Minor Thoughts from me to you

This is exciting news.

U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world's biggest producer.

Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day. This will be the fourth straight year of crude increases and the biggest single-year gain since 1951.

The boom has surprised even the experts.

"Five years ago, if I or anyone had predicted today's production growth, people would have thought we were crazy," says Jim Burkhard, head of oil markets research at IHS CERA, an energy consulting firm.

The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia's output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America "the new Middle East."

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More exciting news on the energy front.

Fracking technology has already made it practical to exploit previously inaccessible natural gas and oil in the United States (see "Natural Gas Changes the Energy Map"). Now several companies are demonstrating a way to use microörganisms that eat coal and excrete methane—the main ingredient in natural gas—as a possible means of extracting fuel from coal resources that had been too expensive to mine.

Many coal beds contain large amounts of methane that can be harvested by drilling wells. In recent decades, researchers have demonstrated that a large fraction of the natural gas found in the coal beds is produced by naturally occurring microörganisms that feed on coal, and they have found ways to stimulate the microbes to produce more methane. Luca Technologies, based in Golden, Colorado, is using this approach to increase production from coal beds with existing methane wells. Another company, Next Fuel, based in Sheridan, Wyoming, recently showed that it could use similar technology to produce methane from coal beds that didn't already have methane in them, raising the possibility that vast amounts of coal that's currently too expensive to mine could be converted into natural gas.

Though the idea of microbial production is not new, says Julio Friedmann, chief energy technologist at the Lawrence Livermore National Laboratory, the technology has taken great strides in recent years, in large part because researchers know more about the different microörganisms that work together to digest coal and produce methane. "I know a handful of companies working on those technologies that seem to have pretty good recovery of natural gas at pretty good cost," he says. That, he adds, creates a potentially significant market opportunity, and "I wouldn't have guessed that a couple of years ago."

It's incredible to think that we could turn America's coal reserves into natural gas reserves. Between natural gas and oil, America could become a major exporter of energy. Given how clean natural gas is, especially compared to coal, we could reduce our greenhouse gas emissions without needing to reduce our energy consumption.

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Fracking has done more to reduce US carbon emissions than anything that solar or wind could currently hope to do.

Carbon-dioxide emissions in the United States have dropped to their lowest level in 20 years. Estimating on the basis of data from the US Energy Information Agency (EIA) from the first five months of 2012, this year’s expected CO2 emissions have declined by more than 800 million tons, or 14%, from their peak in 2007.

The cause is an unprecedented switch to natural gas, which emits 45% less carbon per energy unit. The US used to generate about half its electricity from coal, and roughly 20% from gas. Over the past five years, those numbers have changed, first slowly and now dramatically: in April of this year, coal’s share in power generation plummeted to just 32%, on par with gas.

... The reduction is even more impressive when one considers that 57 million additional energy consumers were added to the US population over the past two decades. Indeed, US carbon emissions have dropped some 20% per capita, and are now at their lowest level since Dwight D. Eisenhower left the White House in 1961.

David Victor, an energy expert at the University of California, San Diego, estimates that the shift from coal to natural gas has reduced US emissions by 400-500 megatonnes (Mt) of CO2 per year. To put that number in perspective, it is about twice the total effect of the Kyoto Protocol on carbon emissions in the rest of the world, including the European Union.

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Suppose—just suppose—that there were a tested energy technology out there that

• produces electricity cheaper than coal, because of lower capital and fuel costs,
• uses a fuel that is in almost inexhaustible supply, both in the U.S. and elsewhere,
• operates continuously, in baseload or peaking mode, for up to 30 years,
• operates at an efficient high temperature but at atmospheric pressure, *can be factory-built and deployed in compact 100-megawatt modules close to the end use of the power,
• contributes nothing to air or water pollution and needs no water for operation,
• safely consumes long-lived transuranic waste products from current nuclear fission reactors,
• produces high-temperature process heat that can make hydrogen fuel for vehicles, and
• is walkaway safe.

Science journalist Richard Martin's book SuperFuel makes the case that such a technology exists. It's thorium, and particularly the LFTR—the liquid fluoride thorium reactor.

The Federal government's regulatory apparatus has been well and truly captured by the companies that make conventional nuclear reactors. As long as they hold sway, it will be very, very difficult for anyone to build an LFTR power plant. The government should give innovative energy companies a chance to see whether thorium reactors really can be the green energy source of the future.

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Huh. It'd be wonderful to deal with Israel as an energy exporter. Maybe then we could tell the Saudi's where they can stick their oil?

An article in the Financial Times illustrates an important theme we follow here at Via Meadia: the geopolitical and economic shifts as the new energy realities of the 21st century sink in.

As the FT puts it,

Experts are convinced that Tamar and Leviathan will not be the last big Israeli discoveries. They point to the US Geological Survey, which estimates that the subsea area that runs from Egypt all the way north to Turkey, also known as the Levantine Basin, contains more than 120 trillion cubic feet of natural gas. Israeli waters account for some 40 per cent of the total. Should these estimates be confirmed through discoveries in the years ahead, Israel’s natural gas reserves would count among the 25 largest in the world, on a par with the proven reserves of Libya and ahead of those of India and The Netherlands. For decades a barren energy island, forced to import every drop of fuel, Israel today stands on the cusp of an economic revolution, fuelled by the vast riches that lie below its waters.

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Richard Epstein looks at the recent run up in gas prices and concludes that it's mostly because of an increasingly hostile posture towards Iran.

Without question, the problem can be traced back to a renegade Iran. For good and sufficient political reasons, the West has come to see that the Iranian nuclear threat is not just bluster. Indeed, it poses far greater risks to world peace and the political order than even a major disruption in oil supplies.

Hence an anxious West has now put into place a reasonably effective concerted effort to cut off Iran from the world’s banking system, and to block the use of Iranian oil internationally, which has been made easier by the Saudis’ willingness to expand their own shipments into the world markets. Nor have the Iranians sat back idly. They have cut off exports to the United Kingdom and France, a move that is largely symbolic. But the Iranian threat to close the Strait of Hormuz, through which about one-third the world’s oil supplies travel, is not symbolic. Nor is the movement of the U.S. aircraft carrier, the U.S.S. Abraham Lincoln, into the Strait of Hormuz, merely symbolic.

For both the short and the middle term, these developments have driven the base-line price of Brent crude from the North Sea up to around $119 per barrel. That translates into a potential price at the pump of about $4.25 per gallon, which undoubtedly will eat into the pocketbooks of many Americans.

He concludes that the worst possible thing, for gas prices, is for politicians to start looking for "something to do". (And, yes, he criticizes both Democrats and Republicans on this issue.) Rather, we should sit back and let individuals and companies figure out the best way to react to the increased risk and the possibility of sudden shortages.

The question on the table is how best to respond to the disruptions in oil supplies, not to pretend that these disruptions do not exist. On this score, the great advantage of a market system is that it forces Mr. Coudle (and everyone else) to think hard about the relative value of the goods and services he consumes and to make cutbacks in a cheap and rational fashion. In both good times and bad, people are always having to decide which goods and services to spend their incomes on, and which to forego.

Price movements give them an accurate, instantaneous, and impersonal picture of how other people value various goods and services. When oil prices rise, its least valuable uses are the first to drop out of the system. The decisions are typically made on a continuous basis, so that if some people find that they have cut back purchases by too much (or too little), they can increase (or decrease) their purchases in the next pricing period. Spurred on by these price increases, people can also make changes in their spending patterns elsewhere to offset the inconvenience of the higher prices for oil products. Purchasing a hybrid, insulating your home, and moving closer to work are just some of the many ways to save money. Good luck to Mr. Coudle, who provides an object lesson in how that task should be done.

The great risk is that the government will undermine the market by resorting to centralized devices to cap the price increases or to dictate its collective vision of the just price. Now is the time to recall the lessons of Friedrich Hayek’s best writing, the scholarly essay “The Use of Knowledge in Society” (1945), which is about the superiority of a decentralized price mechanism in response to system-wide shocks. As he reminds us, “The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all separate individuals possess.”

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I knew that the energy situation in the U.S. had been improving but I didn't realize that it was already this good.

To be sure, part of the reason for this change is that demand for energy in the U.S. is down in the sluggish aftermath of the Great Recession, while demand for energy in other parts of the world is rising. For example, the U.S. is now a net exporter of oil to Brazil, Mexico, Argentina. While exports and imports will bounce around in the short-run, over the longer run it appears that the U.S. is on track to become an energy exporter of oil, coal, and even natural gas (as technology improves for shipping liquified natural gas).

I look forward to the day when the U.S. becomes a net exporter of oil to Venezuela. Given how badly Chavez is mismanaging things, that may not take as long as you'd think.

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Matt Ridley makes a few good points, I think.

It turns out that the great majority of this energy, 10.2% out of the 13.8% share, comes from biomass, mainly wood (often transformed into charcoal) and dung. Most of the rest is hydro; less than 0.5% of the world's energy comes from wind, tide, wave, solar and geothermal put together. Wood and dung are indeed renewable, in the sense that they reappear as fast as you use them. Or do they? It depends on how fast you use them.

One of the greatest threats to rain forests is the cutting of wood for fuel by impoverished people. Haiti meets about 60% of its energy needs with charcoal produced from forests. Even bakeries, laundries, sugar refineries and rum distilleries run on the stuff. Full marks to renewable Haiti, the harbinger of a sustainable future! Or maybe not: Haiti has felled 98% of its tree cover and counting; it's an ecological disaster compared with its fossil-fuel burning neighbor, the Dominican Republic, whose forest cover is 41% and stable. Haitians are now burning tree roots to make charcoal.

You can likewise question the green and clean credentials of other renewables. The wind may never stop blowing, but the wind industry depends on steel, concrete and rare-earth metals (for the turbine magnets), none of which are renewable. Wind generates 0.2% of the world's energy at present. Assuming that energy needs double in coming decades, we would have to build 100 times as many wind farms as we have today just to get to a paltry 10% from wind. We'd run out of non-renewable places to put them.

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Roughly half of our oil imports come from politically unstable Middle Eastern nations.

By increasing U.S. oil production (from off shore drilling, from natural gas fields, and from shale oil fields) we could cut our oil imports roughly in half.

By using U.S. resources, and creating U.S. jobs, we could end our dependence on oil imported from unstable, risky regimes. What's not to like? Why is this such a hard thing to approve?

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Bill Gates is helping to fund a start-up called TerraPower LLC. The company hopes to build a nuclear reactor that can run for 50-100 years on the stuff that we currently consider to be nuclear waste.

Instead of storing it in Yucca Mountain, why don't we use it to generate clean electricity instead?

One big road block: getting a national government somewhere to allow someone to actually build and operate such a reactor.

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This weekend, while in Minneapolis, I started reading Jerry Pournelle's 1979 book, A Step Farther Out. I was reading it on my Kindle, natch.

In the first chapter, Jerry advocates a form of energy production known as the Ocean Thermal System (OTS).

It is an Earth-based solar power system, and the concept is simple enough. All over the Earth the sun shines onto the seas, warming them. In many places--particularly in the Tropics--the warm water lies above very cold depths. The temperature difference is in the order of 50° F, which corresponds to the rather respectable water-pressure of 90 feet. Most hydro-electric systems do not have a 90 foot pressure head.

The system works simply enough. A working fluid-such as ammonia--which boils at a low temperature is heated and boiled by the warm water on the surface. The vapor goes through a turbine; on the low side the working fluid is cooled by water drawn up from the bottom. The system is a conventional one; there are engineering problems with corrosion and the like, but no breakthroughs are needed, only some developmental work

The pollutants associated with the Ocean Thermal System (OTS) are interesting: the most significant is fish. The deep oceans are deserts, because all the nutrients fall to the bottom where there is no sunlight; while at the top there's plenty of sun but no phosphorus and other vital elements. Thus most ocean life grows in shallow water or in areas of upwelling, where the cold nutrient-rich bottom water comes to the top.

More than half the fish caught in the world are caught in regions of natural upwelling, such as off the coasts of Ecuador and Peru.

The OTS system produces artificial upwelling; the result will be increased plankton blooms, more plant growth, and correspondingly large increases in fish available for man's dinner table. The other major pollutant is fresh water, which is unlikely to harm anything and may be useful.

Well, that sounded impressive enough. This book was written in 1979. Why haven't had I heard more about OTS? Then, this morning, I did hear more about OTS. The New York Times published an article about it. The Times' article offers a brief overview of the technology while also talking about how expensive it could be to use.

Skeptics say that the technology is highly inefficient because it requires large amounts of energy to pump the cold water through the system.

Patricia Tummons, who edits the newsletter Environment Hawaii, said a major question about the technology was "just how economical it can be."

Robert Varley, who is helping to lead Lockheed's efforts, estimated that just 3.5 percent of the potential energy from the warm water pumped might actually be used. "In reality that doesn't matter -- the fuel is free," he said.

This is something I'll be keeping an eye on.

I've heard before that shale oil was energy intensive. In fact, that's the most frequent criticism I've heard. But I had no idea it was this energy intensive:

Environmental groups such as the Natural Resources Defense Council have called oil shale one of the planet's dirtiest fuels. It can be converted into liquid petroleum, but only after being heated to 900 degrees Fahrenheit for five years or more, so production requires massive quantities of energy, the council says.

Wow. No wonder it's only worth pumping if oil is over $70 a barrel.

Above: New GOP logo.

Although the Bush Administration has quite typically failed to capitalize on it politically, all Americans are this week definitely enjoying the benefits of Republican-birthed legislation: additional sunlight.

According to FOX News,

"If you turned your clocks back one hour Sunday morning thinking it was the annual move back to Standard Time, all you succeeded in doing was moving into a new time zone... President Bush in 2005 signed the Energy Conservation Act, which pushed back the time change in an effort to squeeze just a little more daylight — and a bit of energy savings [And let's not forget sleep - Adam] — into the daily lives of Americans."

Yes, it's certainly a public relations coup ("GOP '08: A Little Ray of Sunshine In Your Life"). However, those of us of a more theological bent perhaps cannot help but wonder: could this be one more ominous example of Big Government extending its influence into spheres best left inviolate? Is an inept bureaucracy really capable of deciding better than ourselves and God just how much daylight we should all get?

I do not think I am jumping at shadows (of which I notice there are now fewer). There are already worrisome reports by refugees from that most confused of government powers, North Korea - apparently on Sunday morning it became March. The American state of Georgia, still experiencing a severe drought, must now contend with an extra 1% of scorching rays from Father Sol. And questions are already being raised as to just how deep in bed our elected officials are with Big SPF.

Add to all of this a horrifying experience I had once with a tanning salon (I literally spent three days naked as a result) and - well, I guess I'm just afraid of your average, low-income American getting burned by The Man again. Let's be careful out there.

From the New York Times, this is kind of innovative idea that gets me excited:

Mr. Agassi is not planning to make cars, but instead wants to deploy an infrastructure of battery-charging stations in the United States, Europe and the developing world.

The new system will sell electric fuel on a subscription basis and will subsidize vehicle costs through leases and credits.

"We're basically saying this is just like the cellular phone model," he said. "If you think of Tesla as the iPhone, we're AT&T.;"

He said his approach was a radical departure from other electric-car ventures that relied on advances in battery technology, which have come slowly.

Instead, he plans to extend the existing electric-power grids with a wide network of intelligent recharging stations in urban areas and supplementing it with a smaller number of automated battery-replacement stations.

The economics will be more compelling in Europe, where gasoline is roughly twice as expensive as in the United States, he said. Assuming a life span of 1,500 battery recharges, he said that the energy cost of all-electric cars would be about 7 cents a mile. That would be less than a third of the cost of driving a gasoline-powered car today.

"It's much easier to transport electrons than octane molecules," he said. "We've already got a grid that goes around the entire world; all we have to do is extend it."

Mr. Agassi envisions tens of thousands of recharging spots that will adjust for both cost and use patterns. For example, a group of parking-lot chargers at a workplace might recharge a visitor's car before a regular employee's car parked for the entire day.

The system will also supplement recharging stations that require about one minute of recharge time for every minute of driving, with a smaller number of car-wash-style stations for swapping batteries. This would make it possible for a driver to go to a station rather than wait to recharge a battery, he said.

I have no idea if this will work out or not. Still, I pay around $250 month for gasoline, so I wouldn't be opposed to paying a monthly subscription fee if it came out the same, or less, per month. It's an intriguing idea and I do so like seeing ideas that are "outside the box".

Staying warm will be more expensive this winter -- 10-22% more expensive.

That's the sobering message from an Energy Department report Tuesday that estimates heating oil costs are likely to jump 22 percent and natural gas bills, on average, will rise 10 percent between October and March.

Why? Well, a continuing lack of sufficient U.S. refinery capacity, apparently.

Surging crude oil prices are the primary, but not the only, culprit for the jump in fuel oil costs. This spring and summer, American refineries experienced an unusual number of unexpected maintenance outages. The net result was that fewer refineries were producing gasoline, heating oil and other petroleum products.

The outages sent gasoline prices to a record $3.227 a gallon in late May as refiners scrambled to produce enough gasoline to meet peak summer driving demand.

"Because they used every ounce of the refinery to produce gasoline, it came at the expense of distillate fuels" like home heating oil, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

All of the demand for natural gas is boosting supplies, however. That could push prices down in a year or two.

Despite the government forecast, natural gas futures prices have actually been mostly falling in recent weeks. Inventories remained high as new sources of natural gas were tapped this year and a cooler summer depressed demand.

"We could have all-time record storage by the beginning of February," said Tim Evans, an analyst at Citigroup Inc. in New York.

On the other hand, supplies coming on line this year, including Anadarko Petroleum Corp.'s Independence Hub platform in the Gulf of Mexico and a portion of the huge Rockies Express natural gas pipeline project, are expected to boost natural gas supplies by 2 billion to 2.5 billion cubic feet.

"That's a lot of supply coming on," Denhardt said.

Finally, there's this poignant note:

Penny Taylor, who spent about $350 a month last winter to heat her Sarasota, Fla., home with electric heat, blanched when she heard about Tuesday's price forecast from the Energy Department.

"I think we're going to have to get a lot of blankets, because there's no way we'll be able to afford to run the heat," she said.

Everyone living north of the Mason-Dixon line weeps for you, Ms. Taylor. (I think she meant to say "there's no way we'll be able to afford to run the heat as high as we'd like to". We must all practice frugality, even with heating and cooling.)

Space Solar Power is a fascinating idea. It involves putting satellites into space, covered with solar panels. These satellites would catch the energy from the sun -- undiluted by atmosphere or night -- and beam it down to earth. The idea has been around since the 1960's, but has yet to actually become feasible.

Still, recent studies have indicated it might be possible to do this economically in the near future.

A special study group of the National Research Council (NRC) has taken a new look at NASA's current SSP efforts. Their findings are in the NRC report: Laying the Foundation for Space Solar Power - An Assessment of NASA's Space Solar Power Investment Strategy.

While not advocating or discouraging SSP, the advisory team said "it recognizes that significant changes have occurred since 1979 that might make it worthwhile for the United States to invest in either SSP or its component technologies." The study urges a sharper look at perceived and/or actual environmental and health risks that SSP might involve.

The NRC study group singled out several technological advances relevant to SSP:

• Improvements have been seen in efficiency of solar cells and production of lightweight, solar-cell laden panels;
• Wireless power transmission tests on Earth is progressing, specifically in Japan and Canada;
• Robotics, viewed as essential to SSP on-orbit assembly, has shown substantial improvements in manipulators, machine vision systems, hand-eye coordination, task planning, and reasoning; and
• Advanced composites are in wider use, and digital control systems are now state of the art - both developments useful in building an SSP.

Now it appears that the Pentagon is interested in doing some trials as early as 2015.

"A first demonstrator project in, say, the year 2015 might power a military base, be capable of sending power to disaster areas, or transmit energy to troops abroad. The cost of petroleum fuel, not only money but lives lost in wars fought over oil, is a big driver of the Pentagon’s interest in space solar power. [Col. M.V. Smith] has gone from skeptic to enthusiast since the study began. ..."

Sounds good to me.

Silicon nanoparticles enhance performance of solar cells

Placing a film of silicon nanoparticles onto a silicon solar cell can boost power, reduce heat and prolong the cell's life, researchers now report.

To make their improved solar cells, the researchers began by first converting bulk silicon into discrete, nano-sized particles using a patented process they developed. Depending on their size, the nanoparticles will fluoresce in distinct colors.

Nanoparticles of the desired size were then dispersed in isopropyl alcohol and dispensed onto the face of the solar cell. As the alcohol evaporated, a film of closely packed nanoparticles was left firmly fastened to the solar cell.

Solar cells coated with a film of 1 nanometer, blue luminescent particles showed a power enhancement of about 60 percent in the ultraviolet range of the spectrum, but less than 3 percent in the visible range, the researchers report.

The process of coating solar cells with silicon nanoparticles could be easily incorporated into the manufacturing process with little additional cost, Nayfeh said.

GasBuddy has a nifty map of gasoline prices by county. I imagine that ease of transportation explains part of the price differences. However, I think that most of the difference is explained by differences in state taxes and EPA regulations.

Keep this map in mind the next time you're tempted to blame oil companies for expensive gas.