Was ist das?

Guest post from Walter

If you cruise on the London Canals you may have noticed or you will notice something rather different looking either moored or cruising along. It’s not a crashed down satellite or not so secret special device tested by the MOD, neither will aliens jump out, so don’t worry you don’t have to abandon ship. What you see is a boat and I can even claim that the work was overseen by one of my big heroes Isambard Kingdom Brunel who’s RIP only a stone throw away. This boat, barge, vessel, flat/house, is a cruising houseboat called Bauhaus. Why Bauhaus? Well, boat will certainly not come to mind when you see it and there are plenty of other reasons why I named it Bauhaus. I like the Band and all design considerations are based on the principle or manifesto of the Bauhaus school. This principle dictates to use basic forms to create objects which are primarily functional, aesthetically pleasing, of high quality yet easily and cost-effectively mass produced. Bauhaus is made to cruise on canals and lakes and to be lived in wherever and whenever you like, add some sizeable rockets and you can start your own space station. Bauhaus could be called a ‘concept boat’ and is often referred to as such, but I don’t like using this terminology. Most people associate this with a concept which is untested or unproven, with lots of money having been spent and often nothing works as intended. Worse it’s something, a project showing what may be possible in the future, but on Bauhaus only well proven materials and well established technologies have been used. The use, setup and the combination of these materials and techniques is unique or indeed a ground-breaking concept. The future is here!

The boat is solar powered using a 1.7kw PV system which provide you in the current setup (London within zone 2) with enough energy to cruise or live pretty much carbon neutral throughout the year. Different to a sailing boat you have a choice to use the energy harnessed for motion/cruising or to eat hot turkey but not both, at least in the UK apart from a few very sunny periods. There is no gas on board and you cook with the energy the PV system generates. In cold winter months you heat with the wood burning ‘1930’s Bauhaus school stove’ or if a wind turbine is added, compensating for little energy the PV system produces in the winter months you will not even need carbon neutral wood to heat.

Bauhaus is a slow cruising houseboat and handles at its cruising speed (5km/h) as well as any other 4 by 15 meters Wide beam or 2.2 by 22 meter Narrow boat even so that Bauhaus looks like a brick. Is Bauhaus too slow or underpowered, too big or too heavy? Obviously this very much depends on how you intend using Bauhaus. Sorry to spell out the obvious but an ocean going oil tanker is a pretty bad choice for white-water-rafting similarly a 20 meter seagoing sailing yacht is a poor choice to sail the British canal system. When I thought of getting a boat built I asked myself how I would use the boat, how much and how fast I wanted to cruise, what cruising range I would need and of course where I would cruise. Consequently Bauhaus matches all my criteria and the lady does exactly what she should do. Paramount, above all were economical and ecological considerations for me, just like buying a car. Some buy an ecological car because they don’t want to waste money and others want to save the world. When you look into buying a new-built canal boat you will swiftly realise that you don’t have that choice. There is a great boat building tradition and in fact a very dynamic boat building industry in Britain providing jobs for thousands but the ecological or economic terminologies have not entered its vocabulary. In company descriptions, magazines or in tests, fuel or energy consumptions is not even mentioned, imagine that for cars - even the most luxurious ones give you that data. And even if the hourly fuel consumption and emissions of engines fitted in boats is stated it will still not tell you anything about fuel consumption at differed cruising speeds. Here the shape of the hull, size of propeller, kind of propeller and use of the boat i.e. canal or open water influences the performance tremendously. Of course the environmental impact of the leisure boating industry is not enormous but still... Even if we leave all environmental considerations out of the equation and just fancy a bit of cruising, is there a case for electric or even solar boating? How often have I waited on locks where everybody has their engine running to enable them to watch TV or I had to listen to somebody's engine at the most picturesque sites because a fellow boater is charging their battery and how often have I cruised along and been fumigated by my own engine. Is there a case for a hybrid? I always thought it’s a shame that Toyota don’t build boats, with their Hybrid they have shown the world that a economical hybrid can be comfortable, even luxurious and fun. Fortunately there is a company in the UK which manufactures an excellent hybrid engine, combine it with a sizeable PV solar system and you have the perfect cruising boat: www.hybridmarine.co.uk . Where do you put the solar panels or rather where do you put enough solar panels to enable you to cruise or live more or less carbon neutral. Now you know why Bauhaus is brick shaped. The boat is build around the solar panels!

What about other issues such as the insulation? Everybody who has been on a boat in the summer months knows how hot it can get. You open all windows and doors creating a draught that lifts your steak off the plate and still one struggles to cool the lady down. Equally in wintertime even if you heat well you got plenty of cold spots and water condensates not only on your windows and more often then not you wake up in the night freezing. Obviously the insulation has to fit the boat and I would not recommend using exactly the Bauhaus insulation (over 30cm thick) on a Narrow boat, but important aspects could be incorporated.

Bauhaus keep its habitants warm in the winter, cool in the summer and provides enough energy to cruise, cook and so on, and provides a very safe environment. With that steelwork you can cruise even under the biggest wind turbines safe in the knowledge that when the gearbox disintegrates and bits start raining down (this does happen...) you will have a better chance of survival then other boaters. Even if things go slightly pear shaped at your local nuclear power plant you will be much less affected than anybody else because the materials and the structure of the insulation shields very well against radiation. And noise, well you will not hear a great deal, WW3 could break out and if you don’t step out you want even notice it. Obviously using such thick steel on a substantial steel structure could well be considered as wasteful and is certainly not very carbon neutral in the production. But where does one start and where does one stop? I did not want to have a boat which I need to re-plate in the next few decades or something made of recycled milk bottles.

Finally, a few more thoughts regarding this project. I am hoping to encourage not just other boaters but the wider public to consider alternatives rather then just "buying off the shelf". We are very fortunate that today, more than ever before, we can choose from a catalogue of options and we have the means to live as individuals as well as a nation in a much more energy efficient and pretty much self sufficient way. We have to use and importantly share all resources available responsibly and economically, thus creating a self-sufficient and fairer society. Solar panels have gone down tremendously in price and some of them are as cheap as chips to produce, obviously we as end-users pay still quite dearly but this should not surprise us. How much does water from the tap cost and how much do we pay for bottled water? Soon energy producing paint can be painted onto anything, cars will probably be painted with such paint topping up the batteries whilst standing or driving around. These developments don’t just happen they need to be encouraged. Whilst we should all aim for perfection we have to remember that nothing is perfect. A small family car 25-30 years ago such as the Fiesta produced more CO2 and other toxic gases than a Bentley today. Car engines today still work on the same principle as over 100 years ago, are much more economical and ecological then only 10 years ago but nobody even dreamt of waiting. Cars with very primitive engines, measured by today’s standards, were mass produced and the improvements happened gradually. There is no magical solution, battery powered boats or cars do not suit everybody, and nobody should have a bad conscience for choosing a conventional engine, or an old smoky diesel. There is no room for finger pointing or criticism. Criticising is of course very easy, and there is also no room for Schadenfreude… we are all sitting in the same boat! The housing crisis is hitting the headlines on an almost daily basis and I can not understand why the UK waterway system is not used to ease that crisis. More boaters actually increases security and safety on the canal system, additionally this kind of lifestyle offers low impact affordable housing for many. In London there is a whole stretch of canal, starting south of the Kensal Green Cemetery to Park Royal which could be turned inexpensively into hundreds single berth residential moorings, turning industrial wasteland into a vibrant boating community. Something like Bauhaus offers additionally carbon neutral living, harnessing what’s given for free.

In Germany over 400,000 people work in the carbon neutral/renewable energy industry and this sector contributes in the last few years between 0.1-0.4% to the GDP. I do not advocate building oversized wind turbines next to housing developments or next to the motorway, it’s only a question of time before unfortunately somebody gets hurt or worse. Whereas we humans have used the wind and sun since the earliest times, the current form of use is pretty new and comes with risks, still none of them are as enormous as the risk of commercial nuclear power production. It is interesting however that even in the unfavourable conditions, in comparison to Germany the UK solar industry has gained tremendous momentum and even the extraordinary slashing of the feed in tariff has done little to stop the evolution.

The secret to self-sufficiency is economical use of resources as an individual as well as a nation.

For further info regarding Bauhaus go to www.bauhausbarge.com

Walter

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What Peak Oil Looks Like

Thoughtful article over on Energy Bulletin, by John Michael Greer:

Thus our civilization has entered what John Kenneth Galbraith called “the twilight of illusion,” the point at which the end of a historical process would be clearly visible if everybody wasn’t so busy finding reasons to look somewhere else. A decade ago, those few of us who were paying attention to peak oil were pointing out that if the peak of global conventional petroleum production arrived before any meaningful steps were taken, the price of oil would rise to previously unimagined heights, crippling the global economy and pushing political systems across the industrial world into a rising spiral of dysfunction and internal conflict. With most grades of oil above $100 a barrel, economies around the world mired in a paper “recovery” worse than most recessions, and the United States and European Union both frozen in political stalemates between regional and cultural blocs with radically irreconcilable agendas, that prophecy has turned out to be pretty much square on the money, but you won’t hear many people mention that these days.
...
It’s no longer necessary to speculate, then, about what kind of future the end of the age of cheap abundant energy will bring to the industrial world. That package has already been delivered, and the economic rigor mortis and political gridlock that have tightened its grip on this and so many other countries in the industrial world are, depending on your choice of metaphor, either part of the package or part of the packing material, scattered across the landscape like so much bubble wrap.

He goes on to talk about how the industrial system is a kind of arbitrage, making profit off the difference between relatively cheap fossil fuels and expensive human labour. Of course, the price of the former has been rising, and the latter may no be falling, so the game changes...

Read the full article here.

Mike

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The Energy Trap

I just read an interesting post on The Oil Drum. Not a new idea, but a good, clear explanation of it. Basically, it goes like this:

• after peak, fossil fuel supplies decline at a certain rate per year.
• renewable (or nuclear) energy can be used to replace the energy supply that is being lost.
• building new energy supplies USES energy for the construction process.
• if there was spare fossil fuel, this extra energy needed to build the supplies wouldn't be a problem, but instead we have declining fossil fuel supplies.
• as a result, starting a big effort to build new energy supplies, of whatever sort, means that there is less energy available globally for other uses.
• it is then several years before the new energy supplies being built manage to make up for both the fossil fuels lost and the energy used in their own construction - at any given point, giving up on the construction of new supplies would free up some energy and provide a few years of relief from the high energy prices, after which the problem would get worse again.

As you can see, we need to take several years of pain in higher energy prices to fund a new energy infrastructure that will keep us going in the long run. But since when has anyone voted in a government to do that kind of thing?

Take for example the impending cut in the UK solar PV feed-in-tariff. Granted, it was probably too generous form the start, which is why it has been 'too successful' - the result is people grumbling about the extra few pounds added to their electricity bills, rather than congratulating the government on getting lots of new energy supply infrastructure installed.

People want jam today, not tomorrow. We'll all be paying the price later...

Mike

Read the full article on TOD

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TOD: Are We Reaching “Limits to Growth”?

From a new post on the Oil Drum:

It looks to me as though 2012 is likely to be a truly awful financial year, with several crises converging:

• Either very high oil prices or recession,
• The US governmental debt limit crisis,
• The Euro crisis,
• The Chinese debt problem,
• Debt deleveraging in the US and elsewhere,
• Further MENA (Middle East/North Africa) political problems, and
• Conflict between need for greater resources and pollution issues.

...
If a person follows through the expected effects of high oil prices and debt, the financial system would appear to be the most vulnerable part of the system. The financial system would also appear to be what telegraphs problems from one part of the system to another. Unless a solution is found, failure of the financial system could ultimately bring down the whole system.
...
Nothing happens overnight with the world economy, so changes are likely to take place over a period of years, rather than all at once. We can’t know exactly what the future will bring, but the handwriting on the wall is worrisome.

Well worth reading the full story.

Mike

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UK oil output drops 16% in a year

The Telegraph reports:

Britain's oil production from the North Sea has fallen by 16pc since last year in a drastic drop that will cost the Treasury millions of pounds in lost taxes. Officials from the Department for Energy and Climate Change put the unexpectedly large fall down to "maintenance and other production issues" on top of the long-term trend of declining output.
...
The Health and Safety Executive has warned that only one in 30 of the UK's North Sea oil rigs is in a good condition. A number of large platforms have closed for major maintenance this year. Full story

So on top of a declining natural resource, we've got a creaking and rusting and infrastructure... Doesn't bode well for energy security, or for the UK balance of payments...

Mike

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Peak Oil and Economics - Chris Skrebowski

Just received a great article in this week's ODAC newsletter, written by Chris Skrebowski. In it he argues that we are now reaching the point where the cost of new oil supplies is more than most countries' economies can afford.

The reason is that new oil supplies are invariably in difficult to access places, as we (naturally) took the easy stuff first. But every economy has a price point at which growth grinds to a halt. We saw this happen in 2007-8, and we've seen it start to happen again in 2011. The price is higher in some countries than others - it comes down to how dependent the existing infrastructure is on oil, what the benefit of using more oil brings, and how quickly the infrastructure can be changed to adapt. On all of these counts countries like China and India do better than the USA or Europe.

Skrebowski sums his article up by saying:

Unless and until adaptive responses are large and fast enough to constrain the upward trend of oil prices, the primary adaptive response will be periodic economic crashes of a magnitude that depresses oil consumption and oil prices. These have the effect of shifting consumption from incumbent consumers - the advanced economies - to the new consumers in the developing economies.

This is exactly what happened in the last recession when between the start of the recession in January 2007 and its effective end in 1Q 2011 demand rose by 4.3 million b/d in the non-OECD area and fell by 4 million b/d in the OECD area.

You can read the full article at ODAC.

Mike

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Why UK oil and gas production will keep falling fast

In this post I'm going to show you a few graphs from a UK government department, and explain what they mean for future UK oil and gas production.

The Department of Energy and Climate Change has recently published the 2011 Digest of UK Energy Statistics (DUKES), which is a fairly lengthy document. Of particular interest is the 'internet booklet' version, which includes the graphs I'll show you in a moment. A bit of background first...

When an oil or gas field is discovered and developed, production initially rises, then reaches a peak, and finally falls away. The rate at which production falls tends to drop over time, so you end up with a 'long tail' of low production that can carry on for many years - or until the field's owner decides it is no longer generating enough income to be worth maintaining. However, this pattern has changed in the past couple of decades, as explained by this quote from the DUKES internet booklet:

It can be seen from the production chart that during the 2000s the amount of oil produced from older established fields was in general decline. It is also noticeable that the decline in post 1994 developments is greater than in earlier developments. This is because later technology meant crude oil could be extracted at a relatively greater rate leading to a quicker exhaustion of the reserves. In 2010, these newer (post 1994) fields accounted for 69 per cent of the UK’s oil production.

Here's the chart it is referring to, showing oil production, with fields grouped by the year they started production (all charts can be clicked to view a larger version):

The older fields had new technology applied as it became available, maintaining steady but lower production over longer periods of time, but the newer fields have had all the advanced technology applied very quickly (to make money faster), and as a result the production rises quickly, but also falls quickly once peak production is passed. This has allowed the rather small oil fields discovered in the past couple of decades to offset the slow decline from the much larger, older fields, but now that some of them are declining, and declining fast, there is really nowhere left to turn other than importing oil (the UK has been a net importer since 2005). The following chart shows the same data, but as percentage share of total production:

As you can see, the majority of our oil production is now from recently developed smaller fields, which experience shows us will decline quickly - so we've got quite a long way to fall before we bottom out on the 'long tail' of oil production which we can reasonably count on for a longer period.

And just to complete the picture, here's the same graphs for gas fields (bear in mind that in 2010 over 40% of our electricity was generated by burning gas...):

Ever played a game of Snakes and Ladders? I think the UK is half way down a snake...

Mike

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How much oil will Saudi Arabia have spare to export?

For a long time the Export Land Model has been used to argue that as a country's internal oil consumption rises, less is available for it to export. This makes sense, and as long as oil prices rise, the exporting country may continue to earn sufficient income from its reduced exports. Normally we think of this increased domestic oil demand as coming from greater economic activity, resulting in more cars and trucks driving around, or more oil being used in industry. In Saudi Arabia however there are two other significant sources of demand...

The first is air conditioning, which needs electricity. Most countries avoid burning oil or oil-derived fuels to generate electricity as they are too expensive, but Saudi Arabia burns crude oil in some of its power plants, so more air conditioning results in more domestic oil use.

The second is desalination. Saudi Arabia has very little water, and oil-fired desalination plants are used to produce the water needed for agricultural, industrial and domestic use.

A recent article from Reuters said:

The International Energy Agency and analysts at HSBC bank estimated Saudi Arabia's rate of direct crude burning more than doubled from 2008 to 2010 because of a rapid rise in power demand and a shortage of natural gas. How much of that went to desalination is not known but experts believe it is significant.

Of course, the ideal would be that water is used more carefully, but if this doesn't happen, and demand for aircon keeps rising, the rate of oil exports from Saudi Arabia could be falling pretty quickly before too long...

Mike

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Who killed economic growth?

Great little video here from the Post Carbon Institute, featuring Richard Heinberg (author of 'The Party's Over'):

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Continuing Fukushima impact on oil and gas prices

Back in April I wrote about the effect of the nuclear disaster in Japan on gas prices globally and in the UK. Well, the situation continues to develop... Not only are the reactors at Fukushima still not in cold shutdown, but other reactors are being shut down for problems which previously might have been ignored, due to the public reaction to the situation. On top of this, there is a strong possibility that Japan may try to become nuclear-free.

A recent Reuters article gives some more info, suggesting that if all nuclear plants are shut down in Japan their crude oil imports may almost triple as crude oil and fuel oil are burned to generate electricity. Of course, this would mean high CO2 emissions, so in practice they will be burning a lot more gas so that oil doesn't increase by so much. LNG imports are already up 30% on a year ago, and the article predicts that ultimately we could see global prices go up by almost 50% from where they are now.

What this really comes down to is that globally we are now close to a zero-sum game for energy. If one source (Japanese nuclear plants) disappears, and is replaced by oil and gas from the global market, then someone else has to do without that energy. We don't have physical rationing, so instead we will get rationing by price - the cost of fuel will rise until some consumers can no longer afford it, whether that's entire countries or individual households.

Mike

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Huge decline in UK oil and gas production in Q1 2011

The latest instalment of DECC's Energy Trends series has just been published, covering Q1 2011. You can download a copy here (1.8MB PDF).

The summary page says it all really, with these bullet points:

• Total energy production was 11 per cent lower than in the first quarter of 2010.
• Oil production was 15½ per cent lower than in the first quarter of 2010, due to maintenance activity and slowdowns.
• Natural gas production was 17½ per cent lower compared with the first quarter of 2010. Net imports of gas increased by ½ per cent. Liquefied Natural Gas (LNG) accounted for 43½ per cent of gas imports.

If, like me, you prefer to see it represented graphically, you'll be pleased with what I've prepared for you below...

Here's a chart of quarterly oil production in the UK, from the start of 1999 to Q1 2011:

Not looking too promising, is it? To help see the trend, here's a graph showing the % change year-on-year from 2000 to 2011:

As you can see, there's been the odd blip where production has risen, but the last time was in 2007, and the first quarter for this year set a new record for the decline.

Moving on to gas, here's the another production graph, but this time I've added on the amount being imported as well:

 

As you can see, there's a similar trend as for oil, though with greater seasonal fluctuations. I think this is probably because the gas market is more fluid, with pipelines connecting us to Europe, meaning production is often slowed down while prices are low. Here's a percentage change graph again, with the same high fluctuations, and close to a new record on decline:

Just to reiterate the problem we have with gas, here's another graph showing the percentage of UK gas supplied by imports, on a quarterly basis:

As you can see, we imported more than half our gas in the final quarter of 2010, which isn't surprising as it was very cold, but also in the first quarter of 2011 - when it was actually relatively mild!

Many thanks to DECC for providing these figures publicly - shame the government isn't taking the urgent action which the graphs above should prompt them to. It's not just about energy security and keeping the lights on this winter, it's also about whether we can afford the imports. To put it in context, wholesale gas has been trading on the National Grid at about 2p/kWh this summer. The graphs above are in GWh, one of which would cost £20,000 at the same rates.

In the past two quarters we've imported over 367,000 GWh - that's about £7.3 billion worth of gas. So if anyone was still wondering why gas prices are going up,  now you have part of the answer...

It's summer now, but winter is coming - take the time over the coming months to insulate your walls and loft if you've not already done so, and if you want to do even more, take a look at my other blog for some ideas.

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IEA oil release from emergency reserves - start of a slippery slope?

Yesterday the IEA announced it was releasing 60m barrels of oil from its 'emergency' reserves, at a rate of 2m barrels per day. The interesting question is: what is the emergency? OK, Libyan oil is not flowing, but that's been the case for months now. Japan is using extra LNG, though it's not clear if oil use there is higher than before the tsunami, but once again, this is not a recent change.

The only reason that can be seen for releasing this 'emergency' oil is that high prices are choking off the economic recovery in developed countries. But if the high prices are due to restricted supply, then this is just the market doing its work - 'rationing by price'. If we don't like it, we should try physical rationing or other ways to get people to use less oil. If the market is signalling a shortage through rising prices, then doesn't trying to reduce those prices without fixing the underlying problem (excessive oil consumption) just push the problem a month or two further down the road?

Worse still, if we're using 'emergency' reserves when there isn't really an emergency, and if this starts happening more often, what will happen when these reserves are gone?

Of course there's always more going on behind the scenes than we know about in public. Take this news story from last week as an example:

The government was warned by its own civil servants two years ago that there could be "significant negative economic consequences" to the UK posed by near-term "peak oil" energy shortages.

Ministers were told it was impossible to know exactly when production might fail to meet supply but when it did there could be global consequences, including "civil unrest".

Yet ministers consistently played down the threat with the contemporaneous Wicks review into energy security effectively dismissing peak oil as alarmist and irrelevant.
full story

Basically, some smart, forward-thinking civil servants in DECC were researching peak oil and its impact on the UK in 2007, and in June 2009 a report was prepared, but ministers ignored it. This has only become public now because of Freedom of Information requests... You can download the slides here, but they are pretty in depth (which is good to see). Slide 16 is interesting, as most of the impacts which were researched in 2007 have now happened to one degree or another. So, coming back to the IEA oil release, maybe it ties in well with this stuff from DECC - they are perhaps trying to mitigate some of the immediate impacts of peak oil. Unfortunately this can't go on for much longer, as our emergency reserves are just as finite as the oil under the ground...

Mike

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News roundup - prices of food, gas and electricity, and OPEC output

A few interesting news stories in recent days.

The Telegraph reported that food prices are rising at the fastest pace in 23 months in the UK. What's this got to do with oil? Well, here's some quotes from the article:

Disappointing crops and demand from the biofuel industry have helped corn prices rise 112pc in an year and wheat 72pc.

...

Rising energy prices have also pushed up the costs experienced throughout the supply chain, said the BRC.   full article

So there you go, flat or falling supplies of conventional cheap crude oil are boosting food prices through increased demand for biofuels and also through the energy used in growing, processing, transporting, storing and selling food. Expect more of this to come - it is not a 'blip'.

Moving onto gas and electricity, several weeks ago I was warning on this blog of rising prices, and since then the price of wholesale gas in the UK has been hovering around 2p/kWh, which is getting on for double what it was a year ago. So, it was only a matter of time before this fed through into domestic bills. Scottish and Southern has been the first to move:

Scottish Power is to raise the cost of gas by 19% and the cost of electricity by 10%. The utility firm said the increase, which would affect 2.4 million households in the UK, would come into effect from 1 August.

...

Scottish Power's latest rise will mean that customers who take gas and electricity from the company but pay quarterly by cash will see their annual bills rise by an average of £180 to £1,391.   full article

So if you needed another incentive to improve your home's energy efficiency and reduce your reliance on fossil fuels, now you have it.

So what next? Well, OPEC have today announced that they are not going to boost levels of crude oil production, so the price of oil has ticked up another dollar or so. Of course, it may all be academic - nobody really knows if Saudi Arabia actually has any spare capacity, and if it does, how long it could be maintained...

And finally, all of this feeds into inflation, which makes it ever harder for the Bank of England to resist raising interest rates. But if they don't and inflation stays high, then they are effectively taxing everyone's savings and delivering real-terms pay cuts to anyone whose pay isn't going up by 5 or 6% a year...

Mike

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UK govt to prepare Oil Shock Response Plan

Not sure if this is 'better late than never' or 'closing the stable door after the horse has bolted'... Anyway, it is at least promising that the UK govt has finally admitted that peak oil is something that it needs to respond to:

Energy and Climate Change Secretary Chris Huhne yesterday agreed to develop an 'Oil Shock Response Plan', following a meeting with the UK Industry Taskforce on Peak Oil and Energy Security (ITPOES).

The group, which was formed by Arup, B&Q, Buro Happold, Solarcentury, SSE, Stagecoach and Virgin, and campaigns for greater awareness of the economic threat presented by dwindling oil supplies, said that the meeting had proved "constructive" and had helped to advance the energy security dialogue.

source

Of course, what's needed is not just a plan, but for it to be put into action immediately. Perhaps the government didn't notice that we've already had the third oil shock, with prices peaking in 2008, and we've actually having a fourth one already with prices spiking close to the same levels a few weeks ago.

The spike in 2008 contributed to causing the financial crash by pushing up prices of daily necessities to the point that sub-prime mortgage holders had to default (though that day would have come at some point anyway), but that arrived at the end of a period of strong economic growth. The current price spike arrives as the UK barely scrapes out of recession and during a period of government spending cuts and rising taxes, so I dread to think what the outcome will be.

Let's hope the UK government will make this a matter of urgency, but at the same time this is too important to be left to government. It's up to each individual and family to recognise that there's a different future ahead, where energy is much more expensive and in short supply, economic growth is a distant memory and bank collapses are the norm. Preparations need to be made. It's time to become less materialistic and get our enjoyment of life from the things that have been around since before we had oil: family, friends, good food, beer and live music. Sure, there will need to be some drastic changes too, not all of them easy, but the later we leave the smaller the chance of us holding on to the things that make life worthwhile.

Mike

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Humanity can and must do more with less: UNEP

Today the United Nations Environment Programme (UNEP) launched a new report on decoupling economic growth from natural resource use and environmental impacts.

The press release says:

Already the world is running out of cheap and high quality sources of some essential materials such as oil, copper and gold, the supplies of which, in turn, require ever-rising volumes of fossil fuels and freshwater to produce.

When it comes to oil, the report says:

Oil production has already peaked and declined in the majority of individual oil producing nations, and in large regions such as North America and Europe (Hirsch, 2008). Thus ‘peak oil’ is an empirically verifiable phenomenon (Sorrel et al., 2009, p.vii). Evidence suggests that the world is rapidly approaching a world oil production peak. Global new oil discoveries reached their height in the 1960s and have been on a declining trend ever since (see Figure 2.10), despite remarkable improvements in exploration, drilling and extraction technologies, and episodes of high prices in the 1970s and 2000s (ASPO, 2009).

Several scenarios are covered in the report, but the key point made is that 'business as usual' cannot continue - there simply isn't enough raw material on the planet for that to happen, whether that's oil, gas, metal ores or topsoil. One scenario considered includes a contraction in resource use by developed countries of two thirds, while other countries remain the same. The report acknowledges that this scenario is so restrictive that no politician will ever accept it as a goal, yet it would still leave CO2 emissions at the same level as in 2000, not to mention the resources needed - which simply won't be there.

A few challenges are identified in the press release that relate to the oil debate:

• Policymakers and the general public aren’t yet convinced of the absolute physical limits to the quantity of resources available for human use.
• The best and most easily accessible mineral ores and fossil fuels are being exhausted. New sources are generally more remote and of lower quality. Finding and extracting them takes more energy and increases the environmental impact. About three times more material needs to be moved for the same ore extraction as a century ago, with corresponding increases in land disruption, water impacts and energy use.
• Resource extraction increasingly occurs in countries with lower legal and environmental standards, meaning “environmental impacts per unit of extracted material might become more severe.”
• A “rebound” effect often leads to increased consumption after energy or manufactured goods become more efficient as consumers take advantage of cost savings to buy something else, or use a device more often – for example: putting more kilometres on a fuel-efficient car.

There are two key issues that come out of it for me:

1. Economic growth cannot continue in the long run. The report does mention this in a roundabout way, but what it comes down to is that if people get more wealthy they consume more resources, whether it’s a larger house/car, eating more meat, going on more holidays, etc. This clearly isn’t possible with finite resources, as the report makes clear. However, this doesn’t mean we can’t redistribute what we have globally, and within nations, to deal with poverty. It’s a hard one for a politician to sell though!

2. The second point isn’t mentioned in the report. It is that if global economic growth (in a physical sense) cannot continue, then our system of money will break down at some point. This is because debt needs interest paying on it, and the money to do this can only come from growth. If we have economic growth in a financial sense without any growth in a physical sense, that’s just inflation, and the money system still falls apart eventually. There’s an excellent video covering this topic here. Once again, it’s not a topic that’s easy to convince voters on, even if it is an inevitability that we will have to shift (or collapse...) to a new system of money at some point. There are a lot of vested interests that will be hurt by the shift/collapse when it happens. I suspect this is part of the reason commodity prices in general are so strong – people with money to invest are realising that their money is safer in ‘stuff’ then cash or stocks.

As Mark Twain said

"Buy land. I hear they're not making it any more."

...but make sure it's well above sea level and not too far from home, given the contents of this UNEP report!

The full report will be available for downloaded here soon.

Mike

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Update on UK gas prices - going up again soon

In a post a couple of weeks ago I highlighted some issues with UK gas supply that were pointing to likely further price increases. Well, now the news is out:

The owner of British Gas, Centrica, has warned that customers may face higher energy bills.

Centrica said "end-user prices" did not reflect the price it was paying for gas on the wholesale market.

...

"In the UK, the forward wholesale prices of gas and power for delivery in winter 2011/12 are currently around 25% higher than prices last winter, with end-user prices yet to reflect this higher wholesale market price environment," the statement said. Full story

So there you go, more expensive gas, coming soon to a meter near you. If that concerns you, take a look at some pages on my other blog for ideas to cut your bills:

• Installing the wood stove
• Plumbing and testing the wood stove
• Installing solar water heating
• Insulating the cavity walls
• Insulating the loft

Mike

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Update on UK gas supplies/prices - Libya and Japan effects

Just a very quick note here to update the earlier post I did about UK gas supply in the 2011/12 winter. A story on Bloomberg about daily price movements in the UK gas markets noted that:

Goldman Sachs Group Inc. said in a report yesterday that the continuing 30 million cubic meters a day of missing supply from Libya and an increase of 18 million cubic meters a day in liquefied natural gas demand from Japan following the earthquake on March 11 "have the potential to eliminate the supply overhang in the global LNG market, bringing it to balance." full story

This puts some numbers on the issues I brought up in the earlier post, and makes it clear that UK gas prices are going to be staying high for some time...

Mike

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Saudi budget implies sustained high oil price

When the UK needs to balance it's budget we have to make cuts, but when Saudi Arabia needs to do it, it prefers to have a high oil price instead. An article in the FT says:

The break-even oil price the Gulf kingdom requires to balance its budget will jump from $68 last year to $88 this and then $110 in 2015, according to new estimates by the Institute of International Finance, a leading industry group.

Only a decade ago Saudi Arabia was able to balance its budget with oil prices averaging $20-$25 a barrel.

Given that Saudi Arabia exports about 7-8 million barrels a day, out of total net exports globally of just under 50 mbpd (source), it has a strong influence on price. The country is increasing spending to try and placate the masses, fearing an uprising similar to that in Egypt or Libya, but the money has to come from somewhere, and for Saudi Arabia that can only mean oil.

If Saudi needs a high oil price, we will get a high oil price, end of story.

Mike

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Winter 2011/12 gas supply in the UK

I know it's strange to be thinking about winter when it's April and over 20C, but there's some interesting bits of news out recently.

First, there's a story from Reuters, saying:

Gas for Monday fell ... but prices for next winter and beyond rose on expectations that Japan will gobble up more of the internationally traded fuel when Britain needs it most.

"Banks are buying the back, thinking winter will be tighter with LNG diverted to Japan," one European gas analyst at a utility said, adding that a German government meeting to discuss the future of nuclear power in Europe's largest economy was supporting UK gas price in the far future.

There's several factors at play here:

1. The disaster in Japan means that they are importing a lot more LNG than they normally do, burning it to generate electricity. Given recent reports that it's going to take nine months to bring the Fukushima reactors to a cold shutdown, and the fact that the six reactors at that site are now offline for good, these elevated LNG imports are going to continue for some time to come.
2. Although Germany doesn't have many gas fired power stations right now, they are pretty quick to build, and as it's going off nuclear in a big way, there could be some new demand coming over the next couple of years for gas.
3. Libya used to export gas to Europe, via Italy. Clearly it isn't any more...
4. High oil prices drag gas prices higher, due to links in the energy markets.
5. According to statistics from DECC, UK gas production from the North Sea is falling at 8-9% a year.

Although problems tend not to arise until winter comes, it's interesting to note that wholesale gas prices (which you can look up here) in the past couple of weeks have been around 2p/kWh, compared to around 1.1p/kWh a year ago, so the above factors are clearly having an impact - expect more gas bill increases in the pipeline (pun fully intended ;-) ).

The other bit of news is that the National Grid published its 2011 Summer Outlook this week. Page eight starts a section on fuel prices, and says:

Recent developments in Japan, Libya and Australia show how volatile energy markets can be and how unforeseen events can impact energy prices on a global basis. As the UK now imports more than half of its primary energy, notably through gas and oil, these events feed through to UK energy prices and can change the short term view.

Good to see that at least some people realise that a tsunami in Japan, a civil war in Libya and floods (affecting coal mines) in Australia all have an impact on what we pay for energy here... Their Figure F1 shows what's happened to prices of electricity, coal, oil, gas and carbon over the past year, though I find the future predictions a tad optimistic:

Looking at the relative increases of gas and coal, it's not surprising that more coal is now being burned for electricity generation, especially as the carbon price hasn't increased over the period.

But finally, to come back to the main point of this post, page 17 of the National Grid's outlook report has an interesting graph showing where our gas comes from:

UKCS means UK Continental Shelf, i.e. the gas that comes from the North Sea and other offshore areas. As you can see, it's only going one way - there was a blimp from 2009-10, but that's because 2008-9 was a record drop, as DECC itself acknowledges.

So what can you do about it? Well, you can insulate your walls and loft, install solar water heating and look for non-gas forms of space heating (links are all to what we've done to our own house).

Mike

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Saudi Arabia did not make up for Libyan oil

A very interesting post on The Oil Drum:

We can put the situation almost entirely down to two things: the fact that Libyan production has plummeted, and that Saudi Arabia has made no significant move to compensate. In fact, Saudi Arabia slowed down production increases that it had been making in prior months.

...

So the world has abruptly lost something like 1.3mbd of oil production between mid February and March.

Read the full story on TOD.

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Delays to raising oil output from Kazakhstan

The Telegraph writes:

Kazakhstan is planning a three-year halt to work on the main phase of the super-giant Kashagan oil field development, as international oil companies Royal Dutch Shell and Exxon Mobil fight to convince the country's oil ministry to back a simplified design, which would slash costs by $18bn (£11bn) to $50bn.
...
The Kazakhs are considering shelving the new simplified design, and keeping the field producing at its initial rate of 375,000 barrels per day (bpd) for at least three years, after which the NCOC consortium could use a greater understanding of the geology to produce a better design for the second phase, when production is expected to hit 1.5m bpd. full story

Well, there's another 1m+ barrels per day that's not coming on line when it should have done... Of course, this helps reduce the steepness of the post-peak-oil decline (as this oil will stay in the ground for use later on), but it does bring the start of that decline closer.

Mike

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Effects of the new UK tax on oil production start to be felt

A story in the Telegraph says:

One of the world's biggest oil companies, Norway's Statoil, has halted work on two North Sea projects because of the huge tax hit on oil fields in the Budget.
...
It comes after smaller companies such as Valiant Petroleum warned that they are re-evaluating new projects, since the Chancellor increased tax by 12 percentage points to more than 62pc.

There have also been reports that oil majors have withdrawn plans to sell billions of pounds in North Sea fields nearing the end of their lives, leading to fears they will be abandoned with oil still in the ground.

Statoil, the Norwegian state-controlled company, said on Tuesday it will "pause and reflect" on the future of its Mariner and Bressay fields to the south east of Shetland.

Of course, there are pros and cons to this...

On the upside, if oil stays under the seabed for now, it could be extracted later, when North Sea supply has declined further and it will be worth more, and more vital to powering the UK's transition away from oil (assuming we get round to this...). If it stays under the seabed permanently, then that's good for reducing climate change.

On the downside, if existing oil fields are abandoned with oil left in them, it may be that it is difficult (i.e. expensive) to open them up again in years to come, when we might decide we actually really need that oil. In the short term, it will slowly push up oil prices, as new fields come online at a slower rate, so that the declines in output from existing fields are offset to a lesser degree than they would have been.

Overall, my personal opinion is that this is probably positive. It might mean the UK has more indigenous oil left in years to come, when imports have dried up. If abandoned fields can not be accessed again, this won't be the case, but at least then that's some CO2 not released to the atmosphere.

What might have been smarter would have been to have this new tax on oil production, but to also have kept the planned rises in fuel duty, spending the combined revenue on improved and maybe cheaper public transport. But budgets aren't often about doing what's smart, they're about placating the masses to avoid getting voted out of office at the next election, and perhaps also avoiding protests or even riots.

UPDATE
The BBC says:

Scottish Gas-owner Centrica is understood to be reviewing its current and future developments, while Valiant Petroleum also said it had cancelled a project worth up to £93m.

Apparently the government is now meeting with the oil companies to discuss the tax...

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Transcript of Richard Heinberg's presentation at Ecobuild 2011

If you missed Richard Heinberg speaking at Ecobuild 2011, as I did, you'll be pleased to hear that there's a transcript available. Here's the opening paragrpahs:

The premise of my new book, The End of Growth, which will be out in July 2011, is that world economic growth as we know it is hitting up against essential limits.

I am going to argue that the economic crisis that started in 2008 is more significant even than we have been told. To understand it I think we have to look at more than just the financial aspects of the crisis.

Well worth a read of the full transcript.

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Update to Triple Crunch Log from Jeremy Leggett

Jeremy Leggett has just updated his Triple Crunch Log. The email he sent out is well worth a read:

Folks

The triple-crunch log this month, updated now on my website, is dominated by events in the Middle East and the price of oil. As I write, Twitter is ablaze with talk of the protests planned by some Saudi citizens next Friday. Saudi troops are already being deployed around the Kingdom. Before there was any sense that contagion might spread even to Saudi Arabia, some analysts were warning of $220 oil ….”only” if Libyan and Algerian oil production was affected. Now one analyst says this of the prospect of Saudi disruption: “this is when you can come up with pretty much any silly number you want.”

UK Secretary of State for Energy Chris Huhne said yesterday that we face the threat of a 1970s-style soil shock. I fear he is wrong. In the two oil shocks of the 1970s, oil flow rates could be lifted after the respective political crises. This time there is real risk that they can’t, for much longer. The peak oil debate is about both “below ground” (geological) and “above ground” (geopolitical) considerations. The many people who fear that global oil production will drop in the near term, perhaps plunge, stress the potential for below- and above-ground factors to act in concert. Over the last few weeks, above-ground factors have started to hit us hard and fast, while fears continue to build that below-ground there isn't as much readily-recoverable oil left as so many people assume: that reserves and accessible resources are being overstated in the same systemic, cultural, "groupthink", way that the investment bankers overstated their "assets" in the run up to the credit crunch.

The UK Industry Taskforce on Peak Oil and Energy Security has been appealing to the UK government for co-operative contingency planning and proactive risk-abatement for three years now. We remain desperately keen to work with the UK government. The government is belatedly rushing out a plan to wean the UK off oil this week. Let us see what it says.

We are entering a time of consequences. Even if this phase of crisis abates, the core problem is simply delayed. I normally adopt a somewhat apologetic tone in these short monthly missives, but this month please allow me to be a little more strident. Nobody – whether individual, household, community, city, government or business – can responsibly afford simply to hope for a comfortable outcome on the peak-oil risk-issue any longer. We all need to be drawing up contingency plans, and taking whatever proactive measures we can.

Not all the potential outcomes of this latest human drama are negative. There is upside potential for a road to renaissance beyond, including in Saudi Arabia. But we will be challenged, and we will all need to play our parts in holding society together in the tough times ahead. The more proactive we are, obviously, the softer the landing, and the quicker we can engineer the road to renaissance.

For businesses, there is now no longer any excuse for following “business as usual” five year business plans, given the pervasive direct and indirect role of affordable energy costs in those plans. Your board cannot responsibly assume conventional energy prices are going to be in historical brackets over that period.

For those in the corporate world who feel they want to understand the underlying risk issues a little better, I and Chris Skrebowski, consulting editor of Petroleum Review, will offer a 1.5 hour webinar. If your company’s risk managers would like to take part, just send me an e-mail.

Best regards to all

Jeremy

Dr Jeremy Leggett
Founder and Chairman, Solarcentury and SolarAid www.jeremyleggett.net
Twitter: @JeremyLeggett

You can read his Triple Crunch Log here.

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New all-time high oil price in £/barrel - what it means for the UK

Back in early July 2008, oil prices were at $145/barrel, and with the sterling/dollar exchange rate at the time, this was equivalent to £73/barrel.

This morning, the price of Brent crude oil approached $120/barrel, while the West Texas Intermediate price (a US-focused price) was in the $100-105 range. There's lots of reasons for the difference between the price benchmarks, but the important thing is that WTI is only available in the USA, while Brent is named after production from the North Sea.

Add in the fact that the exchange rate is now $1.62 to the pound, while it was almost $2 to the pound in July 2008, and you now have an oil price this morning of about £74/barrel.

So, in the UK we're now at another all-time high oil price, so expect to see the price of petrol and diesel climbing over the coming days and weeks. Also, consider that the last price spike came at a time of affluence, and helped trigger the biggest recession in decades, while this spike comes while we're still barely out of that recession, and are about to face significant cuts in government spending.

Finally, the persistently high and climbing oil price makes nonsense of the Bank of England's view that the inflation pressure from oil is transient. Expect higher inflation, and interest rate rises to follow. Ultimately, the price of oil will only fall back when enough people decide they are too broke to buy it any more - and that's where we're headed anyway...

At least it's a sunny day.

Mike

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The Great Disruption has arrived

Well worth a read:

Why didn’t more of us see it coming? After all, the signals have been clear enough – signals that the ecological system that supports human society is hitting its limits, groaning under the strain of an economy simply too big for the planet. But we didn’t and, as a result, the time to act preventatively has past.

Now we must brace for impact. Now comes The Great Disruption.

It is true that the coming years won’t be pleasant, as our society and economy hits the wall and then realigns around what was always an obvious reality: You cannot have infinite growth on a finite planet. Not ‘should not’, or ‘better not’, but cannot.

Read the full story from Paul Gilding.

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Update on UK gas supplies

About a month ago I posted about the UK's gas supplies, and whether we'd run low this winter. Well, the good news is that January has been much milder than December was, allowing the withdrawals from UK gas storage to slow, and even for some gas to be injected for a short while, as can be seen from the graphs below for long, medium and short range storage:

As you can see, medium range stocks are now around the level they were a year ago, but long and short range stocks are still lower.

As I mentioned in my earlier post, there have often been incidents during past winters that have affected the gas supply, and this year is no exception. A gas processing plant that only returned to almost full capacity on 6th Jan 2011 after technical problems again ran into trouble on on 20th Jan. And the latest development is that Norwegian company Statoil has reduced output from the large Troll gas field while "planned short-term repair work" is carried out, which apparently should take less than a week. However, this has already significantly reduced gas supply to the UK through the Langeled pipeline, from the usual 70 mcm/day to under 40 at the time of writing. This comes during a slightly colder week in the UK, so is likely to result in gas storage being depleted further still.

Now we've had a mild-ish January, the situation is not as dire as it looked at the end of December 2010, but we're not out of the woods yet. Hopefully the companies responsible for managing our gas supply and storage, namely National Grid and Centrica, will act to ensure that a safe level of gas stocks is maintained through until the end of March, when hopefully it will be much warmer.

Mike

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Video: Tainter on "The Collapse of Complex Societies"

A while ago I read Joseph Tainter's "The Collapse of Complex Societies (New Studies in Archaeology)", which is an excellent book. It's quite academic, but easy to read at the same time. Now, for those who don't have the time, inclination or money to read the book, there's a great video of him giving a presentation on the same subject on YouTube.

It's in five parts, and well worth watching. He explains why societies become complex, and what this costs them in terms of resources and money, then goes on to discuss examples of why complexity contributed to the collapse of past societies. He concludes by relating this to our present society, which has only managed to survive an increase in complexity through the use of a subsidy - fossil fuels. Of course, the problem is that this subsidy is pretty much at its peak now, and will start to decline, therefore requiring a decline in our society's complexity...

Here's the videos (p.s. if they don't all display, just reload this page):










Mike

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The UK media wakes up to our low gas stocks

Finally, the mainstream UK media has realised that there may be a problem with gas supplies, even though I wrote about it a few weeks ago. The Guardian says:

The amount of gas kept in storage in the UK is at its lowest level in five years for so early in the winter, according to National Grid.

Last month, was the coldest December since 1890, and the UK's gas storage facilities, which are among the smallest in Europe, are already more than half empty as they cope with record demand. Domestic supplies of gas have also been exported to the continent via the Interconnector under-sea pipeline, because prices are higher there than in the UK.

Full story

Thanks to PowerSwitch for the tip on the story.

On a related note, the weather's been less cold in January so far, but on most days we have still been withdrawing gas from the long range storage at Rough, while reducing imports from their peak levels. A more cautious approach would be to keep imports up and stop withdrawing from storage, or better yet, inject gas back into storage. But that isn't the most profitable way of operating, so our gas security suffers instead.

Still, the milder weather has bought us a bit of time, but the risk to supplies still depends on what happens with the weather over the coming weeks.

Mike

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A new peak in global monthly oil production?

A couple of interesting posts appeared on The Oil Drum this week, discussing the latest oil production figures. It looks like November 2010 oil production may have exceeded the previous peak of July 2008. A couple of points to consider though:

• The graphs on TOD still show that we're well and truly on the "bumpy plateau", with no steady ramping up of oil production in the way that there used to be pre-2005.
• These figures are for the oil produced, but as EROEI falls, the actual oil available to consumers outside the oil industry falls, because the industry itself is consuming more oil to produce what it does.

 (graph from The Oil Drum)

Here's the articles from TOD:
New High of Liquid Fuel Production
Will 2011 be a rerun of 2008? (Longer version)

Mike

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