Where have I seen this before on energy?
Thursday, May 11, 2006 at 10:17AM ARTICLE: “As Profits Surge, Oil Giants Find Hurdles Abroad,” by Jad Mouawad, New York Times, 11 May 2006, p. A1.
Oil prices are up primarily because global demand continues its rapid trajectory thanks to the emergence of the New Core and the huge expansion of the global economy over the last generation (to include a global growth rate right now approaching a whopping 5%). The media will never give you that explanation, though, because it’s a one-time story. Better to say it’s all about supply and jitters and wars in the Middle East, because that’s a story they can write over and over and over again.
Right now, with these high prices that won’t go away any time soon, we see a resurgence of nationalism in the Gap and New Core Russia. Putin, at least, has a plan for diversification and downstream acquisition over time, and yes, we’re seeing more intelligent responses from certain Gulf states, but expect most of this nationalistic surge to be about as strategic in its thinking as your average lotto winner (to wit, Bolivia, which is well on its way to scaring most Brazilian investment out of the country, which should help development a whole lot there).
So Yergin has it right in this article (when does he ever get it wrong?): when prices are up, governments and their NOCs (National Oil Companies) hold all the cards and when they come back down, those same governments open up to foreigners. We saw this dynamic across the 1960-70s (nationalism) and 1980-90s (opening up).
The problem for the producers this time is that the global economy probably isn’t up for another round. Instead, we’ll see this market dynamic naturally push the Old and New Core further and faster down the carbon chain in the direction of renewables, nukes and hydrogen.
Way back when we burned wood, and released lotsa carbon. Then we moved onto coal, and released a bit less. Then oil, still less. More and more gas, still less. Each time we move on it’s not because of supply limits. It’s because we see a better deal economically, when all the externalities (like pollution) are considered. Nationalism in the energy sector is a big externality (i.e., pain in the ass). The more we see of it, the more we’ll see countries move along, like Brazil did so patiently on sugar-cane ethanol over the past generation.
The more advanced countries opt out of this cycle, the more the “all-powerful” producers will be left behind economically in coming years.
Ah, but you’re talking the long run and we’ll all be dead! Not that long of a long run. I remember being a teenager in the 1970s and wondering if the whole world would go to hell in a handbasket because OPEC was controlling everything. Didn’t take long for that worm to turn (my college years).
The problem we face now (the far larger Core of globalization wanting far more energy) is a problem of success (we won the Cold War and expanded our economic universe) not of failure. So the oil producers get another swing at the plate--big deal!
Some will be smart enough to walk away from this period stronger (like Russia), most will not.
But the global energy market and globalization in general will simply move beyond.
Reader Comments (11)
One of my pet peeve's has always been "in the long run, we're all dead". We are living the long run of our grandparents day and creating the long run of our grandchildren's day. To say that "we're all dead" is to essentially announce that you've taken yourself out of the gene pool, psychologically if not biologically (though perhaps that too).
High prices won't go away anytime soon? Then we can make Fischer-Tropsch diesel at $32 a barrel of refined product and open up US coal fields again. I suspect that there is considerable betting going on that oil prices will collapse down to the $30-$40 range within the next 5 years, making technically proven F-T plants risky. As prices persist high, people will start taking the risk and building that supply.
TM, there is one externality you're overlooking: global warming. F-T diesel does nothing in this regard, as its production cycle releases even more CO2 into the environment than that of petroleum. And I think that warming will become one of the biggest externalities in existence over the next few decades.
We're going to need to develop "green" energy sources (solar, wind, etc.) to feed an ethanol economy (near-term and limited duration) and then a hydrogen economy (long-term). Otherwise, we'll be facing the mean side of the biggest externality of them all. :)
"The Problems We Face Now are the Problems of Success" or, more simply, "The Problems of Success." This would make a wonderful title for a blog, an article and/or a book.
Energy from combustion doesn't work that way. You commented that burning wood then coal then oil was putting less carbon out. Not quite, remember the burden is CO2, the old ways were less efficient and we put out the carbon in chunks as smoke which isn't quite the problem that CO2 is to the climate. Also the scale has grown over time and we are putting out much more energy/person than in olden days. So unless we go either nuclear or break the combustion chain the CO2 keeps growing.
Just injecting some physics, as usual your political/strategic analysis is spot on.
With the possibility of "peak oil" occuring in the near future, it's obvious that moving to more secure energy sources here in this hemisphere is absoulutely necessary to give us the energy that will allow us to transition to hydrogen or whatever new energy sources lie in our future.
However, this kind of effort requires leadership from both government and industry. It means that the Congress should put aside politics to work for the "common good." With proper incentives and regulation(as little as possible) the energy industry has the ability to provide secure and affordable supplies for the next twenty-five years while we transition to the fuels of the future.
A small comment on this. As Dr. Barnett said in his books - what will the speed be of the conversion from higher order carbon chains to nukes and hydrogen? If it happens too fast then we will leave "chaos" in the oil producing nations of the world ( single resource nations ), if we go too slow - global warming and we all "die", ok maybe not die but serious environmental problems. So what is the right speed?
Right now the xenophobic media and left wing extremists are covering up their xenophobia by making the issue a David vs. Goliath battle between the colonial white man vs the slave colored man. So they call for energy independency, Iraq is all about oil etc.
I think this is short sighted and plain stupid. We just can go to oil like that, it needs to go at a certain speed with the right world processes so that oil producing and consuming nation can leave their dependency in the right way and for the better. Cold Turkey leads to withdrawal. Slow quitting leads to no quitting and cancer. The right speed with the patch leads to leaving addiction for good.
Vinit Joshi
V: i don't think there's really any worry of getting to H too fast, do you?
1. Fisher-Tropsch fuels from coal - bad because it doubles CO2 emissions. From biomass, good, because it stays in the carbon cycle.
2. Liquid fuels of the future - ethanol from cellulose (as in Iogen test plant in Ottawa, Canada), diesels from biomass/organic wastes (FT and thermal depolymerization, as in test scale plant at Carthage, MO using turkey renderings) and oilseeds.
3. The return to electrical drive - Inherently more efficient, starting to return with hybrids, returning big time with plug-in hybrids. Toshiba announcement of fast charge - 80% in under a minute - for li-on batteries could be a huge game changer if it plays out.
4. So - clean cars of the future run on combination of liquid biofuels and electricity, with mass scale wind, wave, tidal and solar development providing the juice. Intermittent renewables the ideal match for electric vehicle charging, while parked electric vehicles also provide energy storage and grid balancing services via vehicle to grid applications.
5. Enough biomass? Yes. - See my paper based on work done for National Commission on Energy Policy, "The New Harvest," www.ef.org/biofuels.
6. Hydrogen? Chimerical, a long way out to be significant, as National Research Council and others have found, while biofuels and battery technologies provide far faster and cheaper ways to reach samed goals of petroleum and pollution reduction. See my paper, "Carrying the Energy Future," at www.ilea.org (long and executive summary versions available).
I believe that hydrogen propulsions, for land and air vehicles, is closer than many of you think. With the military strongly behind hydrogen technology research, once they begin implementing it in the majority of government vehicles it will spready rapidly across civilian sectors around the world.
None of the alternatives I've seen listed here can spread that fast, nor with so much promise or utility. I suspect that just as some sectors are ramping up to use a variety of current technologies, hydrogen will blow in and make them all obsolete in no time.
Vinit, I don't think you have to worry about anyone going Cold Turkey on fossil fuels. Even if the political will existed to go on a crash nuclear power plant construction program in the U.S. like in China (and India's not so modest effort in that direction as well) there is still the basic problem of inadequate battery life with current technology for plug-in hybrids outside the city.
I'm not sure Peter Huber's numbers in his book The Bottomless Well on the potential of biomass and even grown cellolose/sugar based ethanol would agree with Patrick Mazza's. Huber also claims that North America is a carbon sink and that cultivating more land to get more biofuels may have the unintended consequence of releasing more carbon rather than less - not to mention the need for more land in a world with rising population.
Global warming, huh?? You guys need to re-run the data points and find the "hidden" correlation. Yes, indeed the earth is warming.
But much less from carbon emissions...more a matter of fact we are warming out of an Ice Age. You are not going to die because the planet is warming. It is does this from "time" to "time" and the Earth hangs in there.
Put down "Out of Gas" and re-read the "Prize". Build the hydrogen economy now because may be the economical thing to do---not because you will "Save the Earth".