Energy – Feb 21

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Many more articles are available through the Energy Bulletin homepage.

Interview with ex-Shell CEO Hofmeister: changes tune after debate with peak oil researcher?
CNBC (video and transcript)
Gas to Hit $5 By Summer?
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CNBC: Gasoline prices are now the highest ever for this time of year. donald trump joined us in the last hour. he says oil prices are among the biggest stories to watch right now. take a listen.

Donald Trump: right now it’s at about $103 or $104, it went to $150, i always felt — i consider like oil to be the blood of the nation and the blood of the world, and that blood was so high and i really believe that had more to do with our slash depression major recession, whatever you want to call it, than interest rates or banks or problems or mortgages or home loans or anything.

CNBC: joining us now, john hoffmeister, former president and ceo of u.s. operations at shell oil, founder for citizens for affordable energy. … you heard mr. trump describe it as the nation’s blood. what is the price of that blood going to be, let’s say, over the next six months?

Hofmeister: i think we’re headed for 120, $130 west texas. Brent is already up around $120 and the reality is, this is what’s so mysterious, demand is down and the price keeps rising.

CNBC: sounds like we’re violating a fundamental law of economics.

Hofmeister: demand globally is not down. that’s the issue. demand continues to rise in asia and whether we use less or not, doesn’t matter. price is going up because supply can’t keep up with the demand.

CNBC: john, you’ve heard the president say it, read the numbers. we are producing more oil in this country than we have been in years. and yet it doesn’t seem to be moving the needle on price. why?

Hofmeister: well, he’s not really citing the number, is he? because we’re well below 7 million barrels a day. we used to produce 10 million barrels a day in the ’70s and the ’80s. …

CNBC: is the president lying when he says overall production is up?

Hofmeister: we’re up slightly, if you can’t natural gas liquids from oil shale. natural gas liquids, of course, don’t turn into gasoline or diesel, so it doesn’t help the pump price. yes, we’re up slightly up by a couple hundred thousand barrels a day but also down in the gulf of mexico because of the moratorium. and that net we’re just slightly up. it’s a trickle when we need a river of new supply. ….
(21 February 2012)
Video and full transcript at original. EB contributor Jeffrey Brown writes: It appears that (ASPO-USA board member) Tad Patzek had an effect on John Hofmeister’s opinions about global supply, after their recent debate.

I think OPEC is about maxed out. When people talk about spare capacity in OPEC, I don’t see it. I just don’t see it coming through and I’m not sure it’s there. And it’s not just that they’re greedy, but they’re really producing what they can produce.”

The Achilles’ Heel of Algal Biofuels – Peak Phosphate
Chris Rhodes, Energy Balance
The depletion of world rock phosphate reserves will restrict the amount of food that can be grown across the world, a situation that can only be compounded by the production of biofuels, including the potential large-scale generation of diesel from algae. The world population has risen to its present number of 7 billion in consequence of cheap fertilizers, pesticides and energy sources, particularly oil. Almost all modern farming has been engineered to depend on phosphate fertilizers, and those made from natural gas, e.g. ammonium nitrate, and on oil to run tractors etc. and to distribute the final produce. A peak in worldwide production of rock phosphate is expected by 2030, which lends fears over how much food the world will be able to grow in the future, against a rising number of mouths to feed [1]. Consensus of analytical opinion is that we are close to the peak in world oil production too….

One proposed solution to the latter problem is to substitute oil-based fuels by biofuels, although this is not as straightforward as is often presented…

In order to obviate the competition between fuel and food crops, it has been proposed to grow algae to make biodiesel from. Some strains of algae can produce 50% of their weight of oil,…

The algae route sounds almost too good to be true. Having set-up these ponds, albeit on a large scale, i.e. they would need an area of 10,000 km^2 (at 40 t/ha) to produce 40 million tonnes of diesel, which is enough to match the UK’s transportation demand for fuel if all vehicles were run on diesel-engines [the latter are more efficient in terms of tank to wheels miles by about 40% than petrol-fuelled spark-ignition engines], one could ideally have them to absorb CO2 from smokestacks (thus simultaneously solving another little problem) by photosynthesis, driven only by the flux of natural sunlight. The premise is basically true; however, for algae to grow, vital nutrients are also required, as a simple elemental analysis of dried algae will confirm. Phosphorus, though present in under 1% of that total mass, is one such vital ingredient, without which algal growth is negligible. I have used two different methods of calculation to estimate how much phosphate would be needed to grow enough algae, first to fuel the UK and then to fuel the world…
(15 February 2012)

What EROI tells us about ROI
Chris Nelder, Smart Planet
One of the key deficiencies of “unconventional” fuels is their low energy return on investment relative to conventional fuels. Many analysts have ignored this factor because investment decisions are made on the basis of the financial, not energy, return on investment. But a growing literature suggests that the two are intimately related.

But before I get into that, a quick note on terminology. The financial return on investment is known as ROI. The analogue in energy, the energy return on investment or EROI (also expressed as EROEI, for “energy return on energy invested”) is a ratio of the energy produced to the energy invested in its production. Some, including me, have also referred to EROI as “net energy,” but that really confuses the terms. For parallelism with the language of finance, net energy should refer to energy produced minus energy invested, whereas EROI should refer to energy produced divided by energy invested.
How EROI begets ROI

The relationship between ROI and EROI is actually very simple and logical. The more energy you have to invest to produce a fuel, the lower your EROI will be. The energy you invest has a cost. Therefore, the profit on the same barrel of oil will be higher when it’s produced from a high EROI source than when produced from a low EROI source.

This simple concept gets lost, however, in the complex accounting of fuels in the real world. The financial return on all unconventional fuels is distorted in one fashion or another by subsidies designed to encourage new development, debt acquired to finance the projects, and complex accounting of the investments and returns. For example, as I discussed previously, the accounting methods used in shale gas development allow operators to roll over gains and losses creatively and amortize them across older and newer wells, wet and dry wells alike. Initial development costs tend to be intermixed with long-term operational and maintenance costs, debt servicing expenses, and so on. Initial exploration costs and even production itself can be offset by tax credits. Ultimately, the profitability of production tends to resemble a picture of cash flow more than pure ROI, and the EROI of some fuels becomes very murky indeed.

Corn ethanol offers a fine example of the problem.
(15 February 2012)
Suggested by EB contributor Michael Lardelli.

Prix de l’essence record : le pouvoir en place n’anticipe rien, c’est consternant
Denis Baupin, Le Novel Observateur
LE PLUS. 1,58 euro pour un litre de sans plomb 95, 1,62 euro pour du sans plomb 98 : les prix de l’essence à la pompe atteignent de nouveaux records. Denis Baupin, maire adjoint de Paris (EELV) tire la sonnette d’alarme : il faut mettre en place une vraie politique de transition, afin que le carburant n’ait plus une place aussi centrale.
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Le prix de l’essence à la pompe atteint aujourd’hui des niveaux record. Et ça n’est pas près de s’arrêter : on continue à consommer toujours plus de pétrole sur la planète, alors que la production ne suit pas, et que les tensions géopolitiques liées au contrôle de la ressource ne peuvent que pousser toujours plus les prix à la hausse.

Pour l’écologiste que je suis, c’est tout sauf une surprise. Ce qui reste par contre consternant, c’est l’incapacité des responsables à anticiper cette situation, malgré les nombreux signaux d’alerte… notamment le rapport 2011 de l’Agence Internationale de l’Énergie qui estime que le “peak oil” [1] a probablement été atteint dès 2006, confirmant que la hausse des prix est structurelle.

Des conséquences économiques et sociales potentiellement catastrophiques

Malgré cela, aucune réaction, aucune anticipation des pouvoirs politiques, tant au niveau français qu’européen. Alors que nous vivons dans des économies petro dépendantes, et que les conséquences économiques et sociales de cette hausse sont potentiellement catastrophiques, cette attitude est irresponsable.

Des millions de ménages dépendants de leur véhicule automobile, des dizaines de milliers de salariés du secteur de l’automobile et de la logistique sont directement menacés et pris en otage. Et indirectement des centaines de milliers d’emplois dont les produits intermédiaires sont transportés vont voir l’équilibre économique de leur activité menacé, des millions de ménages vont voir leur pouvoir d’achat directement et indirectement réduit. Mais les responsables politiques restent les bras croisés, impuissants.
(21 February 2012)