Re: Research Topics

["Kevin Chisholm" <kchisholm@ca.inter.net>]

Dear Andries
Subject: RE: Research Topics


> Dear Kevin,
...del...>
> I indeed believe that we will run out of it eventually for PRACTICAL
> purposes. I.e. the proportion that's still affordable.

"Affordable" is a very relative term..... I can "afford" gasoline at $C.75
per litre now, but my current perception is that I could not "afford" $C1.50
per litre that most Europeans are paying. However, over a period of time, I
would switch to energy efficient cars, and only drive where necessary. Then
I could "afford" the higher gasoline prices. As prices increased further,
then it would be more economical to not drive a petroleum powered vehicle.

> I can certainly follow the reasoning that increasing price levels will
drive
> down the rate of usage, but there is a lower practical limit to that usage
> as well. Especially like in moderate and colder area's where winter
heating
> is an issue.
> You can afford $300 per gallon for sewing machine oil, but not for home
> heating oil.

I presently heat with electricity, even though it is about twice as
expensive as furnace oil. I have done a study in the past where I found that
when the price of "convenience fuels", such as oil or electricity, is
greater than about 2.5 times the cost of a solid fuel, coal or wood, then
people will switch to the solid fuel. I am an exception to my own rule,
simply because I live in a very small home.

At the present, fuel oil is so cheap that it is hardly worth saving. As
prices increase, then it becomes financially attractive to spend money to
save energy. At the present, businesses will spend money on energy cost
reduction projects having a 3 to 4 year simple payback. There is enormous
"oil saving potential" in the projects now having a 4 to 8 year payback. A
doubling of oil prices will make them economic, by present investment
standards.
>
> In my view, if it wasn't for the greenhouse effect, I don't believe we
would
> have this discussion today, but many decades later.

That's a good point!!

 Since in principle, the
> buffer of coal and uranium can hold over the world a good while longer,
> after oil and gas have dwindled (by the way, enormous amounts of thorium
in
> the crust of the earth await us for fission as well, so does uranium in
the
> sea water, not to speak of shale and oil sands).

Exactly!! These alternative energy sources are presently not in wide use
because of the present low cost of petroleum, or societal wishes. As the
cost increases, then they become economic and then the pressure is taken off
oil consumption.
>
> But due to the greenhouse debate (which I personally don't expect to be a
> temporary hobby) coal is under pressure and it remains to be seen whether
> uranium will again become popular enough for macro expansion.

In addition to its fossil carbon content, it also has a significant sulphur
and ash disposal cost. This is just a wild guess on my part, but the guess
is that the price of natural gas in large quantities is very close to the
cost of coal energy plus the cost of sulphur and ash disposal.

Both fuels
> might have a tough time just to maintain their relative proportion in the
> energy mix, unless, perhaps, it gets real cold in winter and the public
> perception changes from luxury to survival...?
>
If the "general perception" changes to "the Greenhouse Effect is real and it
is serious", then there should be a significant conversion to uranium, and
to renewables..

> So, theoretically speaking, I agree with you that fossil fuels will never
> run out completely, there always will be some left. But at the same time,
> practically speaking, I do believe that a good residual amount will be
left
> in place, being too extraordinary expensive to exploit, both in money and
> energy.
>
But that's the major point!!!  It is so cheap now, we are consuming it
indiscriminately, at a very serious rate, but that when the price starts to
rise, then the consumption will fall off, and that there will always be an
availability of it for higher value purposes.

> So, at some point in time and at certain competing price levels, alternate
> energy sources will kick in.

Exactly!!! That time has come for some alternative energy sources, in some
places, but it has not come for all alternative energy sources in all
places.

> Fossil gradually getting more expensive, renewable gradually cheaper (by
> mass production etc, look at solar) and somewhere the twain shall meet....
> looks logical to me.

In general, I don't see renewables getting much cheaper than they are now.
The major increases in renewables consumption will come when the fossil
energy costs rise to the point where renewables are economic.
>
> Therefore, as in my other mailing, I propose to concentrate on break-even
> NET price levels for certain technologies, more than on debating local
> political subsidizing and precise timing of fossil depletion (the last two
> items everybody can easily figure into his own local equation).
> Those NET price levels (i.e. stripped from externalities) might offer a
good
> basis for comparative rating and supra-regional discussion on this List.
>
The NET pricing basis that you propose will certainly give results which
will be "safe". However, they will give very conservative results, and can
lead to missed opportunities through understatement of true potential..

> You write:
> >PS: Have you read the Club of Rome stuff from the early '70's, to see how
> far wrong they went with their predictions?
>
> Yes, I read and followed it at the time, including the computer modeling
and
> arithmetic.
> Their basic idea, of course, is still valid: that resources ARE limited,
> that re-use IS to be promoted and that the earth has a FINAL capacity as a
> garbage dump.
> "Limits to Growth", remember?
> Their computer model has to be valued for what it was: a model with
> assumptions.
> But so is every model, right up till today.
> What they did was instilling the idea that the earth is limited, both in
> extraction and absorption, including a final (limited) amount of clean air
> and water.
> And right they were.

Well, they were right as far as they went, but they did not go far enough to
give correct answers. They predicted we would be out of copper, but we still
have loads of it readily available. They were wrong, even though they did
indeed have some neat concepts.

> Personally, I appreciate them for the insight offered and starting the
> discussion at the time. And will not hold them to the exact numerical
> results. Those were -as I recall- rather linear projections of usage and
> double digit economic expansion, which in the western world fortunately
> levelled off somewhat over time. Fortunately, I say, since otherwise,
Venice
> might have been already completely submerged by now........(just joking)
and
> we in deeper......today.

Their problem was that they did indeed have some neat concepts, and if they
had stuck with them as concepts, nobody could have faulted them for their
errors. This was sloppy thinking on their part. Similarly it is sloppy
thinking to state that "we will run out of oil" We will NEVER run out of
oil.

What we will indeed run out of is CHEAP oil. But nobody seems to be making
the connection between price and consumption. We have already run out of $2
oil, but we presently have lots of $20 oil. AS time, and consumption go on,
then we will indeed get to the point where the $20 oil is all gone, but
there will still be $30 oil
>
> Kevin, by the way, with regard to another message of yours, did you ask
Red
> Adair about his views on the "ease of handling of petroleum fuels"?

The Modern Day Red Adair's had no problem at all snuffing Saddam's oil well
fires. Even Red Adair himself could not put out an underground coal fire!!
Some have been burning uncontrollably for 20 to 30 years in Pennsylvania.
:-)

Getting back to oil pricing.... the OPEC cartel is one slick and well oiled
machine. They know that they can charge $20 to $25 per barrel for "the
foreseeable future", and that the World Economy will continue to function.
If they tried $25 to $30 on a sustained basis, their overall sales would
drop, and they would have less money per year in their pockets. As the oil
supplies of some of the Members start to dry up, then oil prices can be
safely increased somewhat. However, they still have to be careful with their
increases, in that there will definitely come a price where renewables will
become economic, and they will lose market share.

Kindest regards,

Kevin Chisholm
>



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