DrumBeat: June 14, 2006
Posted by threadbot on June 14, 2006 - 9:30am
Topic: Miscellaneous
KING: Gas prices going to go down?GORE: Well, I've seen a number of -- over the last several decades I've seen this happen several times, where they spike and then they do come back down.
But each time they go to a higher plateau. We almost certainly are at or near what they call peak oil, defined as having recovered a majority of the oil reserves at a certain price, affordability range. And so with the new pressure on the consumption side from China and India, if they come back down, they won't stay down long.
KING: What do you drive?
GORE: I drive a hybrid. Tipper and I got a Lexus hybrid. And we have a couple of Priuses in the family with our children. And I encourage people to make environmentally-conscious choices because we all have to solve this climate crisis.
Aging oil wells hold a treasure trove, report finds
EDMONTON - A $1-trillion Canadian oil and gas bonanza awaits production in aging western wells, says a new energy treasure map drawn by industry and government experts.‘Top five oil companies focus on developing existing reserves’
The world’s five biggest oil companies including Exxon Mobil Corp are focusing on development of existing fields as it becomes more difficult to find new reserves, Wood Mackenzie Consultants Ltd said."Existing fields" being Canadian tar sands and Venezuelan heavy oil. But don't worry, the Saudis plan to increase oil production to 12 million barrels a day by 2009.
Update [2006-6-14 10:52:28 by Leanan]: Jeremy Leggett describes what it's like to be a peak oiler at an OPEC conference: Oilmen in troubled waters.
For a bearer of bad news, the Opec conference is less of a lion's den than it was. But some of the speakers still have strong ostrich tendencies.And the weekly inventory report is out. Gasoline stocks rose more than expected, sending oil prices down. Distillates also rose more than expected, while crude oil stocks dropped more than expected.
Update [2006-6-14 13:7:43 by Leanan]: The right-leaning New American offers An Expert Look at the Energy "Crisis":
Well, our principal energy problem is the same as with virtually all American economic problems: taxation, regulation, and litigation.
Update [2006-6-14 15:31:29 by Leanan]: Low-income families are feeling the bite
Shannon Hill of Barrington, N.H., is angry about rising costs and has taken steps to deal with them, including buying a bicycle to get around town.“I am absolutely dumbfounded by the price of gas these days and the impact it has had on my everyday expenses,” said Hill, a publicist. “Everything from my drive to the convenience store for milk to my purchasing a home and even my traditional after-work pint (of beer) has been affected by the price of one single good — oil.”
"Sayavur Bakhtiyarov stands next to Energy Reclamation LLC's new oil recovery system Friday -- a system that he endorses."
Dude definitely looks like Al-Quaeda, too. The Real 20th Hijacker.
Maybe having lots of little wells with donkey engines is a good thing. Takes a long time for the oil to run out completely. Allows a gentle slope on the backside of the peak for that well. Add all those wells together and you get a gentle slope for the U.S.
Increase extraction efficiency and we could suck all the oil out of those old wells in 5-10 years. Then where would we be?
People confuse extraction rate with reserves. One does not equal the other. But high extraction rates use up your reserve a lot quicker and in the interim you think you have a lot of reserve because the volume is high on a daily basis. Classic Hubbert curve impact. Steepen the front side and the peak comes sooner. Steepen the back side and you totally run out sooner.
There will still be alot of oil left untouched, and new methods may be able to tap that. 2 trillion doesnt suck dry the entire planet, only the oil that is 'suckable' through a straw - the slushy parts of the margarita will still be down there...
The Seminole field in Gaines County ,Texas was put on CO2 recovery about 1981 or 1982. The wells in the center of the field are showing increased CO2 production indicating that this first generation tertiary recovery is going to be uneconomic for the operator fairly soon. I'm sure higher prices will extend the life, but still, at some time it will be uneconomical for Amerada Hess to continue to produce. Likewise at Saratoga in Hardin County the fireflood has been abandoned by Mobil. There is only so much oil in any reservoir. I hope that these tactics will buy a little time for the US to start conserving, but they will do no good if we don't get the word out and use level heads.
In order to believe that any rational investor could take on a project with a negative EROEI you have to believe that they are:
- Using a cheap form of energy to get a more expensive one in return
- Are not paying the full price for their energy input, or
- Are going to lose money
Am I missing something?*
EROEI is a form of accounting.
But it has nothing to do with money.
Instead we are measuring the amount of useable energy that society has at the end of a process compared to the amount it had at the beginning of the process.
First note in the equation to the right that both the top and the bottom values are always POSITIVE. There is no negative energy and there is no negative value for EROEI.
We want to know if EROEI is greater then 1.0 or not.
Let's make up a simple example.
Suppose you own a coal pit.
Suppose that your truck consumes 10 gallons of gasoline to make the round trip from town, down to the bottom of the coal pit to pick up a load of coal and bring it back to town. (The gasoline station is in-town and useable energy for our example means in-town energy.)
Suppose the amount of energy in each truck load of coal you bring up is equivalent to 9 gallons of gasoline. So in terms of in-town useable energy, you are inputting 10 gallons of gas and getting back 9 with each trip. Is that a wise move? The answer is not an automatic no. There can be other factors. But your EROEI in this example is 9/10 (it is less than one). And the question is how long can you keep playing this game, how many round trips?
However, my question is this:
If energy is priced correctly, is there ever a case where EROEI and ROI diverge? If so why?
In your example, if each input and output were priced correctly, the project should be rejected on either ROI or EROEI terms.
In conclusion, I can not see any circumstances in which EROEI adds to project analysis except for identifying situations in which subsidies or mispricing fool ROI.
So if EROEI is applied to say corn ethanol or tar sands and finds that the EROEI is negative, but financially (ROI) positive, what does it mean?
My claim is that it only identifies a pricing problem.
There cannot be a pricing problem. "Price" is whatever "value" two arms-length negotiators ascribe to a certain trade. If they decide, regardless of EROEI being <1 that a certain liquid fuel (say corn ethanol) is worth a given number of currency units (dollars), then that is the price. Period. There is no "problem". The market has spoken.
Yes of course there is such a case, thousands of them.
Anytime the "consumer" is willing to pay a higher premium for a certain type of useable energy from #2 as opposed to what the consumer is willing to pay for the energy form #1 that was consumed to get energy form #2, then there will be profit (a positive $RO$I).
A simple example is rechargeable cell phone batteries. They have a lousy EROEI per recharge. Yet they provide the convenience of mobile communication. People want convenience and are willing to pay for it. They actually do not care about EROEI.
The ones who care about EROEI are the scientists who are studying whether a given practice is energetically sustainable. So if we are depleting enrgy form #1 (say oil) to obtain another energy form #2 (say corn ethanol) and the EROEI is less than unity, scientist can tell you that all other things being equal, that is a dumb move. Even if EROEI=1 it is a dumb move because what are you gaining for all your effort?
Thank you for two good responses. I don't disagree with much of what you say.
What I am trying to accomplish here is to get a fundamental understanding of exactly what EROEI means and how it can be effectively applied in project analysis. EROEI and ROI will be key tools in making energy decisions in the future. My point is that there is a fundamental connection between the two and that they should be identical except in a finite set of conditions that can be defined. Given how frequently the term is used on this site, it makes sense to better understand it.
In some cases - deep sea drilling, a negative EROEI may doom a project. If the amount of oil required is greater than the amount of oil produced, the project is not viable. In others - cell phone batteries - it would not. In a third category - ethanol - it could imply a misalignment of pricing - i.e. energy is wasted, but financial returns are assured through subsidy.
My original post said that there were three reasons for divergence between EROEI and ROI.
"In order to believe that any rational investor could take on a project with a negative EROEI you have to believe that they are:
- Using a cheap form of energy to get a more expensive one in return
- Not paying the full price for their energy input, or
- Going to lose money"
Your cell phone example meets the first criteria, using one form of energy to produce a preferred form of energy. I expect that the corn ethanol meets a variation of point #2, specifically getting paid more than market value of output. I have modified my list to include this as a new criterion.So I now claim that divergence between ROI and EROEI can be explained by one of the following:
I think we disagree over what I see as a fundamental issue.
"Pricing" and other "Market" behaviors involve men negotiating with men --humans yakking at other humans about mentally contrived concepts like "values" and what is "fair". Mother Nature is not part of this man-o-man negotiation.
EROEI is one of inumerable mathematical expressions that we humans can concot to better understand how Mother Nature works. She does not need our understanding of her. We need it. Desperately. Experiment after experiment appear to verify that Mother Nature does "conserve" this thing we refer to as "energy". Experiment after experiment show that Mother Nature does "conserve" this thing we refer to as "mass". All our economic machinations will not change this.
If we develop a social order that continuously operates on EROEI being less than one (or negative as you keep refering to it), we are simply driving ourselves faster into the abyss.
Mother Nature doesn't "care". There are no "Care Bears" out in the woods. We are the ones who have to care --if we humans intend to continue as a species for a foreseeable future.
Bottom Line: EROEI and $RO$I have almost nothing to do with each other because "$" is a mental fabrication of mankind.
If 2 trillion is ultimately recoverable, at least that much is unrecoverable and left in the ground. So a 1-2% increased URR would equal 20 to 40 billion barrels added to the URR side of the equation. That wouldn't save us from PO, but every little bit helps. Might be easier to figure out how to get an extra 1 or 2% out of a field than it is to make new discoveries at this stage.
Generates CO2 at the site? I wonder what he's burning.
By the end of the year, about half of the jack-up rigs in the Gulf of Mexico will be headed for the Middle East. I think that the number of rigs working in Saudi Arabia has gone up four fold from several years ago.
I suspect that a common theme will be to blame declining production on a lack of investment, despite abundant evidence to the contrary. Never underestimate the power of denial.
http://www.thetruthaboutcars.com/content/115003055823592326/index.php
There are extremely few farmers growing anything, they have mostly sold out to agribusiness.
That's a little harsh on farmers isn't it? Many farmers around here have lost their farms due to the effects of corporatism (i.e. ADM) and the commoditization of their product. Many of these farmers kept thing going as long as they could, mortgaging their home and farm before they finally got swallowed up by the big corporation. Almost all of them would jump right back into farmer if they could. I wouldn't call that selling out.
Actually this isn't how it works. Check out the book Undercover Economist. It specifically devotes half a chapter to the phenomenon know as DETROIT. Detroit is actually competing against a farmer in Iowa rather than benefiting from them or vice versa. It works like this: There's this company that can turn iowa wheat into cars. I know it sounds crazy, but it's true.
It's called Japan and we ship out tons of wheat on a ship and sometime later it comes back with cars loaded on it. While the exact transformation can be argued, the net trade benefit is clearly in Japan's favor. They buy cheap wheat to feed the people and they sell us cars in return. On net we are losers. Of course I'm skipping over some important aspect that makes this so clear, but if you read the entire chapter you'll have a better understanding of how this process works. In the end we gave the country, and the car company an advantage that they exploited and this crop trade adversly affected another industry (auto). It doesn't seem intuitive, but when you start to break down (and the book does the work) the numbers, it makes sense.
Clearly the company doesn't need to be told how to treat their people.
.. but I sure do love my Subaru! 30-32mpg
My car might be 'from away', but my bread and butter is pure Downeast! I have to find out where the Sushi place down the street gets their fish, but I'd bet a bunch of it is within radar distance.
Maybe we can get a "Buy American!" thing going with fuel.. (OR maybe 'Don't Buy UNAMERICAN'..AND buy American SUNSHINE) I'm less concerned with the capital costs as with the operating costs, where we bleed away our income in lots and lots of dribs and drabs, and don't usually think about how many of THOSE dollars are going offshore.
I talked with a cameraman at a local cable access channel yesterday who commutes 1 hr each way, 5 days a week. He says he has effectively gotten a $3/hr paycut this year from the fuel costs. I mentioned the Problems with Ethanol's EROEI, and he mentioned a form of Ethanol mentioned in PopSci or PopMech that is generated by, ahem, Termites. I'll try to find a link, but I'm distracted by the image of thousands of weensy little Hamster-wheels under the hood, keeping our Woodivores in shape and 'regular'..
"Your search - ethanol popular termites - did not match any documents."
... oh, ok. I was looking under 'NEWS'.. my bad.
Brew Better Ethanol - Popular Science
https://www.popsci.com/popsci/energy/6756226d360ab010vgnvcm1000004eecbccdrcrd.html
'Termite guts can save the planet', says Nobel laureate
http://www.physorg.com/news3700.html
"... The way termite guts process food could teach scientists how to produce pollution-free energy and help solve the world's imminent energy crisis. Speaking at the Institute of Physics conference Physics 2005 in Warwick today, Nobel laureate Steven Chu urged scientists to turn their attention to finding an environmentally friendly form of fuel. In an impassioned plea to some of the world's brightest minds, he explained how he's leading by example, and encouraged others to join the effort which "may already be too late."
Chu, who shared the Nobel Prize for Physics in 1997, has begun studying termite guts - one place in nature where a key hurdle for carbon-neutral energy supply has already been solved. Termite guts take indigestible cellulose, which makes up the bulk of all plant material grown on earth, and convert it to ethanol, which even today is a versatile and popular fuel.
Chu described how he decided to leave the richly-funded precincts of Stanford University to become Director of the Lawrence Berkeley Labs to kick-start the effort. He has been cajoling his new colleagues, including 56 members of the prestigious National Academy of Sciences, to realise the gravity of the problem and shift the focus of their research. And, he says, it's beginning to work.
The US already subsidises farmers to grow corn to turn into ethanol, but $7bn in the past decade has been wasted because the process isn't carbon-neutral. "From the point of view of the environment," explains Chu, "it would be better if we just burnt oil."
With all due respect to Dr. Chu, I believe I was the first person to attempt this. When I was working on cellulose ethanol in the early 90's, we were originally using microorganisms from the stomachs of cattle. I reasoned that termites are the most efficient digestors of cellulose in the world, so I got a supply from Texas A&M's entomology department and began experimenting with them. The results are written up in my thesis.
What I found is that the microorganisms from termite guts are notoriously difficult to maintain once they are removed. I reasoned that if a study was done on the exact chemistry of the termite guts, and this chemistry could be reproduced in a bio-reactor, this would be the correct pathway. Or, you could use these microorganisms as a template for genetically engineering something a bit hardier.
To my knowledge, I was the first person ever to attempt this. I couldn't find any references to anyone having done this when I was working on it.
RR
Just to set the record straight, I don't have a Ph.D. I have a master's in chemical engineering, and bachelor's degrees in chemistry and math. I went to Texas A&M to get a Ph.D. in chemistry, and during my last year in the program, I decided that the job prospects looked better for chemical engineers. Long term earnings are also typically higher for chemical engineers. So, I transferred to the chemical engineering department and got a master's degree. I had been in school too long to continue toward a Ph.D. in chemical engineering and the job market for M.S. chemical engineers was pretty hot.
The termite idea has merit. They are extremely efficient cellulose digesters. I believe that butanol was the major product from my termite studies (although still at a low concentration). But, it will take some research funds to flesh out details like appropriate chemistry for a bioreactor, determining the specific microorganisms that merit further study, etc. If I had gone on to become a chemical engineering professor, I would probably have continued down that road.
RR
I was a little nervous picturing the factory that scaled up the 'Humble Termite' into a global powerhouse. I think I saw Sigourney Weaver do that in a Factory Full of massive eggs and leggy beasts, once, and had to wonder whether it would all be worth it?
Ok, if Sigourney is there, it might make it worth it..
(Aliens, of Course)