Posts Tagged ‘Daniel Yergin’

Daniel Yergin on energy security

March 24, 2012

The Quest: Energy, Security and the Remaking of the Modern World is Daniel Yergin’s magisterial survey of the world energy situation.  His guiding principle is that energy security requires diversity of supply, and so he surveys energy  in all its aspects, from the battle for control of the energy resources of the new nations of Central Asia to the possibility of using genetic engineering to create ethanol-making fungi.

This book is not as focused and gripping as Yergin’s previous book, The Prize: the Epic Quest for Oil, Money and Power.  Its great merit is Yergin’s encyclopedic knowledge and his ability to see connections among seemingly unrelated facts.  I learned interesting things I didn’t know, such as that China is now the world’s biggest market for automobiles, or that Admiral Rickover was not only the father of the U.S. nuclear submarine, but of the civilian nuclear power industry as well.  This is a long book, but worth the time if you have an interest in the subject.

Yergin is an insider, not a hostile critic of the energy establishment.  I take his views to represent the consensus of well-informed people within the energy industry.  I mean this as an observation, not a criticism, but I do not take his opinions as necessarily the last word.  For example, I can’t agree that the invasion of Iraq was justified though mishandled, and that the U.S. has “no choice” but to attack Iran if its government acquires nuclear weapons.

The book has six main sections
▪    An update on the world oil industry since publication of The Prize in 1991.  The most important new developments, according to Yergin, are the emergence of China as possibly the world’s largest market for energy and the re-emergence of Russia as a major energy exporter, especially of natural gas.
▪    A rebuttal of the assertion that production of oil, other liquid fuels and natural gas have passed their peak.  Yergin argued that “unconventional” sources, including hydraulic fracturing and deep water drilling, will assure supplies at current rates of use for decades.
▪    A survey of the world electrical industry, and the merits of nuclear power, coal and natural gas to power generating plants.  He concluded abundant, cheap natural gas is the fuel of the future.
▪    A report on global warming and its effect on world energy policy.  Yergin is curiously noncommittal on the validity of global warming science.   His concern is its impact on world energy policy.  The chief problem is the conflict of interest between the United States and the energy-efficient Europeans and Japanese, on the one hand, and with China and other emerging nations, which can’t avoid using more energy as they raise the material living standards of their populations, on the other.
▪    A report on photovoltaic cells, wind energy and other alternative energy sources for electrical generation.  Wind energy is the most promising, according to Yergin, but will require continuing government subsidies to be viable on a large scale, he said.
▪    A report on ethanol, electric vehicle technology and other alternative energy sources for automobiles.  Electric and hybrid vehicles are a viable but as-yet small industry, he wrote; the future of ethanol rests not with corn, but less expensive sources such as sugar cane and switch grass.

I put down the book with a great appreciation of the difficulty and complexity of the task of assuring a supply of gasoline for my car, natural gas for my furnace and electricity for the computer into which I am typing these words, and also an appreciation for the difficulty of bringing new technologies into practical use.

Daniel Yergin

What Yergin wants is what I want—the blessings of modern, prosperous industrial civilization without burning up nonrenewable resources to the point of scarcity, and without threatening human health and the human environment.  Unfortunately, he wrote, we don’t yet know how to do this.

For at least the next 20 or so years, he wrote, we will have to rely on technologies such as hydraulic fracturing and deep water oil drilling.  Subsidies are necessary because, in the past, promising developments of new technologies have been wiped out every time oil prices fell.  So far the greatest progress has been by eliminating waste, improving efficiency and conservation, which don’t get public attention because they are not glamorous.

Fortunately, Yergin said, there is growing availability of “what may be the most important resource of all—human creativity.”

Click on Daniel Yergin | Official Website for Yergin’s home page.

Click on Daniel Yergin Examines America’s ‘Quest’ for Energy for a link to a National Public Radio interview with Yergin on hydraulic fracturing.

Click on the following for reviews of The Quest.

How Will We Fuel the Future? by Fareed Zakaria in the New York Times

Fareed Zakaria, Daniel Yergin and the elite disdain for clean energy deployment by David Roberts on the Grist green energy web site.

Daniel Yergin explores the energy industry and how it’s reshaped the modern world by Michael Hiltzik in the Los Angeles Times

Daniel Yergin’s guide to the essentials of industry in the 21st century is another triumph by Ed Crooks in Britain’s Financial Times

An enjoyable assessment of our energy needs from an industry insider by Derek Browne in Britain’s The Observer

Daniel Yergin can’t quite fully support wind, but he tries hard by Chris Varrone on the Renewable Energy Focus web site.

Visions of an Age When Oil Isn’t King by Dwight Garner in the New York Times

Click on the following links for two of my earlier posts on The Quest

Hubbert’s Peak: are we running out of oil?

Natural gas: the fuel of the future?

Natural gas: the fuel of the future?

March 21, 2012

When I reported on the electric utility industry 25 or 30 years ago for the Rochester (NY) Democrat and Chronicle, natural gas was regarded as a premium fuel—an ideal fuel in that it burned cleanly, without emitting pollutants, but costing much more than any of the alternatives.

Nuclear power was the cheapest fuel, followed by coal and then oil.  But nuclear power plants were the most expensive to build, followed by coal-fired plants, then by oil-fired plants with natural gas plants the cheapest to build.  So the logic was that you would want nuclear power for your base-load generation—the power you would want turned on all the time, year in and year out.  And you would want natural gas for your peaking power, the power you would turn on to meet peak demands, such as for air conditioning on the hottest day of summer and electric heat on the coldest day of winter.

I’m now reading energy expert Daniel Yergin’s new book, The Quest: Energy, Security and the Remaking of the Modern World, and Yergin says all that is out of date.  Natural gas is now cheap and abundant and, in his view, the fuel of the future for the electric power industry and much else.

Yergin wrote:

Natural gas is the fuel of the future.  World consumption has tripled over the last thirty years, and demand could grow another 50 percent over the next two decades.  Its share of the total energy market is also growing.  World consumption on an energy-equivalent basis was only 45 percent that of oil; today it is about 70 percent.

The reasons are clear:  It is a relatively low-carbon resource.  It is also a flexible fuel that could play a larger role in electric power, both for its own features and as an effective—and indeed necessary—complement to greater reliance on renewable generation.  And technology is making it more and more available, whether in terms of advances in conventional drilling, the ability to move it over long-distance pipelines, the expansion of LNG onto much larger scale, or, most recently, the revolution in unconventional natural gas.

Back when I was reporting on the industry, natural gas was transmitted in pipelines.  That’s why the Reagan administration objected to Russia’s Gasprom exporting natural gas to Western Europe; officials feared the Soviet government would be in a position to cut off supplies.

Click to enlarge.

There was an emerging trade back then in liquified natural gas, or LNG, but this was in its infancy.  LNG involves cooling natural gas down to minus 260 degrees Fahrenheit, at which it turns into a liquid with 1/600th the volume of the gas.   Yergin described how availability of LNG has created a world market in natural gas, led by Qatar, which shares access with Iran to the world’s richest natural gas field, right in the middle of the Persian Gulf.  Other LNG exporters include Oman, Abu Dhabi, Algeria, Libya, Egypt,  Nigeria, Equatorial Guinea, Malaysia, Indonesia, Brunei, Australia, Russian Sakhalin, Alaska, Trinidad and Peru.

The necessity to keep LNG at such incredibly low temperatures makes it seem like an unforgiving and dangerous technology.  Yergin didn’t address safety issues, but the Wikipedia article on LNG indicated a good safety record to date.

What Yergin calls “unconventional” natural gas is extraction of natural gas tightly locked into strata of shale by means of a technology known as hydraulic fracturing—a technology which, some of us here in upstate New York believe, creates a danger of water pollution, minor and not-so-minor earthquakes and destruction of the rural countryside.  Yergin did not deal with these objections.  I imagine he would say that this is no worse than coal mining, oil drilling or any other type of fossil fuel extraction.

Coal is the most undesirable source of energy.  The mining of deep coal is one of the most dangerous occupations.  Coal miners have a high death rate in mining accidents and black lung disease.  Surface mining is destructive to the environment.  Coal is the worst source of pollution.  Coal emissions cause respiratory disease and acid rain.  And coal is a major contributor to global warming.

Yet coal is what the United States may have to fall back on if all else fails.  Yergin pointed out that the United States has a quarter of the world’s known reserves of coal, about the same as Saudi Arabia’s known reserves of oil.  The United States together with China, another coal-rich nation, are working on technologies to burn coal cleanly.  One such technology is carbon capture, which would remove carbon from the smoke as it goes up the stack, and make it useful, or easily disposable.

I always thought of nuclear energy as a dangerous technology that is possible to operate safely.  The Chernobyl disaster showed the cost to human life when a nuclear power plant was operated without proper precautions.  Yet the excellent safety record of the U.S. and French nuclear power industries convinced me that, with proper safeguards, these dangers could be averted.   And, as Yergin noted, the increasing efficiency of nuclear power plants has been the equivalent of a whole new source of energy in itself.  I agreed with President Obama’s plan to bring about a rebirth of nuclear energy in the United States.

The Fukushima catastrophe in Japan called my assumptions into question.  The catchphrase, “Nobody could have predicted…”, is a common excuse for negligence and failure.  But I do not think the Japanese were negligent.  As far as I know, they did everything a reasonable person could have done to ensure safety and reliability.  Nobody could have predicted an undersea earthquake would create a tsunami that would inundate the plant and destroy all its backup systems.

So this leaves natural gas.   I still think it would be best to put off hydraulic fracturing for natural gas as long as possible, in hope that more benign technologies will appear.  If not, the gas is not going to go away.  It will be more valuable in the future than it is now.  If there is no choice but to go ahead, New York and other states should enact a severance tax, similar to what Texas, Alaska and other states have for oil.  If we are going to put the countryside at risk, we should be getting something back in return.

Click on Daniel Yergin | Official Website for Yergin’s home page.

Click on Daniel Yergin Examines America’s ‘Quest’ for Energy for a link to a National Public Radio interview with Daniel Yergin on hydraulic fracturing for natural gas.  [Added 3/24/12]

Click on Hydrofracking and  carbon caps for an earlier post of mine.

Click on Liquified natural gas wiki for a Wikipedia article on LNG.

Click on Qatar Economy | Economy Watch for more about Qatar’s natural gas industry and the source of the map below, which shows world exports and imports of LNG and pipeline nature gas.

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Hubbert’s Peak: are we running out of oil?

March 20, 2012

In 1956, the brilliant maverick oil geologist M. King Hubbert predicted that oil production in the United States would peak sometime between 1965 and 1970, and world oil production would peak in about 50 years—that is, sometime around 2006.

M. King Hubbert's 1956 prediction of world oil

He extrapolated the rate of growth in oil production and the rate of discovery of new oil reserves, and based his prediction on when new discoveries failed to keep up with growth.   His chart of the rise and fall of oil production is called Hubbert’s Peak.  He had another chart, showing how nuclear energy could be a source of energy for many centuries.  You could call that Hubbert’s Plateau.

Hubbert’s prediction was accurate in regard to the United States.  Oil production in the Lower 48 states did peak around 1970 or so.  Many smart people believe that oil production in the Middle East has peaked or is about to peak.  But, as Daniel Yergin pointed out in his recent book, The Quest: Energy, Security and the Remaking of the Modern World, worldwide production of liquid fuels continues to increase.

Actual world oil production

What Hubbert failed to take into account, Yergin wrote, were two things—(1) price and (2) technology.  The world gets its oil from sources that were unavailable in 1956, and uses liquid fuels other than oil.   Energy companies drill for oil deep in the ocean.  “Tight oil” and “tight gas” are extracted through hydraulic fracturing of shale deep within the earth.  Oil can be extracted from Canada’s tar sands.  More than four-fifths of liquid fuels—and, according to Yergin, you have to speak of liquid fuels rather than just crude oil—are extracted by advanced techniques that were unknown in Hubbert’s day.  The increase in world oil production probably owes more to chemical engineers than it goes to oil geologists.

In a way, Hubbert was right.  Production of the easy-to-get oil has peaked.  What Yergin calls the “unconventional” sources are available if you are willing to pay a high enough price—a price not only in dollars, but in the risk to the human environment, and in the amount of energy it takes to extract the new energy.

Hubbert's Plateau: nuclear energy as the solution

Yergin says there are enough reserves of “unconventional” energy to last for centuries at (here’s the problem) current rates of use.  The problem is not so much that someday the world have have used up more than half its supply of fossil fuels, as that if the rate of consumption of fossil fuels continues to increase year by year, it will someday catch up with production.  Yergin is aware of that, and is a strong advocate of energy conservation and development of renewable resources.

I don’t claim to have a good answer as to what should be done.  I think that it is amazing that deep water oil drilling or hydraulic fracturing for natural gas are possible at all, without expecting they can be carried out with 100 percent reliability and zero damage.  My inclination is to postpone use of potentially harmful processes as long as possible, in the hope that better technology will reduce risk and in the expectation that future generations will need these resources more than my generation does.

At the same time, I drive a car powered by gasoline and I heat my house with natural gas.  I wouldn’t like to try to get along without the first, and I don’t know how I would get along without the latter.  This is more important to me than the hazards and costs of energy development.

Click on What’s Wrong With Peak Oil for an article by Daniel Yergin in the Wall Street Journal.

Click on Is Yergin Correct About Oil Supply? (an opinion the Wall Street Journal did not run) for a rebuttal to Yergin by Gail Tverberg on her Our Finite World web log.

Click on The Oil Drum for a web log devoted to peak oil and energy issues.

Below are some maps (not taken from Daniel Yergin’s book) indicating where future oil and natural gas may come from.

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The epic history of oil

March 19, 2012

I finished reading Daniel Yergin’s The Prize: the Epic Quest for Oil, Money and Power, tells the story of the world oil industry from its beginning with the drilling of the first oil well in Titusville, Pa., in 1859 to Saddam Hussein’s failed invasion of Kuwait in 1991, with a brief epilogue bringing it up to date.  I’m now reading his current book, The Quest: Energy, Security and the Remaking of the Modern World.

It is a big, detailed book which I would not recommend except to somebody such as myself with a lot of time on their hands.  I read it, even though it was published 20 years ago, because I believe the best way to understand something is to understand its history.

  The main things I took away from the book:
▪    An appreciation that the creation of the modern oil industry really was an epic achievement in terms of engineering, technology, organization and the enormous obstacles, both natural and human-made, to be overcome.
▪    An understanding of the central place of the United States in the history of the world oil industry, and of the oil industry in the development of the United States
▪    An understanding of the key importance of oil in world politics and military power.
▪    A  realization that the history of the world oil industry has always been a cycle of boom and bust, glut and scarcity, which makes the current runup in gasoline prices nothing new.

Nowadays I think of oil in terms of the Middle East, but for a century or more the United States was the main producer and exporter of oil.   In the earliest days most of the world’s oil supply came out of Pennsylvania, and the next big discoveries were around Baku in the Russian Empire and Borneo and Sumatra in the Dutch East Indies.  Texas and Oklahoma did not become important oil regions until late in the 1920s, and Saudi Arabia until after World War Two.

Cheap oil made possible much of what we regard as the American way of life.  The oil industry was created to provide kerosine for illumination, as a substitute for illumination.  But without a pre-existing oil industry, there would have been no auto industry, aviation industry or any other industry based on internal combustion.  Early U.S. preeminence in oil made possible our early preeminence in these other industries.  Our periods of greatest prosperity, especially the period from 1945 to 1973, coincided with low oil prices.

I tend to take fruits of oil-fueled industry for granted, but, as Yergin pointed out, there was a time when none of this existed.  Somebody had to think of drilling for oil instead of digging for oil.  Somebody had to think of setting up gasoline pumps instead of selling it in cans.  Somebody had to figure out how to drill for oil in the jungles of Borneo, the deserts of Persia, the bottom of Lake Maraciabo in Venezuela and the north slope of Alaska.  It really was an epic story.

Crude oil prices adjusted for inflation. Double click to enlarge.

We think of oil in terms of scarcity, but there have been times when an oil glut was considered the more serious problem.  This was the case during the Great Depression, when the Texas oil industry was collapsing under overproduction of oil.  The Texas Railroad Commission (which, despite its name, regulated oil) worked with the Roosevelt administration to set up a system of production allocations regulating what could be taken from each oil field.  The federal government restricted foreign imports to prevent Texas oil from being overwhelmed.

Texas increased and decreased production in order smooth out the cycle of boom and bust, so that oil-using businesses wouldn’t be ruined by sudden increases in oil prices nor oil producers by the sudden collapse.

This helps explain why Texas oilmen for so many years supported the Democratic Party.  When I first learned how this system worked, back in the 1950s, it seemed to me to be an example of government-protected monopoly working against the public interest.  After reading Yergin’s book, I can see the need for some entity to fulfill the function of the Texas Railroad Commission.  Price controls don’t work, as we Americans learned in the 1970s.  But it is a good thing to smooth out swings in prices when they are so wild that they periodically crash an industry.

In later years Saudi Arabia took over the function of swing producer, which partly explains the tight relationship between the U.S. government and the Saudi royal family since President Franklin Roosevelt’s first meeting with King Ibn Saud in 1945.  Saudi Arabia’s function as swing producer has been a great source of tension with Iran.  The Iranian government, which unlike Saudi Arabia rules over a large population who need jobs and income, has always wanted to maximize production and income, while the Saudis have been able to afford to take a longer view.

U.S. gasoline prices adjusted for inflation

There’s a lot more in the book.  I put it down with a greater awareness of how oil is intertwined with everything and what a radical change ending our “addiction” would be.

Click on The Stuff That Makes the World Go Round for Leslie H. Gelb’s review of The Prize in the New York Times.

Click on “the world’s most critical nonhuman economic resource” for a review of The Prize in The Freeman: Ideas on Liberty.

Click on Overdue Evaluation for a 2006 review of The Prize by Doug Merrill on the A Fistful of Euros web log.

Oil and world power

March 19, 2012

Oil was the key to world power during the 20th century.  It still is.  Reading Daniel Yergin’s The Prize: the Epic Quest for Oil, Money and Power reminded me of just how much military and political power rest on oil.

The power of the 20th century British Navy rested on oil.  In the years leading up to World War One, the British Navy went from coal to oil because of the German naval buildup.  The British wanted something that would give their navy an edge.  Oil would give British ships greater range and speed than coal-fired ships.  But while the United Kingdom had coal mines within its border, it had no oil.

Britain needed a secure source of oil.  The British government decided for that purpose it needed to control the oil of Persia (now Iran).  This involved stopping the emerging Persian democratic movement, and installing a dictator with the title of Shah, and giving the British government control of the Anglo-Iranian Oil Company (later British Petroleum, then BP), which held the British concession.  This drama was replayed in 1953, when U.S. and British intelligence services helped overthrow another democratic movement and installed the previous Shah’s son, with consequences that were felt in 1979 and to this day.

It was oil supplies from the United States, not Persia, that sustained Britain during the two World Wars, a reason why the “special relationship” was so important to the British government.  Yergin wrote that about 90 percent of Allied oil in the Second World War came from the United States.

The German army was severely handicapped by lack of oil in both world wars.  The main oil-producing European country prior to the discovery of North Sea Oil was Rumania, which was allied to Germany in both World Wars.  But the oil of Rumania was insufficient.  One of Hitler’s motives for attacking Russia in 1941 was to seize the oil of Baku; that is why he ordered his generals to break off the siege of Moscow and move south.  Yergin said the German army might have succeeded in Russia or North Africa if it hadn’t literally run out of gas.

The Japanese attacked Pearl Harbor in 1941 after the United States threatened an oil embargo.  They hoped to cripple the United States naval forces long enough to seize the oil of the Dutch East Indies, and might have succeeded, according to Yergin, if they had launched another wave of attack and destroyed the oil tanks storing the U.S. Navy’s fuel reserves in Hawaii.   Instead the U.S. was able to mount submarine attacks to such a degree that most of the oil never reached Japan.

Russia under the Tsars, the Bolsheviks and their successors was always one of the world’s top oil and gas producers.  Whatever their government’s failures in economic policy, they always had that to fall back on.

Access to oil—specifically, to oil as a source of aviation fuel—is essential to U.S. world power.  Today the power of the United States rests on the U.S. Air Force, as much as British power rested on the Royal Navy.  Supremacy in the air gives U.S. forces the power to invade and occupy small countries almost at will, although not necessarily with success.  The U.S. Navy has nuclear ships, but the U.S. Air Force requires aviation fuel.  Someday there may be an alternative to gasoline for hand-based vehicles, but the Air Force will always need a secure source of oil to avoid being grounded.

When you think about the need for oil and access to oil, many world events are easier to understand.


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