21 November 2010

Plenty of Energy

Last week's New York Times had an article arguing that there are plenty of fossil fuels available to meet projected demand for coming decades.  If that is the case, then all the more reason for accelerated efforts to increase that demand by expanding access and to put a small price on today's energy supply, while it is plentiful and relatively cheap, in order raise the funds necessary to invest in innovation to build a bridge to tomorrow.

Here is an excerpt:
Energy experts now predict decades of residential and commercial power at reasonable prices. Simply put, the world of energy has once again been turned upside down.

“Oil and gas will continue to be pillars for global energy supply for decades to come,” said James Burkhard, a managing director of IHS CERA, an energy consulting firm. “The competitiveness of oil and gas and the scale at which they are produced mean that there are no readily available substitutes in either one year or 20 years.”

Some unpleasant though predictable consequences are likely, of course, as the disaster in the Gulf of Mexico this spring demonstrated. Some environmentalists say that gas from shale depends on drilling techniques and chemicals that may jeopardize groundwater supplies, and that a growing dependence on Canadian oil sands is more dangerous for the climate than most conventional oils because mining and processing of the sands require so much energy and a loss of forests.

And while moderately priced oil and gas bring economic relief, they also make renewable sources of energy like wind and solar relatively expensive and less attractive to investors unless governments impose a price on carbon emissions.

“When wind guys talk to each other,” said Michael Skelly, president of Clean Line Energy Partners, a developer of transmission lines for renewable energy, “they say, ‘Damn, what are we going to do about the price of natural gas?’ ”

Oil and gas executives say they provide a necessary energy bridge; that because both oil and gas have a fraction of the carbon-burning intensity of coal, it makes sense to use them until wind, solar, geothermal and the rest become commercially viable.

“We should celebrate the fact that we have enough oil and gas to carry us forward until a new energy technology can take their place,” said Robert N. Ryan Jr., Chevron’s vice president for global exploration.

Mr. Skelly and other renewable energy entrepreneurs counter that without a government policy fixing a price on carbon emissions through a tax or cap and trade, the hydrocarbon bridge could go on and on without end.
For those interested in stemming the accumulating carbon dioxide in the atmonsphere, even adopting agressive policies in that direction won't change the underlying dynamics:
Even in an alternative world where there is a concerted, coordinated effort to reduce future carbon emissions sharply, the International Energy Agency projected oil demand would peak at 88 million barrels a day around 2020, then decline to 81 million barrels a day in 2035 — just fractionally less than today’s consumption.

Natural gas use, meanwhile, would increase by 15 percent from current levels by 2035. In contrast, global coal use would dip a bit, while nuclear power and renewable forms of energy would grow considerably.

No matter what finally plays out, energy experts expect there will be plenty, perhaps even an abundance, of oil and gas. IHS CERA, which monitors oil and gas fields around the world, projects that productive capacity for liquid fuels could rise to 112 million barrels a day in 2030 (including 2.75 million barrels in biofuels), from 92.6 million barrels a day this year.

“The estimates for how much oil there is in the world continue to increase,” said William M. Colton, Exxon Mobil’s vice president for corporate strategic planning. “There’s enough oil to supply the world’s needs as far as anyone can see.”

More promising still is that the growing oil production comes from a variety of sources — making the world less vulnerable to a price war with the Organization of the Petroleum Exporting Countries or an outbreak of violence in a major producing country like Nigeria. As IHS CERA and other oil analysts see it, new oil is going to come from both conventional and unconventional sources — from anticipated expansions of fields in Iraq and Saudi Arabia and from a continued expansion of deepwater drilling off Africa and Brazil, in the Gulf of Mexico and across the Arctic, where hopes are high in the oil world, although little exploration has yet been done.

The vast oil sands fields in western Canada, deemed uneconomical by many oil companies as few as 15 years ago, are now as important to global supply growth as the continuing expansions of fields in Saudi Arabia, the current No. 1 producer.

“We’ve got a wealth of opportunities to address around the world,” said Mr. Ryan, Chevron’s vice president.

“We have quite a few deepwater settings all over the world, some of them very new, like the Black Sea. There are Arctic settings. We have efforts under way re-exploring Nigeria, Angola, Australia. The easy stuff has been found, that’s true, but in the end, we still have many basins in the world to explore or to re-explore.”
It is not necessary to agree with rosy scenarios of energy abundance to recognize that the current approach to dramatically reducing carbon dioxide emissions is not going to work, even if successful on its own terms.  The sooner we start building that bridge to the future the sooner we can walk across it. It won't be built by targets and timetables for emissions reductions, nor by putting a price on carbon.

The entire NY Times article is worth a read.


  1. "...then all the more reason for accelerated efforts to increase that demand by expanding access and to put a small price on today's energy supply, while it is plentiful and relatively cheap, in order raise the funds necessary to invest in innovation to build a bridge to tomorrow."

    I disagree. No price was necessary to move from hay burning horses to automobiles, from wooden wheels to rubber tires, from oil burning lamps to light bulbs, etc.

    Yes, R&D requires funding. First, why not let industry move at the pace that will bring the product to the market when it is time, the point of equilibrium with other energy sources? Second, the only real chance of decarbonizing the world is nuclear. Regulatory reform would be much more beneficial than a carbon tax.

  2. So if I understand you, Roger, you want a small carbon tax - one so small that buyers wouldn't revolt against it - to pay for R & D on non-carbon fuels. Is that correct?

    If so, that would do absolutely nothing to stop the increase in CO2 in the atmosphere, no? Population increase, industrialization and rising standards of living would swamp any fractional decrease in CO2 output generated by the carbon tax.

    I can only take from that the belief that you think the apocalyptic predictions of the 'consensus' are wrong. If they were right, then your prescription is to fiddle while Rome burns. Which, of course, is exactly why Joe Romm attacks you with such vigor.

    But if they are wrong, and there is no need to cut CO2 output drastically and immediately, then why do you say you are not a 'skeptic' or 'denier?' It's a serious question. While you take a 'voice or reason' approach rhetorically, it seems as if you're trying to cut the baby in half here.

  3. I am old enough to have experienced the oil shock of the 70's and the fear that the world would run out only to see oil come down in price to nearly $10 a barrel in the late 90's. Climate change is exactly the opposite fear, that we won't run out of fossile energy soon enough. In the 70's and 80's, synthetic fuel from coal was all the rage but cheap oil put an end to that government sponsored industry. It seems that when the government goes big into a particular solution to a problem as big as the energy market, a lot of white elephants are made. However, if they were to focus instead on supporting the development of technical solutions and then let private industry apply these solution when they are ready and the market needed them, it would be less costly and more effective.

  4. BTW, speaking of "plenty of energy," Go Dallas FC!!!!!

  5. #2 Mark B. said...

    I won't speak for Roger..but

    In any conflict strategic victory is the goal.

    In the great CO2 conflict there are some impediments to strategic victory.

    Only a small percentage of the various governments(field commanders) have either the will or the means to achieve strategic victory without risking mass desertions(riots in the streets/electoral defeat).

    Hence, a 'strategic victory', regardless of how desirable, is unlikely if not impossible at this time. Desirability of a strategic victory is a moot point.

  6. Roger

    You forgot this

    "But no sooner did the demand-and-supply equation shift out of kilter than it swung back into something more palatable and familiar. Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia"

    I think that knocks the feeble energy security argument on the head once and for all. Especially when American tar sand fields are taken into account. That leaves no credible reason to decarbonise the global economy, no reason to tax CO2, and no reason to implement carbon trading.

    Add Mike Hulme's inside knowledge and scepticism of the IPCC, Freeman Dyson's inside knowledge of the models, climategate and the laughably pugnacious RealClimate crew and you come up with zero.

  7. Sean

    In the 1960s, it was predicted by scientists that the world would imminently run out of everything and that the planet was being destroyed by modern society. They were wrong because they were blinded by their hippy 'back to nature' puritanical ideology. This was popularised by the music industry by artists who's wealth and hedonistic excesses (literally) made Caligula and Nero look like choir boys.

    There were environmental problems caused by industry in the 1960s and 1970s. They were largely solved. Environmentalists in the 21st century should find themselves another hobby or move to India or China. The first world will slowly decarbonise because industry is moving there.

    By the end of the CO2 wars, environmentalists will have achieved.

    1. The reintroduction of large scale nuclear power.

    2. A massive increase of children living in poverty.

    3. The biggest transfer of wealth from the individual to the corporate sector in history, thanks to carbon trading.

  8. Roger,

    There are hardly any hard facts or numbers in the article that backs the word "Plenty". Why should we take its message seriously?

    per isakson

  9. To eric144,
    I don't disagree with your items 1-3 except that it should be crafted "IF the environmentalists win the climate war". However if they don't win, nuclear power will lose out to cheap and abundant natural gas which has already put a couple of nuclear projects on hold. (This will also happen if their is a draw because environmentalists really hate coal for reasons beyond climate change but could live with natural gas.)

    As far as children living in poverty, its hard to distinguish between whats happening from environmental handcuffs vs. economic contraction. Wages for the working poor have not kept up with inflation. My one hope to change direction here is prosperity in China and India which will give a lifeline to American manufacturing.

    As far as wealth to the corporate class from cap and trade, I think that is the hidden driving force behind climate change alarmism. After all, Al Gore had to get his $300 million green campaign funding from somewhere. However, even greedy money junkies on Wall Street know they have to cut their losses and start working a new scheme at some point. This is still a democracy and people are realizing their not going to get much benefit from poorly thought out green "investment". I personnally think Waxman-Markey was spark that lit the fire in the electorate in the summer of 2009. Look at the number of blue rust belt states that went red in the mid-terms. I sense real fear in blue collar workers who feel abandoned by the democratic party.

  10. The only bridge that will work is nuclear. Wind and solar will not make a viable bridge.

  11. Mark B.: " If they were right, then your prescription is to fiddle while Rome burns"

    Assuming that Rome is actually burning, I think that the "Joe Romm" camp is the one fiddling: they forecast horrible disasters, they write in very general term 'we need a WWII-style effort', but when it comes to actual policy they do not propose anything that would ever come close to solve the problem, and you are left with 'for the cost of a stamp a day...' (WWII definitely costed more) or 'lower you thermostat'.

  12. Sean said... 9
    "nuclear power will lose out to cheap and abundant natural gas which has already put a couple of nuclear projects on hold"

    Just last week India announced 12 new nuclear reactors, with construction to begin on the 12th reactor in 2012.

    The US is the worlds #1 producer of Natural Gas, #2 producer of coal and #3 producer of Oil.

    The rest of the world doesn't have the energy 'choices' the US has.

  13. Perhaps the George Washington administration should have put a small tax on road building and use to fund R&D on airports, which were clearly the wave of the future for intercity passenger travel.

    We need the economically viable alternatives that the market will provide over time rather that the politically viable alternatives that are funded by a political process.

  14. -13-Abdul Abulbul Amir

    Great example ;-) It was the US Postal Service and US Army that provided the "market" for the initial aviation industry. Aviation did not emerge spontaneously from the "free" market and is an industry about as tightly tied to governments as any.

  15. Roger,

    The market is up and running providing cost effective energy solutions. And will do so in the future. The political energy "solutions" result in things like corn ethanol boondoggles to win the farm vote, among others. Taxes on the energy producers merely divert funds from researching economically promising alternatives to politically powerful spending constituencies.

    Coal is inexpensive and abundant and will be for centuries. Paying big bucks now for less reliable and more costly alternatives makes about as much sense as the Washington administration funding airport research.

  16. -15-Abdul Abulbul Amir

    I agree with the spirit of your comments, however, I think that you are too quick to equate production subsidies with innovation policy.

    It can at once be the case that one believes that ethanol is a boondoggle (see my Prometheus posts on ethanol) and a focus on energy innovation policy makes sense.

    I reject the argument that the "market" is providing cost effective energy solutions when 1.5 billion people lack access.


  17. Abdul Abulbul Amir said... 13

    The US Interstate Highway System was originally named the "National Defense Highway System".

    If one wants to sell a policy in the US then one needs to convince Republicans that it somehow enhances national security and Democrats that it creates large numbers of well paying blue collar jobs.

    Here is a bit of propaganda put out by the Nuclear Energy Institute. A one GW nuclear power plant requires 14,000 man years to construct and a windfarm only requires 1,400 Man Years to construct.

    My crystal ball tells me an enhanced 'nuclear loan guarantee' program is on the horizon in the US ;) The republicans will blather on about 'energy security' and the democrats will blather on about 'jobs'.

  18. "I reject the argument that the "market" is providing cost effective energy solutions when 1.5 billion people lack access."

    You must be talking about kleptocratic states that prevent from functioning. Disastrous governmental control of markets is not market failure.