It sure did start off my morning with a nice chuckle, and had me thinking of more laughter with both the South Park episode about smug pollution, and the Simpsons episode where Ed Begley Jr. powers a go-kart off his own sense of self-satisfaction.
I use all of this (substack, the internet, etc.) as entertainment. Smart insightful posts are enlightening and entertaining, but funny posts are entertaining too!
Basically other rate payers cross subsidize rooftop solar users. Eventually we'll move away from "net metering" to pay rooftop solar the marginal cost of the saved generation, which is a lot less that the full price of electricity
Seems like the logic of the Saudi relationship is still intact: they do whatever they want, fund some think tanks, and our executive just acts paralyzed. Is it supposed to work another way?
It seems like we're evolving from a situation where we had a national alliance with the Saudis, to one where the alliance is actually between the Saudis and one political faction here. Just as our conflict with Russia has partially (but only partially) evolved into what's really a conflict between Putin and one political faction here. We're increasingly moving toward a post-nation-state world.
I think in terms of clarifying foreign policy that would be good, or maybe just threatening to in a believable way. Just to draw a line under the idea that we are doing the saudis (and Israel) the favor wrt iran and not the other way around.
Practically I think we get more bang out of normalizing with Venezuela. It’s deep in our geographic control and I think we have comparative advantage refining their sour crude, although I’m no expert.
Crude oil prices only partially explain the high gasoline prices. Another major issue is insufficient refinery capacity to convert crude oil into refined products like gasoline, diesel, and jet fuel. As a result, these refined products are trading at much higher prices than would be expected from current crude prices. Javier Blas covered this issue in his May 9th article, “Sorry, But for You, Oil Trades at $250 a Barrel”. [1]
> If you are the owner of an oil refinery, then crude is trading happily just a little above $110 a barrel — expensive, but not extortionate. If you aren’t an oil baron, I have bad news: it's as if oil is trading somewhere between $150 and $275 a barrel.
> From 1985 to 2021, the crack spread averaged about $10.50 a barrel. Even between 2004 and 2008, during the so-called golden age of refining, the crack spread never surpassed $30. It rarely spent more than a few weeks above $20. Last week, however, the margin jumped to a record high of nearly $55. Crack margins for diesel and other petroleum products surged much higher.
> Third, and perhaps most importantly, refining capacity has declined where it matters for the market now, and the plants that are operating are struggling to process enough crude to satisfy the demand for fuel. Martijn Rats, an oil analyst at Morgan Stanley, estimates that outside China and the Middle East, oil distillation capacity fell by 1.9 million barrels a day from the end of 2019 to today — that’s the largest decline in 30 years.
> The downward trend started well before the pandemic hit, as old Western refineries struggled to compete, environmental regulations increased costs and the unfounded fear of peak oil demand amid the energy transition prompted some companies to close plants. The fuel-demand collapse triggered by Covid-19 only turbo-charged the trend, resulting in dozens of refinery operations shutting down for good in Europe and the U.S. in 2020 and 2021.
Not claiming a timeline, but we’re within shouting distance of the day when oil isn’t the main fuel for ground transportation. I wouldn’t be investing in it either.
One needs a very loud voice to shout that far into the distance!
The United States Energy Information Agency (in 2021, so Biden Administration) projects oil still being the most used for transportation in 2050, and growing in absolute terms. And for all uses (plastics, heating, clothing, etc), oil consumption is projected to increase significantly over the next 30 years. See: https://www.eia.gov/outlooks/ieo/consumption/sub-topic-01.php
I think this is the “reference case” that assumes that current trends continue linearly, without any attention paid to changes in these trends or future laws. Note that this says that plug in electric vehicles (including both hybrids and fully electric) are only a third of the vehicle fleet worldwide, even though many large countries have already announced bans on the sale of vehicles that use gasoline starting by 2030.
So you're saying private sector actors with industry expertise and skin in the game think the market is flat/down, but government bureaucrats with no skin in the game say it's growing, and we should trust the bureaucrats?
Investing decisions include more than just financial and market risk. Regulatory and political risks have increased greatly over the past 5 years, and more so in the past 2. The hurdle rates have increased due to those higher risks.
(I suspect if I would have linked to, say, an ExxonMobil forecast, I'd have been accused of being an industry shill. I guess ANY source can be discredited due to origin rather than content)
From their summary: "The scenarios are not predictions of what is likely to happen or what bp would like to happen. Rather, the scenarios taken collectively are used to explore the range of possible outcomes over the next 30 years."
You might if you knew what those alternative, presumably EV, vehicles were made out of. Shouting distance you say? I haven't seen an electric farm tractor yet. Nor any electric tractor trailers hauling goods over the road for that matter. And I don't expect to see any soon for very sound engineering reasons.
Depends on how many furrows it could plow before it needed recharging. Which, because batteries have terrible energy density, isn't many. That is the central problem here. Farm tractors use a shitload of energy dense fuel. A problem that doesn't go away magically when the power source is a battery. So the real question here is how many of these EV tractors would you need to plow a given field in the same amount of time as one comparable John Deere? Farmers are not dumb.
And what exactly was I wrong about? Elon Musk ostensibly built an electric transport tractor but did not demonstrate it or offer specs. The only time it is ever seen is when it is being hauled around on a trailer by a conventional ICE tractor.
Trying to predict what the configuration of energy sources and CO2 sequestration will be when we get a tax on net CO2 emissions is hard, but I'm sort of with Peter G in thinking that fossil fuel combustion for many niche uses will remain important.
Perhaps neither here nor there in the greater scheme of things but one thing that it seems very obvious in this context would NOT be helpful is picking a trade battle with China and threatening new tariffs because someone has decided that they have made solar panels too good and too cheap!
Disclosure: I am a Chevron shareholder and have owned Exxon in the past in a family portfolio. As long as there is a world price for oil and a cartel that manages a good portion of the world oil supplies, things won't get much better. Companies need to assess whether it is profitable to explore new areas. I don't think this is a big secret at all.
The fundamental error made by the US was not increasing the nuclear portion of the power grid. Germany is now seeing what happens when nuclear is abandoned. A lot of research has gone into the design of safer small flexible reactors but I have grave doubts that any will be deployed in the US.
Yeah Germany really messed up in deciding to close its nuclear plants. Finland will be opening a new nuclear power plant this summer, which also means that Russia cutting off energy exports to Finland is not that big a deal.
We beat this discussion to death about 8 months ago: new-build nuclear (generation III+) costs 6-8X as much as utility-scale PV or wind turbines on an LCOE basis and more like 15X as much on a nameplate capacity basis.
Gen. IV consists almost entirely of PowerPoint reactors which, if their ideas pan out, may stand to reduce that to 4-5X on an LCOE basis.
Even if we assume that we're going to need to build enough storage to more than double the LCOE cost of wind and solar to ensure reliability, nuclear still comes out looking terrible.
An overly-stringent, overly descriptive regulatory regime around radiation safety is among the *smallest* cost contributors to this problem and even doing away with it will reduce project costs by perhaps 10-15%.
There is literally no other prediction on earth in which I am so confident as this one: nuclear will play little to no role in weaning the world from fossil fuel dependence over the coming half-century beyond extending the lives of already-extant PWR plants.
You’re making a disingenuous argument. Opponents have done everything they could to drive up costs and bankrupt projects and then smugly claim that nuclear isn’t cost effective. Give us a break.
Your entire argument was horseshit in September and it's horseshit now, and I'm not going to rehash the endless merry-go-round of argumentation I and others brought to the table that you couldn't rebut and chose to ignore then, because you won't rebut it now either.
Again you're entire argument is that after opponents have used every conceivable tactic to drive up costs to smugly assert that it's just not price competitive.
So again you’ve run off without a rebuttal, because you don’t have one.
But I’d like to give you another chance: by what mechanisms, exactly, would reforming or repealing ALARA reduce nuclear project costs to parity with fossil fuels or renewables?
Be specific. I want to see evidence that we can actually simplify projects enough to avoid the rework debacles seen at Vogtle or Sanmen, that there’s significant material savings to be had, that the complex structural detailing, congested reinforcement, and path-dependent staging can be done away with by removing ALARA’s over-regulation.
Or, if you just want to pop an SMR off the back of a flatbed onto a mat foundation and put up a Quonset hut… well you can admit that too.
In China, India, South Korea? In France? In the UK? In Russia?
Somehow this grand conspiracy to make nuclear expensive is the one thing which unites virtually every major power including all of the ones which have traditionally been strongly pro-nuclear, a half-dozen major oil importers, and a number of countries without private petrochemical industries...
I just skimmed our last exchange and you were acting in even worse faith than I recalled, so I'll quote myself and leave it at this:
"For 3rd and 3rd+ generation technology, it boils down to this:
No matter *what* safety regime I am operating under, for a Gen. III+ PWR, I'm building a reactor housing/shielding structure that eliminates any likely cause of the reactor pressure vessel rupturing, because that's a goddamned doomsday event for the local area and ultimately for groundwater supplies in a several-thousand square mile area.
So I am fabricating, on-site, a large reactor shielding vessel out of high-grade (stainless, I believe) steel, basically by welding big hoop segments together. (*Large*; their size is limited by crane lift capacity and nothing else, so we're often talking about 3-4,000 metric tons per segment.
At the same time, I am building a small plant within it; the reactor and pressure vessel, support infrastructure, and the hookups that have to be staged through the shielding vessel and structure
And at the same time, I am staging a huge construction operation around it, to simultaneously build the actual plant infrastructure and connect it to the reactor pressure vessel, *AND* erect a very, very oversized concrete-steel composite reactor shield around the whole set of works.
Typical designs for modern reactor housings are feet of extremely-heavily reinforced concrete. Sometimes overtop more plate steel for a composite structure. In any case, the concrete is reinforced to the point where 15-20% of its internal volume is replaced by steel, rather than the 1-3% which is typical in a building.
This entire process is path dependent. I cannot complete work on a given stage of the shield vessel until certain internal assemblies are complete, I cannot complete work on stages of the concrete shield structure until the corresponding stages of the steel shield vessel are complete, and I cannot close the whole thing up in anything less than the precise order dictated by what fits or needs to pass through where. So a delay in, say, getting a reactor vessel and pile in place cascades down the whole project. The chances that A goes awry are very high because of the complexity involved, and I cannot make up ground by doing B first, which is much less frequently the case in other projects. Which adds up to financing costs. Lots of them.
Even the China projects, which were backstopped by the government and therefore had extremely low financing costs, still came in vastly over time and budget from what I know of them.
The American projects routinely had to rip out already-completed work as they backtracked and discovered they'd have to do something that happened before it over again, principally due to massive issues with welding quality control. I suspect China had the same issues on Sanmen as it had most of the same delays, just covered up in part by throwing labor at the problem on the concrete side to make up time.
The officially admitted figures for Sanmen put the two reactors 80% overbudget. I would be unsurprised to find they actually came in at more like 2.5X projected cost, with the savings relative to Vogtle mostly down to financing costs."
The over-regulation problem is true. But ALARA is not the driver of the costs I mentioned above. I could snap my fingers, implement every single solitary recommendation anyone has come up with for relaxing the in-plant safety, exposure, and plant systems failure criteria, all of which I agree are good things to do... and STILL be faced with a $16-20 billion dollar cost for Vogtle units 3 and 4.
Address the whole argument instead of running away with your tail tucked between your legs like last time and I will consider taking you seriously.
I was not part of the discussion 8 months ago and cannot respond to what went on back then. My interest has been in small-scale modular reactors whose costs are much less than the very large nuclear plants that have traditionally been built. They may or may not be useful in addressing energy needs but until a demo project is built and amortized we will never know for sure.
I'm fully supportive of renewables but storage remains an issue and the cost of metals used in batteries is not going to decrease as the demand for battery power increases (though if there is a breakthrough in iron oxide technology this might change the cost equation).
"whose costs are much less than the very large nuclear plants that have traditionally been built."
They'll have to be cheaper by a factor of roughly 4-5 to stand any chance against renewables+storage.
And unless SMRs obviate the need for a very beefy reactor shielding structure, they change the cost equation very little, per my other post.
I don't see how that's possible, because at the end of the day, we're now talking about a few hundred kilograms of HALEU fuel instead of a few thousand of LEU fuel. Thus, all the same arguments apply as regards the reactor vessel; it can't be breached, period, or we've poisoned a decent-sized surrounding area and potentially a large groundwater supply permanently.
We can absolutely do away with ALARA in its entirety. But overengineering for plant systems and to mitigate already-low worker radiation exposure is not the primary cost driver for nuclear power. Rather, the large, congested, tightly scheduled physical shielding structures and seismic/disaster design requirements are the main factor which make plants ruinously expensive.
At best, SMRs marginally improve the coordination and path dependency problems on which modern Gen. III+ reactors have all dashed against the rocks. But we're still going to be in the business of constructing very heavily reinforced, over-engineered, seismic occupancy category IV facilities for SMRs, simply because the risk of breaching the reactor vessel is so very grave (regardless of reactor type), and those are very, very expensive.
Have you seen the actual swings in PV power output? That cheap power stops getting cheap the bigger percentage of power it's providing. You need grid-scale energy storage before it makes any kind of sense; that problem has yet to be cracked. Whereas with nuclear you build better versions of the plants that you made in the 70s and 80s and have those workhorses give you a reliable base of clean power to tag-team with wind, hydro, and PV.
Also, if nuclear is 15X as expensive, why does France have the exact same cost per kWH as the US when it uses 75% nuclear? It's a power source that is expensive only when you are determined to make it so.
“It’s a power source that is cheap only when derived from fully depreciated plants held together with duct tape, chewing gum, and baling wire”.
FTFY. France’s last several new-build projects have also gone off the rails, I’ll note, and a significant fraction of its extant fleet is in need of major overhaul. Their regulatory regime is *nothing like* ours. Nor is China’s. Nor the UK’s. So why are they all failing to build nuclear plants economically?
No one is debating that extant nuclear plants are worth keeping (mostly, though there are edge cases).
I’m debating the notion that current or near-future nuclear generating plants can be economically built under any regulatory regime at all short of one which has no concern at all for the security of radiologicals and safety against natural or man-made disasters.
Every single SMR concept, let alone a Gen. III+ plant, requires a very complex, highly path-dependent, construction process for a heavily reinforced shield structure and plant infrastructure. Even if one takes all of the stupid out of the rules on radiation exposure, occupational safety, and plant failure criteria, one has succeeded in removing less than 15% of the cost of a project like Vogtle or Sanmen.
Where the heck do you propose to save the other ~65% needed to achieve rough cost parity with PV+wind+hydro+storage?
I’ve asked this question of several of the pro-nuclear group multiple times and no one can provide an answer at all, perhaps because no one has a bloody clue what they’re talking about.
I don’t think a single one of our resident nuke bros has ever spent five minutes on a construction site, let alone an active Gen. III+ construction project.
You are talking like this has never been done before. But the nuclear plants exist and have been producing large amounts of clean, safe, even-output for decades at scales that can power entire countries. The UK is finishing a nuclear plant that alone will produce 6% of the entire country's power.
If we were correctly pricing externalities from fossil fuel power and people didn't freak out about 3 mile island, (which by the way resulted in not a single injury) the US would be totally clean with 80% nuclear today. In that world you could reasonably take a look at costs and see if we could save some $ by replacing some of the plants with PV. But we live in a world where empirically every state or country that has shunned nuclear power, closed plants early or stopped investing in nuclear has seen their carbon emissions and pollution rise dramatically. The renewable energy promised just didn't fill the gap, and more gas was burned.
Construction cost disease sucks, but the *precise* implications are that we can no longer do what we once could.
“The UK is finishing a nuclear plant that alone will produce 6% of the entire country's power.”
Hinkley Point C is going to end up costing $33 billion at minimum. More likely $39-40B if Vogtle is any guide.
That’s around 3X as much as Hornsea 1 on a nameplate basis, and Hornsea was around 3X the cost of a typical UK onshore wind turbine.
With Hornsea’s availability factor around 65%, Hinkley ends up costing twice what it did at best.
And that’s in the UK, which can’t really rely on PV (cheaper than wind) much at all. Most of the US is different.
So again: After scrapping ALARA and reducing pressure and radiation systems redundancy, where the heck do you propose to save the other ~65% needed to achieve rough cost parity with PV+wind+hydro+storage?
When you take into account the increased cost of variability (storage+grid upgrades) when deployed as a large percentage of generation, nuclear is perfectly competitive: https://www.iea.org/reports/projected-costs-of-generating-electricity-2020 Error bars on LCOE new nuclear entirely overlap with onshore wind and PV. That's a long way off from the claim that you need to save 65% to get to parity. Also, extended operation of existing plants is really, really cheap but nuclear plants are getting closed early.
I'm curious if your perspective on utility scale PV has changed given the massive slow down in solar imports? If those are not resumed, then it would seem to me that the price and even the possibility of PV at scale will be very challenged for at least the next couple of years.
Lost investment in things like years of studies and approvals for a major project like Keystone XL where it was denied, approved, denied (for varying reasons and with little real rule following, all political machinations that you can’t respond to by tweaking the project design) does not incline investors to put more money in oil projects. Similarly, for reasons that have been well spelled out elsewhere, saying that “oil companies are not drilling on every lease” is not a complete picture -- lots of leases wouldn’t produce enough to be profitable even at current prices, and they don’t know all of that at lease auction time, much of the studying is done later. In general the administrations actions would curb investment without regulator support for stranded investment theory *and we’re getting that too.*
There are some unique factors that impede adjusting to higher energy prices
- Energy prices jumped due to a war, whose instigator seems to be losing. That makes for a tough investment case for multi-year projects to increase supply.
- The biggest thing consumers could do to reduce gas bills is buy an EV or simply a more efficient ICE car. But car production is being disrupted by other shortages, so the vehicle fleet is actually turning over more slowly than usual, instead of faster.
Probably a blessing that so many companies are faltering in their quest to get office workers Back To The Office- lots of miles missing from 3 years ago.
Thank you for this article - very rarely is there writing that considers both 1. Global warming is a real threat with 2. Our energy transition isn’t going to happen overnight. Energy prices seem to be the #1 thing voters judge politicians on, so in my opinion is better to have more carbon produced short-term while implementing a long-term vision of switching to renewables (via EV subsidies, repeal of solar tariffs, investments in charging infrastructure and R&D etc.) than to have the democrats be the “party of high gas prices” and be unable to make consistent progress towards the goal.
My mental model here is that coal use didn’t production didn’t plummet because of taxes or restrictions of mining grants, it plummeted because clean natural gas got much much cheaper. I imagine that due to American’s general allergy to raising prices on themselves this will be true for oil as well.
It makes sense for producers to be cautious. Putin is obviously suffering from some pretty serious health problems. If he dies tomorrow and his replacement wisely pulls a Khrushchev and blames all the bad things that have happened on the late Putin, withdraws troops and makes amends with the west, oil prices will plummet.
This is a bit blinkered. Have you never set foot in either a rural area or a city center? Plenty of 4-figure, and even a few 3-figure, "pieces of equipment" being held together with baling wire, duct tape, and willpower.
American urban planning is such that even most urban poor households need a car, it's just a terrible car, usually driven uninsured. Rural poor ones need it even more.
I would expect a significant chunk of those to be professional class kids without families to transport and able to afford the most transit-friendly neighborhoods.
Not scientific but my own experience says that chunk is at least half.
Yea, I’m sure the data doesn’t exist but I’m curious what percent of prime child-rearing age households don’t have cars. I’d bet low, low single digits.
"Yeah and lots of lower-income people spend $0 on gas because they don’t even own a car and rely on walking and inconvenient public transit to get around."
It depends on where you draw the line at 'lower income', but I suspect that that's far from the majority even of the bottom quintile.
It would also be pretty variable by region and also only really apply (in appreciable numbers) to a small subset of urban areas.
Not everybody without a car is poor, does does everyone without gas expenses not have a car (some people drive electric).
For 11 years, I lived without a car, and not in New York. With modern phone apps, from Uber to Amazon Prime, it has never been easier. The trick to making it work is that you need to choose carefully where to live so that as many of your day-to-day trips as possible can be done on foot. If you can walk to work and walk to the grocery, it's much easier. Having rental cars nearby so that you can quickly pick up a car on those occasions you do need one is also a big plus.
Unfortunately, the neighborhoods that make for the best car-free living also tend to be expensive, and the housing premium for living in such a neighborhood can often rival a car payment. But, living car-free the right way has many upsides over living a car-dependent life. You don't have to worry about traffic, the price of gas, or car maintenance. You get all the exercise you need walking places and don't need to waste time running on treadmills at the gym (or driving to the gym).
I eventually did end up buying a car, but it's a nice-to-have, not a necessity. I still walk to the grocery store, and use the car primarily for getting out of town on weekends. I consider it a luxury I can afford, on par with buying extra legroom on airlines. If I were ever in a difficult financial situation, and needed to cut expenses, the car would be the first thing to go. And, even with the car, I still don't have gas expenses, because the car is electric.
Overall a good article - my issue is you didn’t seem to account for the US being the world’s largest producer of oil and gas. That money is still in the economy it’s just in the hands of different people.
To your larger point, I’d be 100% a price guarantee for frackers to ensure the Saudi’s don’t kneecap them again.
I can accept the argument that the government should not block domestic drilling - or pipelines to transport oil from the well to market - for the sake of reducing the oil supply and driving up prices, but I feel a price guarantee for frackers is going too far the other way.
A price guarantee is effectively a government subsidy for oil and gas, and, once you establish such a subsidy, it becomes very difficult politically to take away, even at some point in the future where enough cars and other equipment have been electrified that our overall economy is not so dependent on oil and gas anymore. It would also not do anything to reduce the price of gas in the short term, since new drilling operations cannot start overnight. I also resent the idea, as somebody who drives an electric car, that my tax dollars should be spent subsidizing oil and gas.
In the longer term, there is plenty of opportunity to achieve energy security by letting the free market do its thing on the supply side (blocking drilling only in areas with particularly environmental sensitivity), but using the power of the government to boost alternatives to reduce oil on the demand side. Fuel economy standards need to go up, and automakers should not be able to work around them by selling larger and larger cars. We also need better battery technology to build cheaper and longer-ranged electric cars, and the government should be helping to fund that research so products that use it are available sooner.
By contrast, simply doing the fossil fuel company's bidding does nothing to reduce the demand for oil. Simply put, fossil fuel companies don't want cars to be electrified, or electricity production to be replaced with wind/solar/batteries - they want a captive consumer audience that has no choice but to consume every increasing amounts of their products at higher and higher prices. At least this aspect, the progressives are right on, even if I believe they are wrong on the supply-side part of the equation.
People use “unbelievable” too liberally, but my brain is truly refusing to process the fact that we are likely to get 4 more years of Trump. It is shocking how quickly things went sideways for the administration.
While I basically agree with this- just from a sheer trolling perspective, it would be sort of hilarious if we have a 2024 environment where literally any Republican could beat Biden- but Trump is so whacked-out that he's the only one who can lose. Like, say the economy's terrible, inflation's high, Hunter Biden's under federal indictment, Joe Biden is now so old he doesn't know what country he's the President of, and so on. You could literally nominate a potted plant to be the Republican nominee and it would win. And yet Trump is so bizarre, and so scary, that he's uniquely the one Republican who loses. Aside from being a good result it'd be..... hilarious
Also, with so many folks still working from home where is all this demand coming from? You look at vehicle miles traveled and it’s at a record high. Where the f—k is everyone going?
Commuting is a smaller chunk of traffic than most people assume--something like 15 or 20 percent. And you wouldn't guess it from the discourse, but the proportion of people who have email jobs and are still doing them at home is similarly a low double digit percentage.
From my understanding, it's not the oil production that's the issue, as the oil price and the price of its constituents are now having something of a discontinuity, i.e gas is much more expensive that oil prices would necessarily reflect. It's that Democratic interest in sending signals to energy companies that the era of oil was over and the COVID pandemic drop in demand indicated to the oil companies that they had excess refining capacity and they moved to mothball their least efficient refining capacity. And now here we are.
I don't think the oil refiners are listening to rhetoric when deciding whether to mothball fully-depreciated assets in the midst of a supply crisis, I think they're making the calculation that it's more profitable to allow oil prices to remain high with lower output than to mobilize their most expensive refining capacity and risk driving prices back below the point where that capacity is profitable.
If we were talking about capital expenditure plans, sure, but thinking this way about operational expenditures makes no sense.
"Oil companies look at permanent refinery cutbacks
BY RONALD D. WHITE
MARCH 11, 2010 12 AM PT
Some of the nation’s biggest oil companies are looking at permanently reducing how much gasoline and diesel fuel they make, a move that analysts say would almost certainly trigger higher prices for drivers.
Energy companies are suffering huge losses from refining because of slumping gasoline use -- a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have begun and will accelerate as corporations strive for profits.
Major refiners have been circumspect about their plans, saying that they are considering options that could include closing refineries, selling parts of their operations, laying off workers and slashing spending.
“Refineries will have to be closed,” said Fadel Gheit, senior energy analyst with Oppenheimer & Co. “Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable.”"
"Factbox: Oil refiners shut plants as demand losses may never return
By Reuters Staff
NOVEMBER 10, 2020
(Reuters) - Oil refiners are permanently closing processing plants in Asia and North America and facilities in Europe could be next because of uncertain prospects for a recovery in fuel demand after the coronavirus pandemic cut consumption."
Maybe it just takes a while for these old rigs to be brought back into production. Matt on Twitter posts regular updates on the increase in US rig counts, suggesting that nature is (slowly) healing itself.
rooftop solar producing high year-over-year increases in self-congratulation and schadenfreude, or what economists call "smugflation."
Is this post actually accomplishing anything in terms of enhancing the discussion?
Yes. It’s funny
It sure did start off my morning with a nice chuckle, and had me thinking of more laughter with both the South Park episode about smug pollution, and the Simpsons episode where Ed Begley Jr. powers a go-kart off his own sense of self-satisfaction.
Meh, the original South Park episode sucked (as did most of them) and this wasn't any better.
It’s ok to take a few plays off, champ.
Agree
I use all of this (substack, the internet, etc.) as entertainment. Smart insightful posts are enlightening and entertaining, but funny posts are entertaining too!
Can I just point out that unless someone did a free solar panel installation on Matthew's roof the electrical energy he gets isn't free.
Basically other rate payers cross subsidize rooftop solar users. Eventually we'll move away from "net metering" to pay rooftop solar the marginal cost of the saved generation, which is a lot less that the full price of electricity
Seems like the logic of the Saudi relationship is still intact: they do whatever they want, fund some think tanks, and our executive just acts paralyzed. Is it supposed to work another way?
It seems like we're evolving from a situation where we had a national alliance with the Saudis, to one where the alliance is actually between the Saudis and one political faction here. Just as our conflict with Russia has partially (but only partially) evolved into what's really a conflict between Putin and one political faction here. We're increasingly moving toward a post-nation-state world.
I think this might be a good time to patch things up with Iran and get their production on line.
I think in terms of clarifying foreign policy that would be good, or maybe just threatening to in a believable way. Just to draw a line under the idea that we are doing the saudis (and Israel) the favor wrt iran and not the other way around.
Practically I think we get more bang out of normalizing with Venezuela. It’s deep in our geographic control and I think we have comparative advantage refining their sour crude, although I’m no expert.
Crude oil prices only partially explain the high gasoline prices. Another major issue is insufficient refinery capacity to convert crude oil into refined products like gasoline, diesel, and jet fuel. As a result, these refined products are trading at much higher prices than would be expected from current crude prices. Javier Blas covered this issue in his May 9th article, “Sorry, But for You, Oil Trades at $250 a Barrel”. [1]
> If you are the owner of an oil refinery, then crude is trading happily just a little above $110 a barrel — expensive, but not extortionate. If you aren’t an oil baron, I have bad news: it's as if oil is trading somewhere between $150 and $275 a barrel.
> From 1985 to 2021, the crack spread averaged about $10.50 a barrel. Even between 2004 and 2008, during the so-called golden age of refining, the crack spread never surpassed $30. It rarely spent more than a few weeks above $20. Last week, however, the margin jumped to a record high of nearly $55. Crack margins for diesel and other petroleum products surged much higher.
> Third, and perhaps most importantly, refining capacity has declined where it matters for the market now, and the plants that are operating are struggling to process enough crude to satisfy the demand for fuel. Martijn Rats, an oil analyst at Morgan Stanley, estimates that outside China and the Middle East, oil distillation capacity fell by 1.9 million barrels a day from the end of 2019 to today — that’s the largest decline in 30 years.
> The downward trend started well before the pandemic hit, as old Western refineries struggled to compete, environmental regulations increased costs and the unfounded fear of peak oil demand amid the energy transition prompted some companies to close plants. The fuel-demand collapse triggered by Covid-19 only turbo-charged the trend, resulting in dozens of refinery operations shutting down for good in Europe and the U.S. in 2020 and 2021.
[1] https://www.bloomberg.com/opinion/articles/2022-05-09/crude-hovers-at-110-a-barrel-but-the-refinery-margin-makes-us-pay-a-lot-more
Agreed entirely except for the word “unfounded”.
Not claiming a timeline, but we’re within shouting distance of the day when oil isn’t the main fuel for ground transportation. I wouldn’t be investing in it either.
One needs a very loud voice to shout that far into the distance!
The United States Energy Information Agency (in 2021, so Biden Administration) projects oil still being the most used for transportation in 2050, and growing in absolute terms. And for all uses (plastics, heating, clothing, etc), oil consumption is projected to increase significantly over the next 30 years. See: https://www.eia.gov/outlooks/ieo/consumption/sub-topic-01.php
I think this is the “reference case” that assumes that current trends continue linearly, without any attention paid to changes in these trends or future laws. Note that this says that plug in electric vehicles (including both hybrids and fully electric) are only a third of the vehicle fleet worldwide, even though many large countries have already announced bans on the sale of vehicles that use gasoline starting by 2030.
So you're saying private sector actors with industry expertise and skin in the game think the market is flat/down, but government bureaucrats with no skin in the game say it's growing, and we should trust the bureaucrats?
Investing decisions include more than just financial and market risk. Regulatory and political risks have increased greatly over the past 5 years, and more so in the past 2. The hurdle rates have increased due to those higher risks.
(I suspect if I would have linked to, say, an ExxonMobil forecast, I'd have been accused of being an industry shill. I guess ANY source can be discredited due to origin rather than content)
Nope. Here's a BP forecast. Significant declines in oil consumption.
EIA's core competence is data gathering, not forecasting.
https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/oil-demand.html
From their summary: "The scenarios are not predictions of what is likely to happen or what bp would like to happen. Rather, the scenarios taken collectively are used to explore the range of possible outcomes over the next 30 years."
I have...questions...when their summary graph shows an dramatic inflection point in CO2 levels between actuals and forecast (summary graphic), here: https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/overview.html
We’ve had this discussion, I’ll not have it again.
You might if you knew what those alternative, presumably EV, vehicles were made out of. Shouting distance you say? I haven't seen an electric farm tractor yet. Nor any electric tractor trailers hauling goods over the road for that matter. And I don't expect to see any soon for very sound engineering reasons.
"I haven't seen an electric farm tractor yet"
Behold! The future is now!
https://electrek.co/2021/08/04/solectrac-launches-new-70-hp-60-kwh-electric-tractor-for-75000/
Behold! A toy!
Looks like it's roughly in between John Deere's 4 and 5 series.
Are John Deere tractors "toys"?
Depends on how many furrows it could plow before it needed recharging. Which, because batteries have terrible energy density, isn't many. That is the central problem here. Farm tractors use a shitload of energy dense fuel. A problem that doesn't go away magically when the power source is a battery. So the real question here is how many of these EV tractors would you need to plow a given field in the same amount of time as one comparable John Deere? Farmers are not dumb.
You keep vaguely claiming engineering expertise, but I've never seen hide nor hair of it.
Your skillset seems confined to the making of oblique insults; certainly, that's all you've ever done here.
As after our last exchange: please leave me the hell alone.
And what exactly was I wrong about? Elon Musk ostensibly built an electric transport tractor but did not demonstrate it or offer specs. The only time it is ever seen is when it is being hauled around on a trailer by a conventional ICE tractor.
Trying to predict what the configuration of energy sources and CO2 sequestration will be when we get a tax on net CO2 emissions is hard, but I'm sort of with Peter G in thinking that fossil fuel combustion for many niche uses will remain important.
I see no one actually read my post… “we’re within shouting distance of the day when oil isn’t the main fuel for ground transportation.”
No further claim than that…
By shouting distance do you mean decades? I'd agree with decades. Like maybe three or four.
Yes. the COVID collapse in demand for products led to a decline in refining capacity, another kind of supply shock.
Perhaps neither here nor there in the greater scheme of things but one thing that it seems very obvious in this context would NOT be helpful is picking a trade battle with China and threatening new tariffs because someone has decided that they have made solar panels too good and too cheap!
Disclosure: I am a Chevron shareholder and have owned Exxon in the past in a family portfolio. As long as there is a world price for oil and a cartel that manages a good portion of the world oil supplies, things won't get much better. Companies need to assess whether it is profitable to explore new areas. I don't think this is a big secret at all.
The fundamental error made by the US was not increasing the nuclear portion of the power grid. Germany is now seeing what happens when nuclear is abandoned. A lot of research has gone into the design of safer small flexible reactors but I have grave doubts that any will be deployed in the US.
Yeah Germany really messed up in deciding to close its nuclear plants. Finland will be opening a new nuclear power plant this summer, which also means that Russia cutting off energy exports to Finland is not that big a deal.
We beat this discussion to death about 8 months ago: new-build nuclear (generation III+) costs 6-8X as much as utility-scale PV or wind turbines on an LCOE basis and more like 15X as much on a nameplate capacity basis.
Gen. IV consists almost entirely of PowerPoint reactors which, if their ideas pan out, may stand to reduce that to 4-5X on an LCOE basis.
Even if we assume that we're going to need to build enough storage to more than double the LCOE cost of wind and solar to ensure reliability, nuclear still comes out looking terrible.
An overly-stringent, overly descriptive regulatory regime around radiation safety is among the *smallest* cost contributors to this problem and even doing away with it will reduce project costs by perhaps 10-15%.
There is literally no other prediction on earth in which I am so confident as this one: nuclear will play little to no role in weaning the world from fossil fuel dependence over the coming half-century beyond extending the lives of already-extant PWR plants.
You’re making a disingenuous argument. Opponents have done everything they could to drive up costs and bankrupt projects and then smugly claim that nuclear isn’t cost effective. Give us a break.
Your entire argument was horseshit in September and it's horseshit now, and I'm not going to rehash the endless merry-go-round of argumentation I and others brought to the table that you couldn't rebut and chose to ignore then, because you won't rebut it now either.
Again you're entire argument is that after opponents have used every conceivable tactic to drive up costs to smugly assert that it's just not price competitive.
So again you’ve run off without a rebuttal, because you don’t have one.
But I’d like to give you another chance: by what mechanisms, exactly, would reforming or repealing ALARA reduce nuclear project costs to parity with fossil fuels or renewables?
Be specific. I want to see evidence that we can actually simplify projects enough to avoid the rework debacles seen at Vogtle or Sanmen, that there’s significant material savings to be had, that the complex structural detailing, congested reinforcement, and path-dependent staging can be done away with by removing ALARA’s over-regulation.
Or, if you just want to pop an SMR off the back of a flatbed onto a mat foundation and put up a Quonset hut… well you can admit that too.
In China, India, South Korea? In France? In the UK? In Russia?
Somehow this grand conspiracy to make nuclear expensive is the one thing which unites virtually every major power including all of the ones which have traditionally been strongly pro-nuclear, a half-dozen major oil importers, and a number of countries without private petrochemical industries...
I just skimmed our last exchange and you were acting in even worse faith than I recalled, so I'll quote myself and leave it at this:
"For 3rd and 3rd+ generation technology, it boils down to this:
No matter *what* safety regime I am operating under, for a Gen. III+ PWR, I'm building a reactor housing/shielding structure that eliminates any likely cause of the reactor pressure vessel rupturing, because that's a goddamned doomsday event for the local area and ultimately for groundwater supplies in a several-thousand square mile area.
So I am fabricating, on-site, a large reactor shielding vessel out of high-grade (stainless, I believe) steel, basically by welding big hoop segments together. (*Large*; their size is limited by crane lift capacity and nothing else, so we're often talking about 3-4,000 metric tons per segment.
At the same time, I am building a small plant within it; the reactor and pressure vessel, support infrastructure, and the hookups that have to be staged through the shielding vessel and structure
And at the same time, I am staging a huge construction operation around it, to simultaneously build the actual plant infrastructure and connect it to the reactor pressure vessel, *AND* erect a very, very oversized concrete-steel composite reactor shield around the whole set of works.
Typical designs for modern reactor housings are feet of extremely-heavily reinforced concrete. Sometimes overtop more plate steel for a composite structure. In any case, the concrete is reinforced to the point where 15-20% of its internal volume is replaced by steel, rather than the 1-3% which is typical in a building.
This entire process is path dependent. I cannot complete work on a given stage of the shield vessel until certain internal assemblies are complete, I cannot complete work on stages of the concrete shield structure until the corresponding stages of the steel shield vessel are complete, and I cannot close the whole thing up in anything less than the precise order dictated by what fits or needs to pass through where. So a delay in, say, getting a reactor vessel and pile in place cascades down the whole project. The chances that A goes awry are very high because of the complexity involved, and I cannot make up ground by doing B first, which is much less frequently the case in other projects. Which adds up to financing costs. Lots of them.
Even the China projects, which were backstopped by the government and therefore had extremely low financing costs, still came in vastly over time and budget from what I know of them.
The American projects routinely had to rip out already-completed work as they backtracked and discovered they'd have to do something that happened before it over again, principally due to massive issues with welding quality control. I suspect China had the same issues on Sanmen as it had most of the same delays, just covered up in part by throwing labor at the problem on the concrete side to make up time.
The officially admitted figures for Sanmen put the two reactors 80% overbudget. I would be unsurprised to find they actually came in at more like 2.5X projected cost, with the savings relative to Vogtle mostly down to financing costs."
The over-regulation problem is true. But ALARA is not the driver of the costs I mentioned above. I could snap my fingers, implement every single solitary recommendation anyone has come up with for relaxing the in-plant safety, exposure, and plant systems failure criteria, all of which I agree are good things to do... and STILL be faced with a $16-20 billion dollar cost for Vogtle units 3 and 4.
Address the whole argument instead of running away with your tail tucked between your legs like last time and I will consider taking you seriously.
I’m still here, if you actually have an argument to speak of…
I was not part of the discussion 8 months ago and cannot respond to what went on back then. My interest has been in small-scale modular reactors whose costs are much less than the very large nuclear plants that have traditionally been built. They may or may not be useful in addressing energy needs but until a demo project is built and amortized we will never know for sure.
I'm fully supportive of renewables but storage remains an issue and the cost of metals used in batteries is not going to decrease as the demand for battery power increases (though if there is a breakthrough in iron oxide technology this might change the cost equation).
"whose costs are much less than the very large nuclear plants that have traditionally been built."
They'll have to be cheaper by a factor of roughly 4-5 to stand any chance against renewables+storage.
And unless SMRs obviate the need for a very beefy reactor shielding structure, they change the cost equation very little, per my other post.
I don't see how that's possible, because at the end of the day, we're now talking about a few hundred kilograms of HALEU fuel instead of a few thousand of LEU fuel. Thus, all the same arguments apply as regards the reactor vessel; it can't be breached, period, or we've poisoned a decent-sized surrounding area and potentially a large groundwater supply permanently.
We can absolutely do away with ALARA in its entirety. But overengineering for plant systems and to mitigate already-low worker radiation exposure is not the primary cost driver for nuclear power. Rather, the large, congested, tightly scheduled physical shielding structures and seismic/disaster design requirements are the main factor which make plants ruinously expensive.
At best, SMRs marginally improve the coordination and path dependency problems on which modern Gen. III+ reactors have all dashed against the rocks. But we're still going to be in the business of constructing very heavily reinforced, over-engineered, seismic occupancy category IV facilities for SMRs, simply because the risk of breaching the reactor vessel is so very grave (regardless of reactor type), and those are very, very expensive.
Have you seen the actual swings in PV power output? That cheap power stops getting cheap the bigger percentage of power it's providing. You need grid-scale energy storage before it makes any kind of sense; that problem has yet to be cracked. Whereas with nuclear you build better versions of the plants that you made in the 70s and 80s and have those workhorses give you a reliable base of clean power to tag-team with wind, hydro, and PV.
Also, if nuclear is 15X as expensive, why does France have the exact same cost per kWH as the US when it uses 75% nuclear? It's a power source that is expensive only when you are determined to make it so.
“It’s a power source that is cheap only when derived from fully depreciated plants held together with duct tape, chewing gum, and baling wire”.
FTFY. France’s last several new-build projects have also gone off the rails, I’ll note, and a significant fraction of its extant fleet is in need of major overhaul. Their regulatory regime is *nothing like* ours. Nor is China’s. Nor the UK’s. So why are they all failing to build nuclear plants economically?
No one is debating that extant nuclear plants are worth keeping (mostly, though there are edge cases).
I’m debating the notion that current or near-future nuclear generating plants can be economically built under any regulatory regime at all short of one which has no concern at all for the security of radiologicals and safety against natural or man-made disasters.
Every single SMR concept, let alone a Gen. III+ plant, requires a very complex, highly path-dependent, construction process for a heavily reinforced shield structure and plant infrastructure. Even if one takes all of the stupid out of the rules on radiation exposure, occupational safety, and plant failure criteria, one has succeeded in removing less than 15% of the cost of a project like Vogtle or Sanmen.
Where the heck do you propose to save the other ~65% needed to achieve rough cost parity with PV+wind+hydro+storage?
I’ve asked this question of several of the pro-nuclear group multiple times and no one can provide an answer at all, perhaps because no one has a bloody clue what they’re talking about.
I don’t think a single one of our resident nuke bros has ever spent five minutes on a construction site, let alone an active Gen. III+ construction project.
BTW I am also a David R. and this conversation is weird to me for that reason.
You are talking like this has never been done before. But the nuclear plants exist and have been producing large amounts of clean, safe, even-output for decades at scales that can power entire countries. The UK is finishing a nuclear plant that alone will produce 6% of the entire country's power.
If we were correctly pricing externalities from fossil fuel power and people didn't freak out about 3 mile island, (which by the way resulted in not a single injury) the US would be totally clean with 80% nuclear today. In that world you could reasonably take a look at costs and see if we could save some $ by replacing some of the plants with PV. But we live in a world where empirically every state or country that has shunned nuclear power, closed plants early or stopped investing in nuclear has seen their carbon emissions and pollution rise dramatically. The renewable energy promised just didn't fill the gap, and more gas was burned.
Construction cost disease sucks, but the *precise* implications are that we can no longer do what we once could.
“The UK is finishing a nuclear plant that alone will produce 6% of the entire country's power.”
Hinkley Point C is going to end up costing $33 billion at minimum. More likely $39-40B if Vogtle is any guide.
That’s around 3X as much as Hornsea 1 on a nameplate basis, and Hornsea was around 3X the cost of a typical UK onshore wind turbine.
With Hornsea’s availability factor around 65%, Hinkley ends up costing twice what it did at best.
And that’s in the UK, which can’t really rely on PV (cheaper than wind) much at all. Most of the US is different.
So again: After scrapping ALARA and reducing pressure and radiation systems redundancy, where the heck do you propose to save the other ~65% needed to achieve rough cost parity with PV+wind+hydro+storage?
When you take into account the increased cost of variability (storage+grid upgrades) when deployed as a large percentage of generation, nuclear is perfectly competitive: https://www.iea.org/reports/projected-costs-of-generating-electricity-2020 Error bars on LCOE new nuclear entirely overlap with onshore wind and PV. That's a long way off from the claim that you need to save 65% to get to parity. Also, extended operation of existing plants is really, really cheap but nuclear plants are getting closed early.
I'm curious if your perspective on utility scale PV has changed given the massive slow down in solar imports? If those are not resumed, then it would seem to me that the price and even the possibility of PV at scale will be very challenged for at least the next couple of years.
That just means we’re fucked, not that nuclear will save us.
I have no clue what the Biden administration is playing at but it’s damned stupid.
Lost investment in things like years of studies and approvals for a major project like Keystone XL where it was denied, approved, denied (for varying reasons and with little real rule following, all political machinations that you can’t respond to by tweaking the project design) does not incline investors to put more money in oil projects. Similarly, for reasons that have been well spelled out elsewhere, saying that “oil companies are not drilling on every lease” is not a complete picture -- lots of leases wouldn’t produce enough to be profitable even at current prices, and they don’t know all of that at lease auction time, much of the studying is done later. In general the administrations actions would curb investment without regulator support for stranded investment theory *and we’re getting that too.*
There are some unique factors that impede adjusting to higher energy prices
- Energy prices jumped due to a war, whose instigator seems to be losing. That makes for a tough investment case for multi-year projects to increase supply.
- The biggest thing consumers could do to reduce gas bills is buy an EV or simply a more efficient ICE car. But car production is being disrupted by other shortages, so the vehicle fleet is actually turning over more slowly than usual, instead of faster.
This slower fleet turnover is under appreciated. Not good for EV adoption nor spreading safety features like backup cameras.
Buying a new vehicle to replace an old one to save on gas bills is generally not fiscally prudent.
Probably a blessing that so many companies are faltering in their quest to get office workers Back To The Office- lots of miles missing from 3 years ago.
Thank you for this article - very rarely is there writing that considers both 1. Global warming is a real threat with 2. Our energy transition isn’t going to happen overnight. Energy prices seem to be the #1 thing voters judge politicians on, so in my opinion is better to have more carbon produced short-term while implementing a long-term vision of switching to renewables (via EV subsidies, repeal of solar tariffs, investments in charging infrastructure and R&D etc.) than to have the democrats be the “party of high gas prices” and be unable to make consistent progress towards the goal.
My mental model here is that coal use didn’t production didn’t plummet because of taxes or restrictions of mining grants, it plummeted because clean natural gas got much much cheaper. I imagine that due to American’s general allergy to raising prices on themselves this will be true for oil as well.
It makes sense for producers to be cautious. Putin is obviously suffering from some pretty serious health problems. If he dies tomorrow and his replacement wisely pulls a Khrushchev and blames all the bad things that have happened on the late Putin, withdraws troops and makes amends with the west, oil prices will plummet.
"While energy consumption scales with income to some extent, it’s not like millionaires drive three times as much as the median American."
What's the fuel usage of a corporate jet?
This is a bit blinkered. Have you never set foot in either a rural area or a city center? Plenty of 4-figure, and even a few 3-figure, "pieces of equipment" being held together with baling wire, duct tape, and willpower.
American urban planning is such that even most urban poor households need a car, it's just a terrible car, usually driven uninsured. Rural poor ones need it even more.
And probably getting relatively poor fuel economy and downright shit for smog, NOx, etc., while we're on the subject.
I don’t think that guess is justified.
I would expect a significant chunk of those to be professional class kids without families to transport and able to afford the most transit-friendly neighborhoods.
Not scientific but my own experience says that chunk is at least half.
Or older folks (like my Mother-in-Law) who doesn't drive anymore.
Yea, I’m sure the data doesn’t exist but I’m curious what percent of prime child-rearing age households don’t have cars. I’d bet low, low single digits.
"Yeah and lots of lower-income people spend $0 on gas because they don’t even own a car and rely on walking and inconvenient public transit to get around."
It depends on where you draw the line at 'lower income', but I suspect that that's far from the majority even of the bottom quintile.
It would also be pretty variable by region and also only really apply (in appreciable numbers) to a small subset of urban areas.
A family (not one single 20-something) can live reasonably without a car or a large Uber/taxi budget in…
Yea, just NYC.
Even dense Chicago, Boston, Philly, and DC are a stretch, let alone anywhere else.
Not everybody without a car is poor, does does everyone without gas expenses not have a car (some people drive electric).
For 11 years, I lived without a car, and not in New York. With modern phone apps, from Uber to Amazon Prime, it has never been easier. The trick to making it work is that you need to choose carefully where to live so that as many of your day-to-day trips as possible can be done on foot. If you can walk to work and walk to the grocery, it's much easier. Having rental cars nearby so that you can quickly pick up a car on those occasions you do need one is also a big plus.
Unfortunately, the neighborhoods that make for the best car-free living also tend to be expensive, and the housing premium for living in such a neighborhood can often rival a car payment. But, living car-free the right way has many upsides over living a car-dependent life. You don't have to worry about traffic, the price of gas, or car maintenance. You get all the exercise you need walking places and don't need to waste time running on treadmills at the gym (or driving to the gym).
I eventually did end up buying a car, but it's a nice-to-have, not a necessity. I still walk to the grocery store, and use the car primarily for getting out of town on weekends. I consider it a luxury I can afford, on par with buying extra legroom on airlines. If I were ever in a difficult financial situation, and needed to cut expenses, the car would be the first thing to go. And, even with the car, I still don't have gas expenses, because the car is electric.
As a landlord in New England with a building with oil heating I can confirm I got absolutely murdered on heating costs this past year…
How did you calculate the counterfactual inflation rates for Shelter, Medical care services, Apparel, and New cars?
Overall a good article - my issue is you didn’t seem to account for the US being the world’s largest producer of oil and gas. That money is still in the economy it’s just in the hands of different people.
To your larger point, I’d be 100% a price guarantee for frackers to ensure the Saudi’s don’t kneecap them again.
I can accept the argument that the government should not block domestic drilling - or pipelines to transport oil from the well to market - for the sake of reducing the oil supply and driving up prices, but I feel a price guarantee for frackers is going too far the other way.
A price guarantee is effectively a government subsidy for oil and gas, and, once you establish such a subsidy, it becomes very difficult politically to take away, even at some point in the future where enough cars and other equipment have been electrified that our overall economy is not so dependent on oil and gas anymore. It would also not do anything to reduce the price of gas in the short term, since new drilling operations cannot start overnight. I also resent the idea, as somebody who drives an electric car, that my tax dollars should be spent subsidizing oil and gas.
In the longer term, there is plenty of opportunity to achieve energy security by letting the free market do its thing on the supply side (blocking drilling only in areas with particularly environmental sensitivity), but using the power of the government to boost alternatives to reduce oil on the demand side. Fuel economy standards need to go up, and automakers should not be able to work around them by selling larger and larger cars. We also need better battery technology to build cheaper and longer-ranged electric cars, and the government should be helping to fund that research so products that use it are available sooner.
By contrast, simply doing the fossil fuel company's bidding does nothing to reduce the demand for oil. Simply put, fossil fuel companies don't want cars to be electrified, or electricity production to be replaced with wind/solar/batteries - they want a captive consumer audience that has no choice but to consume every increasing amounts of their products at higher and higher prices. At least this aspect, the progressives are right on, even if I believe they are wrong on the supply-side part of the equation.
People use “unbelievable” too liberally, but my brain is truly refusing to process the fact that we are likely to get 4 more years of Trump. It is shocking how quickly things went sideways for the administration.
While I basically agree with this- just from a sheer trolling perspective, it would be sort of hilarious if we have a 2024 environment where literally any Republican could beat Biden- but Trump is so whacked-out that he's the only one who can lose. Like, say the economy's terrible, inflation's high, Hunter Biden's under federal indictment, Joe Biden is now so old he doesn't know what country he's the President of, and so on. You could literally nominate a potted plant to be the Republican nominee and it would win. And yet Trump is so bizarre, and so scary, that he's uniquely the one Republican who loses. Aside from being a good result it'd be..... hilarious
Right. And I wonder if he comes to power as the stimulus induced part of inflation subsides and Russian war is over.
Wow...what a genius businessman!!!
Also, with so many folks still working from home where is all this demand coming from? You look at vehicle miles traveled and it’s at a record high. Where the f—k is everyone going?
Commuting is a smaller chunk of traffic than most people assume--something like 15 or 20 percent. And you wouldn't guess it from the discourse, but the proportion of people who have email jobs and are still doing them at home is similarly a low double digit percentage.
From my understanding, it's not the oil production that's the issue, as the oil price and the price of its constituents are now having something of a discontinuity, i.e gas is much more expensive that oil prices would necessarily reflect. It's that Democratic interest in sending signals to energy companies that the era of oil was over and the COVID pandemic drop in demand indicated to the oil companies that they had excess refining capacity and they moved to mothball their least efficient refining capacity. And now here we are.
I don't think the oil refiners are listening to rhetoric when deciding whether to mothball fully-depreciated assets in the midst of a supply crisis, I think they're making the calculation that it's more profitable to allow oil prices to remain high with lower output than to mobilize their most expensive refining capacity and risk driving prices back below the point where that capacity is profitable.
If we were talking about capital expenditure plans, sure, but thinking this way about operational expenditures makes no sense.
"Oil companies look at permanent refinery cutbacks
BY RONALD D. WHITE
MARCH 11, 2010 12 AM PT
Some of the nation’s biggest oil companies are looking at permanently reducing how much gasoline and diesel fuel they make, a move that analysts say would almost certainly trigger higher prices for drivers.
Energy companies are suffering huge losses from refining because of slumping gasoline use -- a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have begun and will accelerate as corporations strive for profits.
Major refiners have been circumspect about their plans, saying that they are considering options that could include closing refineries, selling parts of their operations, laying off workers and slashing spending.
“Refineries will have to be closed,” said Fadel Gheit, senior energy analyst with Oppenheimer & Co. “Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable.”"
https://www.latimes.com/archives/la-xpm-2010-mar-11-la-fi-refineries11-2010mar11-story.html
"Factbox: Oil refiners shut plants as demand losses may never return
By Reuters Staff
NOVEMBER 10, 2020
(Reuters) - Oil refiners are permanently closing processing plants in Asia and North America and facilities in Europe could be next because of uncertain prospects for a recovery in fuel demand after the coronavirus pandemic cut consumption."
https://www.reuters.com/article/us-global-oil-refinery-shutdowns-factbox/factbox-oil-refiners-shut-plants-as-demand-losses-may-never-return-idUSKBN27R0AI
US oil production was more than 10% greater in 2019/20 than it is now, when prices were just over half of what they are now (https://tradingeconomics.com/united-states/crude-oil-production#:~:text=In%20the%20long%2Dterm%2C%20the,according%20to%20our%20econometric%20models.). You would think oil that was profitable to pump and refine at $60/barrel might be profitable at $110/barrel, but I'm not an economist.
Maybe it just takes a while for these old rigs to be brought back into production. Matt on Twitter posts regular updates on the increase in US rig counts, suggesting that nature is (slowly) healing itself.