Political correctness is that we should not drill for oil, for more oil will not solve the problem of high and rising fuel prices. Which political correctness the mainstream media firmly endorse. (more…)
The energy crisis happened because of optimistic projections – that gas to liquid and coal to liquid would not be needed until the technology had been improved and the cost brought down, that the dramatic growth in China and India could be accommodated by rapidly expanding conventional oil production. (more…)
Bryan Caplan wonders if oil prices are a bubble.
When oil spikes abruptly, that means people made incorrect investment decisions - under invested in exploration, development, and gas to liquids conversion.
A simple back of the envelope calculation tells me they are still under investing. Exxon recently abandoned gas to liquids plant that would be profitable if oil remains above forty dollars to fifty dollars a barrel. But if everyone acts like that – and everyone is acting like that – oil is going to be way above fifty a barrel.
Do I hear someone saying “Hey. Do you think you are lot smarter than the guys running Exxon?”
It is quite simple. For the price of oil to remain stable at present levels, we need to accommodate China’s industrialization by producing a lot more oil each year. The planned increases in oil production add up to peanuts. So the price of oil is heading up, and going to stay up.
To keep the price of oil from soaring even further the world needs to increase oil production three million barrels per day, each year, largely because large numbers of Chinese want to drive cars.
We cannot increase production except in those places where private property rights are reasonably secure, and there is no oil left in the ground in those places. So it has to be coal to liquids.
Most coal to liquids plants are being developed in China. Du Minghua, deputy director of the China Shenhua CTL research institute, said China could produce thirty million tonnes of liquid fuels each year by 2020.
That is six hundred thousand barrels per day. That is about one sixtieth the rate of increase we need.
In America greenies are taking the same approach to banning coal to liquids as they have taken to banning nuclear power. The proposed regulation is that Americans will not be allowed to convert coal to liquids on a large scale unless they can prove that the CO2 can be permanently disposed of – but of course nothing can ever be proven to those who choose to make themselves too stupid to understand the proof. Presidential candidate Obama goes one step further, and proposes to ban substitutes for oil unless they emit twenty percent less CO2 than oil, which bans any use of coal to substitute for oil
A coal to liquids plant needs to be fairly large scale to be economical, needs to produce at least three million tonnes per year, sixty thousand barrels per day. To stop the price of oil from rising further, the world needs to build one of these plants every week, for the next several decades, to meet the Chinese demand for cars.
Yet we see no political will to permit such developments, and not a lot of enthusiasm amongst developers to doing them. To the extent that developers are working on such projects, their primary focus is on assuaging greenie opposition, rather than the technological problems of converting vast amounts of coal to oil. If it is hard to get oil wells drilled off the coast of California or in Alaska, what are your prospects of getting a coal to oil plant approved?
People are starving yet we still treat energy developers as criminals, rather than heroes.
The twentieth century was the century of the red famines. Now, in the twenty first century, we are seeing the first greenie famine. Let us hope it will not be the first of many.
The red famines killed an extraordinary number of people during the twentieth century – famines caused in part by carelessness, in part by active malice as socialists sought to centralize all food under their direct control. To some extent the red famines were intended to end resistance by depopulating large areas, to some extent they were produced by incompetence, as politicians and bureaucrats directed farmers how they should farm, and some of which were caused by casual neglect, as those politicians and bureaucrats simply forgot to feed their captives.
We are seeing much the same with the first greenie famine. It should have been possible to figure out that converting enough food to feed near a billion people into fuel was likely to cause problems.
Of course, the failure of capitalism to smoothly convert from oil to coal is also a problem, but the conversion has not been made any easier by the fact that it typically takes ten years to get such a plant approved, if you can get it approved at all.
There is a green path and a brown path to dealing with the failure to pump enough oil. Environmentalists complain that coal to liquids conversion is on the brown path, and take for granted that the green path is inherently better and more virtuous, so much more virtuous that simply being in favor of it makes them more virtuous. They neglect, however, to explain that the green path involves a substantial and rapid population reduction.
There is an oil crisis, and there is a food crisis. People in Haiti are eating dirt. Women are giving their babies away to random strangers. People who formerly were poor, and able to afford little more than enough to eat, now are unable to buy enough to eat.
I, of course, am more worried about the oil crisis, but the food crisis is probably more important.
Becker says that food prices are not going to be a problem
the second reason for optimism relates to the lower productivity of food production in the poorer parts of the world relative to the United States and other developed countries. Higher food prices will induce an increase in productivity in developing nations by encouraging greater use of machinery, fertilizers, and other forms of capital.
In fact of course, the problem with food is the same as the problem with oil. In most of the world if you apply machinery and so forth, your tractor is probably going to be stolen, and you yourself quite likely killed in the process, just as if you drill an oil well, your oil rig is probably going to be stolen, and you yourself quite likely killed in the process.
It would be hugely profitable to drill new oil wells in Iraq, and upgrade and maintain existing oil wells, but no one is doing it for obvious reasons. Similarly for drilling water wells and digging irrigation ditches in Iraq. Whenever you ask businessmen why they are investing gigantic sums in Alberta oil sands, and not investing elsewhere in the world in oil that is far easier to extract, they will tell you.
Tractors are just as attractive to tyrants, demagogues, and terrorists as pipelines are.
World oil production is about eighty million barrels per day, four billion tonnes per year. The world has been stuck at that level since 2003, while demand has been increasing at about four percent a year. As a result, prices are going through the roof, largely because Chinese want to drive cars like Americans do.
All the remaining oil in the world is in places that are politically inaccessible - partly because greenies in developed countries have banned oil wells, but most of the remaining oil is in undeveloped places like Iraq, where anyone who drills a new well will probably have his well confiscated, and quite likely he will be murdered in the process.
Just to stay where we are now, for oil to stop rising, we need to increase oil production at about four percent a year, which is around one hundred and sixty million tonnes per year per year, or three million barrels per day per year.
Biofuels made from food are too expensive, and government subsidized biofuel made from food is causing starvation among poor people in poor countries. It is worth while making biofuel from sugar cane waste and paper mill waste, but the total amount we can get from those sources is not going to help us much.
So it has to be oil from shale, oil from tar sands, and oil from coal.
People are just pottering around with small experimental shale oil plants and coal to oil plants. Only Canadian oil from tar sands is being developed full speed ahead, as fast as physically possible. There are other oil sands in the world, but again, insecurity of property rights is a problem. If you try to develop oil sands in most countries, your plant will be stolen, and you will likely be murdered. Oil from tar sand in Canada is increasing at about four hundred thousand barrels per day per year, which about twenty million tonnes per year per year, about one eighth of what we need.
It is often said that the Chinese are developing coal to liquids in a big way, but compared to what is needed, not so big. They are building coal to dimethyl ether plants with a capacity of three million tonnes per year. If these plants were going to fix the problem, we would need around forty of them every year, rather than one or two every couple of years.
Typically people are building dimethyl ether pilot plants that do a few hundred tonnes per year, small scale plants that do a few hundred thousand tonnes per year, and a few big plants that do three million tonnes per year.
To match supply and demand at reasonable prices, the world needs to build sixteen ten million tonne per year plants each year, or fifty of the three million tonne per year plants the chinese contemplate.
The obvious solution is UCG-GTL - underground coal gasification followed by gas to liquid conversion. Digging the coal up is too messy to be done on the enormous scale needed. At present there is ONE such plant under development. Linc energy systems proposes to build, some time in the next several years, a UCG-GTL plant that makes seventeen thousand barrels per day of synthetic diesel, eight hundred and fifty thousand tonnes per year, about one two hundredth of the increase we will need every year.
Further, their coal gasification is air based, as befits the comparatively small scale of their proposed operation. For the really gigantic facilities of the future, oxygen based underground coal gasification is the way to go.
China and Estonia are rapidly expanding their oil from oil shale projects, but again this looks something like one hundred thousand tonnes per year per year, insignificant.
Coal to oil plants are highly profitable at present oil prices, but the trouble is that the obstacles to conventional oil production are political. People fear to invest in coal to oil plants, for an improvement in the security of property rights in oil rich countries could cause a huge drop in the price of oil. But with the steadily rising tide of hostility to capitalism, and the increasing propensity to murder people with property, this seems unlikey to me.
“Brutally Honest” complains that Christianity is immoral, because it does not hate capitalism enough – no of course that is not what he complains. He complains Christianity is immoral, because it teaches that God gave us the world, and commanded us to be fruitful and multiply, to take dominion over the world, to fill it and subdue it. He is worried that we are going to run out of oil, and there will be no oil left for our children.
But Christianity, at least the old fashioned kind, has faith in capitalism, and so long as we have capitalism, we shall have fuel for our cars
Old fashioned, unecumenical, not-in-the-slightest-bit-multicultural Christianity commands private property, and prohibits coveting, let alone stealing other people’s stuff. You are allowed to look at your neighbors house and think
“That is a nice house, I should build a house like that.”
But you are forbidden to look at your neighbors house and think
“That is a nice house, he must have some how cheated me and done me wrong to have a house like that, there is some conspiracy of people like him out to get me, he should be punished and I should have his house.”
The stone age did not end for lack of stones. Oil at present costs about a hundred dollars a barrel. Supply is restricted politically. Most oil companies have been nationalized, and are run by Sheiks or the like, who are incapable of getting the hot water connected to the hot water tap, let along maintaining and upgrading oil rigs. Most remaining oil is located in places where if you find oil, build an oil rig and a pipeline, your rig will be nationalized in violation of the agreement that the government signed when you went looking for oil. Paying off the thieves is, as he points out, not working, irrespective of how much oil remains in the ground, and indeed is funding terror.
But we can make oil substitutes from coal for a cost equivalent to thirty five to forty dollars a barrel - possibly a good deal less, if we were to convert our fuel systems to use methanol, and our fuel distribution system to distribute methanol by the tanker instead of by the drum. China is slowly converting to methanol, and expects to be about ten percent methanol in five years or so.
The main thing slowing the conversion is that businessmen fear that high oil prices are temporary, that the prices are the result of political obstacles to oil extraction which will be politically resolved, which would leave expensive investments in coal to liquid plants high and dry.
The major alternatives to oil based fuels are synfuel, which is good for jets and diesels, not so good for ordinary engines, methanol, which is good for ordinary petrol engines (with radically modified carburettors), but only gives you half the mileage, and dimethyl ether, a good substitute for LPG, good in diesels, no good in regular engines. We should be converting. If oil prices stay high, we eventually will be.