Rick Krementz

What Natural Gas Prices Say about the Domestic Economy

Thank you Lessismore for your comments. (I was formerly ricardoRI)

I think you are mixing QD (quantity supplied) and quantity consumed (QC). QC has declined because of the recession. However, QD remained stronger because investors (speculators) were willing to buy and store gas as long as there was storage available. Now that there is very little storage available, the investor demand must diminish until either more storage is created or demand picks up (and reduces stored gas inventories). Since building significant gas storage is not an instant process (months to years for construction), I think we will see cuts in production soon.

Longer term, I think we will see constrained domestic gas supplies and higher prices. The shale well production is unlikely to be sustainable because of very fast depletion and more drilling may well be curtailed by environmental issues relating to fracking. Natural gas will be used for more electricity production since it is the easiest way to stabilize the grid with intermittent wind and solar generators. Gas may also be used for vehicles which could be a huge demand.

I wouldn't be shocked if gas prices reach record highs in a year or so.

Disclosures: long OGZPY, XOM, BP, LUKOY, PBR and a portfolio of alternative energy equities

On Nov 23 01:54 PM Lesismore46 wrote:

> You are correct on some points but not on others:
> marginal cost should equal marginal price, but quantity demanded
> must equal quantity supplied for there to be equilibrium. So as QD
> drops or fails to increase, QS must also drop, not increase! Prices
> have already plummeted because of low QD. Yet the producers have
> failed to reduce QS, so we have a surplus. The only way to relieve
> a surplus is for prices to remain low, QS to decrease, and as the
> economy recovers, QD will increase. The producers are definitely
> ignoring the economics of the market by continuing the surplus. Prices
> will not recover until the surplus is reduced. This is ECON 103<br/>
>
> On Nov 23 11:35 AM ricardoRI wrote:

Inflation or Deflation: What 'Quantity Theory of Money' Can Tell Us

Responding to the hyperinflation comment:

The threat of inflation is not just the present increase in the money supply, but the highly likely resistance to constraining the money supply when the velocity returns to higher speeds. Neither the Fed nor the Executive branch are likely to support high interest rates and termination of stimulus programs abruptly.

"I know your bridge is half-built, but we have to stop funding it." Ain't gonna happen. Unless unemployment drops to unrealistic levels, there will be all sorts of resistance to interest hikes and funding cutbacks.

What Natural Gas Prices Say about the Domestic Economy

For those of you who missed Econ 101 in college, here is a little refresher. Natural gas is a commodity, so there is no way to increase your margin over the market price. Natural gas extraction and delivery is highly capital intensive, which means high fixed costs, such as interest and equipment maintenance. Since the gas market is relatively free and competitive, there is no single monopolistic producer than can set prices.

Any CEO who did not sleep through Econ 101 knows to maximize profit (e.g., his/her bonus and stock price) knows he has to generally produce as much as he can so long as his marginal cost is below his marginal selling price.

There is no benefit for a CEO to reduce his company's production, although he would love it if all the other CEOs reduce production. When all the storage is full and production exceeds current demand, then he will reduce production because prices will crater.

His only other option is to try to control prices with a cartel or oligopoly, which is illegal.

This has nothing to do with irrational CEOs or investors. This is basic economics.

Fuel Systems Solutions: A Winner in the Alternative Fuels Industry

Check your facts: the US does not have the largest gas reserves; it is number 6. See en.wikipedia.org/wiki/....

Many professionals think we may have reached peak gas, and that remaining US supplies may only last a decade. The shale wells currently flooding the market have very short lives, and the pollution effects of contaminated water may soon make them politically unviable.

We (the US) do have very serious political problems, such as the $10,000 fee per engine type per conversion shop that strongly discourages CNG conversions. ( As mentioned by previous posters).

CNG has another serious problem, especially for autos: a very low energy density. To get the same range, the fuel tank for CNG needs to be about four times larger than the comparable gasoline. It also needs to be cylindrical for strength, so cannot be form-fitted, like most gasoline fuel tanks are.

There are definitely niche applications for CNG, but it is not a panacea. In my opinion, NH3 (anhydrous ammonia) has much better characteristics for most transportation fuels uses. See www.ammoniafuelnetwork... for more info.

Is Google Voice Violating Its Own Privacy Policy?

Did you contact Google? Was there any response?

Barrick Gold Confirms We've Reached 'Peak Gold'

"Peak gold" really does not make sense for a non-fuel. Fossil fuels are consumed, so when they are gone, we need to extract more, or find substitutes. No one is hoarding oil from 1900. When oil is gone, it is really gone, burned into CO2.

All the gold ever mined is still here (except for the trivial amounts shot into space). We still have gold from 3000 BC.
The refined gold supply will always increase, but probably not as fast as demand (population growth).

The amount of gold dissolved in the oceans is greater by about an order of magnitude than all the gold mined in history. (It is far from economic yet, so don't rush out and invest). We are not "running out" of gold, although we are running out of ore than can be processed for less than $100 per ounce. So what?

Beer, Batteries, and a Solar Power Game Changer

The author seems mightily confused.

1) lead acid batteries cannot work at 350 deg.

2) a well designed lead acid battery system last about 10 years

3) the patents at the Ceramatec site talk about hot batteries, not ambient temperatures

4) Without a discussion of the technology plus the comment that there is no prototype means this is snake oil (or hot air if you prefer)

5) There is a huge amount of battery development going on: NaS, PbC, Li-ion, Al, (to name just a few), plus many other energy storage technologies, such as NH3, flywheels, ultracapacitors, CAES, underground pumped hydro, dynamic hydro, etc. Ignoring all these and making an erroneous comparison with > 100 year old technology is ridiculous. Sorta like comparing hypersonic planes ("coming soon, but no prototype yet") with ox-carts.

The Disconnect Between Oil and Natural Gas Prices

Compressed natural gas is not very useful as a transportation fuel because of it low energy density, i.e., you need a very large tank to get decent range. A significant energy is lost when compressing it, too.

The best use of natural gas is to convert it to NH3 (anhydrous ammonia), which has a high energy density. NH3 can be used in internal combustion engines with few modifications and emits no carbon dioxide or ozone depleting chemicals - it burn cleans to water.

Investing in Natural Gas: It's Time

Except that petroleum is used only for 2% for power generation. Oil prices do not affect electricity to any significant extent. Most power is produced from coal, regardless of gas or petroleum prices.


On Aug 24 01:25 PM Bluechippie wrote:

> Cheaper natural gas is probably a good thing as it will convince
> more power generators to switch to natural gas rather use the expensive
> petroleum that we import from countries that do not like us very
> much.

Why I'm Long Uranium and Nuclear / Power Engineering

The author makes a comment: "Quite frankly nothing else comes close to nuclear power with any sort of scale."

Sorry, you are totally out of touch. Certainly there are some fads, like retro-fitted rooftop PV solar that do not make sense. There are several technologies that each can realistically supply 100% of the US electrical demand:

Thermal solar: 10,000 square miles of the Southwest (owned by the Federal government) can readily produce 100% electrical demand. Thermal has tremendous energy enertia, and can provide baseload power, even at night.

Ocean thermal energy conversion: utilizing the difference in water temperature from the surface to the bottom. The energy can be transported via NH3 synthesis, and used as motor fuel as well as boiler fuel for shoreside power plants

High altitude wind: Kites can fly at 20,000+ feet and run int he jetstream. The area above a traditional nuclear reactor (1000 acres) can produce several gigawatts of power, 24/7.

Dry geothermal: In the western half of the country deep geothermal resources can provide baseload power.

Offshore wind: floating wind turbines can produce huge amounts of power. With NH3 (ammonia) production, the power can be used as transportation fuel or transmitted to the grid as electricity.

The point is that EACH of these renewable sources could supply 100% of the US electrical demand. I have not run the numbers yet for other parts of the world.

Should nuclear be part of the solution? Absolutely. But don't be ignorant of other technologies that have the potential to be game changing.

Why the Electric Car Mileage Debate Is Meaningless

The issue of charging time is not just the voltage available at the plug. A 220 volt plug can deliver large amounts of power - many 100s of amps - if designed properly. Current "dryer" plugs are not designed for such high current flows.

Most modern houses are designed with 100-200 amp service, which is adequate for overnight vehicle charging. The US does have a grid and generating capacity challenge, so getting the power to the pole outside the house may be an issue, but that is different than bringing in 440 V to the house. The pole is probably 5,000 volts.

Having spent a lot of time in both China and Europe, I have never heard of residential use of 440 volt in any country. Do you have a reference to that?

The true constraint is the chemistry of batteries: you can't fully charge a battery in ten minutes regardless of the amount (or voltage) available because the battery will overheat or self-destruct, possibly explosively. Most (all?) chemistries need at least two hours to become substantially recharged from fully discharged. Obviously if the battery is only partially discharged it can be topped off quicker.


On Aug 13 08:46 AM Truthmeister wrote:

> You make a good point about range being more important than mileage.
> We'll be able to take care of that when the price of LiFe batteries
> comes down a little more.
>
> "Companies will also compete on charge time, but, to be honest, charge
> time will mostly be out of the control of automakers. It depends
> where you plug in."
>
> True. This is where the urban planners and electric companies need
> to get their act together. It's time to start sending 440V to houses,
> instead of limiting ourselves to one 220V plug for the dryer. This
> is one area where Europe and China have a headstart on us. How many
> billions of dollars a month are we sending overseas for oil?

Will Ocean Power Technologies Surge Forwards?

I've been following Ocean Power for quite a while. They have had some very limited pilots, in Hawaii, and have had numerous failures. Building strong wave energy equipments is really difficult: light enough to produce power on average days, strong enough to survive storms. Only the West Coasts have enough energy to make wave a possible energy source. The amount of wave energy that can be captured on west coasts and in shallow enough water to anchor is not really that large. In may be an interesting niche application, but nowhere near a game changer.

I really liked their idea and almost fell in love, but I realized it wasn't going to work big time. I wish them luck.

Natural Gas: Another Great Thing from a Lobby Near You

Converting vehicles does not ever really make sense. High labor cost, loss of usable space (usually the trunk), safety issues, etc. really kill this even before we get to stupid licensing fees.

Vehicles designed from the start as CNG has tremendous potential and has virtually no premium (other than regulatory).

Changing the fleet to 100% NG is not crazy - we do it by stopping the production of gas cars, so all new vehicles are NG. We do not convert old cars - that is just stupid most of the time. It would not be hard: mandate that no more 90% of vehicles sold by general vehicle manufacturers could be gasoline, and drop that percentage by ten percent per year. Gasoline-free in ten years, and within 20 years essentially all gasoline vehicles would be off the road

Even better, let's use anhydrous ammonia (NH3) as fuel - a carbon-free fuel that is stored at low pressure like propane, has the same energy density as CNG, and can be produced from renewable source domestically. NH3 is not a greenhouse gas, does not damage the ozone, and burns cleans to water and pure nitrogen.

Regarding the long-term availability of natural gas - we never have had more than a few decades of oil reserves, even in the 19th century. We probably have more energy as gas than as petroleum, and to a certain extent natural gas (methane) is renewable from municipal sewer systems, landfills, and factory livestock waste streams.

Gigaton - some Big Energy ideas

Fusion-fission hybrids, if viable, are nowhere ready to be a significant souce of energy in ten years. Recent articles talk about the next step to be computer simulation, which means they are not even to the prototype stage yet.

Fusion has been the energy of the future for many decades, and will probably keep that status for many decades yet to come. I am quite skeptical, but certainly would be pleased to see actual production.

Thank you for your post.


On Jun 27 02:07 AM Axil wrote:

> Why wasn’t fusion considered? It will be available in far less then
> ten years. Do some research?
>
> The concept of fusion-fission hybrids – using high-energy neutrons
> from fusion reactions to transmute, or burn, fissile material – has
> been explored by Andrei Sakharov, Hans Bethe and other scientists
> since about 1951. Although the focus of many of these studies was
> the use of fusion neutrons to generate fuel for fast nuclear reactors,
> Nikolai Basov and others discussed the possibility of fast neutrons
> to drive a fission blanket for generating power. Many proposals have
> also been made to use accelerators to generate neutrons that can
> then be used to burn nuclear waste and generate electricity.
>
> Fusion-fission engines did not advance beyond the discussion stage
> at that time because powerful high energy neutron sources and other
> required technologies did not exist. Similarly, accelerator-based
> schemes never advanced past the conceptual study phase, in part because
> a complete nuclear fuel cycle – including uranium enrichment and
> nuclear waste reprocessing – was still required to generate economical
> electricity. The inefficiency and cost of those systems outweighed
> the benefit of transmuting nuclear waste.
>
> Today, however, researchers have demonstrated the physics and key
> technologies required to make fusion/fission hybrid a reality. The
> capability of Field Reversed Configuration (seekingalpha.com/symbo...)
> to create the conditions required for ignition and thermonuclear
> burn in the laboratory with inertial confinement fusion (seekingalpha.com/symbo...)
> has been demonstrated by the 1/3 scale model of the Helion Energy
> prototype.
>
> The FRC Power Plant
>
> The FRC is designed to operate with fusion energy gains of about
> 6 and fusion yields of about 20 MJ to provide about 100 to 200 megawatts
> (seekingalpha.com/symbo...) of fusion/fission power – about
> 80 percent of which comes in the form of 14.1 million electron-volt
> (MeV) neutrons with the rest of the energy in X-rays and ions.<br/>
>
> The fission blanket contains 40 metric tons (seekingalpha.com/symbo...)
> thorium (Th232);
>
> The point source of fusion neutrons acts as a catalyst to drive the
> fission blanket, so there is no need for a critical assembly to sustain
> the fission chain reaction. Starting from as little 20 MW of fusion
> power, a single FRC engine can generate 100 to 200 megawatts in steady
> state for periods of years to decades.
>
> The fission Blanket
>
> The blanket is comprised of a molten salt called flibe (2LiF + BeF2
> ) and thorium fluoride. It carries away heat and also produces tritium
> that can be harvested to manufacture new deuterium-tritium fusion
> plasma packets.
>
> The Burn Chamber
>
> The neutrons pass through the first beryllium wall which surrounds
> the point of T – D fusion. This wall generates 1.8 neutrons for every
> neutron that it absorbs. The newly generated neutrons have a significantly
> lower energy spectrum that is ideal for fission energy generation
> in the thorium blanket. To keep the first wall cool, the molten salt
> is allowed to form a constantly flowing cover on the inside of the
> first wall where a coating of imbedded carbon nano-fibers increase
> the service area and the thickness of this liquid first wall.
>
> The moderated neutrons strike the next layer, a two-meter-thick,
> subcritical fission blanket containing 40 MT of thorium fuel. The
> neutrons absorbed by the blanket drive neutron capture and fission
> reactions, releasing tremendous amounts of heat to drive turbines.
>
>
> The burn chamber is oriented vertically, and the molten fluoride
> salt is pumped from top to bottom within the chamber. Both a blanket
> of high pressure helium and an axial magnetic field keeps the molten
> salt away from the second wall and at the same time cools its surface
> and the pulsed magnets on the outside of the burn chamber.
>
> The flow of helium gas removes both tritium produced during fission
> of lithium 6 in the filBe and gaseous fission products.
>
> Heat is removed from the molten salt by the primary heat exchangers.
>
>
> A fission/fusion hybrid is the only way to go. The fusion energy
> gain Qfus can be less then one and still produce copious amounts
> of heat from the fission blanket.
>
> The production of ion heating from fusion alone hardly matters Almost
> all of the power of the FRC reactor is produced as heat from the
> fission reaction.
>
> Even if fusion breakeven is not achieved; more power is produced
> by fission in the blanket that is formed in a perfectly efficient
> fusion reactor.
>
> Waste Production
>
> Because of the continuous availability of external neutrons from
> the fusion source, a FRC engine can extract more than 99.8 percent
> of the energy content of its fuel, resulting in greatly enhanced
> energy generation per metric ton of nuclear fuel. The external source
> of neutrons also allows the FRC engine to burn the initial fertile
> or fissile fuel to more than 99 percent FIMA (fission of initial
> metal atoms) without refueling or reprocessing, allowing for nuclear
> waste forms with significantly reduced concentrations of long-lived,
> weapons-usable actinides per gigawatt-year of electric energy produced.
> This remaining waste has such a low actinide content that it falls
> into DOE's lowest attractiveness category for nuclear proliferation.
>
>
> In addition, because of the very high fission product content, the
> waste is self-protecting for decades: its radiation flux is so great
> that any attempt at stealing it would be suicidal.
>
> Following the initial interim storage and cooling at the reactor
> site, a geological repository similar to Yucca Mountain could be
> used for long-term storage or disposal. The size of a geological
> repository needed to accommodate a entire fleet of FRC engines (with
> the same generating capacity as our current Light water reactor (seekingalpha.com/symbo...)
> fleet with a once-through fuel cycle) will be approximately 5 percent
> of that required for disposal of LWR nuclear waste in a geological
> repository similar to Yucca Mountain.
>

Why Coal Is Inevitable

Coal into petro-fuel is really dirty, and when you are finished, you still get dirty, CO2-emitting petro-fuels.

Coal to petro-fuel was developed by the Nazis, and later used by apartheid South Africans. Neither group had access to global markets, and so were desperate.

The process doesn't really solve much of today's challenges. We can use wind to produce ammonia to fuel engines. We have lots of natural gas. Coal mining is an environmental and health mess, and burning or converting just compounds the problem. Only when the externality costs (water pollution, habitat destruction, air pollution, mercury and uranium pollution, health care issues, etc.) are ignored does coal appear inexpensive.

Food is really cheap if you always steal from the supermarket.


On Jul 16 10:11 AM johnbee wrote:

> I seem to remember that a company called Sasol or Sasoil in South
> Africa turned coal into fuel in a very big way. Can't this be done
> still and at what cost?