Thursday, 24 February 2011

How well does the Volt really work for saving gasoline?

Those of you who read this blog know I'm a big fan of electric cars to displace oil usage from the soon to be declining oil production.

Those who buy an electric car will be laughing all the way to the bank as the nay-saying F150 (and similar) will be whining about gas prices north of $5 a gallon.

So let's look at a real-world example of this:

Lyle Dennis, who lives in New York state and owns was given one of the first pre-production volts back in November last year. I'm going to report on how it went.

Lyle had the vehicle for 90 days and drove it 5100 miles. It has to be noted that this period was during the frigid weather we've been having so it was a fairly good winter test. (Though I'd like to see an equivalent test in the summer time in Arizona but let's not quibble).

Anyways, the results were he drove 5,100 miles and used 46 gallons of gasoline. It should be noted that his commute was greater than the all electric range of the volt so someone whose commute is less will be mostly all electric.

Now if we assume 36KW/h per 100 miles driven that gives us 36x51 = 1836 KW/h. The average price for electricity in the US varies between 10c/KW/h up to 20c/KW/h. Let's take the high end.
20 cents times 1836 gives us $367 plus $3 per gallon @ ($3x46=$138) gives us a total fuel cost of $505. Now it's somewhat less than that because I don't know how much extra he drove outside the electric range, but let's assume it was 10%. So that means the total cost was in the region of $470 for 5,100 miles at today's price of $3 per gallon.

If, instead, he had driven a diesel sub-compact such as a VW jetta, whose fuel efficiency is about 45 miles per gallon we would have 5,100 / 45 x $3 = $340.

So at $3 per gallon, it's still about 20% cheaper to drive a high efficiency diesel (assuming we can get fuel) using the HIGHEST prices in the country for electricity. (Note, however, that most of the country will be around 15c per KW/h meaning we have breakeven but let's continue to be unfair to the volt by using the highest possible cost for electricity).

If we drive a more regular small car at 30 miles per gallon, then at today's prices the cost is $510. So we're ahead of the average small vehicle with "good" gas mileage in the USA today at current prices, just not a high efficiency diesel like a VW Jetta.

Let's fast forward into a future of higher gas prices and instability of supply such as we are temporarily experiencing with libya et cetera.

At $4 a gallon 46 gallons cost 4x46 = $184 and we still pay $337 for electricity (since electricity prices are not affected by oil supplies or unrest in the mideast). That gives us a fuel cost for the volt of $521 for the 5,100 miles.

For the high efficiency vehicle we get 5,100/45 x $4 = $453. It's now 10% cheaper to drive a high efficiency diesel than it would cost for the most expensive electricity in the country, but all the rest would now be cheaper.

For the average small vehicle at only 30 mpg it's starting to mount up. It's now $680.

So let's look further ahead, at $5 a gallon. (Note that $5 a gallon is a sure thing by 2015 even without supply disruptions based on current trends).

The volt will cost 46x$5 = $230 plus $330 is $560. As you can see, even at $5 per gallon the cost has only gone up slightly for the volt because part of the fuel usage is shielded from price rises.

Now let's look at the Jetta again: $566. Now even the Jetta costs more (one of the most fuel efficient production vehicles of it's size in the world).

For the average small car it's a whopping $850 a month.

The F-150 driver at this point will be screaming, because he'll be paying nearly $1700 a month in gas for the same commute. Ouch!

In any event, the doomers will say "well I'm better off with a jetta (until gas prices hit $5 a gallon)".

My response is, that's 2-3 years away at best. Unless you plan to lease a new Jetta NOW and then get another one at the end of the lease AND you pay top dollar for electricity, you're better off getting a volt.

Not just that: the moral smugness of driving a vehicle powered by electricity produced by Americans instead of paying for a war to maintain oil supplies in foreign lands.

Wednesday, 23 February 2011

Electric Cars and the magic date of 2015

The Baker Institute for Public Policy put out a report indicating that by far the best bang for the buck in mediating any putative oil crisis would be the rapid and aggressive uptake of electric cars.

I tend to agree with that.

Noting that it is stated Obama policy to have a million electric cars on the road in the US by 2015, I have wondered if that may have been a little optimistic given the continued and persistent whining you hear from the big truck drivers who believe that electric cars are very expensive glorified golf carts which are unsafe etc etc and they just won't drive them.

Sounds like a baby throwing it's toys out of the stroller in a tantrum to my ears, but nevertheless, there is indeed some price resistance even with the generous rebates given by the federal government. The production numbers in terms of vehicles produced per year were also on the low side to my eyes, so I suspected that though there is seed production capacity currently under construction or already in operation by most of the major auto manufacturers I had felt it would be premature to ask "are we there yet?" and answer with a definitive yes.

Now, however, into the scene jumps China, the 800 lb gorilla in the room. They have just come out and made a statement that they want to manufacture 1 million vehicles per YEAR by 2015.

Now that is more like it. If we are seeing prices in current ranges with production capacities in the thousands of units then I suspect that we may see between a 30-50% drop in price for the batteries with current generation. That could mean that e.g. a volt could be sold for $25,000-$30,000 and a leaf could be sold for $15,000-$20,000.

Now THOSE are numbers the average joe can work with.

Good times.

Tuesday, 22 February 2011

New Biodiesel Process based on Photosynthesis

There has been a paper published in "Photosynthesis Research Magazine" which is a peer reviewed journal in which a spinoff from Harvard, Joule Research, outlines its process.

The claims are nothing short of extraordinary.

Allegedly, Joule has bio-engineered an organism which is capable of continuously excreting what amounts to bio-diesel without the need for energetically expensive pre-processing of biomass.

The result is allegedly 10X greater than predicted yields from algae or 50X greater than the best biomass crops of today.

If we assume an extremely skeptical eye (i.e. not believing in magic) and imagine that the process works but it's not 50X but more like 2X or even 1X then we could still conceivably have a lower cost process depending on the cost of the industrial plant required.

I suspect we would be looking at some kind of bioreactor so the costs could be anywhere from "more expensive" to "significant" and thus the at-the-pump cost would of course depend on yield.

Let's wait and see on this one.

Libyan Oil Exports Destination

This is a short post for now with just some regurgitation of facts and very little analysis.

What is the current gap between supply and demand in the world oil market?

About 4 million barrels per day.

What is the size of libyan oil exports?

About a million and a half barrels per day.

Where do Libyan Oil Exports go?
In 2009, Brazil took 3%, Italy took 32%, Germany took 14%, China took 10%, France took 10%, Spain took 9%, the US took 5%, Other European countries took 14% and Other Asian Countries took 14%.

What is the oil consumption of Europe?
About 14 million barrels per day. So the loss of Libyan oil is about 9-10% of the EU oil supply.

On a positive note we still have about 4 million barrels per day of excess capacity so we're not (yet) short and unlikely to be facing a "last light" scenario any time soon.

This, however, does underline the need to ramp up non-oil based alternatives.

Hopefully any price spike ($4 a gallon anyone?) will convince the F150 and Dodge Ram drivers that they may need to start thinking about e.g. a GM Volt for their daily commute

Any case, we're about to find out if the global economy really does collapse based on "high" oil prices. I suspect it won't because my theory is that high prices (notwithstanding oil shocks) are generally driven by a strong economy instead of the other way round.

Friday, 18 February 2011

Historical Natural Gas Production in the US

I've been having a conversation with a fellow peak oiler about historical natural gas production in the USA and I decided to have a look at it.
First of all, according to dieoff theory, once a resource peaks the only way to extract any more is at lower EROEI and lower EROEI and since our inputs are also declining we reach a point of diminishing returns and at that point peak is reach and nothing can be done to reverse the decline in supplies. So let's take a look at the graphs. This is the graph of US natural gas production since 1970 leading up to 2000.

And this is the graph of natural gas production from 1990 project out
to 2035 from the EIA.

Now what you can see from these graphs is the following:
The highest point of production (i.e. the "peak") in the first graph was in 1970 at 21TCF and subsequently production dropped to about 16TCF in 1985. Production bounced around 16-18TCF until abut 1990.
On the second graph you can see that production continued bouncing around 16-18TCF (not including imports from e.g. Canada) until 2000 when conventional supplies started on a downslope (aka the "final" peak and decline).

Five years later, however, you can see that the decline has been reversed by the addition of shale gas (which has been enabled by the development of fraccing technology to liberate natural gas from the massive shale deposits). In 2010 we are slightly above the 1970 domestic production of natural gas. Including imports from Canada, the US consumption is currently running about 3TCF higher than the peak in the 1970s.

Now if you were a doomer you might turn round and say that it's hardly a mark of success that it has taken us 41 years to return to the same production levels we had in 1970.

On the other hand, any alleged peak is supposed to be final and lead to the collapse of industrial civilization.

But, the doomers might say, you're still doomed because we can barely get back above 1970s levels even with increased production.

Not so. In order to keep the wheels turning, we only need to cover the percentage decline from oil. If we look at transportation as the main consuner (2/3 of all oil usage) then we run about 12 million barrels per day consumed in the US. If we don't try to increase mpg and don't use any other substitutes at 5% decline rate (brutal by anyone's imagination and likely decline rates are in the region of 2%) that means we have to replace 0.6 million barrels per day in the USA to keep the fleet running.
Using the conversion factor of 1 million cubic feet of natural gas equals 172 barrels of oil. So to replace 600,000 we need 3488 mmcf which is 3.5 TCF. If we look at production from 2005 to 2010 we increased production about 5 TCF so that means we can do an increase of 1 TCF per year.

So we're short using all the assumptions and taking the position that 1 TCF increase per year is the maximum increase we can do.

If we ignore imports from Canada which could probably boost production, we're short about 2.5 TCF per year increased production to replace the lost 0.6 million barrels per day oil supplies. We'll also ignore the increasing domestic US oil production from the bakken and similar formations and also ignore increasing Canadian oil production from the oil sands.

The current US fleet runs about 15 mpg. Can we increase efficiency by 3 times?
Yes we can.

So how many increased fuel efficiency vehicles do we need combined with a yearly increase in production of natural gas of only 1TCF when what we need is 3.5 TCF if we did nothing?

We need to increase the fuel efficiency equivalent to the decline rate.
That means if 5% of our fleet no longer has any oil to fuel it, then we need to increase the fuel efficiency of that component of the fleet in order to be able to utilize the available increased natural gas production.

The current US fleet is about 220 million vehicles. 5% of the fleet is therefore 11 million vehicles.

What is the current annual market in new US vehicles? The answer is about 18 million vehicles.

So clearly we are already buying enough vehicles every year.

My conclusion is the following: If we ignore increasing domestic oil supplies from the bakken and other similar formations, ignore increasing oil production from the Canadian oil sands, then we can maintain the US fleet at the current size with no interruption if half of new vehicles purchased each year have a fuel efficiency rating of 45 miles per gallon and are converted to natural gas.

Of course we also have the facility for some of those vehicles to be hybrids or diesel or electric, so we don't really need to convert 10 million vehicles a year to high fuel effiency.

Thursday, 10 February 2011

Bakkens, Export land and oil depletion

Contrary to what the doomers would have us believe, we are in fact able to increase recoverable reserves by the use of technology. This is common wisdom in the oil industry and you have to be some kind of conspiracy whack job to dismiss this out of hand.

Two such obvious examples are the recent technological breakthroughs that allow extraction of shale gas in such great quantities that not only has a decade long peak and decline been reversed in North America, but the USA in particular is now so awash in the stuff that they are exporting it to Europe.

Although oil is harder to do than gas and in all likelihood, the USA by itself won't be able to replace ENTIRELY it's conventional output by unconventional oil, there have nevertheless been significant breakthroughs.

The Bakken field in North Dakota has been the focus of much frantic activity in the last five years as new technology was developed by the likes of Chesapeake Energy to extract oil from the tight reservoirs in the Bakken which were previously inaccessible by older technologies. This technology has now become so mature that the decline in oil production in the USA since the 1970s has stopped and actually gone into reverse.

I thought this wasn't supposed to happen?

In any case, it doesn't stop there. Ask yourself this question: Are there likely to be similar reservoirs to the Bakken in other countries?

Is it likely that the Bakken is the only such reservoir in the world?

In fact there ARE other such reservoirs and now industry analysts are predicting that it could be conceivable that the USA would be able to close it's import gap by up to 60% by 2020.

That in contrast to the so-called "Export Land Model" which says the USA will be screwed. In fact it might be Saudi Arabia which instead has a potential problem because their economy is extremely dependent on oil exports.

I'll go further: the Bakken formation on the Canadian side is *underdeveloped* and it's likely that there will be other Bakken types formations in Canada and that continuing and ongoing improvements in process engineering in the oil sands will enable the potential to close the export gap *altogether* with the help of imports from Canada and other friendly nations such as Australia which has recently discovered it's own version of the Bakken which may end up being even more prolific.

I say potential Saudi problem and potential export gap, because I doubt that trade will just stop even if friendly countries can in fact meet the import needs of the USA. We will *still* buy some oil from Saudi. Saudi Arabia is an ally after all and they need to eat. We produce a lot of wheat and other agricultural products and they need to feed their population. We might need to re-sell the oil we buy from them onto the world market but we won't let them starve.

PS This is not to say we should all go out and buy Hummers. Instead I propose we all buy electric cars and we export ALL of our oil. Then there might be a glut. Wouldn't that be a blast.

Follow up on Saudi Wikileaks "scandal"

Saudi Oil Minister al-Husseini says wikileaks quoted him out of context.

Wikileaks effectively says that the oil minister said that the Kingdom does not have the estimated reserves bandied about and thus the oil reserves are overstated by 40%.

In fact, what he was alluding to was that in 2007 Saudi State Oil Company Aramco said that their reserves were 716 billion barrels which would on current technology trends rise to 900 billion barrels recoverable in 20 years time (2027).

The denial wikileaks alleged meant that the 716 billion barrels were false.

In fact, al-Husseini goes on record to say that the 716 billion barrels reserves are almost certainly correct whereas he was skeptical about the 900 billion barrels.

The full story is here:

Make up your own minds

More on Saudi Arabia

The big buzz at the minute on the doomer sites is that wikileaks says the Saudis effectively say peak oil is real and that it's coming to a town near you by 2015.

The detail, however, is more interesting.

Unlike the more extremist doomer peak oil sites like dieoff which will now start ranting about the collapse of global industrial civilization circa 2015 caused by rapid depletion of oil supplies upon which *everything* depends, what the Saudis are actually saying is this:

By 2015 there will be a global production plateau which will be difficult to breach without significant investment. This plateau will last about 15 years followed by a sharp and then decelerating slow decline.

That's not too too far off of my own estimate, although I reckon the plateau will be closer to 10 years and that much of the decline will be mitigated by substitution, demand destruction as well as efficiency.

The upside to this is that it means we have something like 15-20 years to do a switchover.
Hirsch said that if we hit peak then we would have needed a crash program 10 years in advance of *depletion* in order to avoid liquid fuels shortages.

If we take the Hirsch report as reasonable rather than the out on the looney farm fringes (and I do, in spite of his failure to address certain substitutes) then we can say the following based on what the Saudis are saying:

1. We still have time to start the 10 year crash program if so needed
2. If we start now then maybe we don't need a "crash" program and merely an intensive program will be adequate

In fact, we have *already* started. Pressure to electrify the transportation system has been mounting since at least 2003. Great progress has been made on process engineering and cost reduction for both renewables and energy storage. Great progress has also been made in the transportation sector itself. We have viable (though still somewhat expensive) electric vehicles coming into production from almost all major manufacturers as well as Natural Gas alternative fueled vehicles. We also have made great leaps in our ability to extract natural gas from shale and are making increasing strides in our ability to extract from formations similar to the bakken. There are improvements to the processes for extracting usable synthetic crude from the oil sands. There has been deepwater oil discovered in quantities great enough to stave off depletion for probably another five to ten years giving us yet more breathing room. There is significant pressure to move towards fast breeder reactors to extend uranium reserves and additionally there is now a program by both India and China to attempt to utilize the much greater resource of thorium. There are efficiency programs underway also through tax breaks in many countries. In short we have options even if we have been slower on the uptake than at "emergency ramming speed".

While I do not think things are going to be easy (particularly due to the financial crisis in the western world instigated by the housing bubble and subsequent popping thereof) and I suspect we in the "developed" world are possibly going to see something like a combination of high inflation a la Britain in the early 1970s punctuated with recessions for the next two decades, I seriously doubt we are going to see fullscale collapse as foreseen by the extreme doomers.

We have the pieces in play, now it's just time to watch and see what shakes out.
I'm excited. We live in interesting times.

Friday, 4 February 2011

The Economy is driven by oil

This is a very short post, fueled by Taco Bell euphoria on a friday afternoon.

So here's a thought: Many of the doomers are of the opinion that if oil production declines then GDP will decline because there is a 1:1 correlation between oil usage and the economy.

Sounds plausible right?

OK How about this for a thought experiment:

Simply buy as much oil as you can and burn it. Will that cause the economy to grow faster than anybody else?

In other words does energy inefficiency drive the economy?

I'll stick my neck out and say, NO.

I suspect that rather than the economy being driven by the amount of energy it consumes, I think there is a correlation (though NOT 1:1) between the better the economy, the more energy used all things being equal.

When you try to look at the data, however, it's hard to get a clear picture. What's definitely not true is that profligate energy consumers have the best economy in terms of GDP per head except possibly in the case of Norway.

Seems to be that Norway wastes a shit load of energy per unit of GDP and so also does Iran.
But yet, Norway is rich and Iran is poor. What gives? Maybe the *real* correlation is that if you have a ton of it, you *waste it*?

China (not a rich country in terms of GDP per head), the Netherlands and the US all use about the same amount of energy to produce a unit of GDP. China is partly self sufficient in energy and so is the USA. The Netherlands imports much of it's energy.

Germany, Japan, the UK and India all generate GDP using less energy per unit of GDP generated.

What's interesting about that is that if you look at the GDP numbers per head instead of GDP per unit of energy the ranking is different.
#1 Norway $52,238
#2 USA $47,132
#3 NL $40,777
#4 Germany $35,930
#5 UK $35,053
#6 Japan $33,828
#7 Iran $11,024
#8 China $7,518
#9 India $3,290

So what do the rankings show: The highest (out of this small section) is Norway, which has a large oil production per capita. The only other large oil exporter in the list is Iran who is down at the bottom end and nowhere near the rich countries. The world's pre-eminent manufacturing rising star is China, who is no more efficient nor more inefficient at producing GDP using energy than the United States or the Netherlands.

The interesting question is this: where are the countries placed who have no oil resources of their own?

Japan, the Netherlands and Germany virtually have to import all of their oil yet they are all firmly in the rich country grouping. What gives?

Perhaps the relationship of GDP to energy usage for a country is more complicated than the doomers make out hmmm?