Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

The Cost of Energy

with 2 comments

The recent IPCC report has been very clear about the need to get out of fossil fuels. They are also realistic in predicting that it is going to take a while to turn things around. What surprises me is the continued reluctance of the elite to absorb the message – but maybe there is an easier way to get across to them.

There has already been a significant change in energy markets, not just because the price of renewables (solar, wind and so on) has been dropping rapidly. The rush into fracking for oil and gas in North America has depressed oil prices.

Screen Shot 2014-11-04 at 8.10.26 AMNow it may be argued that this is merely short term volatility and that OPEC could cut back its output to prop up prices. But equally, OPEC may be getting concerned about losing market share and needing to protect its revenue stream. Sales at lower prices being better than no sales at all.

I have already been arguing in other fora – such as twitter and facebook – that the dropping oil price ought to be a much bigger consideration for opponents of increasing fossil fuel dependence. The current crop of LNG projects in BC seem to me to be the most obvious candidates. British Gas has already pulled out of Prince Rupert: can Squamish be far behind? The provincial government has already dropped its revenue estimates, even though it was already willing to pretty much give away the resources through low royalties, it has recently cut the tax regime too. I do not understand why they continue to pursue projects which offer very little in terms of employment (relative to other energy opportunities) and now little revenue, especially in the near term. “British Columbia’s auditor general says doing business with the oil-and-gas industry has cost the province’s coffers about $1.25 billion in royalties even before most of the product has been pulled from the ground.” Vancouver Sun

But the pipeline projects that are essential to expanding the tar sands and getting diluted bitumen to oil refineries also  seem to be not only deservedly unpopular, but increasingly unnecessary. The tar sands are already heavily subsidized, but even so “ninety percent of future oil sands projects at risk from eroding oil price” according to a new report from Carbon Tracker.

Screen Shot 2014-11-04 at 8.22.38 AM

I have long argued that the only thing to do with difficult to extract fossil fuels is to leave them in the ground. For one thing it is now clear that we have more than enough geothermal energy resources available to meet all our needs. While not strictly speaking “renewable” it is not likely that the earth’s core is going to cool down rapidly if we exploit these resources anymore than putting up solar panels to capture sunlight risks dimming the sun. The good thing about geothermal is its constant availability which makes it really useful to provide power when sunlight and winds are not available.

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The problematic thing is that transportation, especially in North America, is still heavily dependant on energy dense liquid fuel. Even though batteries are getting better, and energy efficiency improvements such as hybrids are helping reduce demand for gasoline, much more attention is being directed – quite properly – to the fall in car use. I think that is much more to do with the falling buying power of consumers than secular change in transport demand. The grab of the 1% has gone much too far, and the economic impacts of the impoverishment of the rest of the population are now becoming more apparent. So far the knock on effects into social unrest have been relatively weak, but that cannot continue indefinitely, absent a change in policy direction from most national governments. Obviously austerity is not working and cannot work. The changes in mode to walking and cycling can be achieved in some urban areas, but in most suburbs significant shifts in land use are needed to put origins and destinations in better proximity.  That is going to take some time to achieve.

Politicians Discussing Global Warming

Written by Stephen Rees

November 4, 2014 at 9:24 am

2 Responses

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  1. Here is a graph that provides a bit more historical context to the world price of oil. It also overlays the world production levels which were relatively flat while prices whipsawed.

    The price was about $15 / barrel in early 1999. Today’s price, though on a recent downswing, remains 500% higher. Oil remained well below $50 / barrel until 2005, then spiked in lock step with the peak in cheaper conventional oil production. The only thing keeping the production curve fairly flat is the arrival of more expensive unconventionals.

    Given their extraordinary decline rates, the current glut in fracked oil and gas is a temporary phenomenon and prices, according to David Hughes and Anthony Berman, will rise again once production in the five US shale plays start to really taper off by 2020.

    Oil dependency, of course, cannot be sustained. Therefore, conservation and renewables absolutely must be brought forward as soon as possible.

    MB

    November 14, 2014 at 12:37 pm

  2. Stephen, further on this topic, here is a link to a PDF presentation by Steven Kopits. Very interesting interrelationships to VMT and similar things.

    http://energypolicy.columbia.edu/events-calendar/global-oil-market-forecasting-main-approaches-key-drivers

    MB

    November 14, 2014 at 12:41 pm


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