Posted on 10/29/2005 11:59:11 AM PDT by Matchett-PI
Thermodynamics and Money by Peter Huber
In his day M. King Hubbert was a great geologist who spent his life studying the planet's deposits of oil and gas. But as he got older, he simply lost it. His "peak oil" theory--which many people are citing these days--is a case study in junk economics.
Hubbert was born in 1903. By 1949 he had concluded that the fossil-fuel era was going to end, and quite soon. Global production would peak around 2000, he predicted, and would decline inexorably thereafter. By 1980 the aging Hubbert was certain that the impending crisis "was unique to both human and geologic history.… You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered." Indeed we would soon be forced to abandon our entire "monetary culture," replacing it with an accounting tied to "matter-energy" constraints.
An editor of Geophysics magazine summarized Hubbert's views in 1983: "The science of matter-energy and the historic system of finance are incompatible."
Today this same nonsense is often dressed up with numbers in an analysis that's dubbed "energy return on energy invested" (Eroei).
According to this theory it can never make sense to burn two units of energy in order to extract one unit of energy. The Eroei crowd concedes, for example, that the world has centuries' worth of junk oil in shale and tar sands--but they can also prove it's irrelevant. It takes more energy to cook this kind of oil out of the dirt, they argue, than you end up with in the recovered oil. And a negative Eroei can only mean energy bankruptcy. The more such energy investments we make, the faster things will grind to a halt.
Eroei calculations now litter the energy policy debate. Time and again they're wheeled out to explain why one form of energy just can't win--tar sands, shale, corn, wood, wind, you name it. Even quite serious journals--Science, for example--have published pieces along these lines.
Energy-based books of account have just got to show a profit. In the real world, however, investors don't care a fig whether they earn positive Eroei.
What they care about is dollar return on dollar invested. And the two aren't the same--nowhere close--because different forms of energy command wildly different prices. Invest ten units of 10-cent energy to capture one unit of $10 energy and you lose energy but gain dollars, and Wall Street will fund you from here to Alberta.
As it happens, the people extracting oil out of tar sands today use gas from the fields themselves to power their refineries. There's gas, too, under what has been called Alberta's "trillion- barrel tar pit," but it's cheap because there's no pipeline to deliver it to where it would be worth more.
As an alternative to gas, Total S.A., the French oil giant, is thinking about building a nuclear power plant to supply heat to melt and crack the tar. But nuclear reactors extract only a minuscule fraction of the energy locked up in the nuclei of uranium atoms; all the rest gets discarded as "waste."
On Eroei logic, uranium would never be used to generate either electricity or heat. But per unit of raw stored energy, uranium is a thousand times cheaper than oil.
Greens touting the virtues of biomass as a source of energy rarely note that almost all of it is used by lumber mills burning branches and sawdust on site.
No one cares how much energy the sun "invested" to grow all that waste wood. And every electric power plant, whatever it's fueled with, runs a huge Eroei deficit, transforming five units of cheap, raw heat into two units of electrical energy.
But it all works out because the market values the energy in electricity at about 30 times the energy in coal.
The economic value of energy just doesn't depend very strongly on raw energy content as conventionally measured in British thermal units. Instead it's determined mainly by the distance between the BTUs and where you need them, and how densely the BTUs are packed into pounds of stuff you've got to move, and by the quality of the technology at hand to move, concentrate, refine and burn those BTUs, and by how your neighbors feel about carbon, uranium and windmills.
In this entropic universe we occupy, the production of one unit of high-grade energy always requires more than one unit of low-grade energy at the outset. There are no exceptions.
Put another way, Eroei -- a sophomoric form of thermodynamic accounting -- is always negative and always irrelevant.
"Matter-energy" constraints count for nothing. The "monetary culture" still rules.
Which led to the easier to understand "science and politics do NOT mix". It's easier to understand in this day and age because it has fewer syllables and smaller words, in case you're wondering.
Great post. Thanks. Won't be read or believed by many since it is not conventional wisdom.
I wish we could convince the hydrogen fanatics of this fact.
Thanks! :) bttt
Reason doesn't cut it with "fanatics".
A number of potential Canadian projects are not economic because the build up of infrastructure to support extraction is prohibitive - just as some Saudi oil fields go unexploited, because of remoteness, or poor quality of the oil in the field.
Using nukes to generate energy to refine the oil shales or oil sands would make economic sense if the nukes could be built and operated for substantially less than the value of the lode being mined. Apparently it is a toss up at this point, even with $60 barrel oil.
Not to mention the anti-capitalism that is rampant in this country that poses a dire threat and huge risk to any investment of capital, least it result in "windfall" profits tax, particularly in the evil "oil" industry. It will take a serious crisis for a majority of the population to start hanging the socialists in effigy, perhaps straighting these yuppies out. By then of course, it will be too late.
Sadly, you are correct. Even those who are not fanatics find it difficult to discern fact and apply reason to most problems. It is the way the universe is.
It does make sense to mine coal and burn it to cook corn to make ethanol. This is using a low rank fuel to make a high rank fuel. It does not make sense to burn natural gas to make ethanol. This is using a high rank fuel to make a high rank fuel.
I think you missed putting (usable) as in "100 btu's of (usable) energy" in the above sentence. Otherwise, it does not make sense, for all the reasons explained so well in the article.
Thank you for the last paragraph, which makes useful points about the need for education. With the MSM losing market share, I have hope for a better informed populace in the future.
LOL...that's why I've had trouble making myself heard where it counts for so many years. However, it's absolutely true. If any don't believe me, I know a good taxidermist who might sell them some nice lynx hair at a reasonable price ;-)
I think this is where the author of the article would suggest you are wrong. If it takes 100 BTUs of energy in one form to produce 50 BTUs of energy in another form, it might make a lot of sense to capitalize on such a project if the first form of energy is very cheap and the second form is worth a lot of money.
Heck -- just look at all of the energy it takes to dig a ton of coal out of the ground in Wyoming, move it more than a thousand miles to the Midwest on a diesel-powered train, and burn it in a plant that generates electricity. That can't possibly make sense from an "energy consumed vs. energy produced" standpoint, but it must make sense from an economic standpoint because it's done all the time.
That depends, and your statement is too ambiguous to resolve the matter: Is your "50 BTUs extracted" gross energy, or net energy?
If it hadn't been for the extreme growth in Saudi oil production in the 70's, the industrialized countries would have faced the crisis of diminishing supply with increasing demand in the 70's.
According to Matt Simmons "Twilight in the Desert", the overproduction of the giant Saudi fields in the 70's may have damaged these fields and could result in early exhaustion. His research into available sources from oil geologists working in the Saudi fields tells him that things are not too rosy in Saudi Arabia. And that Saudi production may have peaked, curiously at about 10 mbpd in 1981. OPEC stopped reporting production figures in 1982, but Saudi already had declined to less than 8 mbpd.
If you want to see an eye-popping graph, take a look at a 10 year chart of the Vanguard Energy Fund, VGENX for you home gamers. Something happened in 2002 that changed the nature of the market. Energy companies share values exploded in an exponential fashion. They still trade like cyclic companies, with low PE multiples (8-15), but their earnings have dramatically increased. Bid up by the consumers of their product: means only one thing - demand is outpacing supply at an ever increasing rate. This does not necessarily mean that we have reached peak production, as demand can grow at a higher rate than production for periods of time, while both are still increasing. It is another clue to me, however, that there is exponential growth, more easily explained by steadily increasing demand, and an accelerating decline in supply
I highly recommend the author's book "The Bottomless Well" It has completely changed my understanding of the energy economy - and I work in the energy industry.
One of the key points in the book is mankind's eternal quest for higher concentrations and purer forms of energy. We do this becasue we can do more productive thngs with that energy.
For example, the energy path might lead from coal to electricity to more refined electricity to laser energy. Each step of the way there are losses in the form of heat, but since the laser energy is so valuable it makes economic sense to do so.
So to go back to your example, if that 100 BTUs of coal energy is used to make 50 BTUs of laser energy it does indeed make sense.
"Even those who are not fanatics find it difficult to discern fact and apply reason to most problems." ~ marktwain
Here are two really good links regarding that subject:
Michael Crichton September 15, 2003:
"I have been asked to talk about what I consider the most important challenge facing mankind, and I have a fundamental answer. The greatest challenge facing mankind is the challenge of distinguishing reality from fantasy, truth from propaganda. Perceiving the truth has always been a challenge to mankind, but in the information age (or as I think of it, the disinformation age) it takes on a special urgency and importance. ..." [snip] Click link to continue: http://www.crichton-official.com/speeches/speeches_quote05.html
Why Politicized Science is Dangerous - Michael Crichton
(Excerpted from State of Fear)
http://crichton-official.com/fear/index.html
Yeah, right---given the fact that we haven't explored or drilled along most of the most productive coastal zones of the US--FOR POLITICAL REASONS---any "match" of the theory with reality is bogus.
That is, the hydrogen in the hydrogen economy wouldn't be a resource even if it were useful.
"Yes, ruled in Babylon, ruled in Rome, ruled in Germany, and ruled in the Soviet Union. Where are they. Most Empires through out history collapsed because of a failed or dwindling natural resource." ~ jec41
June 26, 2002 The End Is Nigh, Again By Ronald Bailey
Environmentalists insist that humanity really has overshot the earth’s carrying capacity this time.[]
The United Nations Summit on Sustainable Development is coming up at the end of August [2002], so expect to see a spate of news stories warning that humanity is on an unsustainable economic path. To bolster this notion, environmentalists are positioning their views to make it easy for the press to echo them.
In an article published this week by the prestigious journal Proceedings of the National Academy of Sciences, a group of environmentalists led by Mathis Wackernagel of Redefining Progress claim that human consumption and waste production have overshot the earth’s capacity to create new resources and absorb waste. They calculate that "humanity’s load corresponded to 70% of the biosphere’s capacity in 1961," and "this percentage grew to 120% in 1999." They explain that "20% overshoot means that it would require 1.2 earths, or one earth 1.2 years, to regenerate what humanity used in 1999."
Such worries about overpopulation and resource scarcity have a long history.
The Roman writer Tertullian warned in 200 A.D. that "we men have actually become a burden to the earth" and that "the fruits of nature hardly suffice to support us."
In 1798 the Rev. Thomas Robert Malthus published An Essay on the Principle of Population, in which he claimed that population growth would always outstrip food supplies, inevitably resulting in famine, pestilence, and war.
Biologist Paul Ehrlich notoriously updated Malthus’ gloomy predictions in his 1968 book The Population Bomb, which predicted that hundreds of millions of people would die of famine in the 1970s.
Well, are the alarmists right this time around?
Is the end finally nigh?
No.
Wackernagel et al. focus their analysis of how humanity uses the biosphere on six areas: growing crops, grazing animals, harvesting timber, fishing, building infrastructure, and getting energy from fossil fuels and nuclear power. According to their own calculations, humanity has not exceeded the biosphere’s capacity in the first five of these areas, although they say we are close to the limits for growing crops and fishing.
This leaves fossil fuels and nuclear energy, which they claim account for fully half of humanity’s biosphere use. By their account, then, humanity would be using only 60 percent of the biosphere’s capacity if energy use weren’t a problem.
To estimate our impact on the biosphere, Wackernagel et al. calculate an average of how many hectares it takes to support each person. The reason energy use figures so prominently in their calculations is that they are looking at how many hectares it would take to absorb the carbon dioxide produced by burning fossil fuels. Their concern is that burning fossil fuels adds carbon dioxide to the atmosphere, which traps heat, which leads to global warming.
These calculations embody an ideal of stasis, both ecological and economic.
What the authors miss is that for every one of the six areas they are looking at humanity’s ecological footprint probably is going to become smaller, not larger, during this century.
Jesse Ausubel, director of the Program for the Human Environment at Rockefeller University, believes the 21st century will see the beginning of a "Great Restoration" as humanity’s productive activities increasingly withdraw from the natural world. For example, Ausubel and his colleagues calculate, "If the world farmer reaches the average yield of today’s US corn grower during the next 70 years, ten billion people eating as people now on average do will need only half of today’s cropland. The land spared exceeds Amazonia." If 10 billion people choose meat-rich diets in 2070, then farmers will need only 75 percent of today’s cropland. In other words, through technologically improved farming, millions of acres will revert to nature.
With regard to grazing animals, many environmentalists paradoxically oppose intensive meat production that can spare millions of acres. "If you very efficiently produce grain to feed chickens rather than allowing free range cattle," explains Ausubel, "it’s hard to see how you have a problem with increased meat consumption."
Ausubel also notes that "forest regrowth appears part of modernity." He points out that U.N. Food and Agriculture Organization studies "of forest biomass for the decade of the 1990s in the boreal and temperate region in more than 50 countries show the forests expanding in every one of them." As global cropland and grazing area shrink, forests will continue to expand. Ausubel estimates that humanity will need to use 20 percent or less of the world’s 3 billion hectares of forest to sustainably supply all of our wood needs in the 21st century.
"The fish situation is much more difficult," Ausubel cautions. Many fisheries are being harvested at or over their sustainable limits. Ausubel notes that humanity consumes about 800 million tons of animal products--meat and milk--produced on land, compared to 80 million tons caught wild in the oceans. His solution to overfishing? "The ancient sparing of land animals by farming shows us how to spare fish in the sea," he says. "We need to raise the share we farm and lower the share we catch."
Already, 20 percent of seafood is produced by aquaculture that can be expanded in sustainable ways, relieving pressure on wild species such as cod and rockfish. In addition, as Iceland’s and New Zealand’s fisheries show, privatizing fisheries dramatically increases the incentives to conserve and protect wild stocks.
As for infrastructure, Ausubel calculates that if an additional 4 billion people (who are unlikely to materialize, according to the latest U.N. population projections) chose to occupy as much land as the average Californian does today, they would cover 240 million hectares of land, about 2.5 percent of the earth’s terrestrial surface.
So we come to Wackernagel et al.’s chief concern: energy use.
"Some people try to use the climate change issue as a trump card," says Ausubel. "It sounds like they’re doing that." Keep in mind that despite Wackernagel et al.’s certitude, there are still serious questions about whether adding cabon dioxide to the atmosphere is really causing significant problems for humanity or the biosphere.
Assuming that man-made global warming is a real problem, there are plenty of ways to handle it.
One is to deploy technologies we already have to mitigate its effects on humanity: heating, air conditioning, seawalls, irrigation of farmland, crop switching, and so forth. We could also choose to sequester extra carbon dioxide by pumping it back into the ground whence it came, fertilizing the tropic ocean deserts so that they bloom with phytoplankton that absorbs it from the air, or planting more trees.
In any case, Ausubel doesn’t think that carbon dioxide is a long-term problem because the world’s energy system has been inexorably decarbonizing for the past two centuries.
His research traces humanity’s steady progress from wood to coal to oil to natural gas and, eventually, to hydrogen.
At each stage, consumers, without being commanded to do so by regulators, have chosen fuels containing more hydrogen over fuels containing more carbon.
Ausubel sees that trend continuing until carbon-based fuels are eliminated by the end of the century.
He expects that carbon dioxide concentrations, now about 360 parts per million (ppm), will peak at 450 ppm. That is 100 ppm less than the U.N.’s sometimes stated goal of "stabilizing" carbon dioxide at 550 ppm, and it would happen without draconian increases in energy prices or the creation of global bureaucracies aimed at regulating the atmosphere.
So Wackernagel et al. are wrong on every measure they chose to analyze with regard to the future sustainability of the human enterprise.
How could they get it so wrong?
"Biologists and ecologists tend to overlook the power of technical progress compounded over the years," says Ausubel. "If you’re trained in ecology and botany, you think of technology as a bulldozer, but what it really is, is efficiency, using less to do more."
Technological progress has already dramatically expanded the carrying capacity of the earth. In the 21st century it will so outpace the increasing demands of a growing and wealthier population that more and more land will revert to nature.
"It looks like over the next 100 years, for most environmental concerns, we will do better," concludes Ausubel. "You get smarter as you get richer."
Ausubel’s own article in the June 11 issue of the Proceedings of the National Academy of Sciences concludes, "An annual 2-3% progress in consumption and technology over many decades and sectors provides a benchmark for sustainability." In other words, economic growth and technological progress are sustainable in the long run and make it less and less likely that humanity will overshoot any limits the biosphere may have.
Let the Great Restoration begin! []
Ronald Bailey, Reason's science correspondent, is the editor of Global Warming and Other Eco Myths (Prima Publishing) and Earth Report 2000: Revisiting the True State of the Planet(McGraw-Hill).
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