Statistical Review of World Energy 2008

BP's 2008 Review of World Energy makes it clear. Oil demand is very tight. BP argues that blaming market speculation for the increased rise in oil prices is a myth. BP argues that the markets reflect the underlying fundamentals and do not create them. Certainly the high volatility of prices is caused by nervous traders reacting to global political or financial signals, but you can not attribute the exponential upcurve of oil prices to their speculation. They are only responsible for the smaller everyday jumps in the price, as they try to make money on market variations.

Fueling the future

Fuel prices are all over the news lately, with Europe-wide protests of fishermen over the rising cost of fuel and truck drivers on strike. Everybody has been hit hard by the near exponential rise in oil prices recently. People are demanding tax cuts on fuel and maybe even subsidizing, while Sarkozy and the Hungarian government among others are flashing such ideas in face of the EU. Luckily such demands fall on deaf ears. Subsidizing fuel and tax cuts are nothing but a short term solution, with the negative effect of keeping demand up in a market where the growth in supply is practically nonexistent. By the looks of it, the EU seems to understand this. Looking at the nice exponential graph above, one can not stop to think about the reasons behind the sharp increase in prices. Of course there seems to be some correlation with global events, speculation has its role to play in this. There is a sort of a catch 22 situation, with high fuel costs driving inflation and investors using oil (and other commodities) as a hedge against it, which in turn accounts for a further rise in the oil price. But is that the whole picture?

As a general rule the price is defined by supply and demand. If supplies are short, demand goes down and prices go down with it. If so, then why aren't we seeing the oil price ease off? Why are price forecasts in constant need of upward correcting? And possibly the most chilling question of all: where will the price stabilize? It is very interesting to note at this point, that oil demand in the whole of OECD has been declining gradually for 3 years in a row according to the International Energy Agency. The problem it seems, lies with the emerging economies of Asia, whose thirst for oil fuels the overall growth in world demand. But as economist Jeff Rubin pointed out at the 2007 ASPO conference (see video below) this is not the whole picture. The reality is, that demand for oil is increasing rapidly in developing countries and in oil producing countries themselves, like Venezuela, Saudi Arabia, etc. These countries along with a large portion of the world subsidize fuel. Thus, effectively protecting their consumers from the world market price of oil. A person filling up at a pump in Caracas, or Riyadh never feels the 135$/br crude oil price. This is why demand is seemingly ignoring supply, driving up the price.

Recently the G8 have voiced their concerns about fuel subsidies, but the elimination or decrease in subsidies is almost equal to political suicide. Such reforms are very hard to implement. Even if there is political will, measures like this are very hard to swallow by people accustomed to cheap fuel. Just how hard this can be is nicely illustrated by recent events in Malaysia.

I can understand the concerns of people in Malaysia or Spain, etc., when they are witness to the decline of their businesses, but people must understand that deep down the cause of this shortage is natural and the governments of the EU, Malaysia, etc. have little to do with it. Oil production in most counties has already peaked in its production and what surplus OPEC has is used up by rising domestic consumption (see video below). The fact is, that we will have to learn to live in a world where cheap oil and cheap fossil energy is a thing of the past.

Top U.S. Scientists and Economists Call For Swift, Deep Cuts In Global Warming Pollution

From the article in Science Magazine: "In an open letter published online yesterday, leading American scientists and economists urged U.S. policymakers to make deep cuts in greenhouse gas emissions. The action comes as the Senate is poised to vote on landmark U.S. climate legislation."

I hope they'll listen.

You emit what you eat

I've just read this report in the Climate Change Report of the journal Nature.

The full article has appeared in the journal Environmental Science & Technology:

quoting the report:

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Olive Heffernan

Environ. Sci. Technol. 42, 3508–3513 (2008)

Worried about your food miles? With rising public concern over how individual lifestyle choices affect the climate, more attention is being paid to the notion that long-distance transport of goods can harm the environment.

But a new study by Christopher Weber and Scott Matthews of Carnegie Mellon University in Washington, DC, suggests that a dietary shift may be more effective in reducing your emissions than eating local produce. They conducted a life-cycle analysis of all greenhouse gas emissions, not just carbon dioxide, associated with the production of food consumed in the United States, compared against those associated with long-distance distribution. Food production far outstripped transport as a source of emissions, accounting for 83 per cent of the 8.1 tonnes of greenhouse gases that an average US household generates each year by consuming food. Although transport distances were considerable, they led to only 11 per cent of total emissions.

Different food groups varied widely in their emissions, with red meat, for example, producing 150 per cent more greenhouse gases than chicken or fish. The authors suggest that eating less red meat and fewer dairy products even one day per week would do more against global warming than becoming a 'locavore' who eats an entirely regional diet.

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end of quote

Environmental refugees

I've just listened to a podcast on the BBC website, interviewing a few people who have moved with their families to New Zealand. The reason that all interviewees state is, that they've moved to lessen the effects of climate change on their families and future generations.
One of the interviewees says, that one advantage of New Zealand is that it has so few people, as compared to, say Japan, which has about the same land surface. So people consume less, they pollute less and live healthier and better lives. It's a bit ironic that if this phenomenon gets more widespread (not just among well to do westerners) this key advantage may diminish.
It may be that we're looking towards a future, where environmental migration becomes much more widespread.

A quote from Obama

In his campaign in the state of Oregon, US presidential candidate Barack Obama, has stated that:

"We can't drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times... and then just expect that other countries are going to say OK..."

This statement strikes at the heart of the Worlds problem: rampant consumerism, the unequal distribution of resources and most importantly of all, the attitude towards this. The attitude which in the developing world just revolves around 'not caring' and short term thinking.The World has a real energy crisis and it may be that Obama has realized this. To say this out loud is the only responsible thing to do, I have to admit, he's got guts! I sincerely hope he is not committing political suicide with his remarks. Still the problem is much more widespread than the articles in the media present it. I'm referring to the energy problem and peak-oil. The Oil Drum has a good article by prof. François Cellier on the ties between population growth, world economics and energy demand.

Other intereting articles can be found here and a video here.

Wind Would Power 20% of America for Cost of Four Months in Iraq

Solveclimate.com has run an article about a report of the Department of Energy claiming that 20% of the US electricity demand could be provided by wind power, by 2030. Provided that some $43 billion dollars of investment would flow into the sector. Which is about the same amount of money that the US is wasting on the war in Iraq. This is all great news, but I'm always a bit skeptical about the feasibility of grand projects like this. Wind power is known to be an unreliable source of electricity. It can not provide a base load for the grid (because of the unpredictability of wind patterns) and it can not provide at peak times, when the most power is drawn from the grid. I need to mention at this point, that the problem is not unsolvable, as the clever people of Denmark have found, but I wonder if this issue was addressed in the DOE report.
Still the article makes one important point. That money is being wasted on a grand scale, on meaningless endeavours.

image from wikipedia