Popping the Oil Price Bubble
On Friday, the benchmark oil price increased by its largest single day total ever, nearly $11.00 per barrel to nearly $140.00. To put that into perspective, the trading price for a barrel of oil in 1998 - just ten years ago - was less than $11.00, Friday’s price change.
Though there are plenty of reasons to believe that oil will never again cost anything close to $11.00 per barrel, there is also a growing recognition that the current state of the oil market bears some resemblance to a number of other over excited markets like Dutch tulips, Internet stocks, and new home prices in Fort Myers or outside Las Vegas. The similarities include daily headlines, constant water cooler discussions, and fears of missing a big boat.
Unlike some of those other bubbles, however, the recent rapid increases in oil prices are painful for almost everyone but those involved in selling or transporting crude oil. Even though they bear the brunt of consumer anger, oil refineries producing gasoline and gasoline retailers are actually being squeezed as badly as most of the rest of us by high prices. The wide spread nature of the pain caused by rapid oil price increases was brought home to me on Sunday as I visited the Newseum in Washington, D. C. and saw that oil prices were front page news on at least half of the world’s Sunday newspapers.
On a more personal level the prices hit hard when I visited my local fuel station and tried to fill my Jetta TDI’s 12.7 gallon diesel tank. Even though I was not yet on E, the pump stopped at $50.00 - the station does not let a single credit card purchase on their “pay at the pump” exceed that amount because of the increased risk of drive aways (people who leave the station without paying) and credit card fraud. If you think that $4.00 per gallon gasoline is expensive, try filling up with $4.89 per gallon diesel fuel. You will quickly figure out why the truckers and fishermen are protesting.
If the fuel price bubble dramatically pops, there will be a huge sigh of relief heard round the world. Nearly all of us will benefit if we stop filling the already overflowing pockets of the oil producers. My hope, however, is that we do not forget just how painful it is to have fuel prices that increase by a factor of 12 over a ten year period. I hope that people ignore those pundits who try to minimize the damage caused to the entire economy with comments like “in inflation adjusted terms, gas is cheap” or “just be thankful that you do not pay European prices”. Hooey.
Without gasoline, diesel, natural gas, and coal price increases, most inflation would disappear. The wholesale market price of gasoline in Europe is actually a bit less than it is in the US; Europe exports gasoline to the US. The difference in displayed prices at retail stations is that European countries often add very large taxes to gas to pay for social services, and to discourage consumption.
I believe that the fundamentals in the fossil fuel market point to a trend of increasing prices over the long term. Without a major change in direction, the inevitable forces of increasing difficulty in wringing oil and gas out of the ground combined with a growing world population of people with sufficient income to desire all of the benefits of a higher energy consumption is going to require higher prices in order to restrict the demand to levels that can be supplied.
There is, however, a ray of hope that a major change in technological direction can and will be made. Countries around the world are beginning to take another hard look at nuclear fission as a controllable, reliable, transportable power source that can replace oil and coal in a number of applications. Even such stalwart members of the anti-nuclear movement as Italy and Germany have strong voices inside the country that are demanding a change in attitude and acceptance.
Not only is fission a well proven source of electrical power, but it is also a proven source of motive power for ships. With not a whole lot of thought, it can be recognized as a valuable source of heat for many industrial applications, as a way to make salty water drinkable, and as a source of power for a growing electrical transportation system.
There are even some kooks - like me - who occasionally remind the world that there was once a large body of scientists and engineers who had computed that it was technically possible to put fission power plants inside large aircraft that could fly around the world a number of times without adding any new fuel. The US once spent about a billion 1950s dollars on a program called the Aircraft Nuclear Propulsion (ANP) program. It would have worked, but the Secretary of Defense, called the design a “a shitepoke*—a great big bird that flies over the marshes—you know—that doesn’t have much body or speed to it, or anything, but can fly” and canceled the program before the planes ever flew.
There will come a time when the fossil fuel industry will regret that they allowed prices to increase rapidly enough to wake up the sleeping giant energy supply represented by the world’s supply of uranium and thorium. Quite frankly, I would love to see the day happen when fossil guys have less power than those of us who recognize that fission is the new fire.
For those of you who hate high oil prices and greenhouse gas emissions, but also reject nuclear power, please tell me what you suggest as an alternative. Forgive me if I reject the notion that wind and solar power are ever going to compete in the important markets supplied by oil and gas.
Rod,
You make another quite convincing argument. It’s true that the combination of increasing demand, finite supply, and political instability that contribute to high oil prices and long term energy supply concerns could largely be resolved through existing nuclear technology without serious consequences if properly executed.
That last statement - properly executed - being my only reservation at this point.
To answer your questions regarding alternatives, I would suggest that the world could be largely powered by renewables, but at what cost? We anyway have a tendency to follow the path of least resistance, with nuclear being at the end of that path as increasing prices and political pressures start to narrow the fossil fuel road.
Renewables will ultimately provide a bit of political window dressing to compliment all those shiny new reactors.
My 2 cents..
Mark.
Mark:
I fully agree that “properly executed” is a key phrase, but I hope that we have learned something over the years with regard to building and operating nuclear plants. Most of the nukes that I know are exceptional students and learn lessons pretty well.
I would love it if you would elaborate on how we use “renewables” to power aircraft, trains, ships, and heavy equipment. Can you give me an example or two of a controllable renewable system that is not dependent on the vagaries of the weather or very long tranmission lines?
There are safer and more effective ways of generating nuclear power than the current large scale plants. Molten salt reactors and SSTAR-like reactors, one of which is currently being brought to market by Toshiba, will revolutionize nuclear power generation. One possible route someone on the Energy from Thorium site posted that I find most appealing is to replace the furnaces in coal fired plants with a series of molten salt reactors. You already already have the hookup to the grid and a secured facility and molten salt reactors are extremely safe and have the advantage of burning down most of their waste during operation. You might even be able to drive the same turbines. You could probably do something similar with a series of SSTARs if they could be scaled up to produce more than 100 MW. Since both reactor types will probably lend themselves to mass production and can run on Thorium based fuel cycles, the cost should be significantly less per unit output than a traditional solid core fueled reactor. These reactors don’t need traditional containment structures like the current fleet of reactors. A real push should be on to get Gen IV reactors like the MSR on line. This is largely a political decision.
Rod, that’s why I used to words ‘could’ and ‘largely’..
Here in Switzerland, all trains are powered by electricty, aprox. 40% of which is generated from renewable energy sources.
Experiments have already been carried out using sails to reduce fuel consumption of large ships.
Solar powered aircraft have already been flown.
Could and largely are definitely the operative words, along with properly executed. I’m definitely in agreement with you that nuclear power is the most practical long term solution - like I said, renewables will be used as window dressing to help sell a nuclear future.
Mark:
Though I tentatively agree with your statement that about 40% of the electricity in Switzerland is supplied by renewable energy sources, many mainstream “renewable energy” advocates might quibble since the Swiss renewables are almost completely composed of large hydroelectric power plants. In the minds of some purists, large dams do not qualify.
In fact, I might quibble a bit since most of the rest is supplied by nuclear power plants that run on fuel that could be recycled for long enough to qualify as at least “sustainable” by my own definition.
Perhaps there is a reason why I have tended towards engineering type jobs, not political or sales jobs. I am an obnoxious person who believes that the right answer is better than the popular answer. Window dressing is simply not my style.
Maybe I would be more effective in my advocacy if I could change. Then I look at the success that has been achieved by the anti-nuclear activists that refuse to compromise and believe that it might be best for me to remain adamant that fission is the BEST available power source and should be exploited to its full potential.
Ken:
I like smaller reactors as well, but I have no concerns about the safety of the large plants. They are carefully built, operated, maintained and regulated. The general public has no risk from their use.
If you are interested in a plan that just might work to convert coal plants to nuclear you might want to visit http://www.jimholm.com/ - NuclearCoal - Converting Coal Power Plants to Nuclear.
Rod, I agree, modern nuclear plants are safe. You will soon be able to convert most of them to a thorium fuel cycle and slash the amount of waste produced:
http://www.thoriumpower.com/
Liquid Fluoride Thorium Reactors may be better than pebble bed reactors for a number of reasons. Pebble bed reactors are definately better than coal.
While nuclear can be used safely, most folks simply don’t trust the nuclear industry.
Where lots of money can be made by cutting corners, corners will be cut.
To put our future in the hands of faceless Multinationals based abroad (yes citizens of the US, you are a minority) is very scary.
You store your own waste in rusting drums above ground, what care will you take of it in India.
its all well and good, but we can’t make them in time.10-12 years is too late.
I liked the sleeping giant oil article until the very end where solar and wind was rejected by the author. Why? Germany is creating huge solar farms, at a fraction of the time a nuclear plant can be built. ( less than 1 yr to construct) no waste to have to pay for stoarge, completely renewalble. Cost of solar, especially nanosolarand other firms thin films CIGS price points are dropping through the floor, They estimate to be on parity with coal/oil power plants in a few years. So I ask again, solar can power the world, it renewable, its cheap and has leaves no toxic waste to deal with. So I ask again, why do you reject solar or wind?