John Petersen

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Rick, I've always thought the comments were the best part because the commenters bring in divergent views that I don't always share but think readers need to understand. Thanks for the links. From what I've read everybody and his brother-in-law is forecasting a $250 per kWh battery cost, but the DOE roadmap I discussed in an earlier article makes it clear that getting to that price point will require advancement through a couple generations of chemistry and a couple generations of manufacturing technology. The DOE estimate is 6 to 8 years if everything works perfectly. In my experience, things rarely work according to plan and my standard advice for clients is "it is going to take twice as long and cost twice as much as you think it will."

seekingalpha.com/artic...

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Digger, thanks for the kind words, but I already have a job and certainly wouldn't want to be in Secretary Chu's position. Looking at the landscape and picking a few alternative energy sub-sectors that are operationally green and sustainable from a supply chain perspective is the easy part. Trying to develop an overall solution will be much harder. In the end I suspect nuclear will play a much larger role than folks presently understand.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

safariman, I've spent a lot of years working in oil & gas, biodiesel and energy storage. I've also had my fair share of projects for edgy R&D companies, including a couple that are approaching the 20-year mark with no revenues. Now that I find myself mid-way between college and coffin, my investment horizon has shortened a bit and my goal is identifying companies that will do well over a five to ten year period. I'll still buy green bananas but I'm not interested in growing them from seedlings.

Don, I'm really looking forward to the StorageWeek conference because it will give me a great opportunity to network and hopefully gain some insights that go beyond mere presentations.

On an unrelated topic, did you see yesterday's Seeking Alpha article on Toyota's plans to roll out a Li-ion PHEV in 2012? They're apparently looking at a 12 to 18 mile electric only range and a price that's comparable to the Volt and the Mistubishi EV. It lead me to use a new term for the development - eco-bling (which I just found that others have been using since 2006).

seekingalpha.com/artic...

rispskil, yesterday Secretary Chu testified about the importance of getting nuclear back on track, so with any luck that will become a much more important issue in coming years. The magnitude of the looming problems terrifies me because I worry that my kids and grandkids will have a much harder life than I did. So I'm all in favor of anything that's cost-effective and helps overcome the problems.

www.energy.gov/news200...

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

jambo, I still think of a college boy conversation where a friend said something on the order of "In another 10-years computers will be cheap enough to have one in your house." My response at the time was "perhaps, but why would anyone want one?" I've regretted it ever since. I'm a firm believer in the genius of entrepreneurs to solve problems if government will only get out of the way and let the creators create. I also recognize that creators who are working on something at the laboratory level don't always think their supply chains through to the logical conclusion. This should be a fun series and I'm happy to have you reading.

NorthernPiker, many thanks for the reference links. I'll read them on the plane.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

shalegas, since the '70s oil imports have been an increasingly important percentage of GDP and that wholesale export of national wealth is catastrophic over the long term. When declining, or if you prefer flat, domestic production is coupled with rapidly increasing global demand, the long term picture is not pretty.

jimbo, I agree that the secretary does seem to give gas short shrift, but looking at the bright side there are a lot of deep wells along the gulf coast that have intriguing geothermal potential. Maybe that will grab his attention;-)

Roadrunner, I may well be wrong, but I don't see the price channel for oil flattening - ever. The industry will always find and develop new resources, but I've spent enough time in Asia to understand how overpowering the fundamental demand drivers are and are likely to be. The point of this exercise is not to get back to my roots in the oil industry, but to set the stage for a more detailed analysis of how much help various AE technologies can be in overcoming the problem.

JeffDB, many thanks for your contributions.

Don Harmon, you've been with me for a long time and understand that some promising AE technologies (NiMH batteries for one) are rapidly approaching the limit of their ability to contribute. There are others that are every bit as limited but not as well-understood. I'll be writing about some of the other important resource constraints while I wait for something interesting to occur in the storage sector.

Philais, nuclear is a good start and will prove essential. Flywheels are great for minute to minute load-smoothing but they have no stamina and are incredibly expensive. The heavy lifting will have to be done by pumped-hydro, compressed air, thermal storage and big batteries.

Galewhitaker, I hate it when readers give me homework assignments, but thanks for the heads up.

TinyTim, I think we can assume that the highest and best uses will always take priority in the market because they're less price sensitive, but there's no question we have a real mess on our hands!

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Jack, after years of dealing with big oil and seeing what it takes to get anything through their budget process, I'm not the least bit surprised to learn that their NiMH project didn't work out according to plan. Big oil is not stupid, but they face the same problem major institutional investors face in not being able to devote sufficient time and attention to "smaller" projects that don't require hundreds of millions a year in development capital and promise commensurate returns. You'd be amazed at the number of funds that can't afford to invest in a stock that has a market capitalization of less than $5 or $10 billion. Big is not always beautiful.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Nakedjaybird, I don't know if the original reference came from you or somebody else but I've taken a look at chorus and find it more than a bit intriguing. It certainly seems to be a potential solution to a pressing problem and every solution counts. Ultimately, it will be entrepreneurs like the guys at Chorus and a whole team of professionals and financiers to realize the potential, but it sure looks like chorus has a reasonable start. Since they're a foreign company and only listed on the pink sheets, getting solid data from my usual sources is a bit difficult, but I'll do some looking to see what else I can find.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Tireman63, another company that I've been involved in for years is getting ready to re-enter a number of wells in the Humble Dome so I'll not be giving up on the oil industry. I will, however, continue to believe that the days of peak cheap oil have already passed and from here the prices go nowhere but up.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

One of my principal reasons for embarking on this new series is to try and counter some of the prevailing urban legend with hard cold fact. This not an American problem, it's a global problem. The most important driver is six billion people who understand, for the first time, that a better life is possible and are willing to work harder for far less than most Americans and Europeans. We may see more wars over "The Prize," particularly since it's been the primary geopolitical driver for every conflict since WW!. But the idea that functional and cost-effective technologies have been developed, proven and then hidden for the sake of corporate greed needs to be smashed. Business does not work that way. The technologies either didn't work or they involved too many collateral costs.

One of my favorite examples is Chevron's supposed suppression of NiMH battery technology. It's a great battery, but it depends on a rare earth metal called lanthanum, which has not been produced in the U.S. for years, is almost exclusively sourced from China (97%) is limited to about 30,000 metric tons per year, and is a critical metal for the cracking catalysts used in petroleum refining. If Chevron thought it through to the logical conclusion, it decided that crippling the global refining infrastructure in favor of a hundred thousand PHEVs per year was a bad trade. My bet, however, is that they didn't even get that far in their analysis.

In our emerging world of 6.6 billion consumers, the detritus of our past cannot make a meaningful contribution to future global needs. We also need to understand that the rare stuff hasn't been thrown away for years. We have to start making some hard choices about the highest and best use of increasingly scarce metals: questions like which is a better use for a given quantity of neodynium, making the generator for a windmill or motors for HEVs. You can't do both so you better know which is more important.

People are correct in suggesting that there are a huge number of technologies that will be essential parts of the solution, but they are only miniscule parts of the global picture.

Mayascribe, it won't be a year till July 17th. Since I'll be on the road then, I'll try to do something special to commemorate the event.

On Oil's Sesquicentennial, The Dream Becomes a Nightmare

Zenfar, I have a great deal of hope that people will be able to make decisions based on the vulgar exigencies of objective truth, but a year of writing on Seeking Alpha has taught me that there are many people who will defend ill-informed opinions and prejudices to the death despite the facts. If we have the same thing at a policy level, which seems to be the case, it will be a massive problem.

Rick, I'm nowhere near as pessimistic about the length or depth of the recession because for the first time in history, the six billion know there is something more than subsistence farming and dirt floors and they're working overtime to join the modern world. The baby boom was the most disruptive event in history as we all became consumers, but we pale in comparison to the law of large numbers impacts as Asia and South America come to the party.

Greatest, we may consume less oil in the future, but we can count on paying a lot more for it until some genius in a garage comes up with something better. The key for investors is to remember that a stroke of genius does not generally become obvious for several years (or decades) and there is an immense gulf between the laboratory bench and a factory floor.

Ferdinand, since you didn't comment on my supply constraint article, I worry that you might have missed it. It will warm the cockles of your economist heart:

seekingalpha.com/artic...

Alphameister, I'm a firm believer in humanity's fundamental genius for finding cheaper ways to do things. The thing that concerns me is the impact of government agencies getting into the genius selection business and proclaiming from on high "others need not apply."