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Fuel Subsidies: The Elephant in the Room

The Elephant in the Room
by John Brian Shannon John Brian Shannon

Fuel Subsidies ‘built this city’ — and every other city too — but are no longer required for a mature industry in a mature and developed economy.

For seven decades, petroleum provided North Americans with a comparatively cheap, plentiful, and reliable source of energy. And it happened to be a kind of energy that was particularly suited to our growing transportation needs.

Transportation CO2 emissions.
knowledge.allianz.com Image courtesy of: Bettina Fachinger

Back in Henry Ford’s day, all of the government subsidies directed towards the exploitation of oil and gas were easily absorbed by a large and upwardly mobile population, and the few gigatons of transportation CO2 and other gases that were added to the atmosphere were easily absorbed by the Earth’s natural systems.

In Henry’s day, agriculture was by far the biggest polluter, followed by industry, construction, and electricity production, transportation was down the list.

Today of course, transportation is directly responsible for one-third of all airborne emissions, and added to that, are the emissions created in the manufacture of the parts necessary to build those millions of cars, trucks, trains, ships and airplanes. In 2013, it adds up to be a very large number indeed. The U.S. alone produces 7 billion tons of CO2 per year.

In an era of unaffordable U.S. budget deficits, direct subsidies to the petroleum industry are in excess of $4.86 billion dollars per year (on average) and when added to the various indirect government subsidies, have become dangerous to the overall economy.

For just one example of other subsidies supporting North America’s addiction to oil; Whose Army, Navy, Air Force, and Marines have protected all that Middle East oil since 1932, and what is the grand total cost of that protection?

Meanwhile, the environmental subsidy in the U.S. is one that is far past the point of absorbing the total amount CO2 added by the U.S. alone.

U.S. Energy Subsidies Chart by DBL Investors.
U.S. Energy Subsidies Chart by DBL Investors.

Someone has to say it. The oil and gas industry, which once lifted the North American economy to unimaginable heights, has now become an unbearable burden to the economy and the environment, and the situation continues to worsen every year. Petroleum, is the 7 gigaton elephant in the room.

At least we only have one elephant in our room. By 2040, China will have four.

China is racing toward developed nation status. China produced 7.2 billion tons of CO2 in 2010, making it the world’s single biggest polluter. It estimated in 2008 that 410,000 people die from air pollution in China every year. It’s land area is similar in size to the U.S. although the U.S. has 311 million citizens (most households own at least one car) while China has 1.35 billion citizens, (where a majority of households will soon become car owners for the first time).

Huge tracts of forested land and grassland in both countries could conceivably capture and make use of, all the CO2 we produce, storing it for decades or even permanently — but only when forested areas and grasslands are not replaced with shopping malls and factories. Which is what has been happening at an accelerating pace since the beginning of the Industrial Revolution.

India, with less than half of the land area of China, but with a rapidly growing demographic, will be in even worse shape than the U.S. or China. By 2022, India will have 2 billion citizens, but with only half the available land area to absorb all that CO2. In addition, vast areas of land in India are unsuitable for the plant life which removes CO2 from the atmosphere.

At present only 1 billion people in the world have one car or more per household, have home electronics and washing machines, and are connected to an electrical grid (developed nation status). Six billion don’t. But six billion people are expected in the developed nations club by 2050.

For now, the undeveloped and emerging nations are carbon-neutral or better — while one billion live in developed nations which are (huge) net contributors to global pollution levels.

Oil and gas has lifted one billion people into developed nation status, and for that we should be grateful. But, with six billion more people joining the club, we won’t have breathable air in some cities unless we change our transportation fuel — and soon.

All else being equal, if we lower our airborne emissions by one-third by switching from petroleum to electricity for our transportation needs, we will be in acceptable shape. What damage has been done, has already been done — no use in crying over spilt milk. And even if we do successfully switch to electric vehicles, the plant life on the planet will still be working overtime to capture and sequester all CO2 produced by the agriculture and manufacturing sectors as they will continue to add unimaginable amounts of CO2 to the atmosphere.

The important point is to stop adding more carbon dioxide to the atmosphere than the Earth systems can handle. A simple but profound switch away from oil and gas to electricity in our transportation sector can accomplish this goal.

Electric vehicles are presently making huge strides and in September 2013, the all-electric Tesla S was the best selling car in Norway. And really, why not? The Tesla S is a great drivers car, it features almost zero maintenance and it runs on electricity which is provided by a network of (renewable energy powered and conveniently located) Supercharger stations placed all over the country which are free to use for the life of the car. Not to mention the always-available Tesla buyback scheme, where Tesla will repurchase your used Tesla for a previously agreed-upon price.

Free electricity for Tesla cars, no airborne emissions from Tesla cars, and a guaranteed Tesla buyback program. This is the future of transportation!

Royal Dutch Shell Drops Two ‘Bombs’ in One Week

by John Brian Shannon | March 1, 2013

First came the announcement this week by Shell senior executives that oil extraction in the Arctic would be postponed for the second year in a row, and second is yesterday’s announcement foreshadowing the company’s plan for the future, Shell Sees Solar As The Biggest Energy Source After Exiting It in 2009.

The New Lens Scenarios Europe Shell report depicts two different energy policy scenarios, predicts that “photovoltaic panels will be the main power source by 2060 or 2070” (depending on which scenario) and “lower costs and state support will boost solar to about 600 gigawatts in 2035” – worldwide totals.

What might lie ahead 50 years from now… or even in 2100? We consider two possible scenarios of the future, taking a number of pressing global trends and issues and using them as “lenses” through which to view the world.

The scenarios provide a detailed analysis of current trends and their likely trajectory into the future. They dive into the implications for the pace of global economic development, the types of energy we use to power our lives and the growth in greenhouse gas emissions.

The scenarios also highlight areas of public policy likely to have the greatest influence on the development of cleaner fuels, improvements in energy efficiency and on moderating greenhouse gas emissions.

Mountains

The first scenario, labelled “mountains”, sees a strong role for government and the introduction of firm and far-reaching policy measures. These help to develop more compact cities and transform the global transport network. New policies unlock plentiful natural gas resources – making it the largest global energy source by the 2030s – and accelerate carbon capture and storage technology, supporting a cleaner energy system.

Oceans

The second scenario, which we call “oceans”, describes a more prosperous and volatile world. Energy demand surges, due to strong economic growth. Power is more widely distributed and governments take longer to agree major decisions. Market forces rather than policies shape the energy system: oil and coal remain part of the energy mix but renewable energy also grows. By the 2060s solar becomes the world’s largest energy source. – Shell

According to information compiled from Bloomberg New Energy Finance and the International Energy Agency, solar photovoltaic (PV) capacity has grown to about 102 gigawatts worldwide in 2012 – which is up from 1 gigawatt globally in 2000.

Since year 2000, an average of 10 gigawatts of PV solar, per year, has been very unevenly added to the world’s electrical grids, but if PV solar installations were to grow at the same rate as the 2000-2012 timeframe, just 450 gigawatts of PV solar would be installed by 2035 — not the 600 gigawatts predicted by the report. The growth rate for PV solar has been astonishing for a new kind of energy for utility companies — and additionally so, considering it is battling with the big boys of the energy world, oil & gas, coal and nuclear. Regardless of past challenges, strong growth in PV solar is forecast until 2100.

All of this means that PV solar is set to grow dramatically between now and 2035, let alone by 2070.

Royal Dutch Shell
Royal Dutch Shell Solar GmbH 2004 | World’s then-largest solar power plant in Espenhain, Germany | Image credit courtesy: Peter Endig/dpa via AP Images

The report has PV solar power moving to number one position to provide at least 38% of worldwide energy supply (well up from today’s ranking of 13th place) to become the predominant kind of energy by 2100.

By 2100, energy from oil will account for only 10% of worldwide energy use and natural gas will account for just 7.5% of the worldwide total, Shell said.

Due to enhanced Carbon Capture and Storage, clean combustion technology and the use of CO2 gas for industrial processes by 2100, Shell sees “global emissions of carbon dioxide dropping to near zero by 2100”.

As all of the above plays out, natural gas demand is expected to surpass the historic demands seen for any other kind of fuel and the quote from the report’s main authour Jeremy Bentham, speaks volumes about the anticipated level of demand for the gas.

“The underlying pent-up demand for gas is very strong…we see it being sucked up, every molecule.”– Jeremy Bentham

The overall demand for energy will double in the next 50 years due to population growth and increases in living standards, and natural gas will eventually enjoy the highest level of fuel demand in history. But by 2100, the world will mainly run on PV solar, while other kinds of energy will contribute small percentages to the overall global energy mix.

It now appears that Shell would rather ‘switch than fight’ the move to PV solar. It is likely to be the first of many such switches in the global energy industry.

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President Obama: Restoring the Dream

by John Brian Shannon John Brian Shannon

President Obama advertised that he would bring “Hope and Change” to the U.S.A. when he campaigned for president first time around and he did, in fact, bring about momentous change during his first term.

I know this, because in my area of specialty — earth-shaking change has occurred. Change that by some accounts, was too much to hope for in an entire lifetime!

Sometime after his 2009 inauguration, the 44th President of the United States laid out his (then-controversial) positions on energy, energy security and sustainable energy as they related to the United States.

In fact, he wrote me a letter back in March 2012 outlining his energy plans. It is a profound document and is available at: johnbrianshannon.com

At the time, these seemed like grand but unreachable goals. But not now — less than a year later! In hindsight, it is now obvious that President Obama had a strong, overriding vision of a self-sufficient and energy-secure America.

It is also enlightening to read the Reuters report on what the IEA has said about President Obama’s startlingly successful energy, energy security and sustainable energy policies: U.S. to overtake Saudi as top oil producer: IEA

“(Reuters) – The United States will overtake Saudi Arabia and Russia as the world’s top oil producer by 2017, the West’s energy agency said on Monday, predicting Washington will come very close to achieving a previously unthinkable energy self-sufficiency.” (Reuters excerpt)

President Obama promised positive change in America’s energy future — and he delivered unprecedented positive change! Energy industry experts are still reeling.

Which gives me hope.

Hope that with some cooperation from U.S. politicians and from America’s allies, this President and his administration can overcome the economic damage that has threatened the ongoing success story that is our Western society.

How to do that over the long term? And how to do it without throwing billions of dollars at temporary solutions and then ending up in a similar position 10 or 15 years later.

Many Americans and America’s well-wishers around the globe are unhappy with increasing inequality in the U.S.

Initially the U.S. became great on account of the opportunities to citizens (first) and immigrants (second) and its trading partners around the world (third). What built America was the hopes and aspirations of several generations who saw the opportunities offered to those who worked smart and hard, and who also invested their time and resources well.

Millions of people were self-incentivized to be productive, to contribute to the betterment of the nation and to add value to their lives and to their communities. Having the opportunity to succeed — allowed and created all of the success that citizens and trading partners of the U.S.A. have enjoyed over the past hundred years or more.

For those who can be honest about it, those opportunities have dissipated alarmingly in recent decades.

Rarely can one finish their education, begin a career at one level and years later, finish their career as a CEO or owner of a large and prosperous business. People have little upward mobility and for those born into poverty situations, the vast majority of them continue to live in poverty until they pass out of this world — no matter how great their work ethic.

This has been well-documented elsewhere, so I won’t go on about it at length here.

But if anything is going to help restore citizens faith in the American dream, and restore the faith well-wishers of the United States around the world, it will be a healthier and better-educated American society.

One of the best ways to improve peoples economic standing, (according the the UN and other organizations expert in governance and human development) are by society-wide improvements to health and education.

It needn’t cost a trillion dollars — but it does need direction.

The same sort of direction that President Obama used to take his country from a nation perilously addicted to foreign oil and turn it into an net exporter of oil and gas — in the process making it an almost energy self-sufficient nation and a nation on the forefront of sustainable energy worldwide. All accomplished during a time of unprecedented worldwide economic upheaval. By any standard, a monumental accomplishment! Congratulations are in order, Mr. President.

So, where are we now and what could we hope for?

  • An energy-secure America. Done. Check.
  • A uniformly healthy America. In progress, gaining momentum.
  • A uniform minimum education of ‘one-college-level-degree’ or ‘one-vocational-certification’  for all Americans. Let’s hope.

If this President’s first term accomplishments are remembered as making America energy secure combined with a well-begun universal health-care plan — then let us hope that his second term will be remembered by a “Done. Check.” on a uniformly healthy society and a college or vocational education plan for all American citizens — so that all citizens can become part of America’s overall economic success.

Good health, a good education and plenty of career opportunities for citizens, will thereby and effectively remove present inequality, restore the hope of opportunity for success to the American people and improve the nations economic health. These are not new ideas. These have worked before, and profoundly, are what made America great from its beginning.

Let’s restore the American Dream, but this time let it be a Sustainable American Dream and one that will work for all U.S. citizens — not just the wealthy.

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