art berman – Olduvai.ca

The latest conflict between Iran and Israel just made Europe’s already precarious energy and economic situation a lot worse.

Many analysts and politicians are celebrating Europe’s resilience after losing its natural gas supply from Russia.

“Two years on from Russia’s invasion of Ukraine, trade in energy products between Russia and the European Union has largely disappeared. The EU has adapted remarkably well to a decoupling that many would have considered impossible.”

Bruegel

There is some truth here but it misses the larger picture. In the wake of Russia’s invasion of Ukraine, the world has witnessed a major shift in its geopolitical, economic, and social order. These changes have had a particularly large effect in Europe. Events in the Middle East make things even worse.

The Covid-19 Pandemic in 2020 resulted in a re-arrangement of supply chains and trade dependencies, prompting countries to consider the vulnerabilities inherent in globalized production networks. The era of unipolar dominance by the United States has given way to a more multipolar world. The traditional alliances and partnerships that underpinned the post-World War II order are unraveling.

Just before Russia’s invasion of Ukraine, China and Russia issued a joint statement declaring that their partnership had “no limits” in opposing NATO expansion. They further stated their intention to reshape the global governance system to be more representative of the changing global landscape, challenging the current US-dominated world order.

In early 2024, the BRICS group of emerging-market nations—Brazil, Russia, India, China and South Africa–expanded to include Saudi Arabia, Iran, the United Arab Emirates, Ethiopia and Egypt. These countries now hold a dominant position on more than half of the global oil exports, with major implications for oil prices and energy geopolitics…

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Telling the Truth About Our Future

March 3, 2024

Telling the Truth About Our Future

Renewable energy is a poor substitute for fossil fuels. That’s because renewables are a diffuse form of energy and produce power only about one-third of the time.

That doesn’t stop renewable energy true-believers from trying to bend the laws of physics to tell a story that’s not true. EROI** (energy returned on energy invested) was used in this way by Murphy et al in 2022 and more recently, by Delannoy et al in late 2023.

Louis Delannoy and twenty-one co-authors proclaimed the good news in November that there is now a consensus that renewable energy is cheaper and more efficient than fossil fuels.

“The EROI of fossil-fueled electricity at point of end use is often found to be lower than those of PV, wind and hydro electricity, even when the latter include the energy inputs for short-term storage technologies.”

Emerging consensus on net energy paves the way for improved integrated assessment modeling

That’s not true. There is great uncertainty about EROI and a range of net energy values for every type of energy source. It’s a blunt instrument at best. It requires knowing an unknowable array of complex inputs and outputs to be anything more than a high-level guess.

First, let’s examine the easy part of their statement—“including storage technologies.” Lazard’s latest data shows that wind and solar are the most expensive forms of electric power once backup storage is included. Cost and EROI are not the same thing but they are related so it’s a red flag that Delannoy et al’s statement may be untrue.

The reference for their claim is a 2020 paper by one of the co-authors about modeling carbon emissions in California that included simulations for future solar PV EROI . California is not the world, forward modeling is not historical data, and solar PV is not the renewable universe.

…click on the above link to read the rest…

Renewables Are Not the Cheapest Form of Power

February 15, 2024

Renewables Are Not the Cheapest Form of Power

The CEO of TotalEnergies believes that the renewable transition will lead to higher—not lower—energy prices. That’s a very different view from the popular belief that renewable energy prices are falling so fast that electric power will become ever-cheaper.

“We think that fundamentally this energy transition will mean a higher price of energy.

“I know that there is a theory which says renewables are cheaper, so it will be a lower price. We don’t think so because a system where you [have] more renewable intermittency is less efficient . . . so we think it’s an interesting field to invest in.

Patrick Pouyanné

Many energy analysts and renewable promoters see things differently.

“Renewables are by far the cheapest form of power today.”

Francesco La Camera, Director-General of IRENA

La Camera’s statement is based on a 2021 report by IRENA (Internation a l Renewable Energy Agency) that evaluated the levelized costs for renewable energy sources. The problem is that IRENA’s study only evaluated generation costs and did not account for electric power backup and storage costs. Since wind and solar are intermittent sources of electricity, the cost of natural gas backup or battery storage must be included in their levelized cost.

Lazard published a report in 2023 that includes backup and storage costs. The data indicates that electric power costs from wind and solar are about 21% more than from combined-cycle natural gas and 44% more than from coal (Figure 1). At first glance, that doesn’t seem like an unreasonable premium to pay for cleaner electric power.

Figure 1. The levelized cost for electric power from wind and solar with backup is 21% more than from combined-cycle natural gas and 44% more than from coal. Source: Lazard & Labyrinth Consulting Services, Inc.

…click on the above link to read the rest…

Draining America First—The Beginning of the End for Shale Gas

January 24, 2024

Draining America First—The Beginning of the End for Shale Gas

The United States is the biggest producer of natural gas in the world and recently became the largest exporter of LNG. The industry is scrambling to build LNG (liquefied natural gas) export terminals as fast as permitting and funding will allow.

This couldn’t come at a worse time. Instead of having an almost infinite amount of natural gas as many believe, we may be witnessing hard limits to that supply.

Figure 1 shows that shale gas plays have reached an apparent peak and may be starting to decline. It’s not a good sign although some of this may be related to seasonal effects or regulatory matters. At the very least, the rate of production growth is slowing.

Shale gas plays have begun to decline as U.S. becomes biggest world LNG exporter. — Figure 1. **Drain America First**. **Shale gas plays have begun to decline as U.S. becomes biggest world LNG exporter**. Source: EIA, Enverus & Labyrinth Consulting Services, Inc.

Any decrease in the growth of shale gas could become an acute problem because it accounts for 82% of U.S. dry gas production (Figure 2).

Shale gas accounts for 82% of U.S. dry gas production. — Figure 2. **Shale gas accounts for 82% of U.S. dry gas production**. Source: EIA, Enverus & Labyrinth Consulting Services, Inc.

I am frankly less concerned about whether or not shale gas production is currently in decline as I am about what will happen to supply in five or ten years.

That concern is based on plans for increased LNG and pipeline exports. Net LNG exports are expected to increase +6.4 bcf/d by 2030 & another +7.1 bcf/d by 2035 (Figure 3). Total net exports are projected to increase +15 bcf/d by 2035 from 13 to 29 bcf/d.

Total net exports to increase +15 bcf/d by 2035 from 13 to 29 bcf/d. — Figure 3. **Net LNG exports expected to increase +6.4 bcf/d by 2030 & another +7.1 bcf/d by 2035**. **Total net exports to increase +15 bcf/d by 2035 from 13 to 29 bcf/d**. Source: EIA & Labyrinth Consulting Services, Inc.

Let’s take a quick look at production from the three biggest pure shale gas plays (Figure 4).

…click on the above link to read the rest…

A Renewable Energy Future Will Collapse the Financial System

January 22, 2024

A Renewable Energy Future Will Collapse the Financial System

Energy is the economy. That’s a radical concept because most people think that the economy runs on money. It doesn’t.

What is energy? It is the potential or capacity to do work. The economy runs on work. That’s why energy is the economy. That’s simple.

What is money? That’s a little more complex.

“Money is not the value for which goods are exchanged, but the value by which they are exchanged.”

John Law

In other words, money has no inherent value. Economists often attempt to change the subject by pointing out that money is at least a medium of exchange, a store of value or a unit of account. The same, however, could be said for cigarettes that were used as money in Communist Romania in the 1980s.

“Society runs on energy and materials, but most people think it runs on money…[Money] is created as debt subject to mathematical laws of compound interest…Money eventually gets spent on a good or service which will contain embodied energy. Money is a claim on energy yet its creation is not tethered to energy availability or cost.”

N. J. Hagens

In the end, money–as paper, coins, gold or cigarettes–is just a financial claim on energy, a marker, a unit of account. For example, I may contract someone to do work for me—to build a fence or to move some heavy equipment—and we agree on a payment amount. I pay him dollars for his physical work (joules). He may then use those dollars to buy food (joules), gasoline for his car (joules) or contract someone else’s labor to do some work for him (joules). Money is the medium of exchange but the value exchanged is energy.

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Eagle Ford Shale–A Preview of Permian Decline

January 18, 2024

Eagle Ford Shale–A Preview of Permian Decline

The Eagle Ford Shale was the hottest play in the United States a little more than a decade ago. In mid-2012, there were twice as many rigs drilling horizontal wells in the Eagle Ford as there were in the Permian basin.

U.S. Shale Plays — Figure 1. Map showing U.S. shale plays. Source: EIA.

Now its decline is probably a preview of what to expect from the Permian basin a few years from now.

The Eagle Ford still produces more than a million barrels of oil (mmb/d) and 5 billion cubic feet of gas per day so that’s the first thing to expect about the future Permian. Plays don’t crash and burn but follow an undulating path downward over years or decades.

Eagle Ford production climbed steeply after 2010 and peaked at 1.6 mmb/d in September 2015 (Figure 2). Much of its decline over the years that followed were because of low oil prices. Although output increased again in 2018 and 2019, it never reached its 2015 level. The Pandemic in early 2020 resulted in a second period of decline and recovery. Production has fallen about 6% since August 2020.

Many people think that advances in technology and ingenuity will somehow reverse the inevitable decline of shale plays like the Eagle Ford. Indeed, those factors have made some difference. The estimated ultimate recovery (EUR) for the average well increased through 2021 despite falling field production levels (Figure 3). That was mostly because operators drilled longer laterals and used more effective fracking methods. The advances were impressive but the technology wasn’t free and well costs increased.

Since then, however, well performance has fallen below levels before 2021. Wells that began production in 2022 will produce about 26% less than 2021 wells and the most recently drilled wells will probably produce more than one-third less oil.

…click on the above link to read the rest…

Climate change is a Narrow View of the Human Predicament

January 16, 2024

Climate change is a Narrow View of the Human Predicament

A transition away from fossil fuels seems like a sensible approach to climate change but what are the correct ingredients? Wind, solar, hydrogen, electric vehicles, carbon capture, nuclear, geothermal, heat pumps, hydropower?

It’s like a doctor treating a patient without examining the source of his symptoms.

“If many remedies are prescribed for an illness, you may be certain that the illness has no cure.”

—Anton Chekhov, The Cherry Orchard (1904)

Climate change is a serious threat to civilization, but it is a symptom of the larger problem of overshoot. Overshoot means that humans are using natural resources and polluting at rates beyond the planet’s capacity to recover.

The main cause of overshoot is the extraordinary growth of the human enterprise made possible by fossil energy. As that enterprise grew, more and more energy was needed to support its complexity and continued growth. The carbon emissions that underlie climate change are merely a byproduct of using all of that energy.

Humanity has been having quite a party with fossil fuels for the last century of so. Now it’s time to survey the mess we’ve made. Everyone wants solutions but first we must understand the present state of things and how we got here. Without a map of the territory, we are lost. Choosing a destination without a route will probably get us more lost. Yet, that is society’s current approach.

Ecology and economics come from the same Greek word oikos which means home or household. Ecology means what we know and say about our home. Economics means how we measure and manage our household. It seems strange to me that economics largely excludes ecology and the natural world that we consider to be our home.

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Does Renewable Energy Have a Higher EROI Than Fossil Fuels?

May 31, 2023

DOES RENEWABLE ENERGY HAVE A HIGHER EROI THAN FOSSIL FUELS?

There is new momentum behind the idea that renewable energy has a higher energy return on investment (EROI) than fossil fuels.

That contrasts with decades of consensus that the EROI of oil, for example, ranges from 18 to 35 while the range for solar is from 6 to 12.

Nafeez Ahmed wrote in a recent post that

“While the EROI values of wind and solar are “at or above 10”, the average EROI estimate for oil is about 4.2. Murphy et. al’s research concludes that many EROI analyses incorrectly compare fossil fuels with renewables by measuring them at the wrong areas. By consistently measuring them both at their ‘point of use’, they are able to develop a far more consistent approach.”

Similarly, Ugo Bardi wrote a post in January whose title was ” Setting the record straight on the EROI from renewables. It is much better than that of fossil fuels.”

Both Ahmed and Bardi used a 2022 paper, Energy Return on Investment of Major Energy Carriers: Review and Harmonization as their source.

Net Energy and EROI Essentials

Net energy is the difference between the total energy output minus the total energy input over the life cycle of an energy source or technology (Figure 1).

EROI is the ratio of the total energy output divided by the total energy input over the life cycle of an energy source.

That means that the net energy for a 10 megajoule (MJ) energy input and a 20 MJ output is 10 MJ and the EROI is 2 (Figure 1).

Figure 1. Net energy and EROI for a hypothetical energy source or technology. Source: Modified from Hagens (2010).Table 1 shows a range of energy inputs and outputs and their corresponding EROI and net energy values. The important observation is that EROI is non-linear while net energy is linear.

…click on the above link to read the rest…

Fusion Breakthrough is a Nuclear Nothing Burger

December 15, 2022

FUSION BREAKTHROUGH IS A NUCLEAR NOTHING BURGER

The U.S. Lawrence Livermore National Laboratory kicked off its year-end Go-Fund-Me drive last week announcing a nuclear fusion breakthrough.

“The fusion energy breakthrough by US scientists boosts clean power hopes. Net energy gain indicates technology could provide an abundant zero-carbon alternative to fossil fuels.”
–Financial Times, December 11, 2022

These claims are nonsense. The Wall Street Journal called the fusion announcement nuclear fusion hype noting that nuclear power stations are at best decades away.

The experiment used lasers to put 1.8 megajoules (MJ) of energy in and got 2.5 MJ out – proving that energy can be successfully released and gained by a Deuterium-Tritium fusion reaction. Unfortunately, they had to use 500 MJ of energy into the lasers so the EROI was 0.005. That’s the worst net energy ratio ever.

No electricity was produced in the experiment. The energy released was mostly waste heat.

But the announcement was timed to support a huge funding measure by the U.S. Congress:

“I’m…proud to announce…the highest-ever authorization of over $624 million this year in the National Defense Authorization Act for the ICF [Inertial Confinement Fusion] program to build on this amazing breakthrough.”
–U.S. Senate Majority Leader Charles Schumer

Let’s suppose for a moment that this experiment proves that fusion is now a commercially viable new source of energy.

Building fusion nuclear power stations for the country is a big project and big projects take time. If, for example, there were full funding and permits to build a major new airport, it would take about nine years to complete.

“Building a major nuclear site with the handling of radioactive waste would make things many times harder. For an experimental and totally unproven nuclear technology like fusion, the problems are nearly insurmountable and would require decades at a minimum.”
–Thomas Overton, nuclear scientist and publisher of PowerMag

…click on the above link to read the rest…

Energy Aware #4: The Devil Is In the Diesel

November 17, 2022

ENERGY AWARE #4: THE DEVIL IS IN THE DIESEL

Global diesel is in short supply.

Analysts are concerned about diesel because it is the hemoglobin of the global economy. The world’s mines, oil rigs, construction, ships, trains and trucks run on diesel.

Typically, inventories should be 30% higher this time of the year. Such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction.
–Javier Blas, Washington Post, October 18, 2022

Most government leaders, journalists and industry analysts don’t understand why there is a problem. That’s because it’s a refining issue and it’s not something simple that can easily be fixed by pressuring refiners to make more diesel. Let me explain.There is a sequence of products made in a refinery that includes gasoline, kerosene, jet fuel, and diesel that all must be distilled from each barrel of oil. It’s not an a la carte menu in which you can order diesel but tell the waiter to hold the gasoline, kerosene and jet fuel.

Petroleum products are distilled from crude oil like whisky is distilled from fermented grain. For both petroleum and whiskey, a liquid is heated to create a vapor that is then condensed back into a liquid again. In the case of whiskey, distillation removes the heavier molecules that condense at the bottom of the still—the wash—and are later thrown away. Only the lightest fraction—the whiskey—that condenses at the top of the still is kept.

For petroleum, the whiskey is gasoline and a few lighter molecules. The wash is everything else including fuel oil, diesel, jet fuel and kerosene. These are not thrown away because in today’s market, they are worth more than gasoline.

…click on the above link to read the rest…

Arthur Berman: The Devil is in the Diesel

November 16, 2022

Arthur Berman: The Devil is in the Diesel

Energy Aware

October 16, 2022

Energy Aware

The United States is energy independent. Banning oil exports would lower oil prices. Strategic Petroleum Reserve releases lowered gasoline prices. There is a shortage of refinery capacity in the U.S. The cancelation of the Keystone XL Pipeline has limited U.S. oil supply and contributed to higher energy prices.

These popular memes are wrong.

The U.S. is not Energy Independent

The U.S. produced about 11.3 mmb/d of crude oil in 2021 and imported about 6 mmb/d of crude oil per day. That doesn’t sound very energy-independent.

When politicians and journalists talk about American energy independence, they’re not really telling the truth. They’re playing with truth. The energy independence meme confuses oil and refined products. They’re not the same. Let me review the facts.

The U.S. is a net importer of crude oil. U.S. net imports of crude oil averaged 2.9 mmb/d in the first seven months of 2022 (Figure 1 blue fill). That’s way down from almost 9.4 mmb/d during the same period in 2001, and moving in the right direction but it’s hardly energy independent.

The U.S. is a net exporter of refined products. Net exports averaged 5.9 mmb/d in 2022.

Figure 1. The U.S. is a net importer of crude oil & a net exporter of petroleum products. U.S. net imports of crude oil have averaged 2.9 mmb/d in 2022 and net exports of products have averaged 5.9 mmb/d. Source: EIA & Labyrinth Consulting Services, Inc.

The problem arises when crude oil and the products refined from it are combined. That’s the blue curve in Figure 3 and voila. A country that imports more oil than Europe uses, magically became a net exporter in October 2021.

Figure 3. The U.S. is a net importer of crude oil & a net exporter of crude + petroleum products. U.S. net imports of crude oil have averaged 2.9 mmb/d in 2022 and net exports of crude + product have averaged 0.9 mmb/d. Source: EIA & Labyrinth Consulting Services, Inc.

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Energy Shock

September 17, 2022

ENERGY SHOCK

The world is in energy shock.

European imported coal prices increased 421% before Russia invaded Ukraine. German electric power price increased 518%. European natural gas jumped 765% and Asian spot LNG, 957%. Since then, it’s gotten even worse.

U.K. natural gas futures price has increased +$99.86 (+574%) from $17.41 to $117.27 per mmBtu just since June 8 (Figure 1).

Figure 1. U.K. natural gas futures price has increased +$99.86 (+574%) from $17.41 to $117.27 per mmBtu since June 8. Source: MarketWatch, CME & Labyrinth Consulting Services, Inc.

Now Europe’s energy crisis is on a path to even worse outcomes.

Russia announced on September 4 that gas supplies to Europe via the Nord Stream 1 pipeline would not resume in full until the sanctions against Russia were lifted. Finland’s Economic Affairs Minister stated ,

“This has had the ingredients for a kind of a Lehman Brothers of energy industry.”
–Mika Lintilä

Many governments are planning to subsidize consumers with price caps and to help industry with loans. My friend and colleague Nate Hagens recently noted that,

“Europe is committing economic suicide.”
–Nate Hagens

That is because these bailouts are happening at a time of economic contraction, high inflation and rising interest rates. That means increased and unproductive debt at a time that states cannot afford its service except with more debt.

French President Emmanuel Macron recently stated,

“What we are currently living through is a kind of major tipping point or a great upheaval … we are living the end of what could have seemed an era of abundance…the end of the abundance of products of technologies that seemed always available.”
–Emmanuel Macron

Meanwhile, OPEC+ has decided to cut production by 100,000 barrels of oil per day reversing 15 months of output increases. Although oil is relatively less expensive for Europeans than natural gas and coal, many countries have begun using diesel as a substitute to generate electric power.

…click on the above link to read the rest of the article…

Saudi Prince Delivers a Message About the Second Cold War

August 28, 2022

SAUDI PRINCE DELIVERS A MESSAGE ABOUT THE SECOND COLD WAR

Saudi Prince Abdulaziz bin Salman (ABS) said this week that OPEC+ may need to cut oil production. This may be necessary, he said, to correct problems in the market because “the paper and physical markets have become increasingly more disconnected.”

This is rhetorical theater. It has no real basis is fact. But that’s not what this is really about.

This is about the second Cold War to create new world order.

In a written statement to Bloomberg, ABS stated,

The paper oil market has fallen into a self-perpetuating vicious circle of very thin liquidity and extreme volatility undermining the market’s essential function of efficient price discovery.
–Abdulaziz bin Salman

It is true that volatility has been extreme since the Russian invasion of Ukraine in late February, 2022 but that was nearly six months ago. The worst of the volatility ended in April so the timing of ABS’s comments makes little sense based on oil-market technical concerns.

Liquidity and volatility are inversely related. When volatility is high, investors are reluctant to invest in futures contracts. That’s because the price variance is too high to make manage risk. With limited capital flowing in and out of oil markets, it is difficult to convert an asset/contract into cash. High volatility begets low liquidity.

ABS’s distinction between the futures (paper) and physical (spot) markets does not survive the light of day.

Figure 1 shows Brent futures price (red), futures price volatility (blue) and 2021 average price volatility (dashed blue). Both price and price volatility increased after Russia’s invasion of Ukraine in late February of 2022. Volatility decreased in April but has not returned to the pre-invasion 2021 volatility average.

Figure 1. Brent oil-price volatility & futures price both increased with Russia’s invasion of Ukraine in late February 2022. Source: CME, EIA & Labyrinth Consulting Services, Inc.

…click on the above link to read the rest of the article…

Paradigm Shift: End of the Oil Age

August 16, 2022

PARADIGM SHIFT: END OF THE OIL AGE

The world thinks it’s in an energy crisis today and indeed there are shortages in some places but the world is undergoing an energy crisis more fundamental than the simple shortage happening today in Europe. A shortage can be remedied.

The larger problem is that oil use began to decline from 48% of total world energy consumption after 1977 (Figure 1). This was the beginning of the end of the oil age.

Figure 1. The end of the oil age began with the price shocks of the 1970s. Oil consumption has fallen from 48% to 36% of total energy use since 1977. Source: EIA, BLS & Labyrinth Consulting Services, Inc.

Per-capita oil consumption has been flat since since 1985 (Figure 2). That means that individual worker productivity is not growing as it did before the oil shocks.

Figure 2. World per-capita oil consumption reached a peak in 1978 and has been on an undulating plateau since 1985. Source: EIA,FRED, OWID, BP & Labyrinth Consulting Services.

The world thinks that an energy transition is underway but fails to understand that transitions are additive. The relative percent of fuels changes but volumes rarely decrease. The world uses, for example, as much biomass today as in 1800 (Figure 3). Nor is there any likelihood that this transition will take 30 years instead of the century or longer period for earlier transitions.

Figure 3. Energy transitions are additive. The relative percent of fuels changes but volumes rarely decrease. The world uses as much biomass today as in 1800. Source: EIA, BP, IEA, FRED, OWWD, World Bank & Labyrinth Consulting Services, Inc.

The real crisis today is that oil is the economy. The oil age has been ending for 50 years but there is no substitute for oil. Wind, solar and nuclear only address electric power generation which accounts for only 18% of world energy consumption…

…click on the above link to read the rest of the article…

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