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Arctic Leaf

Fake and real news: Links between GHG reduction and alternative fuels

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FT-emissions-graphicTurn on your local news every night and you’ll need a sleeping pill to get some rest. The format and content is the same around the country: a lot of tragic crime — ranging from sexual harassment, robbery and shootings — for about ten minutes; local sports for about 5 minutes; what seems like ten minutes of intermittent advertising; silly banter between two or more anchors for two minutes; and a human-interest story to supposedly lighten up your day at the very end of the show — likely about a dog and cat who have learned to dance together or a two-year-old child who already knows how to play Mozart. You get the picture!

Local news, as presently structured, is not about to send you to sleep feeling good about humanity, never mind your community or nation. National news is really only marginally better. Again, the first ten minutes, more often than not, are about environmental disasters in the nation or the world — hurricanes, volcanoes, cyclones and tornadoes. The second ten minutes includes maybe one or two tragically laced stories, more often than not, about fleeing refugees, suicide bombings, dope and dopes and conflict. Finally, at the end of the program, for less than a minute or two, there is generally a positive portrayal of a 95-year-old marathon runner or a self-made millionaire who is now single-handedly funding vaccinations for kids in Transylvania after inventing a three-wheeled car that will never need refueling and can seat twenty-five people.

Maybe this is how the world is! We certainly need to think about the problems and dangers faced by our communities, the nation and its citizens. Every now and then, Americans complain about the media’s emphasis on bad news. But their complaints are rarely recorded precisely in surveys of viewership. We criticize the primary emphasis on bad news, but seem to watch it more than good news. Somewhat like football, we know it causes emotional and physical injuries to players, but support it with the highest TV ratings and attendance numbers.

Jimmy Fallon, responding to the visible (but likely surface) cry for more good news, has added a section to The Tonight Show. He delivers fake, humorous news, which is, at times, an antidote to typical TV or cable news shows. Perhaps John Oliver, a rising comedian on HBO, does it even better. He takes real, serious news about human and institutional behavior that hurts the commonweal and makes us laugh. In the process, we gain insight.

This week’s news about carbon dioxide emissions “stalling” in 2014 for the first time in 40 years appeared in most newspapers (I am a newspaper junkie) led by The New York Times and the Financial Times. It seemed like good news! Heck, while the numbers don’t reflect a decline in carbon emissions, neither do they illustrate an increase. Let’s be thankful for what we got over a two-year period (in the words of scientists — stability, or 32.3bn tons a year).

But don’t submit the carbon stability numbers to Jimmy Fallon just yet. It’s much too early for a proposed new segment on The Tonight Show called “Real as Opposed to Fake, Good News.” Too much hype could convince supporters of efforts to slow down climate change that real progress is being made. We don’t know yet. Recent numbers only reflect no carbon growth from the previous year over a 12-month period. The numbers might be only temporary. They shouldnt lessen the pressure to define a meaningful fair and efficient strategy to lower GHG. If this occurs, yesterday’s good news will become a real policy and environmental problem for the U.S. and the world for many, many tomorrows.

I am concerned that the stability shown in the carbon figures may be related to factors that might be short lived. Economists and the media have attributed the 2014 plateau to decreases in the rate of growth of China’s energy consumption and new government policies, as well as regulations on economic growth in many nations (e.g., requirements for more energy-efficient buildings and the production of more fuel-efficient vehicles), the growth of the renewable energy sector and a shift to natural gas by utilities.

Truth be told, no one appears to have completed a solid factor analysis just yet. We don’t really know whether what occurred is the beginning of a continuous GHG emission slowdown and a possible important annual decrease.

Many expert commentators hailed the IEA’s finding, including its soon-to-be new director, Dr. Fatih Birol. He indicated that this is “a very welcome surprise…for the first time, greenhouse gas emissions are decoupling from economic growth.”

Yet, most expert commentators suggest we should be careful. They noted that the data, while positive, is insufficient to put all our money on a bet concerning future trends. For example, Hal Harvey, head of Energy Innovation, indicated, “one year does not a trend make.”

Many articles responding to the publication of the “carbon stall” story, either implicitly or explicitly, suggested that to sustain stability and move toward a significant downward trend requires a national, comprehensive strategy that includes the transportation sector. It accounts for approximately 17 percent of all emissions, probably higher, since other categories such as energy use, agriculture and land use have murky boundaries with respect to content. Indeed, a growing number of respected environmental leaders and policy analysts now include vehicle emissions as well as emissions from gasoline production and distribution as a “must lower” part of a needed comprehensive national, state and local set of emission reduction initiatives, particularly,if the nation is to meet temperature targets. Further, there is an admission that is becoming almost pervasive: that renewable fuels and renewable fuel powered vehicles, while supported by most of us, are not yet ready for prime time.

While ethanol, methanol and biofuels are not without criticism as fuels, they and other alternative fuels are better than gasoline with respect to emissions. For example, the GREET Model used by the federal government indicates that ethanol (E85) emits 22.4 percent less GHG emissions (grams per mile) when compared to gasoline (E10). The calculation is based on life-cycle data. Other independent studies show similar results, some a higher, others a lower percent in reductions. But the important point is that there is increased awareness that alternative fuels can play a role in the effort to tamp down GHG.

So why, at times, are some environmentalists and advocates of alternative fuels at loggerheads. I suspect that it relates to the difference between perfectibility and perfection. Apart from those in the oil industry who have a profit at stake in oil and welcome their almost-monopoly status concerning retail sales of gasoline, those who fear alternatives fuels point to the fact that they still generate GHG emissions and the assumption, that, if they become competitive, there will be less investment in research and development of renewables. Yes! Alternative fuels are not 100 percent free of emissions. No! Investment in renewables will remain significant, assuming that the American history of innovation and investment in transportation is a precursor of the future.

Putting America on the path to significant emission reduction demands a strong coalition between environmentalists and alternative fuel advocates. Commitments need to be made by public, private and nonprofit sectors to work together to implement a realistic comprehensive fuel policy; one that views alternative fuels as a transitional and replacement fuel for vehicles and that encompasses both alternative fuels and renewables. Two side of the same policy and behavior coin. President Franklin Roosevelt, speaking about the travails of the depression, once said, “All we have to fear is fear itself.” His words fit supporters of both alternative fuels and renewables. Let’s make love, not war!

Arctic Leaf

Carnivals, peas and oil predictions

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Earlier in my life, I volunteered as a carnival “barker” — you know, the guy who tries to inveigle passers-by to throw a ring around a bottle to win something for their date or children. At the time, most paid a buck, lost, and were happy as I was, because the funds went to charity. While I was at my station, I happened to see a would-be magician working the old pea trick. You know, you followed the pea in the magician’s open hand and when the magician closed his hands, you picked the hand that you believe covers the pea. Again, passers-by lost all the time, because his sleight of hand was faster than their eyes (or their brains and their eyes). Charity, once again, came out ahead.

What’s all this got to do with oil? Well yesterday, I was bemused by a piece in the Financial Times by Ed Crooks, titled “U.S. oil boom resets on shaky foundations.” Earlier this week another article in another respected paper quoted an expert that stated that America is now and will be in the future much less dependent on Middle Eastern oil because of the oil boom and its likely continuance into the future. Numerous papers have called the now and future oil boom the Saudization of America.

Which pea will be picked up tomorrow by the media — the oil is a shaky pea, or the oil is our country’s genetic future pea. Can we, as consumers, based on often different expert projections related to the supply and demand for oil, pick the right pea ahead of the media’s grand pronouncements concerning oil production and consumption? The answer, given the probability of frequent expert-related projection amendments, the different methodologies involved and, yes, in some cases the captive quality of the projector, is no. If it’s Monday, oil is our salvation and America’s oil largess will be a road to riches; if it’s Tuesday, oil salvation is uncertain and we will remain dependent on importing oil; if it’s Wednesday, you put two oil experts in a room and you get three or four or more future projections; and if it’s Thursday, oil analysts, including some of the best, throw up their hands and say we really don’t know where oil is going. How can we be sure, given all the complex variables? Why did I go to college to study research and statistics? I want my tuition money back.

Oil projections recently seem more an art than science. Paraphrasing Ralph Waldo Emerson, and in defense (just kidding) of what often seems like “one a day” projections, foolish consistency is the hobgoblin of foolish minds , and the King from The King and I, oil projections are a “puzzlement.”

More attention should probably be paid to the Financial Times article. The author indicates that a question hangs over the U.S. oil boom in relation to increasing production costs. “The effort required to squeeze the oil out of the rock, from which it will not flow easily, means that shale production has a relatively high cost, compared with the traditionally cheap to extract reserves of the Middle East.”

Up to this point, Crooks (while he is named Crooks, he is not really a crook, but a fine writer) has been easy to follow. Relatively high oil per barrel costs, he indicates, lead to investment in drilling and, as important, innovative fracking technology, products and services. Small and mid-sized independent firms seemed to flourish, given their cost efficient innovative production processes. Service companies supporting drillers and production firms positioned themselves well, given the oil boom. It all seemed like fun and games. Everyone made money and met investor or stockholder expectations. Dinners at fancy restaurants seemed the norm.

But Crooks maintains that with the fall in prices for natural gas in 2012, the oil related equipment and service industry quickly met its waterloo. “Capacity utilization for pressure pumping equipment dropped to just 74%. Prices for pumping services dropped an estimated 22% between the first quarter of 2012 and the third quarter of 2013.” It was tough time for service firms. Many tried to switch from gas to oil drilling, but over capacity and underutilization were pervasive.

Recently, things appear to be looking up for the service and equipment sector. Oil prices seem relatively stable, at least until tomorrow, and gas prices seem on the uptake. Interestingly, several respected industry spokespersons suggest that a rise in prices for equipment and activities is likely more dependent on the hope for significant LNG exports and assumed higher natural gas prices (and production) than on significant increases in shale drilling for oil. But as Crooks points out, gas producers and servicers’ gain is oil’s pain. An increase in prices for services and a reduction in equipment overcapacity, the article suggests will raise the costs of oil production and lead to more investor as well as producer caution concerning investment in new risky oil wells. Remember most experts indicate that the best sites for new oil drilling have been leased or acquired. “It is possible that U.S. shale oil can continue to thrive only if shale gas continues to struggle.”

Several of the assumptions in Crooks’ piece seem to reflect the same shaky foundations that he indicates weaken projections concerning the U.S. oil boom. For example,

  • Yes, hard-to-get-at oil from shale will cause producers pause when thinking about future development. It will be much more expensive than drilling from conventional, easy-to-get-at U.S. or Middle East reserves. Since oil is globally traded, we could see an increase in dependency on imports.
  • Yes, the service and equipment industry will be in better shape if the natural gas industry grows and thrives. The costs of its equipment and services will rise accordingly. However, the increases in the price of natural gas, if they occur, and, if they are sustainable over time, will probably be relatively small in terms of dollars and may not significantly affect oil production and decisions. Sure, there are similarities between oil and natural gas drilling equipment and services, and while they constitute a large share of the on-site drilling costs (40-70%), rapid technological improvements matched by improved management of drilling have and continue to occur, lessening cost impact by improving productivity. They may reduce the harm seen by Crooks that could come to the oil industry from increased service costs. Other related factors, such as global oil consumption, supply and per barrel costs, international tensions, environmental sensitivities, financial speculation and profit seeking etc., will probably affect oil industry opportunity costing concerning drilling — even more than the increased cost of equipment and services. Taken together, these factors often explain short term changing oil-per-barrel prices. A large anticipated and continuous increase or decrease in per barrel costs will provide a drilling marker for investors and producers — over $100 more wells, under $70 or so less wells and uncertainty in between.
  • Yes, exporting LNG will improve the economic condition of the natural gas industry; just as removing export restrictions on crude oil will improve the economic viability of the already thriving oil sector. But the impact of extended large LNG sales abroad will likely take years, given the need to gain regulatory acquiescence to develop infrastructure and product. Similarly, the likelihood of eliminating restrictions on crude oil exports remains politically iffy.

Concern with the health of the natural gas industry— whether from Crooks’ perspective, because he believes growing gas prices will help strengthen the oil boom’s foundation, or my own, because the increased use of natural gas and its derivatives, ethanol and methanol as transitional transportation fuels will help reduce GHG emissions and improve the quality of the environment as well as reduce the price of gasoline at the pump and enhance America’s security, is legitimate. I wonder why Crooks neglected to discuss natural gas as a transportation fuel and the need for competition in America’s gasoline market in his otherwise provocative article. But it seems his core objective in the piece was the health and well-being of the oil industry. A bit more balance would have served him and the readers well.