From Robert Rapier's blog speaking of the Gulf oil spill:
"Who is ultimately responsible for this? BP and Transocean obviously bear the most direct responsibility. But keep in mind that we enable BP because we demand cheap energy. There are very real consequences from our cheap energy demands, and this incident casts a spotlight on one of those consequences. When gas prices spike, the public gets angry and politicians promise their constituents that they will fix the problem. So what is the result? We continue to scour the globe for cheap fossil fuels to satiate the public’s demand to be able to pull up to the pump and pay $2.50 a gallon for gasoline any time they feel like it. So while BP is certainly responsible, so are we all.
I have read of demands that this needs to be a wake-up call that we need cleaner sources of energy. I think we have already had that wake-up call. I think people recognize that we need cleaner sources of energy. If you poll the public, you will find broad support for that. No, the wake-up call needs to be that people connect the dots from their own energy consumption to oil spills in the gulf and explosions in coal mines. When that wake-up call is heeded, perhaps people can begin to understand the consequences of our perpetual demands for cheap energy. Then maybe we can all decide that the “non-negotiable American way of life” is actually negotiable."
TW: I actually support offshore drilling as a least bad alternative, oil prices are going to go up even with such drilling, it is only a matter of how much. But the costs (e.g. negative externalities) of oil and coal and other fossil fuels must be integrated into folks minds when pondering alternatives. And blaming politicians for perpetuating the never-ending chase for cheap oil is hypocritical when we demand it. We are the hypocrites.
Showing posts with label Robert Rapier. Show all posts
Showing posts with label Robert Rapier. Show all posts
Wednesday, May 5, 2010
Wednesday, February 10, 2010
Where Do the Spills Come From?
TW: Interesting numbers from Rapier. Hard to believe but Rapier tends to be pretty level-headed on energy matters (his specialty).
From Robert Rapiers blog:
"...Probably when we think of oil spills, the Exxon Valdez comes to mind very quickly. It's one of the big reasons many of us associate oil usage with pollution. Those images of oil covered birds tend to stick with us.
When I was reading Oil on the Brain...one of the surprising claims the author made was that drivers and boaters spill more oil every year than was spilled in the Exxon Valdez incident. Every year.
The story above breaks some of the relative numbers down. It says that the source of oil spilled in U.S. waters each year has been estimated as follows:
Petroleum exploration and extraction - 1% of the total
Spillage from ships - 3%
Land runoff (e.g., from vehicles, boats, and lawnmowers) - 31%
Natural seepage (e.g., the La Brea Tar Pits) - 61%
Personally, I think those numbers amount to a huge disconnect relative to the view most of us have on oil that ends up in our waterways. Of course that is not to downplay the impact of oil spills. The biggest issue with oil spills is that there is a large volume all at once. If you spill a few drops at the pump, you aren't going to produce birds covered with oil..."
http://i-r-squared.blogspot.com/
From Robert Rapiers blog:
"...Probably when we think of oil spills, the Exxon Valdez comes to mind very quickly. It's one of the big reasons many of us associate oil usage with pollution. Those images of oil covered birds tend to stick with us.
When I was reading Oil on the Brain...one of the surprising claims the author made was that drivers and boaters spill more oil every year than was spilled in the Exxon Valdez incident. Every year.
The story above breaks some of the relative numbers down. It says that the source of oil spilled in U.S. waters each year has been estimated as follows:
Petroleum exploration and extraction - 1% of the total
Spillage from ships - 3%
Land runoff (e.g., from vehicles, boats, and lawnmowers) - 31%
Natural seepage (e.g., the La Brea Tar Pits) - 61%
Personally, I think those numbers amount to a huge disconnect relative to the view most of us have on oil that ends up in our waterways. Of course that is not to downplay the impact of oil spills. The biggest issue with oil spills is that there is a large volume all at once. If you spill a few drops at the pump, you aren't going to produce birds covered with oil..."
http://i-r-squared.blogspot.com/
Wednesday, January 20, 2010
It Is All Relative
From Robert Rapier's blog:
"...Current Energy Prices per Million BTU
Powder River Basin Coal - $0.56
Northern Appalachia Coal - $2.08
Natural gas - $5.67
Ethanol subsidy - $5.92
Petroleum - $13.56
Propane - $13.92
#2 Heating Oil - $15.33
Jet fuel - $16.01
Diesel - $16.21
Gasoline - $18.16
Wood pellets - $18.57
Ethanol - $24.74
Electricity - $34.03..."
http://i-r-squared.blogspot.com/2010/01/costs-of-various-energy-sources.html#links
TW: Wonder why coal remains a crucial energy source despite its extensive negative externalities. Combine the fact that things like jet fuel have no ready substitutes it is no wonder talk of alternative energy sources struggle to gain reliable traction. Things like carbon taxes and cap and trade can mitigate the pricing differentials in order to reflect their negative externalities but that would raise energy prices....ooh, we cannot do that...
"...Current Energy Prices per Million BTU
Powder River Basin Coal - $0.56
Northern Appalachia Coal - $2.08
Natural gas - $5.67
Ethanol subsidy - $5.92
Petroleum - $13.56
Propane - $13.92
#2 Heating Oil - $15.33
Jet fuel - $16.01
Diesel - $16.21
Gasoline - $18.16
Wood pellets - $18.57
Ethanol - $24.74
Electricity - $34.03..."
http://i-r-squared.blogspot.com/2010/01/costs-of-various-energy-sources.html#links
TW: Wonder why coal remains a crucial energy source despite its extensive negative externalities. Combine the fact that things like jet fuel have no ready substitutes it is no wonder talk of alternative energy sources struggle to gain reliable traction. Things like carbon taxes and cap and trade can mitigate the pricing differentials in order to reflect their negative externalities but that would raise energy prices....ooh, we cannot do that...
Monday, December 14, 2009
Industrial Policy In Action
TW: Some folks support industrial policy especially as it relates to new technologies and particularly alternative energy. Some folks support Keynesian stimulus. I support both. For better or worse this is what it looks like in actual practice. Will all or even most of these work, no. But I like the fact that we are priming the pump, just like the Chinese, Germans, French and most other developed or emerging markets. I list only a handful, go to the link for the complete list.
From Robert Rapier's Energy Blog:
"Bluefire Ethanol
DOE Grant: $81,134,686
Non-fed funding: $223,227,314
Fulton, MS: This project will construct a facility that produces ethanol fuel from woody biomass, mill residue, and sorted municipal solid waste. The facility will have the capacity to produce 19 million gallons of ethanol per year.
BioEnergy International
DOE Grant: $50,000,000
Non-fed funding: $89,589,188
Lake Providence, LA: This project will biologically produce succinic acid from sorghum. The process being developed displaces petroleum based feedstocks and uses less energy per ton of succinic acid produced than its petroleum counterpart.
Enerkem
DOE Grant: $50,000,000
Non-fed funding: $90,470,217
Pontotoc, MS: This project will be sited at an existing landfill and use feedstocks such as woody biomass and biomass removed from municipal solid waste to produce ethanol and other green chemicals through gasification and catalytic processes.
INEOS New Planet BioEnergy
DOE Grant: $50,000,000
Non-fed funding: $50,000,000
Vero Beach, FL: This project will produce ethanol and electricity from wood and vegetative residues and construction and demolition materials. The facility will combine biomass gasification and fermentation, and will have the capacity to produce 8 million gallons of ethanol and 2 megawatts of electricity per year by the end of 2011.
Sapphire Energy
DOE Grant: $50,000,000
Non-fed funding: $85,064,206
Columbus, NM: This project will cultivate algae in ponds that will ultimately be converted into green fuels, such as jet fuel and diesel, using the Dynamic Fuels refining process.
Algenol Biofuels
DOE grant: $25,000,000
Other funding: $33,915,478
Freeport, TX: This project will make ethanol directly from carbon dioxide and seawater using algae. The facility will have the capacity to produce 100,000 gallons of fuel grade ethanol per year..."
http://i-r-squared.blogspot.com/2009/12/doe-funding-recipients.html#links
From Robert Rapier's Energy Blog:
"Bluefire Ethanol
DOE Grant: $81,134,686
Non-fed funding: $223,227,314
Fulton, MS: This project will construct a facility that produces ethanol fuel from woody biomass, mill residue, and sorted municipal solid waste. The facility will have the capacity to produce 19 million gallons of ethanol per year.
BioEnergy International
DOE Grant: $50,000,000
Non-fed funding: $89,589,188
Lake Providence, LA: This project will biologically produce succinic acid from sorghum. The process being developed displaces petroleum based feedstocks and uses less energy per ton of succinic acid produced than its petroleum counterpart.
Enerkem
DOE Grant: $50,000,000
Non-fed funding: $90,470,217
Pontotoc, MS: This project will be sited at an existing landfill and use feedstocks such as woody biomass and biomass removed from municipal solid waste to produce ethanol and other green chemicals through gasification and catalytic processes.
INEOS New Planet BioEnergy
DOE Grant: $50,000,000
Non-fed funding: $50,000,000
Vero Beach, FL: This project will produce ethanol and electricity from wood and vegetative residues and construction and demolition materials. The facility will combine biomass gasification and fermentation, and will have the capacity to produce 8 million gallons of ethanol and 2 megawatts of electricity per year by the end of 2011.
Sapphire Energy
DOE Grant: $50,000,000
Non-fed funding: $85,064,206
Columbus, NM: This project will cultivate algae in ponds that will ultimately be converted into green fuels, such as jet fuel and diesel, using the Dynamic Fuels refining process.
Algenol Biofuels
DOE grant: $25,000,000
Other funding: $33,915,478
Freeport, TX: This project will make ethanol directly from carbon dioxide and seawater using algae. The facility will have the capacity to produce 100,000 gallons of fuel grade ethanol per year..."
http://i-r-squared.blogspot.com/2009/12/doe-funding-recipients.html#links
Sunday, September 27, 2009
A Way To Cut Oil Imports
TW: Rapier hits a concept I have always wondered has not been more aggressively pursued- local fleet conversion to alternative fuel sources. Any non-gasoline fuel source faces huge infrastructure build out challenges. It took decades and billions of $ to create the national network of gasoline stations. Any alternative electric, hydrogen, nat gas etc. would require a similar build out. Except for those users like delivery fleets whose energy use is high but localized. For these users the build out becomes a much more manageable proposition.
As you likely know, we have huge nat gas reserves domestically, readily accessible, not offshore or in pristine forests etc. Furthermore, were cities to build out a cng infrastructure the notion of a national network would become more viable as well.
From Robert Rapier's blog:
Quoting Dow Jones-
'Beer distributors are among a growing vanguard of private trucking fleets encouraged by cheap natural gas and new government funding to adopt compressed natural gas, known as CNG, as a cleaner alternative to diesel.'
I [Rapier] think it makes a lot of sense for fleet vehicles to migrate to compressed natural gas (CNG). Natural gas is historically a lot cheaper fuel than liquid fuels such as diesel or gasoline. A quick check of prices today shows natural gas for October delivery at $3.78 per million BTUs (MMBTU). By contrast, gasoline is currently trading at $1.62/gallon (spot market, no taxes included) which works out to be $14 per MMBTU...But more importantly than where prices are today is where prices are going. Natural gas will have a lot of resistance trying to sustainbly break through the $7-$8/MMBTU range because shale gas starts to become economical in that range - and we have a lot of shale gas resources. So if you are planning for the future, the odds are with you over the next few years if you are betting on moderate natural gas prices. Oil prices, on the other hand, are far more uncertain in my opinion.The caveat of course is that the conversion can be quite
Paying for CNG conversions is still a problem. Federal funds are available to cover up to $32,000, or roughly two-thirds, of the additional costs associated with purchasing a CNG truck as opposed to a diesel one.A company that gets the full $32,000 in federal funds should be able to make back its investment in less than three years, according to Natural Gas Vehicles for America.
Lawmakers in Congress are trying to shorten the time it takes to recoup costs on a CNG vehicle. Senate Majority Leader Harry Reid, D-Nev., is among legislators backing a bill, dubbed the NAT GAS Act, that would cover 80% of the incremental cost of a natural gas vehicle and give a $100,000 property tax credit to any company that builds a CNG fueling station.
...fleet conversions are one more way to reduce our dependence on imported petroleum.."
http://i-r-squared.blogspot.com/2009/09/cng-in-your-beer.html
As you likely know, we have huge nat gas reserves domestically, readily accessible, not offshore or in pristine forests etc. Furthermore, were cities to build out a cng infrastructure the notion of a national network would become more viable as well.
From Robert Rapier's blog:
Quoting Dow Jones-
'Beer distributors are among a growing vanguard of private trucking fleets encouraged by cheap natural gas and new government funding to adopt compressed natural gas, known as CNG, as a cleaner alternative to diesel.'
I [Rapier] think it makes a lot of sense for fleet vehicles to migrate to compressed natural gas (CNG). Natural gas is historically a lot cheaper fuel than liquid fuels such as diesel or gasoline. A quick check of prices today shows natural gas for October delivery at $3.78 per million BTUs (MMBTU). By contrast, gasoline is currently trading at $1.62/gallon (spot market, no taxes included) which works out to be $14 per MMBTU...But more importantly than where prices are today is where prices are going. Natural gas will have a lot of resistance trying to sustainbly break through the $7-$8/MMBTU range because shale gas starts to become economical in that range - and we have a lot of shale gas resources. So if you are planning for the future, the odds are with you over the next few years if you are betting on moderate natural gas prices. Oil prices, on the other hand, are far more uncertain in my opinion.The caveat of course is that the conversion can be quite
Paying for CNG conversions is still a problem. Federal funds are available to cover up to $32,000, or roughly two-thirds, of the additional costs associated with purchasing a CNG truck as opposed to a diesel one.A company that gets the full $32,000 in federal funds should be able to make back its investment in less than three years, according to Natural Gas Vehicles for America.
Lawmakers in Congress are trying to shorten the time it takes to recoup costs on a CNG vehicle. Senate Majority Leader Harry Reid, D-Nev., is among legislators backing a bill, dubbed the NAT GAS Act, that would cover 80% of the incremental cost of a natural gas vehicle and give a $100,000 property tax credit to any company that builds a CNG fueling station.
...fleet conversions are one more way to reduce our dependence on imported petroleum.."
http://i-r-squared.blogspot.com/2009/09/cng-in-your-beer.html
Friday, February 13, 2009
Energy Crunch Will Not Just Disappear
TW: We saw energy prices go up nearly parabolically in 2005-2007 and then collapse. The collapse was not due to profound new supplies or alternatives but related to the global contraction which has created historic drops in demand. Most of those supply expansion projects (for fossil fuels and alternative fuels) put into motion during the 0'05-'08 period are coming to an abrupt halt.
This applies to the refining capacity addressed below as well as exploration and production throughout the world. When and if demand resumes its growth, prices should rock and roll up. The free market at work, rather messy I would say, there are things like energy taxes which could smooth things out but that would be socialist...better that we panic into a drill, drill, drill mode later.
From Robert Rapier's blog:
"...the conditions are setting up for a gasoline supply crunch - and the price rise that goes along with that. As I pointed out, refiners are cut back, but they can turn that around pretty quickly. The low utilization numbers could lead to a short-term supply crunch, but as prices recover refiners can bring capacity up quickly.What they can't do quickly is implement new capacity additions. Due to the collapse in oil and gas prices, projects are being delayed, both in upstream oil production and in downstream refining. This is setting up for another run on prices as demand begins to recover.
...This isn't something that will play out short term, but if your strategy for investing is more long term...these project postponements will come home to roost in the next 2-3 years"
http://i-r-squared.blogspot.com/2009/02/impending-gasoline-supply-crunch.html
This applies to the refining capacity addressed below as well as exploration and production throughout the world. When and if demand resumes its growth, prices should rock and roll up. The free market at work, rather messy I would say, there are things like energy taxes which could smooth things out but that would be socialist...better that we panic into a drill, drill, drill mode later.
From Robert Rapier's blog:
"...the conditions are setting up for a gasoline supply crunch - and the price rise that goes along with that. As I pointed out, refiners are cut back, but they can turn that around pretty quickly. The low utilization numbers could lead to a short-term supply crunch, but as prices recover refiners can bring capacity up quickly.What they can't do quickly is implement new capacity additions. Due to the collapse in oil and gas prices, projects are being delayed, both in upstream oil production and in downstream refining. This is setting up for another run on prices as demand begins to recover.
...This isn't something that will play out short term, but if your strategy for investing is more long term...these project postponements will come home to roost in the next 2-3 years"
http://i-r-squared.blogspot.com/2009/02/impending-gasoline-supply-crunch.html
Wednesday, February 11, 2009
Big Oil Buys Big Alternative Energy
TW: Classic behavior for better or worse. The legacy firms of any industry have the existing infrastructure, steady and large cash flows and balance sheets that start-up firms do not. If the start-ups are not able to shatter a business model (e.g. Microsoft, Apple etc.) the legacy will eventually get them. This process has been repeated over and over with the oil and car industries.
From Robert Rapier's blog:
"Some people think that the oil industry is hostile toward the ethanol industry because they consider them a real threat. But I always point out that the oil industry dwarfs the ethanol industry by such a large amount that it could easily buy up all the available assets of the ethanol industry - if they thought there was a good business opportunity. My speculation has turned into reality as an announcement was just released that major oil refiner Valero is buying up the assets of bankrupt ethanol producer VeraSun:
VeraSun Energy to sell assets to Valero Energy
Ethanol producer VeraSun Energy Corp. said Friday it is selling assets to Valero Energy Corp. for $280 million amid difficult industry conditions and tight credit markets. The assets include certain VeraSun production facilities in South Dakota, Iowa, Minnesota, and Indiana. The company will sell all production facilities and operations in separate or combined transactions."Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of Company stakeholders," said Don Endres, VeraSun's chief executive.
For a pure refiner like Valero, this seems to be a decent fit with their business model. They buy oil and turn it into gasoline. Now they will buy corn and turn it into ethanol which will then be blended into gasoline. Their risk of course is that we see a return to the high commodity prices of last summer, which is what put ethanol producers into such dire straits in the first place.I don't expect that this is the last we will see of this. Despite the recent write-downs of assets, the oil industry will continue to generate cash (just not as much). They may be the only viable option for some of these distressed ethanol producers. And I know for a fact that there are companies that are keeping a close eye on some of the other troubled ethanol producers."
From Robert Rapier's blog:
"Some people think that the oil industry is hostile toward the ethanol industry because they consider them a real threat. But I always point out that the oil industry dwarfs the ethanol industry by such a large amount that it could easily buy up all the available assets of the ethanol industry - if they thought there was a good business opportunity. My speculation has turned into reality as an announcement was just released that major oil refiner Valero is buying up the assets of bankrupt ethanol producer VeraSun:
VeraSun Energy to sell assets to Valero Energy
Ethanol producer VeraSun Energy Corp. said Friday it is selling assets to Valero Energy Corp. for $280 million amid difficult industry conditions and tight credit markets. The assets include certain VeraSun production facilities in South Dakota, Iowa, Minnesota, and Indiana. The company will sell all production facilities and operations in separate or combined transactions."Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of Company stakeholders," said Don Endres, VeraSun's chief executive.
For a pure refiner like Valero, this seems to be a decent fit with their business model. They buy oil and turn it into gasoline. Now they will buy corn and turn it into ethanol which will then be blended into gasoline. Their risk of course is that we see a return to the high commodity prices of last summer, which is what put ethanol producers into such dire straits in the first place.I don't expect that this is the last we will see of this. Despite the recent write-downs of assets, the oil industry will continue to generate cash (just not as much). They may be the only viable option for some of these distressed ethanol producers. And I know for a fact that there are companies that are keeping a close eye on some of the other troubled ethanol producers."
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