Category Archives: Resource Constraints

Links for the Week Ending 9 March 2014

Apologies for the late posting of this week’s links. Has been a crazy week.

  • For those of a non-business background, any reference to The Economist magazine with respect to climate change may appear strange. Who cares what The Economist writes on the subject? I would beg to disagree. Few, if any, senior business executives will read posts on Real Climate or Skeptical Science, let alone academic articles on the subject. For English speakers, most climate change commentary will come out of the pages (much of which will, of course, be online these days) of The Wall Street Journal, The Financial Times, other serious non-financial dailies like The New York Times in the U.S. and The Telegraph in the U.K., a motley collection of weeklies like Forbes, and, of course, The Economist. And The Economist is rather special in terms of its reach into board rooms across the globe (and for that matter cabinet offices). For example, Playboy Magazine once asked Bill Gates what he reads. The answer: “The Economist, every page”. A year ago, The Economist wrote an extended article on the global warming ‘hiatus’ that, I thought, gave too much weight to a few studies suggesting that climate sensitivity was far lower than previously thought (here, free registration). This week, however, the magazine made amends by publishing an excellent piece titled “Who pressed the pause button?” on the so called ‘hiatus’ in temperature rise. It ended with this statement:  “Most of the circumstances that have put the planet’s temperature rise on “pause” look temporary. Like the Terminator, global warming will be back.”
  • Talking of ‘The Terminator’, The Guardian carries an interview with the Crown Prince of techno-optimists and Google geek in chief Ray Kurzweil. God help us if anyone actually believes this stuff.
  • Up the road from me in Oxford is the NGO Climate Outreach and Information Network (COIN). Its founder George Marshall has an interesting blog that looks at the narratives surrounding climate change. In a post called “How the Climate Change Messengers Became Blamed for the Floods” he deconstructs the media’s reaction to the recent U.K. floods. It’s somewhat depressing stuff.
  • One of the sharpest observers of the shale hype has been the petroleum geologist Art Berman. He has a site called The Petroleum Truth Report, but, frustratingly, doesn’t keep it current. Fortunately, he has just given a new interview with Oilprice.com updating us on his recent thinking. The interview is full of gems such as this: “Oil companies have to make a big deal about shale plays because that is all that is left in the world. Let’s face it: these are truly awful reservoir rocks and that is why we waited until all more attractive opportunities were exhausted before developing them. It is completely unreasonable to expect better performance from bad reservoirs than from better reservoirs.” I highly recommend you read the whole thing.
  • The economist Noah Smith writes a lively blog called Noahpinion. In this post he makes some keen observations on the ‘jobs and robots’ debate, while in this article in The Week he compares America’s decline with the collapse of the Ming Dynasty.

Data Watch: US Natural Gas Monthly Production December 2013

The US government agency the Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on February 28th, and covers the period up until end-December 2013.

Data is reported in billion cubic feet (bcf). Key points:

  • December 2013 natural gas dry production: 2,090 bcf, plus 2.1% year-on-year
  • Average monthly production for the 12 months to December 2013: 2,023 bcf, +0.9% over the same period the previous year

Since the end of 2011, production growth has stalled (click chart below for larger image), with the year-on-year 12-month average bumping along a plateau.

US Dry Gas Production Dec 13 jpeg

Natural gas well-head prices exhibit seasonality, with winters generally seeing stronger prices due to heating needs. The recent polar-vortex induced cold snap in the U.S. has pushed prices up to their highest since February 2010 (here, click for larger image).

Natural Gas Spot Prices Mar 3 jpeg

To put the current price of $5.0 per million British thermal uni (Btu) in perspective, a longer term monthly time series going up until end December 2012 is given below (click for larger image). Note that natural gas production is very inelastic over the short term. Accordingly, the market is brought back into equilibrium during periods of strong demand through large jumps in price. However, these don’t generally prompt an investment surge in natural gas infrastructure since they are viewed as temporary in nature. Only if prices remain elevated beyond winter would we likely see a supply-side response. However, prices are already coming off their highs as we move toward spring.

US Nat Gas Well Head LT jpeg

Links for the Week Ending 2 March 2014

  • Martin Wolf has been revisiting the robots and jobs topic over the past few weeks in a couple of articles in The Financial Times here and here (free access after registration). This is a theme I have been addressing a lot recently in a series of posts starting here. Wolf finishes his last article with the observation that technology does not always have to shape institutions; it should be the other way around: “A form of techno-feudalism is unnecessary. Above all, technology itself does not dictate the outcomes. Economic and political institutions do. If the ones we have do not give the results we want, we must change them.” I agree, but this will not be easy.
  • I have also just discovered a fascinating blog that pulls together articles on the new robot economy called RobotEnomics (sic). For example, check out this post on the economic implications of driverless cars.
  • California has experienced significant rainfall over the last few days. The latest Drought Monitor (released weekly) doesn’t capture this rainfall, so we should see some slight improvement when the next update comes out. Critically though, California’s water bank—its high mountain snow pack—is still running at around 20% of average. You can see the end month figures as measured by the Department of Water Resources here and an article giving background to the snowpack hereMother Jones has some nice graphics on the crops being hurt by the drought here, while The Atlantic has a very interesting (and very long) article on the history and future of California’s massive water engineering projects here.
  • Here I go again: linking to the March 1998 Campbell and Laherrere article titled “The End of Cheap Oil” in Scientific American. The authors ended the article with this sentence “The world is not running out of oil—at least not yet. What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.” Average price of Brent crude in 1998: $13.2 per barrel, equivalent nowadays to around $19 after adjusting for inflation. Brent now: $109 per barrel. But isn’t fracking going to give us an endless supply of cheap oil?  Here is an article in Bloomberg titled “Dream of Oil Independence Slams Against Shale Costs”. In other words, Campbell and Laherrere continue to be proved right and the energy cornucopians continue to be proved very wrong.
  • For technological optimists the dream is for a transformational technology that can permanently alter the energy supply equation. Fusion has always been one such hope, but forever decades away from commercial development. The New Yorker has just published a superb article called “A Star in a Bottle” on the International Experimental Thermonuclear Reactor (ITER) being built in France. The audacity and scope of the project is extraordinary. Yet my takeaway from the article is that fusion provides little hope of providing a timely saviour with respect to either climate change or fossil fuel depletion.

Links for the Week Ending 23 February 2014

  • The so called hiatus period of flat-lining global mean temperatures has certainly been a godsend for the climate skeptic lobby. A lot of this recent change in temperature trend is due to the ENSO cycle: El Nino years are generally hot years, and we haven’t recently had many strong El Ninos. You can see this effect in the NASA chart here. So the next time we get a strong El Nino year expect to see a new global mean temperature record. When will we see the next one? This intriguing guest post on Jeff Masters Wunderblog suggests we may be due for a big El Nino in 2014. If true, expect to see the ‘hiatus period’ disappear from the climate skeptic lexicon.
  • By coincidence, I saw the NASA chart above reproduced in a blog post on Econbrowser by Menzie Chinn. Hamilton and Chinn, who co-author the blog, are two of the most respected economists in the world. Hamilton wrote one of the standard time series texts that a generation of econometricians grew up on. Chinn’s post is titled “Economic Implications of Anthropogenic Climate Change and Extreme Weather“. He takes aim at those who think we can easily adapt to climate change, pointing out that not only will the trend change but also volatility. All of this will cost a lot of money.
  • The global media has picked up on the Californian drought to a certain extent. If you want to track it yourself, click the U.S. Drought Monitor page here. There has been far less coverage, however, of the Brazilian drought; here is a rare piece of coverage by National Public Radio. And what is happening in Brazil is already having an effect on food prices as witnessed by the skyrocketing price of coffee; see here.
  • I have frequently commented that despite rising resource constraints  and a productivity slowdown, global GDP growth has motored on at around 3% per annum regardless. The is mostly because China has acted as a growth locomotive for everyone else, offsetting anaemic growth in the U.S., Europe and Japan. So if China’s growth collapses, this will likely mean that global growth takes a step-change downward (the other BRICs and MINTs have their own problems). Having seen Japan’s experience first hand (one day growth, the next day no growth), I have been a huge skeptic of China’s economic model. But to date, the sky has not fallen down. The BBC’s economics correspondent Robert Peston has just produced a short documentary called “How China Fooled the World” that sets out the pessimist’s case and can be found on iPlayer. If you have a problem accessing BBC content, try this link at YouTube here.
  • Most web-based technology favours scale: it facilitates ‘winner takes all’ economics. Think Google and Facebook. Yet it also reduces the cost of information and, potentially, small production runs. This, in turn, favours the so called ‘long tail’. This strange dance between the centrifugal and centripetal forces of information technology is a source of both fragility and resilience as we face resource and climate change challenges. For a slightly different riff on the same theme see this article by the economist Robert Frank in The New York Times.

Energy Return on Investment (EROI): State of Play

In my last post, I referred to the work of Charles Hall on Energy Return on Investment (EROI) and biophysical economics. Following an exchange of e-mails with Professor Hall,  he directed me to some of his more recent work, including a January 2014 paper titled “EROI of Different Fuels and the Implications for Society” published in Energy Policy (free access). The paper looks at the critical EROI question: “How many units of energy do you extract for each unit of energy you invest?”.

The paper is a veritable chartfest of all things EROI, but I will wet your appetitive with just three. First up, is an EROI comparison between different fossil fuel and biomass energy sources (click for larger image).

Mean EROI jpeg

The bad news here is that coal remains the king of EROI since you get around 40 times as much energy out for each unit of energy you put in. Hardly good for CO2 emissions trajectories and climate change.

Next up is the decline in global oil and gas EROIs (click for larger image):

Global Oil and Gas EROIs jpeg

The decline is unsurprising since we are trying to exploit ever more geologically marginal sources of oil and gas in ever more unconventional forms.

Finally, a chart showing fossil fuels up against renewables (click for larger image):

EROIs Different Energy Sources jpeg

I was genuinely surprised at this one because both wind and photovoltaic (PV) came in higher than I expected. Hall flags all the major problems with wind and PV (need for base load and so on) and also points to disputes over PV EROI methodology. Nonetheless, I have heard arguments in the past that PV is almost break-even in EROI terms; this does not appear to be the case.

There is a lot more in the paper, including numerous interesting references. When I get time, I will come back to the EROI of renewables as it seems such an important topic.

Should We All Give Up?

The frustration within the sustainability and resilience blogosphere is palpable. Oftentimes it is expressed in terms such as this: “Why even bother communicating with the mainstream, when the mainstream has no intention of listening?”

But ideas have a life of their own, and many are gradually infecting the mainstream, without the mainstream even being aware of their origin. For example, take the chart below titled “Costly Quest” taken from a Wall Street Journal article published on 28 January (behind paywall here, click for larger image):

Majors Oil Production jpeg

This is a classic case of the Red Queen syndrome, under which Big Oil has to run ever faster purely in order to stand still; that is, ever more investment for the same level of production. (A previous post dealt with the Red Queen and shale gas here.)

The Red Queen can also be described another way: a decline in the energy return on investment (EROI), under which you have to put ever more energy into an extraction and production process just to get the same amount of energy out.

EROI was first conceived of by the systems ecologist Charles Hall who later developed it more deeply into the discipline called biophysical economics, the best exposition of which can be found  in the book “Energy and the Wealth of Nations” by Hall and co-author Kent Klitgaard.

You can listen to a recent 19 January 2014 podcast by Hall talking about EROI and biophysical economics at Progressive Radio Network at the link below. Don’t get put off by the weird bird noises at the beginning. The podcast starts one minute in and Hall gets on to fossil fuel depletion issues about 25 minutes into the podcast. The first 25 minutes are still interesting as they explain how Hall got involved in biological energy systems when studying migrating salmon.

http://prn.fm/resistance-radio-charles-hall-011914-2/

At the height of the credit crisis, the revolutionary ideas espoused by advocates of biophysical economics chimed with the times and even got an airing in the mainstream media, as, for example, in this article in The New York Times in 2009.

Five years on and this intellectual strand of thought remains marginalised, as Joseph Tainter, one of the movements most high profile supporters predicted back then:

“Of course I’m trying to send a message,” said Joseph Tainter, chairman of Utah State University’s Department of Environment and Society. “I just don’t expect there’s anyone out there to receive it.”

And many who tried to get the message out have given up, the demise of The Oil Drum being, perhaps, the most famous example. Similarly, we got a post from the blogger Question Everything yesterday making a very definitive statement:

What follows is actually something that has been brewing for a while. I started writing this a little over a year ago. A recent e-mail list exchange with some other people who have been blogging, mostly about things like climate change, energy depletion, and the collapse of civilization, reminded me of my own evolution in thinking. Several well-known luminaries in the blog and book-writing world have begun to voice a kind of remorse that their voices have been ignored. Meanwhile the world has careened toward the consequences they have warned us of. And now they are realizing that they have been tilting at windmills. Somewhere along the line I did too…..

…..In any case I plan to no longer concern myself with warning of imminent collapse or a bottleneck. In all likelihood I may, from time to time, simply mention another signpost along the way, like the current draught problems in California as indications that climate change is having its effects much sooner than expected. But I won’t dwell on how it could have been different if only people would have listened to the warnings and taken heed. I won’t complain about those in governments being so incredibly stupid and foolish. I’ve said quite enough about it already. Think of this as a kind of retirement from the role of a Cassandra.

My own position is somewhat less gloomy. Why should we be so surprised that a well-financed climate skeptic lobby would have emerged after Al Gore’s “Inconvenient Truth” and the Intergovernmental Panel on Climate Change  “Fourth Assessment Report” in 2007? Or surprised that, with an oil price spiralling above $100 per barrel, the fossil fuel industrial complex would throw more cash and technology at getting marginal barrels of oil out of the ground?

My optimism rests on the fact that our problems cannot be permanently ignored: the planet will continue to warm and energy prices will continue to rise. In The New York Times article back in 2009, Hall was quoted thus:

“It isn’t that there’s no technology,” Hall said. “The question is, technology is in a race with depletion, and that’s a whole different concept. And we think that we can show empirically that depletion is winning, because the energy return on investment keeps dropping for gas and oil.”

This is basically the core idea behind The Wall Street Journal article I commenced the post with.

So should we all give up? I think my answer is “no”: every idea has its time and biophysical economics is an idea whose time is just arriving. From the heretical to the mainstream in tiny incremental steps. Indeed, in the not too distant future, even The Wall Street Journal will believe in the idea of peak oil and dangerous anthropogenic climate change. You may call me stupid and naive; I prefer to see myself as patient.

Data Watch: US Natural Gas Monthly Production November 2013

The US government agency the Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on January 31st, and covers the period up until end-November 2013.

Data is reported in billion cubic feet (bcf). Key points:

  • November 2013 natural gas dry production: 2,047 bcf, plus 2.4% year-on-year
  • Average monthly production for the 12 months to November 2013: 2,020 bcf, +0.8% over the same period the previous year

Since the end of 2011, production growth has stalled (click chart below for larger image), with the year-on-year 12-month average bumping along a plateau.

US Dry Gas Production Nov 13 jpeg

Natural gas well-head prices exhibit seasonality, with winters generally seeing stronger prices due to heating needs. The recent polar-vortex induced cold snap in the U.S. has pushed prices up to their highest since February 2010 (here, click for larger image).

Natural Gas Spot Prices Jan 14 jpeg

To put the current price of $5.5 per million British thermal uni (Btu) in perspective, a longer term monthly time series going up until end December 2012 is given below (click for larger image). Note that natural gas production is very inelastic over the short term. Accordingly, the market is brought back into equilibrium during periods of strong demand through large jumps in price. However, these don’t generally prompt an investment surge in natural gas infrastructure since they are viewed as temporary in nature. Only if prices remain elevated beyond winter would we likely see a supply-side response.

US Nat Gas Well Head LT jpeg