Monthly Archives: July 2015

Human domination of the biosphere: Rapid discharge of the earth-space battery foretells the future of humankind

Following last night’s post, I come across this in my blog feed today! Serendipity!!

“Most people who argue about the viability of their [insert favorite technology] only see that viability in terms of money. Energy, to most people is such a nebulous concept that they do not see the failures of their techno Utopian solutions…….”

Damn the Matrix

Chris Harries, a follower of this blog, has found an amazing pdf file on XRayMike’s blog that is so amazing, and explains civilisation’s predicaments so well, I just had to write it up for you all to share around.  I think that the concept of the Earth as a chemical battery is simply stunning…….. the importance of this paper, I think, is epic.

The paper, written by John R. Schramskia, David K. Gattiea , and James H. Brown begins with clarity…

Earth is a chemical battery where, over evolutionary time with a trickle-charge of photosynthesis using solar energy, billions of tons of living biomass were stored in forests and other ecosystems and in vast reserves of fossil fuels. In just the last few hundred years, humans extracted exploitable energy from these living and fossilized biomass fuels to build the modern industrial-technological-informational economy, to grow our population to more than 7…

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Tony Seba’s ‘exponential increase’ in technology will save us – a rebuttal (of sorts)

World renown techno-utopian idealist, and singularitarian, Tony Seba was recently brought to Southland by Venture Southland and Callaghan Innovation to talk to business leaders about the current rate of change in technology and how this is a highly disruptive force to be reckoned with… I didn’t attend the rather expensive seminar, however I do keep coming across links to his talks, etc.

I’ve reviewed a couple of his talks, and I feel I need to put some stuff into writing:

Firstly, what I’m NOT saying:

  1. I’m not saying he’s wrong about the impressive pace of technological change ongoing (although I do think there must be diminishing returns to increases in technological complexity somewhere in there…)
  2. I’m not denying that the idea of being able to continue to do more, but with less, is attractive. It’s just plain and simple NOT POSSIBLE. The future we face from this point forward is doing LESS with LESS (although it can be more fulfilling and finally free up that social / leisure time that technology originally promised us) as I’ve written about here: http://bit.ly/14oMDiO
  3. Having said that, the type of disruption that Tony envisages, IF we can keep our techno-industrial civilisation going in the face of declining net energy available, and through the upcoming GFC MK2 (which again is partially attributable to declining energy profit as a root cause http://bit.ly/1Ips07m) would certainly help with sustainability in any foreseeable future.

Secondly, the rebuttal, in the form of some thoughts and estimates on the potential for renewable electricity generation to replace liquid fossil hydrocarbons as a way to move us and our stuff around (based on what he presents here: https://youtu.be/dUEBDVGXeTE and here: https://youtu.be/lKTHr4diXoc ):

Tony Seba’s thesis that solar’s costs are decreasing exponentially is unfortunate, as he misses (ignores) several key constraints on solar (taking NZ as an example):

1.) Liquid fuel for transport’s declining ROI is leading to a disastrous situation brewing in oil supply, something that has been known for a very long time, and which the current depressed price per barrel is bringing about that bit quicker: http://on.wsj.com/1et7tmb

2.) Solar and EV’s is not liquid fuel for transport, and there are no electric mine trucks, HGV’s, etc as the battery tech is not good enough. You could say well we can at least electrify personal transport, and you’d be right, but we can’t do this for heavy goods vehicles, which comprise 40%ish of NZ’s fuel consumption (See page 25: http://bit.ly/1VIF5OP), and all of the inputs that industry across the globe relies on to produce all the tech that we use the electricity to power.

3.) I question given point 1, and its concomitant deleterious effects on the economy, whether we have sufficient potential profitability to be able to make a wholesale replacement of our vehicle fleet (even only 20% of it, if you subscribe to his arguments on reducing requirements for vehicles) going forwards, never mind the huge investment in infrastructure to power them. Solar requires a lot of material inputs and the input costs will expand rapidly as other limits affect overall industrial productivity and EROI of extraction activities. These blog posts from Gail Tverberg have lots of highly illuminating points in that direction: http://bit.ly/1uEfevy http://bit.ly/1qDeFgB http://bit.ly/1kS6L2o http://bit.ly/TOXvkL http://bit.ly/11nLEOw

4.) All hydro electricity generation in NZ is only 14.5 kWh/person/day (84.2 PJ/annum 2012 figures from IEA: http://www.iea.org/Sankey/index.html#?c=New Zealand&s=Balance) and in the same year our energy consumption for transport from fossil fuel was 32.6 kWh/person/day (189.6 PJ/annum), never mind that the hydro generation capacity is mostly spoken for for other uses.

5.) Can we make up the balance with solar? Our potential for solar energy generation (using the estimation methodology here: http://withouthotair.com/c6/page_38.shtml). NZ population 2012 was 4.4M (https://www.google.co.nz/search?q=nz+population+2012) and 1 petajoule = 277,777,778 kilowatt hours so our fossil fuel liquids consumption was:
189.6 [PJ/annum] /365 = 0.5194520548 [PJ/day]
277777778 [kWh/PJ] => 144292237.558356 [kWh/day]
4433000 population => 32.55 [kWh/person/day] for Transport energy use.
We can get around 8-9 kWh/p/day PV generation based on this estimate for NZ: http://hot-topic.co.nz/wp-content/uploads/2009/11/ScaddenEnergyNZ.pdf. Add another 15% of the 84.2PJ of hydro if Tiwai Point shuts down, which equates (using the same calculation as above) to another 2.17 [kWh/person/day]
So the potential energy deficit to be met from another very low carbon emission source is around 32.55-11 which is approx 21.55 kWh/person/day… 

6.) At best solar is a fossil fuel extender, and it’s potential in terms of being a fossil fuel replacement is routinely and systemically overestimated, as most methodologies don’t account for the energy required to replace it at the end of its useful life: http://bit.ly/TOUHnN

Here’s some food for thought from a more believable source: Nate Hagens on Energy

Edit: This also from Nafeez Ahmed:

As oil prices have slumped over the last few years due to both the shale gas and Saudi oil gluts, the decline in profitability has forced oil majors to slash investments and shut down costly operations.

US industry experts now forecast that these events are setting the world up for an oil price spike, which could begin in the next six months to two years. There can be little doubt that the US government is aware of the industry’s fears.

Robert Hirsh, a former senior energy programme advisor for government contractor Science Applications International Corporation, wrote a major report on peak oil for the US Department of Energy in 2005.

He predicts a likely global oil shock by 2017, accompanied by a stock market crash, inflation, and unemployment.

He also points out that the Pentagon recognises the risk.

As oil production decreases due to the cost-cutting contraction of industry operations, along with declines from aging fields, the International Energy Agency predicts an increase in demand growth by the end of this year.

As demand rises, the question is how quickly existing oil and gas wells can increase global output in the face of this rapidly diminishing spare capacity.

The answer is not very. Over the next two years, around 200 major international oil and gas projects have been scheduled for final investment approvals. But due to the price collapse – and with it the collapse in profitability – the vast majority of them face postponement, or cancellation.

According to Tim Dodson, executive vice president for exploration at Statoil ASA, the industry is “struggling big-time to replace their oil resources and reserves”.

This is part of a wider pattern over the last decade. Oil majors like Royal Dutch Shell, British Petroleum, ConocoPhillips, ExxonMobil and Chevron have all seen their production fall year-over-year by 3.25 percent. Oil and gas extracted last year has not been replaced by new reserves.

The business model of the shale gas industry is so shaky, according to legendary US hedge-fund manager James Chanos, that when prices do rebound as demand growth hits the limits of declining supply, the oil majors will still be in trouble.

The end of oil, the next crash

With insufficient oil available amidst a price rebound, markets will be massively incentivised to flee expensive fossil fuels, empowering cheaper, alternative energy forms.

Oil majors, still facing high production costs and huge debt obligations, will have to grapple with further borrowing to kick-start costly investments in new production projects. But in the corresponding climate of a new economic recession triggered partly by oil price spikes, how likely is this?

Like Hirsh, Charles Maxwell, a senior energy analyst at Weeden & Co., forecasts a price spike in the next few years. “That’s going to bite us big time. 2019 is going to be hell.”

Five years ago, Maxwell told Forbes that “around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today”.

That prediction in 2010 appears to be transpiring today.

“And at around 2015, we will be unable to produce the incremental barrel in the global system. So a tightness of supply will begin to be felt,” Maxwell warned Forbes. “Let’s say in 2013, we may produce 1 percent more oil than we did the year before and then if we have a demand growth of 1¼ percent in 2013, we’ll be very slightly tightening the system. The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we’re only able to produce 0.50 percent more with about 1.25 percent higher demand, so that we’re 0.75 percent short.”

The next global recession, though, is likely to begin as oil prices bottom out further, potentially forcing many oil companies to virtually shut down production, facing the prospect of further write-downs and bankruptcies that could make the 2008 sub-prime mortgage crisis look a like a walk in the park.”

– See more at: http://www.middleeasteye.net/columns/iran-deal-about-staving-coming-oil-shock-1366649799#sthash.yTne8Z31.HkuJwopG.dpuf

Further Reading:

  • “Peak oil turned out to be a more complex phenomenon than theorists originally anticipated. It has not been experienced as a precise ‘moment’ or ‘event’, but rather as a dynamic interplay between various forces that have provoked some adaptive adjustments (such as demand destruction or increased investments) in incremental and multidimensional ways. There may never be a ‘shock moment’ of peak oil’s arrival; instead, peak oil may continue to play out as a gradual, unplanned transition to a new set of energy and consumption patterns that are less oil dependent, giving rise to social, economic, and ecological impacts that no one can predict with any certainty. The evolving interrelationship of geological, geopolitical, economic, cultural, and technological variables has continued to surprise analysts – both the ‘cornucopians’, who claim there is nothing to worry about, and the ‘doomsayers’, who think collapse is imminent, as well as everyone in between. No doubt there will be more twists still to come in this energy tale.But what seems clear is that the consequences of peak oil are not going away. Whether the next twist arrives in the form of a new war or financial crisis, a new technology, a bursting shale bubble, or perhaps a radical cultural shift away from fossil fuels in response to climatic instability, intellectual integrity demands that analysts continue to revise viewpoints asfurther evidence continues to arrive. This issue is too important to be governed by ideology.”
    6 page academic paper on the economics of oil: The New Economics of Oil: Alexander, S. 2014 Melbourne Sustainability Issues paper No. 2, Melbourne Sustainable Society Institute http://bit.ly/1HXWhsj
  • In a new book (March 2014), former oil geologist and government adviser on renewable energy, Dr. Jeremy Leggett, identifies five “global systemic risks directly connected to energy” which, he says, together “threaten capital markets and hence the global economy” in a way that could trigger a global crash sometime between 2015 and 2020. http://bit.ly/1HXWQmb
  • The Energy Policy paper “Global oil risks in the early 21st century”, previously referenced in my submissions to Long Term Plans earlier in the year:
    The combination of increasingly difficult-to-extract conventional oil combined with depleting super-giant and giant oil fields, some of which have been producing for 7 decades, has led the International Energy Agency (IEA) to declare in late 2010 that the peak of conventional oil production occurred in 2006 (IEA, 2010). Conventional crude oil makes up the largest share of all liquids commonly counted as “oil” and refers to reservoirs that primarily allow oil to be recovered as a free-flowing dark to light-colored liquid (Speight, 2007). The peak of conventional oil production is an important turning point for the world energy system because many difficult questions remain unanswered. For instance: how long will conventional oil production stay on its current production plateau? Can unconventional oil production make up for the decline of conventional oil? What are the consequences to the world economy when overall oil production declines, as it eventually must? What are the steps businesses and governments can take now to prepare? In this paper we pay particular attention to oil for several reasons. First, most alternative energy sources are not replacements for oil. Many of these alternatives (wind, solar, geothermal, etc.) produce electricity— not liquid fuel. Consequently the world transportation fleet is at high risk of suffering from oil price shocks and oil shortages as conventional oil production declines. Though substitute liquid fuel production, like coal-to-liquids, will increase over the next two or three decades, it is not clear that it can completely make up for the decline of oil production. Second, oil contributes the largest share to the total primary energy supply, approximately 34%. Changes to its price and availability will have worldwide impact especially because alternative sources currently contribute so little to the world energy system (IEA, 2010).Oil is particularly important because of its unique role in the global energy system and the global economy. Oil supplies over 90% of the energy for world transportation (Sorrell et al., 2009). Its energy density and portability have allowed many other systems, from mineral extraction to deep-sea fishing (two sectors particularly dependent on diesel fuel but sectors by no means unique in their dependence on oil), to operate on a global scale. Oil is also the lynchpin of the remainder of the energy system. Without it, mining coal and uranium, drilling for natural gas and even manufacturing and distributing alternative energy systems like solar panels would be significantly more difficult and expensive. Thus, oil could be considered an “enabling” resource.

    Oil enables us to obtain all the other resources required to run our modern civilization.

    Peak oil is the result of a complex set of forces that includes geology, reservoir physics, economics, government policies and politics.”

    http://bit.ly/1IIyHCv

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Nine Reasons Why Low Oil Prices May “Morph” Into Something Much Worse

An explanation for continuing depressed commodity prices from an energy perspective from”our finite world”:

“We are running short of options for fixing our low commodity price problem.

The ideal solution to our low commodity price problem would be to find substitutes that are cheap enough, and could increase in quantity rapidly enough, to power the economy to economic growth. “Cheap enough” would probably mean approximately $20 barrel for a liquid oil substitute. The price would need to be correspondingly inexpensive for other energy products. Cheap and abundant energy products are needed because oil consumption and energy consumption are highly correlated. If prices are not low, consumers cannot afford them. The economy would react as it does to inefficiency.

See Figure 12. World GDP in 2010$ (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014)

These substitutes would also need to be non-polluting, so that pollution workarounds do not add to costs. These substitutes would need to work in existing vehicles and machinery, so that we do not have to deal with the high cost of transition to new equipment.

Clearly, none of the potential substitutes we are looking at today come anywhere close to meeting cost and scalability requirements. Wind and solar PV can only built on top of our existing fossil fuel system. All evidence is that they raise total costs, adding to our “Increased Inefficiency” problem, rather than fixing it.

Other solutions to our current problems seem to be debt based. If we look at recent past history, the story seems to be something such as the following:

Besides adopting QE starting in 2008, governments also ramped up their spending (and debt) during the 2008-2011 period. This spending included road building, which increased the demand for commodities directly, and unemployment insurance payments, which indirectly increased the demand for commodities by giving jobless people money, which they used for food and transportation. China also ramped up its use of debt in the 2008-2009 period, building more factories and homes. The combination of QE, China’s debt, and government debt brought oil prices back up by 2011, although not to as high a level as in 2008 (Figure 7).

More recently, governments have slowed their growth in spending (and debt), realizing that they are reaching maximum prudent debt levels. China has slowed its debt growth, as pollution from coal has become an increasing problem, and as the need for new homes and new factories has become saturated. Its debt ratios are also becoming very high.

QE continues to be used by some countries, but its benefit seems to be waning, as interest rates are already as low as they can go, and as central banks buy up an increasing share of debt that might be used for loan collateral. The credit generated by QE has allowed questionable investments since the required rate of return on investments funded by low interest rate debt is so low. Some of this debt simply recirculates within the financial system, propping up stock prices and land prices. Some of it has gone toward stock buy-backs. Virtually none of it has added to commodity demand.

What we really need is more high wage jobs. Unfortunately, these jobs need to be supported by the availability of large amounts of very inexpensive energy. It is the lack of inexpensive energy, to match the $20 oil and very cheap coal upon which the economy has been built, that is causing our problems. We don’t really have a way to fix this.”

Our Finite World

Why are commodity prices, including oil prices, lagging? Ultimately, it comes back to the question, “Why isn’t the world economy making very many of the end products that use these commodities?” If workers were getting rich enough to buy new homes and cars, demand for these products would be raising the prices of commodities used to build and operate cars, including the price of oil. If governments were rich enough to build an increasing number of roads and more public housing, there would be demand for the commodities used to build roads and public housing.

It looks to me as though we are heading into a deflationary depression, because prices of commodities are falling below the cost of extraction. We need rapidly rising wages and debt if commodity prices are to rise back to 2011 levels or higher. This isn’t happening. Instead, Janet Yellen is talking about raising interest…

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