Posts Tagged ‘Energy


Economic Behavior towards Oil

I have long contended that the artificially low cost of fuel in the US lends itself to its’ inappropriate and irresponsible usage. While it is ultimately the responsibility of the citizen/consumer to consider his/her actions and the long-term (environmental) effects thereof, other factors are at play.

Some recent research, summarized here, calls into question the extent to which higher prices, reflecting “real” costs, alter the behavior of consumers. An often-missed aspect is the fact that a considerable amount of driving is to-and-from work. This does not change the fact that commuting tens of miles to work suggests the need to reassess your living / work location(s). Nor does it justify the number of SUV’s or other inefficient vehicles, especially in the US. But it does bring up a real obstacle in the way of reducing dependence on driving, and ultimately on fuel. There remain few alternatives for most Americans to driving to work.

And as the non-reaction to higher fuel costs in the study are in European locations, it is hard to extract trends applicable to the comparatively-dismal state of sustainable transportation in the US. That is, for example, places like England boast twice the average MPG than the US. Alternatives such as hybrids are widely used and “conventional” vehicles are often subjected to taxes in metropolitan areas. Therefore, the capacity to “react” to higher prices is relatively lower than that of the US.

But the fact remains, vast rural areas, non bike/pedestrian-friendly cities, little public transportation infrastructure, and the lack of a real alternative vehicle fleet make it more difficult for Americans to curb old habits. Unfortunately, this is inherently speculative in nature, as gas prices are being artifically lowered and the current political campaign is flooding media outlets with misinformation on the state of oil geopolitics. The available avenues – vehicle purchases, use of public transit, and other measures – are showing measurable changes, but full reaction to high fuel prices are yet to be realized, pending (unlikely) equilibration of gas prices.


Oil Geopolitics – Metrics

EIA recently released their short term outlook on global oil. I know, I know, this means that the current administration does have the capacity to understand the geopolitical climate, the ability to generate meaningful information that could be very useful in, say, governing the country…. Anyways, given my rant on the worth of quantified data, I thought it appropriate to share some stats:

Continue reading ‘Oil Geopolitics – Metrics’



Pretty comprehensive article on Pickens at Newsweek

Despite his rampant capitalist self-interest, the man is not too far removed. His refusal to put turbines on his 100,000+ acre ranch because they are ugly is bit disturbing. And his intention to create a huge Liquid Natural Gas (LNG) automobile market is very convenient considering he owns the most LNG filling stations in the country, via Clean Energy Fuels Corp. And better yet, his (failed) water pipeline plan, which successfully fought for eminent domain and included gerrymandering a district in the Texas panhandle to include only two of his employees, on his land, is about as bad as it gets.

But I can look past that – if it means that he will provide the necessary jumpstart for alternative energy to reach necessary scale. What is frightening about such ambitions as the water plan is not the strong-arming of government, but the  fact that the plan failed. The man has SO MUCH MONEY that he can afford to invest heavily without second thought. That wasn’t his only failure; he was driven out of the CEO position at Mesa Petroleum.

While I can’t outrightly oppose his plan, I do fear that if it does fail it could have catastrophic repercussions to the alternative energy industry.  I hope Mr. Pickens considers this, though his old age and $4 Billion makes  me wonder…


Oil Geopolitics

I’ve long put off endeavoring to tackle the current state of oil geopolitics, in all its ugliness.

To begin: Geological vs. Geopolitical peak oil.  While the division is undoubtedly real, it is plainly a waste of time to dwell on. Folks like Paul Roberts have for years warned of the looming consequences. However, he has met with harsh opposition from energy experts. Roberts may be wrong in his assertion that the actual amounts of oil are dwindling, and his opposition likely correct in that the actual amount of oil yet to be harvested is huge… who cares… Given political trends toward nationalization of oil in countries holding the greatest amount of reserves, like Iran and Venezuela, Roberts’ conclusions become much more legitimate than the purely academic differentiation between geological and geopolitical oil. What difference does it really make if there are 0 or infinite barrels of oil owned by the Venezuelan government?

Zaki Yamani, former oil minister of Saudi Arabia, accurately stated:

“The Stone Age did not end for lack of stones, and the Oil Age will not end for lack of oil.”

Indeed, it is high time that both sides forfeit this meaningless debate.

On the other end of the spectrum than peak oil is the argument that oil futures markets are to blame for the looming crisis. Partially as a response to the peak oil claims, this theory holds that the amount of oil yet to be had (geologically or geopolitically) matters little. Rather, investors in futures markets are primarily responsible for the price of gas at the pump.

For those of you unfamiliar with how the whole “futures” thing works: All commodities — anything from corn to gold — are traded in futures markets by traders who never intend to see the product (in this case oil).  The traders set the price based on their perception of the future value of the given commodity. Several factors will play into their predictions: Basic supply / demand predictions, political atmosphere, etc. More specifically, the political climate is restricting oil companies’ capacity to explore and drill for new oil – driving down supply NOTE: not an actual lack of oil. Meanwhile, demand is dramatically increasing with growth from places like China and India. The prospects for new processing plants are also very dim and environmental and other concerns are prohibiting exploration in places with known reserves (Alaska, etc.) Finally, the lack of an alternative energy source with the potential to compete with oil contributes to its’ increased perceived value

But what can be taken away from this? Futures markets play a hand in all commodities markets, and I find it hard to believe that they have disproportionately distorted oil prices. While many of the assertions of this last argument are legitimate, the claim that government, or even industry can do much to change things is flawed – especially in the near term and especially in the US.

This leads me to the whole offshore drilling thing – perhaps the most incredibly flawed argument in the bunch.  A great response to this stupidity is here. The argument goes: Restrictions to offshore oil drilling are directly responsible for high gas prices at the pump.  Not surprisingly, the McCain camp is at the forefront of this lunacy. McCain argues that, to combat high prices, we should start drilling along the US coast – he was flown to an oil rig off the coast of Louisiana to give his pitch..

Jointly owned by Chevron and Exxon Mobil, the rig represents an environmental risk great enough that the US coast guard has set up a “safety zone” around its perimeter to prevent accidents.

What is clear is that offshore drilling will have absolutely no effect on pump prices for years, and very little even then.  As Bob Herbert of the NY Times demonstrates:

Assuming that everything over all those years goes all right, it is estimated that an additional 200,000 barrels of oil a day would come from the additional offshore drilling. That’s a tiny share of the world’s daily output of 85 million or so barrels.

So given all the misinformation circulating, some originating in  the campaigns of both McCain and Obama, and now including Pelosi – what is really happening? Firstly, I look to the oil companies – who are highly interested in things like Liquid Natural Gas, renewable energies, and yes – offshore drilling. While their profits have been staggering, they certainly cannot sustain those numbers. Perhaps this is what is behind T. Boone Pickens, the oilman who plans to invest billions in wind power to free up LNG for a huge new LNG fueled car industry (?)

It is all very complicated and quite frustrating really. At risk of hypocrisy, I’ll say that it’s rather useless to follow the actions of government, industry, or otherwise. Consumption is the true nightmare here. Is the most logical plan of action to find another source of energy to sustain current (rising) levels of energy use? We can do better…


T. Boone Pickens

On the plus side, we have an oil tycoon hyping up Peak Oil. This topic needs all the press it can get, especially from Texas Oil. Pickens has some good ideas, and is correct in his assertion that Wind Power could potentially transform the way we think about energy production / consumption. His motives, though, are questionable at best. To be certain, Pickens is not approaching Wind Power from some heightened ethic or commitment to the environment. Rather, ROI, fame, and the dwindling supply of oil (his blood) are more likely drivers. His focus on reducing dependence on foreign supplies may be his primary motive…

See the following link for some insight into his thought-process:

For instance:

I’m worth $4 billion, and I don’t need to make any more money. But I’m not going to invest money if I don’t expect to make money. Here, I feel like I’m putting my money where my mouth is.

Now the aforementioned motives may be agreeable;they are certainly not all bad things – though I’m not convinced that they have come together to create a real solution. The biggest problem follows. Pickens wants to use the energy from massive scale wind (and solar) farming to offset mostly domestic power usage…. In doing so, he suggests that we use the huge amounts of freed-up natural gas to fuel cars equipped to run on such fuel. WHAT??? Invest billions in a program to shift cars from one fossil fuel to another? Why not use the massive power generation to power cars, and invest in the rollout of a fleet of electric cars, not Natural Gas cars. In the interest of sustainability, while offsetting domestic power use is undoubtedly a good thing, it is simply foolish to invest in another fossil-fuel burning auto technology.

FYI, here is a report on why Natural Gas vehicles are not a good idea:

Also, the investment needed to put up the infrastructure to support Natural Gas vehicles would be astronomical. While his plan is not totally without merit, it reveals the true nature of his power generation (pun intended…) Not only is an economy and transportation system not reliant on fossil fuels unimaginable, but the thought of reducing energy usage…yes, changing behavior, is nowhere close to the radar.

Anyone have news on the development of the Pickens plan?