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Energy Externalities Day 9: Solar Thermal or Concentrated Solar Power (CSP)

Energy Externalities Day 9: Solar Thermal or Concentrated Solar Power (CSP)

With solar thermal, I am beginning to wander further away from systems where I have a reasonable grasp of their operation. There are two main classes of concentrated solar power (CSP) namely parabolic mirrors that focus solar energy onto a pipe filled with water that raises steam and a central tower configuration where an array of mirrors focusses the Sun’s energy onto a central tower, raising steam to drive a turbine (inset image).

Note Ivanpah CSP plant in the USA covers 1,420 ha (3,500 acres) is rated at 329 MW gross and cost $2.2 billon to build.

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity
Energy Externalities Day 4: Nuclear Power
Energy Externalities Day 5: Wind Power
Energy Externalities Day 6: Hydroelectric Power
Energy Externalities Day 7: Solar Photo Voltaics
Energy Externalities Day 8: Diesel

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

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

Energy Externalities Day 8: Diesel

Energy Externalities Day 8: Diesel

Diesel powered electricity generation is a niche common on isolated island grids like El Hierro and in certain countries, like the UK, recently adopted as peaking plants. They have the advantage that they can quickly and easily be switched on and off and the disadvantage that they are expensive to run. Answering some of the questions below for diesel is a bit tricky. For example, when it comes to fatalities we need to consider fatal accidents in the Global oil production and refining industries. But diesel for power generation uses only a tiny fraction of global oil production (<1%?). Power diesel accidents therefore need to be pro-rated accordingly but then adjusted to the amount of electricity produced. Not an easy task to scale in your head.

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity
Energy Externalities Day 4: Nuclear Power
Energy Externalities Day 5: Wind Power
Energy Externalities Day 6: Hydroelectric Power
Energy Externalities Day 7: Solar Photo Voltaics

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

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

Energy Externalities Day 7: Solar Photovoltaics

Energy Externalities Day 7: Solar Photovoltaics

Solar PV is a multidimensional energy system difficult to evaluate on a global basis. Maximum concentration required from The Game players! First, there is solar thermal hot water, solar thermal power generation (also known as CSP) and solar PV. Today’s game is exclusively on the latter. And in solar PV there are two main families of panels: 1) thin film and 2) polycrystalline. Today’s game is exclusively on the latter. Add to that the fact that solar PV works much better at low latitude than high, not only from the resource perspective but also from the seasonal storage one. In short, solar PV makes much better sense in Arizona and Mexico than it does in Aberdeen. Politicians tend to see devices that generate free, clean electricity, while I tend to see expensive devices made from coal in China that produce electricity some of the time.

[Inset image: abject cognitive dissonance seems to be a feature of renewable energy enthusiasts and politicians who see environmental advantage in plastering the countryside with low power density renewable energy devices.]

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity
Energy Externalities Day 4: Nuclear Power
Energy Externalities Day 5: Wind Power
Energy Externalities Day 6: Hydroelectric Power

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

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

Energy Externalities Day 6: Hydroelectric Power

Energy Externalities Day 6: Hydroelectric Power

Hydroelectric power produces no pollution once the dam is built and the valley flooded. It is dispatchable and widely regarded to be the “Rolls Royce” of renewable energy. Based on trapping rainfall produced by solar energy trapped in high valleys that were created by plate tectonics that is driven by spontaneous nuclear fission within the lithosphere.  The Sun and The Supernova combine to produce this ultimate limousine of the energy world. But how do the costs and benefits of this silver ghost really stack up against nuclear, gas and wind?

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity
Energy Externalities Day 4: Nuclear Power
Energy Externalities Day 5: Wind Power

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

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

Energy Externalities Day 4: Nuclear Power

Energy Externalities Day 4: Nuclear Power

It’s now day 4 of the Energy Externality Game. Diesel generators were next on the list, but I decided to skip over that for the time being and to move on to the more exciting topic of nuclear power. Nuclear power has a long supply chain and needs to take into account U mining, ore processing and upgrading to yellow cake; enrichment and fuel manufacture; construction of enrichment facilities, reactors and power stations; operation of the foregoing; decommissioning and waste storage.

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

I then go on to provide qualitative assessments of each measure for each electricity system. I have then developed a game whereby we assign a score against each measure on a scale of 1 to 10 where.

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

 

Energy Externalities Day 3: Biomass-Fired-Electricity

Energy Externalities Day 3: Biomass-Fired-Electricity

Its day 3 of the Energy Externality Game already and we move onto biomass-fired-electricity. Most biomass electricity currently resides in Europe, where much of the fuel is imported from North America. In evaluating biomass we need to consider the whole supply chain from timber operations in N America, transport to and from the wood pellet factory, transport across the Atlantic Ocean, off-loading and transport to power station. We then need to consider the externalities associated with power generation.

The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

I then go on to provide qualitative assessments of each measure for each electricity system. I have then developed a game whereby we assign a score against each measure on a scale of 1 to 10 where.

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

 

Energy Externalities Day 2: Gas-fired-CCGT

Energy Externalities Day 2: Gas-fired-CCGT

Day 2 of The Energy Externality Game and we are assessing gas fired power generation using a combined cycle gas turbine (CCGT). In scoring gas we need to take into account the whole of the gas exploration and supply side of the business (which is complex, see below), transportation of gas and the CCGT operation itself. I was a little disappointed in the level of audience participation yesterday, with only 11 participants in total, although the results are very interesting. It would be really good if we could push that beyond 20. Hopefully all of yesterday’s players will play again. Once you get in the swing it takes <10 minutes to compile the scores.

I am proposing to use 12 metrics to measure costs and benefits:

  • Fatalities / year / unit of energy produced
  • Chronic illness years / year / unit of energy produced
  • Environmental costs not covered directly by the system operators
  • Foot print of energy system per unit of energy produced
  • Energy system costs where energy source transfers costs to the transmission system
  • Energy system benefits where energy source provides a service to the transmission system
  • Environmental benefits derived from energy system operation
  • Taxes raised / year / for total energy produced
  • Subsidies paid / year / for total energy produced
  • Tax free cost of energy
  • EroEI
  • Resource availability

For the following 12 electricity generating systems

  • Coal-fired (Monday 19 March)
  • Gas-fired (Tuesday 20 March)
  • Biomass-fired
  • Diesel
  • Nuclear
  • Hydro electric
  • Wind
  • Solar PV
  • Solar thermal
  • Wave
  • Tidal
    • barrage
    • lagoon
    • stream
  • Geothermal

I then go on to provide qualitative assessments of each measure for each electricity system. I have then developed a game whereby we assign a score against each measure on a scale of 1 to 10 where.

  • 1=good

  • 10=bad

Note that the suggestion to move to a 5 point scale is under consideration and may be adopted, but today we are still using a 10 point scale.

Simply copy / paste the 12 metrics into a comment and add your score.

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

 

The Externalities of Energy Production Systems

The Externalities of Energy Production Systems

The economics term externality is a cost or benefit accrued by a third party from the actions of others where the third party did not choose to acquire said costs or benefits. The term has been widely adopted by the environmental lobby to describe negative impacts of energy production systems. What is all too often overlooked are the externalised benefits the same energy production systems provide. This post aims to summarise both internal and external costs and benefits of 12 electricity production systems employing 12 different measures.

[Inset image: The proposed Swansea Bay tidal lagoon power station. The proponents of the scheme were keen to emphasise the external recreational benefits offered by an afternoon stroll around the 9.5 km wall of the lagoon and sailing and boarding in the sheltered waters. But what about the environmental costs to migrating sea trout? And to changing the hydrology of the coastal ecosystem? How do you begin to compare the costs and benefits of a scheme like Swansea Bay Tidal Lagoon with a nuclear power station?]

In the environmental impact of energy systems, the term externality is used to describe harm done by the combustion of fossil fuels, particularly greenhouse gas emissions. The argument goes that the fossil fuel producers and consumers do not currently pay for this harm and should do so. The inevitable consequence of adopting these measures will be higher energy prices that spread energy poverty and hold back economic growth. It is therefore very difficult to understand why many OECD governments are preparing to introduce measures like a carbon tax that will simply impoverish their citizens and national economies.

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

 

The Week of The Beast Unplugged

The Week of The Beast Unplugged

From 26th February to 5th March 2018, the UK and indeed most of Northern Europe was gripped by severe cold weather blowing in from Siberia. The event was Christened the Beast From the East by UK press. The conditions were harsh, not just sub-zero temperatures and snow but high winds that created life-threatening conditions. In this post I present the electricity generating statistics for the month 13 February to 12 March. The key point I want to make is that during the week of The Beast the UK’s remaining 10.6 GW of coal ran flat out day and night for 8 days. I think the time has come for the UK Government and National Grid to explain how they plan to keep the lights on when they close down this coal capacity by 2022-2025.

Sudden Stratospheric Warming

Before looking at the electricity data I want to dwell on the cause of The Beast which comes down to a process called Sudden Stratospheric Warming. This UK Met Office link has this to say (note there is also a good vid).

The term SSW refers to what we observe – rapid warming (up to about 50 ­°C in just a couple of days) in the stratosphere, between 10 km and 50 km up.

Jet streams high up in our atmosphere, in both the northern and southern hemisphere, circumnavigate the Earth from west to east. One of these, the Polar Night Jet, circles the Arctic.

Sometimes the usual westerly flow can be disrupted by natural weather patterns or disturbances in the lower part of the atmosphere, such as a large area of high pressure in the northern hemisphere. This causes the Polar Jet to wobble and these wobbles, or waves, break just like waves on the beach. When they break they can be strong enough to weaken or even reverse the westerly winds and swing them to easterlies. As this happens, air in the stratosphere starts to collapse in to the polar cap and compress. As it compresses it warms, hence the stratospheric warming.

This is the official view that needs to be contrasted with the man-made climate change drivel emanating from factions of the climate change community.

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

Global CO2 emissions forecast to 2100

Global CO2 emissions forecast to 2100

In his recent post Euan Mearns projected global energy requirements out to 2100. In this brief post I apply Euan’s methodology to carbon dioxide emissions, which are closely correlated with energy consumption. The projections show CO2 emissions peaking around 2075 under the UN low population growth scenario but continuing to increase through 2100 under the UN’s medium and high population growth scenarios. The alleged “dangerous interference” threshold of 1 trillion tons of cumulative carbon emissions (3.67 trillion tons of CO2) targeted by the Paris Climate Agreement is exceeded between 2050 and 2055 under all three scenarios.

Figure 1 plots global CO2 emissions and total primary energy consumption between 1965 and 2016. The data are from the BP 2016 Statistical Review. Note that the CO2 data cover only emissions from fossil fuel combustion. Other greenhouse gases such as methane and Nox are not included:

Figure 1: Global CO2 emissions and primary energy consumption, 1965-2016

The near-exact match between CO2 emissions and energy consumption (R2 = 0.998) is obvious. What is not obvious is any detectable impact from the world’s efforts to cut CO2 emissions, which began at Kyoto over 20 years ago in 1997. (The combination of flattening emissions and moderate economic growth after 2013 has been claimed as evidence that energy and emissions are finally becoming decoupled, but global CO2 emissions in 2017 have risen again – by about 2% over 2016 according to Carbon Brief.)

Figure 2 plots global per-capita CO2 emissions since 1965, calculated from the BP emissions data and the UN’s global population estimates:

Figure 2: Global per-capita CO2 emissions

This plot is similar to the plot of per-capita energy consumption shown in Figure 1 of Euan Mearn’s post, which we would expect given the close correlation between emissions and energy, but the trend is less steep. The likely reason is that the proportion of world primary energy supplied by low-carbon sources (nuclear, hydro, renewables) has increased from about 6% in 1965 to approaching 15% now. Nevertheless the overall trend is still upward.

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

Global Energy Forecast to 2100

Global Energy Forecast to 2100

A global energy demand forecast is presented to 2100 based on historic growth of per capita energy consumption, 1965-2015 and on UN low and medium population growth forecasts. The low forecast sees energy demand growing from 13.15 billion tonnes oil equivalent (toe) per annum in 2015 to 19.16 billion toe in 2100. The medium population forecast sees 29.5 billion toe in 2100, that is a rise of 124% over 2015. This is an interactive post where commenters are invited to suggest where all this additional energy may come from.

[I have been and am still incredibly busy. For the last three weeks I have been working on a significant consulting job.  No comments please on this subject. This short post is based on some simple modelling work I did last May – and no I have not been offered a job as a male model. Those offers dried up about 20 years ago 🙂 ]

There are two main variables that control global energy consumption (three counting price), which are the total number of people in the World and the average per capita energy each person consumes. While per capita energy consumption is falling throughout much of the OECD, it is rising everywhere else as countries like China, India and Brazil strive to become like “us”.

Figure 1 shows how per capita energy consumption has grown from 1965 to 2015. Total global primary energy consumption is taken from the 2016 BP statistical review of world energy. Population data are from the United Nations World population prospects 2017.

Figure 1 The growing trend in global per capita energy consumption based on BP and UN data.

The trend in Figure 1 is clearly not linear. The bumps reflect changes in oil price, global recessions and geopolitical upheavals that are not always negative. The sharp rise post-2000 is partly down to the mega-growth spurt in China. In 1965 the global average per capita energy consumption was 1.12 tonnes oil equivalent (toe).

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

Oil Price Scenario for 2018

Oil Price Scenario for 2018

It is that time of year again where we try to forecast what the oil price will do over the coming 12 months. Last year I forecast $60 / bbl for Brent year ending 2017 and with Brent trading on $66.50 as I write I can conclude that I got lucky this year. My friend wagered on $78 and our bet this year was too close to call. My forecasting effort is based on trying to understand the supply, demand, storage, price dynamic and since this seemed to work pretty well this year I will repeat the exercise with some slight modifications.

I have some reservations about the methodology stemming from 1) US LTO production has unpredictable impact on supply elasticity and 2) OPEC + Russia et al are withholding ~ 1.8 M bpd from the market. In effect this group will determine the oil price in 2018. If the price goes too high they may open the taps a little to maintain the price they want, whatever that may be.

[The inset image shows “shale” fracking pads in the USA.]

Disclaimer

No one has ever been able to confidently forecast the oil price that is subject to a vast array of socio-economic, geo-political and technology variables. The best we can do is to assemble some of the key data and to try and use our experience to draw some inferences about what may happen. Readers act upon the information presented here at their own risk.

Oil Price Narrative for 2018

  • The oil market is now subject to production constraint amounting to ~1.7 Mbpd. This has led to rebalancing of supply and demand by the end of 2017. The Brent oil price has recovered strongly since the summer to close the year at around $66.50. Last year I forecast $60 / bbl for December 2017 and therefore came close.

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

The End of Economic Growth

The End of Economic Growth

UK Chancellor of the Exchequer  Phillip Hammond (finance minister) delivered his budget  on Wednesday last week. The tame budget was overshadowed by news that UK productivity and hence economic growth had stalled. In this post I search for the underlying causes of economic malaise and explore the structure of UK GDP; UK Government and private debt levels; demographics, in particular our ageing population; Higher Education policy, in particular over-production of sub-prime graduates and lastly UK Energy Policy that is focussed on high cost inefficient energy systems.

It has been frustrating to say the least listening to politicians, their advisors and a host of media commentators proclaim surprise and bewilderment that the UK economy seemed to be broken. Since no one seems to know how it broke, then it is clear no one will know how to fix it, if it can indeed be fixed. In this post I voice opinions on several factors that have combined to create these unwelcome circumstances and in the traditions of this blog, there is an energy theme, which I will leave until last touching on the topics of debt, demographics and sub-prime education en-route.

In very simple terms, the size of the UK economy can be expressed as the number of people times their average economic output. A refined measure would be the number of working-age people (16 to 66) times their average economic output. Economic growth is defined as the percentage change of this aggregate productivity from one year to the next. With the current economic model, growth is vital to the country since it feeds directly through to tax receipts used to deliver public services such as health care, welfare, education and defence. The level of aggregate borrowing (national debt) considered prudent may also be compared to GDP. If GDP growth stalls, so does the ability of the government to borrow prudently to finance public services.

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

Implementing the Helm Review on the Cost of UK Energy

Implementing the Helm Review on the Cost of UK Energy

The UK Government has made a call for evidence on the Helm Review published on 25th October 2017. At the time the review was published I chose not to share my opinions on the consequences of implementing Helm’s proposals since I believe these may be far reaching and have a large negative impact on UK citizens, businesses and the economy. At the time I did not want to upset the apple cart since I also believe Helm offers the best path forward for so long as the UK Government remains committed to its 2008 Climate Change Act (CCA).  Helm’s proposals will deliver sharply higher energy and electricity prices, carbon reduction and hopefully a functioning energy and electricity system and market. Muddling along as now will also deliver sharply higher prices with no guarantee of carbon reduction and the near certainty of a broken and dysfunctional energy system.

[Inset image is the Coire Glas pumped storage hydro scheme in Scotland, designed to store surplus wind power and provide 30GWh of storage. Still empty after all those years, Coire Glas stands as testimony to renewable fantasy colliding with thermodynamic and economic reality.]

Energy is More than Electricity

Helm’s review was on the cost of UK energy, which encompasses oil, gas, coal, nuclear and renewables. While his review is focussed on electricity he does make sufficient reference to these other energy sources to make clear that his recommendations apply to the whole energy system.

[Inset image is the Coire Glas pumped storage hydro scheme in Scotland, designed to store surplus wind power and provide 30GWh of storage. Still empty after all those years, Coire Glas stands as testimony to renewable fantasy colliding with thermodynamic and economic reality.]

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

Oil Production Vital Statistics October 2017

Oil Production Vital Statistics October 2017

Last month I drew attention to the fact that the WTI-Brent spread had opened to $7 and that this could be a bullish signal for the oil price. A strong rally in Brent has since continued and the price now stands close to $64 / bbl while the spread remains at $6.50 (Figure 3).

The main reason for this sustained recovery is that the oil market has been brought back into balance thanks to a high level of compliance in the OPEC-Russia+others production cuts and continued growth in global demand for oil. There are several other factors discussed below which suggest that the oil price rally may continue.


[Inset image of the Ku Maloob Zaap production facilities offshore Mexico. Maintenance, delayed by Hurricanes, underlies falling production. When injected nitrogen hits the producing wells, production will collapse.]

The chart below from the October 2017 IEA OMR shows how in the course of 2017 the oil market has been brought back into balance. There is still a vast >3 billion barrels of crude and refined products in storage within the OECD, but the very fact that storage capacity no longer has to grow is bullish since this avoids the scenario where tanker loads have nowhere to go (full storage) which can dump the price.

One reason it has taken so long for the production cuts to work is that production in both Libya and Nigeria have recovered from lows (Figure 17), caused by civil unrest, adding over 1 Mbpd to OPEC supply. Both are now on cyclical highs and are unlikely to rise much further. Indeed, the normal direction post-high is downward. At worst, the Libya – Nigeria market drag should now become neutral.

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

Olduvai IV: Courage
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Olduvai II: Exodus
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