Comments for Kevin L. Doran

Comment on China Drills Into Shale Gas, Targeting Huge Reserves Amid Challenges by AB

AB — Wed, 31 Oct 2012 20:57:22 +0000

Haven’t read the article yet, but that rig looks like a biggie.

Comment on Natural Gas and U.S. Energy Policy by AB

AB — Fri, 17 Aug 2012 02:36:57 +0000

nice! i’ll take a look when i get settled back in.

just landed from a week in london and the south UK coast with a young lady. good times. not that your blog needs to know about that.

see y’all soon.

Comment on Producing natural gas without even trying by Albert

Albert — Sat, 14 Jul 2012 00:58:01 +0000

Hi Adiana,Thanks for reading and for the conemmt. I think that you and I are saying the same thing. No question that a price increase, regardless of the reason, will lead to a demand decrease. For the most part, if price goes up due to a tax increase or a war in the middle east, the effect on drivers’ costs of using their car relative to the cost of public transit increases, and so some demand reduction will occur. My post was meant to highlight the fact that a supply crunch and induced price increase is not necessarily a substitute for a carbon price in that it does not price in any new externalities, and is actually more likely to exacerbate external costs. The reality of most externalities tied to oil production is that they are tied to the use of energy or other expensive inputs (solvents, etc.) in production or to the cost of drilling in more remote and sensitive locations. The use of these inputs, or the costs of drilling in remote locations, becomes more bankable as the revenue to oil producers (and here I will explicitly separate it from the price, as you suggest) increases. The inspiration for the post was in watching the re-tweets and discussion around the Wikileaks cables regarding saudi oil reserves, and that there seemed to be a sense around the many environmental groups that I follow that this was good news. A global supply crunch induces new energy sources, but there is no built-in advantage or disadvantage for clean ones. Thanks again for reading,Andrew

Comment on Producing natural gas without even trying by Victor

Victor — Sat, 14 Jul 2012 00:02:58 +0000

Fair point. However, we are having the same dsuiscsions now about the need for higher oil prices to drive substitutes as we have been having for years. The key learning is that there is always substitution going on, and prices reflect the relative quality of the substitutes. I think it comes back to the reality that high oil prices do not necessarily drive the search for breakthroughs in low-emissions technologies they drive the search for oil and for good substitutes for oil. High gas prices did drive a lot of changes including a strong push for renewables, but they also drove horizontal drilling and fracturing technology because it was about creating an energy source that was a good substitute for $13/GJ conventional gas. $4/GJ shale gas is a great substitute for $13/GJ gas and can be used directly for electricity generation. Solar power, which Ontario tells me needs 42c/kWh to make money, amounts to the equivalent to about $55 dollar/GJ gas run through a power plant w 50% efficiency. So, the market was interested in replacing gas, and had no broad incentives for emissions-free or low-emissions techology, and so the cheaper substitute wins out and prices drop. My point was more that to ignore the fact that fossil fuel sources may be unlocked, that there may be technological progress in these industries and that this is at least as likely to happen in response to higher energy prices as is an emissions-free innovation. If you want emissions-free innovations, price emissions.

Comment on Some Optimism About Natural Gas Prices by Leonard

Leonard — Fri, 13 Jul 2012 23:35:51 +0000

I think you’re being a little siislmptic when it comes to a couple facets of your argument. One As more of these deep water wells are drilled or oil sands plants are built, the technology will improve, and the costs will go down. These are expensive, long to develop, capital intensive plays with uncertain flow through rates and a host of other uncertain variables. There are all kinds of natural limits you can butt up against (water use if the oil sands significantly scales up, black swans when it comes to deep water drilling). All the technology in the world isn’t going to make bitumen anything less than 20-40% oil when it comes out of the ground. There are limits to natural capital that all of the tech in the world can’t solve whether it makes sense from a price perspective or not. I’m fairly indifferent to the price of oil. I’m more of a fan of the price going up because of the limits it puts on the depletion of natural capital but there are a lot of moving parts here. The price of oil will do its thing. I’m currently more worried about food price volatility/climate change related matters and its effect on politics around the world. If what happened in Moscow this summer happened in Chicago (and it will eventually) you’re going to be hearing a different tune from south of the border. TwoYou seem to have been sucked into this view that environmentalists are this homogenous block who all want electric cars and alternative fuel sources so we can continue to run this amazing and trouble free transportation system we have. I don’t think electric cars are worth the rare earths that you dig out of the ground to run them. Looking at it from a systems perspective, our road system is an investment in infrastructure that is simply unsustainable (damn that word). Two cars a household, the investment in public space for private property (parking), ever widening roads and the vehicles that fill them, this is not planning, it’s madness.

Comment on Producing natural gas without even trying by Yamuna

Yamuna — Fri, 13 Jul 2012 21:27:25 +0000

, I think it is generally true that pelope look at oil and old technology and wind power as new technology, under the presumption that learning rates are exponential and so cost decreases are going to be larger in the newer technologies. Unfortunately, all the arguments you make about oil also apply to alternative energy sources, be they biofuels or wind/solar power. There are physical limits, significant unknowns, likely unintended environmental consequences, etc. and some of them will see radical cost decreases while others will not.I agree with you 100% on the effect of extreme events in the US in shifting the policy space. If you would have seen another major hurricane or two hit the US coast the year after Katrina, I don’t think there is any question that you would see much more stringent climate policy in the US and you would see a much more active role from the US on the international scene. You could ask the question of whether aggressive climate policy is more likely to happen with high oil prices, but I think the better question is to ask whether we have reasonable substitutes for carbon-based fuels if you believe in triple-digit and increasing oil prices, you are implicitly saying that the substitutes are much more expensive (true) and this also makes climate policy more challenging. On your second point, I don’t think that at all. I think most pelope (myself included) have their favorite technologies that suit their lifestyles and preferences and would like to see those take over. It isn’t a big surprise to me that you are anti-electric-car, but you are certainly in favour of a different urban infrastructure model which is in many ways a bigger challenge than throwing some 30amp feeds out to pelope’s detached garages in the burbs. I am all in favour of more integrated planning (we must talk about Edmonton’s Green Plan soon) and building environmental valuation into these decisions directly. We don’t disagree on as much as you think.

Comment on Producing natural gas without even trying by Antonio

Antonio — Fri, 13 Jul 2012 18:44:26 +0000

Interesting article, agouthlh I’m not sure I follow your main argument. You seem to be saying (and correct me if I’m wrong) that high oil prices are bad for the environment because they make things like oil sands and shale gas profitable. I follow that part, agouthlh (as you point out) high oil prices also provide incentives to develop alternative energy technologies. But then you say that low oil prices indicate that either we’ve found a cheaper way of extracting oil (which you suggest would produce lower GHGs) or we’ve more or less switched off oil. The first part of that doesn’t make sense to me, because most GHGs are produced by burning fuel (not producing it) and lower prices will mean higher consumption. In any case, I think this scenario is not realistic, since we aren’t going to find magical ways of extracting unconventional oil and gas as cheaply as conventional: it inevitably takes more energy because it’s a lower quality deposit (and we’re unlikely to discover more giant conventional fields). The second part (we’ve switched off oil) seems like an outcome for the distant future which would have to be preceded by higher oil prices. We’re not going to magically switch to cleaner technology if oil is at 30$/bbl without massive govt intervention.So, living in the present (as opposed to the distant future), low oil prices (which are a bit hard to imagine) would just indicate higher consumption and less investment in renewable energy. However, I do think that extremely high oil prices would be bad for renewable energy development because it takes energy to develop new technologies and 200$/bbl oil would likely shift a lot of capital to the oil sands. So, I think gradually rising prices would be the best scenario. If some new information hits the market that drastically increases the price of oil (say, Saudi Arabia writes down their reserves and cuts production dramatically), that would be bad.

Comment on Producing natural gas without even trying by Sarah

Sarah — Fri, 13 Jul 2012 12:27:25 +0000

Hi Surdas, thanks for rindeag and taking the time to comment. I have to disagree with your contention that we are not going to find ways of extracting oil or gas at lower costs than conventional. Natural gas disproves that entirely. The line between conventional and unconventional is a moving target, but shale and tight gas are unconventional by almost anyone’s definition. The cost of gas out of shale wells in Alberta and elsewhere is far cheaper than out of conventional wells in the same jurisdictions. In fact, you do see people shutting-in conventional production while unconventional production expands. I do agree that we are unlikely to discover giant conventional fields. Importantly, high oil prices don’t drive people to seek out low GHG energy they drive people to seek out oil or a good substitute. Some of those might be low-GHG sources, but only high GHG prices will create a preference for low-GHG oil substitutes over high GHG ones.The thought process I am trying to drive here is not to think about oil prices as purely a force which acts on the demand side, and to also think of prices as a consequence of the interaction of supply and demand, not a driver for supply or demand. For example, you argue that low oil prices will drive lower investment in renewable energy this is certainly true in a vacuum, but I would push you one step further and ask you why oil prices are low? Suppose that there is a breakthrough on par with horizontal drilling and fracking that leads to massive cost reductions in next gen biofuels. The availability of a cheap substitute for oil would drive down the price of oil, and rather than that driving down investment in the renewable energy source, it would be because of the investment (and breakthrough) in the renewable energy source. I think it’s tempting to think of oil sands and renewable fuels as fundamentally different because of their environmental footprint. Unfortunately, in the absence of pricing policies on those environmental attributes, the race is simply to provide energy to the market which is signaling value through the price. Whether the ramp up is slow or fast, the technology which can best do this will be the one which is adopted the fastest. thanks again for rindeag.

Comment on Producing natural gas without even trying by Maikon

Maikon — Fri, 13 Jul 2012 06:06:25 +0000

Important observations, Andrew. I think the point is most scnlicutcy encapsulated in one sentence you wrote above, towit If you want emissions-free innovations, price emissions. I would amplify this by suggesting that if you wish to achieve a specific outcome, it is unrealistic (and frankly wishful thinking) to rely on an inadequately structured market to do your work for you. Reliance of this type suggests either a high degree of complacency or a fundamental failure to apprehend the complexity of society or both. In the end, markets are great tools, but they still need to be shaped by policy and that can be hard work.More generally, while it may be possible to set forth a few plausible statements of principle about the way markets function (eg scarcity leads to increased prices in light of continuing high demand and increased prices lead to a search for substitutes ), the outcomes arising out of the interactions between resources, technological innovation and markets over time are fundamentally unpredictable. Thus, if societies (or more precisely groups within societies, whether local, regional or global) wish to at least shape the field of possible outcomes in a context where markets are some of the key tools available to us, the proper conceptual space in which to operate is that in which social norms are formed and, in the case of the modern state, regulatory powers are exercised. (Obviously, I don’t accept the fundamentalist idea that free and open markets are themselves desirable outcomes markets are tools; important tools, but tools nevertheless.)Given this, regarding carbon emissions, the best way to proceed may be by getting adequate societal agreement to put a price on all carbon emissions in order to better shape the market for energy (as your remark quoted above suggests). Then, as non-carbon substitutes come to the fore in light of a market that discriminates against high-carbon outcomes, it will be necessary to be ever-vigilant and to deal with the deleterious consequences of some or all of those substitutes too; all in a never-ending process of adjustment.Alternatively, another possibility would be to coax into existence social norms that stigmatize excessive carbon emissions. Thus, even where the price of carbon remains low’, it may well be possible to stigmatize its use through non-market social mechanisms. Such a process might mirror the growth of the organic food industry in North America and Europe which has operated through a scheme of moral choices, combined with follow-through by markets that developed in order to cater to those choices (ever more efficiently), providing options that fit within the zone of acceptable moral bounds.Returning to your original thesis, then, because of the complexity of social and economic realities, without a much more detailed picture of the world over time (which we will never have), I agree that it is impossible to state what impact specific prices of carbon will have on the anthropogenic emissions of CO2 into the atmosphere (I’m not sure that you would state your thesis in this manner, so I may be taking some liberties). We do know however that, if we can achieve a consensus to limit those emissions by such means as are available, and are willing to make the efforts required to do so, the outcome that matters CO2 levels in the atmosphere can be influenced profoundly over time regardless of the price of carbon.

Comment on Producing natural gas without even trying by admin

admin — Mon, 09 Apr 2012 14:21:16 +0000

Good point. Also see here: http://www.eia.gov/forecasts/steo/report/natgas.cfm. The page makes it clear that while shale gas production grew in 2011, expected growth is expected to occur at a slower rate in 2012-13: “While EIA expects year-over-year production growth to continue in 2012 and 2013, the projected increases occur at a much lower rate than in 2011 as low prices reduce new drilling plans. According to Baker Hughes, the natural gas rig count fell to 691 as of March 2, 2012, from a 2011 high of 936 in mid-October. So far, the lower rig count has not impacted production levels, partly reflecting improved drilling efficiency. However, fewer horizontal natural gas wells, particularly in areas such as the Haynesville Shale, contribute to small short-term production declines through June 2012. These declines reverse later in the year as prices rise, wet natural gas production rises, and associated gas production from oil wells increases.”