resource insights – Olduvai.ca

A very observant longtime friend of mine opined recently that the clean energy economy is really just a metals energy economy where metals provide the basis for energy production and transmission. The idea that this emerging economy is going to be light on resources compared to our current fossil-fuel based economy is a fantasy.

And you don’t have to take his word for it. The International Energy Agency (IEA) has attempted to project the needs of this new economy. The IEA’s report entitled “The Role of Critical Minerals in Clean Energy Transitions” contains some eye-popping statistics that drive home just how much in the way of metals might be needed in order to supply the builders of this clean energy infrastructure.

Using two scenarios the IEA estimated that growth in demand coming from clean energy industries just for battery-related minerals will explode by 2040 relative to 2020:

1. Lithium: Between 13 to 42 times.

2. Graphite: Between 8 and 25 times.

3. Cobalt: Between 6 to 21 times.

4. Nickel: Between 6 to 19 times.

5. Manganese: Between 3 to 8 times.

Demand related specifically to renewable energy and its infrastructure is projected to increase for the following minerals under two scenarios:

1. Rare earth elements (REEs): Between 3.4 and 7.3 times more. REEs are important for electric motors and generators.

2. Molybdenum: Between 2.2 to 2.9 times more. Molybdenum is used in solar and wind power because of its ability to transmit electricity well.

3. Copper – Between 1.7 to 2.7 times more. Copper, of course, has long been used in electrical motors and wires.

4. Silicon – Between 1.8 to 2.3. Silicon, of course, is a semiconductor widely used in solar panels. Silicon is the second most abundant element in the earth’s crust after oxygen, so it is widely available. However, it takes considerable energy and a multi-step process to produce silicon of sufficient purity for semiconductor and other applications.

…click on the above link to read the rest…

How the modern fantasy of an eternal civilization warps our view of technology

January 30, 2023

How the modern fantasy of an eternal civilization warps our view of technology

What historians call the Golden Age of Greece—which ran from about 500 to 300 BC—spawned the foundational Western philosophers Plato and Aristotle; mathematicians such as Euclid whose geometry is still taught in schools today; classical Greek dramatists such as Aeschylus, Sophocles, and Euripides, whose plays are performed even now; an architecture so grand that it has been imitated in our own time, especially in government buildings; and the practice of democracy, a form of governance that would go into eclipse for over 2,000 years until the American and French revolutions.

What most people don’t know is that the ancient Greeks who lived through that era did not think of themselves as being in a golden age. Instead, they thought of their society as a much degraded version of the heroic age that preceded it, an age described in such works as Homer’s Illiad and Odyssey and Hesiod’s Works and Days. How utterly difficult it is for most people living today to imagine a society whose members believed that the future would only bring further degradation and decline perhaps until civilization itself disappeared. History was to them cyclical with dark and golden ages—golden ages that start out with great vigor and hope and then grind down to dark eras that destroy the progress of the past.

Today, most modern people think of time as linear and history as merely a story of the gradual and now rapid rise of technological, social, political and cultural progress. Since time is linear, the trajectory is always forward and expected to be up. We humans will never again fall prey to the civilization-ending mistakes of the past. Our technology has no equal. Humans have decoupled from the limits nature previously imposed on them…

…click on the above link to read the rest…

With U.S. shale oil boom over, can world production climb?

January 2, 2023

With U.S. shale oil boom over, can world production climb?

Prior to the pandemic-induced downturn in world oil production, U.S. oil production growth was responsible for 98 percent of the increase in world production in 2018 (as reported in 2019). Almost all of that growth resulted from rapid increases in shale oil production which accounted for 64 percent of U.S. production (as of 2021).

Fast forward to today when OilPrice.com has declared that “The U.S. Shale Boom Is Officially Over.” The reasons cited mostly have to do with management “discipline” regarding capital expenditure in favor of shareholder payouts and complaints about “anti-oil rhetoric” and “regulatory uncertainty.”

But there might just be another reason for the slowdown in shale oil production in the United States: There isn’t as much accessible and economical shale oil underground as advertised. Earth scientist David Hughes laid out his case for this view in his “Shale Reality Check 2021.” (For a summary of Hughes’ report, see my piece from December 2021 entitled, “U.S. shale oil and gas forecast: Too good to be true?”)

There may be other sources of oil worldwide that will somehow make up for the significantly lower growth in U.S. shale oil production. But no other source seems set to provide the kind of growth U.S. shale oil provided, that is, 73.2 percent of the global increase in oil production from 2008 through 2018.

The world has actually been getting along with less oil for some time now. World oil production proper (crude oil including lease condensate) peaked on a monthly basis in November 2018 at 84.58 million barrels per day (mbpd). In August 2022 production was 81.44 mbpd. That’s after a pandemic-induced shock that saw production fall to 70.28 mbpd in June 2020.

…click on the above link to read the rest…

East vs West, ‘Stuff’ vs ‘Finance’

November 2, 2022

East vs West, ‘Stuff’ vs ‘Finance’

As a military conflict rages in Ukraine between Russia and what the Russian government calls “the West” (apparently meaning NATO allies and particularly the United States), there is a parallel economic battle between “stuff” and “finance.” Both categories are affected by economic sanction regimes imposed by each side. But there is a striking difference in what each side has to sell.

In advanced countries, the percentage of the total economy devoted to services has long exceeded that devoted to goods. This is a reflection of the increasing productivity of those working in manufacturing, mining, agriculture, forestry and fishing who make it possible for so many people to work in service industries. These raw materials and goods industries provide all the stuff those of us in the service economy require to stay alive and perform our services.

It is a testament to the remarkable rise in productivity of the raw materials and goods industries that in the United States, for example, the service sector accounts for almost 77 percent of all economic activity. In France, the percentage is about 70 percent. In Russia the percentage is a little lower, about 68 percent, which may reflect Russia’s relatively large mining, forestry, and agriculture inputs to its economy.

But regardless of the percentage, all service industries remain completely dependent on the raw materials and manufactured goods sectors to function. That has become even more apparent in the wake of price increases on essential goods and disruptions of trade that have resulted from the Russia-Ukraine conflict due to economic sanctions by both sides in the contest.

Western economies these days are dominated by finance and real estate. By that I mean they have large numbers of people working in financial industries including banking and investment services; insurance; and real estate brokerage, leasing and management…

…click on the above link to read the rest…

Dutch dilemma: What is Europe willing to do for more natural gas?

October 10, 2022

Dutch dilemma: What is Europe willing to do for more natural gas?

Modern global society is steeped in the idea of trade-offs, the notion that one must suffer losses to obtain desired gains. This prepares the way for disingenuous leaders to explain why sacrifices are necessary to reach supposedly exalted goals. Usually those sacrifices are made by the powerless in society; they are certainly not made by the leaders who call for sacrifices nor by the wealthy and powerful who benefit from them.*

This coming fateful winter season in Europe is likely to include a lively debate about whether the Dutch should make a perilous trade-off on behalf of an energy-starved Europe. So far, the Dutch have been firm about closing one of the world’s largest natural gas fields, Groningen, no later than 2024—even in the face of severe European gas shortages resulting from the loss of gas from Russian pipelines.

The reason for that firmness has to do with the damage earthquakes are inflicting on the buildings located above and around the field, earthquakes related directly to withdrawal of Groningen’s gas. In the northeastern part of the country, some 1200 earthquakes have severely damaged 27,000 buildings to the point that they are uninhabitable. About 3,300 structures have been demolished. A 2015 study reported that 152,000 homes need to be reinforced. As a result the government has been reducing gas withdrawals to mitigate the problem with an eye toward closing the field. Closing the field also comports with the government’s greenhouse gas reduction goals.

But, will the Dutch be able to withstand calls for increasing production from Groningen as the European winter arrives?

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

Energy consultancy keeps lowering worldwide recoverable oil resources

July 20, 2022

Energy consultancy keeps lowering worldwide recoverable oil resources

It’s hard to say that three years makes a trend. But one of the world’s major energy consulting firms has lowered its estimate of world oil reserves for three years in a row now.

Rystad Energy provides a publicly available analysis of world oil reserves each year. In 2020 Rystad wrote that “the world’s recoverable oil [dropped] by around 282 billion barrels.” That represented a 12.9 percent decline in just one year. In 2021 the firm stated its analysis showed that recoverable resources declined by another 178 billion barrels or about 9.4 percent. Rystad said the decline was due in part to new modelling based on resources “at well level rather than field level.” The closer Rystad looked, the less oil there seemed to be.

In 2022 Rystad noted yet another decline of almost 9 percent in its press release headline. Recoverable oil resources dropped another 152 billion barrels. (For all estimates Rystad uses figures for crude oil and lease condensate which is the accepted definition of oil.)

With estimated recoverable resources standing at 1.572 trillion barrels, there is no seeming immediate threat to oil supplies. But the trend, should it continue, would be troublesome. There is a lot to look at “under the hood” of these estimates. Rystad reduces its broad 2022 estimate to an amount it believes could be produced profitably if oil is around $50, namely 1.2 trillion barrels. Price always matters when talking about recoverable resources. Higher prices, of course, make harder-to-get resources more likely to be profitable.

Rystad notes the lowering of investment in oil exploration as one of the culprits. This drop has been driven by the uncertainties surrounding the pandemic and a world about to be ever more stringent regarding fossil fuel emissions.

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

Oops! U.S. oil and gas exports fuel domestic price rise

June 30, 2022

Oops! U.S. oil and gas exports fuel domestic price rise

The U.S. oil and natural gas industry long fought for and in the last decade finally won release from federal restrictions that limited exports. The ostensible reason was that because of the so-called “shale revolution” in the country’s oil and gas fields, the United States would have plenty of oil and gas to spare for export.

The real reason behind the push was that the oil and gas industry wanted what almost every other industry in American already had: The right to sell their products to the highest bidders no matter where they lived on the globe.

This made it almost certain that as U.S. prices rose to match world prices, U.S. consumers would feel the pain. And, since energy prices affect everyone who votes, they are always politically consequential.

So, it is unsurprising that with U.S. regular gasoline prices over $5 per gallon President Joe Biden lashed out at U.S. oil companies—which are having one of their best years ever—saying they need to increase production of refined oil products. The companies have responded that their refineries are running at close to maximum capacity and so there is not much they can do in the short run.

What is left unsaid is that it has long been the policy of the United States to allow the export of refined (as opposed to crude) petroleum products such as gasoline, diesel and heating oil. The country has refinery capacity significantly in excess of domestic needs and so exports a considerable volume of refined products including about 1 million barrels per day (mbpd) of gasoline and 1.4 mbpd of diesel and heating oil (for the week ending June 10)…

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

Oops! U.S. oil and gas exports fuel domestic price rise

June 23, 2022

Oops! U.S. oil and gas exports fuel domestic price rise

The U.S. oil and natural gas industry long fought for and in the last decade finally won release from federal restrictions that limited exports. The ostensible reason was that because of the so-called “shale revolution” in the country’s oil and gas fields, the United States would have plenty of oil and gas to spare for export.

The real reason behind the push was that the oil and gas industry wanted what almost every other industry in American already had: The right to sell their products to the highest bidders no matter where they lived on the globe.

This made it almost certain that as U.S. prices rose to match world prices, U.S. consumers would feel the pain. And, since energy prices affect everyone who votes, they are always politically consequential.

So, it is unsurprising that with U.S. regular gasoline prices over $5 per gallon President Joe Biden lashed out at U.S. oil companies—which are having one of their best years ever—saying they need to increase production of refined oil products. The companies have responded that their refineries are running at close to maximum capacity and so there is not much they can do in the short run.

What is left unsaid is that it has long been the policy of the United States to allow the export of refined (as opposed to crude) petroleum products such as gasoline, diesel and heating oil. The country has refinery capacity significantly in excess of domestic needs and so exports a considerable volume of refined products including about 1 million barrels per day (mbpd) of gasoline and 1.4 mbpd of diesel and heating oil (for the week ending June 10)…

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

Oops! U.S. oil and gas exports fuel domestic price rise

June 20, 2022

Oops! U.S. oil and gas exports fuel domestic price rise

The U.S. oil and natural gas industry long fought for and in the last decade finally won release from federal restrictions that limited exports. The ostensible reason was that because of the so-called “shale revolution” in the country’s oil and gas fields, the United States would have plenty of oil and gas to spare for export.

The real reason behind the push was that the oil and gas industry wanted what almost every other industry in American already had: The right to sell their products to the highest bidders no matter where they lived on the globe.

This made it almost certain that as U.S. prices rose to match world prices, U.S. consumers would feel the pain. And, since energy prices affect everyone who votes, they are always politically consequential.

So, it is unsurprising that with U.S. regular gasoline prices over $5 per gallon President Joe Biden lashed out at U.S. oil companies—which are having one of their best years ever—saying they need to increase production of refined oil products. The companies have responded that their refineries are running at close to maximum capacity and so there is not much they can do in the short run.

What is left unsaid is that it has long been the policy of the United States to allow the export of refined (as opposed to crude) petroleum products such as gasoline, diesel and heating oil. The country has refinery capacity significantly in excess of domestic needs and so exports a considerable volume of refined products including about 1 million barrels per day (mbpd) of gasoline and 1.4 mbpd of diesel and heating oil (for the week ending June 10)…

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

Climate change, energy, and an unstable grid: The mainstream belatedly gets the connections

May 30, 2022

Climate change, energy, and an unstable grid: The mainstream belatedly gets the connections

Memorial Day marks the unofficial beginning of summer in the United States as the temperate breezes of spring give way to an enveloping heat that has become more and more intense each year due to climate change. This summer forecasters are expecting two big things: deadly heat and electricity outages. Mainstream news coverage is now explaining why these are inextricably intertwined, a relatively new development in such coverage. And, it turns out that the recent blistering record heatwave in India and Pakistan is but a foretaste of our future.

Those of us who have covered climate change in the last two decades believed that by the time such connections became obvious and noted by mainstream outlets, the world would be so far along in the process of global warming that stability-challenging events such as grid failures would become normal.

That’s because of the lag time between when we introduce greenhouse gases into the atmosphere and when we experience the warming caused by them is between 25 and 50 years. This is due to what’s called the thermal inertia of the oceans which means more or less that the oceans take time to warm (usually decades). Even if we were to take drastic action now that stopped all further emissions of greenhouse gases, the world would be in for several more decades of rising temperatures. But, of course, we as a global society are instead pursuing business as usual.

I can remember as a child living largely without air-conditioning. We would experience nights so cool at the cottage we rented along the shores of Lake Michigan that we would close all the shutters and cover ourselves with wool blankets.

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

Just a hint from the mainstream that limits precipitate rising oil prices

May 16, 2022

Just a hint from the mainstream that limits precipitate rising oil prices

Last week a Bloomberg writer at the very end of an article explained that the “only solution” to high gasoline and diesel prices is recession. While I would not accuse the writer of advocating degrowth—this would be too radical for a mainstream business publication—his analysis points to a key and obvious cause of today’s high prices for oil and other commodities: There isn’t enough of them to go around.

There’s an old saying in the oil industry that the solution to high prices is high prices. The logic is that high prices will do two things: 1) Reduce demand as those who cannot afford oil products at high prices will cut back and 2) incentivize more exploration and production as companies seek to increase production to take advantage of high prices.

The big question today is whether the second mechanism can actually ramp up oil production enough to bring down prices. In a recent survey a large number of oil executives said their production plans do not depend on current prices. Many cited the desire of investors in publicly traded companies to receive larger dividends and benefit from the corporate buyback of shares (which tends to increase the stock prices as fewer shares are available for trading).

It’s instructive that 9 percent of those responding to the survey cited an oil price of $120 per barrel as the level at which they would consider raising production. And keep in mind that they are NOT talking about $120 per barrel for a few months, but as an average price over many years—since it can take many years to bring large projects into production and those projects can produce for many years after production begins…

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

Resource limits and our strange game of musical chairs

April 20, 2022

Resource limits and our strange game of musical chairs

With a wide range of commodities in limited supply, various regions of the world are now behaving as if they are engaged in simultaneous games of musical chairs when it comes to commodity shortages.

The games differ by commodity and by region, but they all share one characteristic: As in a game of musical chairs, someone will have to go without. And, as in a game of musical chairs, available supplies are shrinking (as represented by the removal of chairs).

An interesting twist on this game is that now some chairs are being transferred from one game to another. For example, the Biden administration has declared that U.S. liquefied natural gas (LNG) exports to Europe will be stepped up in order to displace natural gas from Russia—which has become a suspect source due to the conflict between Russia and Ukraine and the broad economic sanctions against Russia. The gas still flows for now. But will Russia use a gas cutoff as a weapon? That is a question agitating all of Europe.

Now here’s what I mean about moving chairs from one game of musical chairs to another. It turns out that all of the United States’ LNG export capacity is in use. There’s none left to increase exports. Adding to the problem is Europe’s limited ability to accept LNG cargoes as those cargoes need to be regassified and put into pipelines at special receiving and processing facilities that take years to build. It will also take years to build U.S. capacity substantial enough to make a dent in European dependence on Russian natural gas. The Russian threat of a cutoff remains and will remain a potent weapon for some time to come.

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

Easier said than done: National self-sufficiency in a changed world

April 3, 2022

Easier said than done: National self-sufficiency in a changed world

In the wake of a rapidly evolving realignment of the world trading system resulting from the economic equivalent of World War III, President Joe Biden last week took the first of what are likely to be many steps toward building greater self-sufficiency for the United States.

Biden called for increasing U.S. production of key minerals used in the manufacture of electric vehicle batteries. He invoked the Defense Production Act which allows the government to support production of certain materials and goods deemed essential for national defense and even to order industry to mine minerals and make machinery including vehicles such as tanks and bombs.

For the Biden administration its first small step toward U.S. self-sufficiency consists of making companies which mine minerals key to electric vehicle batteries such as lithium, nickel, graphite, cobalt and manganese eligible for direct subsidies or purchase commitments to incentivize increased production. The applicable program (called Title III) has about $750 million to spend, not that much to rectify what is a huge deficit.

It’s worth looking at U.S. net imports of each of these minerals to understand just how hard reaching self-sufficiency will be. For starters, let’s examine a table from a U.S. Geological Survey (USGS) report about U.S. import dependence for key minerals:

USGS Minerals Table
Of the five minerals listed above, the United States is 100 percent dependent on imports for two: graphite and manganese. (It’s worth noting the China, Russia and Ukraine are among the top six producers of graphite and China is the largest producer by far. China and Ukraine are among the top five producers of manganese and again China is by far the biggest producer.)

Complete U.S. dependence on imports implies that there is no current production of these minerals in the United States and that nobody has even been looking for these minerals on U.S. soil…

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

World War III is here, but it’s not what we expected

March 20, 2022

World War III is here, but it’s not what we expected

Movies and books have often portrayed World War III as either the final chapter of the human epoch or as a new but primitive restart for those who survive the nuclear conflagration. We cannot know if such prophesies will ultimately come true. For now World War III appears to have started with Russia’s attack on Ukraine, but without nuclear missiles so far.

Make no mistake. The battlefield for this war is worldwide; it’s just that it is primarily an economic battlefield. When Russia attacked Ukraine, the other great powers did not send soldiers and tanks. Instead, they orchestrated one of the most comprehensive economic warfare schemes ever devised.

Measures included cutting Russia out of the international payments system called SWIFT, blocking Russian exports (except most commodities) and discouraging commerce of many kinds with Russia. Many countries froze accounts owned by Russia’s central bank and also accounts owned by prominent wealthy Russians. Wealthy Russians targeted by sanctions also saw yachts moored outside Russian territory seized. The value of the yachts runs into the billions of dollars.

In the wake of these unprecedented sanctions, many non-Russian companies have reduced, suspended or eliminated operations in Russia. Here is a list of over 400. Not all were forced to take action because of the sanctions. But companies expected that doing business inside Russia would become extraordinarily difficult and also did not want to get on the bad side of governments around the world participating in the sanctions.

Russia has responded with an export ban covering more than 200 products. Notably, Russia did NOT include its major exports, energy and other minerals in the ban. It did curtail wheat and sugar exports temporarily…

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

Ukraine conflict may portend end to current world trading system

March 6, 2022

Ukraine conflict may portend end to current world trading system

At the beginning of nearly every war including the current one in Ukraine, there are those who loudly declare that it will be over shortly and then business-as-usual can resume. They are rarely right. While no one can say for certain what the trajectory of the Russian-Ukrainian conflict will be, the economic warfare that is going on alongside it is very likely to destroy the current global trading system.

The last time a worldwide trading system was destroyed was just over a century ago. From the late 1800s up to the eve of World War I the dominance of the British fleet on the high seas and the reach of the British Empire created an era of stability and interconnection highly favorable to worldwide trade.

Then, World War I blew that stability and interconnection apart. Later, the Great Depression led to a global trade war that finished off the remnants of the international trading system. The world did not achieve a trading system that spanned the globe unhampered again until the end of the Cold War—which had split the world into two trading blocks for nearly 50 years.

It is unlikely that Russia will simply back down even in the face of crippling economic sanctions. Things have gone too far and the Russian leadership has staked too much on its position that Russia must have its own sphere of influence free from NATO soldiers and rockets. What the Russians have historically called “the near abroad” must not harbor threats to Russian security, they say. Think of this as Russia’s Monroe Doctrine.

The sanctions against Russia are hard to keep track of, ambiguous and ever expanding. Their consequences, however, are clear. Through pressure exerted by the United States and European countries, most of the world will be forced to curtail its trade with Russia sharply.

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

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