Fossil Fuels

Beware the Green Bubble Popping

Posted on by Ron Clutz

David P. Goldman writes at Asia Times Green bubbles threaten to pop stock markets.  Excerpts in italics with my bolds.

Magical US thinking of a Green agenda financed by endless amounts of printing-press money will only end in tears

Prices for all energy commodities jumped during the past month, some by record margins, as a global energy shortage set off a scramble for gas, coal and oil. Brent crude has doubled in the past year, Newcastle coal has quadrupled, and Netherlands natural has risen seven-fold.  There are many small reasons for the global energy squeeze, and one big one:

Investment in hydrocarbons has collapsed under pressure from the Green agenda adopted by international consensus.

Energy investment in the United States has dwindled as large institutional investors boycott fossil fuel investments. China’s critical electricity shortage is the result of draconian regulation of coal mining, exacerbated by Beijing’s punitive ban on Australian coal imports.

The idea is fanciful that the world can re-direct US$100 trillion in capital investment during the next 30 years to reduce carbon emissions to zero by 2050, as the International Energy Agency has proposed. . . To put in context what this number implies, the entire free cash flow of the world’s private corporations would barely make up a third of the Global Reset investment budget.

The political pressure of the Green agenda has virtually wiped out investment in the US oil and gas industry. Capital expenditures for US exploration and development companies during 2021 (and projected for 2022) are only a fifth of the 2015 peak of $150 billion.

Meanwhile, oil and gas companies are sitting on mountains of cash. The free cash flow of the oil and gas industry will rise to $50 billion next year, the highest on record. In 2015 the oil and gas industry showed negative free cash flow because it borrowed to expand production.

Now oil and gas companies are paying down debt and returning cash to shareholders rather than take hydrocarbons out of the ground.

Virtually the whole of the world’s political elite has signed on to the carbon neutrality agenda, including the government of China, which appears to believe that support for carbon neutrality (which China has pledged by 2060) will mitigate hostility to China in the West.

But the energy market suggests that the hard reality of supply constraints will overwhelm the Green agenda before it gets started.

The cost of shelter, which comprises about two-fifths of the US Consumer Price Index, continues to rise at a record pace in the United States. This hasn’t turned up in the official data, because it takes time for old rental leases to expire and new leases to be written.

But several additional percentage points of inflation are now programmed into US inflation for the next two years.

As the Fed forced down the “real” interest rate, by reducing its overnight rate to zero and by purchasing hundreds of billions of dollars in TIPS, investors were forced into stocks.

At some point, the Fed’s game is going to come to an end. The magical thinking of a green agenda financed by endless amounts of printing-press money will be followed by a nasty hangover. Rates will rise and the asset bubble will pop.

Exactly when that will happen is beyond anyone’s capacity to forecast, but the unpleasant September in US equity markets was a foretaste of what we can expect.

A worker installs polycrystalline silicon solar panels as terrestrial photovoltaic power project starts on November 17, 2015 in Yantai, China. Photo: Getty

Updated Sept. 28 Europe Energy Stress Test Under Way

Posted on by Ron Clutz

Update Sept. 28  Additional commentary in Footnote at end

Europeans are going to get a strong dose of energy cuts Greta has long called for since starting her Fridays for the Future.  Shortages of fossil fuels are in the outlook and already reflected in skyrocketing prices. Tyler Durden explains at zerohedge All Hell Is Breaking Loose In Energy Markets.  Excerpts in italics with my bolds.

By now readers are well aware that Europe is suffering from a historic gas crisis, one which according to Rabobank is now even more extreme than the US oil price shock.

And unfortunately for Europe’s population, with every passing day – and to a lesser extent hedge funds such as Statar Capital which suffered a big loss in the past few days – it’s only getting worse. As Bloomberg’s Javier Blas notes today, both UK NBP and Dutch TTF natural gas benchmarks have closed the day at their highest ever settlement level, up ~11% on the day (to a closing price equal to more than $26 per mBtu).

Natural gas prices in Europe have surged past $25 per million British thermal unit, more than 400% higher than the 2010-2020 average, and significantly higher than in the U.S., where the commodity trades at around $5 per million Btu. In Asia, liquefied natural gas has recently changed hands at around $27 per million Btu, a seasonal record high, as China has also been hit by a widespread energy crisis (see “Millions Of Chinese Residents Lose Power After Widespread, “Unexpected” Blackouts; Power Company Warns This Is “New Normal””). Also, for those who haven’t read it yet, please check out Rabobank’s extensive recap of Europe’s energy crisis which we posted over the weekend.

Europe’s energy crisis is not contained to nat gas, and as we discussed over the weekend in another flashback to the 1970s US, UK gas station pumps are running dry in British cities on Monday with vendors rationing sales as a shortage of truckers strained supply chains to breaking point. Pumps across British cities were either closed or had signs saying fuel was unavailable on Monday, Reuters reporters said, with some limiting the amount of fuel each customer could buy.

The Petrol Retailers Association (PRA), which represents independent fuel retailers accounting for 65% of all the 8,380 UK forecourts, said members had reported that 50% to 90% of pumps were dry in some areas.

A post-Brexit shortage of truck drivers as the COVID-19 pandemic eases has sown chaos through British supply chains in everything from food to fuel, raising the specter of disruptions and price rises in the run-up to Christmas. Drivers lined up for hours to fill their cars at petrol stations that were still selling fuel, albeit often rationed. There were also calls for National Health Service (NHS) staff and other emergency workers to be given priority.

Hauliers, gas stations and retailers said there were no quick fixes as the shortfall of truck drivers – estimated to be around 100,000 – was so acute, and because transporting fuel demands additional training and licensing. “We need some calm,” Gordon Balmer, executive director of the PRA, told Reuters. “Please don’t panic buy: if people drain the network then it becomes a self-fulfilling prophecy.”

Shifting from gasoline and nat gas to oil, the near-term outlook is looking even more grim. According to Trafigura, one of the world’s largest commodity trading houses, the world faces higher oil and gas prices this winter and beyond as supply struggles to catch up with fast-rising demand.

“We’re going to see higher oil prices,” Ben Luckock, Trafigura’s co-head of oil trading said in an interview with Bloomberg.

Luckock said the market was mispricing forward oil contracts for the next couple of years because traders hadn’t yet woken up to the fact the supply-demand balance will remain tight for some time. Translation: even higher prices are coming with no easing in sight.

“I struggle to see anything but higher prices going forward in the next two years,” he said, one day after Goldman hiked its price target, now predicting that Brent would hit $90 some time in December. On Monday, Brent crude for immediate delivery surged toward $80 a barrel, setting its highest price in nearly three years.

On natural gas, he said prices could shoot up even more this winter if cold weather forces demand higher in Europe and Asia.

The bullish outlook comes as oil demand fast recovers toward its pre-pandemic level, with most traders expecting that consumption will reach the 2019 by early-to-mid 2022. As demand rebounds, supply has struggled to keep up: U.S. shale companies have kept a lid on spending, preferring to pay dividends to shareholders. With U.S. shale reacting slowly to higher prices, the OPEC+ oil cartel has been able to keep control of the market.

“The U.S. shale industry is showing very strong discipline. Oil prices are roughly double what they were a year ago and despite that we’re not seeing a huge increase in drilling,” Luckock said.

Luckock said that it was difficult to see lower natural gas prices this winter in Europe, despite the commodity trading at a record high already: “If it’s a cold winter in Europe or Asia, we have a big problem,” he said. “If it’s cold, and on top, it isn’t windy, then we have a much bigger problem. We will face shortages.”

Notably, Luckock said he was skeptical that Russia, the biggest gas supplier to Europe, was intentionally tightening the market for political gain, suggesting that Moscow was already pumping as much gas as it could right now.

“It’s easy to say that’s politically motivated, but I think it’s simpler than that: Russia is facing maintenance in many gas fields, very low domestic inventories, substantially increased flows to Turkey, and Gazprom is struggling to increase production,” he said.

Footnote: Commentary from Bloomberg Green and National Review

Ewa Krukowska at Bloomberg Green Energy Crisis Puts World’s Most Ambitious Climate Plan to Test.  Excerpts in italics with my bolds.

  • Soaring power and gas prices shoot up EU political agenda
  • Governments across EU fear backlash over costs of green shift

Natural gas and power prices are surging to all-time highs in the 27-nation region, as the bloc’s economies rebound from the Covid-19 pandemic. The surge in demand comes amid limited gas imports from Norway and Russia, with some countries accusing Moscow of manipulating supplies. At the same time, the EU strategy to accelerate emissions cuts in every sector from transport to manufacturing and agriculture boosted demand for carbon permits, with prices more than doubling over the past two years to new records.

The green package unveiled in July aims to align the economy with a 2030 stricter binding goal of reducing emissions by at least 55% from 1990 levels. The laws need to be approved by the European Parliament and member states in the Council of the EU, with each institution entitled to amending the plan, in a process likely to take around two years.

But for Europe’s lower-income countries — as well for the continent’s energy-intensive industries — the pain of any transition will be significant, and the EU will be under pressure to help cushion the blow from the current price jump.

But European governments are limited in what they can do to tackle the power crunch — without making their climate goals even harder to reach.

“It feels unlikely that politicians will reverse track and go back to coal generation or make changes to the approach to carbon,” said John Musk, an analyst at RBC Europe Ltd. “It is hard to see what measures can be adopted to alleviate near term supply-demand constraints on gas and power. There are likely be a couple of difficult years to navigate in terms of consumer prices and there may have to be some measures to help consumers here and there.”

Andres Stuttaford adds an essay at National Review The Gathering Storm (But with Not Enough Wind): Europe’s Energy Mess Gets Worse — a Lesson the U.S. Looks Set to Ignore.  Excerpts in italics with my bolds.

Instead of looking at these alternative approaches, the EU, the U.K., and, soon enough, the U.S., seem set on what is looking more and more like a headlong rush into disaster.

To understand why this might be, it is important to understand that for many climate warriors a “bloody hard” transition is a feature, not a bug.

I wrote about this a week or so back:

Concentrating on resilience and adaptation do not follow the millenarian narrative that is an unmistakable subtext of the message now being sent out by many climate warriors, whether inside government, linked to government, or outside it. Underpinned by the expectation of apocalypse, this narrative, which has repeatedly demonstrated its dangerously persuasive power over the centuries, is based on the thought that a wicked humanity faces punishment and must, with the assistance of a morally superior, enlightened vanguard, be made to change its dreadful (often self-indulgent) behavior. Adaptation and resilience, by contrast, offer the prospect that our species will muddle on through, living pretty much as it has been doing, except even better, and without donning the hairshirt integral to so many climate warriors’ faith. Theirs has the characteristics of a religion, and there is little that is original about it. Pointless asceticism comes with the territory.

Questioning whether those setting the climate agenda are going about things the right way is not a matter of climate “denial,” but simple common sense. It is not, however, a conversation that the climate establishment wants to have. Fundamentalists are like that.

They may not want to have that conversation, but, as winter approaches, the growing crisis in Europe suggests that it is a conversation that may be difficult to avoid.

 

 

 

Europe Energy Stress Test Under Way

Posted on by Ron Clutz

Update Sept. 28  Additional commentary in Footnote at end

Europeans are going to get a strong dose of energy cuts Greta has long called for since starting her Fridays for the Future.  Shortages of fossil fuels are in the outlook and already reflected in skyrocketing prices. Tyler Durden explains at zerohedge All Hell Is Breaking Loose In Energy Markets.  Excerpts in italics with my bolds.

By now readers are well aware that Europe is suffering from a historic gas crisis, one which according to Rabobank is now even more extreme than the US oil price shock.

And unfortunately for Europe’s population, with every passing day – and to a lesser extent hedge funds such as Statar Capital which suffered a big loss in the past few days – it’s only getting worse. As Bloomberg’s Javier Blas notes today, both UK NBP and Dutch TTF natural gas benchmarks have closed the day at their highest ever settlement level, up ~11% on the day (to a closing price equal to more than $26 per mBtu).

Natural gas prices in Europe have surged past $25 per million British thermal unit, more than 400% higher than the 2010-2020 average, and significantly higher than in the U.S., where the commodity trades at around $5 per million Btu. In Asia, liquefied natural gas has recently changed hands at around $27 per million Btu, a seasonal record high, as China has also been hit by a widespread energy crisis (see “Millions Of Chinese Residents Lose Power After Widespread, “Unexpected” Blackouts; Power Company Warns This Is “New Normal””). Also, for those who haven’t read it yet, please check out Rabobank’s extensive recap of Europe’s energy crisis which we posted over the weekend.

Europe’s energy crisis is not contained to nat gas, and as we discussed over the weekend in another flashback to the 1970s US, UK gas station pumps are running dry in British cities on Monday with vendors rationing sales as a shortage of truckers strained supply chains to breaking point. Pumps across British cities were either closed or had signs saying fuel was unavailable on Monday, Reuters reporters said, with some limiting the amount of fuel each customer could buy.

The Petrol Retailers Association (PRA), which represents independent fuel retailers accounting for 65% of all the 8,380 UK forecourts, said members had reported that 50% to 90% of pumps were dry in some areas.

A post-Brexit shortage of truck drivers as the COVID-19 pandemic eases has sown chaos through British supply chains in everything from food to fuel, raising the specter of disruptions and price rises in the run-up to Christmas. Drivers lined up for hours to fill their cars at petrol stations that were still selling fuel, albeit often rationed. There were also calls for National Health Service (NHS) staff and other emergency workers to be given priority.

Hauliers, gas stations and retailers said there were no quick fixes as the shortfall of truck drivers – estimated to be around 100,000 – was so acute, and because transporting fuel demands additional training and licensing. “We need some calm,” Gordon Balmer, executive director of the PRA, told Reuters. “Please don’t panic buy: if people drain the network then it becomes a self-fulfilling prophecy.”

Shifting from gasoline and nat gas to oil, the near-term outlook is looking even more grim. According to Trafigura, one of the world’s largest commodity trading houses, the world faces higher oil and gas prices this winter and beyond as supply struggles to catch up with fast-rising demand.

“We’re going to see higher oil prices,” Ben Luckock, Trafigura’s co-head of oil trading said in an interview with Bloomberg.

Luckock said the market was mispricing forward oil contracts for the next couple of years because traders hadn’t yet woken up to the fact the supply-demand balance will remain tight for some time. Translation: even higher prices are coming with no easing in sight.

“I struggle to see anything but higher prices going forward in the next two years,” he said, one day after Goldman hiked its price target, now predicting that Brent would hit $90 some time in December. On Monday, Brent crude for immediate delivery surged toward $80 a barrel, setting its highest price in nearly three years.

On natural gas, he said prices could shoot up even more this winter if cold weather forces demand higher in Europe and Asia.

The bullish outlook comes as oil demand fast recovers toward its pre-pandemic level, with most traders expecting that consumption will reach the 2019 by early-to-mid 2022. As demand rebounds, supply has struggled to keep up: U.S. shale companies have kept a lid on spending, preferring to pay dividends to shareholders. With U.S. shale reacting slowly to higher prices, the OPEC+ oil cartel has been able to keep control of the market.

“The U.S. shale industry is showing very strong discipline. Oil prices are roughly double what they were a year ago and despite that we’re not seeing a huge increase in drilling,” Luckock said.

Luckock said that it was difficult to see lower natural gas prices this winter in Europe, despite the commodity trading at a record high already: “If it’s a cold winter in Europe or Asia, we have a big problem,” he said. “If it’s cold, and on top, it isn’t windy, then we have a much bigger problem. We will face shortages.”

Notably, Luckock said he was skeptical that Russia, the biggest gas supplier to Europe, was intentionally tightening the market for political gain, suggesting that Moscow was already pumping as much gas as it could right now.

“It’s easy to say that’s politically motivated, but I think it’s simpler than that: Russia is facing maintenance in many gas fields, very low domestic inventories, substantially increased flows to Turkey, and Gazprom is struggling to increase production,” he said.

Footnote: Commentary from Bloomberg Green and National Review

Ewa Krukowska at Bloomberg Green Energy Crisis Puts World’s Most Ambitious Climate Plan to Test.  Excerpts in italics with my bolds.

  • Soaring power and gas prices shoot up EU political agenda
  • Governments across EU fear backlash over costs of green shift

Natural gas and power prices are surging to all-time highs in the 27-nation region, as the bloc’s economies rebound from the Covid-19 pandemic. The surge in demand comes amid limited gas imports from Norway and Russia, with some countries accusing Moscow of manipulating supplies. At the same time, the EU strategy to accelerate emissions cuts in every sector from transport to manufacturing and agriculture boosted demand for carbon permits, with prices more than doubling over the past two years to new records.

The green package unveiled in July aims to align the economy with a 2030 stricter binding goal of reducing emissions by at least 55% from 1990 levels. The laws need to be approved by the European Parliament and member states in the Council of the EU, with each institution entitled to amending the plan, in a process likely to take around two years.

But for Europe’s lower-income countries — as well for the continent’s energy-intensive industries — the pain of any transition will be significant, and the EU will be under pressure to help cushion the blow from the current price jump.

But European governments are limited in what they can do to tackle the power crunch — without making their climate goals even harder to reach.

“It feels unlikely that politicians will reverse track and go back to coal generation or make changes to the approach to carbon,” said John Musk, an analyst at RBC Europe Ltd. “It is hard to see what measures can be adopted to alleviate near term supply-demand constraints on gas and power. There are likely be a couple of difficult years to navigate in terms of consumer prices and there may have to be some measures to help consumers here and there.”

Andres Stuttaford adds an essay at National Review The Gathering Storm (But with Not Enough Wind): Europe’s Energy Mess Gets Worse — a Lesson the U.S. Looks Set to Ignore.  Excerpts in italics with my bolds.

Instead of looking at these alternative approaches, the EU, the U.K., and, soon enough, the U.S., seem set on what is looking more and more like a headlong rush into disaster.

To understand why this might be, it is important to understand that for many climate warriors a “bloody hard” transition is a feature, not a bug.

I wrote about this a week or so back:

Concentrating on resilience and adaptation do not follow the millenarian narrative that is an unmistakable subtext of the message now being sent out by many climate warriors, whether inside government, linked to government, or outside it. Underpinned by the expectation of apocalypse, this narrative, which has repeatedly demonstrated its dangerously persuasive power over the centuries, is based on the thought that a wicked humanity faces punishment and must, with the assistance of a morally superior, enlightened vanguard, be made to change its dreadful (often self-indulgent) behavior. Adaptation and resilience, by contrast, offer the prospect that our species will muddle on through, living pretty much as it has been doing, except even better, and without donning the hairshirt integral to so many climate warriors’ faith. Theirs has the characteristics of a religion, and there is little that is original about it. Pointless asceticism comes with the territory.

Questioning whether those setting the climate agenda are going about things the right way is not a matter of climate “denial,” but simple common sense. It is not, however, a conversation that the climate establishment wants to have. Fundamentalists are like that.

They may not want to have that conversation, but, as winter approaches, the growing crisis in Europe suggests that it is a conversation that may be difficult to avoid.

 

 

 

2021 Update: Fossil Fuels ≠ Global Warming

Posted on by Ron Clutz

gas in hands

Previous posts addressed the claim that fossil fuels are driving global warming. This post updates that analysis with the latest (2020) numbers from BP Statistics and compares World Fossil Fuel Consumption (WFFC) with three estimates of Global Mean Temperature (GMT). More on both these variables below.

WFFC

2020 statistics are now available from BP for international consumption of Primary Energy sources. 2021 Statistical Review of World Energy. 

The reporting categories are:
Oil
Natural Gas
Coal
Nuclear
Hydro
Renewables (other than hydro)

Note:  British Petroleum (BP) now uses Exajoules to replace MToe (Million Tonnes of oil equivalents.) It is logical to use an energy metric which is independent of the fuel source. OTOH renewable advocates have no doubt pressured BP to stop using oil as the baseline since their dream is a world without fossil fuel energy.

From BP conversion table 1 exajoule (EJ) = 1 quintillion joules (1 x 10^18). Oil products vary from 41.6 to 49.4 tonnes per gigajoule (10^9 joules).  Comparing this annual report with previous years shows that global Primary Energy (PE) in MToe is roughly 24 times the same amount in Exajoules.  The conversion factor at the macro level varies from year to year depending on the fuel mix. The graphs below use the new metric.

This analysis combines the first three, Oil, Gas, and Coal for total fossil fuel consumption world wide (WFFC).  The chart below shows the patterns for WFFC compared to world consumption of Primary Energy from 1965 through 2020.

WFFC 2020

The graph shows that global Primary Energy (PE) consumption from all sources has grown continuously over 5 decades. Since 1965  oil, gas and coal (FF, sometimes termed “Thermal”) averaged 89% of PE consumed, ranging from 94% in 1965 to 84% in 2019.  Note that last year, 2020, PE dropped 25 EJ (4%) slightly below 2017 consumption.  WFFC for 2020 dropped 27 EJ (6%), 83% of PE and matching 2013 WFFC consumption. For the 55 year period, the net changes were:

Oil 168%
Gas 506%
Coal 161%
WFFC 218%
PE 259%
Global Mean Temperatures

Everyone acknowledges that GMT is a fiction since temperature is an intrinsic property of objects, and varies dramatically over time and over the surface of the earth. No place on earth determines “average” temperature for the globe. Yet for the purpose of detecting change in temperature, major climate data sets estimate GMT and report anomalies from it.

UAH record consists of satellite era global temperature estimates for the lower troposphere, a layer of air from 0 to 4km above the surface. HadSST estimates sea surface temperatures from oceans covering 71% of the planet. HADCRUT combines HadSST estimates with records from land stations whose elevations range up to 6km above sea level.

Both GISS LOTI (land and ocean) and HADCRUT4 (land and ocean) use 14.0 Celsius as the climate normal, so I will add that number back into the anomalies. This is done not claiming any validity other than to achieve a reasonable measure of magnitude regarding the observed fluctuations.

No doubt global sea surface temperatures are typically higher than 14C, more like 17 or 18C, and of course warmer in the tropics and colder at higher latitudes. Likewise, the lapse rate in the atmosphere means that air temperatures both from satellites and elevated land stations will range colder than 14C. Still, that climate normal is a generally accepted indicator of GMT.

Correlations of GMT and WFFC

The next graph compares WFFC to GMT estimates over the five decades from 1965 to 2020 from HADCRUT4, which includes HadSST3.

WFFC and Hadcrut 2020

Since 1965 the increase in fossil fuel consumption is dramatic and monotonic, steadily increasing by 218% from 146 to 463 exajoules.  Meanwhile the GMT record from Hadcrut shows multiple ups and downs with an accumulated rise of 0.9C over 55 years, 7% of the starting value.

The graph below compares WFFC to GMT estimates from UAH6, and HadSST3 for the satellite era from 1980 to 2020, a period of 40 years.

WFFC and UAH HadSST 2020

In the satellite era WFFC has increased at a compounded rate of nearly 2% per year, for a total increase of 82% since 1979. At the same time, SST warming amounted to 0.52C, or 3.7% of the starting value.  UAH warming was 0.7C, or 5% up from 1979.  The temperature compounded rate of change is 0.1% per year, an order of magnitude less than WFFC.  Even more obvious is the 1998 El Nino peak and flat GMT since.

Summary

The climate alarmist/activist claim is straight forward: Burning fossil fuels makes measured temperatures warmer. The Paris Accord further asserts that by reducing human use of fossil fuels, further warming can be prevented.  Those claims do not bear up under scrutiny.

It is enough for simple minds to see that two time series are both rising and to think that one must be causing the other. But both scientific and legal methods assert causation only when the two variables are both strongly and consistently aligned. The above shows a weak and inconsistent linkage between WFFC and GMT.

Going further back in history shows even weaker correlation between fossil fuels consumption and global temperature estimates:

wfc-vs-sat

Figure 5.1. Comparative dynamics of the World Fuel Consumption (WFC) and Global Surface Air Temperature Anomaly (ΔT), 1861-2000. The thin dashed line represents annual ΔT, the bold line—its 13-year smoothing, and the line constructed from rectangles—WFC (in millions of tons of nominal fuel) (Klyashtorin and Lyubushin, 2003). Source: Frolov et al. 2009

In legal terms, as long as there is another equally or more likely explanation for the set of facts, the claimed causation is unproven. The more likely explanation is that global temperatures vary due to oceanic and solar cycles. The proof is clearly and thoroughly set forward in the post Quantifying Natural Climate Change.

Background context for today’s post is at Claim: Fossil Fuels Cause Global Warming.

Disputing Ignorant Virtue Signaling

Posted on by Ron Clutz

Adam Anderson, CEO of Innovex Downhole Solutions, wrote the letter below to Steve Rendle, CEO of North Face’s parent, VF Corporation, in response to the latter’s refusal to fulfill a shirt order for the oil and gas company. Mr. Rendle has not responded to date. H/T Master Resource  Excerpts in italics with my bolds and images.

I am proud to be the CEO of Innovex Downhole Solutions. We are an industry leader providing tools and technologies to service oil and natural gas producers worldwide.

Our work enables our customers, employees and communities to thrive. Low-cost, reliable energy is critical to enable humans to flourish. Oil and natural gas are the two primary resources humanity can use to create low-cost and reliable energy. The work of my company and our industry more broadly enables humans to have a quality of life and life expectancy that were unfathomable only a century ago.

The merits of low-cost and reliable energy are too numerous to cite in totality but here are a few key highlights:

  • Lifespans and quality of life have expanded dramatically over the last 150 years, enabled by access to abundant energy.
  • Low-cost and reliable energy enables life-saving technologies. For example, the new Pfizer vaccine must be stored at -70 0C. This would be impossible without low cost and reliable energy.
  • American industry is dependent on low-cost and reliable energy to thrive and compete internationally.
  • More than a billion people worldwide live today without access to electricity. As a result, these people live shorter, more difficult and dangerous lives than necessary. The solution to this problem is more low-cost and reliable energy, not less.

Hydrocarbons are the only source of supply for the vast majority of our low-cost and reliable energy needs.  The Oil and Gas industry is essential to enable human flourishing and no low-cost and reliable alternative exists:

Oil and natural gas are the only viable sources for low-cost, reliable energy today.

Wind, solar and many other alternatives suffer from an intermittency problem that has not yet been solved.

Any attempts to move our energy consumption to these unreliable, higher-cost sources of energy will have many negative impacts for humanity as it will dramatically decrease our access to low-cost and reliable energy.

For example, Germany has endeavored to transition their energy grid to alternatives such as wind and solar with disastrous consequences. Electricity costs in Germany have tripled over the last 20 years and are roughly 2x the US costs (which are themselves elevated due to the partial shift to unreliable, intermittent sources of energy in the US).

Oil and natural gas are used in many other important ways to create materials that go into thousands of critical products including, clothes, smart phones, vehicles and life-saving medical devices.

Lastly, the Oil and Gas industry is a bastion of high-quality, high-paying, industrial jobs for our people. Last year, Innovex employed ~650 people and paid our employees an average salary of >$85,000 per year. More than 230 of our employees earned over $100,000 last year. The majority of these individuals do not have a college degree and achieve these high levels of income due to their intelligence, dedication and work ethic. We need more high-quality jobs staffed with individuals like my team members in this country, not fewer.

Frequently people are concerned about the impacts of CO2 released from the burning of hydrocarbons. I acknowledge that CO2 is a greenhouse gas and modest increases in CO2 level will have modest impacts on global temperatures. However, I think the climate catastrophists who claim we will endure dramatic negative impacts from these changes are terribly wrong and misunderstand how low cost energy can help us adapt to our ever changing climate:

  • The US Oil and Gas Industry has enabled an ~14% reduction in US CO2 emissions over the last decade, largely as a result of significant growth in Natural Gas production
  • Climate related deaths have declined ~90% since the beginning of the 20th century as a direct result our society is more robust against floods, draughts, storms, wildfires and extreme temps
  • As there has been a modest increase in CO2, there has been an increase in carbon dioxide fertilization in plants across the Globe. According to NASA there has been significant greening of the Earth over the last 35 years
  • This greening combined with incredible technological progress enabled by low cost and reliable energy has led to a dramatic decrease in death by famine. The death rate due to famines has declined by more than 95% over the last century.

At this point, you may wonder why I am directing this letter to you, the CEO of one of the world’s largest apparel companies. We recently contacted North Face to inquire about buying jackets with the Innovex logo for all of our employees as Christmas presents. We viewed North Face as a high-quality brand that our employees would value and cherish for years to come. Unfortunately, we were informed that North Face would not sell us jackets because we were an oil and gas services company.

The irony in this statement is your jackets are made from the oil and gas products the hardworking men and women of our industry produce. I think this stance by your company is counterproductive virtue signaling, and I would appreciate you re-considering this stance. We should be celebrating the benefits of what oil and gas do to enable the outdoors lifestyle your brands embrace. Without Oil and Gas there would be no market for nor ability to create the products your company sells.

I appreciate your consideration and look forward to hearing from you.

Adam Anderson, CEO, Innovex Downhole Solutions, 4310 N Sam Houston Parkway E Houston, TX 77032

2020 Update: Fossil Fuels ≠ Global Warming

Posted on by Ron Clutz

gas in hands

Previous posts addressed the claim that fossil fuels are driving global warming. This post updates that analysis with the latest (2019) numbers from BP Statistics and compares World Fossil Fuel Consumption (WFFC) with three estimates of Global Mean Temperature (GMT). More on both these variables below.

WFFC

2019 statistics are now available from BP for international consumption of Primary Energy sources. 2019 Statistical Review of World Energy. 

The reporting categories are:
Oil
Natural Gas
Coal
Nuclear
Hydro
Renewables (other than hydro)

Note:  British Petroleum (BP) for the first time uses Exajoules to replace MToe (Million Tonnes of oil equivalents.) It is logical to use an energy metric which is independent of the fuel source. OTOH renewable advocates have no doubt pressured BP to stop using oil as the baseline since their dream is a world without fossil fuel energy.

From BP conversion table 1 exajoule (EJ) = 1 quintillion joules (1 x 10^18). Oil products vary from 41.6 to 49.4 tonnes per gigajoule (10^9 joules).  Comparing this annual report with previous years shows that global Primary Energy (PE) in MToe is roughly 24 times the same amount in Exajoules.  The conversion factor at the macro level varies from year to year depending on the fuel mix. The graphs below use the new metric.

This analysis combines the first three, Oil, Gas, and Coal for total fossil fuel consumption world wide. The chart below shows the patterns for WFFC compared to world consumption of Primary Energy from 1965 through 2019.

To enlarge, open image in new tabl

The graph shows that global Primary Energy consumption from all sources has grown continuously over 5 decades. Since 1965  oil, gas and coal (FF, sometimes termed “Thermal”) averaged 89% of PE consumed, ranging from 94% in 1965 to 84% in 2019.

Global Mean Temperatures

Everyone acknowledges that GMT is a fiction since temperature is an intrinsic property of objects, and varies dramatically over time and over the surface of the earth. No place on earth determines “average” temperature for the globe. Yet for the purpose of detecting change in temperature, major climate data sets estimate GMT and report anomalies from it.

UAH record consists of satellite era global temperature estimates for the lower troposphere, a layer of air from 0 to 4km above the surface. HadSST estimates sea surface temperatures from oceans covering 71% of the planet. HADCRUT combines HadSST estimates with records from land stations whose elevations range up to 6km above sea level.

Both GISS LOTI (land and ocean) and HADCRUT4 (land and ocean) use 14.0 Celsius as the climate normal, so I will add that number back into the anomalies. This is done not claiming any validity other than to achieve a reasonable measure of magnitude regarding the observed fluctuations.

No doubt global sea surface temperatures are typically higher than 14C, more like 17 or 18C, and of course warmer in the tropics and colder at higher latitudes. Likewise, the lapse rate in the atmosphere means that air temperatures both from satellites and elevated land stations will range colder than 14C. Still, that climate normal is a generally accepted indicator of GMT.

Correlations of GMT and WFFC

The next graph compares WFFC to GMT estimates over the five decades from 1965 to 2019 from HADCRUT4, which includes HadSST3.

Since 1965 the increase in fossil fuel consumption is dramatic and monotonic, steadily increasing by 237% from 146 to 492 exajoules.  Meanwhile the GMT record from Hadcrut shows multiple ups and downs with an accumulated rise of 0.9C over 54 years, 6% of the starting value.

The graph below compares WFFC to GMT estimates from UAH6, and HadSST3 for the satellite era from 1979 to 2019, a period of 40 years.

In the satellite era WFFC has increased at a compounded rate of nearly 2% per year, for a total increase of 87% since 1979. At the same time, SST warming amounted to 0.52C, or 3.7% of the starting value.  UAH warming was 0.58C, or 4.7% up from 1979.  The temperature compounded rate of change is 0.1% per year, an order of magnitude less than WFFC.  Even more obvious is the 1998 El Nino peak and flat GMT since.

Summary

The climate alarmist/activist claim is straight forward: Burning fossil fuels makes measured temperatures warmer. The Paris Accord further asserts that by reducing human use of fossil fuels, further warming can be prevented.  Those claims do not bear up under scrutiny.

It is enough for simple minds to see that two time series are both rising and to think that one must be causing the other. But both scientific and legal methods assert causation only when the two variables are both strongly and consistently aligned. The above shows a weak and inconsistent linkage between WFFC and GMT.

Going further back in history shows even weaker correlation between fossil fuels consumption and global temperature estimates:

wfc-vs-sat

Figure 5.1. Comparative dynamics of the World Fuel Consumption (WFC) and Global Surface Air Temperature Anomaly (ΔT), 1861-2000. The thin dashed line represents annual ΔT, the bold line—its 13-year smoothing, and the line constructed from rectangles—WFC (in millions of tons of nominal fuel) (Klyashtorin and Lyubushin, 2003). Source: Frolov et al. 2009

In legal terms, as long as there is another equally or more likely explanation for the set of facts, the claimed causation is unproven. The more likely explanation is that global temperatures vary due to oceanic and solar cycles. The proof is clearly and thoroughly set forward in the post Quantifying Natural Climate Change.

Background context for today’s post is at Claim: Fossil Fuels Cause Global Warming.

Surprise! Carbon Fuels are Plentiful, not Scarce.

Posted on by Ron Clutz

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.

sk042320dapr20200423034515

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:

No Causation Without Correlation (FF↔GMT)

Posted on by Ron Clutz

59622ecf317b878a1ccb

Previous posts addressed the claim that fossil fuels are driving global warming. This post updates that analysis with the latest (2018) numbers from BP Statistics and compares World Fossil Fuel Consumption (WFFC) with three estimates of Global Mean Temperature (GMT). More on both these variables below.

WFFC

2018 statistics are now available from BP for international consumption of Primary Energy sources. 2019 Statistical Review of World Energy. 

The reporting categories are:
Oil
Natural Gas
Coal
Nuclear
Hydro
Renewables (other than hydro)

This analysis combines the first three, Oil, Gas, and Coal for total fossil fuel consumption world wide. The chart below shows the patterns for WFFC compared to world consumption of Primary Energy from 1965 through 2018.

The graph shows that Primary Energy consumption has grown continuously for more than 5 decades. Over that period oil, gas and coal (sometimes termed “Thermal”) averaged 89% of PE consumed, ranging from 94% in 1965 to 85% in 2018.  MToe is millions of tons of oil equivalents.

Global Mean Temperatures

Everyone acknowledges that GMT is a fiction since temperature is an intrinsic property of objects, and varies dramatically over time and over the surface of the earth. No place on earth determines “average” temperature for the globe. Yet for the purpose of detecting change in temperature, major climate data sets estimate GMT and report anomalies from it.

UAH record consists of satellite era global temperature estimates for the lower troposphere, a layer of air from 0 to 4km above the surface. HadSST estimates sea surface temperatures from oceans covering 71% of the planet. HADCRUT combines HadSST estimates with records from land stations whose elevations range up to 6km above sea level.

Both GISS LOTI (land and ocean) and HADCRUT4 (land and ocean) use 14.0 Celsius as the climate normal, so I will add that number back into the anomalies. This is done not claiming any validity other than to achieve a reasonable measure of magnitude regarding the observed fluctuations.

No doubt global sea surface temperatures are typically higher than 14C, more like 17 or 18C, and of course warmer in the tropics and colder at higher latitudes. Likewise, the lapse rate in the atmosphere means that air temperatures both from satellites and elevated land stations will range colder than 14C. Still, that climate normal is a generally accepted indicator of GMT.

Correlations of GMT and WFFC

The next graph compares WFFC to GMT estimates over the 5+ decades from 1965 to 2018 from HADCRUT4, which includes HadSST3.

Over the last five decades the increase in fossil fuel consumption is dramatic and monotonic, steadily increasing by 234% from 3.5B to 11.7B oil equivalent tons.  Meanwhile the GMT record from Hadcrut shows multiple ups and downs with an accumulated rise of 0.74C over 53 years, 5% of the starting value.

The second graph compares WFFC to GMT estimates from UAH6, and HadSST3 for the satellite era from 1979 to 2018, a period of 39 years.

In the satellite era WFFC has increased at a compounded rate of nearly 2% per year, for a total increase of 91% since 1979. At the same time, SST warming amounted to 0.42C, or 3% of the starting value.  UAH warming was 0.44C, or 3% up from 1979.  The temperature compounded rate of change is 0.1% per year, an order of magnitude less.  Even more obvious is the 1998 El Nino peak and flat GMT since.

Summary

The climate alarmist/activist claim is straight forward: Burning fossil fuels makes measured temperatures warmer. The Paris Accord further asserts that by reducing human use of fossil fuels, further warming can be prevented.  Those claims do not bear up under scrutiny.

It is enough for simple minds to see that two time series are both rising and to think that one must be causing the other. But both scientific and legal methods assert causation only when the two variables are both strongly and consistently aligned. The above shows a weak and inconsistent linkage between WFFC and GMT.

Going further back in history shows even weaker correlation between fossil fuels consumption and global temperature estimates:

wfc-vs-sat

Figure 5.1. Comparative dynamics of the World Fuel Consumption (WFC) and Global Surface Air Temperature Anomaly (ΔT), 1861-2000. The thin dashed line represents annual ΔT, the bold line—its 13-year smoothing, and the line constructed from rectangles—WFC (in millions of tons of nominal fuel) (Klyashtorin and Lyubushin, 2003). Source: Frolov et al. 2009

In legal terms, as long as there is another equally or more likely explanation for the set of facts, the claimed causation is unproven. The more likely explanation is that global temperatures vary due to oceanic and solar cycles. The proof is clearly and thoroughly set forward in the post Quantifying Natural Climate Change.

Background context for today’s post is at Claim: Fossil Fuels Cause Global Warming.

CO2 Unbound

Posted on by Ron Clutz

On May 28, 2019 the US Department of Energy announced that CO2 has been unleashed to bring Freedom to the World.

Department of Energy Authorizes Additional LNG Exports from Freeport LNG

Advances commitment to U.S. jobs, economic growth, clean energy

WASHINGTON, D.C. – Today, the U.S. Department of Energy (DOE) advanced its commitment to promoting clean energy, job creation, and economic growth by approving additional exports of domestically produced natural gas from the Freeport LNG Terminal located on Quintana Island, Texas. The announcement was made at the Tenth Clean Energy Ministerial (CEM10) in Vancouver, Canada where DOE is highlighting its efforts to advance clean energy. The expansion of the Freeport LNG facility is estimated to support up to 3,000 engineering and construction jobs and hundreds of indirect jobs associated with the project.

“Increasing export capacity from the Freeport LNG project is critical to spreading freedom gas throughout the world by giving America’s allies a diverse and affordable source of clean energy. Further, more exports of U.S. LNG to the world means more U.S. jobs and more domestic economic growth and cleaner air here at home and around the globe,” said U.S. Under Secretary of Energy Mark W. Menezes, who highlighted the approval at the Clean Energy Ministerial in Vancouver, Canada. “There’s no doubt today’s announcement furthers this Administration’s commitment to promoting energy security and diversity worldwide.”

“Approval of additional LNG exports from Freeport LNG furthers this Administration’s commitment to promoting American energy, American jobs, and the American economy. Further, increased supplies of U.S. natural gas on the world market are critical to advancing clean energy and the energy security of our allies around the globe. With the U.S. in another year of record-setting natural gas production, I am pleased that the Department of Energy is doing what it can to promote an efficient regulatory system that allows for molecules of U.S. freedom to be exported to the world,” said Assistant Secretary for Fossil Energy Steven Winberg, who signed the export order and was also in attendance at the Clean Energy Ministerial.

Update May 31, 2019 Shale Gas Chemistry (Response to Genghis question)

Shale gas is natural gas trapped within tiny pore spaces in shale formations. It is a hydrocarbon gas mixture. It consists mainly of methane. Other hydrocarbons are natural gas liquids (NGLs) like ethane, propane, and butane, and it also contains carbon dioxide, nitrogen, and hydrogen sulfide.

Shale gas composition in the USA

What is done with Shale Gas?

Warmists obsessed with GHG theory are concerned a little about the bit of CO2 escaping during fracking, but much more about the methane (CH4) lost in the process.  Industry is continually reducing such losses with a high economic incentive for efficiency.  Of course, the atmosphere is a methane sink which soon converts any escaping CH4 to CO2 and H20, two life-giving gases.

In sum, the Freedom to emit CO2 covers both pathways.

See Also CO2 Exonerated

Footnote:  This is not a joke!  (OK, I did invent the CO2 superhero image.)

P.S. Anti-fossil fuel activists are not amused.

 

Required Reading: NIPCC 2019 Summary on Fossil Fuels

Posted on by Ron Clutz

Those who seek the truth about global warming/climate change should welcome this latest publication from the Nongovernmental International Panel on Climate Change (NIPCC). Excerpts from the Coauthors’ introduction in italics with my bolds. H/T Lubos Motl

Climate Change Reconsidered II: Fossil Fuels assesses the costs and benefits of the use of fossil fuels (principally coal, oil, and natural gas) by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs). It is the fifth volume in the Climate Change Reconsidered series and, like the preceding volumes, it focuses on research overlooked or ignored by the United Nations’ Intergovernmental Panel on Climate Change (IPCC).

NIPCC was created by Dr. S. Fred Singer in 2003 to provide an independent peer review of the reports of the United Nations’ Intergovernmental Panel on Climate Change (IPCC). Unlike the IPCC and as its name suggests, NIPCC is a private association of scientists and other experts and nonprofit organizations. It is not a government entity and is not beholden to any political or corporate benefactors. This and previous volumes in the CCR series, along with other publications and information about NIPCC, are available for free on NIPCC’s website .

The NIPCC authors do something their IPCC counterparts never did: conduct an evenhanded cost-benefit analysis of the use of fossil fuels. Despite calling for the end of reliance on fossil fuels by 2100, the IPCC never produced an accounting of the opportunity cost of restricting or banning their use. That cost, a literature review shows, would be enormous.

We thank the more-than-100 scientists, scholars, and experts who participated over the course of four years in writing, reviewing, editing, and proofreading this volume. This was a huge undertaking that involved thousands of hours of effort, the vast majority of it unpaid. The result exceeded our hopes, and we trust it meets your expectations.

The NIPCC authors cite thousands of books, scholarly articles, and reports that contradict the IPCC’s alarmist narrative. We once again tried to remain true to the facts when representing the findings of others, often by quoting directly and at some length from original sources and describing the methodology used and qualifications that accompanied the stated conclusions. The result may seem tedious at times, but we believe this was necessary and appropriate for a reference work challenging many popular beliefs.

The NIPCC authors conclude, “The global war on energy freedom, which commenced in earnest in the 1980s and reached a fever pitch in the second decade of the twenty-first century, was never founded on sound science or economics. The world’s policymakers ought to acknowledge this truth and end that war.”

Footnote:

Lubos Motl commented on this publication following his translating of the SPM into Czech.  Some excerpts in italics.

The NIPCC reports are actually amazing

Previous NIPCC volumes have also been extensive and they dedicated more space to the physical and biological scientific foundations. The newest 2019 report dedicated to the fossil fuels is unavoidably more practical and economics-oriented.

But it rationally discusses all the extra layers of the causal chains of the climate warning. Even if one assumes that there will be a warming, does it hurt the environment? The economy? Don’t the benefits exceed the costs? Don’t the costs of the mitigation policies exceed their benefits? As you may guess, the correct answers to all these questions – advocated in the NIPCC report – are almost universally the “skeptical ones”.

It’s so unfortunate that despite the higher quality of the NIPCC report (or at least comparable quality, if one were really generous to the IPCC), the left-wing media establishment – in some loose alliance with the governments – was capable of promoting the IPCC reports as if they were the Holy Scriptures while the NIPCC reports remained almost completely hidden from the world public.