carbonates's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/176298/comments http://seekingalpha.com/article/168850-shale-gas-promises-promises-promises?source=feed#comment-746615 746615
The first thing Berman does wrong is typical of some engineers. He thinks "average wells" exist. CHK, DVN, and XTO all own very different acreage in the play, have different completion practices and histories, and even have different cost structures. Berman is averaging in the early wells that failed, the vertical wells with the horizontals, the wells in all types of geologic areas, and for every size and skill set of operator. Not even conventional plays will hold up to this type of "average well" analysis. Its a classic over-simplified engineering approach that can kill any new play. Core areas have very different production than the play overall. Berman ignores this.

"The gas companies are assuming a hyperbolic decline curve based on a very limited data set from a few wells, while Dr. Berman found, after studying far more wells.." This is nonsense. These operators have access to FAR MORE DATA than Berman can ever hope to see. Berman is restricted to the data in the public domain, which is reported to the Texas Railroad Commission according to their reporting requirements (which actually cause biases in the data). He can't possibly have BETTER data. That said, I agree that hyperbolic decline curves do overestimate EURs but the same is true for conventional reserves. Hyperbolic curves tend to reflect best case.

Berman's whole approach is flawed because he builds the worst results of the earliest learning curve (which in the Barnett was THE EARLY learning curve) in with later results. By combining these he is assuming that no one improves with experience, and that no operator is better than average.

Profitability is certainly a concern with lower gas prices. That is also true of the conventional Gulf of Mexico (especially deepwater) and all LNG. At some point no natural gas production makes money (yet supply may continue). Reductions in cost of drilling alone can dramatically change the economic potential of a well. At least one study by Drilling Info, Inc. found "there is a 80 to 100x differential in play reserves between static D,C& S costs and $7/mcfg...and $2.50/mcfg." Wellhead cost is not a valid way to address full cycle economics.

"Shale gas companies are funding drilling with debt and asset sales" is probably the one statement Berman makes that I am seriously concerned about. Some companies are clearly doing this, and others are benefiting from the "hype" surrounding their early success in these plays. Then again, isn't that the way the business works for anyone other than the Seven Sisters? It could easily be argued that those who are funding themselves this way are the best businesses, since in the long run they hope to leverage their way into larger and larger market share. That may have been the most effective way to deal with the downturn in 2008. In a rising commodity price market, they will reap the benefits. In a falling market, they seem to have buffered themselves. I think Berman's concern about this may have some validity, but is far too simplistic- again. I have a hard time believing that every operator drilling gas shale wells is doing it at a loss.

Take Berman with a grain of salt. His bias seems to be against all unconventional oil and gas, which I tend to believe is due to resistance to the geologic and engineering paradigm shift that has made gas shale possible. Likewise, he makes more money being controversial than being mundane. ]]> Thu, 05 Nov 2009 13:37:13 -0500
The first thing Berman does wrong is typical of some engineers. He thinks "average wells" exist. CHK, DVN, and XTO all own very different acreage in the play, have different completion practices and histories, and even have different cost structures. Berman is averaging in the early wells that failed, the vertical wells with the horizontals, the wells in all types of geologic areas, and for every size and skill set of operator. Not even conventional plays will hold up to this type of "average well" analysis. Its a classic over-simplified engineering approach that can kill any new play. Core areas have very different production than the play overall. Berman ignores this.

"The gas companies are assuming a hyperbolic decline curve based on a very limited data set from a few wells, while Dr. Berman found, after studying far more wells.." This is nonsense. These operators have access to FAR MORE DATA than Berman can ever hope to see. Berman is restricted to the data in the public domain, which is reported to the Texas Railroad Commission according to their reporting requirements (which actually cause biases in the data). He can't possibly have BETTER data. That said, I agree that hyperbolic decline curves do overestimate EURs but the same is true for conventional reserves. Hyperbolic curves tend to reflect best case.

Berman's whole approach is flawed because he builds the worst results of the earliest learning curve (which in the Barnett was THE EARLY learning curve) in with later results. By combining these he is assuming that no one improves with experience, and that no operator is better than average.

Profitability is certainly a concern with lower gas prices. That is also true of the conventional Gulf of Mexico (especially deepwater) and all LNG. At some point no natural gas production makes money (yet supply may continue). Reductions in cost of drilling alone can dramatically change the economic potential of a well. At least one study by Drilling Info, Inc. found "there is a 80 to 100x differential in play reserves between static D,C& S costs and $7/mcfg...and $2.50/mcfg." Wellhead cost is not a valid way to address full cycle economics.

"Shale gas companies are funding drilling with debt and asset sales" is probably the one statement Berman makes that I am seriously concerned about. Some companies are clearly doing this, and others are benefiting from the "hype" surrounding their early success in these plays. Then again, isn't that the way the business works for anyone other than the Seven Sisters? It could easily be argued that those who are funding themselves this way are the best businesses, since in the long run they hope to leverage their way into larger and larger market share. That may have been the most effective way to deal with the downturn in 2008. In a rising commodity price market, they will reap the benefits. In a falling market, they seem to have buffered themselves. I think Berman's concern about this may have some validity, but is far too simplistic- again. I have a hard time believing that every operator drilling gas shale wells is doing it at a loss.

Take Berman with a grain of salt. His bias seems to be against all unconventional oil and gas, which I tend to believe is due to resistance to the geologic and engineering paradigm shift that has made gas shale possible. Likewise, he makes more money being controversial than being mundane. ]]> http://seekingalpha.com/article/168850-shale-gas-promises-promises-promises?source=feed#comment-746537 746537

On Oct 27 01:09 PM cusip8 wrote:

> I have a question about nat. gas. I have very little knowledge about
> its components, but most homes on the west coast have a nat. gas
> pipe line service into their home. Would it be possible to have a
> pump at your house and you could fill you car at home with nat. gas,
> or is the gas that is pumped into your house not compatible as auto
> fuel? Wouldn]]> Thu, 05 Nov 2009 12:41:06 -0500

On Oct 27 01:09 PM cusip8 wrote:

> I have a question about nat. gas. I have very little knowledge about
> its components, but most homes on the west coast have a nat. gas
> pipe line service into their home. Would it be possible to have a
> pump at your house and you could fill you car at home with nat. gas,
> or is the gas that is pumped into your house not compatible as auto
> fuel? Wouldn]]> http://seekingalpha.com/article/170441-for-your-perusal-the-glory-of-free-market-oil-supply?source=feed#comment-741486 741486
I will also point out that considering only liquids production can be misleading since gas production is rising in most parts of the world. Through fuel substitution as well as gas-to-liquids projects, gas is slowly replacing liquids and will likely continue that trend. ]]> Mon, 02 Nov 2009 19:49:27 -0500
I will also point out that considering only liquids production can be misleading since gas production is rising in most parts of the world. Through fuel substitution as well as gas-to-liquids projects, gas is slowly replacing liquids and will likely continue that trend. ]]> http://seekingalpha.com/article/169392-have-we-reached-peak-oil?source=feed#comment-737404 737404
For the most part, I still believe the real threat to oil production has nothing to do with geology, and everything to do with politics, which is why it will not follow Hubbert's Curve. We may be approaching peak political oil much sooner than we reach true peak oil production capacity. There are still many billions of barrels of oil that are not reachable due to political constraints all around the world. ]]> Fri, 30 Oct 2009 15:05:07 -0400
For the most part, I still believe the real threat to oil production has nothing to do with geology, and everything to do with politics, which is why it will not follow Hubbert's Curve. We may be approaching peak political oil much sooner than we reach true peak oil production capacity. There are still many billions of barrels of oil that are not reachable due to political constraints all around the world. ]]> http://seekingalpha.com/article/166916-natural-gas-from-shale-emerging-plays?source=feed#comment-718093 718093
There are risks, and many companies in the gas shale market are probably doomed to failure in the present market. That does not mean there will not be winners, but not everyone in the game will win. Drilling costs and initial investments in gas shale plays can be huge. Compared to conventional drilling where a well might drain a square mile of land (~260 hectares), many gas shale wells only drain 80 acres (~32 hectares). If short-term gas prices are high enough they can recover drilling costs in a year or two, but the capital to drill enough wells to ramp up production is significantly higher than the cost of a big-hit conventional gas well. Anachronistic leasing practices and bad regulatory policies abound in the gas shale plays that create another problem. Issues with public policy (NIMBYism), reliable sources of water for fracturing, and possible regulatory restrictions coming from the anti-carbon movement are other issues.

By the way, the Middle East is not without its own potential shale gas and the Saudis are already at work.

Overall, I totally agree that gas shale is already a game-changer, but its going to be a wild ride, and without major changes in consumption (demand) patterns natural gas is doomed to be highly cyclical as gas shale players react and over-react to market prices and other forces that keep them drilling even when the economics of individual wells don't make sense. There will be losers, and a few big winners from an investors standpoint. ]]> Fri, 16 Oct 2009 17:30:26 -0400
There are risks, and many companies in the gas shale market are probably doomed to failure in the present market. That does not mean there will not be winners, but not everyone in the game will win. Drilling costs and initial investments in gas shale plays can be huge. Compared to conventional drilling where a well might drain a square mile of land (~260 hectares), many gas shale wells only drain 80 acres (~32 hectares). If short-term gas prices are high enough they can recover drilling costs in a year or two, but the capital to drill enough wells to ramp up production is significantly higher than the cost of a big-hit conventional gas well. Anachronistic leasing practices and bad regulatory policies abound in the gas shale plays that create another problem. Issues with public policy (NIMBYism), reliable sources of water for fracturing, and possible regulatory restrictions coming from the anti-carbon movement are other issues.

By the way, the Middle East is not without its own potential shale gas and the Saudis are already at work.

Overall, I totally agree that gas shale is already a game-changer, but its going to be a wild ride, and without major changes in consumption (demand) patterns natural gas is doomed to be highly cyclical as gas shale players react and over-react to market prices and other forces that keep them drilling even when the economics of individual wells don't make sense. There will be losers, and a few big winners from an investors standpoint. ]]> http://seekingalpha.com/article/158422-how-phevs-and-evs-will-sabotage-america-s-drive-for-energy-independence?source=feed#comment-649340 649340
That said, the market will sort this out. I believe you answered your own question when you compared the cost of a Prius to the Volt. Unless Washington manages to interfere with the market enough to cut the cost of the Volt by 50%, the Prius and its clones will continue to dominate in the market that it can satisfy. It will never satisfy the market that requires vehicles to do more than transport a single person over a relatively short distance. It's not going to replace 18-wheelers, airplanes, tractors, or trains, and so is going to remain a minor solution to transportation fuel usage. As for carbon output, the EV is hands down the largest emitter of carbon as long as coal-fired electricity is the source of its power.

As a geologist who has worked in the Atacama Desert looking at lithium deposits, I do still disagree that the ECONOMIC supply of lithium is unlimited, especially when its afficionados see it replacing millions of cars (and still acting as the major supply for electronics, computers, commercial power back-ups, and other device batteries). At current lithium prices, the supply is not large enough to build large numbers of EV's. The market may also solve this problem, as a tenfold increase in lithium prices will significantly increase the economic supply- but seriously damage the economics of EV's. That, influenced by a political trend among lithium producers leaning toward an "OPEC" of lithium exporting countries, is what I see coming as EV's hit the market.

Full disclosure: I own stock in lithium mining companies and oil companies. I don't own stock in GM or Toyota, and none in any battery manufacturers. ]]> Thu, 27 Aug 2009 14:32:43 -0400
That said, the market will sort this out. I believe you answered your own question when you compared the cost of a Prius to the Volt. Unless Washington manages to interfere with the market enough to cut the cost of the Volt by 50%, the Prius and its clones will continue to dominate in the market that it can satisfy. It will never satisfy the market that requires vehicles to do more than transport a single person over a relatively short distance. It's not going to replace 18-wheelers, airplanes, tractors, or trains, and so is going to remain a minor solution to transportation fuel usage. As for carbon output, the EV is hands down the largest emitter of carbon as long as coal-fired electricity is the source of its power.

As a geologist who has worked in the Atacama Desert looking at lithium deposits, I do still disagree that the ECONOMIC supply of lithium is unlimited, especially when its afficionados see it replacing millions of cars (and still acting as the major supply for electronics, computers, commercial power back-ups, and other device batteries). At current lithium prices, the supply is not large enough to build large numbers of EV's. The market may also solve this problem, as a tenfold increase in lithium prices will significantly increase the economic supply- but seriously damage the economics of EV's. That, influenced by a political trend among lithium producers leaning toward an "OPEC" of lithium exporting countries, is what I see coming as EV's hit the market.

Full disclosure: I own stock in lithium mining companies and oil companies. I don't own stock in GM or Toyota, and none in any battery manufacturers. ]]> http://seekingalpha.com/article/150920-the-mac-vs-pc-debate-was-never-clearer?source=feed#comment-600873 600873
The mistake that Apple has made in focusing on a small high-quality market is that computer users don't always just want ONLY a well-working machine. Most high-end users have specific uses, and if the software on the market that does the job will not run on a Mac, they won't buy one. I fall into that category. I have no prejudice against Apple, they just don't have the support of software companies that I need to get the job done. Since most of the software I use costs much more than the computer, the cost of the computer is trivial (and yes, everyone in my industry who is under the age of 30 uses a PC).

The risk that Apple is still running is that they will gradually lose the small part of the business market that they have now as software designers cease to support their platform, due to Apple's small market. It becomes a visious circle. The risk is not the consumer demand, but the software tools that support the use of the product gradually fading from the market. Unless a software company can make money on the small number of Apple users available, they won't even bother creating the software. That's already happened for me. ]]> Fri, 24 Jul 2009 10:50:24 -0400
The mistake that Apple has made in focusing on a small high-quality market is that computer users don't always just want ONLY a well-working machine. Most high-end users have specific uses, and if the software on the market that does the job will not run on a Mac, they won't buy one. I fall into that category. I have no prejudice against Apple, they just don't have the support of software companies that I need to get the job done. Since most of the software I use costs much more than the computer, the cost of the computer is trivial (and yes, everyone in my industry who is under the age of 30 uses a PC).

The risk that Apple is still running is that they will gradually lose the small part of the business market that they have now as software designers cease to support their platform, due to Apple's small market. It becomes a visious circle. The risk is not the consumer demand, but the software tools that support the use of the product gradually fading from the market. Unless a software company can make money on the small number of Apple users available, they won't even bother creating the software. That's already happened for me. ]]> http://seekingalpha.com/article/147250-not-all-green-jobs-were-created-equal?source=feed#comment-577772 577772
The so-called subsidies to oil companies are mostly a myth created by spinning the definition of tax deductions. Depletion is provided to all natural resource companies. Depreciation is provided to every industry and every business that buys equipment. The recent threat to change the way drilling costs are accounted for amounts to the opposite of a subsidy, since other businesses are allowed to expense costs related to obtaining their inventory. All US oil production pays royalties to landowners, which in turn gets taxed. Most states tax oil production directly. Probably 35% of the price of a barrel of oil that is turned into gasoline represents taxes. The Mineral Management Service, which oversees oil leasing for Federal lands, is the second largest source of income to the US Government behind the IRS. How is that a subsidy? How much of a return is the US government going to get in taxes for energy produced from "green sources"? Probably not as much as it gets from oil production.

I sincerely doubt the numbers of jobs for fossil fuel investments are correct. Pay for college graduates in the oil industry (engineers, geologists, geophysicists) ranks among the highest. Starting pay can be six figures straight out of school. The engineering jobs I have seen in "green sources" are considerably lower, and the "green" collar work I have seen offered is barely above minimum wage and is mostly seasonal work. Those workers will spend several months a year drawing unemployment because the vagaries of that type of work. I instead would give as an example, the fact that research work done by the Gas Research Institute using Federal funding, has added TRILLIONS of dollars to the US economy. Without this work, gas shales would not be at the level they are now, and we would not have 100 years worth of known gas reserves in the United States. Likewise, thousands of highly paid workers in the oil industry would be looking for jobs. ]]> Tue, 07 Jul 2009 17:47:21 -0400
The so-called subsidies to oil companies are mostly a myth created by spinning the definition of tax deductions. Depletion is provided to all natural resource companies. Depreciation is provided to every industry and every business that buys equipment. The recent threat to change the way drilling costs are accounted for amounts to the opposite of a subsidy, since other businesses are allowed to expense costs related to obtaining their inventory. All US oil production pays royalties to landowners, which in turn gets taxed. Most states tax oil production directly. Probably 35% of the price of a barrel of oil that is turned into gasoline represents taxes. The Mineral Management Service, which oversees oil leasing for Federal lands, is the second largest source of income to the US Government behind the IRS. How is that a subsidy? How much of a return is the US government going to get in taxes for energy produced from "green sources"? Probably not as much as it gets from oil production.

I sincerely doubt the numbers of jobs for fossil fuel investments are correct. Pay for college graduates in the oil industry (engineers, geologists, geophysicists) ranks among the highest. Starting pay can be six figures straight out of school. The engineering jobs I have seen in "green sources" are considerably lower, and the "green" collar work I have seen offered is barely above minimum wage and is mostly seasonal work. Those workers will spend several months a year drawing unemployment because the vagaries of that type of work. I instead would give as an example, the fact that research work done by the Gas Research Institute using Federal funding, has added TRILLIONS of dollars to the US economy. Without this work, gas shales would not be at the level they are now, and we would not have 100 years worth of known gas reserves in the United States. Likewise, thousands of highly paid workers in the oil industry would be looking for jobs. ]]> http://seekingalpha.com/article/134860-my-oil-outlook?source=feed#comment-487880 487880
I'm still more comfortable owning individual oil stocks, yet these certainly are not pure plays on oil and gas prices. I do use DUG as a very short term hedge against my oil stocks. At least with individual oil stocks I can pick and choose based on how well I understand their business efficiency. I'm still struggling to understand the price behavior of USO. For all I know, USO may have more upside potential than actual oil prices since USO is lagging behind oil at present. ]]> Sun, 03 May 2009 17:22:30 -0400
I'm still more comfortable owning individual oil stocks, yet these certainly are not pure plays on oil and gas prices. I do use DUG as a very short term hedge against my oil stocks. At least with individual oil stocks I can pick and choose based on how well I understand their business efficiency. I'm still struggling to understand the price behavior of USO. For all I know, USO may have more upside potential than actual oil prices since USO is lagging behind oil at present. ]]> http://seekingalpha.com/article/132319-response-to-jack-lifton-s-lithium-batteries-nothing-but-illusion?source=feed#comment-473302 473302 "An estimated 10,000 toxic exposures occur per year. These data indicate a gradual increase over the past 10 years." for the US.

The FDA banned lithium as a medication for many years due to its toxicity. Overdoses are a risk. Most MSDS sheets say something like this:

"Corrosive. Causes eye and skin burns. Water-reactive. Reacts violently and/or explosively with water, steam or moisture. May ignite or explode on contact with moist air. May cause severe respiratory tract irritation with possible burns. May cause severe digestive tract irritation with possible burns. May cause central nervous system effects. May cause lung damage. Light sensitive. May cause kidney damage. May cause pulmonary edema. "

As lithium carbonate it is only slightly safer.


On Apr 22 03:50 PM speculawyer wrote:

> Indeed, I think you hit on one of the most important points in your
> 'fourth' section. The amount of lithium in a lithium iron phosphate
> battery (the most promising Li-Ion battery for automotive applications)
> is relatively small. Less than 12% of a lithium iron phosphate battery
> is made up of lithium. The Iron, the phosphorous, and other less
> expensive materials make up the bulk of such batteries.
>
> Altaman, lithium is NOT highly toxic nor very expensive. In fact
> lithium is used as a medication for people with bi-polar disorder.
> Of course too much of any one thing, including water, can kill you.
> Lithium is NOT considered a highly toxic chemical.]]> Wed, 22 Apr 2009 17:27:10 -0400 "An estimated 10,000 toxic exposures occur per year. These data indicate a gradual increase over the past 10 years." for the US.

The FDA banned lithium as a medication for many years due to its toxicity. Overdoses are a risk. Most MSDS sheets say something like this:

"Corrosive. Causes eye and skin burns. Water-reactive. Reacts violently and/or explosively with water, steam or moisture. May ignite or explode on contact with moist air. May cause severe respiratory tract irritation with possible burns. May cause severe digestive tract irritation with possible burns. May cause central nervous system effects. May cause lung damage. Light sensitive. May cause kidney damage. May cause pulmonary edema. "

As lithium carbonate it is only slightly safer.


On Apr 22 03:50 PM speculawyer wrote:

> Indeed, I think you hit on one of the most important points in your
> 'fourth' section. The amount of lithium in a lithium iron phosphate
> battery (the most promising Li-Ion battery for automotive applications)
> is relatively small. Less than 12% of a lithium iron phosphate battery
> is made up of lithium. The Iron, the phosphorous, and other less
> expensive materials make up the bulk of such batteries.
>
> Altaman, lithium is NOT highly toxic nor very expensive. In fact
> lithium is used as a medication for people with bi-polar disorder.
> Of course too much of any one thing, including water, can kill you.
> Lithium is NOT considered a highly toxic chemical.]]> http://seekingalpha.com/article/132319-response-to-jack-lifton-s-lithium-batteries-nothing-but-illusion?source=feed#comment-473291 473291
What neither of you seems to be explaining is that reserves are entirely based on economics. If lithium goes to the price of gold, there will be plenty of it available. However, I don't think many automotive applications will support a dramatically higher price for lithium. Lithium supply is currently expected to fall at least 30% below demand by at least one producer (Admiralty). The automotive market would likely destroy itself by creating more demand than the market can hope to supply.

Rather than debating and inferring definitions about reserves and resources, here is the AGI definition:
Reserves: Identified resources that can be extracted profitably with existing technology (my note: understand that as price goes up, so do reserves)
Resource: Reserves plus all other mineral deposits that may eventually become available.

There are plenty of lithium resources, since it is present in seawater. There are NOT plenty of reserves, since it can't be extracted from MOST resources profitably.

If any of you care to read a CURRENT resource/reserve estimate please read this (any 1992 estimates are based on seriously obsolete economics and are WRONG for that reason among others):
www.meridian-int-res.c...


]]> Wed, 22 Apr 2009 17:18:45 -0400
What neither of you seems to be explaining is that reserves are entirely based on economics. If lithium goes to the price of gold, there will be plenty of it available. However, I don't think many automotive applications will support a dramatically higher price for lithium. Lithium supply is currently expected to fall at least 30% below demand by at least one producer (Admiralty). The automotive market would likely destroy itself by creating more demand than the market can hope to supply.

Rather than debating and inferring definitions about reserves and resources, here is the AGI definition:
Reserves: Identified resources that can be extracted profitably with existing technology (my note: understand that as price goes up, so do reserves)
Resource: Reserves plus all other mineral deposits that may eventually become available.

There are plenty of lithium resources, since it is present in seawater. There are NOT plenty of reserves, since it can't be extracted from MOST resources profitably.

If any of you care to read a CURRENT resource/reserve estimate please read this (any 1992 estimates are based on seriously obsolete economics and are WRONG for that reason among others):
www.meridian-int-res.c...


]]> http://seekingalpha.com/article/131593-as-natural-gas-prices-decline-natural-gas-stocks-rise?source=feed#comment-469698 469698
I see no real progress in Washington towards encouraging natural gas use. Most of the actions taken in Washington so far this year will hurt both domestic natural gas producers and domestic oil producers, and give Canada and other sources of imports an economic advantage.

The one thing that is still a wild card in all of this is that pesky decline curve on shale gas wells. While shale gas added tremendously to production last year, most of those wells have anywhere from 60-80% annual declines. It takes continuous drilling to keep most gas shale plays producing steadily. The gas shale effect could go away by the end of this year.

I'm holding the natural gas stocks I have (I have a large position in coal bed methane), but not buying more for now. I think we will see more declines before we see the next bull market for gas. In fact, I think we are going to see a serious shake-out with a few natural gas producers going broke this year as they watch their leases expire undrllled, or desperately try to drill to hold the leases at a loss. ]]> Mon, 20 Apr 2009 11:15:56 -0400
I see no real progress in Washington towards encouraging natural gas use. Most of the actions taken in Washington so far this year will hurt both domestic natural gas producers and domestic oil producers, and give Canada and other sources of imports an economic advantage.

The one thing that is still a wild card in all of this is that pesky decline curve on shale gas wells. While shale gas added tremendously to production last year, most of those wells have anywhere from 60-80% annual declines. It takes continuous drilling to keep most gas shale plays producing steadily. The gas shale effect could go away by the end of this year.

I'm holding the natural gas stocks I have (I have a large position in coal bed methane), but not buying more for now. I think we will see more declines before we see the next bull market for gas. In fact, I think we are going to see a serious shake-out with a few natural gas producers going broke this year as they watch their leases expire undrllled, or desperately try to drill to hold the leases at a loss. ]]> http://seekingalpha.com/article/127285-li-ion-batteries-and-how-cheap-beat-cool-in-the-chevy-volt?source=feed#comment-465510 465510
The brine operation in Nevada still operates, but it does not sell lithium on the open market. The operator consumes all of its own production.

The USGS report from 1994 is completely out-of-date, obsolete and irrelevant. You really need to read some recent references.

Unless lithium prices rise enough for hard rock mines to be economic I will stick to my point. The brine-resources are not large enough to supply an automotive lithium battery market as well as the electronics market they already supply. If lithium were to rise in price to hundreds of dollars per lb. for battery grade, then the hard rock miners might come back into the market. However, that is unlikely to be in the US because the regulatory environment makes US hard rock mining uncompetitive. How do the economics for car battery packs work at $100 per lb? $200/lb? $500/lb?


On Mar 28 01:23 PM NorthernPiker wrote:

> carbonates, lithium is not a rare metal. It is marginally more abundant
> than lead in the earth’s crust and vastly more abundant than lead
> in seawater. Based, on the 1994 domestic US price of $4.41 per kilogram
> (up from $4.21 in ’93), it can be mined economically; however, mining
> cannot compete with a cheaper brine operation.
>
> Prior to 1997, the major producer of lithium was the US, from two
> sources – a brine operation in Nevada and a mining operation in North
> Carolina. The NC mine shut down in 1997 because it could not compete
> with the growing brine operations in Chili. This blog claims that
> North Carolina has reserves of 2.6 million tons of lithium, ½ the
> reserves of Bolivia.
>
> www.nicholas.duke.edu/...
>
>
>
> From the USGS 1994 yearbook:
> “The United States has been the largest producer and consumer of
> lithium and the two U.S. companies have been the leading lithium
> carbonate producers in the world for many years.” …
>
> “Lithium carbonate, … Truckload lots, delivered $2.00 (per/ lb)”
>
>
>
> minerals.usgs.gov/mine...
>
> ]]> Thu, 16 Apr 2009 14:19:28 -0400
The brine operation in Nevada still operates, but it does not sell lithium on the open market. The operator consumes all of its own production.

The USGS report from 1994 is completely out-of-date, obsolete and irrelevant. You really need to read some recent references.

Unless lithium prices rise enough for hard rock mines to be economic I will stick to my point. The brine-resources are not large enough to supply an automotive lithium battery market as well as the electronics market they already supply. If lithium were to rise in price to hundreds of dollars per lb. for battery grade, then the hard rock miners might come back into the market. However, that is unlikely to be in the US because the regulatory environment makes US hard rock mining uncompetitive. How do the economics for car battery packs work at $100 per lb? $200/lb? $500/lb?


On Mar 28 01:23 PM NorthernPiker wrote:

> carbonates, lithium is not a rare metal. It is marginally more abundant
> than lead in the earth’s crust and vastly more abundant than lead
> in seawater. Based, on the 1994 domestic US price of $4.41 per kilogram
> (up from $4.21 in ’93), it can be mined economically; however, mining
> cannot compete with a cheaper brine operation.
>
> Prior to 1997, the major producer of lithium was the US, from two
> sources – a brine operation in Nevada and a mining operation in North
> Carolina. The NC mine shut down in 1997 because it could not compete
> with the growing brine operations in Chili. This blog claims that
> North Carolina has reserves of 2.6 million tons of lithium, ½ the
> reserves of Bolivia.
>
> www.nicholas.duke.edu/...
>
>
>
> From the USGS 1994 yearbook:
> “The United States has been the largest producer and consumer of
> lithium and the two U.S. companies have been the leading lithium
> carbonate producers in the world for many years.” …
>
> “Lithium carbonate, … Truckload lots, delivered $2.00 (per/ lb)”
>
>
>
> minerals.usgs.gov/mine...
>
> ]]> http://seekingalpha.com/article/127285-li-ion-batteries-and-how-cheap-beat-cool-in-the-chevy-volt?source=feed#comment-465498 465498

On Mar 28 08:39 PM NorthernPiker wrote:

> John, I share somewhat your lack of qualifications to speak to mining
> costs.
>
> Based on the USGS 1994 Yearbook, “Production of lithium carbonate
> from brine in Nevada (and the Andes, I assume) is much less energy
> intensive (and simpler) than the production from the spodumene” (the
> ore type found in North Carolina).
>
> minerals.usgs.gov/mine...
>
>
> As for what mining production costs are, I have only a press release
> from Western Lithium Corporation on drilling results for one of the
> five deposits (lenses) at its King’s Valley hectorite clay property
> in Nevada. (Yeah, it’s not even spodumene but it is an ore.)
>
> “The PCD lens contains Indicated Resources of 48.1 million tonnes
> grading 0.27% lithium, or the lithium carbonate equivalent (seekingalpha.com/symbo...)
> of 688,000 tonnes LCE and Inferred Resources of 42.3 million tonnes
> grading 0.27% lithium, for an equivalent of 606,000 tonnes LCE, both
> at a cut-off grade of 0.20% Lithium.”
>
> “Economic assumptions for base-case cutoff grade (high-lighted),
> $3.50 Lithium Carbonate USD/lb, 60% metallurgical recovery; $45 USD/ton
> processing, $2 USD/ton Mining; Rounding errors may exist”
>
> finance.yahoo.com/news...
>
>
>
> Below a price of $4.50 per lb. or $10/kg (seekingalpha.com/symbo...),
> this ore body seems somewhat marginal when one considers capital
> needs, the ongoing drilling costs and risks – market pricing, energy
> cost escalation, … However, they may be able to tap into battery
> stimulus money to improve the project economics. The development
> of this significant lithium ore body would help to prevent the pricing
> of LCE from going absolutely silly.
>
> John, I agree that it would be good to hear from some mining engineers.
> ]]> Thu, 16 Apr 2009 14:09:50 -0400

On Mar 28 08:39 PM NorthernPiker wrote:

> John, I share somewhat your lack of qualifications to speak to mining
> costs.
>
> Based on the USGS 1994 Yearbook, “Production of lithium carbonate
> from brine in Nevada (and the Andes, I assume) is much less energy
> intensive (and simpler) than the production from the spodumene” (the
> ore type found in North Carolina).
>
> minerals.usgs.gov/mine...
>
>
> As for what mining production costs are, I have only a press release
> from Western Lithium Corporation on drilling results for one of the
> five deposits (lenses) at its King’s Valley hectorite clay property
> in Nevada. (Yeah, it’s not even spodumene but it is an ore.)
>
> “The PCD lens contains Indicated Resources of 48.1 million tonnes
> grading 0.27% lithium, or the lithium carbonate equivalent (seekingalpha.com/symbo...)
> of 688,000 tonnes LCE and Inferred Resources of 42.3 million tonnes
> grading 0.27% lithium, for an equivalent of 606,000 tonnes LCE, both
> at a cut-off grade of 0.20% Lithium.”
>
> “Economic assumptions for base-case cutoff grade (high-lighted),
> $3.50 Lithium Carbonate USD/lb, 60% metallurgical recovery; $45 USD/ton
> processing, $2 USD/ton Mining; Rounding errors may exist”
>
> finance.yahoo.com/news...
>
>
>
> Below a price of $4.50 per lb. or $10/kg (seekingalpha.com/symbo...),
> this ore body seems somewhat marginal when one considers capital
> needs, the ongoing drilling costs and risks – market pricing, energy
> cost escalation, … However, they may be able to tap into battery
> stimulus money to improve the project economics. The development
> of this significant lithium ore body would help to prevent the pricing
> of LCE from going absolutely silly.
>
> John, I agree that it would be good to hear from some mining engineers.
> ]]> http://seekingalpha.com/article/130558-homes-vs-businesses-which-are-better-targets-for-reducing-energy-use?source=feed#comment-460862 460862
I agree that industrial users have good incentive to reduce energy usage. However, there are large parts of the commercial market that will have a very difficult time cutting energy usage. One of the major reason is the traditional way leases are handled in buildings with more than one tenant. Where the leases are triple-net, many of the costs of running the building are shared on a pro-rated basis by the tenants, leaving no incentive for the tenants to cut energy usage, as the other tenants might offset their savings. The landlord has no incentive to save money because they are not paying the energy costs, and upgrading equipment to save energy will be considered a capital improvement, not maintenance, so upgrading will provide no direct benefit to the property owner. ]]> Sun, 12 Apr 2009 17:49:01 -0400
I agree that industrial users have good incentive to reduce energy usage. However, there are large parts of the commercial market that will have a very difficult time cutting energy usage. One of the major reason is the traditional way leases are handled in buildings with more than one tenant. Where the leases are triple-net, many of the costs of running the building are shared on a pro-rated basis by the tenants, leaving no incentive for the tenants to cut energy usage, as the other tenants might offset their savings. The landlord has no incentive to save money because they are not paying the energy costs, and upgrading equipment to save energy will be considered a capital improvement, not maintenance, so upgrading will provide no direct benefit to the property owner. ]]> http://seekingalpha.com/article/130552-testing-plug-in-hybrids-what-the-results-mean?source=feed#comment-460847 460847
The real problem with these battery powered cars is that the natural resources to build large numbers of lithium ion batteries do not exist (at least not until the price of lithium starts approaching the value of gold or platinum). The entire battery grade output of one of the major lithium producers (there are only a few) will be needed to build only a few hundred thousand cars per year. The electronics industry already consumes most of the supply. Until a realistic battery solution that relies on materials that are actually available exists, this has only a small-scale potential and will be limited to the high-end market.

Of course, for about $1,000 conversion, and another $2,000 to $3,000 for a home fueling station I can convert a street legal vehicle to natural gas and fuel it up at home from my natural gas line, improving my mileage, reducing my emissions, and saving money. Actually, I can buy CNG vehicles fairly cheaply already on the used car market. ]]> Sun, 12 Apr 2009 17:31:37 -0400
The real problem with these battery powered cars is that the natural resources to build large numbers of lithium ion batteries do not exist (at least not until the price of lithium starts approaching the value of gold or platinum). The entire battery grade output of one of the major lithium producers (there are only a few) will be needed to build only a few hundred thousand cars per year. The electronics industry already consumes most of the supply. Until a realistic battery solution that relies on materials that are actually available exists, this has only a small-scale potential and will be limited to the high-end market.

Of course, for about $1,000 conversion, and another $2,000 to $3,000 for a home fueling station I can convert a street legal vehicle to natural gas and fuel it up at home from my natural gas line, improving my mileage, reducing my emissions, and saving money. Actually, I can buy CNG vehicles fairly cheaply already on the used car market. ]]> http://seekingalpha.com/article/130559-first-ever-solar-city-planned-for-sunshine-state?source=feed#comment-460808 460808 Sun, 12 Apr 2009 16:38:20 -0400 http://seekingalpha.com/article/127907-don-t-bet-on-a-big-rally-for-alt-energy-stocks-this-year?source=feed#comment-441379 441379
One comment above suggested natural gas is in decline in Canada and Europe, but is very much incorrect. The reserves discovered in British Columbia in the Horn River and Montney are huge (hundreds of Tcf's), and any increase in price for natural gas will result in production increases. Similar reserves are being found in eastern Canada, the Marcellus, the Haynesville, and currently Europe is the next new frontier for gas shales. Even the Middle East is getting in on the action, with Saudi Arabia beginning to explore its shale resources. Africa, China, South America, and India are still waiting to be explored for shale gas with this new paradigm. World supply of natural gas is not at all similar to oil, and will not be in decline for decades. Even EIA is predicting that over 50% of US natural gas supplies will come from gas shales within the next 4 years. The world will soon follow that trend.

Don't count on alt energy having a smooth ride up. Existing energy resources are still cheap and abundant and will continue to compete strongly with alt energy, even if carbon taxes are added to the cost. The cost of drilling a gas well is still less than the cost of building a windmill, and the resulting energy resource is still larger. ]]> Thu, 26 Mar 2009 14:46:03 -0400
One comment above suggested natural gas is in decline in Canada and Europe, but is very much incorrect. The reserves discovered in British Columbia in the Horn River and Montney are huge (hundreds of Tcf's), and any increase in price for natural gas will result in production increases. Similar reserves are being found in eastern Canada, the Marcellus, the Haynesville, and currently Europe is the next new frontier for gas shales. Even the Middle East is getting in on the action, with Saudi Arabia beginning to explore its shale resources. Africa, China, South America, and India are still waiting to be explored for shale gas with this new paradigm. World supply of natural gas is not at all similar to oil, and will not be in decline for decades. Even EIA is predicting that over 50% of US natural gas supplies will come from gas shales within the next 4 years. The world will soon follow that trend.

Don't count on alt energy having a smooth ride up. Existing energy resources are still cheap and abundant and will continue to compete strongly with alt energy, even if carbon taxes are added to the cost. The cost of drilling a gas well is still less than the cost of building a windmill, and the resulting energy resource is still larger. ]]> http://seekingalpha.com/article/127638-department-of-energy-technology-metals-subsidy-program-is-short-sighted?source=feed#comment-438800 438800
"H.R. 2262, unveiled Thursday by House Natural Resources Chairman Nick J. Rahall, would greatly expand the power and authority of a law--originally aimed at encouraging U.S. mining on public lands-to ban any mining and exploration on public lands deemed to be environmentally sensitive."

If you think $475B was a lot for imported oil, wait until you see what is coming when we not only don't produce domestic oil, but don't produce any commodities other than agricultural ones!

See: www.mineweb.com/minewe...]]> Tue, 24 Mar 2009 17:43:33 -0400
"H.R. 2262, unveiled Thursday by House Natural Resources Chairman Nick J. Rahall, would greatly expand the power and authority of a law--originally aimed at encouraging U.S. mining on public lands-to ban any mining and exploration on public lands deemed to be environmentally sensitive."

If you think $475B was a lot for imported oil, wait until you see what is coming when we not only don't produce domestic oil, but don't produce any commodities other than agricultural ones!

See: www.mineweb.com/minewe...]]> http://seekingalpha.com/article/127285-li-ion-batteries-and-how-cheap-beat-cool-in-the-chevy-volt?source=feed#comment-438615 438615
If lithium were to increase in price by an order of magnitude it might become economic to go after resources where the concentration of lithium is in the tens or hundreds of parts per million, rather than the thousands of parts per million that are currently extracted. Add another order of magnitude of price increase and 1 to 10 ppm might become economic. Even with this idea in mind, recovery of these low concentration reserves is often a very small percentage of the resource. The simple fact is, it is very unlikely the supplies of lithium will ever allow lithium batteries to dominate the EV market.

The other risk of that these battery manufacturers will experience is that an OPEC equivalent in lithium may eventually be formed. South American countries that produce most of the world's lithium supply could easily demand that lithium batteries be manufactured in their countries as a condition of obtaining the supply. As an investor, I have no interest in the battery manufacturers, as they will be at the full mercy of the mining companies that control the supply.

All this technology is great, but if you can't grow it you have to mine it. And if you can't mine it, you can't build it. ]]> Tue, 24 Mar 2009 15:15:28 -0400
If lithium were to increase in price by an order of magnitude it might become economic to go after resources where the concentration of lithium is in the tens or hundreds of parts per million, rather than the thousands of parts per million that are currently extracted. Add another order of magnitude of price increase and 1 to 10 ppm might become economic. Even with this idea in mind, recovery of these low concentration reserves is often a very small percentage of the resource. The simple fact is, it is very unlikely the supplies of lithium will ever allow lithium batteries to dominate the EV market.

The other risk of that these battery manufacturers will experience is that an OPEC equivalent in lithium may eventually be formed. South American countries that produce most of the world's lithium supply could easily demand that lithium batteries be manufactured in their countries as a condition of obtaining the supply. As an investor, I have no interest in the battery manufacturers, as they will be at the full mercy of the mining companies that control the supply.

All this technology is great, but if you can't grow it you have to mine it. And if you can't mine it, you can't build it. ]]> http://seekingalpha.com/article/127221-who-will-supply-the-batteries-for-plug-in-cars?source=feed#comment-438140 438140
Lithium is recovered from ground water in these dry lake beds (salars) by pumping and drying in evaporation ponds. Rich areas contain about 4000 ppm of lithium in the brine, and the deposits are not consistent across the salar. There are lithium operations in Nevada (one small one) and three in China. North Carolina had a producer that mined spodumene instead of brine that ceased being economic in the 1980's. Australia has a spodumene mine that has a moderate sized deposit of lithium. Other possible reserves are in places like Russia and Zimbabwe. The Great Salt Lake (Utah) and the Salton Sea (California) are two possible reserves, but environmental standards are unlikely to allow these to be exploited.

The brine operators of South America have made the hard rock mine operators uneconomic (except where lithium is a by-product). If lithium prices were to rise an order of magnitude (not a few cents), some hard rock mines might come back. Recoverable reserves of the brine producers are probably no more than 1 million tonnes, while world reserves may be more like 4 million tonnes. You will see wildly larger numbers from some sources, but these are highly inaccurate. Currently to build 90,000 GM Volts, it requires about 2000 tonnes of battery grade lithium carbonate. That is the full annual production of battery grade lithium of one operator, Admiralty Resources (ADY). Lithium is also used in glass, ceramics, lubricants, and in specialty aircraft alloys, so batteries are not the only market.

All that said, for investors, lithium miners are probably a good bet going forward, as demand is going nowhere but up and supply is unlikely to increase dramatically if prices rise. Producers include SQM, FMC, ADY, Chemetalle, CITIC Guon MGL, Talison Minerals, Galaxy Resources, Bikita Minerals, Tanco, Avalon Ventures, and others. Just do your own due diligence, as mileage may vary due to the vagaries of the mining business. ]]> Tue, 24 Mar 2009 11:00:21 -0400
Lithium is recovered from ground water in these dry lake beds (salars) by pumping and drying in evaporation ponds. Rich areas contain about 4000 ppm of lithium in the brine, and the deposits are not consistent across the salar. There are lithium operations in Nevada (one small one) and three in China. North Carolina had a producer that mined spodumene instead of brine that ceased being economic in the 1980's. Australia has a spodumene mine that has a moderate sized deposit of lithium. Other possible reserves are in places like Russia and Zimbabwe. The Great Salt Lake (Utah) and the Salton Sea (California) are two possible reserves, but environmental standards are unlikely to allow these to be exploited.

The brine operators of South America have made the hard rock mine operators uneconomic (except where lithium is a by-product). If lithium prices were to rise an order of magnitude (not a few cents), some hard rock mines might come back. Recoverable reserves of the brine producers are probably no more than 1 million tonnes, while world reserves may be more like 4 million tonnes. You will see wildly larger numbers from some sources, but these are highly inaccurate. Currently to build 90,000 GM Volts, it requires about 2000 tonnes of battery grade lithium carbonate. That is the full annual production of battery grade lithium of one operator, Admiralty Resources (ADY). Lithium is also used in glass, ceramics, lubricants, and in specialty aircraft alloys, so batteries are not the only market.

All that said, for investors, lithium miners are probably a good bet going forward, as demand is going nowhere but up and supply is unlikely to increase dramatically if prices rise. Producers include SQM, FMC, ADY, Chemetalle, CITIC Guon MGL, Talison Minerals, Galaxy Resources, Bikita Minerals, Tanco, Avalon Ventures, and others. Just do your own due diligence, as mileage may vary due to the vagaries of the mining business. ]]> http://seekingalpha.com/article/127221-who-will-supply-the-batteries-for-plug-in-cars?source=feed#comment-437411 437411
I really don't give a #*%@ who supplies the batteries for electric cars. Who will supply the raw materials? It will take major changes in the price of lithium to make the less concentrated lithium sources economic for mining, and at that point, it is likely that the cars will also be uneconomic. If you can't grow it, you have to mine it and if you can't mine it, you can't build it.
]]> Mon, 23 Mar 2009 19:42:34 -0400
I really don't give a #*%@ who supplies the batteries for electric cars. Who will supply the raw materials? It will take major changes in the price of lithium to make the less concentrated lithium sources economic for mining, and at that point, it is likely that the cars will also be uneconomic. If you can't grow it, you have to mine it and if you can't mine it, you can't build it.
]]> http://seekingalpha.com/article/125439-book-review-robert-hefner-s-the-grand-energy-transition?source=feed#comment-424683 424683
Currently natural gas is the only fuel that can be used to quickly supply electric power when demand rises unexpectedly. Wind power, solar, nuclear, hydroelectric, and even coal cannot do that as quickly as natural gas. Currently natural gas is the cheapest source of hydrogen. In effect, burning natural gas IS burning hydrogen as most of the energy comes from the 4 hydrogen bonds.

There is no reason that natural gas cannot be used to substitute for transportation fuel (gasoline and diesel), yet wind and solar cannot do that with any efficiency. I converted my vehicle to natural gas in 1974. Large fleets of buses and garbage trucks in my area have been converted for years.

The real problem for natural gas is that the current administration is throwing the baby out with the bath water, by limiting natural gas production and doing nothing to improve natural gas distribution systems. Currently the natural gas industry is facing higher taxes, serious restrictions on technology applications, revocation of Federal leases, increasing royalties and severance taxes at both federal and state levels, and a supply glut that is forcing most producers to stop drilling and cancel programs that would have been our supply several years from now. Boom and bust, while decried by Obama, seems to be the real result of his administrations policies for the natural gas industry. Maybe Al Gore (who was once a proponent of natural gas) needs to read this book so that maybe the Whitehouse will get the message. ]]> Fri, 13 Mar 2009 13:02:36 -0400
Currently natural gas is the only fuel that can be used to quickly supply electric power when demand rises unexpectedly. Wind power, solar, nuclear, hydroelectric, and even coal cannot do that as quickly as natural gas. Currently natural gas is the cheapest source of hydrogen. In effect, burning natural gas IS burning hydrogen as most of the energy comes from the 4 hydrogen bonds.

There is no reason that natural gas cannot be used to substitute for transportation fuel (gasoline and diesel), yet wind and solar cannot do that with any efficiency. I converted my vehicle to natural gas in 1974. Large fleets of buses and garbage trucks in my area have been converted for years.

The real problem for natural gas is that the current administration is throwing the baby out with the bath water, by limiting natural gas production and doing nothing to improve natural gas distribution systems. Currently the natural gas industry is facing higher taxes, serious restrictions on technology applications, revocation of Federal leases, increasing royalties and severance taxes at both federal and state levels, and a supply glut that is forcing most producers to stop drilling and cancel programs that would have been our supply several years from now. Boom and bust, while decried by Obama, seems to be the real result of his administrations policies for the natural gas industry. Maybe Al Gore (who was once a proponent of natural gas) needs to read this book so that maybe the Whitehouse will get the message. ]]> http://seekingalpha.com/article/125296-opportunities-in-the-oil-sector?source=feed#comment-422101 422101
International operators (majors and independents) will actually benefit from the current US political climate, being able to operate outside of the US restrictions while supplying the US market. The primary result of the current policies that are being imposed is that the US will rely much more heavily on imports in the future.

I am not bullish on service companies like RIG. Right now the drilling and service companies are looking at a major downturn in work. While they have still got some work continuing from last years high priced market, as soon as those contracts end, they are likely to be laid down. Just about every oil and gas producer out there is dramatically reducing costs, and the first place they will look will be service companies.

]]> Wed, 11 Mar 2009 14:52:52 -0400
International operators (majors and independents) will actually benefit from the current US political climate, being able to operate outside of the US restrictions while supplying the US market. The primary result of the current policies that are being imposed is that the US will rely much more heavily on imports in the future.

I am not bullish on service companies like RIG. Right now the drilling and service companies are looking at a major downturn in work. While they have still got some work continuing from last years high priced market, as soon as those contracts end, they are likely to be laid down. Just about every oil and gas producer out there is dramatically reducing costs, and the first place they will look will be service companies.

]]> http://seekingalpha.com/article/122525-nobel-laureate-penzias-u-s-needs-a-1-a-gallon-gas-tax?source=feed#comment-403436 403436
Nothing he says makes sense in terms of science, only in politics. ]]> Wed, 25 Feb 2009 14:55:27 -0500
Nothing he says makes sense in terms of science, only in politics. ]]> http://seekingalpha.com/article/104971-investing-in-wind-energy-when-will-growth-peak?source=feed#comment-301565 301565
Manufacturing of equipment, availability of capital, capacity of local and long distance power infrastructure, NIMBY problems that require months and years of public hearings, environmental hurdles such as Environmental Impact Statements (often requiring a year or more of preparation), leasing of land from landowners, building of roads, species impacts such as those on bats and birds (not to mention endangered species like Kangaroo Rats and Mojave Ground Squirrels), Federal leasing requirements, local and state government regulations and permits, time required for actual site research into wind patterns to justify economics of projects, time limitations on field and construction access caused by wildlife breeding periods (required by Federal regulations), lack of trained installation personnel who are willing to work 200 ft in the air, insurance and liability issues, transportation limits that restrict the size of equipment that can be moved in many areas, bad weather and myriad other problems are quite likely to limit the growth rate to a much smaller number and will eventually impose a maximum growth rate, probably long before 2016. As the overall annual growth increases, it is likely to be a smaller and smaller percentage of the year before leaving the total installed capacity to grow in a pattern resembling a natural log, rather than being exponential as you suggest. Dream on. ]]> Sun, 09 Nov 2008 23:31:29 -0500
Manufacturing of equipment, availability of capital, capacity of local and long distance power infrastructure, NIMBY problems that require months and years of public hearings, environmental hurdles such as Environmental Impact Statements (often requiring a year or more of preparation), leasing of land from landowners, building of roads, species impacts such as those on bats and birds (not to mention endangered species like Kangaroo Rats and Mojave Ground Squirrels), Federal leasing requirements, local and state government regulations and permits, time required for actual site research into wind patterns to justify economics of projects, time limitations on field and construction access caused by wildlife breeding periods (required by Federal regulations), lack of trained installation personnel who are willing to work 200 ft in the air, insurance and liability issues, transportation limits that restrict the size of equipment that can be moved in many areas, bad weather and myriad other problems are quite likely to limit the growth rate to a much smaller number and will eventually impose a maximum growth rate, probably long before 2016. As the overall annual growth increases, it is likely to be a smaller and smaller percentage of the year before leaving the total installed capacity to grow in a pattern resembling a natural log, rather than being exponential as you suggest. Dream on. ]]> http://seekingalpha.com/article/104939-fossil-fuels-vs-green-energy-what-s-a-better-investment?source=feed#comment-301483 301483
The other comment I have is that while demand destruction was a significant factor early in the decline of energy prices, it is no longer an important factor. The new problem, and what will drive prices upward as the economy inches upward, will be supply destruction in oil and gas. The current low prices will destroy much of the planned supply additions (exploration projects) that were being put together over the past two years of rising prices. The next cycle in oil and gas is likely to be much more extreme, while it may be a recession away.

The plans of Obama to tax "windfall" profits of oil and gas producers in the US may be dashed, suggesting his proposed economic support for the alternative energy sector may also never come to pass. I don't expect profits of the oil and gas sector to remain high after the forward selling of oil and gas that many producers have utilized run out. By 1st Quarter '09 this profit will be gone. Natural gas producers in the US are going to be particularly hard hit, especially in the marginal resource plays, as production this year is up almost 10%, and if demand does not go up, they will be forced to either cut production or produce at lower margins. Not even T. Boone Pickens will be able to change this market, as his ideas, while excellent, depend on building infrastructure that will take years. ]]> Sun, 09 Nov 2008 20:48:05 -0500
The other comment I have is that while demand destruction was a significant factor early in the decline of energy prices, it is no longer an important factor. The new problem, and what will drive prices upward as the economy inches upward, will be supply destruction in oil and gas. The current low prices will destroy much of the planned supply additions (exploration projects) that were being put together over the past two years of rising prices. The next cycle in oil and gas is likely to be much more extreme, while it may be a recession away.

The plans of Obama to tax "windfall" profits of oil and gas producers in the US may be dashed, suggesting his proposed economic support for the alternative energy sector may also never come to pass. I don't expect profits of the oil and gas sector to remain high after the forward selling of oil and gas that many producers have utilized run out. By 1st Quarter '09 this profit will be gone. Natural gas producers in the US are going to be particularly hard hit, especially in the marginal resource plays, as production this year is up almost 10%, and if demand does not go up, they will be forced to either cut production or produce at lower margins. Not even T. Boone Pickens will be able to change this market, as his ideas, while excellent, depend on building infrastructure that will take years. ]]> http://seekingalpha.com/article/100670-was-peak-oil-a-multi-billion-dollar-hoax?source=feed#comment-286329 286329
The real question is how realistic 100 years really is, and at what price level we can expect. At $200 a barrel, it is very much more likely we have 100 years supply, as this will allow many now marginal operations to be profitable. The current price decline will definitely affect oil company future planning for the next few years, likely producing yet another traumatic upward cycle in prices as demand destruction abates and drilling activity slows to match current price levels.

I've attended a number of presentations like this from the Saudis for several years. This is not news. They have contended they can keep growing production slightly for several more decades. Yet only recently it looked as is they too had reached a current maximum capacity. They too rely on higher prices to be able to apply cutting edge technology and saying that they can keep producing 10 or more million bbls a day doesn't mean they will if oil hits $50. That also does not mean they can keep up with world demand when it grows faster than they can drill.

There are two things that are certain here. Oil is finite. Prices will change. Meanwhile, hang on because we are on a roller coaster ride that likely will see faster cycles than it has in the past. Oil prices have not decoupled from the world's economic growth rate (consumption patterns still match GDP), but still merely reflect it. That may be the nuance that those who came late to the "peak oil" picture did not understand. When demand outstrips production, and it will happen again, we can expect to see new record levels of high prices for oil, followed by increased production from new sources and demand destruction. Rinse and repeat. It isn't going to be a smooth curve. ]]> Mon, 20 Oct 2008 11:19:41 -0400
The real question is how realistic 100 years really is, and at what price level we can expect. At $200 a barrel, it is very much more likely we have 100 years supply, as this will allow many now marginal operations to be profitable. The current price decline will definitely affect oil company future planning for the next few years, likely producing yet another traumatic upward cycle in prices as demand destruction abates and drilling activity slows to match current price levels.

I've attended a number of presentations like this from the Saudis for several years. This is not news. They have contended they can keep growing production slightly for several more decades. Yet only recently it looked as is they too had reached a current maximum capacity. They too rely on higher prices to be able to apply cutting edge technology and saying that they can keep producing 10 or more million bbls a day doesn't mean they will if oil hits $50. That also does not mean they can keep up with world demand when it grows faster than they can drill.

There are two things that are certain here. Oil is finite. Prices will change. Meanwhile, hang on because we are on a roller coaster ride that likely will see faster cycles than it has in the past. Oil prices have not decoupled from the world's economic growth rate (consumption patterns still match GDP), but still merely reflect it. That may be the nuance that those who came late to the "peak oil" picture did not understand. When demand outstrips production, and it will happen again, we can expect to see new record levels of high prices for oil, followed by increased production from new sources and demand destruction. Rinse and repeat. It isn't going to be a smooth curve. ]]> http://seekingalpha.com/article/97390-need-gold-check-your-fed-holdings?source=feed#comment-265334 265334
From the website:
www.spdrgoldshares.com.../


SPDR® Gold Shares
Objective Designed to track the price of gold (net of Trust expenses)
Structure Continuously offered investment trust
Symbol GLD
Exchange New York Stock Exchange Arca
Initial Pricing Based on the price of 1/10th of an ounce of gold
Minimum order 1 share
Short Sale Eligible Yes
Margin Eligible Yes
Estimated Expenses 0.40%*

Obviously, there is no guarantee that each share matches 1/10 ounce of gold. I have already noticed that it does not exactly match that based on spot. It seems to vary by a significant amount from gold spot at times during the day. This is a problem I have noticed with other ETF's based on various commodities (like oil for example). ]]> Thu, 25 Sep 2008 19:38:41 -0400
From the website:
www.spdrgoldshares.com.../


SPDR® Gold Shares
Objective Designed to track the price of gold (net of Trust expenses)
Structure Continuously offered investment trust
Symbol GLD
Exchange New York Stock Exchange Arca
Initial Pricing Based on the price of 1/10th of an ounce of gold
Minimum order 1 share
Short Sale Eligible Yes
Margin Eligible Yes
Estimated Expenses 0.40%*

Obviously, there is no guarantee that each share matches 1/10 ounce of gold. I have already noticed that it does not exactly match that based on spot. It seems to vary by a significant amount from gold spot at times during the day. This is a problem I have noticed with other ETF's based on various commodities (like oil for example). ]]> http://seekingalpha.com/article/96685-why-drill-baby-drill-does-not-translate-into-effective-national-energy-policy?source=feed#comment-262964 262964
Likewise, I can shift my investment portfolio from US oil producers to foreign producers that will benefit from having a larger market share in the US. As US production goes into even higher declines, oil will no doubt go higher and I will continue to benefit in my portfolio. I can even start collecting my paycheck in Euros or Swiss francs!

Also inherent in your position is the shift away from environmentally responsible oil and gas production within a strongly regulated framework, to production in areas where there is no environmental regulation. Russia still considers plowing on-shore oil spills under with a tractor to be "spill remediation." Other countries I have worked in tolerate lakes covered with 12 inches of oil as the cost of doing business. Your attitude only supports this lack of responsibility and will hasten the decline of the worldwide environment.

Meanwhile, you seem to suggest the US stop using oil, or alternatively import more oil, as for some reason drilling seems to upset you. You would prefer to take the point of view that since we can't produce all of what we need, we should not even try.

I can easily change the way I live. It will not be beneficial to you however, but will be very beneficial to me. Can you change the way you live? Call me an idiot, but at least I have a positive suggestion on how to make the transition to renewable energy and alternative raw materials that will be needed to replace oil and gas. As is often repeated quietly in the oil industry "you can all go freeze in the dark" if you don't want my help. I'm not the cause of your digestive problems. ]]> Tue, 23 Sep 2008 19:00:08 -0400
Likewise, I can shift my investment portfolio from US oil producers to foreign producers that will benefit from having a larger market share in the US. As US production goes into even higher declines, oil will no doubt go higher and I will continue to benefit in my portfolio. I can even start collecting my paycheck in Euros or Swiss francs!

Also inherent in your position is the shift away from environmentally responsible oil and gas production within a strongly regulated framework, to production in areas where there is no environmental regulation. Russia still considers plowing on-shore oil spills under with a tractor to be "spill remediation." Other countries I have worked in tolerate lakes covered with 12 inches of oil as the cost of doing business. Your attitude only supports this lack of responsibility and will hasten the decline of the worldwide environment.

Meanwhile, you seem to suggest the US stop using oil, or alternatively import more oil, as for some reason drilling seems to upset you. You would prefer to take the point of view that since we can't produce all of what we need, we should not even try.

I can easily change the way I live. It will not be beneficial to you however, but will be very beneficial to me. Can you change the way you live? Call me an idiot, but at least I have a positive suggestion on how to make the transition to renewable energy and alternative raw materials that will be needed to replace oil and gas. As is often repeated quietly in the oil industry "you can all go freeze in the dark" if you don't want my help. I'm not the cause of your digestive problems. ]]>