Oil’s Tightening Spiral

February 6, 2016

Any impact or non impact of a carbon tax may be trivial compared to the growing geo-political and technological challenges to the Oil industry.

Amory Lovins for Rocky Mountain Institute:

Those who claimed low oil prices would crash renewables (other than biofuels) were wrong. The reason is simple. Wind and solar power make electricity. Oil makes less than four percent of world and under one percent of U.S. electricity, so oil has almost nothing to do with electricity. Thus in 2015, as oil prices kept skidding, global additions of renewable power set a new record, adding about 121 GW of wind and solar power alone. Renewables’ $329 billion investment was up 4% from 2014, says Bloomberg New Energy Finance (which tracks each transaction), but it added 30 percent more capacity because renewables got much cheaper. Solar power is booming even in the Persian Gulf, where it beats $20 oil.

Natural gas does compete with solar and windpower, and its price tends to move with oil’s, but cheaper gas doesn’t much affect renewable power either. That’s because new wind and solar power often beat even the operating costs of the most efficient gas-fired power plants anyway, even without counting the market value of gas’s price volatility.

Yet as oil prices gyrate, it’s important to understand that underlying trends are shifting too, to oil’s disadvantage. It’s happened before. In the 1850s, whalers—America’s fifth-largest industry—were astounded to run out of customers before they ran out of whales. Over five-sixths of their dominant market (lighting) vanished to competitors—oil and gas both synthesized from coal—in the nine years before Drake struck “rock oil” (petroleum) in Pennsylvania in 1859. Two decades later, Edison’s electric lamp beat whale oil, coal oil, town gas, and John D. Rockefeller’s lighting kerosene. Today in turn, most  traditional lighting is being displaced by white LEDs, which each decade get 30x more efficient, 20x brighter, and 10x cheaper. By 2020 they should own about two-thirds of the world’s general lighting market.

LEDs inside-out are PVs—photovoltaics, turning light into electricity. PVs often, and very soon generally, beat just the fossil-fuel cost of running traditional power plants. PVs are now less capital-intensive than Arctic oil, not counting the ability to use electrons more effectively than molecules. Costly frontier hydrocarbons like Arctic oil can’t sell for a high enough price to repay their costs. Their revenue model has been upside-down for years. Had Shell persevered instead of abandoning its $7-billion Arctic investment, and had it found oil, it wouldn’t have won durable profits.

Oil companies since 1860 and electric utilities since 1892 have sold energy commodities—molecules or electrons—rather than the services customers want, such as illumination, mobility, hot showers, and cold beer. This business model means that when customers use the energy commodity more efficiently to produce the service they want, the provider loses revenue, not cost. That’s bad for both electric utilities and hydrocarbon companies, because most (and for oil, ultimately all) of the commodity they sell can be displaced by far cheaper energy productivity. Read the rest of this entry »

The President has proposed a modest tax on oil, 10 per barrel, at a time when oil is so low that Oil companies are being derated. Conventional wisdom says it’s dead on arrival, but the fact that it’s being proposed suggests that oil companies might not be the unbeatable “Bigbads” they were a few years ago.

Above, Art Laffer was an architect of Ronald Reagan’s tax policy. Bob Inglis is a former republican congressman from South Carolina.
Both of them think a carbon tax might be a pretty good idea.

Vox:

It’s the last year of President Obama’s presidency. He doesn’t have to stand for reelection. Congress isn’t going to pass any of his proposals anyway. So he may as well dream big.

That’s one way to read this new idea Obama’s putting forward: He’s suggesting that Congress slap a $10-per-barrel tax on oil, phased in over five years, in order to fund $300 billion worth of investments in “clean transportation” over the next decade. That would mean massively increased spending on mass transit, high-speed rail, self-driving cars, freight upgrades, and so on.

You can see the White House’s fact sheet here. Officials later clarified that the tax would apply equally to domestic oil and imports.

None of this is going to pass Congress anytime soon — House Republicans have already vowed to block it — so any discussion here is purely academic. But there are a few points to make about this plan:

1) In theory, there’s not a huge difference between a broad oil tax and a tax on gasoline. An oil tax might sound better — the White House says it will be “paid for by oil companies” — but the costs presumably pass through to consumers anyway. As a rule of thumb, a $10-per-barrel increase in the price of crude oil translates into a roughly 24-cent-per-gallon increase in the price of gasoline.

2) That said, there are a few smaller differences. A gasoline tax mainly affects drivers; a broader oil tax would hit air travel, home heating, and a few other sectors as well. What’s more, a per-barrel oil tax would be a bit more work to implement, since we’ve never done this before. By contrast, the United States already has a federal gasoline tax, so it’d be much simpler to just hike that.

3) If you were going to tax oil or gasoline, right now would be the time to do it. The price of crude oil has been plummeting over the past year, down to around $30 per barrel, a level not seen since 2004. A $10/barrel tax would lift that to $40 per barrel, which is roughly the (still-low) price we saw… last November.

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Not usually a metalhead, but this has a good beat and you can bang heads to it.

Visonary Tesla Ad

February 5, 2016

Trust me on this one. Shut up and watch.

Kind of reminded me of my wind power video of several years back.

Yup, me and Nikola.

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coalfade

Bad week, in what’s going to be a tough decade for Big Fossil.

I’ll be posting a series of updates on this over the coming days. Change is coming faster than most people think.

Climate Progress:

In a stunning trend with broad implications, the U.S. economy has grown significantly since 2007, while electricity consumption has been flat, and total energy demand actually dropped.

“The U.S. economy has now grown by 10% since 2007, while primary energy consumption has fallen by 2.4%,” reports Bloomberg New Energy Finance (BNEF) in its newly-released 2016 Sustainable Energy in America Factbook. BNEF’s Factbook, which is chock full of excellent charts and data, cites studies attributing most of this change to improvements in energy efficiency.

BNEFdecoupling1

CREDIT: BNEF

Equally remarkable, this “decoupling” between energy consumption and GDP growth extends to the power sector: “Since 2007, electricity demand has been flat, compared to a compounded annual growth rate of 2.4% from 1990 to 2000.” As I discussed in my recent renewables series, this decoupling is an unprecedented achievement in modern U.S. history. It may seem especially remarkable for an economy underpinned by soaring usage of the internet and electronic equipment — but as I wrote in a 1999 report, a true Internet-based economy was always likely to be a more efficient economy.

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januaryice

Every picture tells a story.

See below for more.

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