Part of the discussion at the WSJ Eco:nomics conference:Interesting stuff.
Oil contracts for April delivery touched 110 dollars today. The chart above shows the May contracts which are not much behind.
About two and a half years ago, I stated:
"The price in December 2010, when adjusted for inflation so it's stated in 2005 dollars, would be at least $80 per barrel. I am willing to put 10 dollars on that."
Assuming a 3.2 year over year increase in CPI (the actual rate from 2005-2006 according to BLS), 80 dollars in 2005 is about 88 dollars in 2008 and 94 dollars in 2010.
To me, the fact that clean energy technology is getting lots of venture capital money is THE best sign for it taking off mainstream. Whats amazing to me from the post below is this:
Clean Tech as a Percentage of Total Venture Capital
2005: 0.2 percent
2006: 6.7 percent
2007: 10 percent*
Those are some very big numbers.
It is not just Google that is investing in clean tech these days. Green energy startups are cleaning up on Sand Hill Road as well. The National Venture Capital Association and Thomson Financial put out some figures today on the amount of U.S. venture capital going into clean tech startups—some of the startups are overseas, but the money came from U.S. firms. (You can download the full release here). During the first three quarters of 2007, VCs poured $2.6 billion into clean tech startups, compared to $1.8 billion for all of 2006, and a mere $533 million in 2005.
How does this compare to venture capital going into Internet startups? According to the NVCA, here are the stats for U.S. venture capital invested in Internet startups over the past three years:
U.S. Venture Capital in Internet Startups
2005: $3.61 billion
2006: $4.96 billion
2007: $3.86 billion*
So far this year, VCs are putting two-thirds as much into clean tech as they are into Internet startups. To put this into perspective, for the first three quarters of 2007, clean tech investments represented 10 percent of all venture fundings, compared to 15 percent for Internet investments.
Clean Tech as a Percentage of Total Venture Capital
2005: 0.2 percent
2006: 6.7 percent
2007: 10 percent*
Shouldn't I feel free to call BS when I see BS?
It's not like Sen. Chris Dodd's energy plan is full of it. There is a willingness to say "Carbon Tax", but I do not understand the need for a "Corporate Carbon Tax" if there is an economy wide Cap-n-Trade system. Doesn't Dodd's "corporate carbon tax" look like a different name for "Windfall Profits Tax"?
50 miles per gallon vehicles by 2017 or 36 billion gallons of renewable fuels by 2022 are pathetic attempts to one-up Bush's Twenty in Ten goals.
There is also the now customary lip-service to plug-in hybrids, production tax credits for wind and solar, tax credits for buying hybrids...
Of course, the biggest indicator that this plan is baloney is the promise to eliminate dependence on Middle Eastern oil by 2015. Not going to happen even if Sen. Dodd did everything possible as a President.
May be I am being too critical. May be it is too early in the campaign, but from what I have seen so far from the Democratic candidates on energy is very uninspiring.
Hilary's latest webcast of her view of energy shows how much out of depth she is on Energy issues. If this is all she has to offer in her Energy Plan, then I must say that it is a pathetic plan, if I must use the word plan. I actually listened to the webcast again to see if there was anything that I could call CONTENT, and all I could hear was:
blah, blah, windfall profits, blah, blah, energy indendence, blah, blah, alternative energy, blah blah, ethanol, blah blah, foreign oil, blah, blah, clean coal, blah, blah.
Sorry Mrs. Clinton. This was a D- performance.
Tim Haab has a couple of posts about Peak Oil on Env-Econ blog. I learned about these via Econbrowser. With all due respect for Tim and John, I believe that one should not try to sound authoritative if one does not know enough about a topic.
First, given the time scales over which energy systems evolve and change, ten years is tomorrow and Thity years is day after tomorrow. I recommend reading the Hirsch report.
I will not get in to resources, and reserves, but one thing I must explain. Even CERA acknowledges that as times goes by definition of what we call oil is changing as non-conventional oil is being clubbed together with conventional oil.
We currently project worldwide liquids production capacity (not actual production) to grow from 88.7 mbd in 2006 to 105.3 mbd in 2015. This involves a growing role for non-traditional liquids—oil sands, gas-to-liquids, ultra deep water. This represents a widening of the definition of oil. Such a development and accords with the history of the industry, in which non-conventional technologies are introduced and, over time become conventional.
What Peak Oil community wants Tim and similar minded economists to understand is that the issues of transition are far more complex than economists will give them credit for. What exactly do we mean by alternative fuels for transportation? Unfortunately, we do not have a good substitute for oil.
I must recommend that Tim read Dave Cohen's post at the Oil Drum:The Tragic Consequences of the High Discounting of Oil Extraction I admit that Dave's analysis is not complete, but he makes very good points about backstop technologies and implied high discount rates of oil extraction.
If current prices are sending a good signal, why does IEA feel the need to shout every year that enough investment is not being made in energy sector?
On Stabilization Wedges: I suggest that Tim check out the science paper by Pacala and Socolow.
Tim is right when he says that prices will not peak at peak oil, but they will keep rising. This is precisely the issue that peak oil people want to highlight. John asks what should we do. There is no clear simple answer, specially when one considers that we can't think of Peak Oil as an isolated topic. What makes this whole debate complicated that in addition to providing a long term secure supply of liquid fuels, we are going to be very concerned about cliamate change. Several of the non-conventional sources of oil are two to six times as Carbon intensive. The issue is not simply of supply, but whether and how we choose to manage our demand as well.
I was very angry when I started sriting this post. In many ways, I have cooled down while putting the links together for this post, which I think is a good thing. I still think however that Tim and John need to think about this topic in a much more sophisticated manner before making cavalier comments. I recommend reading the Oil Drum and Econbrowser regularly as starters.
I remembered that it has been almost a year since we reported the climate change search statistics. After I discovered Google Trends, I thought that there was not much point in continuing with our overture search results. On the other hand, we have some data for about three years now, and there are at least a couple good results from our search trends, so I thought I should present them here.
As you can see in the chart above, we haven't see a big change in most of the terms we have been searching. There is minor variation from month to month, but there is very little if any trend that at least I can observe except for a dropoff in searches for "Fuel Cell" and a small increase in "Climate Change". In the past few months, I have added "ethanol" and "biodiesel" to our search terms, but for now we do not have a trend.
The second chart is a little bit more interesting as it includes a couple of heavy hitters that dwarf all the other search terms viz. "Global Warming" and "Hybrid Car".
From this chart it is pretty clear that there is considerably more interest in "Global Warming" now as compared to three years ago. The average searches per month have about doubled in this period. This is pretty consistent with the US Google Trends search for "global warming". The second thing to notice is the wide fluctuation in the search for "Hybrid Car". After a few spikes in the searches for "Hybrid Car", the interest seems to be cooling. Perhaps it is a sign that Hybrids are now well known, or perhaps it may just be indicating that gasolines prices are on a downward path in the last few months. Again google trend for "Hybrid Car" shows a similar, although not exactly similar pattern.
What do you make of these charts?
Felix Salmon on his brand new RGE Monitor blog asks if $65 the new $30, and $50 the new $20. Some time ago, I observed that $55 could be reasonably taken as a floor for oil prices for medium term. Felix asks if there is a plausible scenario where oil prices could fall below this floor. Eric Chaney and Richard Berner at Morgan Stanley GEF think that there is a pretty good chance that oil might be heading down to the floor of $55 per barrel, and in case of an ultra cool scenario even further down.
Several pieces of news led us to consider a third alternative scenario. First, investments in alternative (to traditional oil) sources of energy, from bio-fuel in Brazil to sand oil in Canada without forgetting very deep oil, are soaring. Second and maybe even more importantly, the main bottleneck in the global supply chain, i.e., the limited capacity to refine heavy sour crude, might disappear faster than expected. In Saudi Arabia, two giants’ refineries are now firmly on track in Jubail, one by Aramco and ConocoPhillips, the other by Aramco and Total. Together, they will produce 800 kb/d from heavy grade crude oil. In India, our analyst, Vinay Jaising, expects the refining capacity to increase to 3.4 mb/d by 2009 from 2.4 mb/d currently. The bulk of the increase will be on account of two key greenfield projects:
1) Reliance Petroleum’s project to set up a 580kb/d refinery at Jamnagar, at an investment of approximately US$6 billion. The refinery is likely to be commissioned in 2009.
2) Essar Oil’s project to set up a 220 kb/d refinery at Jamnagar, Gujarat. This project has been under construction for some time now and is likely to be fully commissioned in January 2007.
According to press reports (Wall Street Journal, August 29), the Reliance-Chevron project could be completed before the end of 2008. We are not qualified to discuss these projections. But one thing strikes us: so far, major oil companies were very reluctant to invest in large greenfield projects, having had their fingers burnt by overly optimistic price assumptions made in the early 1980s. But several years of very high refinery margins and the emergence of new investors such as Reliance in India, or the ambition of states such as Saudi Arabia seem to have changed their views. In our ‘ultra-cool’ scenario, a combination of a longer-than-expected economic slowdown and unexpected increases in global refinery capacity could well send the price of crude where it was in 1999, in the aftermath of the Asian crisis. This is an outlier scenario, but history has taught us that the markets tend to under-estimate the reaction of economic agents to very large changes in relative prices.
This ultra cool scenario is built on top of a cool world scenario where supplies of crude and refined products increase, conservation accelerates, global economic growth slows down due to a US recession. IMHO, this is not an outlier scenario, and something that a lot of people should think about.
Inhofe insists that he feels even stronger about taking on what he sees as the current hysteria about global warming than he did several years ago when he first uttered that now-famous hoax statement. In an interview, he heaped criticism on what he saw as the strategy used by those on the other side of the debate and offered a historical comparison.
"It kind of reminds . . . I could use the Third Reich, the big lie," Inhofe said. "You say something over and over and over and over again, and people will believe it, and that's their strategy."
...While declining to watch either the Gore movie or the Brokaw documentary, the senator said he armed himself with the statements used in both.
"I know the text, and I know they are using old stuff that has been totally discredited," Inhofe said. "Everything on which they based their story, in terms of the facts, has been refuted scientifically."
... He dismisses even the suggestions that Americans could help by giving up big cars or using more energy-efficient light bulbs. "It is not going to make any difference," the senator said. "But if it makes them feel good, they can do it."
I am sorry for offending the people of Oklahoma. I do not disrepect them, but one has to ask: Why do you keep electing this man?