Archive for the ‘Energy’ Category

New reports on the hazards of fracking

February 25, 2015

fracking-infographic-1024x767Source: Daily Kos.

I’ve long been aware that hydraulic fracturing for natural gas is associated with earthquakes, but I had thought the main reason was the settling of the geological strata after the fracking process is complete and the fracking fluid is pumped out.

But according to a report by the U.S. Geological Survey, the main cause of fracking-induced earthquakes is the injection of the huge amounts of contaminated waste water into deep geological strata.

Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity that has caused considerable public concern as well as damage to structures. This rise in seismic activity, especially in the central United States, is not the result of natural processes.

Instead, the increased seismicity is due to fluid injection associated with new technologies that enable the extraction of oil and gas from previously unproductive reservoirs.  These modern extraction techniques result in large quantities of wastewater produced along with the oil and gas. The disposal of this wastewater by deep injection occasionally results in earthquakes that are large enough to be felt, and sometimes damaging. Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S.

via USGS Release.

Meanwhile in California the Center for Biological Diversity, a non-profit conservation organization, has found deep underground storage of oil fracking waste water has allowed toxic and cancer-causing chemicals to contaminate aquifers, underground reservoirs that can be a source of irrigation and drinking water.

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Peak coal? Or just a temporary coal glut?

February 23, 2015

My e-mail pen pal Bill Harvey sent me a link to an article reporting that Peabody Energy, the nation’s largest coal company, is losing money, and some smaller U.S. coal companies have already gone bankrupt.

Does this mean we’ve reached peak coal?  Have American companies already mined all the coal that can be extracted profitably?  Profitably, even taking into consideration all the costs in human health, environmental destruction and climate change that they offload onto the public?  Maybe.

There’s another trend at work, and that is a glut in the world supply of coal, which is driving the price down.  This is part of a normal economic cycle.  A glut causes a drop in prices, which causes business failures, which causes scarcity, which causes a rise in prices, which causes another boom, which causes another glut, and so on.

But as we use up all the easy-to-get coal, easy-to-get oil and easy-to-get natural gas, and the remaining gas becomes more expensive to extract, the cycles of boom and bust will be shallower and shorter.

The question is how much buyers of coal should count on a good supply at a reasonable price in the long run.

Electric utilities typically make take-or-pay contracts, which obligate them to buy certain amounts of energy from certain suppliers at a certain price over a long period of time.

I don’t think there’s anything improper about take-or-pay contracts in and of themselves.  A supplier isn’t going to make a long-term investment unless there’s assurance of a market.  But the buyer needs to do a lot of hard thinking about the future.

I think that, as a matter of national policy, coal companies and other energy companies should be made to absorb the costs of the harm they do to human health and the human environment.  If that increases the cost of energy—well, the cost was always being paid, just not by them.

As a matter of national policy, it is best to leave as much coal and other fossil fuels in the ground as possible.  Ideally we the people will find good substitutes.  But if there comes a time when they are desperately needed, these resources will be there for us.

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The fracking boom is ending with a bust

February 16, 2015

screen shot 2015-02-14 at 10.06.10 am

screen shot 2015-02-14 at 10.07.42 amSource: Business Insider.

Business booms are followed by busts—the interaction of overconfidence, oversupply and diminishing returns.

That’s not just a law of the free-market system, it’s a law of human nature.

As the chart above indicates, hydraulic fracturing for natural gas is an industry entering the bust part of its cycle.

The glut of natural gas probably will continue for some time.   Gas companies would continue to pump gas even if they’re losing money.

They’ve already paid for the drilling equipment, and they’d lose less money by continuing to pump than by walking away from their sunk costs.

It’s good that New York state didn’t jump into fracking just now.   We’d have had all the problems associated with fracking and none of the benefits the come with getting in on the ground floor.

The wise thing to do just from a business point of view, aside from all environmental and climate considerations, is to keep natural gas in the ground as long as we can.  If there comes a time when we desperately need it, it will be there.

LINKS

Fracking has collapsed by Wolf Richter of Wolf Street for Business Insider.

Keystone XL, Cold War 2.0 and the GOP Vision for 2016 by Michael T. Klare for TomDispatch.  Fracking is a factor in geopolitics.

Update 2/28/15

As Bill Harvey pointed out in his comment, a decline in the number of rigs doesn’t mean a decline in production—that is, not right away.

markets cotd rig count2

Oil rigs and oil production in the United States

Comfort, risk and coal-fired furnances

January 26, 2015

When I was a schoolboy, one of my chores after I walked home from school was to stir up the coal in our furnace, so that the fire, which had been banked during the day, would flare up start to warm our house again.

Both my mother and father worked outside the home for pay, so there was no sense burning coal unnecessarily when nobody was home.

furnaceThe coal was in a huge pile in our basement, delivered by the coal company through a chute.  We had to remember to shovel new coal in the furnace at regular intervals, especially just before we went to bed at night, lest the fire go out.

Restarting a furnace fire was a major operation.  What we should have done was to start a fire with newspaper and kindling wood, then add more food and then, when the fire was going strong, add coal

What my dad actually did was to splash kerosene onto the coal, toss a lighted wooden match into the furnace and then jump back.  I do not recommend this.

The coal burned down to ashes which collected in the bottom of the furnace in big metal tubs.  Another one of my chores, when I was big enough, was to help my father carry the tubs out to the curb to be collected.

I imagine my father thought having a furnace at all and having coal delivered to the house was a great advance.  He grew up in a farm with only a stove in the kitchen for heat.

I myself have a gas furnace which I control with a thermostat.  That’s a lot easier than shoveling coal.  But on Saturday night, my furnace failed—with temperatures outside below 10 degrees Fahrenheit.

I phoned Betlem Heating, and a service technician came by a few hours later.  He quickly diagnosed the fixed the problem—a failed thermocouple—and was on his way.

He told me he had many calls that night, each one to a place 20 or 30 miles from the one before.  But he said he didn’t mind.  That was his job.

I have a much easier life than my father and grandfather.  But compared to them, I am much more dependent on complex systems that I don’t understand—not just the furnace, but the whole interdependent web of people and institutions that bring the gas to my house.

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Russia turning down the gas on Europe

January 15, 2015

gas_to_eu_final_3

Russia cut natural gas shipments to Europe by 60 percent, and announced plans to eventually cut off shipments through Ukraine altogether.

The Urkainian route will be replaced with a new pipeline through Turkey, which will take a couple of years to build.  The European Union will need to build its own infrastructure to take the gas from the Greek border to the rest of Europe.

If the Europeans don’t get their new pipelines built in time, Russia will send its gas elsewhere, the head of Gazprom said.  Russia is working on gas deals not only with China, but with India.

Vladimir Putin is not a helpless victim of economic sanctions and falling oil prices.  He is willing and able to use Russia’s economic power to damage Ukraine and the European nations.

Nobody benefits from this cycle of tit-for-tat retaliation.  It’s an economic form of mutually assured destruction.

Russia Fires Ukraine as Natural Gas Transit for Europe by Michael Collins for Op-Ed News [added 1/16/2015]

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Can Russia diversify away from oil and gas?

January 7, 2015

SR-russia-economic-freedom-2014-chart-2-825

Russia is a land rich in natural resources and human talent.  It has been an industrial nation for more than a century.  Why hasn’t it developed a world-class manufacturing industry in anything but armaments?  If it had, Russia would not be jeopardized by falling oil prices.

russianexportschartOne explanation is that Russia has been held back by world trade treaties, which restrict Moscow’s right to subsidize its infant industries—even though that has been the method by which every new industrial nation, except Great Britain, which was the first, has made up the head start of the older industrial nations.

During the Napoleonic Wars, the young United States was cut off from trade with Europe, which New England manufacturers used as an opportunity to develop our domestic manufacturing industry.

RUSSIA_CORRUPTIONAnother is that the Russian economy is controlled by a corrupt financial oligarchy, which is interested only in extracting profit for themselves and not in building for the future.   Probably the truth lies somewhere in between.

I don’t think that having a strong oil industry in itself is a curse that prevents development of  manufacturing.

The United States was a leading oil producer and exporter in the first half of the 20th century, and Americans leveraged that advantage to develop an mass-produced auto industry, a chemical industry and other industries based on cheap and plentiful oil.

To the extent that Russia is shackled by the international economic system, the current crisis represents an opportunity to break free of that system.

To the extent that Russia’s problem is its own dysfunctional political and economic system, it means the country must either reform or become a satellite of China or the West.   Or, in the worst case, Russia could become a Ukraine writ large, a prize for other, more powerful states to fight over.

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Plummeting Oil Prices Could Bring Radical Change to Russia.  What Comes Next? by David M. Kotz for The Nation.  [Hat tip to Bill Harvey]

The passing scene: January 1, 2015

January 1, 2015

The Tragedy of the American Military by James Fallows for The Atlantic.

Gun Trouble by Robert H. Scales for The Atlantic.

HighAirfare35e18The U.S. armed forces have greater prestige than at any time in American history, and the nation spends almost as much on its armed forces as the whole rest of the world put together.  Yet the USA doesn’t seem to be able to win wars, or even provide troops with a gun that doesn’t jam.

James Fallows wrote in The Atlantic that the United States has become a “chickenhawk nation.”  The majority of Americans do not wish to serve in the military and have no real desire to understand the military, so we take the easy way out which is to say, “thank you for your service,” and go about our business.

Military procurement has become a business subsidy and job creation program.  If the USA reduced its military force and weapons spending to what is needed to defend the nation, and nothing else was done, a recession would result.

Infrastructure advances in the rest-of-the-world will blow your mind by james321 for Daily Kos.

We Americans used to pride ourselves on our mega-engineering projects, but now the rest of the world is leaving us behind.

China has opened direct rail service from the China Sea to Madrid.  Switzerland is about to open its 35-mile Gotthard Base Tunnel under the Alps.  Italy is soon to start high-speed rail service between Milan and Rome, capable of speeds up to 250 miles per hour.

We Americans don’t even perform maintenance on what we’ve got, and that’s a sign of a society with a fatal loss of concern for its future, just as our military strategy is a sign of a society with a fatal loss of a sense of reality.

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Don’t back Russia into a desperate corner

December 22, 2014

Bank+exposure+to+Russia

It is a grave mistake to put President Vladimir Putin or the leader of any nation with nuclear weapons into a situation in which they think they have nothing to lose.

I wrote a post Wednesday on the danger of nuclear war with Russia.  Pepe Escobar pointed out that Russia has other means of Mutually Assured Destruction.

eruopeanbankexposuretorussia pmOne would be to default on Russia’s debts, or even suspend payment on the debts, pending the end of the current emergency.  This would threaten major banks in Western Europe that have extended credit to Russia.

Another would be to cut off gas exports to Ukraine and the countries of the European Union.

Either of these things would hurt Russia as much as it hurts Russia’s enemies.  Russia needs credit, and Russia needs foreign markets.

But if the country has been brought to the brink of collapse anyway, then its leaders have nothing left to lose by striking back.

gassuppliedbyrussia (more…)

The rise and fall and rise of oil prices

December 21, 2014
gs-oil

Click to enlarge.

Source: Business Insider.

This chart, made by Goldman Sachs and reprinted by Business Insider, which I found on a Naked Capitalism link, shows the rise and fall and rise and (very probably) the impending fall of the price of oil on world markets.

It’s partly an example of the law of supply and demand in action.  When the price of something goes up, people use less of it, look for ways to produce more of it, and invent substitutes for it, and eventually that brings the price back down again.

But I think it shows something else, and that is the end of easy-to-get oil.  Hydraulic fracturing, deep water ocean drilling and Arctic drilling will increase the supply of oil over time, but oil will never be available as easily or as cheaply as from the historic oil fields in Texas and the Persian Gulf.

I don’t think oil will ever again be as cheap as it was during the years from 1880 to 1970—at least not for long.   And that’s probably a good thing in the long run.   So long as oil and other fossil fuels are cheap, we’ll keep on making new greenhouse gasses and burn up the planet.

A happy surprise: Gov. Cuomo bans fracking

December 18, 2014

Gov. Andrew Cuomo’s decsion to ban hydraulic fracturing for oil and gas in New York state was made for the right reason – the Precautionary Principle.

fracking-diagramThat is, he banned fracking not because it was proven to be harmful, but that there were good reasons to think it might not be safe.

I misjudged Cuomo.  I thought he intended to approve fracking, but was postponing this unpopular decision until after the election.

With falling oil and gas prices, the economic benefits of fracking are even less than before.  The oil and gas locked underground in the Marcellus shale will not go away.  It will still be there if someday the USA is so desperate for energy that fracking is necessary.

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“This Will Have a Ripple Effect Across the Country”: State of New York Bans Fracking by Cole Stangler for In These Times.  (Hat tip to Bill Harvey)


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