September 29, 2005
Matthew Simmons On Softening Oil Peak Impact
Foreign Policy interviews Houston energy investment banker Matthew Simmons (author of the book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy) about the coming world peak in oil production and what could be done to soften the economic blow of declining oil production. (requires free registration)
FP: If you were the secretary of energy right now, what policies would you recommend to President Bush?
MS: If we restructure the way we use fuels, we might be able to get along very well with oil in decline. The single-most energy inefficient way we use oil is large trucks delivering goods over large distances. If you take all the goods that are trucked more than, say, 50 miles, onto railroad tracks, depending on the length of travel, you’d use between 3 to 10 times less energy. If you put them on a marine vessel, it’s even more efficient. So forget about just-in-time inventory. Once you get the large trucks off the road, you make a tremendous dent in traffic congestion, which is public enemy one through five on passenger car fuel efficiency.
But won't this happen anyhow if fuel costs for vehicles double or triple? To make that shift happen now would require either high energy taxes (not going to happen) or government edict forcing less truck use and more tain use (again not going to happen). If what he's saying is true then that is great news. We can gradually migrate businesses nearer to rail lines and adjust distribution patterns to reduce energy usage. But to do that now doesn't seem in the realm of the politically possible.
How much of transportation fuel is for trucks and how much for cars? Of the portion used by trucks how much of that is for home delivery? Also, what portion of total truck fuel use is for trips longer than, say, 50 miles or 100 miles?
My suspicion is that mail order deliveries by UPS and FedEx save fuel. People who would have driven to a store to buy something instead get the product delivered by truck to their door. Since that same truck passes through a neighborhood delivering to many other doorsteps the net effect must be a reduction in energy consumed as compared to having each purchaser drive to a store to pick up the same product. Furthermore, growth in home delivery increases fuel efficiency by allowing each delivery truck to empty its contents over a shorter delivery route.
Simmons argues for more work performed from home.
We also need to embrace the concept of distributed work. In most of our non-manufacturing commercial jobs, we assume that it’s better to have a lot of people working at the same site, even though it’s not necessary. By allowing people to work at home and keep their jobs, all they have to do is invest in communications such as video conferencing, the Internet, and cell phones.
I've heard claims that most work must get done in offices. But I can think of some big categories of work where that is not the case. For example, a lot of phone service work such as order taking could get done by home workers. This raises some security issues. But those issues seem like solvable problems in many cases.
Simmons wants more energy efficient agriculture.
We also have to change the way we distribute food. An amazing amount of the global food supply is transcontinental and produced by energy-intensive large-scale agriculture. Whole Foods, a successful grocery retailer, has basically created organic farming near each store it builds. The produce is less energy-intensive to grow and ship.
If fuel becomes a lot more expensive then I expect the market to provide sufficient incentive for shifts toward less energy-intensive production methods and transportation patterns. From a policy perspective the most important question is whether governments currently behave in ways that create obstacles for approaches with greater energy efficiency. Well, what government-erected obstacles can any readers see for greater energy efficiency?
The biggest obstacle I can see for greater energy efficiency in transportation is the unfriendliness of roads for bicyclists. I'd use a bicycle with perhaps a pull cart to go to a grocery store if I didn't have to fear getting hit by a car. The bicycling would be good exercise. But peddling down narrow shoulders around parked cars strikes me as risky business.
I find credible Simmons' arguments for why oil production is going to peak sooner than government projections. See the interview for some of his observations about various oil fields. But I'm less convinced by his argument on what we should do about falling oil production.
I think governments should lead more by example. Governments should set an example in the category of energy usage where the biggest improvements in efficiency can be achieved with the least impact on living standards. Think of energy usage as dividing up into three main categories: transportation, building heating/cooling/lighting, and industrial processes (e.g. aluminum smelting or fertilizer manufacture from natural gas). Of the three buildings seem most ripe for greatly improved efficiency using the best of today's technology. Specifically, I'd like to see all levels of government impose building codes on themselves for their own buildings that have much higher requirements for insulation and building efficiency.
Building efficiency increases are best designed in before the buildings get constructed. Buildings last decades or even centuries. Every year that goes by without the usage of best energy efficiency practices for building construction leaves us with another year's worth of unoptimized housing stock that we'll be stuck with for decades to come. Governments should steer societies down the road of greater energy efficiency by imposing tough efficiency requirements on themselves. By designing government buildings to meet high energy efficiency objectives governments can save money, demonstrate what can is possible using existing technology, and provide incentives to develop more energy efficient building technologies.
As for houses and commercial buildings: For starters, how about local building codes that have a standardized set of several levels of energy efficiency where each building gets built and certified as meeting some level. Each house could get built to which ever level the builder or owner chooses. Then that level gets included in the title. When the house or apartment building or commercial building goes on the market it can have an energy efficiency rating revealed in ads and during inspections. Building efficiency information would serve a purpose similar to that of car fuel effiiciency ratings.
Suppose the oil peak comes sooner as Simmons expects. Oil can rise above substitute replacement costs but only temporarily. Also, economies will contract before driving oil to $200 per barrel. I expect oil shale, oil tar sands, wind, coal, and nuclear to substitute on different time scales. Suppose the oil peak pessimists are right. What's the worst we are in for?
Nanotechnology will improve the efficiencies of all types of fuel-collecting and fuel-burning technologies. It also will enable check photosynthesis and economical hydrolysis of water into hydrogen (fuel) and oxygen. Humans will adapt and overcome.
One problem with trains is that they have their own schedule and businesses need a lot more inventory (and thus market risks, inventory costs, and inventory taxes) to operate using rail delivery than with truck delivery. Until rail operators do something about their business practices (assuming they can), trucks will retain substantial advantages despite much higher fuel and labor costs.
This also means that if the rail industry could find a way to deliver goods on tight schedules, they could eat the truckers' lunches.
Building efficiency increases are best designed in before the buildings get constructed. Buildings last decades or even centuries. Every year that goes by without the usage of best energy efficiency practices for building construction leaves us with another year's worth of unoptimized housing stock that we'll be stuck with for decades to come.
I've been complaining about this for years; IIRC, the previous governor of Michigan (Engler, a Republican) vetoed a bill to increase efficiency standards for buildings (can't find documentation on that). Well here we are, with a boom's-worth of inefficient buildings built since then and both natural gas and electric prices set to soar.
The rationale for the veto is that these matters were best left to "the market". Yeah, "the market" is going to go back and rebuild all that stock to the standard that it was always obvious (if not always undeniable) that they should have been.
Bush is even worse. If you told him that an asteroid was going to turn Pittsburgh into a crater on Halloween, he'd wait until the first of November to tell people to be careful not to fall into it!
***How much of transportation fuel is for trucks and how much for cars?***
Some reading I did says that out of a barrel of oil that we consume, about 66% of that goes for gasoline for cars/SUV's, while about 17% of that goes for deisel. I don't know how accurate that is, but one thing that strikes me about this whole Peak Oil scare stuff is that no one seems to be thinking about what's going to happen when Mom and Dad Suburbia are hit with a couple of years of $3 + gas prices...that 13 mpg Escalade and 17 mpg F-150 are suddenly going to be a LOT less appealing...and for the set that likes to get a new car every 3-5 years (I know PLENTY of these folks), they're suddenly going to take a closer look at that Honda Accord that gets twice the gas milage of that SUV.
You don't need a lot of new technology in order to seriously raise passanger fuel efficiency, shifting from an SUV that gets 15 mgp on a GOOD day to gas/hybrid SUV's that are available NOW that get 30 mpg is not that hard. Even easier, if slightly less convienent for Joe Sixpack, is getting Jimbob and Joebob at the office and forming a car pool. Trust me, before gas skyrocketed to $6 per gallon, those 3 guys would likely start car pooling. The point is that if oil supplies peak and start declining by 2% a year, it would be easy for the US to drop overall demand for fuel by more than 2%. In the 5 years between 1978 and 1983, US demand for crude oil DROPPED by 22%. If that happened now, that would translate to a 5% drop in GLOBAL oil demand, because we use so much. If gas goes up to $5 a gallon, we'll get a LOT more serious about conservation and Toyota will have to ramp up production of those hybrids even higher.
The world's not going to end because of Peak Oil, we're in a lot more trouble over the long run because we can't afford to burn what's left without somehow sequestering all that CO2 in a way we can afford. What the Bush administration will never do but needs to do now is to create some serious tax breaks for solar concentrating power towers with molten salt storage technology (to provide electrical power even when the sun goes down) along with making utilities upgrade the grid. Freaking Arizona could become a major electricty producer for the whole Southwest and that would be that much less CO2 from burning coal we'd have to worry about. Don't think concentrating solar can do it? Check out the 2 deals that Stirling Energy Systems Inc just made in California...if the utilities out there decide to go full steam on them, it would add 1.7 GW/h capapacity...that's 3 decent size coal plants that didn't need to be built, and that's just the beginning...there's a LOT of useless desert you can plant a Stirling Dish on.
I agree that economic collapse due to peak oil seems unlikely.
Solar concentrators in California: Those are a response to a California state mandate requiring utilities to get 20% of their power from renewables by 2017. But the reports I've seen on that do not say what the real cost will be for that electricity. As we discussed here on that thread, straight concentration alone doesn't solve the problem of peak demand let alone night time demand.
Still, the deals the utilities made implies that solar concentrator cost is not far from the cost of wind towers. The utilities must have studied the cost data pretty hard. So this is telling.
Have you read anything about costs for storing molten salt into the night?
SYG: Don't rely on reading you did; you can get numbers straight from the horse's mouth.
It looks like about 45% gasoline and 20% distillates (which includes diesel and heating oil). Jet fuel's about 8%, LPG's of all types are about 12%.
SYG, two other things:
- There's a lot of useless roof out there too, and it doesn't require any land purchases, impact statements or T&D investment to get power from there to market.
- If you use a physically-meaningless term like "GW/h" again, I will be compelled to castigate your illiteracy at length.
Trucks use about 19% or US oil.
The 39 quad consumption of oil in the U.S. in 2003 is equivalent to 19.7 million
barrels of oil per day (MM bpd), including almost 13.1 MM bpd consumed by the
transportation sector and 4.9 MM bpd by the industrial sector, as shown in Table
III-1. This table also shows the petroleum fuel types consumed by each sector.
Motor gasoline consumption accounted for 45 percent of U.S. daily petroleum
consumption, nearly 9 MM bpd, almost all of which was used in autos and light
trucks. Distillate fuel oil was the second-most consumed oil product at almost 3.8
MM bpd (19 percent of consumption), and most was used as diesel fuel for
medium and heavy trucks. Finally, the third most consumed oil product was
liquefied petroleum gases, at 2.2 MM bpd equivalent (11 percent of total
consumption), most of which was used in the industrial sector as feedstock by
the chemicals industry. Only two other consuming areas exceeded the 1 MM
bpd level: kerosene and jet fuel in the transportation sector, primarily for
airplanes, and "other petroleum" by the industrial sector, primarily petroleum feedstocks used to produce non-fuel products in the petroleum and chemical industries.
Detailed Consumption of Petroleum in the U.S.
by Fuel Type and Sector - 200326
(Thousand of barrels per day)
Residential Commercial Industrial Transportation Electric
Motor Gasoline - 20 159 8,665 - 8,844
Distillate Fuel Oil 421 236 603 2,455 51 3,766
LPG 429 76 1,648 10 - 2,163
Kerosene/Jet Fuel 27 9 7 1,608 - 1,651
Residual - 30 87 250 291 658
Asphalt & Road Oil - - 513 - - 513
Petroleum Coke - - 398 - 61 459
Lubricants - - 78 73 - 151
Aviation Gas - - - 18 - 18
Other Petroleum - - 1,435 - - 1,435
Total 877 371 4,928 13,079 403 19,658
I agree with those above who look to the auto fleet for easy improvment. Basically, somewhat affluent people can downsize their cars, and less affluent people will have to drive less. A gas tax is a easy lever to make that happen ... but I'm not holding my breath.
Thanks for the table, I didn't even know that it existed, much less where to find it, I was just quoting some stuff from memory that obiviously wasn't quite correct :) Also, let me say that I've read and enjoyed a number of things that you've written in response to some of the Peak Oil "Oh noes! The world is ending TOMORROW! Buy your ammo now!" guys that seem to think that there's NOTHING that technology can do. And while 49% motor fuel is not 66%, it still shows that some carpooling by Bubba Sixpack would help cut oil consumption. That table does demonstrate the rather dramatic 7.6% reduction in demand that occured in 1980 alone. Somehow, the Peak Oil guys seem to think that we'll keep driving our SUV's right up until civilization collapses or something...I've never quite understood that. Cheney may think that conservation is just a nice virtue, but with oil at $65 a barrel it's an economically sound way to help drop the demand curve to match the supply curve.
1.) Indeed your right about the roof space available to PV's, and if these guys really have what they seem to think they have: http://www.nanosolar.com/ , it may become an economically viable option sooner rather than later.
2.) Heh, sorry, I'm not an engineer so while I'm hurriedly typing this stuff at work, I get confused between "500 Megawatt peak output" and Kilowatt/hr stuff that gets thrown around. My expertise lies in other areas, I fear.
Randall Parker, I don't know any solid info on what the molten storage technology for solar concentrating power towers like Solar II added to cost, but here's a link to the Solar Tres project in Spain, there might be info there:
While I'm sure I don't know nearly as much about this stuff as you guys, I just get the feeling that things are probably a lot brighter than some of the Peak Oil Cassandras like to claim. I mean, heck, even Ford motor company seems to have finally noticed that hybrids can be profitable.
All you have to remember is that watts are like horsepower (1 HP = 746 W); you can multiply them by hours (watt-hours, kilowatt-hours, gigawatt-hours, horsepower-hours) usefully, but not divide them.
I wouldn't call "GW/h" physically meaningless. One can imagine some calculation concerning the rate of change of power of some process; thus it is not completely meaningless. However, it would be terribly unconventional when discussing electrical generation. Also, I know that I quibble and I understood the gist of what you meant.
Not that anyone is actually interested in hearing me yatter on, but here's another example of the kind of tech that the Peak Oil Cassandra's don't seem to take into account when they say how the worlds ending:
Mitsubishi to Display Lancer Evolution EV at Tokyo Motor Show
28 September 2005
The Lancer Evolution MIEV
Among the production and concept cars Mitsubishi will display at the upcoming Tokyo Motor Show (22 Oct to 6 Nov) will be the new Lancer Evolution Mitsubishi In-wheel Electric Vehicle (MIEV). (Earlier post.)
The Lancer is the most recent electric test vehicle (following the Colt EV announced in May) and is the only one Mitsubishi will have in its stand at the show.
The Lancer Evolution MIEV uses lithium-ion batteries to provide the energy store for the four 50-kW in-wheel motors, manufactured by Toyo Denki Seizo K.K. The new in-wheel motor design uses a hollow doughnut construction that locates the rotor outside the stator as opposed to a common electric motor where the rotor turns inside the stator.
Each motor delivers 518 Nm torque. The Lancer Evolution MIEV accelerates from 0 to 100 km/h in less than 8 seconds and has a maximum speed of 180 km/h (112 mph).
Apparently the cruising range is about 155 miles. Now I don't know about you, but I don't actually drive 155 miles in a day, normally. When oil supply drops below demand and I need a car to commute to work, this thing would do me (and most of the rest of Americans) just fine! And I think that long before civilization itself would collapse and the great "die-off" would begin, we might see this kind of technology in the show-rooms.
I'd like to know how many kilowatt hours it takes to fully charge that car.
AC Propulsion claims 170-205 Wh/mile for the tzero (at the battery terminals). Add 20% for losses, you've got 204-246 Wh/mile at the wall. 155 miles would be 32-38 kWh. Too much to charge overnight with an extension cord from a 15 A outlet (though you could top off easily enough), but a dryer outlet at 220 V 30 A would do.
Suppose we take the 38 KWh and assume 10 cents per KWh. That's only $3.80 to go 155 miles or 2.5 cents a mile. For someone making a 20 mile round trip to work every day that's only 50 cents a day for fuel or $2.50 per week. Suppose we even go to $3 per week. That's only $150 per year. Never wait in line at a gas station.
KWh costs vary across the United States. Some people pay 7.5 cents per KWh. Others pay 15 cents. Still not expensive.
Solar is, what, about 30 cents per KWh? Though that has got to vary a lot depending on where you are.
If you want to directly charge vehicles with solar the problem is that home solar will gets its power while you are at work with the car during the day. What to do about that? Leave part of your batteries at home while you drive to work? You'd need removable batteries.
But with electric cars peak oil would matter very little. Even photovoltaics for charging cars would be cheaper than current gasoline prices when looked at in terms of cost per mile.
Although the US is an important consumer of oil, a large component of future growth in the demand for oil will come from India, China and other emerging economies. India and China have a population of 2.3bn and currently consume 5.5 barrels of oil/person pa vs developed countries' 39 and their elasticity of oil demand wrt gdp growth is double that of the developed world. So efforts towards energy economy in the developed world will no doubt be necessary and desirable but they likely won't be enough to prevent continued (possibly accelerated) growth in oil demand.
So I'm not sure I agree with Sumyungguy above
"The point is that if oil supplies peak and start declining by 2% a year, it would be easy for the US to drop overall demand for fuel by more than 2%. In the 5 years between 1978 and 1983, US demand for crude oil DROPPED by 22%. If that happened now, that would translate to a 5% drop in GLOBAL oil demand, because we use so much. If gas goes up to $5 a gallon, we'll get a LOT more serious about conservation and Toyota will have to ramp up production of those hybrids even higher."
The 1978-83 period was economically brutal yet even such a drop in demand would not offset likely structural growth from india and china (although clearly a recession might in the short term lower demand below its long-run trend).
Solar is, what, about 30 cents per KWh? Though that has got to vary a lot depending on where you are.
I touched on that in one of my first posts
. Even a year and a half ago, solar PV to batteries was becoming competitive with gasoline; it's only going to get more and more attractive as crude prices rise. Our problem is that there are still no mass-market passenger vehicles which allow the driver to "tank up" with electricity.
If you want to directly charge vehicles with solar the problem is that home solar will gets its power while you are at work with the car during the day. What to do about that?
Well, there is
this thing called the "electrical grid". It's supposed to be good for moving energy from place to place; I believe it uses something called "wires". ;-)
In all seriousness, there is nothing which prevents businesses from installing solar over their own parking lots (right next to the vehicles of their employees and customers). If a farm of 37-foot dishes in the Mojave is good, a farm of them atop piers in the lots at the office parks and malls would be much better; they'd produce power exactly where needed, they'd need no more land to be used, and they'd provide shade for the vehicles during the day. You've got pavement all the way around for maintenance access. Why would anyone even consider a greenfield (okay, beigefield) installation in California?
With the right incentives - and $60.00 to $80.00 a barrel oil is about right - the capacity for conservation and innovation is unlimited. Lots have been discussed here, one which hasn't is micro geothermal as partial or complete heating and cooling for homes. A lot of those suburban homes are on lots large enough to have a pond which would allow a significant bit of tubing.
The point being that incremental change prompted by strong price signals will alter behaviour. A lot.
Sumyung, I'm inclined to agree with you that 2% per year drop in oil wouldn't be horrible. But some of the peak people are thinking we could see 5% per year or even more.
5% per year would be harder to cope with. After five years, we'd have only about 3/4 as much oil per year. And five years is too little time to tool up to manufacture hundreds of billions of dollars of new efficient products--even if they were designed and tested, which for the most part they aren't.
If we had to cut 25% in 5 years, most of that would have to come from demand destruction, which would be... um, destructive.
If new technology (e.g. reel-to-reel solar cell production *plus* cheap fast-charge batteries) comes online in the next five years, *and* if serious drop in production holds off for ten years or more, then we could be OK. But I'm far from convinced that we can count on that. And the inertia and incomprehension of the system will make people slow to see signals. Currently they're saying, "Oil is at $65 *today* but we can't invest in solar because what if oil fell back to $35?" That kind of thinking could chew up a few remaining years.
You do realize that we could have had plug-in hybrids in volume production by about 1995, if the California Air Resources Board hadn't tried to compell production of complete ZEV's?
And we'd have had 80-MPG sedans coming in about 4 years if Bush & Co. hadn't cancelled the PNGV in 2001.
I'm beginning to think that we need a branch of government run by engineers and scientists, to tell the legislators, executives and judges when they need to get their heads out of their butts.
"I'm beginning to think that we need a branch of government run by engineers and scientists, to tell the legislators, executives and judges when they need to get their heads out of their butts."
Interesting thought. It is also another reason that we need to worry about China, besides their growing petroleum demand. The Chinese government is run by engineers and scientists. President Hu Jintao is a geologist, the most insightful sort of scientist. Unlike our governmental policy creating mechanism of a free-for-all of competing lobbyists, the Chinese government can wield powerful macro-economic controls based on sophisticated economic models created by economic advisors who are scientists, not former campaign managers. The result is that China has seen about a 9% per annum, stable economic growth rate over the past two decades, about three times the rate for the US. About a year and a half ago, when there was much talk about the Chinese economy overheating, the central government deftly applied macro-economic controls and smoothly landed the economy. They are carefully looking at projections of fuel imports and taking immediate steps to mitigate their effects on the Chinese economy, like buying foreign oil companies and making great deals for oil with countries like Venezuela that the Bush administration is going out of its way to alienate. And they can do what the science tells them is the proper thing to do in the long term without worrying about getting re-elected. They do need to worry about growing inequities between rich and poor and the potential for social chaos, but they are doing so and taking strong measures to deal with the problems.
When the Chinese government saw the potential of the internet, vast sums of government money were applied to set up the infrastructure and now the government is able to instantly collect economic data (and a lot of other data of interest to them). I think that we have to ask ourselves if, in this age of hugely efficient information technology, whether effectively run, centrally controlled governments with appropriate use of market forces and entrepeneurship, will simply out-compete us and bring truth to Khrushchev’s cold war (and completely misunderstood) warning that “We will bury you”.
And this enlightened group of Confucian technocrats is subsidizing consumption of motor fuel and threatening to bust national budgets... why?
The Chinese are no more perfect than the Japanese were. One can intelligently plan for contingencies, but command economics does not work. If the USA can get its act together we'll stay well ahead of them (though our current version of crony capitalism does not leave me optimistic).
"And this enlightened group of Confucian technocrats is subsidizing consumption of motor fuel and threatening to bust national budgets... why?"
I suppose it is for the same reason we are. Cheap energy greases the economic wheels. But it isn't sustainable for them or for us. Their direct subsidies are certainly much more efficient than our method of fighting wars in the Middle East.
You are a good patriotic American who believes the Adam Smith dogma of the "invisible hand" and it's corollary that “command economics does not work”. Perhaps not in any ideologically pure form, but what has the Chinese economy been doing for the last thirty years since Deng declared that “Some people must become rich before others”? In ’97 when the Asian economies were melting down, China’s chugged along without a hiccup. We may hope that the Chinese people will revolt and cast off their Communist chains, but I don’t see that as being in the cards either. Not one of the dozens of people I have talked to who live in China or expatriates here in the US despise the Chinese government. While my sample is not unbiased, it is certain that Chinese people in general view the government as a benign parent rather than as an oppressor as Westerners typically do. As long as the vast majority of people in China continue to see their situations improve, things will continue to hum along.
Certainly China continues to be guilty of human rights excesses, but these are tolerable to the Chinese if they remain minor and the government maintains a stable place to raise children and carry on business.
I recall hearing about the phenomenal growth of the Chinese economy back in 1999 through 2002 when I worked with several immigrants from China. They relayed from their families stories of unthinkable unemployment levels painting a picture like 1930's America. PRC would have had to have had double-digit growth since then just to start getting people back to work.
Don't believe everything the PRC propagandists tell you.
Just because central planning has failed everywhere it has ever been tried doesn't mean it won't work if only... yeah, right. I've heard it before.
Rumor is also that China's got a huge problem with corruption in its banking system, which has made enormous bad loans to formerly state-owned firms and continues to prop them up. It's one huge Ponzi scheme (which we should now expect in those proto-capitalist nations which haven't adopted good securities laws). If there is a hiccup and the rest of the economy stops making deposits, the whole house of cards comes down.
This could be interesting, because one of the consequences would probably be for China to dump US T-bills in order to get foreign goods. US interest rates would jump briefly, but we'd be able to buy back that debt for a fraction of its face value. This would cement the wealth transfer from China to the US.
I've got nothing against electric cars ( and given my skill at auto mechanics having a
reliable maintenance free electric motor is very appealing) but if a econo compact electric
car requires 38 Kwh to fully charge, whoa boy, look out.
That is more than the total electrical demand for the average home. Do you realize what
any large scale use of electric cars would mean for the electric grid and generation
capacity? Sure most cars would be charged in what is currently the off peak hours and
thus demand would be smoothed out but if just 10 percent of say Californians adopted
electric cars I suspect you would quickly get a replay of the 2000/01 power crisis. Plus
there simply is not enough natural gas availability or pipeline capacity to accomodate
such a surge in demand. Nuclear power plants would have to built as would LNG terminals
new high voltage transmission lines and other infrastructure to accomodate electric cars
and Californians have not shown much enthusiasm for any of that.
Then there is price. Electric power costs are going to be rising steeply in areas that do
not generate their power via nuclear, coal and hydro. Gas prices are at $14 per 1000 cubic
feet on the spot market thanks to Katrina and Rita. That compares to about $3/1000cf 4 or
5 years ago. Nationally gas fired power plants generate about 19% of total US electric
power, a lot more in some areas like California. Even if gas prices fall back after this
winter they won't ever be getting back to 2000 levels.
I would not be keeping an eye on oil so much as gas. Even if we muddle through the shorterm
effects of Katrina and Rita, the long term outlook is still bleak. Despite an explosion in
domestic drilling rigs gas production has been stagnant. The industry is running hard just
to stay in place. Canadian imports are going to dry up as Ontario phases out coal fired
power production. New fields are quickly exhausted as they are not as large as the earlier
finds and currently there are only 4 LNG terminals operating in the US and they are fully
booked so we have no way to increase our imports till more are built. The only new ones
under construction were located guess where... in Lousiana and the Texas gulf coast and
another in Mexico that Sempra is building because you can't build them anywhere else due
to NIMBYISM. That's going to have to change. We would be facing a gasoline shortage right
now were it not for the ability to import gasoline from abroad ( and that only because
EPA requirements were temporarily lifted). European stockpiles were released, some tanker
cargoes of refined product diverted to the US and, of all people, Hugo Chavez agreed to
an emergency shipment of 4 tanker loads ( 240,000 barrels each) to the US. It wasn't
entirely altruistic, the Venezualan national oil company owns CITGO.
The effects of high gas prices/short supply are going to be felt soon. PVC plants are shut
in Louisiana right now because of a shortage of feedstock. Nitrogen fertilizers are going
to get a lot more expensive too. Home heating costs will be rising and they won't be going
down. Most gas distribution companies had some degree of 'hedging' for the immediate
future but long term contracts are a thing of the past for natural gas and beginning next
year the purchased cost of gas for utilities will reflect the current run up in prices so
even if the Gulf gas production facilities come back on line ( some of them won't as it
will be too expensive to reclaim them) don't expect a return to the status quo ante of
Even LNG offers no panacea. Global demand for natural gas is soaring ( in Britain they
had a 'dash for gas' to meet Kyoto emission standards and they aren't alone) so LNG
prices are going up too. Plus some 20 to 30 percent of the energy value of the gas is
used in the liquification process. Toss in transportation, processing and storage costs
and LNG from Trinidad, Indonesia or the Persian Gulf is not going to be cheap just
"Don't believe everything the PRC propagandists tell you."
Right. I talk to Chinese people too, and as I said, my sample is not unbiassed. People I talk to are largely on the internet and so are pretty unlikely to be unemployed peasants. But would you believe (in memory of Don Adams) the CIA fact book? They report that the Chinese GDP grew fourfold since 1978. That is an average rate of about 5.5% and it is clear that the rate has been between 7 and 10% for the last decade or so.
Sure, China has huge problems as it transitions from a largely agrarian workforce to a largely industrial one, and as it transitions from a completely planned economy to a dominantly privately owned one. But those same problems have existed from the beginning and the government has kept them under control.
Getting back to energy markets, China's high growth rates do not bode well for the US as we compete for dwindling fossil fuel supplies. With terrible problems of environmental degradation, China will be importing much of the world's supply of LNG. If the monolithic Chinese government can plan effectively with good information and good science, they will have a distinct advantage over the US, unless we stop selling our government to the highest bidder.
Hugh Angell writes:
if a econo compact electric car requires 38 Kwh to fully charge, whoa boy, look out.
That's for the full range of 155 miles. How many days do you drive 155 miles?
That is more than the total electrical demand for the average home. Do you realize what
any large scale use of electric cars would mean for the electric grid and generation
If you drive the average 22 mile/day commute and use 250 Wh/mile, you'd use 5.5 kWh/day. Recharge 8 hours a night using your regular old extension cord (10 A @ 110 VAC) and you'd bring the batteries up by 8.8 kWh/night. Two cars charging simultaneously is probably less juice than the central A/C.
Plus there simply is not enough natural gas availability or pipeline capacity to accomodate such a surge in demand.
Fine, burn oil instead. The GE LM2500+ gas turbine is 38.6% efficient in simple-cycle operation, considerably higher in combined-cycle use. If you burned petroleum in those instead of car engines you'd get close to twice the useful energy out, plus heat for industrial process heat or space heat. As you build the coal or nuclear plants, you cut your consumption from 50% of the previous situation down toward zero.
Is 38 KWh a problem? At 10 cents a kilowatt hour that's $3.80 for a fillup. About what we're paying for a gallon of gas. Not bad. And with distributed renewable sources, the infrastructure would be less of a problem.
Bob, don't care for the CIA either? Then go to Walmart and try to find something not made in China. Your economic theory paper reference from 1945 doesn't really have a lot a relevence to our discussion about China. I'd say that when the internet and supercomputers are the methods used to collect and analyze economic data, what some guy thought about knowledge and economics in 1945 is only of philosophical interest. The bottom line is that Chinese style socialism has been working very well and leading to unprecedented economic growth for a quarter century, regardless of whether or not you think it should. My point is that the methods for achieving this growth are made much easier and more effective as information technology improves rapidly, and that China may be in a better position to take advantage of these technological developments than we (in the US ) are. People have been predicting the collapse of China's economy since the '70's. The arguments always sounded well reasoned and they were always wrong.
I don't think energy efficiency would make much difference. I just read a projection of US energy production needing to double by 2030. The authors didn't go into what that would mean, just based on looking at trends. That is a 3% rise a year, which considering US population is rising over 1% a year, is only a 2% growth in energy use per capita per year. To double by 2030. And really then you are looking at quadrupling by 2055.
I think as long as energy is cheap there isn't much incentive to be that efficient or to conserve. The amount of resources allocated to improving efficiency have to be less then the amount of resources allocated to expand supply by the same amount. And when efficiency gains are made it often makes sense to expand the uses of energy. For example better lighting on roadways at night.
If oil keeps rising and alternatives like the batteries, or other types of oil production can't keep up with demand, then there will be immense pressure from the market to become more efficient. And to conserve. But I think it is sort of insane to listen to the people who are talking about doing that now when there is no indication that we are going to have sustained energy problems. And every look at history shows that we have been able to expand energy and resource use exponentially for centuries.
Europeans were worried that they wouldn't be able to build any more ships in the future as the old growth trees in Europe were running out. But new and unforseeable supply came online, then ultimately new ways of building ships without wood came.
You are right powering up electric cars will require a large expansion of the power grid. And that will have to be on top of the ongoing expansion that is needed with increasing use of electricity that is happening now, and a growing population.
There are only two viable ways for increasing power production at this time. Coal and nuclear. I prefer nuclear because capital is cheap right now which is the main expense, and because of coal's pollution.
What I want to know: If cars are totally electric powered and coal is used to generate the electricity will that generate more or less CO2 emissions than powering cars by gasoline?
Why is 38 KWh a big shocker? Most vehicles would not need that much juice every night.
Yes, some electric power plants would need to be built. Is that a problem?
I agree on nuclear versus coal. But in California due to regulatory requirements 20% of the increased demand will come renewables. Does California's government count nuclear as renewable? If not then that 20$ will come from a combination of wind and solar.
In ten years time I expect solar panels to get cheap enough that a lot of people will use solar to recharge their cars.
I wonder what the hood and roof surface area is for the average car and how much electricity a car parked in the sun could generate if it had photovoltaic surfaces with 50% conversion efficiency.
Do they plan 20% of increased demand or 20% of total demand?
I found a guy online who actually did the calculations for how much a hybrid car with solar panels as the roof and sides, could get for free in miles per year. In a place like the southwest. I believe it was 11,000 free miles. I will look for his page.
I was thinking about solar after I made my post, and I wonder if it will become viable when we can do silicon manufacturing on a much larger scale.
One issue that makes them difficult is how cheap electricty is when you translate it into the energy from a gallon of oil. I read a gallon of oil's equivilant is less then 3 cents of electricity from the grid.
Still adding solar power to your car is exactly the type of revolutionary advance that having a big battery can do.
If cars are totally electric powered and coal is used to generate the electricity will that generate more or less CO2 emissions than powering cars by gasoline?
35 MPG car @ 6.167 lbm/gallon and fuel assumed to be CnH2n: .151 lbm/mile carbon (251 g/mi CO2).
IGCC powerplant burning Illinois coal (11,800 BTU/lb) and 65% carbon at 40% efficiency: 2.13 kWh/lb carbon.
Used in a Prius+ at 262 Wh/mile: .123 lbm/mile carbon (205 g/mile CO2).
Looks like it's a close thing; the Prius+ is about par if it's charged from a coal-steam plant at 33% effieicncy, and a 42-MPG car would reach parity with the IGCC/Prius+. However, an IGCC powerplant can sequester carbon at a fraction of the cost of doing the same on board a vehicle, and coal-fired IGCC is nowhere near the best we can do for carbon emissions per kWh. If the grid mix becomes 55% non-fossil (any combination of nuclear, wind, solar, and hydro) and 45% coal (50/50 PCC/IGCC) we'd be way ahead at .0609 lbm/mi carbon (101 g/mi CO2). Complete use of IGCC with some sequestration could cut that further.
Yes, you could build more power plants to accomodate electric cars. Don't know where or
how long it would take but it could be done. Nobody seems to want them in their neighborhood of course and cooling water in the Southwest might be an additional problem
though grey water can be used if the plant is near a wasterwater treatment facility.
Of course if they are to be gas fired you will need an LNG terminal sooner or later. Where
do you put that? I'd suggest Malibu and Sausalito for California. Time the liberals learn
that rednecks aren't going to bear ALL the burdens associated with energy availability.
Coal, unless gasified, is not going to fly in California. Even gasified I can't think of
a likely spot to put the plant other than using eminent domain and building one next door
to Barbara Streisand or Barbara Boxer. Plus putting power plants near where the demand is
reduces the need for additional 500kv transmission lines and losses from electrical
Gas power plants are very clean. Even a modern coal plant can be though mercury is a problem if you burn the coal. CO2 can be 'sequestered' in future plants as well. In
fact Britain is planning on injecting CO2 into old oil fields both to assist in
recovery and to help meet their Kyoto targets ( which they won't but that is another
Mileage or range figures for electric cars are probably inflated. I believe RP made mention
of this in a thread on hybrids. Driving in urban areas, especially in California has got
to be a lot more energy intensive than what the electric car enthusiasts want to admit.
Toss in A/C, CD players, GPS and all the other electronic gadgetry in a modern car and I
just bet you won't get anything like 150 miles per charge and that range is for new
The electrical demand problem is real. 10 cents/KWH is based on existing power plants with
long term contracts for coal supplies and does not factor in fuel cost adjustments which
every utility in America is now passing on. Anyone in California can remember what power
costs went to when the market was tight. Whereas $30-60 per megawatt hour typical for
daytime power in 2000 when capacity grew tight or transmission lines became congested
it shot up to 10 or more times that level. Prices of a $1000/mwh are not unknown.
PV and windmills are useful but they are limited. Part of the problem is that a utility
or ISO has to have power sufficient to meet the maximum credible load. If people are still
connected to the grid, which almost all personal users of home PV or wind generating plants
are, the utility still has to have available sufficient power to supply them AND their
regular customers. Since overcast or windless days cover wide areas and if such weather
conditions persist beyond the battery backup PV or Windmill users have ( if any) then they
are going to suddenly be sucking power from the grid. Where utilities HAVE to buy excess
power from PV and wind generators they either have to idle their own plants ( which means
they don't generate revenue) or hope they can buy enough capacity on the spot market when
the excrement hits the fan. Problem is merchant generators don't want to build plants where
they can't get long term power contracts from utilities. Thus in California, Wisconsin and
New England there are real concerns about having sufficient capacity available when it will
be needed most and this without ANY electric cars on the road. California had a Chamber of
Commerce summer year along the coast. Just wait till there are 3 or 4 days of 100+
degree weather in the Los Angeles or San Francisco. The grid out there is going to crash.
Samething could happen in Wisconsin or New England this winter only it will be -10 degrees
outside. People are going to be very unhappy but whether that will get more transmission
lines and power plants built and the means to fuel them remains to be seen.
Long-winded replies are not necessary for the points you are making.
California: But most people do not live in California. In most parts of the country more electric power plants can be built.
Also, in California wind and solar collector installations can be built. As E-P and I have pointed out, the cost of wind and solar collector power would make electric cars quite affordable. So what if the sun does not always shine or the wind does not always blow. Batteries can get charged up when the power is available. Electric power prices could be set dynamically depending on supply and demand.
Also, electricity can be brought in from Nevada and Arizona.
Also, the lights go out often enough and political attitudes in California will change.
Supply problems will not stop a shift to electric cars.
I am stunned -- literally stunned. Your choice of 25 years means you start measuring at the end of The Cultural Revolution which started at the end of the Years of Natural Disasters which started at the end of the Greap Leap into the abyss um I mean the Great Leap Forward. By your mendacious choice, you try to turn the worst excesses of 25 years of Chinese socialism and central planning into proof of the wonderful benefits of socialism and central planning. As I said, I am stunned. I am truly stunned you think the readers of Randall's blog are stupid enough to fall for that crap.
I don't know what sort of Chinese folks you speak to, but two of the people I worked with spent years in the countryside struggling not to starve. The younger hipper folks I worked with were at least aware of the history.
I have seen some alleged refutations of Hayek's simple observations. I found them as mendacious as your choice above and was frankly shamed that they originated in my country of birth. They have a simple flaw in their reasoning--a mistake I see you repeat:
Ten or 15 years ago, the notebook computer I am using would have been a supercomputer. My buying decisions, which maximize my utility, involve very complex biochemical interactions. For instance, while I prefer Chicken Noodle Soup, I do like Campbell's Tomato Soup. If I am in the mood for the salty tangy goodness of tomato soup, I will happily spend 10 cents more while leaving my preferred Chicken Noodle on the shelf. Long before anyone builds a supercomputer capable of predicting my buying decision at every given moment of time along with the buying decisions of billions of other humans, I will have a laptop capable of performing realtime long range global weather forecasts. Since I have no need for such forecasts, I might use the computer and the internet to help me maximize my utility instead.
Basically, as the computing power and access to information of the central planner increases so does the computing power available to individuals. By the time the central planner catches up to where we were 60 years ago, we will be long gone. We have yet to produce a computer capable of even pretending to approach a tiny fraction of the computing power of the human brain, and you suggest the central planner will replace millions of brains augmented with their own computers with a single computer. Absurd.
I don't recall predicting an immediate end to PRC. Even allowing for a sizable margin of error, the PRC through socialism and poor planning could starve a subpopulation the size of the entire USA and still have about a billion people. I fail to see a reason to ignore that demographic reality when explaining the stock available on Walmart's shelves.
You make me nostalgic for the cold war.
Of course I picked the last 25 years. That is when China got started with Deng's application of pragmatic market-based economic development. Who would argue that Mao was incompetent as an economic master and that his policies killed millions? Not even CPC members. He was blinded by his own cult of personality. Remember what we are discussing here: China's future impact on fuel supplies and prices. Looking at China's economic disasters of the 50s and 60s is interesting history, but it isn't relevant to the discussion.
Economic planners don't need to know whether you are eating tomato or chicken soup. But if they can predict how 100,000 people will be affected by an increase in grocery prices of 5%, that is useful information. If they can use actual sales numbers from a thousand grocery stores to test their predictions, that is even more useful. Very complex models of large scale economic activity can be very quickly implemented and tested using large computers and information networks, and this has revolutionized economic planning and analysis. Your comparison of computers and human brains is what is absurd. A human baby can learn to talk without special intervention and a supercomputer can't. But my laptop can do millions of arithmetic calculations in a second that would take me years to do. Brains and computers aren't comparable in the simple-minded way you suggest. Economic models are mathematical, and while it takes a human to conceive of one, it takes a computer to compute it. It is clear that human economic activity is a collection of chaotic processes and will never be perfectly predicted, but useful predictions of large scale economic activity can be made. China is not ahead of the US in these activities, but when economic predictions suggest problems, China can take actions to mitigate them much faster and more effectively than we can, simply because they don’t have pass through a gauntlet of bought off legislators to create a policy to do the right thing. Just like you, I marvel at our great system of checks and balances, but it is at best slow and inefficient in an era of very rapid change and currently the unchecked ascendancy of large corporate interests in the form of a plague of lobbyists has destroyed any balance and with the cooperation of the incompetent Bush administration, it is destroying our country.
In the years that China has overhauled her economy, the economic prospects of all levels of society has improved, some much more than others. There have been no famines. The performance is far better than any developing country following the prescriptions of Milton Friedman. It is in fact, the fastest growing economy in history. Sorry if that doesn’t fit your ideological bent. It is just a fact, and we ignore it or minimize it at our own peril.
While I am in the Edsgar Dijstra school regarding thinking machines, I should point out that I did not contrast a computer and a brain with respect to number crunching. I contrasted a handful of brains using a supercomputer with millions of brains each using a supercomputer for the purposes of responding nimbly to market forces. None of those supercomputers will have a liker or a disliker, whereas each of the brains will.
We are arguing cause. You see a success of fascist style socialism, and I see a success of a quarter of the world's population who happen to have a higher group average intelligence and a mercantile attitude.
Regardless of the real cause, we can each anticipate that the cause will continue into the future. I see no reason to think the demographic reality will change suddenly. I suspect you see only improvements in the abilities of fascist socialism as technology advances.
Let me first say how much I appreciated your links. They are very useful and relevant.
I think previously we were arguing about the extent of the success of the Chinese economic development. Sounds like I won that one.
Your argument regarding the cause of success being "a higher group average intelligence and a mercantile attitude" doesn't really hold water unless you posit that those factors suddenly changed around '75-'80. I don't think they did. What did change at that time was the leadership and policies toward a pragmatic mix of socialism and market forces. Certainly Chinese culture embraces a mercantile attitude and unleashing that powerful force helped to get the economic expansion rolling. But it is also true that the government of China made some very smart choices that are now paying off. First amoung these choices is probably the massive investment in science and mathematics education, which is rapidly leaving the US educational system in the dust. Second is massive investment in infrastructure including railroads, highways, ports and internet. There is no arguing the clear fact that the Chinese economy has been well managed and the Chinese people are very talented and determined to be successful.
What I don't see is any indication amoung most Chinese people, any sense that their government is evil or "Fascistic". I recently had a long conversation with two Chinese businesswomen, one from Hong Kong and one from Fujian, and when I informed them that many Americans, including so-called experts, believed that most Chinese people were chafing at the bit to revolt against their oppressive government, they had a great laugh. They said the great majority of Chinese people are very happy with their government and they really rarely thought about politics. For the most part, they assume that the leadership is doing it's best and the results seem to be good. And this is what I hear over and over again. Even when I talk about Tianamen Square, they say it was a shame, but the government had to maintain order, and it clearly paid off, relative to the disarray of the former Soviet Union. You see, they just have a different perspective on "Socialism with a Chinese face" than you do. And don't forget, a happy worker is a productive worker.
I am not blinded by ideology and you can't read. In the previous post I wrote that the Chinese policies moved "toward a pragmatic mix of socialism and market forces" i.e. market forces were introduced, which would be toward, but not to, the ideal of a free market.
I agree that the differences between Fascism and Communism are subtle and under a strong dictatorship, insignificant. Fascism can most succinctly be defined as corporations ("the means of production") controlling the government while communism can be defined as the government controlling corporations. Both forms of government control all other aspects of society. I would have to ask, in the present day which country is closer to Fascism, the US or China?
As to a significant difference between Deng and Mussolini, your own reference states that Deng "allowed open criticism of the excesses and suffering that had occurred during the" Cultural Revolution. In general Deng is considered to be pragmatic rather than ideological, in stark contrast to Mussolini.
It may be true that Chinese culture is somewhat less individualistic than Western culture, but I see little difference in how Chinese people value freedom.
What indicates the superiority of the Chinese economic system WITHIN THE CONTEXT OF A DEVELOPING COUNTRY, is not a comparison of performance with the previous regime, but rather a comparison with other developing countries over the same time period. China wins, hands down, against any other country you can name. I pointed this out before, but your reading comprehension is lacking.
There, I answered every one of your innane points and soundly defeated them all.
Corporations controlled Mussolini and Hitler and Deng?!?
Mussolini did not allow criticism of his enemies?!? I can only conclude you believe that from your stated 'difference' between Mussolini's Italy and Deng's China.
You guys ought to get a room.
You're so far off thread, it would take light years to reach you in time...