The next big thing -- corrections requested
July 29th 2010 17:09
In a recent entry, we discussed the idea of bridge fuels, energy sources that can be used until a fuel-less future when the United States, and the world, can produce adequate energy supplies from wind, sunlight, tidal and geothermal power. While it’s likely that we’ll rely on a mixture of energy sources, it’s also likely that one will predominate, if only because of the need to modify production, distribution and storage facilities, and the energy source that’s selected will be as profitable as oil is now. Inevitably, there is a great deal of jockeying for government subsidies by companies that produce the various energy sources, and each one has its advocates. The following discussion, in spite of efforts at objectivity, is admittedly biased, and comments, particularly those expressing alternative opinions and factual corrections would be helpful..
It’s important to recognize that while there is no immediate danger of running out of oil, the oil that is available is no longer easy to produce or refine. Major discoveries have been made off the coasts of Africa as well as in the Gulf of Mexico, but many of them are in ultra-deep waters requiring equipment similar to the Discover Enterprise rig that was involved in the recent disastrous oil spill. Much of this oil is “heavy”, oil that does not flow easily. Venezuela’s oil resources, which may be the largest in the world, are all in the form of heavy oil. This increases the problems of extraction and refining, and increases the costs of production. Also, some of the oil is in politically unstable regions, where the oil fields, once developed, may be nationalized, or damaged by terrorists. The argument in favor of continuing to rely on oil is simply that the infrastructure is already in place, and with reasonable conservation measures the current supplies may be sufficient for a long time – at least until there are new discoveries in alternative energy resources. Continued reliance on oil extends our dependence on foreign sources of energy.
Ethanol is being advocated as a bridge fuel, and has the immense advantage of being a renewable resource which can be produced in the United States. Ethanol is a very clean burning fuel which would reduce most harmful emissions associated with greenhouse gasses and water pollution. Its limitations, for the moment at least, are significant. Ethanol, in the United States, is being produced primarily from corn – from the edible portion of the plant – and so diminishes the food supply. Research is being conducted into production of ethanol from cellulose, from the corn husks and stalks, but commercial methods have not been developed. In Brazil, ethanol is produced from sugar cane, which, in the equatorial climate is inexpensive to produce, but there are no comparable crops in the United States. Most of the gasoline sold in the United States contains about 10% ethanol, but higher concentrations may be damaging to conventional automobile engines, although flex-fuel vehicles, which can run on up to 85% ethanol, are available. The challenge at this point is to produce commercial quantities of ethanol from plant waste, and this has yet to be achieved.
Coal liquidisation can convert coal to a motor fuel, and the United States has large reserves of coal. According to the web site Ultracleanfuels.com “ The "US Geological Survey estimates the total identified coal resources as being 1,600 billion tons. Another 1,600 billion tons of unidentified resources are postulated." Currently the US produces approximately 1.06 billion tons of coal annually. If the US were to produce, from coal alone, the amount of oil equivalent to what the US imports, the US would consume an additional .912 billion tons annually.” The limitations of coal are the lack of a safe, ecologically sound method of mining, and the problem of greenhouse gases. Coal, in any form, produces large amounts of carbon dioxide, and there are no technologic fixes available yet. Congress has funded research into carbon dioxide sequestration, burying the gas underground, but the technique remains unproven. The most effective method of coal production is surface mining, sometimes called strip mining, in which the ground above a mineral deposit is removed, as opposed to tunneling down to the mineral deposit, but this has been associated with severe ecologic damage. The United States has funded over $3 billion in research into carbon dioxide sequestration.
The United States has very large reserves of natural gas, which is relatively clean burning as compared with oil or coal. Although traditionally the price of natural gas has been comparable to that of oil based on the amount of energy each provided, in recent years natural gas has been priced lower than oil. Natural gas reserves are widely distributed throughout the United States, but are found in large quantities in traditionally oil producing regions, so that there would be minimal economic disruption during a transition period. The technology for extracting natural gas and producing vehicles that run on this fuel is in use – with one critical caveat. The natural gas reserves under discussion are in the form of shale gas, gas deposits trapped in rock. The gas is extracted by injection of water and solvents into the rock to break up the formations. While this production method is in current use, there is not enough experience to determine how safe it is. Recently there was a blow-out in a gas well in Pennsylvania, and New York City has requested that there be no gas production in the region that provides the city’s water supply.
While all three alternatives are competing for support as the fuel of the (near) future, natural gas seems to have an edge both in terms of stage of development and industrial support. Exxon Mobile has made a clear commitment to natural gas production through its purchase of XTO, the second largest gas producer in the United States. The purchase price has been estimated at $26-31 billion. ConocoPhillips is heavily invested in technology to liquify natural gas for transportation and storage. This degree of private commitment may imply less need for government support for research and development. However, after the ExxonMobile purchase, there was no subsequent effort by other oil companies to purchase natural gas resources, indicating that these companies are waiting for a political decision before committing to any single fuel source.
T. Boone Pickins, the oil billionaire turned alternative fuel advocate, has estimated that in June 2010, the United States spent $27.3 billion on oil imports. The trade deficit for May 2010, the most recent month currently available, was $42 billion, so that an increase in domestic energy production would reduce, but not eliminate the imbalance of trade. It is possible that with the economies of scale associated with greater coal or gas production, the United States could expand energy exports and eliminate the trade imbalance. The amount of money involved clearly indicates the reason for the advertising efforts and political wrangling going on. Oil currently accounts for 40% of the United States’ energy sources, so that the alternative fuel that ultimately dominates the market will be incredibly profitable both for the corporations providing it, and for the regions of the country where the fuel is produced. If we could reach a consensus and start a transition now, it would reduce dependency on foreign energy sources, improve the balance of trade, and create many new jobs.
While there is a great deal of concern about the United States' national debt, and concern about inflation, as of the time of this writing, United States Treasury 30-year bonds are yielding 4.09%, indicating that the world and investment communities have concern about devaluation of the dollar for decades to come. With both consumers and corporations essentially waiting to see what comes next, this might be a good time to make a decision on what will be a tremendously important issue for the economy, our future, and the future of the planet.
It’s important to recognize that while there is no immediate danger of running out of oil, the oil that is available is no longer easy to produce or refine. Major discoveries have been made off the coasts of Africa as well as in the Gulf of Mexico, but many of them are in ultra-deep waters requiring equipment similar to the Discover Enterprise rig that was involved in the recent disastrous oil spill. Much of this oil is “heavy”, oil that does not flow easily. Venezuela’s oil resources, which may be the largest in the world, are all in the form of heavy oil. This increases the problems of extraction and refining, and increases the costs of production. Also, some of the oil is in politically unstable regions, where the oil fields, once developed, may be nationalized, or damaged by terrorists. The argument in favor of continuing to rely on oil is simply that the infrastructure is already in place, and with reasonable conservation measures the current supplies may be sufficient for a long time – at least until there are new discoveries in alternative energy resources. Continued reliance on oil extends our dependence on foreign sources of energy.
Ethanol is being advocated as a bridge fuel, and has the immense advantage of being a renewable resource which can be produced in the United States. Ethanol is a very clean burning fuel which would reduce most harmful emissions associated with greenhouse gasses and water pollution. Its limitations, for the moment at least, are significant. Ethanol, in the United States, is being produced primarily from corn – from the edible portion of the plant – and so diminishes the food supply. Research is being conducted into production of ethanol from cellulose, from the corn husks and stalks, but commercial methods have not been developed. In Brazil, ethanol is produced from sugar cane, which, in the equatorial climate is inexpensive to produce, but there are no comparable crops in the United States. Most of the gasoline sold in the United States contains about 10% ethanol, but higher concentrations may be damaging to conventional automobile engines, although flex-fuel vehicles, which can run on up to 85% ethanol, are available. The challenge at this point is to produce commercial quantities of ethanol from plant waste, and this has yet to be achieved.
Coal liquidisation can convert coal to a motor fuel, and the United States has large reserves of coal. According to the web site Ultracleanfuels.com “ The "US Geological Survey estimates the total identified coal resources as being 1,600 billion tons. Another 1,600 billion tons of unidentified resources are postulated." Currently the US produces approximately 1.06 billion tons of coal annually. If the US were to produce, from coal alone, the amount of oil equivalent to what the US imports, the US would consume an additional .912 billion tons annually.” The limitations of coal are the lack of a safe, ecologically sound method of mining, and the problem of greenhouse gases. Coal, in any form, produces large amounts of carbon dioxide, and there are no technologic fixes available yet. Congress has funded research into carbon dioxide sequestration, burying the gas underground, but the technique remains unproven. The most effective method of coal production is surface mining, sometimes called strip mining, in which the ground above a mineral deposit is removed, as opposed to tunneling down to the mineral deposit, but this has been associated with severe ecologic damage. The United States has funded over $3 billion in research into carbon dioxide sequestration.
The United States has very large reserves of natural gas, which is relatively clean burning as compared with oil or coal. Although traditionally the price of natural gas has been comparable to that of oil based on the amount of energy each provided, in recent years natural gas has been priced lower than oil. Natural gas reserves are widely distributed throughout the United States, but are found in large quantities in traditionally oil producing regions, so that there would be minimal economic disruption during a transition period. The technology for extracting natural gas and producing vehicles that run on this fuel is in use – with one critical caveat. The natural gas reserves under discussion are in the form of shale gas, gas deposits trapped in rock. The gas is extracted by injection of water and solvents into the rock to break up the formations. While this production method is in current use, there is not enough experience to determine how safe it is. Recently there was a blow-out in a gas well in Pennsylvania, and New York City has requested that there be no gas production in the region that provides the city’s water supply.
While all three alternatives are competing for support as the fuel of the (near) future, natural gas seems to have an edge both in terms of stage of development and industrial support. Exxon Mobile has made a clear commitment to natural gas production through its purchase of XTO, the second largest gas producer in the United States. The purchase price has been estimated at $26-31 billion. ConocoPhillips is heavily invested in technology to liquify natural gas for transportation and storage. This degree of private commitment may imply less need for government support for research and development. However, after the ExxonMobile purchase, there was no subsequent effort by other oil companies to purchase natural gas resources, indicating that these companies are waiting for a political decision before committing to any single fuel source.
T. Boone Pickins, the oil billionaire turned alternative fuel advocate, has estimated that in June 2010, the United States spent $27.3 billion on oil imports. The trade deficit for May 2010, the most recent month currently available, was $42 billion, so that an increase in domestic energy production would reduce, but not eliminate the imbalance of trade. It is possible that with the economies of scale associated with greater coal or gas production, the United States could expand energy exports and eliminate the trade imbalance. The amount of money involved clearly indicates the reason for the advertising efforts and political wrangling going on. Oil currently accounts for 40% of the United States’ energy sources, so that the alternative fuel that ultimately dominates the market will be incredibly profitable both for the corporations providing it, and for the regions of the country where the fuel is produced. If we could reach a consensus and start a transition now, it would reduce dependency on foreign energy sources, improve the balance of trade, and create many new jobs.
While there is a great deal of concern about the United States' national debt, and concern about inflation, as of the time of this writing, United States Treasury 30-year bonds are yielding 4.09%, indicating that the world and investment communities have concern about devaluation of the dollar for decades to come. With both consumers and corporations essentially waiting to see what comes next, this might be a good time to make a decision on what will be a tremendously important issue for the economy, our future, and the future of the planet.
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