Here are my choices for the Top 10 energy related stories of 2009. Previously I listed how I voted in Platt’s Top 10 poll, but my list is a bit different from theirs. I have a couple of stories here that they didn’t list, and I combined some topics. And don’t get too hung up on the relative rankings. You can make arguments that some stories should be higher than others, but I gave less consideration to whether 6 should be ahead of 7 (for example) than just making sure the important stories were listed.
1. Volatility in the oil markets
My top choice for this year is the same as my top choice from last year. While not as dramatic as last year’s action when oil prices ran from $100 to $147 and then collapsed back to $30, oil prices still more than doubled from where they began 2009. That happened without the benefit of an economic recovery, so I continue to wonder how long it will take to come out of recession when oil prices are at recession-inducing levels. Further, coming out of recession will spur demand, which will keep upward pressure on oil prices. That’s why I say we may be in The Long Recession.
2. The year of natural gas
This could have easily been my top story, because there were so many natural gas-related stories this year. There were stories of shale gas in such abundance that it would make peak oil irrelevant, stories of shale gas skeptics, and stories of big companies making major investments into converting their fleets to natural gas.
Whether the abundance ultimately pans out, the appearance of abundance is certainly helping to keep a lid on natural gas prices. By failing to keep up with rising oil prices, an unprecedented oil price/natural gas price ratio developed. If you look at prices on the NYMEX in the years ahead, the markets are anticipating that this ratio will continue to be high. And as I write this, you can pick up a natural gas contract in 2019 for under $5/MMBtu.
3. U.S. demand for oil continues to decline
As crude oil prices skyrocketed in 2008, demand for crude oil and petroleum products fell from 20.7 million barrels per day in 2007 to 19.5 million bpd in 2008 (Source: EIA). Through September 2009, year-to-date demand is averaging 18.6 million bpd – the lowest level since 1997. Globally, demand was on a downward trend as well, but at a less dramatic pace partially due to demand growth in both China and India.
4. Shifting fortunes for refiners
The Jamnagar Refinery Complex in India became the biggest in the world, China brought several new refineries online, and several U.S. refiners shut down facilities. This is a trend that I expect to continue as refining moves closer to the source of the crude oil and to cheap labor. This does not bode well for a U.S. refining industry with a capacity to refine 17.7 million barrels per day when total North American production is only 10.5 million bpd (crude plus condensate).
China was everywhere in 2009. They were making deals to develop oil fields in Iraq, signing contracts with Hugo Chavez, and they got into a bidding war with ExxonMobil in Ghana. My own opinion is that China will be the single-biggest driver of oil prices over at least the next 5-10 years.
6. U.S. oil companies losing access to reserves
As China increases their global presence in the oil markets, one casualty has been U.S. access to reserves. Shut out of Iraq during the recent oil field auctions there, U.S. oil companies continue to lose ground against the major national oil companies. But no worries. Many of my friends e-mailed to tell me that the Bakken has enough crude to fuel the U.S. for the next 41 years…
7. EU slaps tariffs on U.S. biodiesel
With the aid of generous government subsidies, U.S. biodiesel producers had been able to put their product into the EU for cheaper than local producers could make it. The EU put the brakes on this practice by imposing five-year tariffs on U.S. biodiesel – a big blow to U.S. biodiesel producers.
8. Big Oil buys Big Ethanol
I find it amusing when people suggest that the ethanol industry is a threat to the oil industry. I don’t think those people appreciate the difference in the scale of the two industries.
As I have argued many times before, the oil industry could easily buy up all of the assets of ethanol producers if they thought the business outlook for ethanol was good. It would make sense that the first to take an interest would be the pure refiners, because they are the ones with the most to lose from ethanol mandates. They already have to buy their feedstock (oil), so if they make ethanol they just buy a different feedstock, corn, and they get to sell a mandated product.
In February, Valero became the first major refiner to buy up assets of an ethanol company; bankrupt ethanol producer Verasun. Following the Valero purchase, Sunoco picked up the assets of another bankrupt ethanol company. If ExxonMobil ever decides to get involved, they could buy out the entire industry.
9. The climate wars heat up
There were several big climate-related stories in the news this year, so I decided to lump them all into a single category. First was the EPA decision to declare CO2 a pollutant that endangers public health, opening the door for regulation of CO2 for the first time in the U.S.
Then came Climategate, which gave the skeptics even more reason to be skeptical. A number of people have suggested to me that this story will just fade away, but I don’t think so. This is one that the skeptics can rally around for years to come. The number of Americans who believe that humans are causing climate change was already on the decline, and the injection of Climategate into the issue will make it that much harder to get any meaningful legislation passed.
Closing out the year was the United Nations Climate Change Conference in Copenhagen. All I can say is that I expected a circus, and we got a circus. It just goes to show the difficulty of getting countries to agree on issues when the stakes are high and the issues complex. Just wait until they try to get together to figure out a plan for peak oil mitigation.
10. Exxon buys XTO for $41 billion
In a move that signaled ExxonMobil’s expectation that the future for shale gas is promising, XOM shelled out $41 billion for shale gas specialist XTO. The deal means XOM is picking up XTO’s proved reserves for around $3 per thousand cubic feet, which is less than half of what ConocoPhillips paid for the reserves of Burlington Resources in 2005.
There were a number of stories that I considered putting in my Top 10, and some of these stories will likely end up on other Top 10 lists. A few of the stories that almost made the final cut:
The statement they made was that barring any major new discoveries “the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”
Turns out that deep geothermal, which the Obama administration had hoped “could be quickly tapped as a clean and almost limitless energy source” – triggers earthquakes. Who knew? I thought these were interesting comments from the story: “Some of these startup companies got out in front and convinced some venture capitalists that they were very close to commercial deployment” and “What we’ve discovered is that it’s harder to make those improvements than some people believed.” I am still waiting to see a bonafide success story from some of these VCs.
In total, $80 billion in the stimulus bill earmarked for energy was a big story, but I don’t know how much of that money was actually utilized.
The website is still there, but the hype of 2008 turned into a big disappointment in 2009 after oil prices failed to remain high enough to make the project economical. Pickens lost about 2/3rds of his net worth as oil prices unwound, he took a beating in the press, and he announced in July that we would probably abandon the plan.
So what did I miss? And what are early predictions for 2010’s top stories? I think China’s moves are going to continue to make waves, there will be more delays (and excuses) from those attempting to produce fuel from algae and cellulose, and there will be little relief from oil prices.
Although not always successful, my goal is to let data drive my conclusions. Still, we all sometimes find ourselves in debates that are based more on passion and conviction than on data. But if the data are ignored because the conviction is strong, it may be dogma driving the conclusions.
Passionate debates are fine, but passionate debates that ignore data have no business in a scientific discussion. Further, such arguments frequently degenerate because one or both sides is not listening to the other.
During such emotional debates, I have been accused of being a shill for oil and gas, or of being a shill for biomass. In fact, in the debate I will discuss here, I was called both in the same thread! I am pro-biomass. I am anti-biomass. I love the environment. I want to destroy the environment. I am a Conservative. I am a Liberal.
The thing is, my world is not a black and white place. In the right hands, a screwdriver is a handy tool. In the hands of an enraged person, it can be a weapon. Same tool, vastly different outcomes, depending on how it is used.
Biomass is also a tool in which the outcome depends on lots of different factors. And even then the answers to the questions don’t always lead to the same conclusions for everyone.
Here is what I mean by that. People die in car crashes every year. So one reaction to that is “If you don’t want to die in a car crash, then don’t ride in a car.” That is true. That is one response.
But one must then consider the impact of that response:
In other words, what secondary conclusions result based on the response to the initial question? But another approach is to reexamine the initial question:
The answer may be that most people die in car crashes due to very specific issues that can be mitigated. That is not to say that this will eliminate your risk of dieing in a car crash. But if I determine that 63% of the people who die in car crashes were not wearing seat belts, then I can always wear a seat belt and improve my odds of surviving a car crash.
This is the approach I try to take with science issues. Frequently the answers to questions are not definitive, and instead depend on any number of conditions. And in the end there will still be disagreement. Some people may feel that a 1% risk is acceptable, but that may be 100 times too high for the next person on the very same issue.
When someone is letting their emotions drive the argument, I try to get them to confront the data. If the answer is “It won’t fit”, then I either want to see that it doesn’t fit, or I want to measure it. This was the approach that I attempted to take with Joshua Frank, the author of – Burn a Tree to Save the Planet? The Crazy Logic Behind Biomass.
Following my recent critique – Biomass is Not Crazy Logic – Frank dropped by and left a number of comments. Not everyone wades through the comments, and the comments are really not designed for prolonged exchanges. Further, these essays are often picked up and reposted without the comments. So I thought it might be worthwhile to extract some of the comments here. (The complete responses can be found following my initial essay).
Frank’s argument can be distilled down to this: Citing Professor Tim Searchinger, Frank argues that burning biomass creates a net addition of carbon to the atmosphere. Burning biomass creates the danger that we will cut our forests down and inefficiently turn them into energy. Burning biomass creates emissions. Therefore, the burning of biomass is crazy, and it must be stopped.
My response can be distilled down pretty easily. I actually agree with Searchinger that there are lots of factors that have to be evaluated in the biomass/bioenergy equation. Searchinger’s point is to show that the improperly used screwdriver can be a weapon. Frank then extrapolates that position to: A screwdriver is a weapon, and therefore we must stop the spread of screwdrivers.
Frank cites Searchinger, but Frank’s extrapolations are subjective and qualitative. Numbers are missing from Frank’s analysis. Conclusions are sweeping and rigid. He argues that there is only one way to do biomass: The wrong way.
In the real world, the burning of biomass can present the risks Mr. Frank cites. But where Mr. Frank goes wrong is that he believes that it must present those risks. That logic does not follow. Responsible management of biomass resources can have the opposite impact of what Mr. Frank suggests.
In the back and forth that ensued, Frank seems to be unaware that the issues he raises are known issues; that while he is bemoaning them as a reason to surrender, some are out there working on solving them.
A perfect example of this was his frequent argument that “burning biomass creates particulate emissions.”
JF: “Burning woody biomass produces PM25, the most deadly form of particulate matter. This is a serious public health threat. Even if you believe that biomass is carbon neutral, you cannot skate around this important, well-documented fact.”
Regarding this issue that Frank kept trying to educate me on, here are some excerpts from a book chapter that I recently completed on Bioenergy and Biofuels from Woody Biomass:
RR: The majority of the wood used for cooking is done over an open stove. This is an inefficient process, leading to excessive consumption of wood. Open cook stoves also result in particulate emissions. Excessive pollution from wood cooking has been identified as a risk factor in acute lower respiratory infection, the chief cause of death in children in developing countries (Smith 2000).
So I am well aware of the particulate emission issue with biomass burning. But here was the next paragraph, in which I discussed mitigation of the particulates problem:
RR: Modern biomass stoves have been developed that are much more efficient with respect to wood utilization. These stoves can mitigate some of the problems associated with cooking over an open fire. By operating more efficiently, the money spent for fuel, and/or the time spent collecting fuel is diminished, as less fuel is required. Because combustion is more efficient, the air pollution associated with open fires is also diminished. Due to the multiple advantages of moving to modern biomass stoves, a number of programs have emerged with the intent of disseminating these stoves to the developing world (Barnes 1994).
In another section, I wrote:
RR: As with wood for cooking, one disadvantage from using wood for heating is the high level of particulate emissions. Open fireplaces also suffer efficiency losses from heat exiting the chimney. The development of community advanced combustion systems (AWC) has the potential for allowing increased usage of wood for heating, because of increased efficiency and lower particulate emissions.
So Frank is aware of a problem, but is unaware that this sort of problem can be mitigated if the framework is in effect to mitigate it. This problem has a solution, albeit many have not adopted the solutions. Frank only sees a problem.
The biggest hang-up, though, was probably around energy balances. There was quite a bit of “it takes a lot of energy to cut trees down and haul them out of the forest.” Again, there were never any numbers associated with these kinds of comments (except for the ones I provided). I guess if you use phrases like “diesel-powered” a lot, you can infer that the energy balance is bad without ever having to crunch the numbers.
As I told Mr. Franks, the various energy inputs in the logistical chain of taking a tree from the forest and getting it to a processing facility – or the energy inputs in the conversion process itself – are available and are used in life cycle assessments regularly. “A lot of energy” for me has numbers associated with the claim. So instead of arguing about “a lot of energy used to harvest and transport” and that no biomass process can overcome that, why not attempt to quantify that?
Back to the chapter I just completed, I wrote a section called “Net Energy Considerations.” Here is an excerpt from that section:
RR: When calculating the energy that one could extract from a resource, it is important to consider the energy inputs into the process, as well as the types of energy inputs.
In that section, I spent a bit of time explaining that the net energy of a process can easily be negative, and those processes are not sustainable. I concluded that section with:
RR: Consideration of energy inputs also highlights one of the shortcomings of biomass relative to petroleum: The energy density for biomass is much lower; less than half the energy density of oil. This is due to the fibrous nature of biomass, and the fact that the moisture content tends to be high. This has implications for recoverability of wood resources. In general, the lower the energy density of the feedstock, the closer it needs to be to the processing facility due to the energy required for transport. Economical technologies that can efficiently increase the energy density of biomass in the field are needed. Some are currently under development and will be discussed in this chapter.
So yes, I am aware of the relationship that energy inputs have on the sustainability of the system.
At one point Frank did actually use some numbers to show that it takes longer to grow a tree than it does to burn a tree:
JF: “A large tree that took 20 years to go (GE trees would be less) may burn in 17 seconds (after chopped to fine pieces).”
This must be a key concept for him, because he actually pointed it out three different times. At one point he referred to this as a fundamental fact. This leads him to the conclusion:
JF: “Trees will be burned at a far quicker rate than it takes to replace them.”
As a rebuttal to his “fundamental fact,” I point out that the tomato it took 60 days to grow is eaten in 5 minutes. Therefore, tomatoes are eaten at a far quicker rate than it takes to replace them and the eating of tomatoes must be stopped before they are wiped out?
Frank made a number of other unsupported arguments such as:
It’s like arguing that red is the best color. Put some numbers to it and let’s measure it. Are 99% of biomass to electricity plants really burning coal or trash? What is the source of that claim? Or is that simply hyperbole over coal plants that have started to supplement with biomass?
I kept wondering if he ever gave any thought to what would happen if we abandoned the use of biomass for fuel. I can tell you what would happen: In the U.S., the future would be coal until we run out of coal. (To be perfectly honest, that’s probably the case anyway). That is reality. Sure, there’s nuclear, but something tells me that this wouldn’t be his preferred outcome. In developing countries, it would eliminate the particulate emissions problem because huge numbers of people wouldn’t have any fuel for cooking.
At one point Frank brought up the threat of genetically modified organisms (GMO). I pointed out that while my company doesn’t use genetically modified trees, I am not personally opposed to genetic engineering in principle. Nature has been genetically modifying organisms since the beginning of time, and everything we eat has been genetically modified. Every mutation (even those that aren’t expressed) is a naturally-occurring experiment in genetic engineering. This was his response:
JF: If you are not opposed to GE (and no, cross-breeding and hybridized plants are not genetically engineered, stick to engineering because your biology stinks) then I can’t help you. GE is new to the cycle of evolution.
That line of argumentation is certainly a tangent, but countless people are alive today as a result of genetic engineering. Incidentally, I appreciate his concern, but it isn’t my biology that stinks. I wrote that nature has been doing genetic modifications forever. That is a fact. Frank was the one who translated that as “cross-breeding and hybridized plants.” He may want to look into genetic mutations, because cross-breeding and hybridization aren’t the only things that have changed the genetics of our food.
Ultimately when I continued to challenge his replies, it went the way emotional-arguments often go. Because I failed to yield to his subjective arguments, he concluded that I couldn’t be motivated by the science. So he threw out a couple of ad homs –
JF: You get paid to do it. Makes much more sense why you will not address the real dangers of biomass production.; You are motivated by factors other than hard science. Biomass = paycheck. I get it.
– and then left. In light of what he actually wrote, I found the phrase “hard science” especially ironic. Maybe I misunderstood and he was simply complaining that the science is hard?
For the record, I don’t get paid to promote biomass. I don’t get paid to write at all. I write because I like to, and I am focused on biomass because I think it is going to have to play an important role in our energy future. It can’t be the sole solution – and I have argued the point many times that it can only replace a small fraction of our fossil fuel usage – but every analysis I have ever done suggests that it must be a part of the solution.
At the end of the day, I try to be practical. I frequently hear people suggest that what really needs to happen is to reduce the global population by 95%. My eyes just glaze over. Those are the sorts of things that are not going to happen by politics or decree. It is navel-gazing to sit around and argue about “solutions” like this. Better to focus on solutions in the context of what is likely to actually take place once the politics have been factored in.
This is how I view biomass. Frank can spend his time dogmatically arguing that it must necessarily be a disaster. But what is likely? It is more likely (in fact, it is certain) that we are going to continue down this path. Therefore, I think a much more productive use of time is to ask “How do we do it right?”
Barnes DF, Openshaw K, Smith KR, van der Plas R. (1994). What Makes People Cook with Improved Biomass Stoves? A Comparative International Review of Stove Programs. Washington, DC. The World Bank.
Smith, K., Samet, J., Romieu, I., and Bruce, N. (2000). Indoor air pollution in developing countries and acute lower respiratory infections in children In: Thorax. June; 55(6): 518–532.
I saw a story about a week ago that I flagged to comment on when I got caught up. I suppose I am caught up enough now to do so. The story is:
The author is listed as Joshua Frank, described as an environmental journalist and the author of Left Out!: How Liberals Helped Reelect George W. Bush. Frank has previously written an article critical of Oregon’s usage of electricity derived from coal, and in the current essay he turns his attention to biomass.
The article is confusing from the start:
It might seem crazy that anyone would even consider the incineration of wood and its byproducts to be a green substitute for toxic fuels such as coal. Yet that’s exactly what is happening all over the country, and it has many environmentalists scratching their heads in disbelief.
I find those comments baffling. Why would it seem crazy to believe that burning biomass – which utilizes CO2 when it is growing and helps sequester carbon in the soil through the root systems, leaves, and slash – would be greener than burning a fossil fuel like coal that has a long list of potentially undesirable environmental impacts? Do you know what happens to waste biomass that isn’t utilized? It decomposes and ends up as the same CO2 it would end up as if you burned it.
While it is true that emissions controls on coal-fired power plants are much improved in recent years, it is also true that burning coal has resulted in acid rain and increased levels of mercury in our waterways. Burning coal also increases the concentration of CO2 in the atmosphere. To suggest that burning trees isn’t greener than burning coal is one of the most ludicrous things I have ever heard. From the tone of the article, it sounds as if the author believes that forestry and the harvesting of trees is by definition bad.
Now it is true that if you cut down an old growth forest and inefficiently turn it into a liquid fuel, that isn’t environmentally responsible. I could certainly envision any number of schemes to make the burning of biomass come out with a higher environmental impact than from burning coal. If I cut down a chunk of the Amazon, displace the people and the wildlife living there, ship the wood halfway around the world, and combust it in an old, inefficient boiler – then yes, the environmental impact of that would be higher than from burning Powder River coal. But such exceptions aren’t the norm. This article, however, paints with a very broad, one-sided brush and acts as if all usage of biomass is by definition bad:
NASA’s James Hansen says that the burning of coal is the single largest contributor to anthropogenic global warming, so any alternative fuel source must decrease the amount of carbon dioxide (CO2) released into the atmosphere if we are to put the breaks on climate change. Biomass, despite its label as a renewable energy source, does not solve the problem because burning trees actually emits a large amount of CO2.
That is another very odd comment. Burning coal releases ancient CO2 that was sequestered away. Burning biomass releases recently recycled CO2. That’s why it is renewable. If the author is concerned about CO2 emissions – and he clearly is – then coal and biomass are night and day. And while they acknowledge in their next paragraph that this is what “proponents counter with”, Frank quickly tries to shoot that one down:
An article in Science released last October attempted to debunk the myth that biomass is a good alternative to traditional coal and oil burning. The study, authored by climate scientists, claimed that when an existing forest is chopped and cleared to produce fuel, the ability of those harvested trees to absorb CO2 is eliminated entirely while the amount of greenhouse gases in the atmosphere actually increases.
This entire article seems bent on the notion that the biomass we utilize will come from old growth forest that is slashed, burned, and left fallow. The people interviewed for the article must envision a scenario like turning the Amazon into biofuels – and this is the future they must foresee for biomass to come up with these sorts of conclusions. Such a notion isn’t remotely indicative of the future of biomass. Biomass will be grown for purpose (as I explained in Don’t Weep for the Trees), and it can definitely be grown responsibly and sustainably.
“The game is up,” stated biomass skeptic Ellen Moyer, a principal of green engineering firm Greenvironment, after the release of the report. “The problem has been identified, and the clarion call for course correction has rung out around the world. The days of biomass burning … are numbered and pending legislation needs to be corrected before perverse incentives to burn our forests are enshrined in law.”
You will have to show me the laws that incentivize the burning of our forests. If you mean laws that incentivize the usage of biomass for energy – well that isn’t the same as burning our forests. You first grow the forest, and while that is taking place everything you are complaining about when you burn it is running in reverse. Oh, there can be particulate emissions from improper burning, but it is also true that proper forest management can result in improved soil and increased carbon sequestration in the soil.
Another problem with biomass is that it is typically mixed with substances like coal to produce energy. In Nevada, for example, NV Energy is set to use a mix of coal and wood at its Reid Gardner coal-fired power plant. As a result, the company hopes to qualify for the state’s renewable energy credits.
The first problem is that this isn’t true. That is not how biomass is typically used. It can only be blended with coal in small amounts due to differences in chemical and physical properties, and it requires a substantial investment in the coal plant to allow such mixing. There is a technology called torrefaction that has the potential to allow much greater mixing, as it converts biomass into something like bio-coal. But torrefaction is still mostly at a pre-commercialization stage.
If a coal-fired power plant receiving energy credits isn’t mind boggling enough,…
Why is that mind-boggling? You just wrote that they were going to use wood to displace coal. Why wouldn’t they qualify for the same energy credit anyone else gets for using biomass? Or do you prefer that they simply continue to use 100% coal?
“They are burning more than trees because wood is simply not a good energy source,” said Jeff Gibbs, who resides in Michigan and is fighting the state’s six operating biomass plants. “Look, wood produces 50 percent more CO2 than coal, for the same amount of energy output. We have to stop this before more plants begin to pop up.”
I am sorry, but that’s another ludicrous statement. I would really love to see the analysis that provided that figure.
Not only is biomass not a good source of power, claims a 2007 paper presented at the European Aerosol Conference, it’s also not a healthy alternative to coal. The paper claimed that particulate matter (particles, such as dust, dirt, soot or smoke) was actually higher for a 7 megawatt wood gasification plant than it was for a large coal-fired power station.
There’s that broad brush again. While it is true that wood gasification plants can have lots of particulate emissions, that is not an inherent quality. You can put the same pollution controls on them that you can on coal plants. So once again a bad starting assumption leads to a sweeping, but false conclusion.
In summary, this was a very one-sided view that presented the worst extremes as more or less the status quo for biomass utilization. It is true that you can do things a right way or a wrong way. Water is healthy and I need it to live, but if I drink too much it can kill me. Taking a page from this article, I suppose I should avoid water from now on, as it has the potential to kill me.
For those quoted in the article, I hope they don’t freeze to death in the dark as the biomass they are so opposed to rots and releases its CO2 anyway. As I tell people sometimes, if you are opposed to everything, then prepare to be happy with the status quo.
I have mentioned that I think ClimateGate will end up being one of the top stories of 2009. A number of people have commented or e-mailed me and said that the story will soon be forgotten. I don’t think so. I don’t think they realize the energy this gives to those who were skeptical. In my opinion, this will galvanize the opposition and make it much harder to get any legislation passed on climate change. (I am reading through a very comprehensive examination of the raw data and the nature of the temperature adjustments now at Watt’s Up With That?: The Smoking Gun At Darwin Zero)
Regardless of whether that view is accurate, I would be remiss if I didn’t have an essay devoted to the Copenhagen Conference. Prior to the Copenhagen conference, the Great Plains Institute, an energy-focused NGO that was going to delegates to Copenhagen, asked if I would be interested in receiving dispatches from their policy analysts about what’s happening in real-time inside the convention hall.
Here is one of those dispatches:
Copenhagen Suggests Climate Issue Not Going Away
Rolf Nordstrom, Wednesday, December 9, 2009
I arrived in Copenhagen on Monday afternoon and am still suffering a little jet lag, but I am awake enough to give you a glimpse of what the climate change conference taking place here these next two weeks looks and feels like, and how you might expect it to impact your life.
First, to give you a sense of scale, I want you to imagine that the vast Mall of America is filled not with shops of every kind, but with hundreds of booths from different organizations, temporary offices for delegates from 192 countries, vast meeting rooms set up with microphones and video screens, cafes, the mother of all cloak rooms, huge banks of computer stations (many with Skype and video capability built in), and the whole place teaming with people.
To get into this global “town hall” meeting, I waited in line with hundreds of others in order to get my picture taken and go through several security check points. Indeed, the elaborate airport-like security system rivals any major airline hub, complete with scanners and sniffing dogs. And all this only hints at the scale of this gathering.
If you don’t follow the climate change issue closely, it may seem like this conference in Copenhagen is coming out of thin air. But the international negotiating process on climate change has been going on for a long time and takes place through a series of meetings, each called a “Conference of the Parties to the United Nations Framework Convention on Climate Change” (or COP for short). This one, COP15, is my first and by all accounts the very largest of them all, suggesting that concern over the world’s climate has grown dramatically over the past 17 years; and of course the issue of climate change has been studied by scientists for decades prior to that.
High-level ministers and negotiators from all over the world meet every year to review the implementation of the overall Convention, which was signed back in 1992 in New York (including by the U.S.). Its objective is “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”
If you are a climate skeptic, being at this conference would prompt you to ask yourself, “if the science behind climate change is not compelling, then how is it that essentially every major country in the world—and many you’ve never heard of (think Tuvalu or Comoros), is convinced that climate change is a real and urgent challenge? Have their scientists and elected leaders all be hoodwinked?
We tend to be a bit isolated in our thinking in the U.S., but a lack of strong action on climate change has led to demonstrations in some 4,500 locations in 170 countries, and more are taking place here in Copenhagen. An example yesterday featured people convincingly dressed as trees being followed around by a scrum of reporters with cameras and sound booms as the tree people called for a halt to deforestation and the preservation of forests in the push for new forms of energy production.
No matter what happens here, you can expect there to eventually be an international agreement that places legally-binding limits on the emission of greenhouse gases. If I were a business, I would ask myself two questions:
1) Do I think this issue will go away? In other words, can we just wait it out (like a war of attrition) and hope that climate change goes away? If your answer is “yes”, what is the evidence for this view? What leads you to believe that the world will forget about climate change?
2) If the issue is not going away, then what can I do as a business (or an individual for that matter) to position myself to flourish in a carbon-constrained world?
At a minimum, you may want to stay informed. One good way to do that is to follow the proceedings and the U.S. government’s positions here in Copenhagen through this official Web site: http://cop15.state.gov/uscenter/multimedia/index.htm
Rolf Nordstrom is executive director of the Great Plains Institute, a Minnesota-based nonpartisan, nonprofit working with Midwestern States and Canadian provinces to accelerate the transition to a sustainable and prosperous low-carbon economy.
I am working on a few things right now that should be finished up in the next week or so. First, I am compiling a list of questions/comments for Bob Cohen regarding his recent guest post on ocean thermal energy conversion (OTEC). I will post his answers. If you have a relevant question that you feel wasn’t asked following that essay, post it here and I will get it to him.
Second, I am trying to put together the year’s top energy stories. In my mind the one at or near the top has been the resurgence in oil prices since January. Oil prices have more than doubled, and in a normal year that would be big news. But I think the news has been discounted merely because the levels are so much lower than the record levels of 2008. After that, there are a few stories that I think go in the Top 10, like the enormous amount of money devoted to energy in the stimulus package, the plunge in oil demand/imports, the commissioning of various alternative energy projects, Climategate, and the passage of Markey-Waxman. What other significant stories happened this year that deserve a spot in the Top 10?
Third, I have been really overwhelmed with e-mails lately. If I didn’t answer your e-mail in a timely manner, I apologize. If I missed it completely and you really need an answer, please resend. Sometimes things inadvertently end up in my spam folder. But I have gotten a couple of e-mails recently from people wishing to share links on energy saving tips, and so here those are:
One of their tips:
Too much junk in the trunk – It’s a known fact that excess weight in your car caused the engine to work even harder. Being that said, having too much junk in the trunk, of your car, that is, can significantly affect the way your car utilizes gas. Please leave the unwanted items at home before starting your driving journey. Just think of all the junk you can accumulate in your car and how all those items can start to add up.
One of their tips:
Strip : According to the experts at Lowe’s, a 1/8″ space between a standard exterior door and its threshold is equivalent to a two square inch hole in the wall. Closing those gaps can save you up to 15% in heating costs and reduce the demand on your heating system. They also offer a guide on how to accomplish this at the beginner level. Only three tools, three materials, and a day is all it requires to weatherstrip your entire home.
Finally, thanks to all who read and contribute here. I probably don’t say that enough, but this blog continues because of you. I initially started it just as an outlet for myself, unsure of whether it would attract any readers. But I enjoy writing, and would have still probably written a dozen or so essays even if nobody ever stopped by. Based on current trends, 2010 should bring in the 1 millionth visit (page views are already at 1.2 million views) and I should publish essay number 1,000.
A couple of years ago, I wrote an essay that ultimately turned out to be very controversial:
That same essay published at The Oil Drum received 560 comments, and was until recently the most-commented upon post in The Oil Drum’s history. Global Warming/Climate Change is a topic that people get very emotional about, and the idea that I claimed that we would never address it didn’t sit well with a lot of people.
Now I know that I have some global warming skeptics here. And I have said many times that I am fine with that, but I don’t want to engage in that debate for multiple reasons. And in the hopes that I can focusing this essay, let me say what I really mean: We won’t stop rising atmospheric carbon dioxide concentrations. If you want to argue that increasing carbon dioxide is not resulting in climate change, fine. But I think we can all agree that carbon dioxide concentrations are steadily increasing in the atmosphere. In fact, one of the key monitoring stations is here in Hawaii at Mauna Loa, which I can see clearly from my house.
The reason I don’t believe we will stop accumulating carbon emissions is that this is a global issue, and people around the world are going to generally gravitate to the cheapest source of fuel they can find. So, many of the world’s countries can sign a well-intentioned protocol in Kyoto, but then China plans 562 new coal-fired power plants. Carbon emissions continue unabated, despite Kyoto.
This week I saw a new article by Lester Brown – author of the “Plan B” series, the most recently published version of which is Plan B 4.0: Mobilizing to Save Civilization. In his article, Brown observed that the U.S. has had major reductions in carbon emissions:
For years now, many members of Congress have insisted that cutting carbon emissions was difficult, if not impossible. It is not. During the two years since 2007, carbon emissions have dropped 9 percent. While part of this drop is from the recession, part of it is also from efficiency gains and from replacing coal with natural gas, wind, solar, and geothermal energy.
The U.S. has ended a century of rising carbon emissions and has now entered a new energy era, one of declining emissions. Peak carbon is now history. What had appeared to be hopelessly difficult is happening at amazing speed.
For a country where oil and coal use have been growing for more than a century, the fall since 2007 is startling. In 2008, oil use dropped 5 percent, coal 1 percent, and carbon emissions by 3 percent. Estimates for 2009, based on U.S. Department of Energy (DOE) data for the first nine months, show oil use down by another 5 percent. Coal is set to fall by 10 percent. Carbon emissions from burning all fossil fuels dropped 9 percent over the two years.
All of that may very well be correct. But China and India continued to build new coal plants. Demand for oil around the world remained high. And the result so far is that the monitoring station on Mauna Loa shows absolutely no sign that global carbon emissions have been impacted by this sharp drop in U.S. emissions. In fact, the most recent measurements show the highest atmospheric concentrations that the observatory has ever measured:
This is one of the reasons I have never focused my time on carbon emissions. I just can’t see that anything the U.S. does or that I can advocate is going to really impact global emissions. Sure, we may reduce our carbon emissions in the U.S. But there is a long line of countries waiting to use that fossil energy that we don’t use. So I think the best we could hope for is to slow the accumulation rate. But I think the atmospheric concentration will continue to rise until fossil fuels start to run out. That’s the only thing I think will permanently rein in carbon emissions.
Let me be clear that this has nothing to do with what I would like to see happen. The reason the essay was so controversial at The Oil Drum was because some people perceived my attitude as “I don’t care about climate change.” That’s not it. This is just the way I see things playing out.
I have instead chosen to focus my efforts on changing the forms of energy we use. There is of course some synergy with those who are working to reduce carbon emissions. We both would like to see expanded use of alternative energy. For me, this is about energy security. Increasing the locally produced energy should help insulate against future energy shocks. This would also reduce localized carbon emissions.
But I don’t expect this to impact the global carbon emissions picture. If that was my goal, I think I would be very frustrated by that Mauna Loa graph. I see no reason to believe that picture will change in the next few years. But I am optimistic that we can continue to develop some alternative energy options that enhance energy security for specific locations that have limited fossil fuel resources. I think those countries with ample fossil fuel resources will continue to burn them, though, which is why I think the focus on carbon emissions is ultimately futile.
I just read a story this morning suggesting that the “Cash for Clunkers” program is expected to reduce carbon dioxide emissions by only a trivial amount:
While the focus of the story is that this won’t do much for climate change, this is the piece that attracted my interest:
America will be using nearly 72 million fewer gallons of gasoline a year because of the program, based on the first quarter-million vehicles replaced. U.S. drivers go through that amount of gas every 4 1/2 hours, according to the Department of Energy.
In the context of the amount of gasoline we use – 140 billion or so gallons per year (a bit less now because of the recession) – this amounts to only 0.05% of our annual gas usage. Experts have suggested that making sure tires are properly inflated could save 3% on gas usage, or 60 times the amount saved by “Cash for Clunkers” if the majority of people are driving around on under-inflated tires.
So, for $1 billion invested in the program, a savings of 72 million gallons means we taxpayers paid $13.89 for each gallon of gasoline/yr saved. Readers know that I am a big fan of much higher fuel efficiency, but $13.89 to save a gallon of gasoline per year? While this benefit will be spread over several years of gasoline savings, surely we can do better than this.
Even if – as one reader suggested – those cars would have been on the road for another 10 years, you are still paying over a buck a gallon for the savings. No doubt that stimulus funds can stimulate in the short term, but what happens when the tax bill comes due? Will we look back on that as a wise use of those funds?
I spend a lot of time playing “What if?” We all do this. I do this when I am driving – “What if that car at the next intersection pulls out in front of me?” – when I am working – “What if that high pressure line ruptures?” – and at home – “What if I wake up and find the house is on fire?” I also spend a lot of time pondering the question “What if there are energy shortages in the near future?“
When we do this, we are generally trying to understand the potential consequences of various responses to a given situation. This sort of exercise is a form of risk assessment, and it is a very important tool for making decisions about events that could impact the future. Sometimes the consequences are minor. If I choose not to take an umbrella to work and it rains, there is probably a small consequence. If I choose to pass a car on a blind hill, the consequence may be severe, and may extend to other people.
In this essay I will explore the implications of the question: “What if my viewpoint is wrong?“
What If I’m Wrong About Peak Oil?
I guess it was my training as a scientist that emphasized to me that conclusions are tentative (I was two years into a Ph.D. in chemistry before I decided the job prospects were better for a chemical engineer). They are subject to revision as additional data come in, and you have to always be willing to consider that you may be wrong. But acknowledging that I could be wrong has to go hand-in-hand with the consequences of being wrong.
I spend a lot of time thinking about the possible consequences of peak oil. My view on peak oil is that it presents an enormous challenge for humanity, that we will begin to face these challenges within 10 years, and that there is no easy solution. I see spiking oil prices and the subsequent fallout as a prelude to what lies ahead. These views have influenced my profession, where I have chosen to live, what I read, and what I say to others. Fear of peak oil has influenced some people not to attend college, or to quit their jobs and move away to remote locations. It has even caused some people to decide against having children. But what if I am wrong about the timing of peak oil? What are the consequences?
For me, this one has low consequences. If I am wrong and we have adequate oil supplies for the next 40 years, then perhaps I live a more frugal life than I might have otherwise. I prefer to walk, ride a bike, or take a train instead of hopping into a car to drive some place. When I drive, I probably drive a smaller car than I would have otherwise. Then again, I have always been frugal, so perhaps I would have done all of these things regardless. The one thing that it may have impacted upon in a major way is my interest in energy.
But if I am right, then I have plans in place to manage the impact as well as I can. Those plans start with minimizing my energy consumption. It is my small insurance policy. If the worst case doomers turn out to be right, then there isn’t a lot I can do except try to make sure my family and I are in circumstances that minimize the risk. Further, I have done a lot of work that is aimed at improving our energy security in the years ahead. That work includes promoting renewable energy technologies that I think can make a long-term contribution, but also arguing for conservation, and better utilization of our own natural resources. So if I am correct, then I have chosen to work on things that have the potential to mitigate the consequences.
But what if the other side is wrong? Government agencies devoted to monitoring our natural resources often reassure us that there is plenty of oil for decades to come. But what if the government, industry, etc. turn out to have missed the mark on peak oil? In that case I think we will be in for a lot of trouble.
If the peak comes quickly and the decline is steep, I believe we will be wholly unprepared. There is not a cheap, easy substitute for oil. Much higher prices will be inevitable in such a situation. Industries – such as the airline industry – won’t be prepared and we will see perhaps entire industries go bankrupt. While I do believe that over time we can transition to natural gas vehicles (and our supplies of natural gas look adequate for a while), that will take some time. If the government is wrong and the peak happens much sooner than expected, we will be in for a very difficult transition period.
What If I am Wrong on Global Warming?
Another question I think a lot about is “What If I am Wrong on Global Warming?” To me, this one is more complicated. If the Al Gore contingent is correct, then we are facing some very major problems. As I have written before, I don’t expect us to be able to rein in carbon dioxide emissions, so I see a future with ever higher atmospheric CO2. And while I tend to come down on the side that human activity is contributing to global warming, the scientist in me reminds me that “conclusions are tentative.”
On the one hand we have potential global devastation if Al Gore is correct (because again, I believe carbon dioxide in the atmosphere will continue to climb). On the other hand are those who believe that human activities play little or no role in global warming. They view the opposition as putting global economies at risk by putting a price on carbon emissions. While I think global devastation is a much worse consequence than economic stagnation, the impact of that could be pretty severe as well.
So we have two camps, each of which thinks if the other side gets their way it will lead to global disaster. So we get a lot of vitriol in this debate, which I don’t like. I don’t know what the ultimate outcome on this one will be, but one thing I don’t want to see is the debate stifled by placing derogatory labels on those with whom you disagree.
I never discount the possibility that I could be wrong about something. I would say that precious few of my views are embedded in granite. That’s why I write this blog; to discuss, debate, learn, and change my mind when reason dictates that.
A number of people have written to ask why I haven’t commented on the climate bill. There are two reasons. First, the House and Senate versions are very different, so the final form may not resemble the version the House just passed. Second, I haven’t had the time to read through much of it.
There was one issue that I considered quite important, but I didn’t know whether it was in the bill. Jim Mulva was recently quoted as saying that the climate bill would impose higher taxes on domestic fuel versus imports. While we can agree that Mulva’s comments are self-serving, I also believe that most people would oppose a bill that shifts more of our fuel supply to imports.
While I know the goal here is to favor renewable energy, what happens if it can’t fill a void left if the new bill discourages domestic production? The void will be filled by imports. Prices will also rise, so some of the void will be filled by conservation. But in order to keep the playing field level, I really liked the idea proposed by Jeff Rubin: If you place a carbon tax on domestic production, you can place a carbon tariff on imports. This idea was discussed in my review of his book Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization.
I hadn’t heard any discussion of this until today. From Steven Mufson of the Washington Post:
President Obama yesterday said that the House took an “extraordinary first step” by passing a climate bill on Friday, adding that he hoped it will “prod” action by the Senate and predicting that the legislation could make renewable energy “a driver of economic growth.”
But he said he hopes that Congress will strip out a clause that would impose a tariff in 2020 on imports from countries without systems for pricing or limiting carbon dioxide emissions.
Obama went on to suggest that there were other protections built in that will keep the playing field level. I would like to know what those are. I can understand how tariffs would do it (although enforcement raises some sticky questions). But I have heard enough double-speak on energy policy that I want to see the fine details of how the playing field will be kept level.
Make no mistake: This bill is a tax increase. That’s the basis for the political opposition. But I have long advocated a tax increase on fossil fuels to slow the rate at which we are using them up (and to make renewables more competitive). So I don’t oppose the bill on the basis that it is a tax increase. On the other hand I can’t say that I endorse it, because I haven’t read it. I certainly believe there are more efficient ways of raising carbon taxes than this. I still think – perhaps naively – that my proposal to tilt the tax code toward higher fossil fuel taxes and lower income taxes would be more attractive than this.
My former CEO Jim Mulva spoke today at the National Summit in Detroit, and had some newsworthy comments. Bloomberg reported on his talk:
June 16 (Bloomberg) — ConocoPhillips, the third-largest U.S. oil company, said it may take a century for the nation to replace fossil fuels with alternative energy sources.
I don’t know of too many people who think we have a century’s worth of oil left. Natural gas and coal? I also seriously doubt we have that much of either of those, especially allowing for economic growth. What I think this means – in any case – is that we have some potentially difficult times in front of us. However, Mulva went on to give his prescription for preempting some of those difficulties:
The country will need to develop its own oil and natural- gas deposits and continue importing petroleum while developing alternative supplies in the decades ahead, ConocoPhillips Chief Executive Officer Jim Mulva said today at the National Summit economic conference in Detroit. At the same time, he said, the nation will need to address climate change.
On the issue of climate change, Mulva thinks legislation is likely, but doesn’t want to see U.S. producers punished while foreign producers are left unscathed:
The U.S. needs policy that encourages investments in all types of energy and avoids hurting the economy by making the nation less competitive than countries with cheaper energy, Mulva said. Proposed climate legislation in Congress threatens to drive U.S. refiners out of business by imposing higher carbon costs on domestic fuel than on imports, he said.
That last bit is very important. If we do get climate legislation, we need to make sure that we aren’t providing a competitive advantage to countries who don’t care about emissions – while putting our domestic producers out of business. This was a major theme in Jeff Rubin’s book Why Your World Is About to Get a Whole Lot Smaller. Rubin argued that if we put a price on carbon emissions in the U.S. we can apply a carbon tariff on imports to level the playing field. Rubin argues that this will encourage efficiency from foreign producers of all things that are energy intensive, and it will ensure that the legislation doesn’t put U.S. firms out of business. (I reviewed Rubin’s book here).
Mulva went on to suggest that oil prices had gotten ahead of themselves. That story from Reuters:
“We have felt that an oil price between $70 and $80 (a barrel) is a good balance to promote investment, continue to replace reserves and keep production up, as well as a balance with respect to the cost to the consumer,” he told Reuters.
But Mulva also acknowledged the price run-up — expectations of a recovery drove crude prices to $73 a barrel last week, more than double their winter lows — was “stronger than we would have expected” and was “a little bit ahead of the actual supply and demand situation and inventory levels.”
I think “expectations” is the key word here. We do seem to have a little bit of a glut of oil (and natural gas) right now. In that respect, prices seem to be too high. But take this story from Fortune, where a majority of analysts believe that prices long-term are headed much higher:
NEW YORK (Fortune) — Ask a group of oil analysts about the recent surge in crude costs and here’s the consensus answer you’ll get: Prices have run up too far, too fast and they aren’t supported by the fundamentals.
Ask them about where prices will be two years from now, however, and the majority will offer this prediction: A lot higher.
So if I am an investor – and I think oil prices will be “a lot higher” in two years – I am going to invest in oil and/or oil company stocks regardless of what the supply/demand situation looks like today. And when enough people do that, you have pressure on oil prices today, which is why I think we are back to $70 oil.
Full Disclosure: I own shares of ConocoPhillips and Petrobras.
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