An oil company doesn’t just wake up one day and say “Gee, I think I’d like to drill for oil 5000 feet below the ocean’s surface! That sounds like fun!” They do it because they’ve run out of easy oil. They’re throwing every bit of technological know-how into projects that are just at the edge of human ingenuity and technology to get out the energy and keep the party rolling. And they don’t stop drilling at 5000 feet, that’s where they start. Sometimes, they go as deep as 35,000 feet.

That’s amazing technology. It’s also called going after the scraps.

And that’s pretty much it in a nutshell isn’t it?

This profile of his new young-adult novel, Ship Breakers also includes a nice Environment 101 analogy that also hits the nail right on the head with regards to the problem of energy consumption, carbon emission reductions and why it is so hard to get global agreement on such things.

Full Post

Gelinas makes a good point. But this is hardly a comprehensive solution either to pricing externalities or to controlling oil demand. Note first this free-market pricing of risk will only work if the U.S. government holds oil companies’ (in this case BP) feet to the fire for the full cost of damage and cleanup. Which will require that a reasonable number of pro-business politicians ignore the special pleading of BP and do the right thing. Because, in the case of the Deepwater Horizon spill, those costs are likely to run well into the tens of billions of dollars; enough to wipe out the better part of a couple of years’ worth of BP profits.

But U.S.-based production accounts only for a smidgen of world oil production. Oil is a fungible asset. BP sells its oil from the wellhead to refiners who get crude from all over the world, refine it, then sell it back to BP’s chains of gas stations. The oil from a BP pump doesn’t necessarily come from a BP well somewhere. I might come from a Petrobras or a Yukos well.

Those who think that free-market approaches to pricing in externalities and risk would be well-advised to do a little research on the success of the residents of the Niger Delta region in getting adequate settlement for the environmental degradation of their region by various oil companies. Hint: not much. Or of the efforts of environmental activists in Russia. Hint: they end up dead.

This week more IEA people are going off the reservation and declaring that the IEA’s official statements regarding future oil supplies were basically just shit they made up and had no basis in reality.

“The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.

“Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.”

IEA Petroleum Production Estimates (IEA, The Guardian)

The problem here is that the last time I looked, global demand for oil products was around 85m barrels a day. And that is in a depressed global economy. That only leaves about 10m bbl/day in excess capacity to support a robust economic recovery. Since plunging to $38 or so in April, crude futures have climbed consistently back up into the mid-60′s and 70′s this summer and have started to show support in the $80 range the last week or so. The upshot of all this is that as soon as economic growth begins to take off, demand is going to come close to supply and oil prices are going to go back to very high levels. This will effectively put the brakes on any serious recovery.

Time is not on our side in the move to move our economies out of their dependence on oil. To my mind, energy policy will need to be front anc center once the health-care debate is finished.

Implementing new power technologies like wind and solar that are not tied to always on generation facilitie will require substantial upgrades to our power infrastructure. NPR has this awesome infographic on the grid structure, power sources and more.

Via The Economist comes a nice little bit of infoporn on gas taxes in the OECD. You have to scroll down past all those economic backwaters, Britain, Germany, Japan, et. al to the very bottom to find the US. Poor Americans, being taxed to death by our Socialist Overlords.