With recent headlines trumpeting the entry of Saudi Arabia and China into the shale game, enthusiasm for unconventional natural resources has reached a fevered pitch. Countries in all corners of the world are poised to bolster the global economy when, only a few years ago, concerns abounded that demand would unsustainably exceed supply. Any increase in supply is an investment in future energy security worldwide.
However, it may be time to put a damper on some of the enthusiasm.
What is good for the global economy in the long term may very well cause problems for the countries pursuing shale energy in the short term. Indeed, the stress of infrastructure investments, resource constraints, environmental concerns, and the risk of financial losses from temporary, price-depressing energy gluts could cause nations like Saudi Arabia and China to abandon shale energy before they reap its benefits. Thus, government policy will be key in determining the scale of the shale boom – even in the United States, which has reached a crucial fork in the road in shaping the future of its shale industry.
Saudi Arabia’s chief concern is the immediate need to develop the critical infrastructure necessary to make shale plays a possibility. Much of Saudi Arabia’s shale resources lay in remote, dry areas where no existing extraction or transport facilities exist. Moreover, in order to access this shale, Saudi Arabia will need to commit to the costly, energy- and resource-intensive process of hydraulic fracturing. Not only does Saudi Arabia need to establish the infrastructure to obtain shale gas, but it also needs to develop a viable way to transport the vast amounts of water required to get the process started. In addition, producers will need to bolster their ranks of skilled workers. These challenges indicate that it could take up to five or six years before Saudi Arabia achieves meaningful production. The global energy economy can change substantially in that time frame, and fluctuations in energy prices can make such a vast investment risky. ( Continue… )
The Keystone XL pipeline has idled in limbo since 2008 when TransCanada, a Canadian energy company, first sought presidential approval for the cross-border oil pipeline.
Now, some in the US House of Representatives are again hoping to move forward with the project, sans approval from either the White House or US State Department. The project requires a presidential permit because the proposed pipeline would straddle the US-Canada border.
The latest proposed workaround is the Northern Route Approval Act, which would mitigate potential legal challenges and effectively allow TransCanada to begin construction on the project without a presidential permit. The bill is a sign of continued frustration from Republicans who say the Obama Administration has dragged its feet on a job-creating, economy-stimulating infrastructure project.
While technically possible, such a bill faces significant obstacles. ( Continue… )
Designed by the engineering multinational firm Arup, more famous for designing the Pompidou Centre, the Sydney Opera House and many of the stadium used for the 2008 Olympics in Beijing, the building is the first attempt to create what Arup has called the future of skyscrapers.
With the outer facades covered in glass panelled bioreactors the building can produce its own energy. The algae in the reactors provide biomass and thermal energy, as well as insulating the building from temperature changes and noise.
Currently a total of 129 reactors have been installed, all controlled by an energy management system that harvests energy from the sun, and the algae, to be used to heat water, which then can be used to generate electricity, or as a means of warming the building during the winter. ( Continue… )
Recently, I explained how high oil prices can bring on financial collapse for oil importers. In this post, I’ll discuss the flip side of the situation: how oil exporters reach financial collapse.
Unfortunately, we have many examples of countries that were oil exporters, but are dealing with collapse situations. Egypt, Syria, and Yemen all have had political disruptions since 2011. These may not be called financial collapse, but they all took place as the country’s oil exports decreased and as the price of imported food rose. Another example is the Former Soviet Union (FSU). It collapsed in 1991, after a period of low oil prices, in what looks very much like a financial collapse.
There are several dynamics at work in the financial collapse of oil exporters:
- Oil exporters are often dependent on oil export revenue to fund government programs.
- The need for government programs grows as population grows and as the price of food rises.
- The amount of oil that can be extracted in a given year often declines over time, as initial stores are depleted.
- Exports often decline even more rapidly than oil supply, because of rising oil consumption as population grows.
In general, high oil prices are good for oil exporters (except the effect on food prices). At the same time, oil importers strongly prefer low oil prices. As a result, we end up with a price tug of war between oil importers and oil exporters. ( Continue… )
Albert Einstein once said: “Make everything as simple as possible, but no simpler.” Pundits always pursue the former, but often fail to uphold the latter.
Such has been the case recently in regards to the prospects for electric vehicles. Will electric vehicles be commercially successful or won’t they? As often happens, there is superficial evidence supporting both sides of the argument.
On one hand, you have Tesla Motors (NASDAQ: TSLA). Tesla recently announced that it had achieved its first quarterly profit, on the back of better-than-forecasted sales of its new Model S sedan.
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On the other hand, you have Fisker Automotive. At the same time that Tesla was releasing good news, Fisker was making waves with its drastic downsizing, laying off 75% of its workforce. Fisker’s main model, the Karma, is probably unfortunately named, as the company is certainly beset with misfortune these days. ( Continue… )
We in the United States, the Euro-zone, and Japan are already past peak oil demand. Oil demand has to do with how much oil we can afford. Many of the developed nations are not able to outbid the developing nations when it comes to the world’s limited oil supply. A chart of oil consumption shows that oil consumption peaked for the combination of the United States, EU-27, and Japan in 2005 (Figure 1).
We can see an even more pronounced version of this pattern if we look at the oil consumption of the five countries known as the PIIGS in Europe: Portugal, Italy, Ireland, Greece, and Spain. All of these countries have had serious declines in oil consumption in recent years, as high oil prices have impeded their economies.
Oil consumption for the PIIGS in total hit its highest level in 2004, before the decline began. Peak oil consumption by country varied a bit: Portugal, 2002; Italy, declining since 1995; Ireland, peak in 2007; Spain, peak in 2007; Greece, peak in 2006.
Peak demand is very much related to jobs. Peak oil demand occurs when a country is not competitive in the world market-place, and because of this, loses industry and jobs. One reason this happens is because the country’s energy cost structure is not competitive in the world market-place. With the run-up in oil prices starting about 2003, oil is by far the most expensive of the traditional energy sources we have available today. Countries that use a large percentage of oil in their energy mix can be expected to have a hard time competing, because of oil’s higher cost. ( Continue… )
With all the talk about new oil discoveries around the world and new techniques for extracting oil in such places as North Dakota and Texas, it would be easy to miss the main action in the oil supply story: Aging giant fields produce more than half of global oil supply and are already declining as group. Research suggests that their annual production decline rates are likely to accelerate.
The most recent research on giant oil fields has been available since 2009 so it doesn’t attract media attention the way new discoveries hyped by oil company public relations departments do. And yet, that research is far more important to understanding our oil future.
Here’s what the authors of “Giant oil field decline rates and their influence on world oil production” concluded: ( Continue… )
As it looks more and more likely that the Keystone XL pipeline will be rejected, it may actually turn out that the US can develop their own tar sands. Yesterday the Department of Energy unveiled a new technology that can be used to make US oil sands and heavy oil economically viable for refining.
If the new technology proves a success it could encourage a mining boom of shale oil in the Green River Basin in Utah, Colorado, and Wyoming, as well as enable oil companies to extract heavy oil that has been left in oil fields along the North Shore of Alaska and off the coast of California.
Jenny Hakun, a spokeswoman for the DOE’s Office of Fossil Energy, stated that “estimates for the U.S. heavy oil resource total about 104 billion barrels of oil in place — nearly five times the United States’ proved reserves. Although no commercial-scale development of U.S. oil sands or oil shale has yet occurred, both represent another potential future domestic unconventional oil resource.” (Related article: Are Canadian Oil Policies Misguided?)
The problem with heavy oil is that it is too viscous to flow through pipes, and too contaminated with sulphur and heavy metals to be refined. This was traditionally solved by saturating the oil with hydrogen, but this was always too expensive to make the extraction of heavy oil a viable business. This new technology uses alkali metals to extract he heavy metals and sulphur in a much cheaper manner. ( Continue… )
EPA nominee Gina McCarthy says coal a 'significant' energy source (Sponsor content)
In a US Senate confirmation hearing yesterday, Gina McCarthy, President Obama’s pick to lead the EPA, told a Senate panel on Thursday that coal will remain important in the U.S. energy mix and that if confirmed that she will be flexible in applying new pollution rules for coal-fueled power plants.
“Coal has been and will continue to be a significant source of energy in the United States, and I take my job seriously when developing those standards to provide flexibility in the rules,” McCarthy said.
According to a story from Reuters, “Republican Senators John Barrasso of Wyoming and James Inhofe of Oklahoma, among others, quizzed McCarthy about the economic impact of its rules on states that rely on coal as a primary energy source, and about her feelings toward job losses when coal plants close.”
Barrasso said rules that prevent new coal plants from being built and would potentially shut down existing coal plants are already causing “chronic unemployment” in Wyoming.
“I haven’t heard yet any plain statements from EPA –hopefully we will today from this nominee – about the negative health impacts and lives lost from chronic unemployment caused by the EPA policies,” he said. “This is a serious health epidemic and it seems to go unnoticed by the EPA. How many more times will an EPA administrator pull the regulatory lever that will allow another mining family to fall through the EPA’s trap door of joblessness, poverty and poor health,” he said. “Are coal miners no longer heroes to the nominee and the EPA? These people are heroes and they deserve better than they’re getting from the EPA,” Barrasso said.
Coal is mined in 25 U.S. states and is responsible for more than 760,000 jobs in the United States. Wyoming is the largest coal-producing state, followed by West Virginia, Kentucky, Pennsylvania and Illinois.
France finds itself in an interesting conundrum that the oil industry is hoping to take advantage of: The country has banned fracking but is now planning to tap into geothermal energy which requires a process similar to fracking.
In 2011, France banned shale fracking. In February, France’s Environment Ministry awarded two exploration licenses for geothermal energy, which involves drilling deep into the Earth’s crust.
The media has described the oil industry as up in arms over France’s geothermal plans. It’s not fair. Fracking is, after all, fracking. But more to the point, the oil industry likely sees an opportunity here to reverse the fracking ban.
France will have a hard time arguing that geothermal fracking is so much different than shale fracking. The outcome will either be to foster public opposition to geothermal energy plans and sideline this as well, or to advance the shale cause. (Related article: U.S. Game Changing Renewable - Geothermal Power)
And France’s geothermal energy plans are rather ambitious: Not only have they awarded three licenses, but they are reviewing 18 more. At the same time, along with the 2011 ban on shale fracking, the government revoked shale exploration licenses awarded to France’s Total SA and the US’ Schuepbach Energy LLC. ( Continue… )