Let's talk about oil

[PrinceOfLeigh]

Let's talk about oil

Ahh the little known Salt & Pepper B-Side.

 

[Che Guava]

Maybe governments are waiting for viable alternative fuels before taxing CO2? While politically expedient, it's not very efficient for forcing innovation.

Too true: necessity is the mother of invention, and getting off of the petroleum energy-mobile might soon be a real necessity. Imgaine if all the money going into subsidizing and supporting the petroleum industry was redirected to alternative fuels and energy? Well, it'd be chaos for awhile, but after that....

 

[El_Machinae]

That's why the $20 'terror premium' is not so bad, from a scientific view. Now, it would be much nicer to have a different barrier, clearly, but we'll take what we get.

 

[betazed]

There's nothing that we as economist can do to convince the public that peak oil does not in theory and in reality exist.

Huh?

How can it not exist? Unless you believe that there is an infinite supply. If the total amount of oil in earth is a finite quantity and the actual generation of oil (a chemical process) is less than the demand of oil then there is a point in time when the production must peak. This is a mathematical certainity.

Now whether that point in time has passed or it is in the near or far future is arguable. But how can you argue its existence?

Also, I think it is intellectually dishonest to hand-wave and say the "market" will take care of it. We really need to show how the market will take care of it. This is specifically important because the "market" has never in the past discovered a new source of energy. It has been supremely efficient in utilizing a new source once it was discovered thought. The market did not teach us how to split the atom for example.

 

[Narz]

Peak energy is back in the news.

Fears over looming energy crisis in UK

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1813006.ece

From The Sunday Times
May 20, 2007
Fears over looming energy crisis in UK
The lights could go out in Britain within eight years as demand is predicted to outstrip supply
Grant Ringshaw

ACROSS Britain, cities are plunged into darkness. In London, the Underground grinds to a halt, leaving panicked commuters stranded in oppressively hot carriages. In office blocks, lifts stop operating and the air-conditioning shuts down. Employees swelter in stifling conditions.

This is not the postapocalyptic vision of some film-maker, but a realistic scenario as Britain grapples with a looming energy crisis. The statistics are frightening. In only eight years, demand for energy could outstrip supply by 23% at peak times, according to a study by the consultant Logica CMG. The loss to the economy could be £108 billion each year.

“The idea of the lights going out is not a fantasy. People seem to accept that security of energy supply is a right. It is not. The industry will have to work hard to maintain supply and for that we need a clear framework,” said Simon Skillings, director of strategy and energy policy at Eon UK, Britain’s largest integrated energy company.

This Wednesday, the government’s delayed energy white paper will attempt to provide some answers. It is a crucial document that will determine whether Britain can deliver on its pledge to slash carbon emissions by 20% from 1990 levels by 2020. The white paper will seek to tackle a host of tough issues – from nuclear power to energy efficiency, renewable power sources and clean-fuel projects. A planning white paper, due tomorrow, is also seen as crucial after a number of energy projects have been delayed for years or slapped down by local authorities.

The scale of the challenge is immense. By 2015, Britain’s generating capacity could be cut by a third as ageing coal and nuclear power stations are closed. Britain is also moving from being self-sufficient in oil and gas as North Sea production declines. In 2005, the UK became a net importer of gas. By 2010, imports could account for 40% of British gas needs; by 2020, 80% to 90%.

The most contentious area is likely to be nuclear power. Nuclear reactors account for about 20% of Britain’s electricity, but this will shrink to 6% in 20 years as ageing plants are closed down. By 2023, only Size-well B could be in operation.

Already controversial, the government’s commitment to building new nuclear power stations became even more sensitive when the High Court agreed with the environ-mental lobby group Greenpeace that the consultation process was “seriously flawed”.

The white paper is expected to give guidance on how the government would like to see new reactors built, but will have to stress that any decision will depend on a new, more detailed, consultation round.

What the energy industry wants is clarity. Even so, energy companies, including RWE, Eon, Suez, EDF, General Electric and West-inghouse, have already held talks with British Energy about using the sites of its eight nuclear power stations to build new reactors.

Combining the need to secure Britain’s energy supply and reduce carbon emissions will require £55 billion in investment in the next few decades, according to Logica CMG.

Exactly where the money will be spent hangs in the balance. One of the big issues is how the government plans to encourage operators to build cleaner but more expensive power stations. To make the economics work, much will depend on the price of carbon and the credits power operators need to buy if they overshoot emissions targets.

This falls under the EU emissions-trading scheme. If the EU cracks down and imposes higher penalties on “dirty” power producers, the price of carbon would in theory be pushed up. Centrica believes that carbon prices would need to double from the current €19 (£13) per tonne to make a £1 billion clean-coal project it is considering in Teesside economically viable.

“If the UK is to hit tough targets on reducing CO2 emissions, it is vital that the structure of the EU emissions-trading scheme is optimised to encourage the building of really low-emitting power generation stations,” said Jake Ulrich, managing director of Centrica Energy.

Another key area is carbon capture; this involves trapping carbon-dioxide emissions from coal or gas-fired stations and storing them underground, probably in old North Sea oil reservoirs. Schemes include Centrica’s Teesside proposal while BP is considering building a £500m power station in Peterhead, Aberdeenshire, in partnership with Scottish & Southern Electricity.

However, power-industry executives claim that each project would need several hundreds of millions of pounds in government support – far higher than the Treasury’s financing plans.

Meanwhile, the government is under pressure to encourage desperately needed new gas-storage facilities. The UK has storage capacity to cover only two weeks of gas needs against two to three months for France and Germany.

New objectives for renewable energy are also expected. The renewables obligation, where suppliers are bound to source a rising percentage of electricity supply from renewable sources, will be refocused to give more support to costlier offshore wind farms and biomass projects used to co-fire coal-powered stations.

Britain is already struggling to meet its ambitious target of supplying 10% of electricity needs from renewables by 2010 and 15% by 2015. Today’s figure is about 2%.

“The goals are very ambitious and we are currently behind the curve. Investment would have to be accelerated very substantially to have any chance of meeting those targets,” said Jayesh Parmar of Ernst & Young.

Those targets are likely to get even tougher. In a little-noticed detail, the EU agreed in March to make it compulsory for 20% of all energy used to come from renewable sources by 2020.

As for the British consumer, the white paper will underline the need for smart meters, which measure exact energy use and cost, to be installed in people’s homes. There is also support for microgeneration projects – small-scale wind turbines, solar panels and gas devices to create electricity. However, the sums are tiny – £12m in grants is up for grabs this month from the Department of Trade and Industry, in addition to £6.8m already paid out.

The big question is whether the UK can act fast enough to tackle the looming crisis. Even if the government’s nuclear plans remain intact, it could be at least 10 years before the first new nuclear station is ready. A typical coal or gas-fired project could take between three and five years to construct.

 

[GoodGame]

Understanding the energy crunch is important, especially in the parts of the world where energy is used frivolously (look at me!!)

I believe it's critical for nations to cooperatively get into the alternate and renewable energy research and at overdrive speed, rather than waiting for the consumer market to demand it (at which time the transition probably won't be smooth or socially stable).

 

[Narz]

Well said GoodGame.

 

[Ball Lightning]

Theres a documentary on Australian TV, which is 2 hours long about oil on thursday night, and you'll probably be able to download it afterwoods, i'll get a link once i watch it.

 

[Narz]

Thanks Ball Lightning, what's it called? I'd like to look it up.

 

[Ball Lightning]

Its called "Crude", you'll be able to find it at www.abc.net.au (australain broadcasting corporation).

 

[Urederra]

Air conditioning in the UK, in May?

I can't believe it.

Is The Sunday Times one of these tabloids you can't trust?

 

[History_Buff]

How can it not exist? Unless you believe that there is an infinite supply. If the total amount of oil in earth is a finite quantity and the actual generation of oil (a chemical process) is less than the demand of oil then there is a point in time when the production must peak. This is a mathematical certainity.

Because it doesn't. The Stone Age didn't end because we ran out of stones.

The reason peak oil doesn't exist is that demand will eventually fall off, as the price climbs. Despite the price inelasticity of oil, it's an economic certainty.

Also, I think it is intellectually dishonest to hand-wave and say the "market" will take care of it. We really need to show how the market will take care of it. This is specifically important because the "market" has never in the past discovered a new source of energy. It has been supremely efficient in utilizing a new source once it was discovered thought. The market did not teach us how to split the atom for example.

No, the market didn't teach us to split the atom, war did. Demand will remain for the time being though, and as oil becomes more expensive, it will become more economical to develop alternative sources, or, since many capable ones already exist, simply implement them.

But at the same time, there is no reason we can't help the market along a little. Carbon taxes and alternative subsidies are very much a good idea, particularly with Climate Change looming on the horizon. (And to all you non-believers, lets not argue whether we are the cause, because it's not important. It is happening, and anthropogenic CO2 certainly won't help keep the temperature where it is.)


That, or we'll start fighting world wars over oil, which will make us come up with something better, as it always has in the past.

 

[Yuri2356]

How is the US electricity produced? I know it's not nuclear, but is it coal, gas or oil? 'Cos if it's oil, you're back to square one...

At very least, it would help focus the problem-solving efforts. (ie. Refit x thousand power plants to some new energy source, rather than replace x million vehicles.)

 

[amadeus]

It's quite amusing to hear neo-cons claiming that somehow we're not running out of oil, that it isn't a worry at all, and so on, when the neo-con leaders are working their butts off to secure the major sources of oil supply. It all makes perfect sense from a geo-political viewpoint, if you think that they're looking to secure oil. If you don't think that, then what the Bush administration is pursuing is not only stupid, it has no justification, legal, strategic, political, what have you.

You might want to get that knee-jerk checked out.

 

[Desmond Hawkins]

As others have pointed out, there will be a residual oil-based infrastructure for a long time. However, nuclear power combined with electric cars, hybrids, a general increase in vehicle efficiency, and a dramatic change in lifestyle planning could seriously reduce dependency.

As for ethanol, I can only see food prices rising in the coming decades, and ultimately arable land will probably be better used there. While there is a lot of "excess" land in North America, environmental problems in places like China could seriously decrease the quality and quantity of land for production there. People will need food to eat more than they will need it to burn.

 

[BasketCase]

When I was a kid, one of the science books I kept on the shelf said the Earth had about thirty years' worth of oil left, at then-current consumption rates.

That was just about thirty years ago. Yet our estimates of remaining reserves have gone up rather than down.

So I think it's pretty safe to say the Peak Oil theory is ocean foam, and that we actually have no freaking idea how much oil we really have left.

 

[Desmond Hawkins]

When I was a kid, one of the science books I kept on the shelf said the Earth had about thirty years' worth of oil left, at then-current consumption rates.

That was just about thirty years ago. Yet our estimates of remaining reserves have gone up rather than down.

So I think it's pretty safe to say the Peak Oil theory is ocean foam, and that we actually have no freaking idea how much oil we really have left.

Ya, but it costs about 10 times as much to extract oil from the newly classified reserves in Alberta compared to those of Saudi Arabia. In fact, there is talk of building a 2,500 megawatt nuclear reactor just to power Shell's proposed development west of Fort Mac. Not to mention all of the natural gas that needs to be used just to get at this oil...

 

[BasketCase]

I don't see that supposedly higher cost reflected in oil or gas prices.

When you adjust for inflation, today's gallon of gas (supposedly a record high!) actually costs less than a gallon of gas did during the various oil crises of the 70's.

The new reserves we've discovered over the last thirty years don't cost significantly more to extract than the reserves of thirty years ago. Technology is one of the primary reasons; over time, any given deposit of oil becomes more and more feasible to extract.

 

[ainwood]

The new reserves we've discovered over the last thirty years don't cost significantly more to extract than the reserves of thirty years ago. Technology is one of the primary reasons; over time, any given deposit of oil becomes more and more feasible to extract.

Partly correct. It become technically feasible to extract more out of a given reservoir. It turns some fields from being uneconomic to marginal; and marginal to attractive.

The actual reserves replacement ratios take this into account, as reserves are re-evaluated each year. Actual 'new reserves' additions are getting scarcer.

Peak oil is a 'fact', but timing uncertain. 8 years? I'd suggest that isn't the result of peak oil - but lack of energy infrastructure, and running out of gas (well, inability to import enough). There are still a lot of new (large) oil & gas projects that won't be coming on stream for another 8-10 years.

 

[MrCynical]

Air conditioning in the UK, in May?

I can't believe it.

Is The Sunday Times one of these tabloids you can't trust?

Depends on the weather. Air conditioning was certainly being used fairly heavily at the end of April in the UK this year. May's been rather cold and soggy this year so far.

And no, the Sunday Times isn't a tabloid. This story involves far too many numbers and far too few celebrities for it to be remotely plausible as a tabloid story.