etc.) to move away from it, then why don't we? A concerted effort is needed to make PHEVs common enough to be market viable w.r.t. cost. That is beginning to take place now.

Your last comments above point out the biggest single dilemmas facing consumers and governments/grid planners: decisions on what to buy and when to buy when considering a change in energy sources and energy consumption methods. Those dilemmas are in weighing the upfront costs to buy or build new equipment versus fuel and maintenance costs and their availability.

These dilemmas apply to PHEVs, new home appliances, solar PV or wind generators, and new large central power stations from nuclear, gas, coal or hydro sources. Of course there are many other issues that affect decisions too, like environmental impacts, NIMBYism, political issues, and whether the finances of the day can afford new choices to be made.

Please let this forum know if you guys know anyone who can accurately predict any of these costs into the distant future, and they would facilitate many easy answers to these dilemmas. In the absence of accurate cost predictions, the lowest risk answer to most of them is to diversify – by setting up a large mixture of sources and equipment over time.

This BTW is what is going on if you look around at what many governments/grid planners are doing now, and usually get heavily criticized for it because it appears they don’t know what they’re doing or are being reckless at the very least. Smart consumers who can afford to will also diversify their choices. And those consumers who cannot afford to diversify will typically wait indefinitely to make choices to keep them open, and wait until forced to make choices when equipment reaches end-of-life, or when maintaining their existing methods becomes unaffordable, or when a major financial incentives are provided to jump off the fence.

If we had crafted the most elegant energy policy based on the notion that gas production was about to go into decline and that we were faced with global cooling our model would have been a monstrosity. We didn’t make this very enlightened model. We made decisions based on economics of the time which meant making much of our electricity from coal because it cost the least and there really was no other option than to use petroleum for transportation.

Now we find the relative cost of fuels far different than the costs that gave us our present situation. It takes decades for this ship to answer the helm.

Stupidity always surprises me, however, Why weren't the railway lines leading to Aushwitz bombed, and especially the railway bridges, and maybe a few other things having to do with that place. Among others, John McCloy was against it, and he was NOT a dumb man.

Speaking of dumb, some people have told me that the business in Libya is not about oil. Exactly how was it possible to mobilize a coalition of the willing and gullible to go there unless oil had something to do with it. The kind of massacre that they wanted to prevent may be taking place in Cote de Ivoire now, and the civilian-protection junkies are as quiet as they can be.

Alas, these are the very places where birth rates (and child mortality), AIDS, population growth, crimes of moral turpitude, and need for electrification are greatest. It is also where average IQs are the lowest. Just made of search for Ivory Coast news and found far more than I can or want to read. I still have the heebeegeebies about my recent revisiting Rwanda data.

It is hard to even think up magic wand solutions.

I don't know at what level it would make sense to fuel vehicles with NG. It looks like at this level it already makes sense to heat homes with NG over fuel oil.

Here in southern Ontario we have a wide network of NG piping to virtually all the major urban residential and industrial customers, so the default heating choice has always been to use NG for central heating and for hot water heaters for decades now. Electric heat is much more expensive and is only used where NG pipes are not close by, typically in rural or remote northern areas.

For vehicles our provincial and federal governments have provided sales tax rebates and grant incentives for many years now to install a dual-gasoline-NG conversion kits on any new or used vehicle purchased as long as the kits are installed within 6 months of vehicle purchase.

Some of the NG distributors sell and install the kits, developed for practically any passenger vehicle or commercial bus or truck. A typical passenger car kit costs close to $2500 last time I looked them up. Provincial sales tax rebates of $1000 plus a $500 federal grant lower the cost to only $1000 for the purchaser. However the conversion kits never gained much popularity due to the physically large NG tanks the kits use installed in the trunk. Hence only buses and commercial fleets of trucks have ever used them very much, but now that gasoline is climbing steadily, many consumers make take another look at them over time.

"The Thermal Efficiency of GTL is considered low and is typically around 60% .... a typical GTL facility processing 1 BSCFD will product approximately 100,000 BPD of GTL products. Depending upon the technology employed the facility may include about 5-6 trains. The indicative capital cost for such a facility is estimated at around $ 2.5 Billion."

Considering that the GTL output doesn't need the comparable capacity $1.25 Billion refinery (outputs high-quality diesel directly), and a single 100,000 BPD facility at a $1.25 Billion additional cost will eliminate the installation of $2,500 conversion units on about 2,000,000 autos (assuming avg. use of 50 l/week or 13 gal / week) , a capital saving of $5 Billion in conversions alone is available by doing GTL rather than CNG.

My congratulations to Susan and Hilary, Barrack Hussain, Sarko, and the other boys and girls who decided to threaten the Colonel instead of talking to him. We'll be paying for that mistake for a long time.

During that recession many blamed the oil price spike then as the primary cause of the recession. Today we all know it was only a contributing factor since the main cause was toxic debt in the banking system, especially in the US where it was loaded with sub-prime mortgages going into default.

This time the oil price spike hasn’t shown any signs of an accompanying recession, but you can bet your bottom dollar it's dampening economic growth both in Canada and the US. People everywhere are feeling the pain in their wallets at the gas pumps. Besides perhaps driving their cars a lot less, they are curtailing their discretionary spending on other consumer goods knowing their disposable income to spend on other things is shrinking as oil prices climb. Inflation is also starting to rear its ugly head as the higher costs of transportation are beginning to creep into price hikes for everything from airplane tickets to food.

I personally think oil prices are likely to stay permanently above $100 a barrel until the next deep recession, probably years away from now.

You state:

Every stock trade looks pretty much the same, panic or not. A seller and a buyer. The number of shares sold equals the number of shares bought. I.e. number of shares = a constant. Nothing is “left behind.”

Nothing wrong with your logic Don - except that using it no-one would make any money. Not even Warren Buffet. The stock market however is not logical. Emotion not logic is what rules.

Stock prices reflect supply and demand. The events at Fukushima did not change the supply imbalance of Uranium however, many chose to sell their positions (probably not idiots but very poor decision makers) on the cheap so that those who understand what is really going on can buy them at a nice discount. What they "leave behind" when they are running out the door is low priced assets to be collected by the likes of me and John Sutherland.

In 2008 Cameco shares plummeted to just over $14 Cdn. as a result of the banking crisis. Since (as far as I could tell) the banking crisis did not stop the consumption of Uranium (did not change the demand) I bought all the way up to about $24. A month or so before the Japanese earthquake Cameco hit $42. At that point I sold off about half the position making between 100% and 300% profit. So when the price dropped down again to around $24 that represents a buying opportunity for the following reasons. You can challenge them if you like.

1. Cameco is still sitting on the worlds largest reserves of high grade Uranium ore. 2. Cameco still has about a billion dollars cash to exploit those reserves and find more. 3. There remains a 25% shortfall between mined Uranium and consumed Uranium 4. There are 60 reactors under construction that have no choice but to use Uranium 5. The agreement to use weapons grade Uranium from Russian warheads ends in 2013. 6. Only about 20 reactors of the 442 currently operating have stopped consuming Uranium (Some in Japan and some in Germany). The rest are still operating. 7. Cigar Lake the worlds richest (read lowest cost) Uranium deposit is coming on stream next year.

Neither Fukushima nor the banking crisis changed any of the above one iota.

When the Russians stop shipping enriched Uranium to the US the shortage of Uranium will become very evident and as with all commodities in short supply the price will go up. Unless someone perfects the thorium cycle in the next 2 years the only fuel those multi billion dollar machines will burn is Uranium - they have no choice.

But don't take my word for it Don. Come back in 2 years time and I'll show you how the math worked out.There are other Uranium companies out there of course. Uranium One, Uranium Participation Corp but none the size of Cameco.

By the way - Warren Buffet is buying railroads and coal mines right now because everyone thinks coal is on the way out. Mr. Buffet is not an idiot - but those selling their coal and railroad shares for low prices are.

Anyway, should you decide to join John and myself, you should use a 20% trailing stop to protect your capital and lock in your gains.

Malcolm

It is as easy to fill up with natural gas as it is to fill up with gasoline. It takes about the same amount of time. Natural gas infrastructure already exists in most urban areas and is the fuel of choice for heating and far cheaper than electricity.

Also natural gas needs far less conditioning than oil to convert it into useful fuel - mostly removing sulphur compounds - so no expensive oil refineries required.

Delivery is also cheap since it travels directly from the wellhead via undergorund pipelines directly to the end user. Using home fuelling appliances you can even refuel at home from your own natural gas supply line.

So while there is no doubt increasing demand will cause prices to increase it will still be a cheap fuel for years to come.

I expect that natural gas will be the key competitor for nuclear energy. Natural gas power plants can be built quickly with far less capital cost and they can be run automatically with almost zero staff. Provided gas supplies remain plentiful the price should stay relatively low.

Some estimates I have seen recently put the shale and coal bed methane reserves of the US alone at 2 quadrillion cubic feet. If those estimates are even half right we'll be running out of oil long before we run out of gas.

Malcolm

Oh, by the way, I never mentioned Uranium stocks.

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