Surprise! Carbon Fuels are Plentiful, not Scarce.

Brentan Alexander writes at Forbes $40 Oil Will Return: This Isn’t The End Of Fossil Fuels. Excerpts in italics with my bolds and images.

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Yesterday, May futures for WTI crude, a benchmark often used for U.S.-sourced oil, crashed into negative territory for the first time ever. It was the last day to trade a May contract, and with storage space filling up as oil demand craters, contract holders with nowhere to put the oil they were obligated to physically accept were forced to pay to have somebody take contracts off their hands. This moment represents a stunning new chapter in the ongoing oil crisis that has seen record drops for oil consumption and prices globally. Spot prices in May will remain depressed, and the June market is likely to be painful as well. It may seem like the days of $40 oil are behind us, and that we’re witnessing the beginning of the end for oil as the lifeblood of the global economy. We aren’t:

Oil will one day return to $40 a barrel, but the last few weeks have demonstrated in hyperdrive how the oil endgame will play out.

It seems that oil isn’t the precious commodity it has been made out to be. Much ink has been spilled on the concept of peak oil, wherein dwindling reserves of oil cause rising prices as the marketplace becomes more and more supply-constrained. In the endgame scenario, supply shocks send prices soaring to levels that force global economies to find alternative fuels, renewable energy, or otherwise. A key issue with the peak oil theory is that ‘reserves’ are only counted if they’re known to exist and can be extracted with current technology.

As prices soared to upwards of $100 a barrel around 2008, many wondered if the high prices were here to stay, and if peak oil was coming to pass. Instead, high prices were just the motivation needed to unlock a bit of American ingenuity. Within 10 years, new technology unlocked vast fields of oil and gas throughout Texas, Pennsylvania, and the Dakotas. The ‘reserves’ in the United States multiplied, oil prices dropped, and the United States regained its status as the world’s leading producer of oil.

Peak oil, it turns out, is a story of peak demand.

As some economies of the world begin to face the realities of climate change, new renewable and net-zero (or negative!) technologies have emerged and will emerge to supplant fossil oil. At first, these technologies require higher fossil prices, government programs, or both, to compete in the market. But as they mature and grow, prices come down. Demand for fossil will drop accordingly. And at some point, so little demand will exist for crude oil that producers will have to pay somebody to take if off their hands or stop producing it altogether.

This market conversion has already begun. Tesla has proven electric vehicles can out-perform and out-sexy the incumbents. Biorefineries are being built to turn household trash in to jet fuel. Governments are taking action to incentivize cleaner fuels. Nevertheless, action thus far has been spotty at best and despite the current market, peak oil demand has not yet come to pass.

The unprecedented demand destruction caused by COVID-19 will eventually subside as the threat of the pandemic wanes. The public will fly again, drive again, and buy plastic again; oil demand will ratchet up again. Shuttered wells won’t restart, stored oil will be drawn down, OPEC will maintain supply controls to balance government budgets, and prices will rise to $40 or more again. But someday, hopefully in the not too distant future, oil will again find itself in decline when a different (and more permanent) source of demand destruction weans the global economy off of fossil carbon for good.

Comment:

This article makes a distinction between short and long term energy supply and demand.  Thus the price drop yesterday signifies a present glut of carbon fuels.  Climate activists can not count on the supply of fossil fuels falling as long as they are plentiful and inexpensive.  For example, others note coal reserves exceed 100 years at current rates of consumption, and will remain attractive for electrical power production.  In the absence of economical substitute energy sources, modern societies for years to come will depend on companies providing carbon-based fuels.

As Bjorn Lomborg has long maintained, this is the time to invest in advanced energy technologies, including nuclear, to engineer price-competitive energy alternatives and achieve an orderly transition for future generations.  It is not a time for short-term bad bets on immature wind and solar tech that do not scale to societies’ need for reliable affordable energy.

BTW, Bill Gates also shares and funds this perspective:

4 comments

  1. oiltranslator · April 22, 2020

    Looks like Billy Gates is having a flash of lucidity! It’s about time…

    Like

  2. Raymond · April 23, 2020

    Micheal Moore WTF?
    Have you seen this video from Michael Moore? He’s just discovered that maybe all the green energy will no save the world … something many of us have been saying for years and years and years. I don’t like Michael Moore since he’s not very honest with many of his films. But WTF happened here?
    Sorry to bother you with this … Cheers from Switzerland

    Like

    • Ron Clutz · April 23, 2020

      Yes, Moore has lost faith in wind and solar, but is still committed to anti-humanism. The ending is pure doomsday porn, the ape is destroyed along with the Garden of Eden. The message: There is No Hope. Worse than Greta, but less forgiveable since Moore should know better.
      “Inside every cynical person, there is a disappointed idealist.” ― George Carlin.

      Like

      • Raymond · April 24, 2020

        I couldn’t watch it to the end for exactly this reason. Moore isn’t being honest with himself or the audience. Next week the slow process of getting the economy started again begins. However retail will remain closed. Ron this is the biggest tragedy off the whole thing the collateral damage to people’s existence is going to do us a whole lot more damage then the virus. This is no joking matter but it just hasn’t hit the majority of the population that the worst is yet to come. I’m an optimist generally speaking but having grown up with parents that joined a fundamentalist religion I know how easily people can be manipulated and want to believe. We’ve become softies and get even more spooked as the generations come along. It’s a flu, a nasty flu, but we have to learn to live with it and stand up to our fears and go on with working to keep our social cohesion. That means facing the risks and moving on, anything else will destroy us!

        Like

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