Windmills Make Cheap Natural Gas

The Grand Game has many twists and turns, some are quite fascinating. One key aspect of the Grand Game (supplying the world's energy requirements), is the role played by natural gas. Natural gas does not exist alone, but interacts with other fuels and technologies that are part of the Grand Game.

Recently, as I have written (but so have many others), natural gas has become more abundant than ever, and therefore lower in price. Some politicians are even saying that burning natural gas to produce electric power releases half the CO2 into the atmosphere compared to burning coal. Well, that is just not true. The number is closer to one-third, and in some cases is closer to one-fourth. Any chemical engineer can tell the politicians this. The reasons this is true have to do with the chemical composition of methane (one Carbon atom with four hydrogen atoms attached) versus coal (three Carbon atoms with, on average, two hydrogen atoms attached). Another reason this is true is that a combined cycle gas turbine power plant converts more of the fuel to power than does a coal power plant (57 percent compared to approximately 35 percent). Politicians should really talk to chemical engineers someday, and stop saying embarrassingly wrong things.

Some critics of renewable energy, in particular wind energy, whine and moan that wind power is not reliable, and we must build natural gas fired power plants as full backup for when the wind dies down. That is only partly true, and is disappearing as an issue as large-scale power storage becomes more economic. Yet, and this is to the topic of this article, windmills that generate power decrease the need to burn natural gas, thus decreasing the demand for natural gas, and therefore reducing the price of natural gas. Since natural gas is the preferred fuel for peaking power plants, and many electric power price rate structures have as a key component the highest cost of power (peaking power), the lower the peaking power price, the lower the average power price to the consumer. Wind power is growing very rapidly in the U.S., particularly in Texas and a few other states in the windy Great Plains area.

As always, some ill-informed pundits who blindly back outrageously expensive and toxic nuclear power dream up phantom conspiracies where none exist, such conspiracies involving supplying natural gas world-wide from places where vast deposits exist, via LNG plants and LNG tanker ships, then re-gasification plants at the destination. Some even wonder, in print, how LNG plants can be justified with their billion dollar price tags, if there is no secure market for their product. Ignorance shows in these comments, as LNG supply contracts have, until recently, been locked in for 20 years or longer. A 20 year contract is a very secure market. A spot market for LNG has recently developed. Low prices are a good way to ensure a market exists, which is why a spot market is nothing but good for the world.

None of this is mysterious, nor do conspiracies exist to explain this part of the Grand Game. Oil men have known for many decades where natural gas fields lie, mostly because they found them while drilling for oil. The gas fields were not developed unless a market was fairly close by due to the expense of shipping natural gas across great distances on land via pipeline, or across oceans. At one point in the 1970's the best thinking was to chemically convert natural gas to methanol, which is liquid at normal temperature and pressure, which then could be shipped by tanker across the oceans, reconverted to natural gas at the destination, then injected into existing natural gas pipelines. (as a personal note, that was the senior design project my graduating class was assigned in chemical engineering undergraduate study in 1977). At that time, LNG plants were known but were very expensive. The methanol process was hoped to provide a way to bring the stranded natural gas to market. LNG plants won the day, as history has shown.

LNG plants became economic due to economies of scale, that is, the larger the plant, the lower the operating costs per unit of product. Exxon was one of the first to discover how to make an LNG plant that was much bigger, and built just such a plant in Qatar. Their large-scale design was such a success that Exxon duplicated that design over and over in the same facility. Furthermore, Exxon developed a large-scale LNG tanker ship, again reducing unit costs by economies of scale. No one any longer considers converting natural gas to methanol for large scale transport around the world. There is no need. Exxon and others, through their ongoing efforts by engineers, have brought the previously stranded natural gas to the world's doorstep.

Now that windmills for power are being built by the hundreds around the world, natural gas prices will be lower and lower, as long as the wind blows. That seems like a safe bet.

US Oil Demand Is Falling

In the Grand Game, which I define as meeting the world's energy requirements, oil plays a key role. Oil is not the only source of energy, of course, as natural gas, coal, nuclear power, and renewables of various kinds also play a part. Oil consumption, as measured by the amount of gross inputs into refineries, peaked in the U.S. in summer 2005 at just over 16 million barrels per day. Since then, gross inputs into refineries has steadily declined, to approximately 15 million barrels per day, for a reduction of approximately 6 percent over 4 years. Imported finished petroleum products such as gasoline also peaked around 2006 at approximately 4 million barrels per day, and have fallen to approximately 2.5 million barrels per day recently. These results show that the U.S. oil demand is falling, this has continued for 4 years, and cannot be fully explained by the economic crisis and recession because those began just after Obama was elected President in late 2008. A possible explanation is the increased cost of gasoline and diesel fuel, causing motorists to slow down and thus save some fuel. Another possibility is the gradual impact of hybrid vehicles with their greater fuel economy, along with retirement of older vehicles with very poor fuel economy.

A very interesting article came to my attention, in which Deutsche Bank analysts are quoted as writing that U.S. energy intensity has been declining at an annual rate of 2 percent for several years, and this decline is expected to accelerate to 3 percent. Energy intensity, in this context, means oil consumed per unit of economic output. Energy intensity can be reduced by several means, such as replacing oil with another fuel e.g. natural gas in a flexible-fuel power plant or industrial furnace, converting transportation fleets to an alternate fuel such as natural gas, ethanol, or bio-diesel, mandating improved fuel efficiency for motor vehicles, reducing highway speed limits, and a few others.

In the early 1980's, the U.S. (and many other countries) embarked on a federally-mandated energy conservation program, because OPEC production cuts and misguided regulations caused an apparent shortage of oil worldwide. Hindsight proved that there was no shortage of oil or any other energy source, and in fact, more proven reserves of oil and natural gas exist today than then. The conservation program was quite effective, and reduced industrial energy consumption by approximately 30 percent.

The technologists, or geeks, are beginning to make an impact on the Grand Game. As just one example, GM's Chevrolet Volt car is now to be delivered by the hundreds in late 2010 for sale in California. The Volt is a plug-in hybrid, which under short commuting driving can use zero gasoline and run entirely off of electricity drawn from the grid. While the price tag for a Volt is expected to be rather high (some estimates are around $40,000), this price will likely decrease. Also, other manufacturers will likely beat that price and offer similar performance. The impact on the Grand Game will be huge.

As always, it will be quite interesting to watch OPEC's moves in the next few months. Maintaining their oil revenues is of paramount importance to them, so we may see increased oil flow and reduced oil prices as a move to check the popularity of plug-in hybrid cars. The higher cost for the plug-in hybrid cars only makes sense when gasoline prices are high. Otherwise, the consumer will buy a conventional car without the hybrid and plug-in machinery. However, the U.S. under Obama now has very ambitious fuel efficiency rules in place, such that the average city/highway miles per gallon for new cars sold in 2016 must be 35.5 miles per gallon. This target is a dramatic increase over current standards of approximately 25 miles per gallon. Either way, the U.S. demand for oil is likely to decrease for the next few years.

As I have already written, Peak Oil is a myth and will not occur, but peak demand has very likely already happened. In the U.S., peak demand has certainly already occurred.

The Grand Game - Oil in Disarray

Subtitle: Precision Directional Drilling Causes Oil Price Decrease

It has been a while (four years) since I last wrote on the Grand Game, where renewable energy, nuclear power, oil, coal, and natural gas all compete for shares of the world's energy needs.  Previous articles on the Grand Game may be found here (see link).   This week has seen a flurry of articles on the weakness of OPEC, and the looming oil price collapse.   (see link for one of many such articles)

The reasons for the impending oil price reduction, or collapse as it may turn out, are fundamental economics of supply and demand.  Demand is stable or slightly falling, while world supply is increasing as US domestic oil production due to precision directional drilling and hydraulic fracturing brings more oil to the surface.   On a side note: hydraulic fracturing, or "fracking" as the media terms it, is not the key.  It does little good to fracture an oil-bearing formation if the oil well is vertical and pierces only a small part of the oil-bearing rock.  The key to the recent increased oil production is precision directional drilling, in which the oil well travels horizontally through the oil-bearing rock.   

Meanwhile, new cars are achieving ever-increasing miles-per-gallon ratings.  In the commercial aviation field, more and more ultra-efficient aircraft are flying, including Airbus' A380 and the Boeing 787.   However, the biggest influence is the increased oil production in the US.  

World oil price hit a low point this week, with the benchmark crude reaching $90 per barrel, representing approximately 10 percent decrease from recent prices.   It will be very interesting to see if OPEC members can reach some agreement on reduced production levels in an effort to increase or maintain price.  Or, perhaps the member countries will splinter and engage in a production war, each trying to sell as much as possible while prices plummet. 

On an editorial note, the price of oil has many ramifications.   The primary impact is on the cost of delivered goods since most goods move to their destination by petroleum-powered transport.  The transport usually takes the form of diesel-powered trucks and trains.  Also, ships and barges burn fuel oil.   Consumers who drive cars also enjoy reduced prices at the gasoline pump, leaving more disposable income in their wallets.   Industries do not burn much oil in modern times, and very little electricity is produced from oil so there is not much benefit for them.   

One of the major benefits is the price of natural gas, which in some instances is tied to the price of oil.  For example, Russia recently contracted to supply China with great quantities of natural gas, with the price of the gas being tied to the price of oil.    Since natural gas is used for electric power production, lower oil prices will have some impact on electricity prices. 

Long-term, OPEC has warned that low oil prices will create an oil shortage.  OPEC insists that few, if any, investments will be made into new production unless the price is obtainable to justify the spending.  

OPEC will meet again in November, 2014.   The results of that meeting should be interesting. 

Roger E. Sowell, Esq. 
Marina del Rey, California

copyright (c) 2014 by Roger Sowell -- all rights reserved

The Year In Review 2009

It has been an interesting year, 2009. On several fronts, the legal and technical world made advances and a few retreats. My observations follow.

First, climate change in California, the United States, and the world. In California, several pieces of AB 32, the Global Warming Solutions Act of 2006, were codified. Tire Pressure regulation, Landfill Gas regulation, Cap and Trade, Computer Chip Manufacturing, and others are either now on the books or have the rough draft completed and seeking comments. The California government continues the fiction that AB 32 will create jobs, and already has created jobs, although the plain fact is that unemployment in California is at 12.5 percent and climbing. As I wrote earlier, if green policies created jobs, California should have very low unemployment - yet the reverse is the case.

In the U.S., the House passed a weak version of a global warming bill (Waxman-Markey), and only just barely obtaining sufficient votes. The Senate made a few false starts on a similar bill but postponed it until 2010 and after the disastrous Copenhagen climate summit meeting in December (the meeting is ongoing as I write this, with great acrimony, mistrust, and violence). As more and more evidence accumulates showing the entire foundation for man-made (i.e. CO2-induced) global warming is false, legislators must be fearing for their re-election chances if they vote for such a law.

The Obama EPA finalized their finding that CO2 is a dangerous pollutant. While this move may be but a pawn in a game to goad the US Senate into action to pass a Cap and Trade bill, it will be challenged in court. The EPA must use sound science in its determinations, and that is woefully absent in this case.

Worldwide, the Copenhagen climate summit, mentioned above, is in hopeless disarray. One sticking point is that poor countries view this event as an opportunity to redistribute the wealth of rich nations, which wealth was produced by (oddly enough) burning fossil fuels that produce CO2. The rich nations are refusing to pay what is demanded by the poor nations.

In addition, the Climategate scandal erupted in November, with literally thousands of emails and other documents (including computer code) released into the internet. These documents show that leading scientists manipulated the data to show a warming where there is none, conspired to control the peer-review process, and stifled dissenting views. The excellent work by bloggers at climateaudit, wattsupwiththat, and especially E.M. Smith at chiefio.wordpress.com exposed the wrongdoing. It is more and more clear that there is no global warming, but there was clever selection of thermometers (or digital temperature measurements) to yield a perceived warming. Chiefio's blog entries are must reading.

The climate catastrophe is not cooperating with the warmists' agenda and schedule; in fact, most of the US is much colder than average (see California for December), the 2009 hurricane season is now over and had very few and very weak hurricanes, the prolonged drought in the US Southwest is ending with wave after wave of storms bringing both rain and snow, sea levels are not rising, heat waves are no greater than in the recent past, and many indications point to the lack of sunspots rather than any CO2 emissions.

A noted PhD chemical engineer, Dr. Pierre R. Latour, with PE in both chemical engineering and in process control, wrote and had published in Hydrocarbon Processing magazine two excellent letters to editor that show beyond any doubt that CO2 is not and cannot be the cause of any changes in the earth's average temperature. I expanded on this theme on this blog. Climate scientists may be educated, and may indeed understand a few things about the climate, but they must reconcile their findings and projections with the realities of engineering. The principles of process control are well-known, not new, and are completely inviolable. CO2 fails these principles, and therefore it is a complete waste of time and money to pursue global warming schemes based on reducing CO2.

Second, manufacturing and process plant safety. 2009 was not a good year for process plant safety. Space does not permit a list and discussion of all the plants that exploded or caught fire or had another type of chemical release. Refineries in Utah, Texas, plants in North Carolina, Wisconsin, California, and others all experienced such events. One of the most troubling is the refinery in Utah that had a false sense of security related to process plant piping wall thickness. A contracted inspection company wrongly reported adequate thicknesses, when the pipes were actually very thin. An explosion due to pipe failure resulted, and the entire refinery is now shut down while an investigation is undertaken. Litigation from this event will be ongoing for years.

The number of serious events was so great that the Chemical Safety Board, a federal agency, had too few resources to investigate them all. see www.csb.gov.

Third, The Grand Game where renewables, nuclear, oil, coal, and natural gas all compete for shares of the world's energy. California has a goal, or requirement, that 20 percent of electric power be produced by renewables by December 31, 2010. This is most unlikely to occur based on plant construction. Some plants are planned, but not progressing rapidly.

More about the Grand Game may be found here.

Advances and flops in fuel-efficient cars and trucks were seen in 2009. California obtained their long-sought waiver from the EPA to require very fuel-efficient cars be sold in California, with a requirement for 42 miles per gallon on average by 2016. The US increased the national mileage requirement, to just over 35 miles per gallon by 2016. The automobile companies nearly collapsed in 2009, and the added strain of producing such vehicles certainly is not helping them. Ford Motor Company is currently leading in profitability, but has no cars that meet the California standard. GM apparently is counting heavily on the Chevy Volt, a plug-in hybrid that will use only battery power for short runs. Yet the Volt may be priced so high that only the rich can afford to buy one.

Refineries saw at least five shut down, while construction was completed on a major refinery expansion. Demand for petroleum products is down and will likely continue very low as the Obama administration demonstrates its incompetence in stimulating job growth and economic activity. Blaming the previous administration for all problems is not becoming. Tax cuts are proven to stimulate the economy, but such are rare for Democrat administrations.

Oil was discovered in places where oil is not supposed to exist, deep below the ocean below the salt layer. Natural gas is literally everywhere, from shale gas, coal-bed methane, and LNG plants that came online in 2009. OPEC is understandably nervous that their long-held control of oil markets is disintegrating.

The proposed nuclear power project in South Texas created an uproar over falsified cost figures, with projected costs revised upward again and again. This is exactly what I predicted, because the final cost will be approximately $25 billion - and no one will invest at that cost. Nuclear proponents insist that project costs will decline after a few plants are built, yet the proven experience is that nuclear power plants have no learning curve. With more than 400 plants built and operating world-wide, cost over-runs of 100 percent to 200 percent are the rule and not the exception. Startup dates are years behind the initial baseline schedule. A new project in Finland is a case in point, many billions of Euros over budget, and years behind schedule, with no final date established for startup. By comparison, the recently-completed major refinery expansion had a modest cost over-run of approximately 30 percent due to price of materials increases. The startup date was right on schedule. (see link just above).

Fourth, and personally, I was privileged to make four speeches this year. The importance of the climate change laws in place (e.g. California AB 32) or proposed is not fully appreciated by many people. I spoke to engineering groups in Los Angeles, Walnut Creek (California), Nashville (Tennessee), and Ventura (California) this year, all on the requirements of AB 32. Sound public policy must be based on proven, sound science, and nothing less. Engineers have answers that must be provided as input to the public policy decision-making process, to act as a senior, sober, and sound counter to the alarmist scientists with their apocalyptic scenarios of doom based on falsified data.

Finally, predictions for 2010. More refineries will shut down in the US, with approximately 1 million barrels per day shut down. These will be small and inefficient refineries, causing thousands of workers to lose their jobs. More explosions and fires will occur in refineries and other plants. The climate change bill in the Senate will fizzle, as a grass-roots movement swells and Senators are hit with thousands of requests to vote against the bill. AB 32 will be more and more in the spotlight, with unemployment in California reaching 15 percent. Efforts to repeal AB 32 will escalate, although success is elusive in the heavily Democrat state.

Hybrid cars will increase in sales, although the Chevy Volt will not sell well with a price tag of $40,000.

With a fading El Nino in the Pacific, temperatures will decline substantially in the northern hemisphere, bringing many more people to the awareness that the climate warmists claims are false.

The South Texas nuclear project expansion will collapse due to insufficient investors.

Grand Game Plays On

The Grand Game, the supply and consumption of world-wide energy, had some interesting developments this week. In natural gas, prices in the U.S. dropped below $3 per million Btu, at approximately $2.90. Gas price has been dropping all summer, as more and more shale gas is brought up out of the ground, and more and more LNG is arriving on U.S. shores. Even with a very cold winter, supplies will be more than adequate to keep the cost of heating homes much lower than in previous winters. The price of crude oil, meanwhile, continues at around $70 per barrel, continuing the complete break with natural gas.

Crude oil prices will drop as the northern hemisphere fall and winter begins, with summer vacations over and school in session. OPEC's main move is to reduce supply, hoping to prop up the price of oil. Maintaining production discipline is more and more difficult for OPEC.

Gasoline demand in the U.S. has already begun its drop, at least two weeks earlier than usual. We should also see fewer gas guzzler cars on the road as some hybrid cars are reaching the trade-in point. Those who buy used cars are finally able to purchase a high miles-per-gallon car, thus further depressing gasoline demand.

An interesting development this week was the announcement by Rentech that their trash-to-diesel process is ready to roll. Rentech signed contracts for 1.5 million gallons per year of their synthetic diesel. This is, to be sure, not much in the vast market for diesel fuel in the U.S., but it is a start. Nation-wide, diesel fuel production is approximately 4 million barrels per day, or roughly 165 million gallons per day. Rentech's production is roughly one-three hundredth of one percent of the total diesel consumed.

Refineries in the U.S. continue to struggle to keep production sufficient to cover their operating costs. With present operating rates at just 84 percent, look for operating rates to drop to 82 or 81 percent. Historically, refining operating rates drop roughly 5 percent during the fall and winter months. They peaked at 87.9 this summer. Some refineries will undoubtedly shut down in these conditions. The economy is not turning around, instead, more banks are failing, more mortgages are underwater, unemployment is still high and growing in many key states, especially California, none of which bodes well for gasoline demand.

Energy Supply in Post-Coal America

Subtitle: What Will Replace Coal in 20 Years

(Note, see Update below)
One of the several themes on SLB is energy supply, as at times articles on the Grand Game appear in which various aspects of US national and international energy are discussed.   As time permits, I conduct personal research into those various aspects.  In general, energy supply is categorized as coal, natural gas, petroleum, hydroelectric, nuclear, wind, solar, geothermal, tidal, wave, river and ocean currents, and bio-fuels such as ethanol, bio-gas, and bio-diesel.  There are a few others, too, such as municipal solid waste (MSW), waste fuel as cogeneration feed, waste treatment plant sludge conversion to methane, ocean thermal electric conversion (OTEC), and direct osmosis using fresh river water and the saline gradient into ocean water.  (Update: and algae-to-oil as another bio-fuel.  )

Many of these have several variations, so that the 20 categories listed above easily have 50 or more distinct types.  Each has advantages, disadvantages, environmental impacts, economics, resource and land-use requirements, grid impacts, and other aspects.  As an example of different grid-scale electric generating power plants, a recent study (cited in several SLB articles) by the California Energy Commission in 2009 lists 21 different technologies including baseload, peaking, and intermittent sources. ( see link. ) 

An earlier article on SLB (May, 2014) had the following, with respect to the world running out of coal in the 50 to 60 year time-frame:  (see link to "Coal Exhaustion Looms - Renewable Energy to the Rescue")

". . . coal, that mainstay of electric power generation world-wide, is in shorter supply than I had remembered.  In fact, several reputable sources now state that world reserves of coal will be exhausted in roughly 60 to 70 years - and that is if no increase in current consumption occurs.  Yet, growing economies in several countries are increasing their coal consumption year-over-year.  China and India are on that list.   It is entirely conceivable that coal will run out in less than 50 to 60 years."  

That statement is a bit vague on what reserves of coal are included, it should be improved by stating the "world economic recoverable reserves" of coal will be exhausted in roughly 60 to 70 years.  

However, the US coal domestic supply and demand picture is quite a bit gloomier: the coal will run out in approximately 20 years.  (see link to USGS' 2009 National Coal Resource Assessment Overview) That is, by 2035, every coal-fired power plant in the US will be out of fuel.  With coal-fired power plants providing approximately 40 percent of the US electricity today, see pie-chart at right, and only 20 years in which to identify and build replacement power supplies, perhaps it is no wonder that the current federal administration is pushing coal to the sidelines and assisting renewables.  The USGS shows economical recoverable reserves to be a bit more than 28 billion tons in 2009, and 1.1 billion tons annual production.  Today, six years later, the reserves are at approximately 21 billion tons, and production has declined to just under 1 billion tons per year, leaving 21 divided by 1 for approximately 20 years of coal remaining.  

Replacing the domestic coal-power can be via several alternatives: importing coal from overseas, increasing construction of natural gas-fired plants, building 200 nuclear plants, or increasing renewable production.  Of course, a crash program to reduce electricity use would also play a role, but not a very large role.   Any increased efficiencies would be offset by increased economic growth.   Another possibility is by in-situ coal gasification, gas collection, cleanup, and distribution to power plants. 

Importing Coal

Other countries are also running out of coal and are importing coal to run their power plants.  India, China, Korea, and Japan are a few examples.   Importing coal requires port and rail infrastructure to unload the ships, store the coal on shore, then load the coal into rail cars for delivery to the power plants.  A major concern is security of energy supply with coal ships shuttling over the oceans.  

Build Natural Gas Power Plants

The US has abundant natural gas due to advances in precision directional drilling and hydraulic fracturing in gas-bearing rock formations.  Gas price is low at approximately $4 per million Btu.  Combined cycle gas turbine power plants are very efficient at approximately 60 percent, and use very little water for cooling compared to coal and especially compared to nuclear plants.  CCGT can also be built rapidly and are mature technology with predictable startup dates and finished costs.   CCGT plants also have desirable operating characteristics of load-following or baseload operation.  

Build 200 Nuclear Plants

Another option to replace coal power is to build approximately 200 nuclear power plants using the Pressurized Water Reactor design at 1,000 MW each.  However, with the plants running at less than 100 percent, it is likely that at least 220 nuclear plants would be required.   But, getting 220 nuclear plants through the regulatory approval process, licenses to construct issued, and building the plants so that all start up within the 20 year deadline is essentially impossible.  Recent experience in the US with the Vogtle and Sumner nuclear plant expansions indicates that a new reactor requires 8 to 10 years to construct.  

Finding locations for the plants, and finding adequate cooling water for that many plants would also be essentially impossible.  Nuclear plants consume approximately 4 times as much water per kWh generated compared to a CCGT plant described above  (see link to "Nuclear plants use far more fresh water than other power plants").  

In addition, if the country were to "go nuclear" to replace coal, it is necessary to replace the existing fleet of approximately 100 aging, operating nuclear plants as they will (almost) all be beyond their service lives of 40 to 60 year with the passage of another 20 years time.  Therefore, the build requirement is then 320 new PWR nuclear power plants.  

Finally, the price impact on consumers, whether residential, commercial, or industrial would be catastrophic from building that many nuclear power plants, as described in some detail (see link) in "Preposterous Power Pricing."      Replacing coal power with nuclear power is simply not an option. 

In-Situ Coal Gasification

 A potential option, but one that has not shown any hope of economic practicality, is to convert the residual coal left in the existing mines into a viable form of synthesis-gas that can be brought to the surface and burned in power plants.  The basis for this is that approximately one-half of a coal deposit remains in the ground after all the economically mine-able coal is produced.   That figure varies from mine to mine.  The concept is not new and has been the subject of some research over the decades.    Even if gasification can be accomplished, a substantial hurdle exists to convey the low-Btu synthesis gas via pipeline to the power plants.   New power plants would be required, or substantial modification to existing plants to accommodate the heating characteristics of the synthesis-gas.  

Increase Renewables With Storage

After exhausting the other avenues as impractical or hopelessly expensive (other than building CCGT plants), what is left is the renewable energy systems.  Noting that 15 of the 20 generating technologies listed above are renewable, there is substantial opportunity for competition between technologies.   It is very likely that solar will be deployed where the resource is adequate, and some form of storage will accompany the solar plants.  

Wind, however, will likely be the major player in replacing coal, along with CCGT.  Wind plants require some form of storage to make the energy reliable.  Off-shore wind systems can use the submerged spheres hydroelectric technology.  There is plenty of wind offshore, with the US' Minerals and Mining Service estimating in 2009 that 900 GigaWatts of energy can be economically produced offshore the US coasts.  Half of that is along the Atlantic seaboard.  (900 GWatts is almost 10 times the installed capacity of all the nuclear power plants in the US) 

Conclusion

Unless some way to produce more coal from existing mines is discovered in the very near future, the US is headed to a fundamental change in the way the electric power grids are supplied.   Coal, which has powered much of the country for more than 100 years, is about to run out.  It appears that the current presidential administration is not emphasizing this fact, but has chosen the theme of Climate Change and Man-Made Global Warming due to Carbon Pollution as the vehicle to phase out coal-power and encourage renewable energy systems.  

The most likely outcome will be a combination of natural gas-fired CCGT plants with wind turbines both onshore and offshore, and suitable ocean-based storage, to meet the electricity demands.   It is little wonder, then, that Congress continues to renew the small incentives and subsidies for renewable energy systems.   The time has come for the power in the sunshine, and the wind, to step up and be counted.   

Meanwhile, the age of the nuclear power plant is essentially over.  As described in many Truth About Nuclear Power articles on SLB and in many other places, the nuclear plants are far too expensive, take far too long to build, and have unacceptable risks of radiation releases, meltdowns, and catastrophic health hazards and environmental destruction.

The next 20 years will indeed be interesting to observe.  The Grand Game in the US, as it relates to the electrical power grid, will be a fine subject to watch as all this plays out.  

UPDATE: 1 -  Extending the 20 year deadline:  Some calculations show that we have a bit more than 20 years, perhaps 40 years, if two things occur.  One, no more coal-fired power plants are built and we simply retire aging plants as scheduled over the next 20 years.   Approximately one-half of all the coal-fired plants would normally be retired and shut down in a 20-year period, given a 40 year normal service life.   That, alone, will extend the life-time of the coal reserves as less coal is produced each year.   Two, in addition to not building new plants and retiring aging plants on schedule, a reasonable fraction of the remaining least-efficient plants are shut down and their output replaced as discussed above: CCGT plants and wind with storage. 

That, then, is the key parameter to watch:  No new coal-fired plants to be built in the next 20 years, and aging existing plants are retired on-schedule or a bit earlier.  -- end update 1 )

Roger E. Sowell, Esq.
Marina del Rey, California
copyright (c) 2015 by Roger Sowell, all rights reserved

  

False Ideas from Non-Engineers

Subtitle:  For National Engineers Week - Some Whoppers

Many, many false or wrong statements are made on so many internet sites that it is impossible to keep track.  And not only on the internet, but in journals, magazines, books, radio broadcasts, TV, the list is endless.   This article is a place where I list and briefly discuss some of the whoppers I have encountered.  These are in no particular order.  

There seems to be a serious lack of scientific understanding (valid science, not BS or Bad Science), engineering fundamentals, economic realities, and undesirable consequences in those who write such things.   

It does not seem to matter what the topic is, climate change, nuclear power, fresh water, renewable energy, city congestion, environmental regulations, there seem to be so-called experts that are completely wrong.   This is a serious problem when elected officials and appointed agency heads are called upon to make decisions, sometimes important policy decisions, based on the presentations and testimony that is completely wrong. 

Part of the problem is that many organizations and individuals have agendas and will pick only the facts, or portions of the truth that support their agenda.  In other cases, the wrong statements are the result of not knowing any better.   In other cases, the wrong statements are advanced even though the speaker has been advised that he or she is wrong, but the truth requires the speaker to admit she or he is wrong and that is too much for the speaker to bear.  

1. HSR is good (High Speed Rail)
2. Elevated highways are a good way to ease congestion
3. Vacuum tube HSR is good
4. Mars colony is good
5. Man is overheating Earth by fossil fuel use
6. Nuclear power is cheap
7. Running out of oil
8. Fracking is bad
9. Fracking is new
10. CO2 settles to bottom of atmosphere
11. Can only obtain correct slope of sinusoidal shape by connecting peaks or valleys
12. Grid power is cheapest --  nope, cogeneration
13. Wind power makes zero contribution to a grid 
14. Wind and solar power increases CO2 emissions
15. Australia SA can install profitable nuclear plants
16. Too few oil refineries exist, must build more
17. Fuel cell cars are economic
18. H2 to fuel cell cars is cheap, more efficient than gasoline
19. Electric trucks are economic
20. Steel won't melt (Hollywood star)
21. World is running out of fresh water
22. All-nuclear grid will have cheapest power
23. Nuclear plants cost only $4000 per kW to build
24. H2 from nuclear power plants using 2 cents per kWh
25. Electric airplanes are the future of air transportation
26. Wind turbines in US yield 15 percent return on investment
27. The world is running out of copper (or any other mineral one cares to name)
28. Plutonium 238 is an ideal energy source for Africa (WUWT article Feb 2016)
29. Los Angeles River as a river-walk, like San Antonio in Texas. 
30. Electric cars cost $325 per kWh to recharge their batteries (3-7-2016)  (no, that's not a typo.   The writer actually published that, as if it is a fact)
31. Nuclear plants run at 100 percent capacity factor (oh sheesh, what a lie...)

HSR is good (High Speed Rail)  --  Recognizing that HSR aready exists in some countries, EU, Japan, China, and a debate continues over HSR in the US.  California has approved HSR but is mired in financing and legal troubles.   The reality in California is that time is valuable and HSR simply takes too long to make the trip from Los Angeles in the south to the Bay Area in the north.   The cost to build is too high, the revenue from too few riders will be too low, and the system will be just another sinkhole for public money.    One of the idiotic decisions for California's HSR is the multiple stops in the Los Angeles area, and more stops in the Bay Area.  

Elevated highways are a good way to ease congestion --  this one came from a conversation with another attorney, with an electrical background.  He should have known better.  The idea he supported is double-decker highways in all locations, to provide more lanes for traffic and secondarily to preserve the adjacent land.   The fact is that elevated highways are extremely expensive and are used only in very limited circumstances.   Congestion in traffic systems can be reduced in several ways, including but not limited to carpool lanes, contra-flow lanes, staggered business hours, prohibitions on large trucks during peak commuting times, control of vehicles entering a freeway, light rail passenger transport, among others.  

Vacuum tube HSR is good --  this one was recently proposed by Elon Musk, billionaire businessman, although it has been tossed around for many decades.  The idea is to build a long airtight tube, install train rails inside the tube, evacuate the air from inside the tube, insert a train, and run the train at high speeds.  The absence of air eliminates friction or drag (the technical term) so the train uses less energy for a given speed, or can go much faster for a given energy consumption.   One supposes that proponents of VHSR (vacuum high speed rail) have solutions to the very serious and numerous problems.  First, the cost to build, operate, and maintain.  Second, the consequences of train wrecks at very high speeds, then more dire consequences of train wrecks that cause the air inside the passenger car to escape explosively into the vacuum in the tube.  Picture quick but agonizing death from lack of air.    In some designs the tube is elevated above the ground, in others the tube is placed underground.   Both designs have very high costs and maintenance issues.  

Mars colony is good --  this one has its own article on SLB, citing NASA, MIT, and other information.  see link.  Overwhelming technical problems, other than breathable air and drinkable water, include the native soil is likely poisonous to plant life; radiation at the surface is deadly, plus the radiation penetrates as much as 3 feet into the surface; the atmosphere is too thin to effectively burn up meteors, the long journey from Earth to Mars requires prospective colonists to endure strong, inter-planetary radiation that also can and likely will destroy any plant seeds, tremendous dust clouds that obscure the sun for weeks or months on end, and the abrasive effect of dust storms on solar photo-voltaic systems, the adverse impact on mechanical systems and especially their lubricants from fine dust found on Mars, the lack of spare parts, and a small colony has a small gene pool therefore children will quickly become inbred.   

Man is overheating Earth by fossil fuel use --  this one has numerous articles on SLB already.  The most effective evidence for no man-made warming is the data from NOAA's US Climate Reference Network (USCRN) that is located only in pristine areas across the US.  see link  to "US In A Cooling Trend - Winters Much Colder."  This USCRN data is uncontaminated by urban heat islands and other artificial influences that corrupt the longer-lived databases on which the false-alarmism is based.  In a period during which false-alarmists insist the Earth is overheating, the past decade, the USCRN data shows a pronounced cooling trend.  In addition, satellite and atmospheric balloon data shows no alarming trend upward, indeed, there is barely any upward trend at all.   Also see link to "Warmists are Wrong; Cooling is Coming," my well-received speech from April 2012 on the false-alarmism of man-made global warming.  (Note, this article Warmists are Wrong... is the most-read article on all of SLB at this time)  also see link  and see link  to other highly-viewed articles on SLB on the same subject. 

Nuclear power is cheap  --  this one has been refuted numerous times on SLB, as part of the 30-article series Truth About Nuclear Power.  see link and see link for just two of the many articles:  "Preposterous Power Pricing if Nuclear Proponents Prevail"  and "Nuclear Power Plants Cost Far Too Much to Construct"  With operating and maintenance costs of 3 or 4 cents per kWh, and capital asset payments another 25 cents per kWh due to the high costs of construction, inflation on construction materials and labor, plus interest on construction loans that accumulates for a decade or more.  Several authoritative sources conclude that nuclear power plants must charge 25 to 35 cents per kWh to justify building the plant: California Energy Commission, Massachusetts Institute of Technology, and C. Severance.    In fact, even older, paid-for nuclear plants are closing because they just cannot sell power profitably in the US, see e.g. link to "Nuclear Power Plants Cannot Compete"  The situation is so bad that local legislative bodies whine about loss of jobs and cry for new legislation for yet more subsidies to keep the doomed reactors running.   The state of Illinois is but one of those, see link above to "Nuclear Power Plants Cannot Compete."

Running out of oil -- this one was very common a few years ago, but recently has dropped off in frequency as the national and world news is replete with stories of falling oil prices due to a production glut.  So-called experts are trotted out and give their opinions on what will happen next.  Oil scarcity was the subject of a speech I made in 2012 (see link to "Peak Oil and US Energy Policy") as one of three panelists at Tulane Law School in New Orleans.  I was the only panelist to take the position that there is plenty of oil.  The other two speakers apparently had not seen the data that I presented.   So, how could the best experts conclude that the world is running out of oil back in the 1970s, yet be so very wrong that today there is a huge surplus of oil?   The answer lies in part of what I refer to on SLB and my speeches as The Grand Game, the various forces and parties that provide energy to the world.  Oil, coal, hydropower, natural gas, renewable energy such as wind or solar, even nuclear energy in its various forms are subjects of Grand Game articles.   For oil, the Peak Oil proponents missed the very important fact that petroleum engineering is not a static field, but has major advancements routinely.  Oil deposits lie not only onshore but also offshore, some in shallow water and some in very deep water.   Also, oil exists in various forms of rock.  Recent advancements in precision directional drilling (PDD) allow much more oil to flow from known oil fields.   Also, PDD allows oil to be produced economically from shale formations.   As an aside, PDD also was crucial in stopping a gas leak in Los Angeles in early 2016. see link.   The crucial point for not running out of oil is that many oil deposits exist at various locations and depths, so that even if one oil field is depleted, there are a vast number more to drill.   Pessimists insist that eventually the world will run out of new fields in which to drill, even using PDD.   If that were to happen, some centuries in the future, advances in chemistry and engineering will very likely allow algae-to-oil or waste-to-oil to economically provide any oil required. 

More updates to the list of false ideas will be added as time permits. 

Roger E. Sowell, Esq. 

Marina del Rey, California

Copyright © 2016 by Roger Sowell, all rights reserved

More Musings on the Grand Game

This post is a little different from what I usually write. Different, in that this touches a bit on politics. I have read many things from many places over the years, as have we all, I suspect. Sometimes things fall into place, and a pattern emerges, then a clear conclusion. This is one of those times, for me.

The core issue is "going green," and whether that is a good thing. As some of you will note, having read my other blog EnergyGuysMusings, I am all for renewable energy (a form of green energy), but only when that renewable energy can be made as cost-effective, and as reliable, as that provided by natural gas. So far, nothing comes even close.

Let us dial back the clock about a decade or so, and remember the world situation from this perspective: is the world about to run out of oil? Is peak oil real, and if it is real, is it about to happen soon? In the 1990s, the United Nations passed some sanctions on the rogue nation of Iraq, one of which led to curtailing the oil flow from Iraq. A little oil was allowed, but only enough to buy humanitarian needs such as food and medical supplies. In a world with a growing appetite for oil, and economies growing, especially emerging economies of India and China, taking Iraqi oil off the world market meant other exporting countries increased production. So they did, and Saudi Arabia opened up the spigot, so to speak.

It became very clear, very soon, though, that without Iraqi oil, demand would equal supply, and the price of oil would rise. And it did. The higher oil prices gave a boost to renewable technologies, especially hybrid cars with their much lower fuel consumed per mile. We heard and read much about wind-power and solar power, with idiots stating (in public, over the airwaves) that renewable energy equates to importing less oil. That, of course, would only be true if we did one, or both, of two things: 1) burn oil to make electricity, and 2) drive electric cars that are recharged from electricity. As it turns out, we do neither in the U.S. First, a quick look at the Energy Information Administration (EIA) website shows just how little of our electricity is produced from burning oil: almost zero. It is an emergency fuel, not the mainstay. Second, electric cars are a very, very small fraction of the total cars on the road. Such cars are being developed by various manufacturers, with a very few available for sale. Hence, it requires an idiot to state that renewable energy equates to importing less oil. It does not.

As I have written, because this IS true, when vehicles burn natural gas instead of petroleum, THEN renewable energy will help reduce imported oil. But the U.S.A., in its vast wisdom handed down from the various federal and state legislatures, does not view natural gas as a true alternative to petroleum fuels. To illustrate this, just try to convert an engine from gasoline to natural gas in California.

Fast-forward a few years, and thanks to a multi-national coalition, now the Iraqi government is different, without a dictator, but with a representative democracy. Western oil companies now work in Iraq to bring the oil fields back into production, and very soon the oil will flow again into the world market. That oil will flow in sufficient volumes to cause great concern in OPEC, as the price of oil will drop if the supply exceeds the demand by very much. To maintain a supply and demand balance, and thus prop up the oil price, some existing oil producing nations must reduce their production by the amount of the new Iraqi oil flow. This will not be an easy task, nor will it be done willingly. It could very well be the case that the oil price will drop yet again to the $20 per barrel level. Or, it could be that the emerging economies of India and China will take up all the oil the Iraqis can supply, and the price of oil will remain in the $70 to $80 range.

Which brings me to the green aspect. There are at least three groups of geeks at work, by which I refer to engineers and technicians who find ways to advance their particular product. One group is those who work in the oil and gas industry, finding oil and gas, producing oil and gas, refining the oil, liquefying and shipping the natural gas, and making these products available as needed and at very low prices. A second group of geeks works in the automotive industry, making cars that use less gasoline and trucks that use less diesel fuel. The third group of geeks works in the renewable energy field, finding ways to provide electric power from wind, solar, waves, geothermal, bio-mass, and in the bio-fuels field making ethanol and bio-diesel. By the way, when I use the word "geeks" it is not a disparaging term. As an engineer, I am a geek. I have great admiration for what geeks can do, and have done.

Then, which group of geeks is winning? Right now, the automotive geeks are doing pretty well, with cars that achieve miles per gallon in the low to mid 30's. Some hybrids do even better, with mpg in the high 40s and low 50s. Plug-in hybrids are expected to do much better, as the vehicles use only electricity until the battery is depleted and the gasoline engine is started up. However, the renewable energy geeks are also doing pretty well, with large windmills having economies of scale to provide electric power. Solar cells are also doing much better, with greater efficiencies than ever. Yet, there remain huge problems with electricity storage, the true weakness of wind and solar power systems. It appears to me that the oil and gas geeks are the true winners, as shale gas is being developed all around the world. Oil is now found in places where oil is not supposed to exist, deep beneath the salt layer and in very deep offshore waters. The situation is interesting, as governments intervene to assist the automotive and renewable geeks, but hinder the oil and gas geeks. Assistance comes in the form of mpg mandates (35 mpg in the US, with 42 mpg in California), plus minimum renewable energy quotas in many states (see, e.g. AB 32 in California that mandates 20 percent renewables by 2010, then 33 percent by 2020), plus government subsidies for renewable energy projects. Those are huge assists to the automotive and renewable geeks.

Meanwhile, the oil and gas geeks are hindered by governments. Many oil fields are not available to market-based oil companies to drill and produce them, as state-run oil companies own and control those fields, or they are off-limits by government decree (see Alaska North Slope, and offshore California, offshore the U.S. East Coast, and parts of the Gulf of Mexico). Also, the U.S. government is threatening to remove tax incentives for oil companies, which have long existed and have not given oil companies a huge return on investment. Indeed, if their tax status is changed, oil companies will slip further down the list of profitable industries (see profitability of cosmetics companies (40 % return on equity), and liquor companies for high-profitability (29 % return on equity), much more than the oil industry (20 % return on equity). Yet nobody complains about the exorbitant profits of cosmetics companies). Capital will not flow into oil and gas companies, and we will see a shortage of oil and gas. But, not because of Peak Oil or running out of oil, but simply because of government-imposed dis-incentives to produce oil and gas.

And then there is the legal side of the green energy. As I wrote elsewhere on SLB, there are legal challenges to several laws, both at the federal and state level. The Low Carbon Fuel Standard (California state law that mandates ethanol in gasoline, among other things) is the subject of a lawsuit in US District Court in Fresno, California. The US EPA has been challenged by more than a dozen lawsuits, each seeking to have the Determination that CO2 is a hazardous and dangerous pollutant reconsidered based on the Bad Science (BS) that was used in the Determination. There are also the traditional legal challenges to the environmental impact of renewable energy projects, and the long transmission lines that are required to bring the power to the consumers.

The question resolves to a political one. The choice is this: is it better to penalize oil and natural gas by restricting production, increasing the oil and gas price as a consequence, thus giving incentives to renewable energy? The higher price of energy hinders economic growth, and hurts consumers by taking more of their hard-earned paychecks. Or, is it better to topple a brutal dictator of an oil-rich nation, whose policies resulted in economic sanctions such that very little oil was produced? The new regime allows the oil to flow again into the world market, bringing down the price of energy world-wide, and encouraging economic growth and prosperity for billions of people world-wide.

The question remains, even though the Iraqi situation has been resolved, at least for now. Their neighboring country, Iran, is now likely to have oil-export sanctions applied by the United Nations due to Iran's increasingly belligerent attitude and nuclear arms prospects. Perhaps the Iranian government does not see this clearly, but removal of Iranian oil from the world market will only accelerate the automotive and renewable energy geeks as the price of oil increases.

It is inevitable that the technology for cars and renewable energy will be discovered and developed. The only question is one of economics: will the oil price be so high that the higher-priced cars and higher-priced electricity are justified in the eyes of the consumer? Or, will the oil price drop so that only government mandates force the expensive cars and high-priced electricity on the consumer?

And thus ends this installment of musings on the Grand Game, the battle for energy markets around the world.

Roger E. Sowell, Esq.

Marina del Rey, California

Grid Scale Energy Storage Flywheel

There was a major breakthrough announced this week in grid-scale energy storage. From the news release dated July 13, 2009, "Power Tree Corp. said they have started building a 30 GW energy storage device designed to help implement the smart grid." That is 30,000 MW or roughly the output of 30 nuclear reactors at 1,000 MW each. The amount of power stored per the announcement is somewhat questionable, as it should likely read 30 GW-hrs. If this is a bona fide project, the Grand Game has changed. Wind power can then be stored as much as needed for as long as needed. Same with solar and wave. Nuclear power may be done for; all this depends on the cost of the storage flywheel and how well it actually works.

As I wrote earlier, "The promises that were made in the 1950's by the nuclear power engineers regarding abundant power, that is too cheap to meter, will finally be realized. However, it will not be nuclear power providing that cheap energy, it will be a mix of renewable energy sources coupled to reliable energy storage systems. No matter how cheap uranium is, nor how efficient it is at producing electrical power, nothing is cheaper than free. Wind is free. Sunshine is free. Ocean currents are free. Rain is free. Those are worthy goals for renewable energy, and CO2 has nothing to do with any of it. The engineers are close, and getting closer."

It is quite tempting to state that the day has come, but it is better to wait and see if this super-storage device actually works, and at what price to build and operate.

20000 Hits and Counting

It seems like only last week I wrote that SLB passed the 10,000 hits mark, and here it is at 20,000 hits. A big Thank You to all those who take time to have a look, and leave a comment. Actually, 10,000 hits was 4 months ago in October of 2009.

Since then, quite a number of events have happened that are of great interest to me. The US EPA has been challenged in the courts (US Court of Appeals for the D.C. Circuit) concerning its Determination that CO2 is a dangerous pollutant. Several lawsuits were filed, some by individual states including Texas. The primary charge is that US EPA did not follow the law and use the best science available, but instead followed the IPCC's flawed conclusions, many of which are based on opinion magazines.

California was also sued in the US District Court in Fresno, California, seeking to declare their Low Carbon Fuel Standard un-constitutional and a prohibitory injunction preventing its implementation. Similarly, a bill in the California Assembly was defeated in committee, which would have stopped implementation of the entire AB 32 until unemployment drops to healthy levels of 5.5 percent. But, a ballot initiative to accomplish the same thing is underway. Also of importance to California's AB 32, the State of Arizona withdrew from a key multi-state pact (Western Climate Initiative), declaring that Arizona will not enforce the cap-and-trade provisions because of the adverse economic effect it will impose on Arizona businesses. This is a key event in the idiocy of AB 32, as businesses that can relocate away from California now find a very attractive and nearby location in Arizona.

The Copenhagen climate summit was a bust, which is a very good thing. No treaty, no agreement, and no disaster for the world. Thank you, China and India, for having the good sense to not hamstring your economies.

Perhaps the biggest news is the ongoing, and ever-deepening, scandal of Climate Gate, the revelation that key scientists in the global warming field falsified, altered, manipulated data, used non-peer-reviewed reports in their findings, and indeed perverted the peer-review process to stifle dissenting views. Meanwhile, global warming appears to have run away and is hiding in shame, as it is very cold and snow is at record levels in the Northern Hemisphere. Yet, CO2 continues to increase. Perhaps CO2 does not read the IPCC reports? It seems pretty clear, now, why climate scientists do not publish their raw data nor their data manipulation methodologies. Independent reviews revealed that there is no warming, but there was massive manipulation of the data to show a warming.

My own research into the published Hadley research center's HADCRU data (see this link) shows not only essentially zero warming for the entire USA, but several cities with pronounced temperature declines recently. If these declining temperatures do not reverse soon, it will be very, very cold in Eureka, California; Los Angeles, California; Washington, D.C.; and Marquette, Michigan.

The Grand Game, energy supplies for the world, has made some interesting turns as the US refining industry is reeling from lack of demand for their products. The Saudis announced they anticipate Peak Oil Demand to occur within the next decade. Peak Oil Demand already occurred in the USA, in 2005. I posted on this.

Also, new nuclear power plants in the USA continue to have serious problems with financing and regulatory approval. South Texas Nuclear Project's expansion is on the ropes as the parties involved battled it out in court. Also, the Japanese reactor vendor for STNP cannot seem to reveal the final price, which has escalated to $17 billion - but will likely be far, far more. This is quite puzzling, since the nuclear proponents' mantra has always been that these plants are mature technology in Japan, with great certainty on construction costs and elapsed time to completion. Apparently not.

Meanwhile, the US government issued a loan guarantee to Georgia's Southern Company for two new nuclear reactors - but notably, not to South Texas Nuclear Project expansion. The loan guarantee amount, $8.3 billion, is far too small to provide much comfort for lenders, so that project, too, is dead. A project of that size will cost approximately $25 billion or more, thus the loan guarantees represent only approximately one-third the investment. Typically, utilities borrow around half the total amount. That leaves several billion dollars without guarantees.

I tried something new a few days ago, with the first guest post on SLB. My cousin Charley Sowell has some interesting things to say about global warming, from the perspective of a Texas rancher near San Angelo, Texas. Charley is highly educated and knows his stuff.

It has been a fascinating four months, with SLB now at 20,000 hits and visitors from 97 countries, an increase from 76 countries in October.

Thank you, everyone. I cannot imagine what events will occur between now and 30,000 hits. Hopefully, the world will regain some much-needed sanity and stop the nonsense about global warming from carbon, the US federal laws on cap and trade will die and go away, and the chemical engineers' message that science must obey the fundamentals of process control will gain a wider audience.

Roger E. Sowell, Esq.

Marina del Rey, California

OPEC In Disarray in 2015

Subtitle: A Big Move In The Grand Game

Organization of Oil Exporting Countries, OPEC, met this week and essentially left member states' production levels to their own discretion.  Many articles in the media covered this.  

This is as I predicted in 2011, almost 5 years ago in my speech to Tulane Law School at their Energy Conference  (see link).   Competition from shale oil producers, and political instability in the Middle East have each contributed to the disarray in OPEC.   In my speech, I predicted oil price would drop to $20 or even $10 per barrel. 

The fallout from this will be good in some sectors, and grim in others.   The good news is for auto makers, and consumers who purchase gasoline and diesel, also industrial diesel customers, and airlines that purchase jet fuel.   Gasoline at under $1 per gallon will be a boon to the consumer.  

However, those industries that depend on oil for success will suffer.  Texas, for example, had a regional recession when a significant price decline occurred almost 30 years ago in the late 1980s.   Real estate prices dropped, many businesses closed, and people moved away from the state seeking better fortune elsewhere.   

The key question is who can sustain their output with low oil prices, will it be US shale oil producers, OPEC members, or non-OPEC producers such as Russia?   In previous meetings of OPEC, production was held constant on the belief that China would continue to grow economically and purchase crude oil.  However, China's growth has slowed and not continued on its rapid double-digit growth rate.  The anticipated demand for the oil is not there.  

This has to be frustrating for the Obama administration, who recited early in their administration that the price of gasoline must increase to approximately $9 or $10 per gallon.   Instead, declining demand due to cars that achieve better fuel economy, and world events have sent prices downward.  

Roger E. Sowell, Esq.
Marina del Rey, California
copyright (c) 2015 by Roger Sowell, all rights reserved

Thoughts at 30,000 Hits

Again, I am amazed that SLB has today hit another milestone, 30,000 pageviews. The pace of hits has slowed a bit, as 8 months elapsed since 20,000 hits in February. That is most likely due to fewer posts. The old adage is true: post or perish. The number of countries has also increased, now up to 115.

It has been an interesting 8 months. As I wrote at 20,000 hits, I hoped the world will regain some much-needed sanity and stop the nonsense about global warming from carbon, the US federal laws on cap and trade will die and go away, and the chemical engineers' message that science must obey the fundamentals of process control will gain a wider audience. The nonsense continues but the battle is not over. Noted physicist Hal Lewis, professor emeritus at University of California at Santa Barbara, declared that CO2-induced global warming is a scam, when he wrote his letter resigning from the American Physical Society. Yet, the few official investigations of wrong-doing by climate scientists have concluded nothing was amiss - yet many feel the investigations were not sincere, nor properly conducted, and failed to ask the right questions. Of course there is no wrong-doing if no one asks the right questions.

We still have no federal law on cap and trade, and the upcoming elections in November will likely see a rout of the Democrats in Congress such that a law in that area will not be coming. However, the Democrat-majority Congress could pass some sort of bill before the new Congress is seated in January. The California ballot in November will have Proposition 23, which if it passes will suspend the state's wrongly-guided climate change law, AB 32.

The fundamentals of process control still do not have a wide appreciation among the climate scientists, but that will likely change as the climate world-wide continues to cool. Just in the past few months the sea surface temperatures (SST) have declined dramatically. Hurricanes world-wide (or tropical cyclones to use the proper terminology) are also at a historic low. Heat waves are not happening, and the polar ice is not melting at either pole. In fact, the Arctic ice growth is at a record pace since hitting the minimum in September. This is based on the satellite record, which is only a few years. Sea levels are not rising as predicted by the alarmists. In short, there is no cause for alarm. On the other hand, there is good reason to prepare for very cold winters. There was almost zero warmth this summer along the California coast where I live near Los Angeles, in fact I had no reason to turn on the air conditioner. Instead, I was tempted to turn on the heater quite a few times. I did not, though, and simply put on sweatpants and a sweater.

To switch subjects, I had the pleasure of giving more speeches since February, one to the North County Economic Development Council of San Diego, California, in which AB 32 was the topic. One speaker took the pro-AB 32 position, and I took the anti-AB 32 position. The vote by the committee following the speeches and question/answer session was strongly anti-AB 32. I also spoke in Anaheim, California, to the Orange County Chapter of the Construction Specification Institute, also in a pro and con format related to AB 32. The pro-AB 32 speaker was Dr. Elaine Chang of South Coast Air Quality Management District, the local air pollution control district for the area including and surrounding Los Angeles. My message was clear: AB 32 will spell the end of California's economy.

I have another speech upcoming, this time to the Southern California Chapter of the American Institute of Chemical Engineers (AIChE) at the monthly dinner meeting October 19th in Long Beach, California. With the economy in such bad shape, and employment prospects for so many people so dismal - including chemical engineers - the engineering society leadership asked me to speak about my engineering career, and how I weathered the several ups and downs since 1975. I am very much looking forward to that evening! In that speech, I will trace my career from 1975 as an engineering trainee, through plant process engineer, to owning and running my own consulting company providing chemical engineering services to a world-wide clientele. I will also describe the various events that shaped the decisions I made to change companies and change industries, and what led me to attend law school at the age of 47.

On yet another subject, the Grand Game, the quest for energy to supply the world, not much has changed. OPEC and oil still rule, and nuclear power in the USA is still on hold. As I wrote on SLB, the Saudis are no dummies, and they will never allow the price of oil to escalate so that renewable energy plants can be competitive without government subsidies. There is a reason oil is priced at $75 per barrel, and not $750. That reason is that alternatives do become preferable to OPEC oil at the $80 to $90 range. The General Motors car, the Chevrolet Volt, was announced and will likely be a quick loser as it is priced far too high to ever be competitive. Adding to GM's woes, electric power prices in California are escalating, most likely due to more and more renewable power plants such as solar. Natural gas continues at a very low price and over-supply. With oil cheap, gasoline is cheap therefore expensive hybrid cars and electric cars have little to recommend them. With natural gas cheap, wind-turbines and solar power plants also have little to recommend them.

A notable event occurred late this summer in Los Angeles, when the city's Department of Water and Power concluded their long-awaited study on the cost to replace cheap coal-based power with expensive renewable power based on wind-turbines and solar power plants. The DWP concluded that base rates must increase 25 percent. This is bad news for the AB 32 supporters because the Air Resources Board assures everyone that renewable power will only increase costs 13 percent. A 25 percent increase will hurt the poor and those on fixed incomes, forcing many to make hard choices between food, rent, medical care, and paying for the electric bill.

On the legal front, Texas has filed yet another action against the US EPA, challenging the EPA's threat to force Texas to consider CO2 a pollutant in issuing its air quality permits. Apparently, the US EPA is about to learn a lesson. The state of Texas has plenty of resources to battle this to the finish, and certainly has the will to do so.

The next few months will be interesting, indeed, as the Northern Hemisphere goes through the winter. It will likely be one of the coldest and longest winters in recorded history. The national elections for Congress and Senate will give some indication of the direction the nation will take. The California election will give some idea of the direction this state will take, as a new Governor will be elected, also Proposition 23 will be decided. Lawsuits don't progress that fast, but eventually we will know if Texas is correct, or the US EPA can just ignore the law clearly written in the Clean Air Act.

Once again, thank you to all who visit and read SLB.

Roger E. Sowell, Esq.

Marina del Rey, California