Peak Fossil Energy

No peak demand Eamon Keane "So much for peak demand - try 134mb/d by 2030."  That was the startling conclusion dispatched from the ivory tower recently by Joyce Dargay, a British transport econometrics professor, and Dermot Gately, an American economics professor. I'll present their conclusions and then discuss the implications. Their report is available here (pdf). The main conclusion is that the low hanging oil fruit has already been picked after the 1970's oil shocks. From 1978-85 OECD fuel oil consumption dropped by 7mb/d and then from 2003-2008 by another 2mb/d. The...

Tom Konrad CFA There are two types of solution to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies.  The most obvious is to find a substitute to replace oil.  These substitute have barriers to their use as a replacment petroleum based fuel.  Understanding those barriers also leads us to the investment opportunities that arise from these substitutes.  As I wrote the first five parts of this series, looking into potential substitutes for gasoline and diesel, it was clear that many potential substitutes would need...

John Petersen Generation specific cultural references can be treacherous ground for bloggers because the flashback effect is usually limited to readers with long and vivid memories. In this case, however, the lessons of history are so relevant that I'll accept the risk and offer some context for younger readers. In my youth a war wrapped in the liberal ideology of the Kennedy and Johnson administrations and fueled by an underlying concern over who would control oil and gas resources in the Gulf of Tonkin was fought in the jungles of Vietnam, Laos and Cambodia. By current standards,...

Tom Konrad CFA Anew report written by Nathaniel Bullard at Bloomberg New Energy Finance highlights the difficulties large institutional investors would have divesting from fossil fuels. What it does not specifically discuss is that these difficulties could lead to large financial losses for investors who see the difficulty of divesting as a reason to delay. Just as we can't easily fill up our cars with solar power instead of gasoline, the report points out that there is no asset class that can directly substitute for oil and gas in large institutional portfolios. A person...

by Garvin Jabusch Sempra Energy’s leaking gas field in Porter Ranch, CA, near Los Angeles, has been making national headlines recently, as it now enters its third month of being the largest methane leak in U.S. history. How big is that? The LA Times says that, “by early January, state air quality regulators estimate, the leak had released more than 77 million kilograms of methane, the environmental equivalent of putting 1.9 million metric tons of carbon dioxide in the air.” 1.9 million metric tons of carbon dioxide and counting. In addition, methane isn’t only a powerful greenhouse gas, it can...

Peak What? Eamon Keane The Energy Information Administration (EIA) released its Annual Energy Outlook 2010 (AEO 2010) last week, with projections out to 2035. It makes for interesting reading. Most notable was its take on peak oil, natural gas vehicles and on converting natural gas to liquids (GTL). An otherwise reasonable report was marred by the presumption of oil plenty. Figure 1 shows a graph presented (.pdf) by Glen Sweetnam, director of the EIA's International, Economic and Greenhouse Gas division, in April 2009. Although it mentions the source as being the...

The recent slump in the price of energy commodities that has accompanied slumps in the rest of the market has reignited an old debate: to what extent is the performance of alt energy companies (and their stock prices) linked to fossil energy prices? People who argue that the two are closely connected implicitly believe that policy-makers and other important economic actors view alt energy mainly as a hedge against high energy prices, and therefore believe that a drop in fossil energy costs will result in a fall from grace for alt energy (there is evidence that at least...

By Christopher Mims According to some of the most complete calculations available, when we use natural gas to generate electricity in an average power plant, it results in 40 percent less warming than if we generate the same electricity with coal. If we fully utilized the natural gas-fired power plants that already exist in this country, we could significantly reduce the amount of coal we’re burning practically overnight. What’s more, primarily because of access to new natural gas reserves, proved reserves of natural gas recently shot up to 284 trillion cubic feet – more than we’ve...

David Gold With all the complexities of cleantech policy and technologies, there is only one simple thing needed for an explosion of competitive clean technologies – increased price of fossil fuels. The amount of R&D expenditures that will need to be invested in clean technology in order for it to hurdle the bar into competitiveness is much greater with low fossil fuel prices. And, the lower those prices, the less appetite the private sector has for making such investments. This leaves a much-increased burden on the back of government through grants and subsidies– a back that is...

Tom Konrad CFA Dr. Arthur Berman, of Labyrinth Consulting Services has taken a hard look at actual production data from  Barnett Shale in 2007.  What he found should worry anyone expecting this abundant, relatively clean, domestic energy resource to be cheap.  It should especially worry investors in shale gas companies, such as CHK, DVN, and XTO. In a panel entitled "Natural Gas Game Changers?" at the 2009 International Peak Oil Conference, Dr. Breman presented some results from his research into the actual production from the nearly 2000 horizontal gas wells drilled in the Barnett Shale in 2007.  The Oil...

The most recent issue of Fortune has an excellent interview with Jim Rogers, of Investment Biker and Adventure Capitalist fame, as well as an excerpt from is new book, A Bull in China.  Jim saw the start of the current commodities supercycle early (peak oil is just one driving force for this cycle), but it still has a long way to run, in my opinion, as well as Jim's.   Almost everything has some dependence on energy prices, because of either the embodied energy, or because if the embodied energy of substitutes.   As Jim says in the interview, ...

Tom Konrad CFA Bargain hunters looking for opportunities in muni bonds should be mindful of peak oil. Meredith Whitney predicts a wave of defaults in municipal (muni) bonds, followed by indiscriminate selling and potential buying opportunities for some.  She's been widely criticized for the prediction of defaults, but I'm a lot more interested in the prediction of the market's reaction.  With tax-free, AAA-rated munis currently yielding more than comparable taxable Treasury bonds, they seem at least a relative bargain already.  I would not call it outright panic, but I'd expect there are be some bargains...

Charles Morand Last Friday, the WSJ's Environmental Capital blog noted how, according to HSBC, growing government efforts to de-carbonize the electricity supply across the developed world would hurt makers of power generation technology with high exposure to coal. Yesterday, the EIA released its Electric Power Monthly report for April 2009. In it, the agency notes the following: The drop in coal-fired generation was the largest absolute fuel-specific decline from April 2008 to April 2009 as it fell by 20,551 thousand megawatthours, or 13.9 percent  The April decline was the third consecutive month of historically large drops...

Tom Konrad CFA Part Subject / Description Stocks mentioned I Biofuels Overview WM II Hydrogen Vehicles and Vehicle Electrification III Natural Gas Vehicles WPRT, CLNE, and one I missed: FSYS IV Synthetic fuels: Gas-to-Liquids, Coal-to-Liquids, and Biomass-to-Liquids SSL, SYNM, RTK V Biofuel from Algae GSPI.PK, OOIL.OB, PALG.OB, PSUD.PK VI Barriers to Alternative Fuels ...

shale gas Eamon Keane shale gas shale gas Shale gas is back in the news recently after Obama hearted the shale gale in his energy speech ("Recent innovations have given us the opportunity to tap large reserves, perhaps a century's worth of reserves...in the shale under our feet,"), and Daniel Yergin (full disclosure: he wrote The Prize) has a lengthy piece in the WSJ along with an interview in which he says a bunch of stuff. It turns out that the US and...