Autonomous Vehicle Consultant

Good News

According to the Boston Globe (7/13/11), “Greater Boston ranks in the top 10 among the nation’s largest metropolitan areas for employment in the alternative energy industry, boosted by state policies that require utilities to purchase electricity generated by solar, wind and other nonpolluting power sources, according to a new study.” Is this employment picture sustainable without state support?

Bad News

In the July 7th issue of Forbes, The Coming Clean Tech Crash, Devon Swezey writes, “The global clean energy industry is set for a major crash. The reason is simple. Clean energy is still much more expensive and less reliable than coal or gas, and in an era of heightened budget austerity the subsidies required to make clean energy artificially cheaper are becoming unsustainable.”

The subject of wind energy, both on/off shore in Massachusetts, is treated in my blog posts of April 5, 7, 12, 14, 18, 20, 26, and 28. Capital equipment costs, development time, state subsidies and insufficient wind are issues that make wind energy far less competitive with respect to fossil fuel, electric generation sources.

“Clean tech crashes are nothing new. The U.S. wind energy industry has collapsed three times before, first in the mid 1990s and most recently in 2002 and 2004 when Congress failed to extend the tax credit that made it profitable. But the impact and magnitude of the coming clean tech crash will far outstrip those of past years.”

Cuts in clean energy are already underway in Europe with budget reductions in Germany, France, Spain, the Czech Republic and Italy. China, however, is expanding its clean energy support based on a ten year program and $760B. There is a reasonable chance that the clean tech industry will migrate to “only game in town,” namely China.

Path Forward- Back to Good News

The United States should support adequately budgeted, clean tech programs that consistently feature innovation (i.e., riskier projects) to develop energy generation technologies that are less costly than their fossil fuel counterparts. In this manner, government subsidies can be removed permanently, along with the creation of a competitive industry and many jobs. China does not have to win the clean tech game if the United States plays its cards well.

In approximately 11 years the United States will be importing 100 percent of its crude oil requirements. That import number is now 60 percent. This means that upstream oil workers will need to find other forms of employment in shale gas or offshore oil production, for example. Upstream activity involves surveying, environmental assessment, seismic surveys, drilling, cementing, manufacturing/selling tools, supplies, drilling fluids, and producing crude oil itself. Numerous secondary and tertiary vendors support upstream, exploration, development, production and well decommissioning. The term downstream refers to oil refining.

How many upstream oil workers will be affected in 11 years? According to the Bureau of Labor Statistics (BLS), there are nearly 155,000 workers involved with both oil and gas extraction. Since the BLS does not separate oil and gas workers, I divided 155,000 workers into oil and gas workers based on the number of oil and gas wells in the United States. As of 2009 the number of oil wells is approximately 363,000, while the number of gas wells totals 461,000. Thus, oil wells are nearly 44 percent of the total number of wells. Based on this simplified model of counting the number of oil workers, in 11 years about 68,000 upstream oil workers will be seeking employment elsewhere.

Employment in offshore oil production is uncertain. New crude oil sources might be discovered in the outer continental shelf (OCS) of Alaska, the Atlantic, Pacific oceans, as well as the eastern and central sectors of the Gulf of Mexico. However, estimates on reservoir volumes lack modern seismic survey data. (See the Annual Energy Outlook 2011, Projections to 2035, p 35, Department of Energy). Job creation in the production of shale gas may be a possibility. However, there are opinions both pro and con.

“According to Fox News, The New York times reported, that the administration is proposing a standard of up to 56.2 mpg for new cars and trucks by 2025, about twice the current level. A senior administration official told the newspaper that the goal was only the opening bid and may not be the final figure.”

“Environmentalists have sought requirements of at least 60 mpg by 2025, contending that more gas-electric hybrids, electric vehicles and cars and trucks with improved internal combustion engines and reduced weight could radically alter the fleet.”

“But automakers have warned that pushing gas mileage standards up that quickly could force them to raise prices to sticker-shock levels for many consumers, and they are skeptical that consumers will want the new breed of cars that will be smaller, lighter and, in some cases, more expensive.”

The above paragraphs do not mention the likelihood that the United States will be importing 100 percent of its crude oil needs in approximately 11 years (Please see blog post of June 26, 2011). Has anyone ever asked why the above paragraphs cited the date of 2025? Was it based on time to reach commercialization via manufacturing, distribution, sales, and installation of a new engine/fuel technology? Did this date reflect the time required to completely transition into a new fleet of vehicles (See p 15) powered by a new technology, namely 15 to 20 years? When will the Obama administration honestly address the American public that the U.S. oil reserves are declining? Perhaps President Obama should take time from his busy fund raising schedule and ponder these questions.

Several decades ago the United States was a major exporter of crude oil. There was plenty of secure, domestic crude oil to make gasoline for passenger cars. Gasoline prices were generally stable.

Now the United States imports 60 percent of its crude oil needs. That means availability of gasoline for 137 million passenger  cars is far less secure and can lead to higher prices.

In 11 years, the United States will import 100 percent of its crude oil needs based on known reservoir capacities and current withdrawal rates. Availability and price of passenger car gasoline will be greatly influenced by exporters of crude oil.

Significant new sources of crude oil are not likely in the lower 48 states or Alaska. With the possible exception of the Gulf of Mexico, they are all past peak production.

Oil production jobs in the lower 48 states and Alaska will disappear in about 11 years. Those workers will need to find other employment (e.g., shale gas production?).

New crude oil sources might be discovered in the outer continental shelf (OCS) of Alaska, the Atlantic, Pacific oceans, as well as the eastern and central sectors of the Gulf of Mexico. However, estimates on reservoir volumes lack modern seismic survey data. (See Annual Energy Outlook 2011, Projections to 2035, p 35, Department of Energy.) How can one form a national energy policy based on uncertain reservoir capacities?

Conclusion: It is troubling to think that the misguided, uninformed  “Drill, Baby, Drill” folks might influence an urgently needed, yet non existent national energy plan.

On June 23, 2011 President Obama released 30 million barrels of oil from the U.S. strategic reserves to counter rising gas prices due to Libyan production shortfall. That’s odd because gasoline prices are already declining here and the United States only imports about 1 percent of its oil from Libya compared to far greater oil exports to Europe from Libya. The amount of oil released by President Obama equals approximately two days consumption by the United States.

Actually there are 28 countries that are tapping their strategic reserves to make up for greater than anticipated Libyan production decline. The United States is contributing about half of this strategic oil release to help the Europeans. What are they doing to help us?

The number of countries opening their strategic reserves was not mentioned in the CBS News report last night, nor in the Boston Globe today. It was, however, reported in the German online magazine, der Spiegel, last night. Why was this number of countries not reported by these two major U.S. news outlets? Not paying attention to details? Other reasons?

According to the Financial Times (February 25, 2011), “Saudi Arabia has begun producing more oil to fill the shortfall in global supplies caused by Libya’s political crisis…” Why are 28 countries, including the United States, now dipping into their strategic oil reserves when the Saudis were allegedly supplying extra oil to make up for the Libyan shortfall? Perhaps the Saudis have limited production capacity?

Here is a bit of insight into the current Saudi oil production capability that appeared in my blog of March 3, 2011. “Despite its large oil production, 90 percent of Saudi Arabia’s oil production comes from only five fields and up to 60 percent of its production stems from the Ghawar field. These giant, aging oil fields were discovered in 1941 to 1965. The Saudis may have irretrievably damaged some of their oil fields by over pumping salt water into them to maintain production. No external auditing of their oil fields is permitted by the Saudis. The turmoil spreading throughout the Middle East has not impacted Saudi Arabia yet. That situation, however, could change quickly. If that happens, what is the United States’ plan?”

Conclusion: Dipping into its strategic oil reserves clearly shows that the United States does not have an energy policy. Relying on the Saudis is not a comforting energy policy that promotes security of supply. U.S. consumption of 15 million barrels of oil per day only displays unabated, voracious greed without regard for future generations.