The Fossil Fuel Welfare State

The Atlantic has a look at the massive subsidies doled out to fossil fuel companies and consumers while renewables are starved of funds (Japan being the main exception) - The Fossil Fuel Welfare State.

When we talk about the Great Energy Shift to a shiny green future, keep in mind that there’s plenty of green bankrolling the dirty power past. That point was driven home yesterday by the release of a report detailing the extent governments subsidize fossil fuels.

Global subsides for fossil fuels paid to companies and individuals reached more than half a trillion dollars in 2011, the latest year full data was available, according to an analysis from the Overseas Development Institute (ODI), a UK-based nonprofit that advocates rolling back such incentives.

In the 11 wealthy nations that make up the Organization for Economic Cooperation and Development, ODI estimates subsidies for fossil fuels range from $55 billion to $90 billion annually. In 2011, that figure reached $74 billion, or $112 for every person. No coincidence that the G20 group of nations accounted for 78% of the world’s carbon spew in 2010.

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2012 Global Fuel Supply Still Flat

Stuart at Early Warning has a look at global oil production trends - 2012 Global Fuel Supply Still Flat.

I seem to be the only person paying much attention to this, but I still think its significant. May figures for global liquid fuel supply are out from OPEC and the IEA and they continue to show that global supply has increased very little since January (in contrast to the very strong increases in the second half of 2011).

Other things being equal, we would expect this to lead to rising prices. Instead, prices have been weak/falling as a result of Eurozone fears. The fears about the eurozone are legitimate, but still, at present the global economy has got to be growing, if a little weaker than normal. Only Europe is actually contracting at present and that mildly. Thus, if the fears do not translate into much more pronounced global contraction in reality fairly soon, oil prices could jump up quite a bit. On the other hand, of course, if Europe does turn into a full-blown financial crisis then they could fall further.

There is a strong Schrodinger quality to the oil markets at present: prices are a superposition of the state in which Europe turns into a major global financial crisis, and the state in which it doesnt. I wonder how long before the measurement is made?

Stuart also has a look at oil production in Iraq and some of the dodgy reporting of production trends- Is "Soaring" the Right Word Here?.

Ten days or so ago, I posted the graph above under the headline "Sharp Uptick in Iraqi Production". I chose my words carefully - "uptick" to indicate that this was a movement upward of the same general order of magnitude as other recent movements in the time series, and "sharp" to emphasize that, as upticks in Iraqi production go, this was a somewhat larger and faster one than has been typical (but not, in my judgement, so great as to make the use of "uptick" misleading).

Yesterday, the New York Times decided to report on the same development under the headline "Oil Output Soars as Iraq Retools":

BAGHDAD — Despite sectarian bombings and political gridlock, Iraq’s crude oil production is soaring, providing a singular bright spot for the nation’s future and relief for global oil markets as the West tightens sanctions on Iranian exports. ...

I dont object to the graphic. Nor of course do I disagree that Iraqs production has increased and is likely to increase further (Ive been covering this for a long time).

But I do really question whether the sober grey-lady paper-of-record should refer to an increase of about 300kbd above the level of last fall as "soaring" in the present tense. I dont think so. I think "soaring" carries a strong connotation of already being way up in the air, or ascending very materially and rapidly. I dont think 300kbd merits that term. I think, if we wanted to use a flight metaphor, we might reasonably say "has begun to take off" or even "looks set to soar". But I think the use of "soaring" in the present tense is an exaggeration. I think this fits in a long-standing pattern at the New York Times of distorted coverage in which positive oil market developments are over-hyped while negative ones are minimized.

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Could Natural Gas Fuel a Trucking Revolution

The Energy Collective has a post from Geoffrey Styles on the growth of natural gas fuelled road transport - Could Natural Gas Fuel a Trucking Revolution ?. might as well use that transition fuel up as fast as possible...

The International Energy Agency (IEA) released its latest Medium-Term Gas Market Report in St. Petersburg, Russia last month. Although the IEA sees the growth of gas in the power sector slowing, they also cite its emergence as "a significant transportation fuel." What really caught my eye was their projection that gas over the next five years would have "a bigger impact on oil demand than biofuels and electric cars combined," in light of the US shale gas revolution and tougher pollution rules in China.

Thats quite an assertion, considering oils longstanding dominance in transportation energy. As I noted in March, Italy, Pakistan and several other countries already have well-established demand for compressed natural gas (CNG) for passenger cars. Despite these hot spots only 3% of gas is currently used in transportation, globally, based on analysis from Citigroup. The IEA is forecasting that transportation growth will consume 10% of the projected global gas production increase of roughly 20 trillion cubic feet (TCF) per year by 2018. Thats 2 TCF per year of additional natural gas demand in the transport sector, equivalent to 1 million barrels per day of diesel fuel.

Id be more skeptical about that figure if I hadnt seen a presentation from Dr. Michael Gallagher of Westport Innovations at the Energy Information Administrations annual energy conference in Washington, DC last Monday. Westport specializes in natural gas engine technology for heavy-duty trucks and played a major role in implementing the LNG vision of the ports of Los Angeles and Long Beach, CA a few years ago.

Dr. Gallagher made a strong case for gas in heavy-duty trucking, starting with the low cost of US natural gas compared to oil and its products. Initial growth rates in several segments look encouraging, including transit buses and new trash trucks, for which natural gas now has around half the market. Growth in China has apparently been even faster, with LNG vehicles increasing at over 100% per year (from a small base) and natural gas refueling stations growing at 33% per year since 2003.

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Peak oil can fuel a change for the better

The SMH has a rare mainstream media opinion piece on peak oil (albeit of the doomy circa-2005 variety) - Peak oil can fuel a change for the better.

The advent of peak oil means we should prepare for a downscaling of our highly energy and resource-intensive lifestyles.

What is peak oil and why does it matter? And what effect will it have on the Western lifestyles we take for granted? These are not questions that many people are asking themselves yet, but this decade is going to change everything. Peak oil is upon us.

Peak oil does not mean that the world is about it run out of oil. It refers to the point at which the supply of oil can no longer increase. There is lots of the stuff left; its just getting much more difficult to find and extract, which means it is getting very hard, and perhaps impossible, to increase the overall flow of oil out of the ground. When the flow can no longer increase, that is peak oil. Supply will then plateau for a time and eventually enter terminal decline. This is the future that awaits us, because oil is a finite, non-renewable resource.

The prospect of peak oil is no longer a fringe theory held only by a few scaremongers. It is a geological reality that has been acknowledged even by conservative, mainstream institutions such as the International Energy Agency, the UK Industry Task Force and the United States military. Even the chief executive of one of the worlds largest oil companies, Total, said recently he expected demand to outstrip supply as early as 2014 or 2015. Given how fundamental oil is to our economies, this signifies the dawn of a new era in the human story.

While the supply of oil is stagnating, demand is still growing considerably. China and India are industrialising at an extraordinary pace, requiring huge amounts of oil, and even in the Middle East and Russia – the main oil exporting regions – oil consumption is growing fast. What this means is that competition is escalating over access to the limited supply, and basic economic principles dictate that when supply stagnates and demand increases, oil is going to get much more expensive – a situation that is already playing out.

The problem of peak oil, therefore, is not that we are running out of oil, but that we have already run out of cheap oil. Currently the world consumes about 89 million barrels a day, or 32 billion barrels a year. Those mind-boggling figures are why oil is called the lifeblood of industrial civilisation. It should be clear enough, then, that when oil gets more expensive, all things dependent on oil get more expensive. Since almost all products today are dependent on oil for transport (among other things, such as plastic), the age of expensive oil will eventually price much global trade out of the market. Peak oil probably means peak globalisation.

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