Independence Day
July 4, 2006 8:07am by Barry Ritholtz
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client. References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers Please see disclosures here: https://ritholtzwealth.com/blog-disclosures/
What's been said:
Discussions found on the web:Posted Under
Previous Post
Open ThreadNext Post
4 Year Presidential Cycle: Bond edition
Our investment in an energy intense lifestyle has brought more benefits than negatives. If we stopped eating we could declare independence from our addiction to food just as easily. Don’t get me wrong, there’s a lot to being energy efficient but it is a oversimplification to the point of incorrectness to call our use of fossil fuels a dependency.
I beg to differ with you Robert. You say it’s incorrect to call our use of fossil fuels a dependency, you seem to conveniently overlook the fact that we import a great deal of those fossil fuels. If the US were energy *independent*, there would be no need for imports, correct? Thus the word dependency applies.
The peakoil discussion gets emotional and the true world reserve data is frustratingly incomplete. one undeniable fact is the parabolic rise in population. If a graph of human population was a graph of a stock, it would scream “sell”. Therefore the peak in energy production per person looks real,whatever the final results for fossil fuel totals. Given the long lag periods for policies to become effective, steps toward energy independence seem reasonable.
I’ve pretty much given up on trying to discuss peak oil. Every few years the peakers move the Hubbert point and deny that they’ve ever done so. We’ve consumed more petroleum since 1975 than was known to exist as provable reserves in 1975 and still have as much proveable reserves as we did then.
US production declined because it was cheaper elsewhere. As I live near Venutura California, an early west coast oil town I can use my eyes to tell you the spot price of oil. Below $30 no rigs pumping, above $60 all rigs pumping. These are wells dating to 1914. Another set of historical facts that are impossible under the theory of peak oil.
Let us procede to the prediction as to the finiteness of oil. Mexico last week announced a field potentially larger than the peak oil theory allows for as the highest possible amount left undiscovered.
Now let us look, that’s some cases of impossible under peak oil. It only takes one impossible to prove a theory incorrect.
In June 2000 the USGS raised its previous estimates of the the world’s crude oil reserves by 20 percent to a total of 649 billion barrels. This after a five year study. Sure the countries and companies are lying, so what.
And Hubbert? He was late to the party:
* “. . . although an estimated two-thirds of our reserve is still in the ground, . . . the peak of [U.S.] production will soon be passed–possibly within three years.” –David White, Chief Geologist, USGS
* Writen in 1919.
You can quibble about peak oil theorists moving the goal posts but the inescapable fact is that this country has to import 60% of its oil and until that changes our geopolitical nightmares will continue.
Robert. Let us know when those Ventura rigs shut off again ok?
Fact is, any other set of eyes looking at the prob knows the status quo is unacceptable and that the 21st century’s non FF based energy sources are in development NOW (though not nearly to the funding level they need to be-*thanks oily men of Bushco*)
Fact is fossil fuels ARE a finite resource..
Fossil fuels are immensely polluting and the pursuit of them politically destabilizing.
The FF based economies of the world would benefit from increased Conservation efforts (with a capital C) and massive development of cheap, democratic, renewable alt energy.
It can be done and it WILL be done because it must be done.
I expect this energy crisis, with all the hand wringing and alternate fuel blather, will blow over much as it did back in the early eighties. As I recall the world as we knew it was ending, running out of oil at any price, and then low and behold crude was selling for $11 a barrel in 1998.
It can be done and it WILL be done because it must be done.
And that’s why we are where we are. The clearing price of fossil fuels — in economic, environmental and geopolitical terms — has to become a problem before free markets have incentive to fix the problem.
Look at the driving habits of the US consumer. What will change those habits other than $4 a gallon of gas? Not much.
Necessity is the mother of invention. The ironic thing is, if fossil fuels were copiously abundant, we would probably be worse off. Imagine if industrial China and India had all the crude they wanted at dirt cheap prices and no incentive to change. The long run environmental effects would be much, much worse. We’re actually seeing this play out with coal, which China will eventually have to wean itself from out of environmental necessity.
In some sense, the economic curse of fossil fuel at the margins is an environmental blessing. Because we don’t have any functional market mechanisms for pricing environmental effects, we’re fortunate that a compelling reason for switching to alt fuels has come about.
And by the way, energy independence is something of a canard because the market for crude oil is fungible, global, and manipulated.
Cutting back just means more crude supply for China to burn at horribly unproductive rates as it ramps up its mercantilist growth. Cutting back in a big way, enough to put a dent in overall world demand, just puts the Saudi ‘central bank of oil’ and its OPEC governors back into the resource management game.
The market has solutions, but they will take time. If we get a global growth crunch, funding for alternative energy may take a hit as demand at the margins tails off. But then it will pick up again along with developing world growth. The transition away from fossil fuels is a long term story with plenty of twists and turns and many chapters left to go.
With or with out oil, our geopolitical nightmares will continue as we disregard other countries and falsify our reasons for war.
There are many young people from countries all over the world that grow up hating the US. Part of it is because other countries don’t understand us, but another part of it is because of the way we treat those countries. Eventually that will come back to bite us.
On the energy note: Although I was just a little kid when we had a similar situation back in the early 80s, this energy crisis is here to stay. The world as a whole is much more industrialized now as compared to then. While we look for other sources of energy, conservation of the oil we have now must be stressed.
I think its rather disgusting how SUV owners are the among the first to complain about rising fuel costs, when they are in part a large reason to the increasing price.
I don’t have any exact figures on me, but I do remember hearing that SUV sales have been flat or increasing for the past few years, and even up until recently. I honestly think that we’re going to need to see $100 a barrel or higher just to greatly diminish the sales of these ridiculous gas guzzlers.
The rest of the world, has in part done their share to adapt. For example, if you went to London or another European city, you’d see that most of their cars have alot smaller engine sizes and are alot more fuel efficient.
I think we can do it within the next 10-15 years; we have the technology developed by UTX; BMW is implementing it.
http://www.bmwtransact.com/hydrogen/cars_h2r.htm
http://en.wikipedia.org/wiki/BMW_H2R
There are wo major obstacles:
1. All big oil companies bribing politicians in Washington to come up with silly reasons not to do it; thus protecting their big oil money.
2. Convincing the public in safety of using nuclear power to produce dirt cheap electricity and for electrolysis to produce liquid hydrogen fuel to power their cars. (Hydrogen + Oxygen = Water = No Pollution)
BMW 745hi
http://www.bmwtransact.com/hydrogen/Cars_745hi.htm
Hydrogen is not a magic bullet. You have to isolate the hydrogen..either from water (which requires massive electricity inputs) or from a fossil fuel (typically natural gas). Then you need an infrastructure to store/transport/sell it.
Sure sure, you could use alt energy inputs for the electricity, but then you’re back to square one in the sense that you could have just skipped the hydrogen part and gone straight to the plug-in electric/alt energy electricty route. And you could use nukes, but not without solving the waste disposal issue. Even with pebble bed and the increased safety + less waste/greater input material efficiency, there are disposal issues. Even Nevada says “no way are you dumping that shit here”.
It’s likely more efficient as a whole to simply use plug-in electrics rather than highly volatile hydrogen gas.
A plug-in hybrid w/propane reserve would be one option.
In 1982 we had a Ford Escort that achieved 40mpg on the highway regularly. Nothing special, just a small, light car. I don’t even think it was fuel injected. Why is it that 25years later the best MPG I can get in a non-hybrid gasoline car (i.e. non-diesel) is about…yup, 40mpg.
We have lighter materials, better tech, etc. Yet still only 40mpg.
like Alaskan Pete said…..Plug-in hybrids. They are do-able. NOW. Right now.
Fuel cells are a pipe dream (i used to be an early booster)
There are French prototypes that run on compressed AIR fer chrissakes…..Solar power is coming along… ( on a relative funding shoestring)
On this 4th it seems fitting to remember one of our country’s most salient traits…
The ability to pull off stunning innovation with simple Pragmatic brilliance.
It galls me endlessly to see other nations moving forward in something so vital as Alt Energy innovation while we throw Billions to big oil/token millions to R&D.
There is a place on mount rushmore for the prez who takes the u.s. on an ” Apollo moonshot” for alt energy/conservation development….
The half a trillion (at least) we’re going to flush in Iraq would have funded a nice “Space Race” energy program. Oh well.
Alaskan Pete –
You are talking about hydrogen fuel cell technology, basically hydrogen powered battery (GM direction).
I was talking about burning hydrogen (Hydrogen + Oxygen = Energy + Water) as fuel (BMW direction).
BMW uses the current 7 Series as its basis. Like its predecessors, the 745h has two fuel tanks — one for gasoline, one for liquid hydrogen. When fueled by hydrogen, its 4.4-liter V-8 generates 182 horsepower, which helps it reach 62 mph in 9.9 seconds, and a top speed of 134 mph.
(I do not know any highways in the US allowing you going at 134 mph; average speed limit in the US is 60 mph.)
Refueling and Service:
Currently, there are two hydrogen fueling stations in Germany: one at the Munich airport, and one in Berlin that offers conventional fuels, compressed gaseous hydrogen (CGH2), and liquid hydrogen (LH2). There are also plans underway to build 24 hydrogen refueling stations throughout California.
http://www.bmwtransact.com/hydrogen/Technology_infra.htm
You will be amazed how nuclear can be dirt cheap, safe, and leaving almost no waste. Also, using nuclear energy to produce electricity to produce hydrogen from water via electrolysis; Water + Energy => Oxygen + Hydrogen.
France gets 80% of their electricity from nuclear and US gets only less than 10%.
Why?
Oil supply isn’t the problem – global warming because of burning carbons is what’s going to get us…
The explosive limits for hydrogen, are very wide, eventually it will be found to be too dangerous for everyday use.
Ah here are the counter-arguments to “efficient” markets!
As we can see here they have no mechanism for externalized expenses in the form of pollution/global warming, OR in the form of an insane self-perpetuating military industrial complex that feeds off itself like a police force in the war on drugs with ever higher and higher taxes, low to non-existent results and needless infringement on our civil rights and the human rights of others.
Oil is far more expensive than we want to know or are honest enough to truly factor into the equation.
It is funny how everything gets blamed on surge in demand from China and India.
What China and India are to blame for the limited refining capacity in this country?
Who is financially benefiting now from the limited refining capacity in the US?
Why there has been no new refineries build in this country during the last 30 years? Why do US taxpayers continue to subsidize big oil companies?
The problem is not with China and India but with Washington politicians getting bribes from big oil companies and packing their office refrigerators with cash.
“one for liquid hydrogen…”
Run! Surely you meant compressed hydrogen. Boiling point is 20 degrees K.
No, I was talking about LIQUID hydrogen.
In a liquid-hydrogen-powered BMW, by the time the driver needs more fuel, the hydrogen left in the tank has turned into a gaseous state, at a higher pressure. At the refueling station, -423° F liquid hydrogen is pumped into the tank. As this liquid hydrogen “rains” into the tank, the gaseous hydrogen already there condenses on these super-cold droplets, and the partial pressure in the tank is reduced.
Alaskan Pete: Because the market hasn’t really wanted fuel efficient cars and in some cases you could argue the market as a whole still doesn’t care much for fuel efficient cars.
Happy 4th everyone.
We should really be looking at coal as a source of energy; but, this might upset big business.
Looking at coal?
Coal is China’s largest energy source by far; Chinese coal dust is making Koreans cough and setting off pollution alarms as far away as Lake Tahoe. The NYT sez “Coal use in China exceeds that of the United States, the European Union and Japan combined.”
Here in the US the rails are set to haul a record amount of coal this year, they are spending $8 billion or so in track and infrastructure upgrades, and even so the coal miners are swearing and screaming at the bottlenecks. Meanwhile the USG forecasts coal demand to rise something like 225 million tons over the next two decades.
I think its rather disgusting how SUV owners are the among the first to complain about rising fuel costs, when they are in part a large reason to the increasing price.
…………………………………………………
you can bet that most of the cut backs, conservation
has been done by the poor as they have no choice
while the upper crust burns bountiful oil in their
SUV’s .
This is a good discussion, with a lot of well-considered opinions delivered concisely. Thanks to all who have spent the time and effort to share them.
The peak oil concept definitely makes sense to me. To get more oil from places such as U.S. will definitely require a much higher price. The idea that we will keep finding more big fields seems unrealistic. Alaska, Mexico, and the North Sea are all over the hill.
I’m a believer in the market, but markets don’t run themselves. Government is needed to set and enforce the rules. Industry can’t regulate itself because there are other constituents — consumers, the environment, workers — that have a stake in the rules of the game.
It seems obvious to me that oil was a big reason for our disastrous invasion of Iraq and subsequent unending occupation. Yet many Americans can’t bring themselves to see this.
Happy 4th to all…
Okay time time to shut it down and Graham Parsons is just the guy:
Once I knew a young man
Went driving through the night
Miles and miles without a word
With just his high-beam lights
Who’d have ever though they’d build such
a deadly Denver bend
To be so strong, to take as long as
it would till the end
Politicians and pundits use the word “Independence” because the word is so loaded with positives for the US audience.
In the global economy the real operative words for what we desire are: “we want a reliable and resilient supply of energy”.
Meanwhile – too many folks confuse the concept of peak-oil-production with running-out-of-oil. There will be a peak of oil production. There are and will be many alternatives for producing liquid hydrocarbons and other forms of energy.
As to the ability to predict a global peak of oil production as well as M. King Hubbert…
The data are inaccurate and/or incomplete from too many major source regions. Hence we will most likely see-the-peak after it has occurred.
You may think otherwise but I find encouragement that Japan has such a high standard of living whilst using less than half the oil per capita that we do.