Yet another process which will shore up hydrocarbon based heavy trucking during the depletion phase of peak oil has been created.
Previously there has existed the Fischer-Tropf process which allows conversion of coal to liquids, with significant energy costs, coal and other inputs including hydrogen.
This new process has been developed by a company called Quantex Energy based out of Calgary, Alberta and is significantly more efficient than the Fischer Tropf process to the point of estimating that it could be easily scaled to "millions of barrels per day in North America".
See www.quantex.com for news. Quote from the site follows:
"Quantex Energy Inc is developing a process which seeks to refine coal as easily and inexpensively as crude oil processing. Taking advantage of the fact that the hydrocarbon refining industry has already developed the technology for "upgrading" heavy hydrocarbons such as Venezuelan Orinoco crude, or Alberta Oil Sands crude, Quantex Energy Inc seeks to produce liquids that meet the same specifications as heavy crude.
This new process is in distinct contrast to processes of the 1970s and earlier, which assumed that coal should only be made only into sweet light crudes. Consequently, protocols of the 1970s called for adding 30 pounds of hydrogen per barrel of synthetic crude, in turn requiring enormous high pressure reactors with hour long processing times. In contrast, the Quantex Energy Inc process requires only a few pounds of hydrogen to liquefy coal. It is primarily a depolymerization and cracking process. The reasons why the Quantex process is perceived to be advantageous compared to conventional direct liquefaction are:
* Requires significantly less hydrogen per barrel versus other CTL technology
* Hydrogenation is accomplished through a patent pending process
* Requires only minutes of processing time rather than hours in the break through bio-hydrogenation reactor
* Is accomplished at pressures significantly lower then competitive processes
* No molybdenum or cobalt catalysts are required.
Unlike the Fischer-Tropsch indirect liquefaction process, the Quantex coal to liquids process produces no carbon dioxide during the liquefaction process. The Quantex process is not based on gasified coal at all. Rather, the Quantex process is a simpler-cheaper-faster direct liquefaction process, which seeks to produce commodity fuels and chemicals-particularly heavy products such as pitches and heavy crude at the lowest achievable pressure and residence time.
Hence, given the enormous amount of coal reserves in Canada and the United States, the Quantex process can be scaled to the level of millions of barrels per day at a fraction of the cost of conventional liquefaction schemes."
Showing posts with label investment risk. Show all posts
Showing posts with label investment risk. Show all posts
Tuesday, 11 May 2010
Tuesday, 9 February 2010
The Financial System will collapse because of Peak Oil Part II
The collapse of the financial system post peak oil part II
In the first part I debunked the myth that the global financial system will collapse once peak oil becomes evident because allegedly "growth" is based on oil and when oil stops growing we will no longer have growth. I did this by demonstrating that we do not in fact have a growth system but instead have a cyclical system and that our system is based on risk rather than the prospect of continual growth.
I will continue this by asking the question: Can the payment of interest be continued past peak oil?
This question is a very loaded question replete with multiple assumptions (as are many of the assertions on which dieoff are based).
The answer to the question "Can the payment of interest be continue past peak oil?" is met with another question: "Can surplus be generated post peak oil in order to pay interest?"
This is turn is answered by the question: "Do we or can we do work other than that provided by oil powered machinery?" and "Will this work provide any surplus?"
If we look closely the ultimate question is this: After peak oil, will ALL work be agricultural?
If the answer is yes then clearly there will be no surplus and thus no interest.
Back in the real world however, we see that even in heavily agricultural countries cities existed prior to the use of oil. Cities clearly are not deriving their income from agriculture and THUS they must have been living off of some kind of surplus. This is simple specialization of labor. In addition, in every single human society there is a power law describing the wealth distribution of the population. The human population since the invention of agriculture has never been homogenously poor. There have always been rich people, wealthy people and those who service them living in the cities. This is not likely to disappear after peak oil. And since the definition of a wealthy person is someone who has more than they need to live, quite clearly such a person will be capable of paying interest since they will be able to accumulate savings. This is also the case for EVERY SINGLE PERSON who earns more than their daily bread.
It's also interesting to note that the world's largest investors (such as Warren Buffer, HSBC bank etc) are not merely investing in gold, oil and ammo but instead are investing in what they reckon will be the markets of the future (i.e. electrified transportation systems, enhanced oil extraction, shale gas, renewables and nuclear (among other things)), quite the opposite of what you would expect if they were aware (as doomers like to suggest) that the world was about to disappear up it's own butt due to the collapse of the financial system brought on by peak oil.
But then again, rich people and their advisors are clearly stupid and unqualified right? Obviously the doomers know better. Sheeesh...
Those who say peak oil will lead to the collapse of the financial system are simply ignorant of real world economics. But that's the point isn't it? The dieoff crowd says "economists are wrong" and thus the world is doomed. My five bucks says otherwise.
In the first part I debunked the myth that the global financial system will collapse once peak oil becomes evident because allegedly "growth" is based on oil and when oil stops growing we will no longer have growth. I did this by demonstrating that we do not in fact have a growth system but instead have a cyclical system and that our system is based on risk rather than the prospect of continual growth.
I will continue this by asking the question: Can the payment of interest be continued past peak oil?
This question is a very loaded question replete with multiple assumptions (as are many of the assertions on which dieoff are based).
The answer to the question "Can the payment of interest be continue past peak oil?" is met with another question: "Can surplus be generated post peak oil in order to pay interest?"
This is turn is answered by the question: "Do we or can we do work other than that provided by oil powered machinery?" and "Will this work provide any surplus?"
If we look closely the ultimate question is this: After peak oil, will ALL work be agricultural?
If the answer is yes then clearly there will be no surplus and thus no interest.
Back in the real world however, we see that even in heavily agricultural countries cities existed prior to the use of oil. Cities clearly are not deriving their income from agriculture and THUS they must have been living off of some kind of surplus. This is simple specialization of labor. In addition, in every single human society there is a power law describing the wealth distribution of the population. The human population since the invention of agriculture has never been homogenously poor. There have always been rich people, wealthy people and those who service them living in the cities. This is not likely to disappear after peak oil. And since the definition of a wealthy person is someone who has more than they need to live, quite clearly such a person will be capable of paying interest since they will be able to accumulate savings. This is also the case for EVERY SINGLE PERSON who earns more than their daily bread.
It's also interesting to note that the world's largest investors (such as Warren Buffer, HSBC bank etc) are not merely investing in gold, oil and ammo but instead are investing in what they reckon will be the markets of the future (i.e. electrified transportation systems, enhanced oil extraction, shale gas, renewables and nuclear (among other things)), quite the opposite of what you would expect if they were aware (as doomers like to suggest) that the world was about to disappear up it's own butt due to the collapse of the financial system brought on by peak oil.
But then again, rich people and their advisors are clearly stupid and unqualified right? Obviously the doomers know better. Sheeesh...
Those who say peak oil will lead to the collapse of the financial system are simply ignorant of real world economics. But that's the point isn't it? The dieoff crowd says "economists are wrong" and thus the world is doomed. My five bucks says otherwise.
Tuesday, 6 October 2009
The Financial System will collapse because of Peak Oil Part I
The Financial System will Collapse because of Peak Oil.
It's often heard on peak oil doomer sites that Peak Oil will lead to the collapse of our financial system because our system depends on growth and peak oil will cause growth to stop and thus since our financial system owners know this, once peak oil is identified, all the money will be pulled out and things collapse.
Let's take a look at these one by one.
1. Our Financial System Depends on Growth
This is really a two part argument. The first is about interest and the second is about growth in the economy. In the first case the argument is that the financial system depend on interest and that it needs interest to continually be paid back otherwise the scheme will collapse.
OK Let's look at that.
What is interest?
It's a percentage of the principal of a loan which will be paid back in addition to the original principal.
OK with me so far? It's naively possible to say that if the lender doesn't get paid the interest the system will collapse, right? And further, that OIL is required to generate the income to pay it back. Well, interestingly (no pun intended) interest doesn't always get paid back, and also interest existed long before we had an oil based economy.
The money to pay back interest is generated from income which is not spent now and comes from labour OR capital. Note that I said labour OR capital, not capital only.
Is the financial system based on interest?
Certainly part of it is, but it's naïve to say that all of it is.
The system in fact is based on RISK. The higher the risk, the greater the reward. Sometimes this reward comes in the form of interest (as in money lending). Sometimes it comes in the form of asset appreciation due to speculation, yet other times it comes from "buy low, sell high".
The argument that interest will disappear with peak oil must be extended fully to mean that no profit can be made post peak oil. This is clearly false.
In fact, even the interest part of the financial system is based on risk. The riskier the debtor, the higher the interest the debtor must pay in exchange for the loan. In other words, the interest is a reward for taking the risk, not a guarantee of return. Currently as it stands, loans are not repaid all the time. Some of them are collected and some are not. The bankruptcy system is in place to make sure that an honest but insolvent debtor can escape his/her debts and the bad debt is written off via the taxation system.
The best the peak oilers can argue is that an oilshock induced recession would increase the number of bad debts (as recessions always do) and thus the amount of credit available to the system would reduce (called "tightening lending"). This is hardly a disaster and is the normal situation. Post recession, any banks would be better placed to predict who would be a good creditor and who wouldn't. So the interest part would conceivably contract but not disappear.
Is the entire system based on interest? No it is not.
Parts of it (the commodities market, the futures market and the stock market) are based on asset appreciation. Bidders for the various instruments bid on their perceived value of an instrument whether it is undervalued (if they're going long) or whether it is overvalued (if they're going short). This type of instrument (in the stock market for example) is based on the premise that a profitable company will be worth more in the long run and thus pay higher dividends (share of profit) in the future, or not as the case may be. Since stock markets existed in the seventeenth century (pre industrial revolution) and commodities markets for much longer than that, it's hard to argue that they depend on oil.
The second case is an interesting one because it using the word growth to mean many things. In the context of the peak oil doomer argument, growth is generally assumed to mean "growth in resource usage" because of the assertion that economic growth needs energy growth and that the only "real" kind of growth is growth that creates more "stuff". The doomer argument is that you cannot have unlimited growth in a finite world and our system (based on infinite growth) is therefore unstable and will ultimately collapse.
Well, if you look at the question of "growth", with regards to the financial system, what you're really talking about is the growth of savings. Is it possible that savings can grow without an oil based economy? Why yes it is. All someone has to do to grow their savings is to spend less than they earn. Unless the doomers are going to argue that peak oil means everybody suddenly has to spend every penny they ever earn from now on, then the argument that growth of savings will stop is nonsensical. Clearly we can grow savings.
Can we grow the economy? Yes we can. All we need to do is have people spend more and more money. How is this possible even today if people don't have infinite money? It isn't possible long term even today. Growth today is based on fractional reserve banking which multiplies the money in deposit accounts by the "money multiplier". This allows the economy to grow beyond it's natural rate limited by the growth of savings.
Now the more astute among you will have noticed an anomaly when we talk about growth.
It's this: growth cannot possibly continue forever unless either income rises forever or else the money multiplier is infinite.
So we have stumbled on a fundamental truth. Our current system isn't based on growth.
The horror!
So what IS it based on?
Cycles.
This is evident in the commodities markets where the cycles are visible based on growing seasons. EVERY other market is exactly the same, except the cycles are longer.
Clearly since summer always follows winter, a system based on cycles will always seed, grow, boom and bust only to do the same again next time. The key point is that one industry is replaced by another and "growth" is in the new industry which replaces the old.
What we are witnessing with peak oil is the end of the boom phase of the oil industry. Concurrently with this we are in the very early stages of the "seed" phase of the industries that will replace oil.
Our system is based around this fundamental fact.
Now the doomers could say "but our economy has been growing steadily concurrently along with oil".
I would argue that what they are seeing is correlation, not causation.
In an apples to apples comparison, a large populous country with similar laws and infrastructure to a smaller country in terms of population with similar laws will have a smaller economy.
There is thus a reasonable argument behind the proposition that just maybe, the world economy is so large because the population is so large and that the larger the population, the more energy is used. The causative factors are exactly backwards from what the doomer crowd would have us believe.
The second part will follow later.
It's often heard on peak oil doomer sites that Peak Oil will lead to the collapse of our financial system because our system depends on growth and peak oil will cause growth to stop and thus since our financial system owners know this, once peak oil is identified, all the money will be pulled out and things collapse.
Let's take a look at these one by one.
1. Our Financial System Depends on Growth
This is really a two part argument. The first is about interest and the second is about growth in the economy. In the first case the argument is that the financial system depend on interest and that it needs interest to continually be paid back otherwise the scheme will collapse.
OK Let's look at that.
What is interest?
It's a percentage of the principal of a loan which will be paid back in addition to the original principal.
OK with me so far? It's naively possible to say that if the lender doesn't get paid the interest the system will collapse, right? And further, that OIL is required to generate the income to pay it back. Well, interestingly (no pun intended) interest doesn't always get paid back, and also interest existed long before we had an oil based economy.
The money to pay back interest is generated from income which is not spent now and comes from labour OR capital. Note that I said labour OR capital, not capital only.
Is the financial system based on interest?
Certainly part of it is, but it's naïve to say that all of it is.
The system in fact is based on RISK. The higher the risk, the greater the reward. Sometimes this reward comes in the form of interest (as in money lending). Sometimes it comes in the form of asset appreciation due to speculation, yet other times it comes from "buy low, sell high".
The argument that interest will disappear with peak oil must be extended fully to mean that no profit can be made post peak oil. This is clearly false.
In fact, even the interest part of the financial system is based on risk. The riskier the debtor, the higher the interest the debtor must pay in exchange for the loan. In other words, the interest is a reward for taking the risk, not a guarantee of return. Currently as it stands, loans are not repaid all the time. Some of them are collected and some are not. The bankruptcy system is in place to make sure that an honest but insolvent debtor can escape his/her debts and the bad debt is written off via the taxation system.
The best the peak oilers can argue is that an oilshock induced recession would increase the number of bad debts (as recessions always do) and thus the amount of credit available to the system would reduce (called "tightening lending"). This is hardly a disaster and is the normal situation. Post recession, any banks would be better placed to predict who would be a good creditor and who wouldn't. So the interest part would conceivably contract but not disappear.
Is the entire system based on interest? No it is not.
Parts of it (the commodities market, the futures market and the stock market) are based on asset appreciation. Bidders for the various instruments bid on their perceived value of an instrument whether it is undervalued (if they're going long) or whether it is overvalued (if they're going short). This type of instrument (in the stock market for example) is based on the premise that a profitable company will be worth more in the long run and thus pay higher dividends (share of profit) in the future, or not as the case may be. Since stock markets existed in the seventeenth century (pre industrial revolution) and commodities markets for much longer than that, it's hard to argue that they depend on oil.
The second case is an interesting one because it using the word growth to mean many things. In the context of the peak oil doomer argument, growth is generally assumed to mean "growth in resource usage" because of the assertion that economic growth needs energy growth and that the only "real" kind of growth is growth that creates more "stuff". The doomer argument is that you cannot have unlimited growth in a finite world and our system (based on infinite growth) is therefore unstable and will ultimately collapse.
Well, if you look at the question of "growth", with regards to the financial system, what you're really talking about is the growth of savings. Is it possible that savings can grow without an oil based economy? Why yes it is. All someone has to do to grow their savings is to spend less than they earn. Unless the doomers are going to argue that peak oil means everybody suddenly has to spend every penny they ever earn from now on, then the argument that growth of savings will stop is nonsensical. Clearly we can grow savings.
Can we grow the economy? Yes we can. All we need to do is have people spend more and more money. How is this possible even today if people don't have infinite money? It isn't possible long term even today. Growth today is based on fractional reserve banking which multiplies the money in deposit accounts by the "money multiplier". This allows the economy to grow beyond it's natural rate limited by the growth of savings.
Now the more astute among you will have noticed an anomaly when we talk about growth.
It's this: growth cannot possibly continue forever unless either income rises forever or else the money multiplier is infinite.
So we have stumbled on a fundamental truth. Our current system isn't based on growth.
The horror!
So what IS it based on?
Cycles.
This is evident in the commodities markets where the cycles are visible based on growing seasons. EVERY other market is exactly the same, except the cycles are longer.
Clearly since summer always follows winter, a system based on cycles will always seed, grow, boom and bust only to do the same again next time. The key point is that one industry is replaced by another and "growth" is in the new industry which replaces the old.
What we are witnessing with peak oil is the end of the boom phase of the oil industry. Concurrently with this we are in the very early stages of the "seed" phase of the industries that will replace oil.
Our system is based around this fundamental fact.
Now the doomers could say "but our economy has been growing steadily concurrently along with oil".
I would argue that what they are seeing is correlation, not causation.
In an apples to apples comparison, a large populous country with similar laws and infrastructure to a smaller country in terms of population with similar laws will have a smaller economy.
There is thus a reasonable argument behind the proposition that just maybe, the world economy is so large because the population is so large and that the larger the population, the more energy is used. The causative factors are exactly backwards from what the doomer crowd would have us believe.
The second part will follow later.
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