Oil Is Still the Key to U.S. Economic Future 47 comments
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Recently there has been a plethora of articles in the financial press, including SeekingAlpha, intimating the weakness of large integrated oil companies based on the last couple quarterly earnings reports. Most of the authors of such articles have a very short memory and obviously need a reality check. I'm happy to oblige.
Naturally companies like ExxonMobil (XOM), British Petroleum (BP), ConocoPhilips (COP), and Chevron (CVX) reported lower earnings. After all, oil had dropped from $145/barrel to around $40/barrel and the price of natural gas has plummeted. Did anyone not expect earnings to be significantly lower? However, the question is not what earnings are today, but what will the oil company earnings be in future quarters next year and the year after?
Let's take a look at the history of world oil prices.
Obviously the price of a barrel of oil has been cut in half from the high of $145/barrel reached in 2009. After dipping below $40, oil is now trading over $70/barrel. People are talking about how cheap oil is only because they are looking at the 50% drop from the highs. However, they forget that a mere 5 years ago, oil was trading in the $30's and many economists were predicting the US economy would not survive $50/barrel oil. Now, here we are today with oil at $70/barrel and psychologically folks are thinking it's cheap. Whew - gasoline is only $2.50/gallon rather than $4.50! Well, oil is up over 100% the last 5 years. Meanwhile the US is going bankrupt enacting financial policies in a wrong-headed attempt to deal with a commodity based problem (oil).
Since oil has more than doubled over the last 5 years, and at one point was up nearly 500% ($30->$150), is it any surprise that the S&P500 is flat over the last decade? That index is actually negative when one takes into account dollar depreciation and inflation. At the same time, energy company investments are up over 10% annually during this S&P500 "lost decade". Imagine the performance of the S&P500 with the energy stocks removed from the index. It would be horrendous.
Was it any surprise to see the American automanufacturers struggle after oil went to $145/barrel considering they only make cars that run on gasoline? It's amazing that Americans and American policymakers are already forgetting $145/barrel and the role it played in the economic, fiscal, and US equity market debacle of the past year and from which we are still suffering.
The financial press is likewise being fooled and acting like energy companies are losing money. Yes their earnings are down, but they are still making money. Their net incomes are *positive*. Unlike the banks and insurance companies, the oil companies made money without any assistance from the US taxpayer. The latest quarterly earnings were positive despite oil dipping below $40/barrel and very low natural gas prices. Now oil is at $70/barrel and so earnings will therefore be trending higher from here.
Unlike US natural gas prices, oil prices are not down due to some new huge source of supply coming online. Oil prices are down simply because of demand destruction due to the worldwide financial crisis. Once worldwide government economic stimulus policies take hold and reflate the world economy, oil demand will come roaring back. Meanwhile, most energy companies have cut exploration and production budgets. Does anyone really believe oil prices will stay "low" much longer? Apparently some of these financial journalists do. I certainly do not.
US Energy Policy
Despite all the rhetoric from President Obama, US energy policy is still non-existent and what does exist is abysmal. Certainly we have some solar and wind initiatives, but they generate electricity - not gasoline, and America is hooked on gasoline as foreign oil fuels our transportation sector. "Cash-for-clunkers" is being touted as a great success, and I suppose from a short-term economic perspective the program has stimulated car and truck sales, which is a good thing. However, the cars and trucks being sold still run on gasoline. If one judges American energy policy by how much it reduces foreign oil imports, I give Obama's energy policies a D-. The US is still dependent on foreign oil imports for 60-70% of its consumption and there are no policies in place to significantly loosen the rope that continues to tighten around are necks.
Meanwhile, the US's best competitive advantage in the worldwide economy (it's abundant, clean and cheap natural gas supply combined with its 2.1 million mile natural gas pipeline grid) is being underutilitzed and ignored by US policymakers. US natural gas production is so high there is little spare capacity left to store additional reserves ahead of the winter heating season. Folks in states wise enough to support natural gas transportation are paying substantially less on a gallon equivalent basis than the nationwide $2.50/gallon gasoline price: in Oklahoma, the price of natural gas is $1.11 GGE; in Utah it's $0.96 GGE. Despite the fact that US produced natural gas prices are less than half of foreign imported oil derived gasoline, the US Congress and American people still don't seem to "get-it" that US produced natural gas is the solution to the economic, environmental, and national security problems facing our country. How can a country that is home to colleges and engineering schools like MIT, Stanford, CalTech, Georgia Tech, University of Illinois and Berkeley miss such an obvious policy? Answer: oil and coal lobbying money and a Congress that is bought and paid for.
Meanwhile, hope springs eternal with HR 1835, the so-called natural gas act. We can only pray this doesn't die a quiet death in the Senate, where so many good House resolutions end up in the trash can. Please contact your elected officials and ask them their position on HR 1835 - are they a co-sponsor? Do they support it? Let them know if they don't support this bill you will not be voting for them in the next election.
Environmental Misperceptions
"Environmentalists" continue to make the mistake of lumping natural gas into the fossil fuel camp along with oil and coal. Although natural gas is indeed a fossil fuel, there are indications that natural gas has non-biological origins as well. Read Robert Hefner's book "The Grand Energy Transition" for a detailed discussion of this topic. Regardless, so-called "environmentalists" continue to get it wrong: natural gas emits 50% less CO2 than does coal and has none of the toxic particulate remnants. Prudent energy and environmental policy would therefore be to use natural gas for electricity generation and shut down the coal plants. Natural gas is also much cleaner and cheaper than gasoline, so again, prudent economic, energy, and environmental policy would be to use natural gas in the transportation sector. However, most "environmentalists" oppose using natural gas simply because they lump it in as a "fossil fuel" and those are just "bad". Lacking other realistic alternatives in the short term, these "environmentalists" are therefore actually supporting continued burning of coal and gasoline (oil). Ironic isn't it? What we need is a realistic and pragmatic energy policy like this one.
Bottom line to the investor is this: the US is making NO significant progress in weaning itself off of foreign oil imports. In an era of peak oil, worldwide supply will not keep pace with worldwide demand once the world economy recovers. In addition, oil is priced in US dollars and the outlook for that currency, in my opinion, is weak. For these reasons, US investors should be investing in energy stocks - they are still very cheap for anyone with an horizon longer than a few quarters. My favorites energy investment recommendations continue to be BP, COP, CVX, XOM, Petrobras (PBR), StatOil (STO), Schlumberger (SLB), and Transocean (RIG). In the so-called "alternative" energy company space I like Fuel Systems Solutions (FSYS) and Westport Innovations (WPRT). I like these not because of US energy policy, but because foreign countries do "get it" and are making the transition to natural gas transportation. WPRT is reporting earnings this Thursday.
Disclosure: the author owns COP, PBR, SLB, STO, and WPRT.
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This article has 47 comments:
On Aug 03 01:17 PM ilovesum wrote:
> the demand for nat gas has been weak recently thus nat gas prices
> cheap , so if demand returns then price will increase and these savings
> will evaporate
www.eia.doe.gov/cneaf/...
Your NGV idea will remain dormant (unfortunately) have for a while, until it is too late.
1) In Washington, we a PhD nobel prize winner (Steven Chu) that is totally ignorant on energy issues despite his many accolades.
2) T. Boone Pickens has essentially given up on his wind farm / NGV dream. I am wondering if the Democrats are deliberately ignoring his wind farm project as pay back for him funding "Swift boat" ads against John Kerry back in 2004.
ripskii: agreed.
happycajun: you're right, there is alot of LNG capacity in the US. i'm curious though: at current natural gas prices, and a filled storage system in the US, are LNG imports from foreign sources economical?
JonathonSwift: the biggest differences on energy policies between pickens and myself are:
1) pickens focuses on natural gas usage for fleets. that is a good start, but i believe to significantly reduce foreign oil imports, we need NGVs in the hands of consumers not just truck fleets.
2) pickens wants to shift natural gas away from electrical generation to fuel the fleets. i believe we have abundant natural gas reserves and enough to heat homes, power industry, generate electricity, and power 50% of the cars & trucks and do all these for the next 50-60 years (with current nat gas reserve estimates).
3) pickens is not against coal for electrical generation. i think all coal plants should be either shut down or switched to natural gas.
4) pickens doesn't seem to correlate his energy policy with his political policies, and backs political candidates that are at odds with his energy policies.
longoil: i don't think pickens has given up. he's pragmatic and delayed the wind farm. his company is making great progress in fleets all across the country. although i differ with pickens on several key issues (see above), i admire pickens and the US needs more pickens'.
Dave5577: thanks. yup, the US dollar is a fiat currency. as far as nuclear, i hate to have to support them, but we have boxed ourselves into a corner with idiotic energy policy for decades, so, i agree we need them. that said, i want to limit them. we should first utilitze natural gas electrical generation and shut down coal.
NOTE: i sure wish the person giving myself and all the other commentors thumbs down would have the decency to write a comment of their own and give reasons for the thumbs down. simply going around and clicking on thumbs down to people who contribute valid thoughts and ideas with no rationalization or debate to justify your negative action is pretty cowardly - don't you think?some of the comments above with -3 thumbs shows irrational behavior. J. Swift was docked 3 thumbs down for merely asking the difference between my energy policy and boone pickens?? please, give these people a break and grow a backbone of your own. that is, participate with your mind and *write* something. any idiot can click on a negative thumb. only someone with real ideas, valid thoughts, and a logical mind can actually debate issues. try it sometime - you might actually feel better about yourself at the end of the day.
I get weekly emails encouraging further action and laying out actions to do so. Anyone who agrees with Fitzimmons' suggestions should become involved in supporting the Pickens plan where there is some hope of actually accomplishing something:
While the price per barrel of oil has fallen over the past nine months, the percentage of oil we import has not. Over the past 12 months we have continued to import nearly two-thirds of the oil we use.
Most of the oil we import is used as a transportation fuel - cars, trucks, aircraft, boats and trains. About one barrel out of every five is used as diesel fuel to power heavy trucks - 18-wheelers.
I am all for developing battery, fuel cell technology and nuclear power or some other technology which is still in the laboratory stage. But the latter are not ready for widespread distribution to our national fleet of approximately 250 million cars and light trucks. The only fuel which is available to reduce our dependence on foreign oil is domestic natural gas.
Due to recent advances in technology, we now have the ability to recover natural gas from the enormous deposits in Texas, Louisiana and Appalachia in the lower 48 states. A recent CERA study showed there are enough proven reserves in the Continental United States to supply our needs for the foreseeable future.
Natural gas is cheaper than diesel fuel. Natural gas is cleaner than
diesel. And it's ours.
Congressmen Boren (D-OK), Larson (D-CT) and Sullivan (R-OK) recently introduced a bipartisan bill, the NAT GAS Act of 2009, to incentivize industry to replace older diesel trucks with newer natural gas vehicles - it's a great step in the right direction. It will provide the momentum for engine manufacturers, natural gas producers and natural gas distributors to ramp up and make a real difference in our dependence on foreign oil.
I hope everyone will take a look at this plan and help us push it further.
Dollar down= Oil up.
Craig Cooper is right to a point. That point being when oil gets tight.
2-3 yrs.
On Aug 03 09:52 PM Michael Fitzsimmons wrote:
>
> happycajun: you're right, there is alot of LNG capacity in the US. i'm curious though: at current natural gas prices, and a filled storage
> system in the US, are LNG imports from foreign sources economical?
>
In France, for instance, there is massive surplus power off peak from nuclear power generation, most people usually travel modest distances and so EVs are a no brainer - especially since the alternative is unreliable gas imports from Russia.
It should be noted that studies have shown that although some extensions and upgrades to the grid would be needed to power electric vehicles, their very high efficiency means that they are much more modest than might be imagined - here is just one of the studies to that effect:
www.nyiso.com/public/w...
Just the same, for the US to maintain present commute distances and living patterns, at the moment NG is the only economic way of doing this, and they would actually increase security of supply rather than decrease it.
It should also be noted that the IEA, who are one of the main bodies who calculate energy use and supply, reckons that with the current relatively low oil prices the investment needed to bring more supplies on line is just not happening, and so as soon as recovery occurs you will get on oil price spike and supply shortages which will throw the world economy right back into recession.
The US by switching to NG can avoid this whip-sawing effect of recoveries being aborted by massive oil price rises by opting for NG.
On another note regarding secure energy supplies, in the 60's the US had a running demo reactor using liquid fluoride thorium reactions.
It was cancelled as it is lousy at producing weapons grade materials!
These reactors can't go bang, as they operate at atmospheric pressure but need high temperature, so they just freeze solid and the reaction stops if the vessel is breached.
They can be factory mass-produced and delivered by trucks in bits to sites and don't need most of the elaborate and costly safety engineering.
Using thorium and burning all of it they are around 100-300 times as fuel efficient as current reactors, and produce correspondingly little waste.
They can use the waste from other reactors as fuel, and transform all the really nasty long lived stuff to much more manageable and short lived waste.
So fusion reactors are not really needed - we already know how to produce vast amounts of power, and can do so without the breakthroughs needed for fusion - the structure for a LFTR can be designed using standard engineering materials.
More here:
www.energyfromthorium.com/
So America between natural gas and thorium has all the tools needed for a secure energy future, if it has the will to use them.
www.autoblog.com/2008/...
think a prius that runs on US produced natural gas instead of gasoline derived by foreign oil. obama and his administration should not only invite the CEO to washington and embrace this car, but they should have made US tax-payer bailout money to GM and chrysler contingent on manufacturer such a vehicle along with the garage appliance needed to refuel the car at your home.
issac_the_terrible: thanks, i would say it's good to be back but i already miss colorado. there's stories and pictures (mostly about fly-fishing) on my blog: thefitzman.blogspot.com/
with respect to your 2-3 year prediction, is for oil to reach its old highs or to go over $100 again or? i think we'll see $100 barrel again in that timeframe, but it all depends on when the world economy gets in gear again. despite oil inventories at 20 year highs in the US, we can burn that off in 4 or 5 months very easily and we'd be right back in the schtank again. i've seen some experts argue that worldwide spare capacity is 4 or 5 million barrels, but that is based on current demand, not the pre-contraction demand, and that spare capacity never comes online quickly as it is not in the interest of the producers to bring it online quickly. so, yup, i agree with you. i think the world economy, and much more so the US economy, is completely dependent on oil to function adequately. it's a shame $145/barrel oil didn't convince congress to do something. their reaction has been to take away our freedoms and plan for marshall law and a police state, and that is scary. that is why i often say natural gas transportation is vital if the US wants to remain a free and democratic country (assuming we even still are both of those....). once gasoline is rationed or worse yet controlled by the government, church is out.
ANarrelFull: if what you say is true, i suppose that is why some of the builders and financiers of those LNG plants are having such a tough time. i know i would hate to own an LNG plant in the US right now with the huge shale supply hang over my head. perhaps they can export american natural gas to europe? that'd be wonderful!
davewmart: you are exactly right: the US is on an economic yo-yo tied directly to foreign oil and the best way to get off this dangerous yo-yo is to use our own natural gas for transportation. i have never heard of the thorium reactor you speak of (!). thanks for bringing that to my attention and for the link: there is a plethora of information and documentation on the LFTR. why do you think this technology (if actually feasible, which i don't know for sure yet...) isn't being adopted and isn't even in the energy debate?
It was cancelled as it is lousy at producing weapons grade materials, could be substituted for the coal burning part of present plants enormously reducing coal use, and doesn't need the very expensive processed fuel which forms a major part of the revenue stream of nuclear operators.
It's biggest advocate, Weinburger, was the guy who designed the light water reactor, the most common type in use today!
For civil use though he saw that the liquid reactor was much better.
So the answer as to why it got cancelled was that a whole bunch of vested interests did not fancy it.
For instance, to provide all the energy, not just the electrical power, but all the energy the world consumes, you need around 5-6,000 tonnes of thorium a year - compare that to the present coal and uranium mining industry.
It is minuscule, so hardly likely to appeal to miners.
Most nuclear engineers have never heard of the technology - in a Master's degree in nuclear engineering, Kirk, who runs the site I referenced, had just a ten minute mention given to the technology.
For an in-depth technical talk on the subject, here is Kirks' Google talk:
thoriumenergy.blogspot...
For less technical info:
nextbigfuture.com/2009...
Kirk estimates a few hundred million dollars as the development cost.
An initial demo to prove some of how to fit the bits together would cost far less.
We already know that it works.
The report that was used to kill the program picked up on three nits as reasons - two of which had already been solved by the team working on it.
Kirk gave a talk in England recently for the Manchester Report, organised by the Guardian newspaper.
We achieved top rating as the idea most likely to solve carbon emission problems, and on of the judges, Bryony Worthington, now counts herself as an advocate of thorium power:
www.guardian.co.uk/pro...
I look forward to seeing you on the thorium forum - much of the discussion is highly technical, looking at different possible designs, so the nuclear engineers have a ball, but some there like me are not qualified for discussion on that level, but hope to play a small part by making people aware that we ALREADY know how to produce abundant, cheap, carbon free energy.
There has been many new reports about Pickens putting the wind farm project on hold.
Here is a few articles from the last month from reputable sources:
edition.cnn.com/2009/T...
www.guardian.co.uk/env...
e360.yale.edu/content/...
We still have a somewhat free market and we should keep it that way. I don't think the government should get involved with any of this, or health care, or bail outs, etc. I know you will completely disagree and thats ok.
But what if there are ideas out there that are two times as good as what you are recommending?
For instance, we travel to buy groceries and items from the store.....we travel to go to work..etc.
We have to move a 3000lbs vehicle and a 100-300lbs person.
What if we designed a system where all we had to move was the goods, not the person or the vehicle? What if we designed a system much like a bank has with air moving pods around? How about a small single track with little trains moving goods to each home? Why continue to think like we do today?
Why even have stores? Why not go virtual? Why are we spread out? etc etc etc.
I think we could easily cut 50% of the demand for oil in the USA if we had to....this could buy us time for something new.....and that something new shouldn't be decided by a group of individuals....but by the free market....this will also provide the most economically viable option.
If you use natural gas for heating did your heating cost decline last year? Companies that sell the natural gas are keeping prices high because public service commissions are owned by them. You can switch companies to buy fuel oil or propane but you are captive when it comes to natural gas.
It is time for the government to protect the consumers so we can enjoy the low natural gas prices.
longoil: yes, but putting the project on hold due to current economics and funding constraints is alot different than "giving up" on the project, yes?
andy1234: if you can convince me that my energy policy is lacking some component or something in it is not feasible for some reason, i'll update the policy. i have updated it in the past, and did so after i read robert hefner's book. as far as the government getting involved - they already are involved - they subsidize coal and oil (!!). my viewpoint is that they should stop subsidizing the two dirtiest fossil fuels, stop the oil wars, and stop reinforcing our addiction to foreign oil. if they are going to subsidize anything it should be US produced natural gas!! you may think the energy market is a "free market", but if you look at the US energy market, for instance, you will see that it is not: the government has stacked the deck against natural gas through idiotic legislation and EPA restrictions and roadblocks to natural gas transportation. i mean in most states a person can't even buy an NGV and a home appliance to refuel it! this in a country that imports 60-70% of its oil. this is not a "free market", this is government control at its most dangerous! if you want to make some concrete proposals for changes to my energy policy, please state the exact policy you don't like, why you don't like it, and what it should be changed to. if a good argument is made, i'll modify the policy. i am not married to it, and it is not to promote myself, but to save america from it's biggest threat: dependence on foreign oil in an era of peak oil. that said, if your recommendation doesn't help to significantly reduce foreign oil imports, it won't gain traction with me.
long_on_oil: great question and i had that exact discussion with the CEO of my local natural gas company as i was paying the same thing last winter as i was the winter before despite the huge drop in nat gas futures. the answer i got was logical: natural gas utilities have to buy natural gas for winter usage during the late spring and early summer and store it. prices were still high at that time last year, and that is why nat gas heating bills last winter didn't reflect the huge drop in nat gas prices. i told him i bought the argument, but that THIS winter natural gas prices should be 60% lower because when they bought winter supplies THIS spring and summer nat gas prices were around $4 or less. so, i told him i would get back to him this winter...and i will.
At present to create electricity natural gas is burnt centrally, throwing most of the energy away as waste heat.
Fuel cells have now been built, which mean that the gas can be piped to your home and the waste heat will provide you with hot water.
There are a number of Japanese ones, but here are the details for the Australian one, which uses a solid oxide design:
www.cfcl.com.au/
He gave a very impressive talk at the Manchester Report conference.
On using natural gas in cars, Sweden is pressing ahead:
www.greencarcongress.c...
That Growth was driven by a number of factors, but the primary factors were Oil (cheap, abundant & readily accessible), Population Growth & New Technology.
Can anyone tell me, what New Technology will be the New Economic Driver, because the other two are now past their use by date!
LNG: once the LNG liquifaction plants and re-gas plants are constructred, those huge capital investments are "sunk costs" and the profitability is based on incremental operating costs. The cost to buy gas in Qatar, liquify it, ship it to the US and re-gas it are very low...in the $2-3 range. Remember, Qatar gas is so plentiful it makes the shale plays look small! So, with a $2-3 cost, yes LNG is competitive. And someone above was right, these LNG plants in the Middle East have contracts that allow/force them to get this gas over to the US market if other markets won't take the LNG.
I think LNG will be a factor, but it won't be a doomsday factor as I once thought and others are thinking. Other markets are starting to improve and will relieve some of the pressure!
Boone's delaying the wind farm project is a very good example of why it will be a long time before wind and solar and other alternative energy supplies are competitive with oil/gasoline/coal/dies... gas. The market just isn't there yet.
Hope...fading. Change...all I have left after taxes! The new Obama as Heath Ledger's Joker poster...priceless! As our Bought-and-Paid-For Congressmen/women and Senators come home for summer recess, let's all make an all out effort to get around to their town hall meetings and give them a piece of our minds. Let them know that energy policy is important and it doesn't look like Crap-And-Trade. That Natural Gas is vital to our future. And that we don't want GM-Chrysler Health Insurance/Healthcare.
Putting something on hold when you are 80+ years old is essentially giving up. He will live another 10 years at most (hopefully longer). Who knows when this economic crisis will be over. The 1929 depression offically ended in 1954. The stock market of the late 1960's stagnanted from 1965 to 1980.
The sad part is there is many excellent syngeries that can be implemented today with current technology to reduce foreign oil imports. The no-brainer is the Pickens plan of liberating NG for vehicular use. But with PHEV technology this can be taken another two notches higher. PHEV can use the wind generated electricity as per the Pickens plan as well as being capable of using several fuels such as gasoline, NG or ethanol as a backups.
I thought I would post here some of the problems with getting a licence for any new nuclear design, not just a LFTR:
The US regulatory authority makes the licensing of alternative designs, and in particular small reactors, prohibitively expensive.
For a new design they charge around $200/hour to educate themselves on the new design, and they then charge just as much for authorising a 50MW reactor as a 1500MW one.
It could be purpose built to prevent progress
Some Fuji and Toshiba small reactor designs seem to be stopped by this hurdle.
i missed your missals[missiles?] of late.
three comments:
take a look at two NG potentials--CHNG[NASDAQ], a chinese combination of CLNE and installation of [ FSYS/WPRT] type product on autos, done their way. coal bed methane EP in Indonesia, CBMASIA[TCF on TSX; CBMDF.PK OTC].
interesting article on net employment[green does not make more jobs]in the renewables world. Economedes, et al authors. energytribune.com
INSTITUTIONS OF HIGHER LEARNING[your references and question in this article]-- most of the better students have return to opportunities in their home countries. primarily in Asia.
It seems pretty lame to just mark down what is, AFAIK, and entirely factual post.
www.americanoilman.com/
I very much agree with you that we need to redouble ( or triple) our nuclear output, and we have alot of very old plants.
Unfortunately we are late to the game here. If the country decided this would be aggod move, how long would it take to get electricity online?
Some say 8 years for a new plant, but that may be optimistic in this country. We need to get on with it for sure, but it will not be quick enough. I think a similar time element can be applied to a massive solar buildout in the southwest.
But we better get to it.
I read your response. Those statements are more problems of our governmental system than energy in and of itself. While I don't agree or disagree with NG being the best alternative....we need to agree that our government has powers that it should not. That we don't need an energy policy....what we need is freedom from government. subsidies should not exist anywhere...because in essence they are choosing what is the cheapest or trying to influence what people use.
In essence....their energy policy is exactly what we have:)
I am advocating a completely free market where prices determine what we use.
You are saying you want NG...and the government should supply NG solutions.....possibly its not the best solution is all I am saying. We won't know until the government gets its hands out of everything.
If you have a demand for 900MW of wind or solar....you might need to build many times 900MW worth of wind in order to achieve that power output at a certain wind speed or solar output, etc.
He claims that energy from wind and solar cannot exceed more than 40% of our power source......for reasons he didn't explain.
I think in order to get a complete and whole picture of these things...research and development need to be completed....and the effects documented. We can sit here all day and say NG is our savior....but possibly the environmental effects of drilling tons of gas wells in shale locations will put us in a water shortage problem. I don't know....but someone needs to figure it out.
As storage fills and reaches capacity, you will see the pipeline pressures start to increase all by themselves. This results in "backing out" wells that are lower pressure. Its kind of a natural curtailment to production when we are producing too darned much!
On Aug 04 10:58 AM ripskii wrote:
> Fitz: I've been wondering what the effect of the U.S. gas storage
> capacity reaching the full status will have on the industry production
> and pricing? You can see that current excess production going into
> storage is reaching record proportions. When we reach "full" it will
> also have a big impact on where to store the large increases in LNG
> projects coming on line in the near term. I've read somewhere that
> if present trends continue our capacity will reach full in a a fairly
> short time. I've even heard that capacity can be expanded by increasing
> pressure in the gas lines. Any thoughts on this?
>
> www.americanoilman.com/
'I very much agree with you that we need to redouble ( or triple) our nuclear output, and we have alot of very old plants.
Unfortunately we are late to the game here. If the country decided this would be aggod move, how long would it take to get electricity online?'
Official estimates are that the US could build around 10 nuclear plants in ten years.
Their capacity has been substantially degraded, and would take time to build up.
My personal favourite of the conventional designs is the Westinghouse, which relies on passive safety much more than the Areva design and is well suited to modular construction.
Everywhere except North America it has been built on time and to cost.
Construction time for a reactor is around 4 years, to which you have to add the US regulatory authorisations.
If you used my favourite liquid fluoride thorium reactor, the principles have already been demonstrated, but you would need to build some sort of more advanced demo reactor to take things on from the 60's design, and then a prototype.
You have several design choices to make.
The first is whether you mix the thorium and fluoride, in which case the reprocessing is tougher, but the plumbing is simpler, or have them separate, in which case reprocessing is easy but eh plumbing more complex.
The next decision is how advanced you want the reactor to be.
You could build it from steel, in which case you would not be so efficient and it would not operate at high temperature so could not just be slotted into a coal plant, or you could go for the more expensive high temperature version, which uses hafnium which is more expensive and tougher to work but could just be put into existing coal plants.
There are number of other design criteria, which the nuclear engineers on the site I referenced discuss, but the point is that no breakthroughs or new physics are needed.
Kirk estimates that using not a Manhattan style approach with unlimited resources but a skunk works type of environment it would take around 5 years to sort out the way you wanted to play it and have a full prototype working.
The difference after that is the speed it could be rolled out.
You don't need a massive steel containment vessel, all components could be made in a factory and road delivered and you don't need multiple redundant safety systems.
There is a solid fluoride safety plug in the bottom of the reactor, kept cool and solid by a fan, which is powered by the reactor itself.
Any interruption in the power supply and the fan stops, the fluoride melts very, very rapidly and the reactor drains.
They used to shut the reactor down at weekends in the demo in this way - this reactor can be revveed up and down very easily.
So within ten years you could be replacing coal plants on a massive scale, rapidly reducing CO2 emissions.
Because the reactor can be throttled up or down, it could be used in conjunction with renewables, as it could make up for the intermittency.
Check out the forum:
www.energyfromthorium.com/
www.washingtonpost.com...
"If Nuclear Power Has a More Promising Future ... Seth Grae Wants to Be the One Leading the Charge
The president of Northern Virginia-based Thorium Power Ltd. says he has a way to make nuclear energy safer, less expensive and more effective. So why isn't he getting more reaction?"
A brief excerpt shows how nuclear power got derailed from being peaceful and safe - -
"Like some other early reactors, Shippingport ran uneventfully for a few years on thorium-based fuel. But in civilian reactors, thorium was soon eclipsed by uranium. The United States and the Soviet Union, along with a few other countries, had already built vast infrastructures to enrich uranium for nuclear weapons, which provided full-blown uranium-based industrial complexes. Also, Cold War powers believed they could muddy the waters of intent by enriching uranium for military purposes and for civilian nuclear energy in the same buildings.
"With thorium in its core, Shippingport became the first U.S. commercial nuclear plant to be decommissioned, in 1982. But by then the whole industry had turned on its head. Nuclear's growth in the United States was already slowing for a mix of economic reasons in the late '70s. In 1979, the near-core meltdown at the Three Mile Island nuclear station near Harrisburg, Pa., dealt the industry's prospects a body blow by turning public opinion against it.
"And that is where those prospects have mostly stayed...."
It seems that the nuclear industry is now so wedded to uranium that "not invested here" is the biggest threat to a transition to thorium.
The Thorium power proposals use solid fuel, and is a very different reactor to the liquid fuelled ones as the fuel rods have to be carefully maintained to ensure that hot spots don't form.
Chemists much prefer dealing with liquids, where keeping control is a lot easier, as is reprocessing (on-site) for the separate thorium and fluoride designs.
Here are the principles simply laid out:
nextbigfuture.com/2009...
It is not my intention to diss any other approach - I particularly like , for instance, the Westinghouse conventional reactor, but in my view only the liquid thorium approach can give the greatest advantage.
Here is how Toshiba's efforts are being nullified:
www.atomicinsights.com...
if you have not yet seen, check out today's[8/04/09] jack lifton SA article, NISSAN/LEAF/GHOSN//BAT... OF AUTOS. interesting in "many" ways.
davewmart: wrt natural gas electric generation efficiency, there have been formidable gains in generator efficiency recently. if we are going to shut the coal plants down, we need to replace them with a central natural gas generator and attach to the existing grid in place. that makes the most economic and timely sense. don't get me wrong, i am all for distributable power generation, but i think the US should make it a priority to shut down the coal plants, and simple replacement with nat gas generators is the way to go.
perceptions: i encourage you to read robert hefner's book "the grand energy transition". i suspect you'd then answer your question with "energy gases technology"..that is, the transition from solid and liquid forms of energy to that of energy gases (nat gas, hydrogen, wind and solar). i'd also add on a technology front: obviously continued computer architecture and sw design and biotechnology.
Mmmark: thanks, good to be back, well, sort of. where did you get the $2-$3 dollar estimate for qatari nat gas via LNG? not doubting you, but that is amazing that you could liquify it, ship it, pay and feed the crew, re-gasify it, and sell it for $2-$3? boy, if that's the case, i suppose i should be more bearish on nat gas prices than i am, and more bullish on nat gas transportation than i was! as far as wind and solar, there is a market:
thefitzman.blogspot.co...
if we ever get the external cost of coal and oil factored into the equation (subsidies, health care costs, navy to secure oil shipping, funding the army, marines and air force to fight oil wars), solar and wind are very economical in comparison. but, i do agree it will take time to signficantly build out he infrastructure. but it will be built. boone delayed the wind because of the financial crisis and lending, not because it is an unviable project.
obama and the "new" congress are every bit as useless as bush and the old congress. people are making the same mistake with obama they made with bush: they are overlooking his obvious bone-headed policies because he is "their man". but this isn't the place for that discussion, but i will be writing an article on my personal blog about this. obama is a big big dissapointment to me. more ivy league police state policies...just like bush.
nyetnichevo: thanks. sometimes i wonder if they are really that dense, or, if they know what is happening with oil and prefer to use oil as the ultimate means of control over an american population that is nearly 100% dependent on gasoline for personal transportation. if you look at the loss of freedoms being legislated (patriot act, etc. etc) and some of the police state legislation (the unconstitutional executive order bush passed to put ALL policiing elements (fed, state, and local) under the president's control during times of "martial law" for national security reasons, the conspiracists in me sees something darker going on.
longoil: well, i guess we disagree. i think he is pragmatic and realizes the financing isn't there today. what else can he do? he's going full steam ahead with NG transportation and staying the course, regardless of his age (imho).
davewmart: now this issue i knew about, and it is very similiar to the roadblocks the EPA has in place to keep NGVs off the road. very similar. why the US can't design one damn good small reactor design and reuse the design in multiple locals is beyond me.
fran: good one and missed you to. before i became a "retired catholic" i used to read those missals ;) thanks for the three comments:
1) i'll research CHNG
2) well, we could have saved hundreds of thousands of jobs in the auto industry with NGV conversions, and we could put hundreds of thousands of people to work building natural gas refueling infrastructure. but the factor economedes misses is this: if the US was keeping all the money INSIDE the US (to pay for US produced nat gas) instead of sending it OUTSIDE the US (for foreign oil) the benefits across the entire economy would be huge and create damn near full employment (in my opinion).
3) yeah, alot of people leave, but alot stay here. natural gas transportation is a no-brainer, no PhD is needed, no engineering degree required. it is so black and white to me. the problem is oil and coal lobbying money has bought off our policymakers, and americans haven't banded together (except for pickens and his army) to an extent to embarass the politicians into doing the right thing.
zuck_book: please keep that comment off my articles. thanks.
jimbo: you are correct: secretary chu has proven himself to be a "no-op" and should be fired and replaced immediately. i am available.
davewmart: i feel your pain. i have suggested to SA editors that they require people using thumbs up or down to at least post a comment on the article first. that will stop a big majority of the rating fraud that is going on by the cowards doing so.
ripskii: well, you already see the rig count falling and some company's just stopping production. my thoughts is that it would be crazy for a company to bring LNG into america right now.
issaac: yup, on nuclear (and every other energy issue) the US is stuck in the mud with its coal and oil centric losing policies. what idiots we are to see the CO2 and toxic emissions of coal and $145 foreign oil and do nothing. US policymakers (including obama and chu) are simply incompetent when it comes to energy.
Andy1234: my energy policy is about more than NG transportation, it's just that NG transportation is the only viable way to reduce foreign oil imports over the next decade. freedom from government?? were you not paying attention during george bush's 8 years?? under bush, the gov took over the national mortgage market, the banking system, the financial services industry, and the insurance business. you can forget "freedom from government". seriously, those day are over. bush bankrupted the US, so we have no financial wiggle room any longer and china is in the catbird see. this is the new reality of the very much weakened position of the US after bush's tenure. now, i am not asking the government to supply ALL the NG solutions, i am saying STOP subsidizing coal and oil and ALLOW natural gas solutions to come to market. at the same time, i do acknowledge the refueling infrastructure problem and for that, yes, i do want government assistance - just like the man on the moon project, the cross country railroad/telegraph/tel... and interstate highway systems, all these were funded by the US government and paid for themselves and paid dividends to the american people for decades afterwards. a natural gas refueling infrastructure would do exactly the same thing, and prepare us for the hydrogen future. the government DOES have its hands in energy and it is dealing off the bottom of the deck to keep us addicted to oil and coal. i want that *stopped* and some sanity injected into US energy policy. otherwise we continue our addiction to foreign oil, continue to weaken as an economic power, and allow our government and military to institute the police state they are now preparing for....
your brother likes coal?? jeez, send him to Kingston, TN so he can talk to the people who have lived through the biggest environmental catastrophe in american history. perhaps he can rent a canoe and take a ride on the tennessee river and see all the dead fish of a river that is so toxic it will be dead for a generation and possibly longer. coal is simply and idiotic energy source. not sure why you are asking for research on wind and solar - the systems are well engineered, well known, and there are many sites in operation today. i will give you that NG drilling has the potential to harm water supplies. but look at what coal has done! there are over 35 states in the lower-48 for which it is safe not to eat a fish from any lake, river, or stream in the state! why? because of all the toxic crap (mercury, lead, etc. etc) from burning coal. so we can keep burning coal (and we know what we'll get) or, we can transition to something much cleaner, more efficient, and more abundant - natural gas. but please note my energy policy is more than just natural gas...it's just that natural gas transportation is the most important piece of the puzzle in getting us off foreign oil in the age of peak oil. if we don't do that, it won't matter how many nuclear, wind, or solar plants we make, we're still screwed as an economic "power".
freedom from gov...well, how ironic is it that the EPA (supposed to "protect" the environment) has roadblocks setup to prevent NGV availability? here we have nat gas vehicles that emit 30% less CO2 than gasoline powered vehicles and NONE of the toxic particulates of gasoline that create smog and health problems, and the gov puts up roadblocks?? all i am asking for is a level playing field and the superiority of NGV will become apparent and will be widely adapted. we're going to end up doing it sooner or later (when the oil runs out) so, we can save our people and our economy alot of pain (and perhaps survive as a democracy) by being smart and doing it now before it is too late.
Mmarrrkk: production will be shut in, it's that simple.
davewmart: the LFTR work should go on in parallel with exisiting modular designs like the westinghouse reactor you refer to. since it is "new" in terms of working design, we can't place all our eggs in that basket. why arent the nuclear engineering companies working on LFTR? why isnt france?
fran: thanks, i'll check it out. i did see an interview with ghosn yesterday about the electric car introduction and i know about his involvment with project better place. i like it - anything to reduce foreign oil imports! anyhow, i'll read it now..
Davemart: Thanks for posting the thorium reactor info and links. It appears that the concept is similar to the IFR reactor program that was shut down in the 1990's. Both approaches are breeder types that use liquid salt cooling systems so the reactor can operate a low pressure and are very much more efficient users of the radioactive materials. I feel that advanced fast reactors are the long term solution for most of our base load electrical generation since they can burn the accumulated light water reactor waste so we must get going on the necessary development to finalize a workable design. GE has a version of the IFR reator, but of course nothing has been done on that front for a very long time. Natural gas is a good transition fuel to solve our immediate problem, but we need to define what the transition is to and develop a workable plan to arrive there before the time expires to accomplish a good solution.
bravenewclimate.com/20.../
It ain't easy to introduce a new system though when Areva have the most successful light water reactor program in the world - you have a lot of institutional inertia.
The Czech Republic is probably the one doing most on LFTRs at the moment.
ripski:
LFTR bears some resemblance to IFR designs, and burns up waste from other reactors in the same way.
It is much safer inherently though, as it runs at atmospheric pressures and does not use anything reactive or which changes state such as water or sodium.
Reprocessing is also much easier as it can be done as a continuous flow as the fuel is liquid - it is all on site as an integral part of the process.
I am not sure how much of the fuel the IFR typically burns, but LFTR can be almost 100% efficient.
I mean.....you realize that when they test cars they take a reading of so many particles per gas emitted.....you could measure it in parts per million or some other form....but its a percentageof emission from a tailpipe.
So you could emit a very high amount of a toxic substance but as long as you emit a shitload more non-toxic byproducts...you are ok...since its a percentage. This just doesn't make sense to me????
Shouldn't we be looking at total byproduct of toxins released per mile? Is it possible to have a very lean running car which emits hardly any toxins on a per MPG basis....but might be 100% toxins when coming from the tailpipe......but the overall toxin amount emitted per mile is just a fraction of a percent of what emitted from our cars today?
wouldn't that be the ultimate goal of a car anyway? efficiency.
I don't think most of the policies are well thought out, and I am questioning how this government is run. I can't believe that our government is this inept, I think there is a higher power running our government......whomever that may be....yea conspiracy theory stuff. who knows.
I just DO NOT want them making any decisions at all. I want to choose how to live my life....and spend my money.
CrudeOilT: please read my SA article entitled "Is There Enough Natural Gas?":
seekingalpha.com/artic...
the conclusions i reached is that the US can use natural gas to supply it's home heating requirements, power half the cars and trucks in the US, and half the coal burning electrical generation plants converted to natural gas for at a minimum of 30 years based on current reserve estimates (i.e. no growth, but we know nat gas reserves are growing quickly). if an expert like robert hefner is correct in his nat gas estimates, and he has been proven right over and over for the past 4 decades on this subject, we have enough natural gas for 80 years. two things: surely either of these time frames is enough to:
1) signficantly reduce foreign oil imports
2) significantly reduce CO2 and toxic particulate emissions
3) significantly build out wind and solar infrastructure
4) engineer the nat gas infrastructure to be reused by a future hydrogen based energy economy.
5) create (and save) millions of american jobs by reindustrializing america
thanks.