Would it be possible for us to be granted permission to reprint this blog post in our monthly newsletter? Our organization is the Domestic Energy Producers' Alliance. Website is www.depausa.org for information about our organization. Past newsletters are located there for you to review. My email is csimonds@depausa.org if you'd rather reply privately. Many thanks for the consideration! - Cynthia
Thanks for continuing to share such clear insights!
Much of the energy debate seems to pit fossil fuels against "clean energy". But many companies from XOM and other majors to disruptive newcomers (Netpower Aker Entropy etc..) are researching ways to produce "clean energy" out of existing fossil fuels and infrastructure. I would be interested in hearing your perspective on these efforts.
I recall an article about shale oil in the late 70s or early 80s explaining that it held vast resources that could be extracted by mining the shale and then burning the rock, but it was not economically viable. New ideas and new technology eventually made it possible to capture that oil. Now some people reflexively say that Carbon Capture is uneconomic, but I hope that continued innovation can enable fossil fuels to provide energy the world deserves and needs for many years to come while steadily reducing the adverse CO2 impacts.
Thanks Arjun. As always I really appreciate your articles and learn a lot each time. You have stated before that you are "fighting the good fight" in terms of balancing the energy debate, and from my perspective I think there are inroads being made. Whether the algo is catering to my bias, I am not sure, but I am seeing more and more data rich push back against climate alarmism on Twitter and decision makers starting to talk about rational / logic based policy choices.
Domberg had a good series a while ago talking about the foundation of the environmental movement being based on malthusianism and a core part of this is to deny cheap / plentiful energy to "them".
Hopefully we are moving away from the zealotry of recent years to a period of sensible energy policy that benefits all of humanity, not just the "haves". Cheers John.
Excellent article except for one point: No, we don’t “need all forms of energy supply and technologies, in particular many of the newer options like electric vehicles, heat pumps, solar, wind,….”. We have to “ban, forbid, proscribe, outlaw, banish, destroy (choose as many as you are allowed to) solar and wind because of their low density and intermittency. The reason is utterly simple: when the capacity of wind and solar is small compared to the overall capacity of an electricity network they a just a costly parasite to endure; but when they get to reach 15% to 20% of the overall capacity, they ruin the economics of baseload stations. So you have the choice: you can either have “Availability (24/7/365)” as a building block as per Exhibit 2 or you can have solar and wind. But you can’t have both.
Thank you. So, I understand your points on low capacity factors and of course intermittency. But all those new options are likely to grow significantly in coming years. If I take 3 bbls for 7 bn people and 58 mn b/d...150 mn b/d of incremental oil demand may be a challenge to meet. Most of the new technologies need to get better, much better. Some will. We'll need that to happen, IMO.
"It is about recognizing that as an American (or European) we have no right to dictate to the Rest of the World how they should develop. The colonial era ended nearly 80 years ago. " Arjun, I loved that line. What I can never understand is how elites in the West are in agreement that colonialism was a bad thing historically, but have no trouble expressing displeasure/disdain for present day energy policies in developing countries that don't conform to western policy. Seems like a form of cognitive dissonace to me.
Aug 7, 2023·edited Aug 7, 2023Liked by Arjun Murti
Arjun, I don't know if this is still true today, but in one of my poly sci classes years ago, I read how the U.S. used entities like the World Bank to impose it's will/policies on developing countries that needed such financing when they got into debt problems. While that means nothing to countries like China and India today, it might be be relevant to smaller countries who the West could potentially squeeze by adding environmental compliance terms to any such loans. You've previously mentioned the issue of European insurers/reinsurers not willing to finance fossil fuel projects, so to the extent a developing country's project is dependent on the West for finance or insurance, isn't that a potential means for the West to impose it's will/policies on some developing countries? By analogy, I used to review a lot of federal grants for my clients and that's how the Feds impose their will/policies on state and local government by making it a condition of taking their money (in many pages of attachments with a litany of statutory and regulatory citations that were indecipherable to my clients and were all incorporated by reference into the terms and conditions of the grant agreement).
James, yes, unfortunately still very much happening. You can see in World Bank and other policies toward "clean" vs "dirty" energy. It is very unfortunate.
James, I totally agree with you but I’m not sure if these “useful idiots” are displaying cognitive dissonance or just old fashioned ignorance plus overweening arrogance. These elites are pathological ideologues and are true believers in the climate-apocalypse catechism. That mind set is very dangerous for a society to follow. I have just finished Steven Kotkin’s magesterial biography “Stalin” (and anxiously await the final volume of this trilogy due for release next year) which drives home so brilliantly the danger to a society of a crockpot ideology perused with unwavering diligence causing the deaths and immiseration of millions of people. Our current climate-cultist elites, entrenched in the Biden administration and many western governments, are pursuing a very flawed ideological agenda which cannot succeed (for many of the reasons detailed on this site)but will have lasting dangerous effects on our societies.
Thank you for highlighting. I think demand strength is now too meaningful to ignore...and I mean "strength" vs the net zero "oil has already peaked or will peak soon" views.
Logan Roy to Shiv, Kendall and Roman: "You're not serious figures. I love you. But you're not serious people." Same as John Kerry and Jennifer Granholm, et. al.
Shortly before reading your excellent post, I read Dan Niel’s review in the WSJ of the Jeep Grand Wagoneer L. A behemoth to compete with the Suburban/Escalade. I am sure Jeep did an analysis of market demand before developing the GW L. Shows the schism in our society of those who think using fossil fuels will destroy the planet, and those who, like me, want a gas guzzling comfortable ride, with lots of metal for safety! Disclosure. I also own 2 EV’s. Perhaps says I’m bipolar. :-)
Nice summary of the issues around energy demand, and countering the usual points made by climate alarmists. As Alex Epstein and others have been saying, the most significant error made by those who advocate the immediate elimination of fossil fuels is the failure to properly weigh the benefits along with the costs. It is also easy to overlook the benefits of the myriad uses of petroleum as a material source or feedstock for industry.
The funny thing about Net Zero, in my mind, is that you hear about this a lot from the Biden Administration and many private organizations, but I have yet to see the impact in our daily lives. If this was taken seriously by a large percentage of the population I would expect an evident impact in these areas:
- cruise line travel down
- private and commercial passenger jet travel down
- ocean front property values down - e.g., coastal properties in Florida
- smaller cars, as opposed to larger SUV
- smaller homes
- a pushback in the use of imported foods, flowers, coffees - items that have a high carbon footprint (Chilean sea bass, fresh flowers from Colombia, Fiji water, etc.)
- reduced vehicle traffic in urban areas as people commute less in private cars
This is a tour de force Arjun. Well done. Now is the period that should drive excess returns for long suffering energy investors as lead times to cure a decade plus of under-investment remain so extended. This is divorced from the pressing issue of where to source human capital. So much talent has fallen by the wayside due to retirement, termination and none of this replaced by graduates who seem to want to chase fever dreams and the promise of fast riches in technology. I’ve never seen a setup like this in my life.
I'm one of those that will soon retire from the O&G industry. I am a long-time member of the Society of Petroleum Engineers (SPE), and it's amazing to see the dramatic change of focus within the SPE from purely hydrocarbon advancement to the "energy transition". Younger engineers (the few who still choose petroleum engineering) are coming out of college fully steeped in global warming alarmism, and all about reducing carbon emissions. Unfortunately, my skill set in developing conventional reserves is becoming a lost art!
I'm not opposed to working, even part-time, in retirement. Like many industries, O&G companies are pushing us older folks out the door in favor of youth. Natural cycle of business I guess, but your story is inspirational!
Aug 5, 2023·edited Aug 5, 2023Liked by Arjun Murti
"We are energy analysts analyzing likely trends in energy demand. It's not about what we wish could happen or what we feel should happen." Super-Spiked carefully avoids the two traps you usually see analysts fall into and that I've fallen into before:
(1) mixing analysis with advocacy, however subtly, however subconsciously, this is always a fatal mistake, and
(2) perma-bull or perma-bearishness, an inability to be flexible in our thinking and consider the 'other' side of an argument, we become so wedded to thinking about one view, or worse, 'promoting' one view, and arguing against alternative view(s) that we don't fully consider the strength of those alternative views.
I'll leave us with a story from Richard Dawkins to give us inspiration to stay the course and be open to alternative views:
"I have previously told the story of a respected elder statesman of the Zoology Department at Oxford when I was an undergraduate. For years he had passionately believed, and taught, that the Golgi Apparatus (a microscopic feature of the interior of cells) was not real... Every Monday afternoon it was the custom for the whole department to listen to a research talk by a visiting lecturer. One Monday, the visitor was an American cell biologist who presented completely convincing evidence that the Golgi Apparatus was real. At the end of the lecture, the old man strode to the front of the hall, shook the American by the hand and said - with passion - 'My dear fellow, I wish to thank you. I have been wrong these fifteen years.' We clapped our hands raw.”
Very relevant comments here - the IEA Net zero scenario is simply not practical, no matter how many people wish it were so. Self interest for growth provided by inexpensive hydrocarbons overwhelms decarbonization considerations for billions of consumers (as you point out). This fact is hard for the “wishers” to swallow. And thus many choose to ignore. Which makes the world polarized around the topic - likely for decades to come.
Would it be possible for us to be granted permission to reprint this blog post in our monthly newsletter? Our organization is the Domestic Energy Producers' Alliance. Website is www.depausa.org for information about our organization. Past newsletters are located there for you to review. My email is csimonds@depausa.org if you'd rather reply privately. Many thanks for the consideration! - Cynthia
Thank you for reaching out. I emailed you.
Amen, Arjun.
Increasing human progress needs to become the denominator, NOT CO2 emissions. Esp. for the 7 billion not at our living standards.
thank you!
Thanks for continuing to share such clear insights!
Much of the energy debate seems to pit fossil fuels against "clean energy". But many companies from XOM and other majors to disruptive newcomers (Netpower Aker Entropy etc..) are researching ways to produce "clean energy" out of existing fossil fuels and infrastructure. I would be interested in hearing your perspective on these efforts.
I recall an article about shale oil in the late 70s or early 80s explaining that it held vast resources that could be extracted by mining the shale and then burning the rock, but it was not economically viable. New ideas and new technology eventually made it possible to capture that oil. Now some people reflexively say that Carbon Capture is uneconomic, but I hope that continued innovation can enable fossil fuels to provide energy the world deserves and needs for many years to come while steadily reducing the adverse CO2 impacts.
thank you Koneko and 100%...no way it won't be all energy and this putting of "clean" vs "dirty" is a non-sensical paradigm.
Thanks Arjun. As always I really appreciate your articles and learn a lot each time. You have stated before that you are "fighting the good fight" in terms of balancing the energy debate, and from my perspective I think there are inroads being made. Whether the algo is catering to my bias, I am not sure, but I am seeing more and more data rich push back against climate alarmism on Twitter and decision makers starting to talk about rational / logic based policy choices.
Domberg had a good series a while ago talking about the foundation of the environmental movement being based on malthusianism and a core part of this is to deny cheap / plentiful energy to "them".
Hopefully we are moving away from the zealotry of recent years to a period of sensible energy policy that benefits all of humanity, not just the "haves". Cheers John.
Thank you John. I too am an optimist...there is at least some turn in a healthier direction that has started.
Excellent article except for one point: No, we don’t “need all forms of energy supply and technologies, in particular many of the newer options like electric vehicles, heat pumps, solar, wind,….”. We have to “ban, forbid, proscribe, outlaw, banish, destroy (choose as many as you are allowed to) solar and wind because of their low density and intermittency. The reason is utterly simple: when the capacity of wind and solar is small compared to the overall capacity of an electricity network they a just a costly parasite to endure; but when they get to reach 15% to 20% of the overall capacity, they ruin the economics of baseload stations. So you have the choice: you can either have “Availability (24/7/365)” as a building block as per Exhibit 2 or you can have solar and wind. But you can’t have both.
Thank you. So, I understand your points on low capacity factors and of course intermittency. But all those new options are likely to grow significantly in coming years. If I take 3 bbls for 7 bn people and 58 mn b/d...150 mn b/d of incremental oil demand may be a challenge to meet. Most of the new technologies need to get better, much better. Some will. We'll need that to happen, IMO.
"It is about recognizing that as an American (or European) we have no right to dictate to the Rest of the World how they should develop. The colonial era ended nearly 80 years ago. " Arjun, I loved that line. What I can never understand is how elites in the West are in agreement that colonialism was a bad thing historically, but have no trouble expressing displeasure/disdain for present day energy policies in developing countries that don't conform to western policy. Seems like a form of cognitive dissonace to me.
Thank you James. As I noted, doesn't matter what I or anyone else in the West says or believes. it is not up to us.
Arjun, I don't know if this is still true today, but in one of my poly sci classes years ago, I read how the U.S. used entities like the World Bank to impose it's will/policies on developing countries that needed such financing when they got into debt problems. While that means nothing to countries like China and India today, it might be be relevant to smaller countries who the West could potentially squeeze by adding environmental compliance terms to any such loans. You've previously mentioned the issue of European insurers/reinsurers not willing to finance fossil fuel projects, so to the extent a developing country's project is dependent on the West for finance or insurance, isn't that a potential means for the West to impose it's will/policies on some developing countries? By analogy, I used to review a lot of federal grants for my clients and that's how the Feds impose their will/policies on state and local government by making it a condition of taking their money (in many pages of attachments with a litany of statutory and regulatory citations that were indecipherable to my clients and were all incorporated by reference into the terms and conditions of the grant agreement).
James, yes, unfortunately still very much happening. You can see in World Bank and other policies toward "clean" vs "dirty" energy. It is very unfortunate.
James, I totally agree with you but I’m not sure if these “useful idiots” are displaying cognitive dissonance or just old fashioned ignorance plus overweening arrogance. These elites are pathological ideologues and are true believers in the climate-apocalypse catechism. That mind set is very dangerous for a society to follow. I have just finished Steven Kotkin’s magesterial biography “Stalin” (and anxiously await the final volume of this trilogy due for release next year) which drives home so brilliantly the danger to a society of a crockpot ideology perused with unwavering diligence causing the deaths and immiseration of millions of people. Our current climate-cultist elites, entrenched in the Biden administration and many western governments, are pursuing a very flawed ideological agenda which cannot succeed (for many of the reasons detailed on this site)but will have lasting dangerous effects on our societies.
Not sure if this is paywalled but you and David Olive uncannily on the same page today https://www.thestar.com/business/our-never-ending-oil-addiction-why-a-net-zero-world-is-unlikely-anytime-soon-as/article_7495f07d-39cf-5f6c-9842-55a695d80565.html
Thank you for highlighting. I think demand strength is now too meaningful to ignore...and I mean "strength" vs the net zero "oil has already peaked or will peak soon" views.
Logan Roy to Shiv, Kendall and Roman: "You're not serious figures. I love you. But you're not serious people." Same as John Kerry and Jennifer Granholm, et. al.
LOL. One of my all time favorite TV lines.
Shortly before reading your excellent post, I read Dan Niel’s review in the WSJ of the Jeep Grand Wagoneer L. A behemoth to compete with the Suburban/Escalade. I am sure Jeep did an analysis of market demand before developing the GW L. Shows the schism in our society of those who think using fossil fuels will destroy the planet, and those who, like me, want a gas guzzling comfortable ride, with lots of metal for safety! Disclosure. I also own 2 EV’s. Perhaps says I’m bipolar. :-)
You are 100% capturing the essence of my point. We are not seriously trying to tackle demand. Or at least not in a way that is going to make a dent.
Nice summary of the issues around energy demand, and countering the usual points made by climate alarmists. As Alex Epstein and others have been saying, the most significant error made by those who advocate the immediate elimination of fossil fuels is the failure to properly weigh the benefits along with the costs. It is also easy to overlook the benefits of the myriad uses of petroleum as a material source or feedstock for industry.
https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php
The funny thing about Net Zero, in my mind, is that you hear about this a lot from the Biden Administration and many private organizations, but I have yet to see the impact in our daily lives. If this was taken seriously by a large percentage of the population I would expect an evident impact in these areas:
- cruise line travel down
- private and commercial passenger jet travel down
- ocean front property values down - e.g., coastal properties in Florida
- smaller cars, as opposed to larger SUV
- smaller homes
- a pushback in the use of imported foods, flowers, coffees - items that have a high carbon footprint (Chilean sea bass, fresh flowers from Colombia, Fiji water, etc.)
- reduced vehicle traffic in urban areas as people commute less in private cars
Thank you Stuart.
Excellent post @Arjun Murti. I am sharing to my network. Many thanks!
Thank you Dave
This is a tour de force Arjun. Well done. Now is the period that should drive excess returns for long suffering energy investors as lead times to cure a decade plus of under-investment remain so extended. This is divorced from the pressing issue of where to source human capital. So much talent has fallen by the wayside due to retirement, termination and none of this replaced by graduates who seem to want to chase fever dreams and the promise of fast riches in technology. I’ve never seen a setup like this in my life.
Thank you MA.
I'm one of those that will soon retire from the O&G industry. I am a long-time member of the Society of Petroleum Engineers (SPE), and it's amazing to see the dramatic change of focus within the SPE from purely hydrocarbon advancement to the "energy transition". Younger engineers (the few who still choose petroleum engineering) are coming out of college fully steeped in global warming alarmism, and all about reducing carbon emissions. Unfortunately, my skill set in developing conventional reserves is becoming a lost art!
We are going to soon need to bring back retired petroleum engineers. Hey, I was a retired Wall Street analyst...un-retiring can be OK!
I'm not opposed to working, even part-time, in retirement. Like many industries, O&G companies are pushing us older folks out the door in favor of youth. Natural cycle of business I guess, but your story is inspirational!
"We are energy analysts analyzing likely trends in energy demand. It's not about what we wish could happen or what we feel should happen." Super-Spiked carefully avoids the two traps you usually see analysts fall into and that I've fallen into before:
(1) mixing analysis with advocacy, however subtly, however subconsciously, this is always a fatal mistake, and
(2) perma-bull or perma-bearishness, an inability to be flexible in our thinking and consider the 'other' side of an argument, we become so wedded to thinking about one view, or worse, 'promoting' one view, and arguing against alternative view(s) that we don't fully consider the strength of those alternative views.
I'll leave us with a story from Richard Dawkins to give us inspiration to stay the course and be open to alternative views:
"I have previously told the story of a respected elder statesman of the Zoology Department at Oxford when I was an undergraduate. For years he had passionately believed, and taught, that the Golgi Apparatus (a microscopic feature of the interior of cells) was not real... Every Monday afternoon it was the custom for the whole department to listen to a research talk by a visiting lecturer. One Monday, the visitor was an American cell biologist who presented completely convincing evidence that the Golgi Apparatus was real. At the end of the lecture, the old man strode to the front of the hall, shook the American by the hand and said - with passion - 'My dear fellow, I wish to thank you. I have been wrong these fifteen years.' We clapped our hands raw.”
Thank you Investor
excellent
Thank you
Very relevant comments here - the IEA Net zero scenario is simply not practical, no matter how many people wish it were so. Self interest for growth provided by inexpensive hydrocarbons overwhelms decarbonization considerations for billions of consumers (as you point out). This fact is hard for the “wishers” to swallow. And thus many choose to ignore. Which makes the world polarized around the topic - likely for decades to come.
Dan, Great to see you here.
I value your work greatly - it is accurate -eloquently written - balanced - thank you
thank you Patrick
So balanced. It’s refreshing.
Thank you Six Bravo