Oil Company Favors Carbon Tax - No Surprise

Subtitle:  Never Interrupt Your Opponent When He's Making A Mistake

In an earlier article posted on SLB, (see link) I stated that oil companies are indeed in favor of a carbon tax, that is, a tax on carbon dioxide emissions, not because they believe the man-made global warming hype, but because they stand to profit by selling more natural gas.  Natural gas emits far less carbon dioxide when burned in comparison to coal,

BP Energy Outlook 2019,
Fair Use exception to US copyright law

especially in electric power generating plants.   It is pure self-interest that drives oil companies to favor a carbon tax, and if the world has gone crazy in the belief that man-made global warming is real, and dangerous, and ceasing emissions of carbon dioxide is needed, then oil companies seize this as an opportunity.  One wonders just how many coal companies also favor a carbon tax. 

Very recently, yesterday in fact, BP, a major oil company went on record and on camera with a review of energy demand for the near future, out to about year 2040.  A major part of their vision, if you will, was having governments collect a carbon tax.  BP stands to benefit, by selling more natural gas.  BP Energy Outlook 2019 is at this link. 

Some of the major points that BP made in the video are:

1. Favors a carbon tax to replace coal with natural gas
2. Favors subsidies for carbon capture-sequestration, CCS
3. Favors massive energy efficiency investments
4. Favors biofuels for aviation
5. Favors battery-powered transportation, for all but aviation.  This increases electric power generation and sales of natural gas.  

6. Oil will be reduced to non-transportation uses such as petrochemical feed, etc.  (note that these are the more profitable business segments)

The video may be viewed on Twitter at this link.  The interview begins at around 6 minutes 10 seconds into the recording.  

Carbon tax:  BP stated that burning natural gas yields about one-half the carbon dioxide when compared to burning coal in a power plant.  That is rather generous, since the actual comparison is approximately one-third.   My number is based on the gas-powered plant using combined cycle technology, CCGT, with 60 percent efficiency while a coal-fired plant has only 30 percent efficiency.  If the fuels had an equal number of carbon and hydrogen atoms, that would give the one-half figure by BP.  But, coal has more carbon and less hydrogen than natural gas, so the actual comparison is less than one-half, and approximately one-third.   However, natural gas consumption is increasing while coal is decreasing in some areas, without a carbon tax.  UK, for example, has almost zero coal-fired power at this time.  The US has increased natural gas and decreased coal consumption for power generation as pollution laws changed so that coal plants now must invest in pollution abatement equipment.  The plants shut down rather than invest.  Meanwhile, natural gas power plants are booming.  

It is also instructive that Peabody, the major coal company, does not favor a carbon tax.  Instead, Peabody advocates for subsidies for carbon capture technologies, see below.   Also, Peabody's statement on climate change and ways to address it are at this link.

Subsidies for CCS:  BP stated the long-term subsidies for wind and solar power were very effective in making those technologies economic, and wants a similar treatment for CCS technologies.  They refer to it as CCUS, for carbon capture, use, and sequestration.  Presumably, the "use" includes CO2 mineralization such as conversion to sodium bicarbonate for food sales.   At present, there is already a great deal of research into the capture technology, as that is the capital and energy-intensive part.   BP wants more. 

Energy Efficiency Investments:  It is unclear exactly what BP means by this; however we have already seen energy reduction by mandated efficiency for automobiles, the CAFE standards.  Many years ago, the US chemical and refining industries had a mandated energy efficiency improvement that was quite successful.   The problem with energy efficiency in many areas is a diminishing return on the investment.   There are some areas, though, where efficiencies can save more energy; the mandated sale of high-efficiency home appliances is one such area.   It may be a good idea to promote off-peak power consumption for chilled water or ice-and-water storage, then use the stored chilled water the next day for building or home cooling.  This could save fuel when more efficient power plants are running at night, and the least-efficient are running during the peak of the day.  

Biofuels for Aviation:  Bio-jet is similar to bio-diesel in that it handles and burns like jet fuel but is made from renewable feedstocks.   Bio-jet exists and a few test flights have been made. 

Battery-powered Transportation (EVs for cars and trucks):  BP favors these because they increase the demand for electric power.  In BP's vision, the additional electric power will be provided by natural gas, a product which they sell. 

Non-fuel uses for petroleum:  BP discussed single-use plastics, as an environmental problem that should be resolved.  Correctly, BP stated that plastic containers serve a useful purpose and their replacement must be carefully considered else it may be worse. Before plastic (another BP?), containers were typically glass or metal.  Plastic weighs less and therefore less fuel is consumed in the transport of such products in plastic containers.  

Conclusion
BP sees oil demand continuing for many years, perhaps two or three decades as fuel uses diminish, and petrochemicals from oil increase.   Not mentioned were asphalt and lubricating oils.   A reduced demand for oil will extend the life of oil fields, while reducing fuels produced from oil actually increases the profit margins for an integrated oil company. 

All of this has the goal of combating man-made climate change, or so BP says, but one really must wonder how much is simply taking advantage of an opportunity by putting self-interest first and nodding one's head.    Selling more natural gas as power plant fuel, and prolonging the life of oil reserves while making much more profit per barrel, are not bad things to a big oil company.   

If governments are making a mistake in stating that man-made global warming is real and a real danger, (and they are) then BP and other oil companies have figured out ways to make a profit.   That's not a bad thing, actually, since the entire business of mining, transporting, burning, and disposing of the ash from coal has serious and real environmental issues. 

Roger E. Sowell, Esq.

Houston, Texas
copyright (c) 2019 by Roger Sowell - all rights reserved

Topics and general links:

Nuclear Power Plants.......here
Climate Change................here  and here
Fresh Water......................here
Engineering......................here  and here
Free Speech.................... here

Renewable Energy...........here  

Mandatory Bio-fuels Very Bad Idea

The U.S. now has mandatory bio-fuels requirements for gasoline and soon for diesel. This is a very bad idea and the consequences will soon be apparent.

Farmers know that farming and crop production are not reliable - some years produce good crops, other years do not. Even if a growing season is long enough and warm enough (more on that later), a bad year can be caused by (among others), flood, drought, hail, insects, and blight. Then, if none of those occur, untimely rain can cause the fields to be too wet to plant or too wet to harvest when the soil becomes too soft due to the rains. See here and here for current assessments of the farmers' plight.

A late frost can delay planting, and an early frost can ruin the crop before harvesting. Farmers made up for some of these issues by planting amazing seeds that yield many more bushels of product per acre than in the past. Proper use of fertilizers, herbicides, and pesticides also remove some of the risk. Irrigation also helps to ensure the proper amount of water applied at the correct times for optimal yield. Yet, no one can control the rain, or hail, or frost. So, even if a farmer does all the right things at the right time, he can still end up with no crop to sell. And, where corn for ethanol is the crop, there will be no ethanol for blending into gasoline. The same is true of crop-based bio-diesel, such as from soy beans.

This year, 2009 summer, has farmers in the U.S. Midwest anxious about an early frost. The planting season was delayed one to two weeks in many areas this year, due to inclement weather. Or was it a climate change? No matter what label it is given, the fact remains that the crops were not planted as early as usual, therefore they cannot be harvested when they normally would. If the weather predictions are true, that this winter will be severely cold and long, an early frost may occur and eliminate much of the crops this year.

There have already been several days in late August where large portions of the northern states experienced frost. A few more of those in the next two to three weeks and the ethanol for next year may be very difficult to obtain.

On the other hand, oil wells produce around the clock, with no concern for weather or climate. Refineries run 24/7, each day of the year. Natural gas is weather-independent, also, and therefore has yet another reason to be the transportation fuel of choice.

None of this should come as a surprise. At least as far back in time as Joseph of Egypt, and the Pharoah who had a dream about seven lean cows that ate seven fat cows, famines due to crop failures were known. Not much has changed, except the wisdom of the leaders and decision-makers.

The normal manner to handle variation in supply is with storage, or inventory. There is an inventory for ethanol in the U.S., and per the EIA there are approximately 14 million barrels of fuel ethanol in storage at this time. However, that represents merely 17 days of demand, given that U.S. gasoline demand is approximately 8 million barrels per day, and ethanol content is approximately 10 percent. There may be corn storage at corn refineries.

UPDATE 1 (Sept 15, 2009): An early frost prediction for late next week has corn futures rising, and corn farmers worried. "Corn is lagging in maturity with USDA estimating that only 12% of the crop is mature versus the five-year average of 37%" And so, we see the new life we live. Gasoline blended with ethanol made from corn that is not reliable due to shortened growing seasons and early frosts. Who will the government penalize, when there is not enough ethanol to meet the increasing mandates? The farmers? The ethanol refiners? The coal plants' owners for pumping out all that global-warming CO2?

UPDATE 2 (Sept 27, 2009): And the frost is on the way, tonight. Western Nebraska is predicted to have a hard freeze, which will kill crops. See image below.

UPDATE 3 (October 13, 2009) The killing freeze occurred before the crops were mature this year in the farm belt of the U.S., as shown in this article. From the article, "About a quarter of the country's corn will leave the field immature [due to the killing freeze]. As of this past weekend, about 3/4 of the nation's corn crop is fully matured, according to Tuesday's USDA Crop Progress report. That's almost 20% more than a week ago, but still almost 20% below the previous 5-year average.

Corn harvest is at a similar pace: 13% of the corn crop's out of the field, versus the previous 5-year average of 35%." It is a very good thing that there is plenty of oil for manufacturing gasoline, and natural gas for powering CNG vehicles. It is a very bad policy to rely on weather and agriculture for our nation's energy security. This year's harvest is a prime example.