Look, there's nothing magic about $50/bbl. oil. Nothing. Still the same stuff -- black gold, Texas tea. It's just that, at $50 a barrel, oil will lower the U.S. GNP from an estimated 4.5% this year to 3.5% or lower.
And we're eight-five cents away from $50 oil. Oil closed at $49.15 on NY Mercantile pre-market trading today.
Market watchers said some investors had started to whisper about the possibility of a $60 barrel, even as the head of producers' cartel OPEC made soothing-but-vague comments about ``a significant outcome'' from its next members' meeting in September.``Fifty dollars is, I would say, a foregone conclusion,'' said Esa Ramasamy, editorial manager for oil in Asia at Platts, the energy market analysts. ``Now the market is thinking $60, possibly.''
The Saudis keep saying, in effect, "we can replace the reduced production ... at a moment's notice ... just give us the word" and then do nothing to change their output. That's because even though it's going to hurt the world economy something fierce, $50 oil is, well, a frickin' bonanza for these guys. And maybe, just maybe, the price is that high because the Saudis really cannot make up the difference.
As crude spot prices on NYMEX topped $48/bbl today (actually flirting with $49 before receding slightly to a session close price of $47.64), we would do well to ponder very seriously what the end of cheap oil means for every man, woman and child on the planet. In a contemporary setting, it seems almost hackneyed to suggest this, yet I can't escape a feeling that most folks really don't understand what this means.
The end of cheap oil? Could it be? While more and more economists are coming around to serious consideration of what petroleum experts have been hinting at (and, at times, screaming about), there is still no shortage of optimists to prop up the belief that we are fairly swimming in oil. But, if the recent rise of oil prices hasn't proven sufficient to do so, an article at Ocnus.net (while somewhat crudely presented) provides us with reason to re-evaluate our addiction to free-flowing, cheap oil.
"'At Ghawar,' he said, 'they have to inject water into the field to force the oil out,' by contrast, he continued, Shayba's oil contained only trace amounts of water. At Ghawar, the engineer said, the 'water cut' was 30%.""The hairs on the back of my neck stood up. Ghawar's water injections were hardly news, but a 30% water cut, if true, was startling. Most new oilfields produce almost pure oil or oil mixed with natural gas--with little water. Over time, however, as the oil is drawn out, operators must replace it with water to keep te oil flowing --until eventually what flows is almost pure water and the field is no longer worth operating."
"Ghawar will not run dry overnight, but the beginning of the end of its oil is in sight."
But this year at the Offshore Technology Conference some were talking about a 55% water cut for Ghawar.
To put this into perspective, check this out...
"BEIJING, Aug 13 (Reuters) - Chinese crude imports, up 40 percent so far this year, show no sign of slowing despite high oil prices and government efforts to calm economic growth, latest monthly import data showed on Friday."
The price of oil is within a gallon of gas' price of $50. I'm willing to bet that $50 oil will arrive ahead of the Republican National Convention. What a wonderful gift for the Rethuglians.
Oil closed at $48.20 today.
Need I say more? Oil at $47 a barrel.
Oil prices topped $47 a barrel early Wednesday, setting yet another record, as violence in Iraq threatened to engulf the country's main export pipeline.Analyst estimates that weekly data due later Wednesday will show a dip in inventories in the United States, the world's biggest oil consumer, also helped push prices to a new all-time high.
At about 8 a.m. ET, U.S. light crude eased to $47 a barrel, up 25 cents, after pushing the record price to $47.04 before 7 a.m.
Now why isn't gasoline racing to $2.50/gal. ?
PhysicsWeb is reporting a process for extracting hydrogen for fuel cells from ethanol.
Ethanol made from corn has already been used to power some car engines, but the process is only 20% efficient. Moreover, all traces of water must be removed before the ethanol can be used as a fuel, which adds to processing costs. Now, the Minnesota-Patras team says that if ethanol was used to make hydrogen for fuel cells, the process would be 60% efficient and the ethanol would not need to be pure.Schmidt and colleagues passed an ethanol-water-air mixture over a porous metal catalyst containing rhodium. The reaction on the rhodium surface heated the catalyst to 800°C and produced a mixture of hydrogen, recyclable carbon dioxide and some minor by-products in a few milliseconds. The conversion rate of ethanol to hydrogen was over 95%. Furthermore, the process minimized the build up of carbon – normally observed when ethanol burns – that would have deactivated the fuel cell. This allowed the reactor to operate for as long as 30 hours.
The team believe that it should be possible to produce five molecules of hydrogen for every molecule of ethanol – rather than four as at present - once the process has been optimised. Electricity from a perfect fuel cell would cost only $0.04 per kilowatt-hour says the team, and the first applications could include small remote and portable devices.
Oil closed at $46.60 today. This is not a short term trend.
Most oil market commentary still makes it sound as if high prices are a passing phenomenon. Each spike is attributed to the threat of a loss of Iraqi exports, or possible Saudi instability, or Yukos's problems in Russia, even though what is happening there seems unlikely to affect oil production, just to change who profits from it.But the markets are smelling something different. Oil to be delivered next year now fetches $39 a barrel, and oil to be delivered in 10 years costs almost $35.
The problem is not a lack of oil in the world. The problem is getting the oil to refineries and then to market. The large undeveloped resources are in West Africa, around the Caspian Sea and in Siberia. Two of those areas have issues of political stability and the third has severe weather.
The trend now, Mr. Currie said, is to ''have new oil produced in West Africa, shipped to Asia to be refined, and the product then shipped to North America.''
If he is right, many arguments in Washington have been irrelevant. It does not make much difference whether oil is pumped from the Arctic National Wildlife Refuge in Alaska because a shortage of oil is not the biggest problem. ''The real problem is the shortage of infrastructure to obtain and deliver the commodity,'' Mr. Currie said. ''That seemed to go completely unnoticed until the last six months.'' Neither Europe nor the United States shows any indication of willingness to build new refineries.
Mr. Currie says the oil industry invested about $100 billion a year in the 1990's, a figure that has grown to $150 billion but needs to rise to perhaps $250 billion. Until that investment bears fruit, the world faces both higher prices and the possibility that supply interruptions could have severe effects.
The infrastructure is not able to produce the refined products that North America, Europe and now China are competing for. The demand has overrun the infrastructure, and has done so quickly and without any (seemingly) any planning. The Iraq War has made things worse by destabilizing the world's 3rd largest producer. In trying to steal 1/6th of the world's reserves, we've made it worse.
Will $50 oil be the real "October Surprise"? A surprise for the American public, who will start to really feel the burn at $2.50 gas, and a bigger surprise to George W. Bush who's Saudi masters cannot save now.
Iran lowered it's petroleum output today, sending crude up to within three cents of $45/bbl. I'm predicting $50/bbl. oil on or before the election in November. When does $44/bbl. oil start driving gas back up over $2/gal.?
From the latest Newsweek:
My fellow Americans, drop the fantasy that we'll return to cheap gasoline, and pump it for as long as our withered hands can steer an SUV. As the prophet saith, the end is nigh. Demand for oil is running high—in fact, we're gobbling up the stuff. But world production grew by only 0.6 percent a year for the past five years. At some point, supplies will shrink, not grow.The two oilmen in the White House maintain that we can drill our way out of this hole. George W. Bush is campaigning on subsidies for more oil production at home, especially in the Arctic. John Kerry says he'd invest in alternative fuels, raise mileage standards for cars and SUVs, and subsidize energy efficiency. For their part, consumers don't want to hear that oil could run out. That Escalade in the showroom just looks too good.
Am I crying wolf? If so, I'm in the company of some pretty big guns in the oil biz—geologists, merchant bankers, analysts and petroleum engineers. They note that the major companies aren't building new U.S. refineries, investing in drilling or enlarging the tanker fleet—suggesting that they don't expect much new oil to appear. Saudi reserves, which the world depends on to fill every energy gap, remain a state secret; outsiders wonder how big they really are
Princeton geology professor emeritus Kenneth Deffeyes, who's writing a book due in 2005 called "Beyond Oil," waggishly names an Armageddon date: "World oil production will reach its ultimate peak on Thanksgiving Day 2005," he says. Then the long, slow decline begins (for a fuller discussion, see oilpeak.com).
Crude oil reached $43 a barrel today.
Crude oil prices hit a record high of $43 a barrel Wednesday despite an increase in U.S. crude inventories amid record imports, as traders worried about supply after bailiffs ordered Russian oil major Yukos to halt sales.
Are you ready for $2.50 gas? I am.
Our buddy, Paul, brought the Air Car to our attention.
This is interesting. I think it is real. Best I can tell, it runs (ideally) on compressed air. The designs they show on the web site appear to have a range of about 60-70 miles if you travel at 30 mph. In order to do this, you must charge the compressed air tanks, which in Europe (with 230V supply) will take about 3 hours for the small 2-seater; in the U.S., it could take considerable longer unless you can tie in to the higher voltage lines in your home, like the ones that electric clothes driers use. I couldn't tell whether there is any regeration from braking; if not, then the range could be extended, but I kind of suspect that they are doing some kind of energy re-capture, so probably not much improvement there.
In general, though, I'm pretty skeptical about such complex mechanical systems. I suspect there are a number of serious issues with, for example, the air filters, which would probably need serious regular
maintenance -- like on a weekly or daily basis, depending on the air quality of one's locale. Air compression just doesn't tend to stack up to any thermodynamic advantages over competing technologies, like pure electric, hybrid electric or even fuel cell, although this is mostly opinion/speculation on my part.
Perhaps most important, one must consider where the energy is coming from, and how efficiently it is being utilized across the entire flow, from source to end use. That compressed air won't be free. I'm trying to imagine what my electric bill would look like if I ran my electric clothes drier for six or seven hours every night, and what changes would be required to the local grid to support *everyone*
in my city doing this every night. Where will that electric energy come from? Currently, most electric energy in the U.S. comes from the burning of coal, which is very dirty. So, someone needs to estimate how the electric power infrastructure must change to accommodate these cars, and then compare that to changes related to competing technologies.
On the web site, they refer to using windmills and river currents to charge the cars. That sounds fine, although I think some serious analysis needs to be done to estimate both the efficiency and the
scalability of that scheme.
In short, it looks kind of nifty, but I'm quite skeptical.
PS Personally, I really like the Twike!
CNN is reporting that a Houston grand jury has indicted Ken "Kenny Boy" Lay, former CEO of Enron (or as Mr. Jones prefers, "Heads on Sticks™" Corp.).
Prosecutors were expected to center their case against Lay on his efforts in the months leading up to Enron's fall to reassure workers about the energy company's financial health at the same time that he was quietly unloading his own Enron stock.In recent days, as rumors spread that an indictment was near, Lay and his defense lawyers have mounted a public campaign declaring his innocence in the hopes of warding off criminal charges. Lay and his advisers have argued that he knew nothing of the secret partnerships managed by Fastow and fully believed in the company's long-term viability when he urged employees to hold onto their Enron shares.
Kirby Behre, a former federal prosecutor who is now in private practice in Washington, D.C., said it comes as no surprise that Lay has been charged. "The government seems to have successfully worked its way up the food chain and enlisted the help of senior officers of the company who obviously were cooperating."
Behre added that ex-CFO Fastow most likely provided the missing link the government needed to bring the indictment.
"I don't think Fastow would have gotten the plea offer he did unless he had something to deliver on Ken Lay," said Behre, now a partner in Paul, Hastings, Janofsky & Walker.
All we can say here at SJR is about fucking time!
From an op-ed by Robert Samuelson in the Washington Post:
When oil prices hovered around $40 a barrel, pundits screamed for an energy tax (a policy I've long advocated). Although that's desirable, it won't bring much immediate benefit, because there are more than 230 million vehicles on the road. Any shift toward fuel efficiency will take time. A smart energy policy operates over years and decades, not weeks and months. The question that we ought to be asking -- and aren't -- is whether we're similarly blundering with natural gas. Given our history, that seems a good bet.Natural gas is the heating fuel of about half of U.S. homes (51 percent in 2001). Since 1993 it has been the fuel used for almost 90 percent of new electricity generation; in effect, natural gas powers the Internet and most PCs. It is also a major fuel for manufacturers and for heating office buildings. In 2002 about half of gas sales went to industrial and commercial users. The trouble is that we're no longer self-sufficient in natural gas -- and our import dependence will grow.
In 2003 Americans used about 22 trillion cubic feet (tcf) of natural gas, up from 19 tcf in 1990. By 2025 consumption will be 29 tcf to 34 tcf, projects the Energy Information Administration. If we don't import more or expand domestic production -- or both -- those projections won't come true. Prices will rise, choking demand; or, shortages will occur. Some factories that need gas will move to countries with cheaper and more reliable supplies.
Democratic Underground's weekly Top Ten Conservative Idiots features a piece on the release of the audio tapes of Enron (excuse me, Mr. Jones has reminded me to refer to the former "energy trader" as "Heads on Stix Corp.") traders gloating about ripping California off during rigged energy shortages. Click on the extended entry for the (rather adult) quotes ...
CBS News dropped a bomb on Enron last week after they obtained audio tapes of Enron traders discussing such entertaining subjects as how Ken Lay "fucks California," how Enron stole money from "Grandma Millie," and how Grandma Millie, um, "wants her fucking money back for all the power you've charged right up, jammed right up her ass for fucking $250 a megawatt hour." Yes, after years of allegations that Enron was deliberately defrauding the state of California by causing a massive energy crisis, the evidence was made public last week, and it wasn't pretty. The energy company's traders were caught ordering power plants to be shut down and gloating about a huge forest fire which closed a major transmission line into California, as well as suggesting that they would "love to see Ken Lay Secretary of Energy," and dreaming about how "When this election comes Bush will fucking whack this shit, man. He won't play this price-cap bullshit." Funnily enough, Bush gave a speech during the energy crisis in which he said, "We will not take any action that makes California's problems worse and that's why I oppose price caps." Hmm... isn't that called "aiding and abetting?" See, former governor Gray Davis was trying to get Bush to impose price caps on electricity in California, but Bush refused. Meanwhile Our Great Leader's surrogates were running attack ads accusing Davis of failing to protect Californians from rising power prices (see Idiots 24). And finally, Davis was ousted by groping Austrian beefcake Arnold Schwarzenegger, who coincidentally met with Enron executives during the energy crisis (Schwarzenegger says he doesn't remember the meeting, of course). What a disaster.
With Skates preparing for a little well-deserved R&R, the SJR seems to be gathering a fine layer of dust. What do you say we perk things up with a fun post about oil ( or "awl" as we say down here in Texas )? It just so happens that the Washington Post has a nice op-ed on Hubbert's Peak this morning. Now, you may be tempted to ask what the heck that is, but that would only elicit a long-ass lecture from Heimie, so we best be stoppin' with the folksy non sequiturs and start readin' on here if you know what I mean...
If you're wondering about the direction of gasoline prices over the long term, forget for a moment about OPEC quotas and drilling in the Arctic National Wildlife Refuge and consider instead the matter of Hubbert's Peak. That's not a place, it's a concept developed a half-century ago by a geologist named M. King Hubbert, and it explains a lot about what's going on today at the gas pump. Hubbert argued that at a certain point oil production peaks, and thereafter it steadily declines regardless of demand. In 1956 he predicted that U.S. oil production would peak about 1970 and decline thereafter. Skeptics scoffed, but he was right.It now appears that world oil production, about 80 million barrels a day, will soon peak. In fact, conventional oil production has already peaked and is declining. For every 10 barrels of conventional oil consumed, only four new barrels are discovered. Without the unconventional oil from tar sands, liquefied natural gas and other deposits, world production would have peaked several years ago.
Oil experts agree that hitting Hubbert's Peak is inevitable. The oil laid down by nature is finite, and almost half of it has already been extracted. The only uncertainty is when we hit the peak. Pessimists predict by 2010. Optimists say not for 30 to 40 years. Most experts expect it in 10 to 20 years. Lost in the debate are three much bigger issues: the impact of declining oil production on society, the ways to minimize its effects and when we should act. Unfortunately, politicians and policymakers have ignored Hubbert's Peak and have no plans to deal with it: If it's beyond the next election, forget it...
Fortunately, oil production does not suddenly stop at Hubbert's Peak; rather, it declines steadily over time. But because production cannot meet demand, the price of oil will rapidly and continuously escalate, degrading economies and living standards. People complain now about gasoline at $3 per gallon. After Hubbert's Peak, $7 per gallon will seem cheap. Spending $150 to fill up the SUV? Ouch!How to minimize the impact of declining oil production? Conservation and new finds can help. Higher mileage standards for autos and trucks could cut U.S. oil use by 20 percent or more. New oil fields continue to be discovered, but they are small. No giant Saudi Arabia-type fields have been found in 30 years. The small fields contribute ever diminishing amounts of oil. But while conservation and new oil can delay Hubbert's Peak and ease its impact, they cannot prevent it. Moreover, even if the United States conserves oil, other countries might not. A practical long-term, non-oil solution to the problem of Hubbert's Peak is needed.
We need new technologies, especially for transportation, which accounts for two-thirds of U.S. oil consumption. Possible options are synthetic fuels from coal, hydrogen fuel from nuclear and renewable power sources, and electrified transport: light rail, rail and maglev. Processes for synthetic gasoline, diesel and jet fuel are well developed but expensive. The environmental problems from coal -- mining, carbon dioxide emissions and other pollutants -- are serious and require more attention. Hydrogen fuel produced by electrolysis from renewable power sources is environmentally clean, but it has serious technical problems. Producing the hydrogen equivalent in energy to the oil now used in U.S. transport would require 10 trillion kilowatt hours of electric energy; we would have to triple our electric generation capacity.
A more practical approach would be the electrification of transport. Switching half the truck and personal auto miles to electrified transport would require an increase in electric generation capacity of only 10 percent. Electrified transport is clean, non-polluting and energy-efficient. Light rail and rail systems are already in wide use. First- generation maglev systems are operating, and lower-cost second-generation systems are being developed.
As oil production declines, the combination of electrified transport and synthetic fuels from coal can meet the challenge. Hydrogen fuel is probably not practical, but research and development on it should continue in the hope of a breakthrough.
Whatever non-oil transport technologies prove best, making the transition from our present systems will take many years. It took decades for the first automobiles and airplanes to evolve into effective systems, and decades to build the interstate highway network. We can't afford to wait until Hubbert's Peak occurs. We should begin now to plan and implement the new, non-oil technologies. If we don't, our economy and living standard will be in serious trouble.
Staying with the fuel theme, David Ignatius makes the case for higher gasoline taxes:
Let's imagine for the moment that the United States was a prudent nation and that its politicians, rather than pandering to the public appetite for cheap gasoline, decided to reduce the nation's dependence on energy from the volatile Middle East.
After America's annual Memorial Day drive-a-thon, the idea of such a rational energy policy may sound quaint. Millions of Americans hit the road this weekend in their cars, trucks and SUVs -- many of them doubtless grumbling about the 2004 "oil crisis" that has pushed gas prices well over $2.
It would be nice if politicians would tell these road-happy Americans the truth, which is that the energy situation will only get worse over the long run. And it would be nicer still if politicians proposed policies that would improve the energy efficiency of SUV Nation. But in America, there's a name for such politicians: losers. The reason the oil squeeze will only get worse can be stated in two words: China and India. As those countries become more prosperous, their consumption of energy will inevitably rise -- putting further pressure on the market. That has already begun to happen with China, whose growing demand sucked up the 500,000 extra barrels a day of crude that Saudi Arabia added to the market last year to compensate for lost Iraqi production.Optimists hope that an easy way out of the energy crunch may be found in abundant cheap supplies of natural gas, but industry economists tell me that's wishful thinking. One Denver-based consultant says that recent price moves and merger valuations suggest a 50 percent or more rise in natural gas prices in the next three to five years. Liquefied natural gas may eventually help temper prices, but only if huge investments are made to store and transport it.
The people who make America's gas guzzlers know exactly what would force the country to deal with the energy crunch: higher gasoline taxes. A recent article by Danny Hakim in the New York Times had some astonishing quotes from auto executives. Ford chief executive William Clay Ford Jr. explained: "Every place else we operate, fuel prices are very high relative to here and customers get used to it, but they get used to it by having a smaller vehicle, a more efficient vehicle." GM's chief executive, Rick Wagoner, agreed: "If you want people to consume something less, the simplest thing to do is price it more dearly."
The European market illustrates how higher taxes push greater efficiency. Last week, premium gas prices in Europe were averaging more than double the U.S. level of $2.24 a gallon -- with prices at the pump averaging $5.07 a gallon in France, $5.36 in Germany and $5.59 in Britain. European consumers inevitably have demanded more efficient cars. According to Hakim, overall oil consumption has fallen in Germany and Britain since the 1970s.
Many news outlets are reporting that despite the Saudis' offer to increase production by 600K bbls./day, the price of oil has shot up to nearly $42/bbl. Worse still, even though the Saudis can crank up to 2M bbl./day more than they currently do, their impact on the world price is considerably less than they expected. The market is clearly behaving as if the Saudi increase is already a given, thus the price is rising regardless of the increase in Saudi production. So if the Saudis cannot (or will not) deliver the extra production, we can expect even higher prices come the fall election cycle.
I cannot believe the Saudis are going ahead so early with their quid pro quo production increase to ensure Bush's re-selection. The Iraq situation is forcing them to move sooner, and thus washing out their actual impact on the price of oil and gasoline for the cruical fall election season (crucial, that is, for Bush).
I urge everyone to read this essay by none other than Kurt Vonnegut, Jr. He talks about the human condition, tosses in some real politik, and then plants a 2 by 4 to your forehead at the very end. As always, if you are pregnant or on heart medication, this ride is not advised! But Kurt remains one of my favorite writers of all Time.
The New York Times did a piece in their Automobile section about the Hummer's slacking sales and fan sites [Note: Not "family friendly"].
As Hummer dealers are being forced to build ever more grandious dealerships for the Edsel of the 21st Century, sales are plummenting (down 24% this year). Most Hummer buyers don't balk at the obscene cost of fueling the H2 (11 MPG, EPA estimates) at $2 or even $3/gal. You gotta wonder at what price does the SUV cost more to drive than to buy?
(Answer: at $4/gal., fuel costs would equal the zero-interest monthly payment of an MSRP priced H2 on a 6 year 0% note and if you drive 25K a year, which is typical for a suburban commuter in America. By comparison, my VW Golf TDI would require gas to be $62/gal. -- well, diesel -- to equal the equity cost of the vehicle on the same loan/miles driven terms as the H2.)
Salon has a review of The End of Oil by Paul Roberts. He accuses the U.S. consumer of being "energy illiterate" (no argument there) and places both the blame and the responsibility on them.
And it's not just the U.S. government that doesn't care. It's the individual consumer, as well, who appears remarkably indifferent to price jumps. Roberts compellingly argues that it will take more than a temporary spike at the pump, or even the ongoing Iraq war, to wean Americans from their energy-hog habits, much less mobilize the country to confront global warming.Roberts puts the dilemma this way: "In the simplest terms, the energy challenge of the twenty-first century will be to satisfy a dramatically larger demand for energy, while producing dramatically less carbon." He analyzes the possible options for alternative energy sources -- including the clean dream of hydrogen fuel-cell cars -- that could help the world consume less of the CO2- and pollution-rich energy we're currently bingeing on. By charting the history of energy consumption -- from wood and biomass fuels to coal and then oil and natural gas -- he makes a convincing case that massive energy infrastructures can change.
But he is not optimistic that any of the alternative fuels can compete with the entrenched fossil-fuel establishment in time to stem the impact of global warming. Every alternative source of energy has its flaws and hurdles to overcome, but their overall failure can't be pinned to specific technical issues with, for example, solar and wind power, or to the drawbacks of hydrogen as a form of energy storage. The real problem is that consumers -- and the governments that represent them -- are not yet feeling the economic pressure to inspire them to invest in such a switch.
I think letting the U.S. government, especially one run by oil industry CEOs, off the hook for this is ridiculous. Only President Carter seriously proposed energy efficiency, and Reagan promptly reversed all his earnest measures (except, ironically, the infamous 55 MPH speed limit). Allowing car manufactures to sell SUVs with subsidies (both overt and hidden), waging a war to steal access to the last easy oil and letting energy executives decide national policy, in secret, are only some of the choices that the Bushies have made that have resulting in things getting worse, not better.
And the end of oil comes ever closer.
According to CNN Money, Greg Mankiw says that oil reaching nearly $42/bbl. is "no significant risk" to the U.S. recovery. Isn't the cost ratio "$1/bbl. increase equals $70B more the U.S. spends on oil"? So, since Wed. (when oil crossed $40/bbl.) we've had to add twice the amount we blew on Iraq last year to the cost Americans will spend on petroleum. Did I miss something? How does that sound in light of this quote?
According to U.S. officials, the oil spike does not appear to have stunted that growth. Gregory Mankiw, chairman of the White House Council of Economic Advisors, told Reuters the U.S. economy remained on track for a robust recovery and current oil prices did not pose a significant risk.
Damn, how 'bout that crazy price of oil, eh?
Despite OPEC's announcement yesterday that they would consider raising output, I am highly skeptical that any actual change in production will be realized. Most likely, what we will see is a modification of OPEC's price target, and perhaps a slight increase in output quotas.
But, these changes mean nothing. The only thing that will have any effect would be more oil. So, since Saudi Arabia is the only OPEC member to claim any real spare capacity, perhaps we will see whether they really can increase output like they've been assuring us all this time. My prediction is, though, that they won't, because they can't. I think they're maxed out, capacity-wise, and the loss of western workers due to safety concerns can't be helping. So, while there'll be all sorts of blustery talk of raising this price band or that output quota, which will play all sorts of havoc with the hyper-volatile price of oil, don't look for Saudi Arabia to make any promises of significantly increased output, let alone actually increase their output.
And, even if they could increase output, it would have little effect on the price of gasoline in the U.S., as refiners, having retooled to produce our special, more expensive "environmental" formulations of gasoline, are already running at near full capacity. Gasoline demand is on the rise, and gasoline stocks are low. There are very few sources from which we can import gasoline that meets our stringent formulation requirements, and the domestic refining industry, having incurred the expense of retooling, is unwilling to let the EPA relax its requirements on imported gasoline formulations, as that would put them at a competitive disadvantage. While Democrats may find political leverage in urging the President to release oil from the National Strategic Petroleum Reserve (NSPR), it really wouldn't serve much practical purpose to do so.
My feeling is that our oil situation is critical beyond belief at this point. And, one would imagine that the likes of Al Qaeda must know this. All it would take is one lunchbox packed with C4 at one of the major oil processing terminals in Saudi Arabia to bring the U.S., and the world, to its knees economically.
Luckily, we've been able to depend on abundant natural gas!
Andrew Weissman, Publisher of EnergyBusinessWatch.com, writes on EnergyPulse.com that the prices of natural gas, contrary to what economists might predict, have significant upside potential over the remainder of the year. Interesting to read that our stalwart supplier, Canada, is unlikely to meet U.S. demand for natural gas. This seems an ominous sign to me.
What I find a little interesting is that, while I have long predicted increasing natural gas prices, my reasoning was based on presumed shortages resulting from increased demand from the 200,000 MW of new gas-fired power plants that have been built over the past five-ten years. But, it turns out that these new plants remain idle -- because of the high cost of natural gas.
Thank god, we have coal to save us!
Reuters reporter Steve James, writing in Forbes, has recently reported on the low coal inventories of U.S. power plants. Coal demand is up significantly due to increased steel production to satisfy industrial growth for both a recovering U.S. economy and, perhaps even more important, booming demand for U.S. steel in China. Power generators typically store their own purchased coal for later use, but with higher coal prices, they have chosen to wait, gambling that the price will come down.
To make matters worse, the U.S. rail industry has fallen into neglect in recent years, and currently have their hands (and railcars) full supplying transport of coal to steel plants, and steel to port. If the power companies suddenly decided to bite the bullet and buy the coal they needed to satisfy demand, perhaps because they realized their gable wasn't going to pay off, physically getting the coal to their plants will be a challenge.
Luckily, our oil-rich pals in Iraq are going to help us out -- all according to plan, eh?
This is the Krugman column I've been waiting years for:
Before the start of the Iraq war his media empire did so much to promote, Rupert Murdoch explained the payoff: "The greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil." Crude oil prices in New York rose to almost $40 a barrel yesterday, a 13-year high.Those who expected big economic benefits from the war were, of course, utterly wrong about how things would go in Iraq. But the disastrous occupation is only part of the reason that oil is getting more expensive; the other, which will last even if we somehow find a way out of the quagmire, is the intensifying competition for a limited world oil supply.
...or maybe a Volkswagon.
I just got back from paying a huge repair bill for our old family minivan, and it's becoming more apparent that, since I can't convince my wife and kids to give up the car culture completely and rely on bikes and (gasp!) walking to get around (but, I have to mention that I really shouldn't complain, as my family is really pretty progressive and cool as these things go, and certainly don't complain about my lame bike-riding ass even when it inconveniences them or when I rag on and on about cars and whatnot, kinda like I do in this blog, y'know... but, anyway, where the heck was I? Oh yes...), we need to start thinking seriously about getting a different (if not new) car. Oh, the irony.
So, this morning I noticed this article in the NYTimes about the dismal new car sitch in the U.S., and its deleterious impact on health -- namely, via air pollution and crashes. Nicely ties together most of the important themes highlighting how screwed up we are in the U.S. -- at least, regarding our dependence on cars.
Trying to cut back on the morning caffeine, -Heime
PS Investment banking firm Raymond James & Associates has evidently developed their own analysis of world oil supply, and predict that a peak betwen 2010 and 2022. (I trust everyone has been watching the recent oil prices holding at 13-year highs...?)
Samsam Bakhtiari has published an article in the 26 April 2004 issue of Oil and Gas Journal predicting a world oil production peak occurance in the 2006-2007 timeframe. The article is copyrighted and subscription access only, so I can't reproduce it here, but I've seen it. Evidently, the analysis is based on Campbell's conventional reserve estimates, and concludes that the peak will occur at 81 million barrels per day +/- 1 million b/d, while OPEC doesn't actually peak until the middle of the next decade.
This work contrasts with a Wood Mackenzie estimate that Russian production will not peak until over 10 million b/d around 2010, and will carry non-OPEC upward until that time, indicating that a world-wide peak would not occur until sometime after 2010. Look for output numbers by this year's end to settle the dispute.
I confess, though, that I'm a little confused about the 81 million b/d number as a peak estimate, as I think we may already be beyond that now. I'll have to look into that. Interesting, though, that Bakhtiari mentions that "Saudi Aramco's defense of its future oil potential ... simply cannot be taken seriously."
This Op-Ed from the Washington Post warns that demand for gasoline in the U.S. will soon exceed the capacity of our refineries to produce it:
The price of gasoline rose over the winter, but that was just the beginning of an inevitable upward trend. Summer will give us an even better feel for things to come. Complaints by motorists and accusations by politicians will not avoid the unavoidable: Most Americans simply cannot have all the gasoline they want much longer.We already burn more of this precious but cheap commodity than U.S. refineries can make. For the past two years, imports climbing toward 1 million barrels per day have kept supply in step with consumption. But within three years, we'll be extracting as much from foreign suppliers as they can spare. At that point, demand cannot continue to grow at the current pace. It cannot exceed supply...
Let me stress an essential point. We must not pretend that a supply increase can save us. Even if public opposition and economic impediments to refinery expansion should disappear today, the oil industry could not install new equipment fast enough to prevent a shortage two or three years from now. No company can order the major process hardware to make gasoline -- pipe stills, catalytic crackers, alkylation units, cokers and reformers -- off the shelf. It takes three years to build and install those big, costly, complex units. Add another year for design, engineering, bidding and funding. In the real world, securing operating permits would entail anywhere from a year to as long as it takes for one to lose hope.
Today's NY Times has an article about the effect that Bush's wisdom regarding NASA's direction is having on one of this nation's most valuable scientific resources. In particular, climate research will take a hit...
"And despite President Bush's promise to seek answers to the questions about global warming, about $1 billion has been removed from the projected earth science budget over the next four years, delaying by two years the launching of a satellite that will measure worldwide precipitation.
"'OPEC is ready to fill any gap created from whatever reason,' United Arab Emirates Oil Minister Obeid bin Seif al- Nasseri said in a telephone interview from Abu Dhabi yesterday. 'However, OPEC has its limitations, if there's big damage in more than one place at the same time, then we will have a problem because we are already near our total capacity.''"
Interesting (and short) article in Janes about peak oil and the state of U.S. foreign policy.
"As the world's natural resources shrink and global warming changes the environment, competition for unimpeded access to them has intensified and will continue to do so."
Also, watch for the next issue of Oil and Gas Journal -- THE petroleum industry rag -- to predict 2006-2008 as the peak production years. But, bear in mind that we won't see the peak except in retrospect; it'll be a few years after the actual production peak that we will begin to notice consistent downward trend. Meanwhile, we will witness increasing price volatility and geo-economic-political instability.
BTW, non-OPEC production is already on the decline, I believe -- certainly production from conventional reserves. So, as our (and China's and India's and Japan's and ...) demand continues to rise, our dependence on OPEC oil will increase even moreso. The days of being able to shop elsewhere for oil, as we did after the OPEC embargo of the 70s, are fast drawing to a close.
Just as two thirds of the American public is convinced there is a terrorist attack coming this year, some nuclear fuel rods have gone missing. CNN has this report:
"We do not think there is a threat to the public at this point. The great probability is this material is still somewhere in the [spend fuel] pool," said Nuclear Regulatory Commission spokesman Neil Sheehan.
Maybe Saddam Hussein can tell us where it went!
Page 54 of the U.S. D.O.E. Energy Information Administration's"2004 International Energy Outlook" asserts...
The decline in Canada's exports of natural gas to the United States is expected to be mitigated by the construction of a pipeline that would bring MacKenzie Delta natural gas into Alberta. The gas would then be available both to serve Canada's internal needs and to provide exports to U.S. markets."
Yet, an Edmonton Journal article indicates that Canada may have other ideas about how to use that gas. Canada has huge reserves of oil, but most of it is trapped as unconventional tar sands in Alberta. Tar sands are expensive to produce, and so the reserves only become proven -- or, economical feasible to produce -- when the price of oil is high enough to guarantee a return on the high investment costs. Well, now we are seeing high oil prices, and Canada is becoming increasingly interested in exploiting it's natural resources. From the Journal article, ...
Gas consumption by oilsands projects for heat processes and power generation is forecast to triple by 2015 to 1.8 billion cubic feet per day, a figure exceeding anticipated deliveries by the Mackenzie pipeline.
I have an acquaintance inside the U.S. National Energy Research Labs who confirms -- with an ominous tone of incredulity -- that, indeed, U.S. energy officials are depending on the MacKenzie gas (as the 2004 energy outlook report indicates).
Folks, I can't be emphatic enough about the severity of the problem that is indicated here, and I believe my friend at the NERL would agree. We are setting ourselves up for a serious natural gas crisis in this country over the next few years. This will affect energy and food prices, which in turn will have a trickle-down effect across the whole economy over the longer term. Most of the power-generating plants built in recent years -- and there have been quite a few, to address shortages that have become evident -- are gas-fired. I have heard that a number of fertilizer plants in the U.S., which depend heavily on natural gas as a feed stock to produce anhydrous ammonia fertilizer, have either idled or closed.
Oops! Gotta go! Takin' the Excursion down to the steakhouse for some o' that tasty CORN-FED BEEF! Yum!
It will cost more to put in the crop this year, according to agrinews. This is due largely to increased energy costs. The direct impact to farmers of higher energy costs is only moderate, as the fuels they use to produce and deliver their crops is only a small percentage of the overall production costs. But, when you throw in the increases in the costs of such materials as fertilizers, pesticides and other agri-chemicals that get used, nearly all of which are derived from petroleum, the cost increases become substantial.
And, this is one of the reasons that I harp on energy, and in particular oil and natural gas, as the linchpin of our economy, and in fact our whole modern civilization.
Bottom line: look for higher food prices in the fall.
Since I know no one can get enough of this oil talk (like the commodity itself), here's more.
First, since I've mentioned Matt Simmons here in the past, here's an article from the Houston Business Journal that gives a pretty good view of the feud he is currently having with the Saudis regarding their reserves and capacity.
Next, since we've also discussed the effect that the growing economies in Asia are having on world resource demand (especially oil), here's some commentary on the Saudis' dealings with Japan and South Korea.
"The Saudis want a deal: oil at good prices if countries like Japan and South Korea help develop the kingdom's infrastructure, power stations, petrochemical plants, mining and water-desalination plants."
My feeling has been that we are dangerously overdue on building momentum to establish a sustainable energy infrastructure. While I have come to the conclusion that that infrastructure is realistically going to be built primarily on a combination of wind, solar and biomass sources, some folks believe that the only realistic long-term solution will be nuclear, in one form of another. To be honest, I'm fairly open-minded about this option. If we could acceptably manage the risk and figure out how to spin up the necessary infrastructure elements, I might be for it.
So, what's needed? Right now, there are approximately 100 nuclear plants operating in the U.S. supplying roughly 20% of the electrical energy we consume. Considering the scenario where we eventually wean ourselves from fossil fuel dependence, we would need to expand that to about 1,200 plants. Off-hand, I'm not sure what the timeframe is to build a nuclear power plant, nor the cost, but given that we may well be approaching Hubbert's peak of fossil fuel production, we may only have somewhere around 15 or 20 years to do this, and we will need to do it in a time where highly volatile energy prices are playing havoc with our economy.
But, let's say we can get that done.
Currently, straight fission reactor design is pretty much the only option we have. Breeder reactors have proven to be problemmatic and have been mostly shut down, and fusion is still a pipe dream. At least, it's unlikely that we will have commercially/industrially feasible designs for any of these technologies in the timeframe that we are probably limited to.
So, we need fissionable material. Uranium is pretty much the sole fuel for fission plants today. It is a mineral resource like oil, and has a hubbert's peak of its own. There are some, like John McCarthy, who make claims that this technology can sustain us for hundreds of years, and that breeder technology can sustain us for billions of years longer. But, regarding the "hundreds of years" estimate, bear in mind that it is based on current rates of consumption. If we will be burning 12 times more than current rates, and if energy consumption continues to rise year-upon-year -- as a growth-demanding economy like ours requires -- this fuel resource quickly is reduced to only a few decades, or about the life of the generation of reactors that we are talking about building. So, we may run out of uranium before we can even get to feasible breeder technology.
John McCarthy is a smart guy, there's no doubt. But, he is, of course, not without critics, of which I am one.
But, let's say we forge ahead.
What about risks? Well, I think we all are familiar to varying degrees with the risks associated with reactor malfunction. So far, in the world's history of nuclear energy production, we have had accidents roughly every 10,000 reactor years. Of course, reactors that we begin designing today are likely to be safer. How much safer is difficult to say, but let's assume they are two times as safe, so that we are likely to extend the accident periodicity to 20,000 reactor years. With 1,200 reactors operating in the U.S., that means we would have an accident of some consequence every 17 years. Ouch.
And, to be sure, nuclear accidents can be nasty in many ways other than Chernobyl-nasty.
Finally, what about the waste? With only 100 plants operating over the last few decades, we're already having difficulties finding mountains to stuff full of toxic radioactive waste, where we can feel safe that it won't leach out into the environment and our bodies, and where we know it won't become a terrorist target or fall into hands that would use it as a weapon against us. What if we produced the stuff at 12 times the rate that do today?
As I said, I'm happy to entertain the idea of a nuclear future, but I have yet to see how it is sustainable in any sense.
By the way, at the beginning of this little piece, I said that I "might" be for nuclear if we could solve the problems and make it a safe, sustainable and plentiful source of energy. Well, the reason I say might is that, if nuclear energy effectively eliminates the energy bottleneck on population growth, then I would conclude that it is a very bad idea. My feeling is that the vast majority of the problems on the planet are due, ultimately, to overpopulation. Given that we tend to increase are population when not restrained by a bottleneck, then I am not in favor of removing bottlenecks as it will only worsen so many other problems.
I wonder what Heimie Gifeltistein will have to say about this article from the NY Times:
While Oman represents a small part of Shell's reserves, oil industry experts say the company's experience there highlights broader questions about the future role of Western oil companies and their technology in the Persian Gulf, which has most of the world's oil reserves.
In the case of the Yibal field, for example, Shell and Omani oil engineers and auditors have expressed concerns that a technique Sir Philip said would recover more oil not only did not do so, but also increased the amount of water in the extracted oil to as much as 90 percent of the total volume, increasing production costs.
"In Oman, Shell seems to have fumbled on technology," said Ali Morteza Samsam Bakhtiari, a senior official with the National Iranian Oil Company.
Perhaps more ominously for the world's oil outlook, he added that the failure of Shell's horizontal drilling technology in Oman suggested that even advanced extraction techniques "won't bring back the good old days."
The Earth's magnetic field may already be shifting. This process is well documented in scientific studies of ancient rocks, and it seems to occur at stunningly rapid periods (around 1/4 of a million years). Evidence is growing that the process is under way, and that geologically soon we'll have to abandon our existing compasses.
One of our contributor's father wrote a book about this called Pole Shift. It makes an interesting read.
As I suspected, the forward month natural gas futures are moving upward -- all above $6/mmbtu now. And, given today's report of an unexpected drop in U.S. crude inventories, oil prices are headed back up into the mid-$36/bbl range.
It appears that refineries are gobbling up more oil now in an attempt to bring surging gasoline prices under control by increasing output to match demand. The demand for gasoline is rising, with U.S. inventories also declining. This is a little unsettling, since we haven't even reached peak gasoline demand months.
So, as increased refinery output is likely to slow the rise in gasoline prices a bit (perhaps not much; I also expect to see more calls for (a) reducing the diversion of oil into the strategic petroleum reserve, and (b) relaxation of EPA rules on gasoline formulations -- both a sign of desparation, and loaded with election-year implications), we will continue to see increased demand for crude in the coming months. As power generators and other industrial consumers feel the pinch of the subsequent price increases, those that can switch fuels, will, driving the demand for, and therefore price of, natural gas higher still.
To make the natural gas story a little more bleak for the U.S., increased oil prices has the effect of increasing proven reserves (for all nations), and Canada in particular will be keen to take advantage of this opportunity to develop their unconventional sources -- mainly, Alberta tar sands -- which will require a large increase in utilization of their domestic natural gas resources. That is likely to result in decreased willingness to export to the U.S. (watch for political battles over this issue in Canada), or at least a higher price for that gas to the U.S.
Again, pray for a mild summer.
Postscript: There's a fair bit of talk about liquified natural gas -- LNG, which allows natural gas to be transported overseas in tankers and stored in a compact form -- as a way to ameliorate domestic shortage problems. This article presents a pretty good view of the plans and challenges with LNG. Also, regarding natgas prices, some pretty good discussion about the relationship between commodity prices and natgas futures is presented here.
A while back, I showed some folks how one might take advantage of the natural gas shortages of the past winter to make a few dollars through mock investments. Originally, I'd been thinking it was a short-term opportunity, taking advantage of more-volatile-than-average seasonal natgas prices. The fake investments (trading futures) turned out wildly profitable, and it was a little painful that they were not real, since it wasn't clear to me if/when other such opportunities might arise. I mean, in general, the trend seems to be in this direction (more frequent shortages and crises, etc.), but one can never be quite certain beyond a three- or four-month horizon.
Well, this Financial Sense article lays out a pretty strong argement that we may see more such opportunities sooner than we think.
From the last paragraph of the piece...
"... look for gas to put in a price floor of $6.50US by the middle of the summer and trade much higher as we head into next winter."
As I write this, we're seeing natgas spot prices edging up toward $6 after a couple of months hovering in the mid-$5 range. And, prices for six-month-horizon futures are all below $6. From an investment perspective, that looks like potential opportunity to me (albeit short-term and risky), although consumers will be in for high natural gas and (especially) electricity prices in the coming months. Pray for a mild summer.
Steve indicated a while back that I should say a few words about hydrogen, perhaps to debunk the notion that solving all of our energy problems is as simple as switching everything over to hydrogen fuel cells. Maybe I'm not using the right keywords, but I've been having a slightly hard time Googling for a good site that addresses the issues in a reasonably balanced way.
While this Dallas Morning News article isn't perfect, it does touch on (most of) the issues with the proper tone (ie, not saturated with naive optimism).
In general, I think it's easy to avoid the common trap of instantly believing that hydrogen -- or any other "fuel" -- can easily solve our energy and environmental problems by remembering a little thermodynamics, by understanding a little about the nature of oil vs that of, say, sunlight or wind, and by noting rates of consumption of finite resources, and in particular, the effect that increases in those rates over time has on the depletion of the resource.
The third law of thermodynamics tells us, basically, that we don't get anything for free. Any time you do any kind of work, including converting from one form of energy to another, you always lose. And, what's important about oil is that it is a highly concentrated form of energy. Oil contains energy that the sun delivered over many millions of years. Sunlight, by contrast, is relatively "thin," energy-wise, and difficult to harvest efficiently for practical use.
Regarding rates of depletion, if someone tells you that we have 200 years worth of coal, they ALWAYS mean 200 years at current consumption rates. If growth in the rate occurs at a moderate 3%/year, that 200 years really translates to about 64. Now, consider that by switching from gasoline to, say, coal, the initial 200 years might really be halved, which means we're really talking about 45 years. From 200 to 45 in just a few simple steps -- that's what's important here.
To begin an analysis of hydrogen fuel viability, we should try to figure out our real energy requirements. Since hydrogen fuel cells mainly target highway transportation, we'll start there. The U.S. DOE EIA says that, in 2002, 27.3% of energy consumed in the U.S. was for transportation, representing about 26.7 quadrillion BTUs ("quads"). Of that, about 16 quads went to highway transportation (including trucks, buses, etc.) Luckily, internal combustions engines tend to be (very roughly) about 30% efficient, so our real highway transportation energy requirement is 4.8 quads. That's the energy that we would need, as a nation, to get the same work of getting people and things from one place to another on the ground, assuming 100% efficiency.
The next step is to figure out how much hydrogen we're gonna need. I've heard before that hydrogen fuel cells ultimately operate at about 50% efficiency. (Can't remember where I heard that, so sorry -- no reference. But, I think it might have been SciAm.) That means we need about 9.6 quads/year of energy stored in the form of hydrogen gas.
So, where do we get the hydrogen? We need a feedstock. The two most likely candidates currently are natural gas (using steam reformation) and water (using electrolysis). Steam reformation is somewhere around 60% efficient (on average; I've seen higher figures), which means we'd need probably close to 16 quads/year of natural gas (at least). And, remember that the U.S. currently uses upwards of 23 quads of natgas per year, and we're already finding ourselves strapped for supplies of this fuel, which is finite and a GHG producer.
The other option is electrolysis. While it looks good from the standpoint of being able to use electricity from solar, wind, nuclear or other "convenient" electrical energy sources, it pretty much sucks as far as efficiency. I think about the best you can hope for is around 50%, which means we need to find around 20 quads of electrical energy. The logistics of getting that from solar (at 10% efficiency), wind (perhaps the most promising, although logistics certainly becomes an issue) or nuclear (don't forget to consider how many additional plants we'd need, and the rate of consumption of available uranium) is left as an exercise for the reader.
The Economist on the price of oil and China's growing appetite for it:
Last week, the spot price of crude rose to its highest level (in nominal terms) since 1990. The proximate cause was an announcement in February by OPEC, the producers’ cartel, that it would cut production by 1m barrels a day from the beginning of next month. But other factors are at work, too. There have been supply problems both within and without OPEC. Some of these problems are likely to be temporary, but then analysts have been saying this for months.
OPEC’s desire to force the oil price up is almost certainly linked to the falling dollar. All crude is priced in dollars, and exports are thus worth a lot less because the dollar has plunged. Many think that this is one reason why OPEC is happy to see the oil price remain higher than its self-imposed band of $22-28. Possibly, too, Arab-dominated OPEC is rather less enthused by America’s war in the Middle East than George Bush.
If oil supplies have been tight, demand has been expanding briskly, and in China—where else?—it has been growing at a breathtaking pace. China’s rapidly growing economy will account for 40% of the 1.65m-barrels-a-day increase in demand expected this year by the International Energy Agency, according to David Fyfe, one of its analysts. Last year, China overtook Japan as the second-largest consumer of oil after America.
And then this bit from the same article about the effect of oil prices on the economy:
To stop profits from falling, American companies must keep a tight lid on labour costs. As Mr King puts it, shareholders have been benefiting at the expense of those who work for them (though not CEOs, of course). A prolonged rise in the price of oil and other commodities would make this problem still more acute: America’s jobless recovery is likely to stay jobless. This would eventually kill the recovery, since consumers in fear of their jobs are unlikely to carry on splurging.
We have seen that obesity is emerging as the #2 killer of Americans behind smoking. (Too bad Bush is opting, er, being forced to cut CDC budgets for physical activity promotion projects...) And, childhood obesity is reaching epidemic proportions. As fat Americans age, they place a burden on the Medicare system.
Compounding this problem, baby boomers are reaching the age of Medicare dependency. These are folks who grew up with TV dinners and drive-in restaurants, and to a large degree passed this new fast-food, car culture, nurtured by corporations recognizing huge market opportunities, on to the next generation.
Yet, we fight expensive wars, in part, to protect access to cheap energy. In addition to having questionable efficacy, given escalating gasoline prices (not to mention that these higher prices still don't even come close to the true cost of gasoline), the strategy seems particularly wrong-headed because, as a recent New York Times article on the transportation bill that's now before the House of Representatives points out,
"... at a time when the nation is obsessively worrying about obesity, the bill seems to do everything it can to make sure that Americans continue sitting in their cars for as much time as possible."
Now, consider the quality of air we breath in urban areas, where sprawl reigns supreme. Consider the potential for devastating effects from anthropogenic global warming. Consider that 40,000 Americans are killed each year in car crashes -- the equivalent of upwards of some 100 jumbo jet airliner crashes each year (that's one every few days), or of more than one WTC attack each month.
I guess I shouldn't be surprised. We arrive at the current insane policy by the hand of a president who passed a law increasing tax incentives for the purchase of gas-guzzling SUVs.
Oh well. I'm done with my post-commute cool down now, so I gotta change outta my bike shorts.
Well, as the "energy editor," I guess my first entry oughtta be something about energy. So, I'll offer this as a level-setting lay of the energy landscape.
Smart Money published a story today that I think presents a fairly balanced view of the current oil situation. I won't provide any excerpts here, as the article really should be taken as a whole. In short, there's a very real probability that we may be witnessing the end of cheap oil. The "cheap oil" distinction is important. We'll NEVER run out of oil. There will ALWAYS be oil in the ground. The question is, at what point does it become economically infeasible to extract it. When we reach that point, the price of oil will begin to escalate dramatically. And, given the current rise in demand from not only the good ol' USA, but from China's and India's growing thirst, competition for remaining resources will be ever more intense. One might even be inclined to speculate that this sort of knowledge might lead a country to even go to war to ensure future supply, but let's not get too far out on a limb, eh?
So, is that the lay of the land? Of course not. There are all sorts of alternatives. In future posts, I'll try to cover some of these, and explain why none of them comes close to the bang-for-the-buck that our current addiction affords us.
