Coal-electrification is the lowest hanging fruit in terms of getting our energy-growth up. Oil-electricity is almost criminal in its wastefulness and gas-electricity is moronic beyond belief.
But if we are NOT!!!!! going for nuclear electricity then we ought to be like the Chinese and be putting up more coal-electricity stations all the time.
They put a new one up every week and in doing so they are doing everyone else a great favour.
So we would want to be putting one COAL-ELECTRICITY plant up every quarter of so but THIS IS A SECOND-BEST OPTION.
Second-best is always NOT GOOD ENOUGH.
Because the first-best option is to be putting up nuclear power stations just as fast as we can……. And coupling them with Coal liquifaction plants. Perhaps even the two operations going on in the same giant complexes.
Gas is just so cool. Because you can use it indoors. You can produce heat instantaneously and turn it off straight away as well. You can use it for cooking and water-heating.
So Al Gore ought to be tracked down and subjected to a vengeance-killing on account of the sheer wastefulness of pushing gas-electricity.
Its because nuclear is the safest, cheapest, cleanest source of electricity that this is where the segregation comes down.
To fail to get nuclear electricity up just as quickly as we can everywhere at once is to hatefully waste our hydrocarbon paternity.
Because you see there is just no substitute for liquified-coal for motor vehicles and large machinery for the next many decades.
Its unbelievable just how important all this is and its so important that we don’t blow this.
We are at a crucial moment where the decisions we make in the next few years will determine our success for many decades.
POST 2. THE VICIOUS CIRCLE OUR LEFTISTS ARE PUSHING US INTO.
“Graeme, let me explore a couple of your ideas. Like the 1% a year capital changeover. Where does this figure come from? The rate of switching from horses to cars? Any particular reason you think we’d be stuck at 1%?”
It comes from taking the percentage of energy used by the primary energy-source of the age. And then seeing how it substituted towards the primary source of the next age.
So they tracked it going from wood to coal to oil.
And if what you were saying was true then the substitution rate would have picked up.
It might have been only 1% in the early 1800’s and then you would have expected it to pick up to like 3% or something later on.
But it defied such expectations.
And the reason is that energy-production lies at the very heart of capital-creation and that technological improvement is really part of the procedure of updating capital.
The natural substitution rate was something like 1% but this time I expect it to be faster simply because the leftists have shut off a lot of the substitution artifiicially for so many years and the way things have turned out we are past the peak and we still haven’t got these bastards off our backs.
So when we finally do maybe we will be able to increase the substitution rate but this implies great stress forcing us to do so.
“I’m sure the factories would rather keep their investment in wooden pallet handling gear, but if suddenly the wood pallets become massively more expensive, many factories will bite the bullet and invest in the plastic pallet handling gear, even though the wood stuff is not worn out yet……”
Right they would do that.
But notice this would require capital expenditure… which must come from savings. And it would imply extra energy usage.
The problem with capital updates WITH REGARDS TO ENERGY ITSELF is that they imply capital expenditure which can only come from savings……….AND THEY IMPLY EXTRA ENERGY USAGE!!!!!!!!!!!
Do you see the very grave conundrum here and why in point of fact we have not even a month to lose in terms of sacking all these taxeaters.
You see once we are caught in this vortex of needing more energy from a dwindling supply, and having to take the capital expenditure from savings when we are under stress and might normally be dissaving…….
… And then this implying extra energy useage when such useage is already stressed greatly….
…..You catch my drift????
Its a big problem and if we were serious about it we’d find a new yearly spending cut of a billion dollars each day for many months.
Whereas supposing it was capitalism. And particularly with monetization of refined petroleum.
Well then the massive investment in the alternatives (primarily nuclear and coal liquification) would have occurred while we were still on the upsweep and not years after PEAK OIL has already been reached with YET MORE YEARS BEING PISSED AWAY in the time it takes to defeat the ecologist monsters.
And so no problem could have occurred and we would have gone from strength to strength powerfully accumulating capital with nothing getting in the way of that.
“Accumulating the capital for making a switch won’t be a problem. If the price of oil hits $150 a barrel, it is a no brainer to invest in the coal liquification plants. Everyone will want to do it.
Macquarie Bank will launch their Coal Liquification Plant fund and hoover up tens of billions of dollars that would otherwise have gone into inflating property values.
Factories in China will be retooled from making fridges and mobile phones into producing machinery for coal-liquification plants. Engine lines will start turning out diesel motors. The conversion rate will be more like 10-15% a year.”
There is some great hope in this.
And its our great good fortune that liquified-coal goes straight into diesel motors and that these diesel motors are typically used in business production AS THINGS STAND.
So what we are saying is that there is still time if your vision was put into practice NOW.
Marvellous vision by the way.
“If the price of oil hits $150 a barrel, it is a no brainer to invest in the coal liquification plants. Everyone will want to do it.”
BUT ITS A NO-BRAINER NOW AND NO-ONE WANTS TO DO IT.
Its going to be so much easier if we hussle after nuclear and liquified coal NOW!!! before its like people trying to charge out of a burning theatre.
The reason is NIMBY, global-warming-lies and the failure to get our clarity-in-property-rights and level playing field going for infrastructure pricing and construction.
No businessman knows where they stand here.
Imagine that we write a business plan.
We then go out to a farmer who lives adjacent to the rail somewhere between Picton and Bowral and we ask if we can buy some land next to the rail.
Then we want to hook into the grid system, set up a new train station somewhere between Picton and Bowral.
Then what we are going to do is set up a nuclear power plant and a coal liquification plant.
And we are going to get heaps of coal coming in. Also we want to string our lines along the existing power lines and we want to be digging under the city streets or we want to expect a fair price from Energy-Australia or some procedure where we can outcompete them on their own lines.
Now politically this is not doable. We simply don’t have the clarity in property rights to do this. Our workers would be hampered by rich white lunatics and celebrities and lawyers jamming writs at us and suing the local council. We’d be in the high court all the time.
We should be able to do this and we should in advance know where we stand insofar as electricity pricing policies, costs for digging up the roads to plant our cables or even our pipes and so forth.
The whole thing ought to be doable without sucking up to a single taxeater and its none of the publics business anyway.
But the thing is the normal market assumptions don’t apply in this situation. Because in infrastructure its crony-socialism and not capitalism in this country.
And its true that the political WILL will indeed be present when we get to $150 per barrel but the coal price will be high then and all that international capital will have dried up.
That idea about China tooling up for liquified coal plants is a massively hopeful vision but you see we ought to be creating that offshoring opportunity right away.
Let the tooling up begin.
People go crazy under these crisis situations, and like in the Great Depression policy can be precisely in the wrong direction.
So its up to all of us that understand these things to keep pumping out the education so that when this deal does go down we all keep our heads and don’t do stupid shit.
But right now we are doing stupid shit.
Pretending we have time up our sleeves and subsidising biofuel just for example.
The result of subsidising biofuel is to deplete 7 barrels of oil for every 1 barrel biofuel and the result of this has been rising world food prices everywhere.
Starving people off and depleting the oil in one stupid move.
This is just unbelievable stupidity and akin to slaughtering pigs in the depression to get pork prices up.
Just totally destructive.
As is any subsidy for energy or any spending program with that goal in mind.
Even tax-deductions are sub-optimal. I mean the only thing worse then a tax-deduction is no tax deduction.
But what it means is that some activities can occur where 2 barrels equivalent energy are used up for 1 that is produced.
What you need is ways of increasing the available capital….
….ie firing taxeaters, cutting spending, getting rid of the company tax entirely or if thats not possible getting rid of it for energy companies save only for picking up some royalties. Getting rid of taxes on interest income and so forth.
A new tax cut every week and purges of departments entire. Tighter money, 100% backing…. The entire reform program.
But instead the dumb bastards are going in for energy depleting spending programs.
Just unbelievable the stupidity going on here.
You know this nuclear-coal-liquification duel construction program, if started with some despatch, can simply never turn into a white elephant deal.
We can never have too much of the nuclear-electricity generation in this case because if supply outstripped business and consumer demand this would in itself create growth and all this nuclear-electricity in any case could be drained off into coal liquification…….
…….. and that means we can export gigalitres of the stuff and bail every other silly-bugger out of the conundrum they are drifiting into just in time to save their stupid skin one hopes.
If we do it now we will gather all the revenues to ourselves and if we wait it will be forced onto us and some of the investments may not be paid back.
“How quickly will production decline?
How quickly will demand grow?
These are the questions which need answers.”
These two are UNKOWNS. But the price rising is a KNOWN.
You’ll see this when you go to construct price-falling scenarios.
Here is what the “natural” decline looks like:
You would expect the drop to go more or less like a bell curve for oil coming from traditional oil-drilling ……. setting aside some revolution of super-deep drilling coming to be normal some decades hence.
BUT THAT BELL CURVE WON’T HAPPEN.
The reason that this natural curve won’t occur is that we cannot afford it to occur now that the leftists have destroyed our other options.
But the bucking of this natural trend implies PROGRESSIVELY RISING PRICES.
So no I cannot predict when the leftist energy-deprivation crusade will be defeated……. when the global economy will for a time flatten… So I cannot predict how things will go in terms of your questions.
WHAT I CAN PREDICT WITH TOTAL CERTAINTY is the price rises on the way over the next many years and starting very soon.
Since the bucking of the trend within the industry and the mitigation of the trend without implies an absolute fucking energy scramble the likes of which only China has occupied itself with.
The Chinese are really the only people acting responsibly in this matter and lifes ironies never seem to end.
And one supposes that the forty and fifty-somethings in the ruling class can remember what near-starvation felt like and they won’t want to go through it again.
So those evil Chinese commie bastards are about the only people acting in a rational and responsible fashion.
They are also about the only people producing DDT these days bless their black hearts.
“The question, as I keep saying, is at what rate?”
THAT I do not know.
There’s no point me pretending to know since I don’t. How can I know when the leftist-energy-deprivation-crusade will be defeated for example???
What you ask will be determined by HUMAN AGENCY and not automatic processes.
How well will we behave when we realise the squeeze is on?
How can I tell that?
Like for example after the crash of 29 one would have predicted that the recession would last only about 18 months. But people acted irrationally and policy went consistently and furiously the wrong way.
So its not possible for me to make such predictions with the same total confidence that I have that the rise will be pretty steep.
I mean if all the speculators got involved with it they’d drive it up above 150 overnight and from there it might never have to rise again and could fall.
But its impossible to tell those things.
Its like trying to predict back in the 50’s who Elizabeth Taylor would marry and whether she would marry Richard Burton twice.
We know that the oil price will rise and we know it will rise a great deal. Beyond that predictions are impossible since its up to all of us to promote coal-liquification and nuclear-electricity and to take ALL energy production out of the tax system.
“Barring revolutionary technologies which offset demand for oil the price will increase. The question, as I keep saying, is at what rate?”
I missed this the first time around.
No you see WE WILL GET THESE REVOLUTIONARY TECHNOLOGIES that you speak of.
Surely we will. But they won’t grow quickly enough under any plausible scenario which could possibly let oil prices fall.
You see what you are doing is disaggregating technology from CAPITAL GOODS.
But in fact new technology under capitalism is inextrcably linked with capital updates and the accumulation of capital and capital updates is inextricably linked with ENERGY USE.
So you see BARRING NOTHING!!!!!!!
BARRING NOTHING!!!!! at all the oil prices must rise.
By the way I want to emphasise that we will surely be in a time-period of dirt-cheap energy by 50 years time.
This is just a decadal screw-up visited upon us by incredibly bad policy.
And all these technological solutions will have had a chance to be applied within that time.
We have to keep remembering that we have, for all practical purposes, infinite energy.
We need the capital to gather it is all.
“So if you don’t know the rate at which the price will rise, how can you be sure we’re in trouble? If the increase is $1 / barrel / year then we’ll be fine.”
Well it will be substantially more then that.
If inventories are currently not building we can take the current price as a valid ‘trading’ price.
You see the speculative market supply and demand curves sit on top of what you’d expect if they weren’t there.
They sit on top and make the supply and demand more elastic.
One time just before the second Gulf War I think stocks were building and one pundit reckoned that the proper price ought to have been about $12 but it was up at $40.
And last time it was up above $70 some pundits were saying it ought really be $40 but speculation was putting it up.
So we need a valid starting point and that would be the price at a time when stocks were falling a bit. Or had been flat for an extended time.
Now I don’t know whether we are in such a time period I might try to look it up.
But supposing we say we’ve got an “underlying” price of 50USD rathet then the 70-something actual price.
Well the fact that the actual price is above that would (under such a scenario) be taking some of the heat off the future price rises for us. This implies that stocks are building and adaptations are being brought forward.
But if the actual and what I’m calling the underlying price are the same then I’m saying that the price rises will be really very steep.
Not the discount rate that the oil producers face as Quiggin suggests but twice that or more.
Take the growth rate of the American money supply as the bargain basement rate of increase from what we decide is a valid trading price.
You could probably double THAT and you might get some sort of indication.
But like I said that part of it I don’t know.
It ought to be more then $1 a month for the forseeable future.
The forseeable future meaning many years because there is no chance of massive alternative production coming onstream for very many years.
But you see if the actual price has been way above what I’m calling a realistic “trading” price for an extended period then whats happening will be masked and investments in mitigation will already be on the books (ie planned) or in process.
So I’d want to look up inventories and see whats happened to them over the last few years and see how they track against prices.
If inventories have been dropping away for the last few years then we would say that the 70-something price is a valid price and that the price rises will be upon us pretty soon and they will be pretty nasty.
If the inventories are still building we would say that the speculation industry is doing its job and the enhanced price will be doing double duty to force extra work mitigating the fall-off in supply….
…. And pushing lots of substitution and demand-side policies also.
Try and track down inventories and if you have a long term track of it I then ought probably be able to tell you whether we are going to get stomped sooner and steeply or a bit later and less steep.