Tag Archives: Robert Rapier

Biofuel, Peak Oil

What Happened to $200 Oil?

Richard Ha writes:

Whatever happened to $200 oil?

For the last few years, supply side thinking was the most prevalent way of considering the world’s oil supply. But in this last year,
something changed. Commentators started to ask about the demand side.

Specifically, they started asking, “What happens if demand goes up and prices start to rise – eventually killing demand?” In that scenario, the rising price of oil contains the seed of its own destruction.

In May of this year, Jeff Rubin, who had been the most outspoken expert warning of $200 oil, changed his mind. He calls what is happening “the end of growth.”

Whatever Happened to $200 Oil?
by Jeff Rubin on May 23rd, 2012

Four years ago, when I was still chief economist at CIBC World Markets, I forecast that global economic growth was on pace to send oil prices to $200 a barrel by 2012. In short, the argument was based on a supply-driven analysis that weighed the sources of future oil supply against the prices that would be needed to make the extraction and processing of that oil economically viable…. Read the rest  

If Jeff and many others are right, we are not looking at a rapid climb of the price of oil to $200/barrel. It may not get to that price for 20 years.

And if that’s true, HECO’s request to pay $200 per barrel for Aina Koa Pono’s biofuel will be a tremendous mistake. All that will be
accomplished is a massive transfer of wealth.

This is why I am so pleased that Kamehameha Schools (on the
recommendation of Neil Hannah, Kamehameha’s Director of the Land Assets Division) is sending two senior level management folks to the upcoming Peak Oil conference. Things are moving quickly in the world energy field, and policy makers need to be up on current information.

That HECO is betting on the high side of the 2012 AEO cost curve shows they are not aware that thinking has changed. Had they sent people to past Peak Oil conferences, they would have seen the shift.

Including myself, there are now five people from Hawai‘i going to the ASPO conference. We have the makings of a delegation. Robert Rapier will also be going, too, but I am not counting him because he is a national/international commentator and he will be presenting.

This will be my fifth ASPO conference. I cannot be happier that there are other people from Hawai‘i going, besides myself, and educating themselves on this very important subject.

Renewable Energy Sources

Taking Matters Into Our Own Palms

2 Comments

Richard Ha writes:

Over the weekend I went to a Palm Oil presentation given by Dr. Bill Steiner, the recently retired Dean of the University of Hawai‘i College of Agriculture, Forestry & Natural Resources, and I made a decision: We are going to plant palms, and produce enough palm oil to make our farm free of fossil fuel in 10 years.
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We use 12,000 gallons of diesel annually for our tractors and trucks.

Oil palms produce 500 gallons/acre per year. If we plant thirty acres in palms, that should produce 15,000 gallons annually. This would allow us to grow our crops and definitely get them to market, no matter what happens in the Middle East.

We have the land, deep soil and free water. A big disadvantage is that harvesting palm oil is labor intensive, but the palms will not need to be replanted for 25 years. We already have the land, and if oil is cheap and abundant 10 years from now, then we control our
cost by not harvesting. If, at that point, oil is expensive and hard to get, then we harvest and are to get our produce to market. There are some other issues, which we are working through right now.

Palm oil production is a proven technology. Palms like to grow in the tropics, and Hawai‘i is not perfect at 22° north latitude, but we think it’s good enough. Palms need 80 inches of rain per year, and where we are we have one and a half times that amount falling out of the sky.

Robert Rapier, who writes the R-Squared energy column at Consumer Energy Report, has this to say about palm oil:

The Palm Oil Conundrum

by Robert Rapier

People sometimes ask which biofuels are competitive head to head with crude oil. By competitive, I mean those that can actually compete favorably with oil prices on a level playing field (i.e., they don’t require big subsidies or mandates in order to compete). There are two that always come to mind: Ethanol from sugarcane (although less competitive currently due to high sugar prices) and
fuel from palm oil (oil derived from the fruits of the African Oil Palm). In fact, in the first book chapter I wrote in 2007 (Renewable
Diesel in Biofuels, Solar and Wind as Renewable Energy Systems:
Benefits and Risks) I highlighted palm oil as a crop with great
promise, but also great environmental risk:

By far the most productive lipid crop, palm oil is the preferred oil crop in tropical regions. The yields of up to five tons of palm oil per hectare can be ten times the per hectare yield of soybean oil. Palm oil is a major source of revenue in countries like Malaysia, where earnings from palm oil exports exceed earnings from petroleum products.

Read the rest

Peak Oil, Renewable Energy Sources

How To Evaluate a Renewable Energy Technology

Richard Ha writes:

Robert Rapier has been in the trenches, fighting hype and misinformation, for a long time.

In this 2006 article, he challenged Vinod Khosla:

Vinod Khosla Debunked

By Robert Rapier

Update: Vinod Khosla and I have discussed his claims. That conversation is documented here.

Who is Vinod Khosla?

When an influential person begins to affect energy policy decisions – decisions that will have a huge impact on all of our lives – we better take a critical look at the claims that person is pushing. You can’t discuss ethanol for long with an ethanol proponent without having them mention the endorsement of Vinod Khosla. If you don’t know who Khosla is, here are a couple of blurbs from his Wikipedia biography:

Vinod Khosla is an Indian American venture capitalist who is considered one of the most successful and influential personalities in Silicon Valley. He was one of the co-founders of Sun Microsystems and became a general partner of the venture capital firm Kleiner, Perkins, Caufield & Byers in 1986. In 2004 he formed Khosla Ventures.

Vinod was featured on Dateline NBC on Sunday, May 7, 2006. He was discussing the practicality of the use of ethanol as a gasoline substitute. He is known to have invested heavily in ethanol companies, in hopes of widespread adoption. He cites Brazil as an example of a country who has totally ended their dependence on foreign oil.

Why Khosla Must be Challenged

I have previously made the case that Khosla’s claims don’t stand up to scrutiny. However, I recently got an e-mail from a reader who had watched a video presentation by Khosla. He had been referred to the video by a blog, where a poster wrote: “this is actually starting to sound like a rational plan to me.”

…In addition, another e-mail recently called my attention to a coast-to-coast road trip being fueled by E85:Kick the Oil Habit Road Trip. In one of the blog entries from the trip, there is a conversation between the driver of the E85 car (Mark Pike), Tom Daschle, and Vinod Khosla. The conversation is archived at:

Sen. Tom Daschle & Vinod Khosla talk Ethanol [ed’s note: this link is no longer active]

I documented my impressions of the exchange at:

RR Critiques the Road Trip

For me, the most disturbing part of the exchange came when Mark Pike said: “If the technology is good enough for Mr. Khosla, it’s good enough for me. I know that guy has done his research, so I trust him. I will leave all of the scientific data and research to him.”

There we come to the crux of the matter: People trust that he knows what he is talking about. The Wikipedia biography says he is “successful and influential.” Make no mistake; he is influencing people in this ethanol debate, including political leaders. Khosla is convincing people that his projections are viable. Yet, are they carefully scrutinizing his claims? No, because they trust him. Yet claims like his, will dampen conservation efforts, and Americans will not be prepared for Peak Oil. After all, Khosla, a guy they trust, says we are going to produce enough ethanol to replace our oil imports….

Robert came under immense pressure for his article because he was going against the conventional wisdom of the day. He was even accused of being an obstructionist. I liked his approach, though, because he is always interested in the greater good.

And at the end of the day, it turns out, Robert was right.

I first became aware of his work when I went to the Peak Oil conference in 2007. Then I missed the 2008 conference, but went to the 2009 conference in Denver. By that time, biofuels were starting to get traction in Hawaii.

We farmers thought the whole idea was iffy because we knew that a barrel of oil weighs over 300 pounds and when oil is $100 per barrel each pound of oil is worth 30-something cents. So if we had to grow four pounds of stuff to get out one pound of liquid, we knew that the most we could earn for the stuff was less than 10 cents per pound. Forget it.

I admired Robert’s tenacity and integrity, and I asked my friend Gail Tverberg if she would introduce us at the Denver conference. She sent him an email and I was amazed to find out that he had moved to Waimea and was sitting in Michael Saalfeld’s office at that moment. I called him and we have become good friends.

Robert writes the Rsquared blog. One of his interesting posts talks about how to do due diligence in order to evaluate a renewable energy technology. At the end of his post, he
suggests asking 10 questions.

Summary

To break this down into a short “cheat sheet,” here is a summary of some important questions that you want to ask. Try to corroborate answers by talking to employees or competitors.

  1. At what scale has the process been actually demonstrated, and is the process currently running?
  2. What is the source of raw materials for the process?
  3. What is being done with the product?
  4. What are the primary energy inputs into the process, and what is the energy balance?
  5. Will there be intermediate scale-up steps before a commercial facility is built?
  6. What are the key assumptions for a commercial facility (e.g., size, cost of production, location)?
  7. What is the presumed source and cost of biomass for a commercial facility?
  8. Has the process been proven on that specific biomass?
  9. What are the patent or patent application numbers relevant to the process?
  10. What prior work is most similar to yours, and who are your perceived competitors?

If you manage to get honest answers to those questions, you will be well on your way to burrowing through the hype to understand the true potential of a process.

This template is very useful, because we can put all proposed projects on an equal footing by comparing answers. It allows one to compare risks. If all a project’s costs are borne by private investors, then no harm/no foul. But if taxpayers or ratepayers are being asked to pay for the project, then one needs to know how much risk the tax/rate payer is assuming.

At the end of the day, the fundamental question is: Are we socializing the risk and capitalizing the return?

If we are going to socialize the risk and capitalize the returns, we cannot let our decisions be based on P.R. They must be based on a systematic analysis of the process.

Peak Oil

Rapier Speaks on Others’ Views re: Global Energy

Richard Ha writes:

In the following video from Consumer Energy Report, Energy Expert Robert Rapier discusses a recently released paper by former Eni Executive Leonardo Maugeri, in which Maugeri suggests that by the end of the decade, global oil supplies will increase by 17 million barrels per day. Rapier also talks about George Monbiot’s reaction to that report. Monbiot is a prominent environmentalist concerned about global warming.

I like Robert Rapier’s views. He is fearless, credible, easy to understand and has common sense.

Though some articles recently have suggested that the U.S. has more petroleum resources than Saudi Arabia, and suggest, “Don’t worry, be happy,” we must play the position on the chess board as it exists – not as we wish it were.

Where are we now and where do we want to go?

In general, oil at $125 a barrel has thrown the world into recession. If it falls below $70 per barrel, some folks will lose money and stop production. We will probably be between those two prices for a short while. Oil is a finite resource, and the forces of depletion are relentless.

Hawai‘i has a lot of catching up to do. We need to move toward geothermal so we can dodge the bullet.

Photo

Look who I got to hang out with the other day. It’s Scotty Blaisdell, left, and Robert Rapier, right. They are classmates from a small Oklahoma town, both of whom have made it big in Hawai‘i. Scotty is the award-winning Star 101.9 radio co-host known as “Scotty-B.”

Big Island, Biofuel

Challenges of Biofuels on the Big Island

1 Comment

In the video below, Robert Rapier, Managing Editor and Director of Analysis at the Consumer Energy Report, discusses the challenges of producing cellulosic ethanol, the role natural gas plays in biofuel production, and the uses of excess heat in the production of biofuels.

In general, a circular production model with the production facility in the middle is most efficient. Flat land, deep soil without rocks, lots of sunshine and adequate water supply give significant efficiency advantages.

These conditions do not exist in sufficient scale on the Big Island, making it difficult to produce biofuels in any cost-effective way.

Peak Oil

It Fails The Common Sense Test

But it sounds too good to be true!

Energy Expert Robert Rapier writes that:

On December 6th, the Institute for Energy Research released a groundbreaking report claiming that the amount of oil that is technically recoverable in the U.S. is more than 1.4 trillion barrels, with the largest deposits located offshore, in portions of Alaska, and in shale deposits throughout the country. The report estimates that when combined with resources from Canada and Mexico, total recoverable oil in North America exceeds nearly 1.7 trillion barrels.

To put this into perspective, the largest producer in the world, Saudi Arabia, has about 260 billion barrels of oil in proved reserves. It’s suggested that the technically recoverable oil in North America could fuel the U.S. with seven billion barrels per year for almost 250 years.

So, what does this mean for our energy future? For starters, it could mean the end of our reliance on imported oil from unfriendly nations.

I find these sorts of reports highly misleading, for the following reason. It is true that the U.S. has tremendous oil resources. But it is also true that most of those resources are not economically recoverable. An analogy I have used in the past is the amount of gold in the oceans. There are trillions of dollars of gold in the oceans that is technically recoverable. But that gold is not — and in my opinion will never be — economically recoverable. So it would be misleading for me to argue that we can have all the gold we want if we just get serious about it.

In fact, I tracked down the report referenced above from the Institute for Energy Research: North American Energy Inventory. Then I tracked one of the references they used to come up with their estimate of more than a trillion barrels of “technically recoverable” oil in the United States. The source is a U.S. Department of Energy report: “Undeveloped Domestic Oil Resources.” What that report says is quite different than the implications that are being drawn. The following chart tells the tale:

Screen shot 2011-12-15 at 11.21.21 PM

So of the 1.3 trillion barrels of oil from this DOE report, most is not technically recoverable, and the only category that is known to be presently economically recoverable is that tiny sliver of 22 billion barrels that says “Proved Reserves.” This accounts for less than 2% of the 1.1 trillion barrels categorized as “Undeveloped Oil In-Place.” Read the rest here.

The U.S. imports roughly 12 million barrels of oil per day. Prudhoe Bay, on Alaska’s north slope, produced, at its high point, two million barrels per day.

To be self-sufficient in oil, we would need to have six Prudhoe Bays sitting in North Dakota. This does not pass the “common sense” test.

Maku‘u Stories, Peak Oil, Renewable Energy Sources

Hawaii Needs to Show the Way, Not Serve as a Warning

Robert Rapier and I have an article in Civil Beat today. Read the article here.

Hawaii Should Show Way to Better Energy Future

Over the past decade, world oil prices have advanced from approximately $25 per barrel to more than $100 per barrel. Had the price of oil merely kept pace with inflation, the $25 barrel in 2000 would have been worth just over $30 in 2010. Thus, there was a fundamental shift in the oil markets.

By 2005, the idea that the price increase was being caused by oil depletion – commonly referred to as “peak oil” – was receiving widespread attention. While some dismissed the idea of peak oil, instead offering up speculation, OPEC, growth in developing countries, or other geopolitical factors as the primary factors behind the advance in prices – oil production remained flat despite record high oil prices. Read the rest

The world is changing, and our next 20 years will be completely unlike the past 20 years. We need to adapt to this change.

We can start by taking a triple bottom line approach to the problem. We need to put the needs of the people first and foremost, we need to consider the effect on the environment and we must make sure that the investment makes sense. It isn’t the strongest that survive; it’s the ones who can adapt that survive.

Chris Martenson’s YouTube video explains in a commonsense way how the world is changing. Economic growth requires energy growth. Energy growth has hit a plateau and so economic growth is slowing down. If net energy starts to decline, there will be serious, and unpredictable, consequences.
We have geothermal, the gift of Pele, to help us cope. We must change and adapt.
Also from the Civil Beat article:

Because of our heavy dependence on oil, it has been said that Hawaii is the canary in the coal mine for the rest of the U.S. But in warning others of impending danger, the canary dies. We do not want to serve as a warning to others; we want Hawaii to be the beacon for the world to see how we have achieved a better future.

Biofuel, Peak Oil, Renewable Energy Sources

Great Podcast About Renewable Energy

Richard Ha writes:

This is a very interesting podcast by Robert Rapier, who spoke at the recent Association of the Study of Peak Oil (ASPO) conference.

He talks about a request for him to rank the top 50 renewable energy companies. By the time he reached the fifth one, it was looking iffy and by the time he reached the tenth company, he did not expect the rest to survive 10 more years.

It really is tough to do what Mother Nature did for free and to be competitive, cost-wise. Some have Mother Nature’s oil embedded in the process and so the break-even point of the renewable oil recedes into the horizon.

Some fail because of bad assumptions – like that the feedstock will be available for a cheap price. Only if the farmer makes money will the farmer grow feedstock.

Scale is a significant issue, too. The process is like cooking turkeys. It’s one thing when one is cooking just one turkey in a bench scale experiment. It is quite another when one is cooking 100 turkeys per hour in a large oven. How do you make sure the turkeys in the middle are not raw and the ones on the edge are not burnt to a crisp?

What can we make of the fact that oil is $100 per barrel and yet we are in a recession? One would expect oil prices to decline in a recession. Could we be in an endless recession?

And what about the difference in the oil consumption of different countries? Will they be in a permanent recession? China uses only two barrels of oil per person per year while the U.S. uses 26 barrels of oil per person per year.

They can grow their economy at $100 per barrel oil, and we are barely keeping our heads above water at the same price? Hmmm.

Let’s move to geothermal now!

Peak Oil

2011 Peak Oil Conference, Part 2: Impressions From the Conference

This is my fourth Association for the Study of Peak Oil conference. Here are some highlights and some of my impressions:

Robert Hirsch pointed out that what we have is a liquid fuel problem, not an energy problem. Sixty percent of the world oil supply comes from a few giant oilfields. And giant oilfields decline naturally. The problem is that we have been using twice as much oil as we have been finding for 20 to 30 years.

There is some near-term potential: gas to liquids, coal to liquids, heavy oil refining, enhanced oil recovery and energy efficiency. He points out that in the long term we must implement much more electricity use. Robert Hirsch always makes common sense to me. His book The Impending World Energy Mess is well worth reading.

Robert Rapier pointed out that the U.S. uses 23 barrels of oil per person per year, while China uses only two barrels per person. At present oil prices, China’s economy is growing while ours is barely staying above water.

This is a zero sum game – they want to improve their standard of living, and we cannot afford to pay more, so our per barrel use must shrink. It looks to me that the Chinese cannot wait to jump into their cars and drive to McDonalds. I’m thinking, too, that we in Hawai‘i should be trying to implement lower cost energy as a top priority as we move toward renewables. Like geothermal?

Jeff Rubin: Two thirds of our economy is consumer spending. Peak Oil is not about how much oil there is, it’s about how much we can afford to pay for it. To grow the economy, we need cheaper oil. Market clearing prices do not seem to be compatible with economic growth.Transporting goods uses liquid fuels and the longer the distance the more the cost. Debt means borrowing on our future. We have done a lot of that. I wonder, will there be growth so we can pay it back?

There are links to both Jeff Rubin’s and Robert Rapier’s blogs in our sidebar, at right.

From the first ASPO conference that I attended, in Houston in 2007, it was immediately apparent to me that we needed to implement geothermal sooner rather than later.

I also learned a lot on the trip to Iceland that Ro Marth and I took. Iceland had the biggest economic collapse in the history of the world. The banks had been privatized a few years earlier and they just went crazy lending money to anyone without worrying about payback ability.

When the banks could not pay their obligations, the Icelanders let the banks collapse and they are now prosecuting the bankers for fraud. The big story behind all this is that Iceland is pulling themselves out of the hole. And that is exactly what I went to see for myself.

I saw that cheap energy is what saved them. And in Hawaii, we can do the same – with geothermal in the short term and with all the other renewables we have in abundance in the longer term.

Hawaii and Iceland, with a combined population of 2 million people, have the best geothermal resource in the world.

Our Big Island will be over the “hot spot” for the next 500,000 to a million years.

Our two million people, out of the 7 billion people in the world, are so lucky.

More commentary to come….

In the meantime, here are some pictures from Washington, D.C. This is Helen Davis, an energy staff member for Rep. Hirono. I’m so happy to see Hawai‘i’s people represented at the conference.

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Occupying the Capitol. There are rows of tents, all neatly organized. More than 50. I understand there is another Occupy encampment, too.

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When I was walking toward the Capitol, I saw this monument in a park.

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Read Part 3 of this series.

Go back to Part 1.

Biofuel

National Research Council: Biofuels Costly, Impacts Questionable

Cellulosic biofuel projects have been a financial disaster for U.S. taxpayers.

From Robert Rapier’s Energy blog:

NRC Report to Congress: Cellulosic Biofuel Mandates Unlikely to Be Met

A congressionally requested study by the National Research Council — an arm of the National Academy of Sciences — concluded that next-generation biofuels are costly, and their impacts questionable. “Absent major technological innovation or policy changes, the … mandated consumption of 16 billion gallons of ethanol-equivalent cellulosic biofuels is unlikely to be met in 2022,” the report stated. This conclusion should come as no surprise to readers of R-Squared Energy, as its author Robert Rapier covered this in a recent article: Cellulosic Ethanol Targets: Mandating the Nonexistent. Read the rest

You can learn about this and other important liquid fuel subjects at the Association for the Study of Peak Oil (ASPO) conference, which will be held November 2 – 5 in Washington, D.C. I highly recommend decision makers send people to this conference.

I’ll be representing the County of Hawai‘i at this year’s conference, my fourth time attending. Mahalo to Mayor Billy Kenoi. He knows what is going on.