----- Original Message ----- From: Charles Whalen To: Fran Sullivan-Fahs Sent: Tuesday, December 02, 2008 7:05 PM Subject: Re: what do you think, charles? from fran
Very complex subject. Peak Oil is not about running out of oil; it's about having reached maximum supply and production. There's a big difference. Basically what Peak Oil does is that it puts a cap on GDP, where the only way GDP can grow any further is through efficiency gains. The practical effect of this is that we will see repeated cycles of rolling recessions (or worse, depressions) and recoveries, but without a longer term trendline of growth. The longer term trendline will be flat. This is exactly what we are seeing. Global oil extraction and production peaked in 2005 and has fallen slightly since then. We are now on a very slightly decreasing plateau and will likely not see larger declines in oil output for a few years, possibly until 2012-15, when the declines will get steeper. There can be, and will be, lots of oil price volatility within this paradigm, with price basically determined by demand. What we now have is a demand-destruction dynamic, where price will moderate demand and vice-versa, but where total supply is limited and capped by the global peak that is now clearly visible behind us in the rear-view mirror back in 2005. Peak Oil is only visible in hindsight, and we've now got that hindsight to clearly see it. There are mathematical models which explain the extreme price volatility we are seeing and will continue to see in the oil market. In the absence of any widely developed and available, competing substitute for oil and with the supply of oil constrained and limited to the peak we have already seen behind us and unable to expand any further, I see mathematical queueing models as a good proxy and theoretical construct for explaining this price volatility. In a queueing model, you have a demand rate and a supply rate, just as in the case of the oil market. Mathematical queueing models do not directly incorporate price into them, but this can be done by proxy, as the length of the queue -- or equivalently, the waiting time in the queue (which is proportional to the length of the queue) -- can be thought of as a proxy for price, since price will likely be directly proportional to the length of the queue (or equivalently, waiting time in the queue). This may be somewhat counter-intuitive to those without mathematical training, at least on first thought, but the length of the queue (and waiting time in it), and hence, by proxy, the price of oil, takes off exponentially and skyrockets as the demand rate approaches the limited, constrained, fixed supply rate. In fact, the length of the queue, and hence price of oil, actually goes to infinity (in the mathematical model) as slack capacity completely disappears and the demand rate reaches 100% of supply, bumping up against the fixed supply constraint. This can be seen mathematically, for the simplest M/M/1 queue, with the formula: L(t) = 1/[mu(t)-lambda(t)] where L(t) = length of the queue (as a proxy for price) at time t lambda(t) = demand rate at time t mu(t) = supply rate at time t This mathematical model is a good proxy in explaining the demand-destruction dynamic in a supply-constrained environment, as we now have with the oil market having reached maximum global ouput, and the resulting repeated cycles of rolling recessions and recoveries that we are seeing and will continue to see, with a flat longer-term GDP trendline, where demand continues to bump up against this fixed ceiling at the height of each recovery, causing the price of oil to skyrocket, which then results in demand destruction, leading to another recession and then subsequent recovery, and so on and so on. As demand backs off of the fixed, constrained supply going into each recession, the mathematical model explains and demonstrates how the price of oil will drop precipitously with the more slack capacity that is freed up through demand destruction. Basically what will happen is that with sufficient slack capacity (of supply over demand) in the global oil market, the price of oil will start to drop back down towards its cost of extraction and production, which is exactly what we are now seeing. The only way we can get out of the vicious cycle of this paradigm (explained reasonably well by mathematical queueing models), which has stalled and flatlined long-term economic growth, is to develop a widely available competitive substitute for oil, which of course would be electrically-powered transportation, i.e. EVs. That would remove the constraint and ceiling on economic growth and allow the global economy to once again expand. Charles ----- Original Message ----- From: Fran Sullivan-Fahs To: Charles Whalen Sent: Tuesday, December 02, 2008 10:50 AM Subject: what do you think, charles? from fran Peak oil hoax: Keeping the idea of EVs alive in the era of cheap gas Posted by: "doug korthof" [EMAIL PROTECTED] live_oil_free Sun Nov 30, 2008 7:45 am (PST) What makes you think Peak Oil is a hoax? You think there's an infinite amount of oil? You don't believe the decline in discovery & production rates and increase in demand rates? I wrote an article about this; while oil is not unlimited, per se, there's much more of it than the peak oilers think or will admit. Do you know that the original peak oiler was a Shell exec? Hubble was writing about peak oil to promote Shell nukular power, and to jack up the price and increase control of oil supplies. It's not entirely a bad idea, because the peak oil myth gets people to accept high oil prices; but it's pernicious if people think we're going to run out of oil. ---------------------------------------- The Myths of Peak Oil and the "Energy Crisis" "the problem is NOT that we are running out of oil; the problem is that we are NOT going to run out of oil before we smother in the debris of the oil economy...". The American Petroleum Institute confidently expects to deliver oil at the present rate of growth until the very last decades of the 21st Century. Newer technologies such as shale-oil extraction, and revived older technologies, such as converting coal and natural gas to oil are in ADDITION to this assurance. The amount of oil in the Earth is finite, of course. Books such as "The Party's Over" claim much more, that the upcoming end of cheap energy from oil will necessarily cause global political disruption, and that there's neither enough time nor enough other resources to find a substitute. This version of "Peak Oil" is the one that sells books, is a real position held by widely read authors, and can be shown to be false. Explication of the two meanings for "peak oil" remove the salability of scare books. In one sense it's trivially true, and in the other sense, it's just false. 1. Peak Oil in one unarguable sense means that it's the end of easily-recoverable oil. When oil stops bubbling out of Arabia, it must be pumped or pressure-extracted and separated. The price of oil will rise correspondingly. Oil prices of $50 per barrel may explode to $100 or even $500 or more if oil must be extracted from "shale oil" or converted from coal deposits. These numbers correspond to pump prices of $1.60, $3.20, and $14.00 per gallon. Price inflation will eventually increase the price of gasoline to these levels, as the dollar degrades over the decades. Even a pump price of $14/gallon is still a DISCOUNT from one estimate of the real, unsubsidized costs that are not paid by the oil industry. So in this sense, "Peak Oil" is trivially true; gas prices are going to rise, maybe severely! No one doubted, back when bread was 30 cents a loaf, that some day it would be $3; it's just a matter of time and market pressures. The price of oil has little to do either with the cost of production or scarcity. As the Saudi Oil Minister stated, there is no shortage; they are able to supply ALL their customers. When the reporter asked about lower prices, the Minister laughed. Big Oil charges what they feel the market will bear; it's a managed market, like diamonds. Big Oil has been consolidating, from reducing the number of gas stations and refineries to a smaller number of multi-nationals, effectively allowing Standard Oil to reform itself and join with OPEC to control the market. It's a monopoly in the sense that folks who relied on cheap gas and purchased a gas-guzzler are helpless, for now. They must purchase the fuel or do without driving. In a sense, we are hooked on the drug of mobility, and have no alternative. Mass transit was dismantled years ago, and we got hooked on the freedom of the auto. In a controlled market, there's a mathematical model for the price- point where cash returns are maximized. Naturally, drivers react to higher prices by either driving less or finding other means of transportation. To the degree that they do so, Big Oil lowers the price, but only in accordance with the model; there's no shortage, as there is in a free market, all the customers get the "drug". Are oil-fired cars "sustainable?" That is, could we run oil-fired cars indefinitely? Amazingly, it's possible. Given enough power, we can sequester carbon dioxide from the atmosphere, as plants do, and accelerate its conversion into burnable Carbon compounds such as oil. The cost of this oil might be perhaps $2000 per barrel, and we would all be smothered by the debris of burning the rest of the oil, but it is theoretically possible. So in this sense, unfortunately, our oil addiction won't be solved by "peak oil." We have to decide to get off the "drug" ourselves, nobody else is going to do it for us. In another sense, "Peak oil" is the idea that, in the immediate future, we will run out of physical oil, and not have any. Why does this matter? Well, it will mean our cars will sit idle, and our economy collapse. Shopping centers, urban sprawl, and whole populations will disappear; societies will fight and die over the last few gallons of gasoline, the last few puffs of CNG, and the last few pounds of coal. In this sense, it's just false, as shown by the supplies of physical oil examined above; moreover, as oil runs out, people adapt. When trains disappeared, we were "trained" to use cars and busses; those who depended on trains adapted. The chief thing about this sense of "peak oil" that bothers me: it ignores the infinite adaptability of humans. We are clever and ingenious monkeys; we adapt, within limits. As things change, commodities become scare, prices rise, and people learn to live with the new situation. To run out of oil in this way assumes we would have to fall off the cliff suddenly, from subsidized cheap oil to scarcity with scarcely a break. The scary image is of suddenly empty pumps, going from lots of cheap oil to none at all. Things don't happen this way. It's ironic, to see videos like "the end of suburbia", when so many people are working so hard to stop big developments like Rancho Mission Viejo; sprawl is happening now, and it's an insult to think that it's going away because soon there won't be any gasoline. Peak oil won't stop sprawl, only difficult battling and opposition even has a ghost of a chance. Can there be an "Energy Crisis" without a crisis? What happens with Peak Oil is illustrated by the claims of an Energy Crisis. A mild, but sudden, jump in oil prices led to the sudden popularity of Electric cars. Every automaker seems on the verge of some day producing an Electric car. From Nissan to VW, Honda, and even General Motors, which scarcely three years ago arrested would- be buyers of their Electric car and crushed them all. Dick Cheney said that we need "a new power plant a week for the next twenty years," 1,000 new electric plants. A study of the California grid on www.CAISO.org shows that the only time we are anywhere near a shortage of electric power is summer daytime peak periods. The rest of the time, we are shutting down big generators as electric power goes begging. During off-peak hours, extra electric is used to pump water up to Lake Castaic and other reservoirs; the next day, the pumps turn into generators, and the power helps meet peak demand. Electric generated by this "peak shaving" technique is still cheaper than firing up dirty "peaker" units, despite the loss via pumping and generating. Our current generating capacity of about 52,000 megaWatts is far in excess of even our peak demand. A simple calculation shows that we could generate all of this peak power by rooftop solar panels, assuming every Californian lives under an average of 1000 square feet of roof; this is realistic, since the area available includes parking structures, apartment houses, courtyards, etc. A thousand square feet per person assumes 2.5 residents of an average 2,500 square foot home. 1000 square feet is 100 square meters of roof, times 200 Watts per square meter yields an average system of 20,000 Watts or 20 kiloWatts (kW) per person. If only half of the roof is useable due to shading or skylights, that's an average system per person, just using rooftops, of 10 kW. Multiply by 30,000,000 Californians and you get 300,000,000 kW of capacity, or 300,000 megaWatts, about 6 times our existing generating potential. So there's no "energy crisis" with respect to electric production. We have more than enough electric capacity, and, if we used our solar peak power generating capacity, we would be flooded with excess electric power. There are equipment outages and storm damage, of course, but if we installed battery backup solar systems, we'd be immune to that, too. What, then, do they mean by an Energy Crisis? Let's look at oil. Could that be what talk about an Energy Crisis is all about? First, people don't want to get off oil. If you claim there's an oil shortage, I'd have to ask where's the shortage. What this boils down to is that we don't like the high price of oil. If we really wanted to get off of oil, and still retain our mobility, and assuming oil prices remained high and manufacturers resumed production of all-electric EVs and started making plug-in hybrids, we can reduce oil far below current US demand of 20 million barrels per day. Even better, some of our driving could be done with excess electric production, especially off-peak charging of plug-in cars. The average car travels 1000 miles per month. A kilo-Watt-hour (kWh) is a measure of electric energy or work. There's about 35 kWh per gallon of gasoline. An Electric car such as the Toyota RAV4-EV, a small SUV, gets about 4 miles per kWh of energy. So to travel that 1000 miles only takes 250 kWh of electric energy per month. The average home uses between 500 kWh and 1000 kWh per month. So 1000 miles of driving could be done on a small fraction of the energy use of the home. An average gas car gets 20 miles per gallon, so avoiding buying gas for 1000 miles saves 50 gallons of gas. At $2/gallon, that saves $100, not counting oil changes, tune ups, and so on. That's more than enough to purchase a rooftop solar system large enough to produce 300 kWh of energy per month. So in effect, if you could buy a plug-in car, you could use the money you don't spend on gasoline to help electrify America. And after it's paid for, you get to drive for free. Even better: your daytime peak electric production could charge your car -- or you could "bank" the valuable peak power with the grid when it needs it most, using the extra credit for that valuable power to "pay for" off-peak charging of your plug-in car. Both the daytime peak production and the nightly charging help level electric usage and actually lower the cost of electric power. Each plug-in car that doesn't use gasoline tends to lower the price of gas for the remaining oil-fired cars. Those people who want to buy a plug-in car, and power it with their own solar system, should be allowed to do so; the only thing stopping them is a lack of plug- in cars. The RAV4-EV ceased production after Chevron bought control of its Nickel Metal Hydride (NiMH) batteries from GM and sued Toyota, extracting $30 million in "damages" and allowing Toyota only to make small NiMH batteries, too small to power an Electric car or a plug- in. That's why all car companies are forced to experiment with Lithium batteries, which show promise, but may not last as long as NiMH. Should an oil company dictate our Energy Policy? Why did GM and Chevron collude to suppress plug-in cars, and why should they be allowed to get away with it? There's in the end no "peak oil" problem, and no "energy crisis". There's a lack of leadership, a lack of will, a sickening failure to address our Energy Policy, but that's a lack of mental energy in our failure to force politicians to rein in Big Oil. Our corrupt politicians are paralyzed by Big Oil's donations. Big Oil must smirk when the pols scramble for pennies while they make off with billions, distracting the gullible with talk of an "energy crisis." All the talk of "solving the energy crisis" and of Electric cars would vanish instantly if gasoline fell to $2/gallon. We'd go back to sleep, and remain vulnerable to Big Oil any time they want to yank our chain. So the real angst behind the Energy Crisis is the desire for lower pump prices. In practice, most of the remaining Electric cars are Toyota RAV4-EV, and most are powered by energy credits from daytime rooftop solar electric peak power production. The only thing stopping more people from making this sensible choice is the failure to resume production of the Electric car. If the auto companies were serious about it, they would not defer production of Electric cars for years; Electric cars, and plug-in hybrids, are not, as GM claims, "cutting edge" ideas; they are twenty years old, are well proven, and you can see examples in your own community of people living the "EV-PV" lifestyle. It's not difficult to "go green" if they let you, it's EASY, and it's even fun. _______________________________________________ Florida EAA mailing list listserv@floridaeaa.org http://www.floridaeaa.org
