Some homework on energy efficiency of ethanol and energy security by Goldmans.
$this->bbcode_second_pass_quote('', '
')Policy proposals create upside risk for crude and corn
Policy proposal is aimed at reducing US foreign oil dependency
In the annual State of the Union address, US President George W. Bush called for the extension of two energy policy initiatives to reduce US dependency on foreign oil sources including a doubling of the Strategic Petroleum Reserve to 1.5 billion barrels by 2027 and a 20% reduction in petroleum-based gasoline demand by 2017. The latter is to be achieved by an increase in the renewable fuels standard from 7.5 billion gallons in 2012 to 35 billion gallons in 2017 and a modest improvement in fuel economy standards to reduce gasoline demand by an additional 8.5 billion gallons (this amounts to a 2-mile-per-gallon improvement in fleet efficiency).
The net proposal tightens corn without easing the oil balance
On net, particularly in the near term, these proposals further tighten fundamentals, supporting our positive energy outlook and our constructive longer-term outlook for corn. Although the headline proposal would cumulatively reduce oil demand by 258 billion gallons by 2017, after controlling for the SPR proposal, fuel efficiency losses due to the lower energy content of ethanol, and the increased mineral oil demand used in the ethanol production process, the net reduction through 2017 would be reduced
to 15 to 110 billion gallons depending on the vehicle fuel efficiency, while the first two years of the program would actually tighten the global oil balance.
Implementation of the full proposal would be difficult
In general, policy makers in the United States are likely to continue to support these policies to some degree, in the name of energy security and environmental stewardship, even if substantial subsidies are ultimately required. While physical constraints would likely limit such an aggressive renewable fuels policy, we believe an SPR policy and some version of a renewable fuels proposal is extremely likely (our forecasts already embed 12 billion gallons of renewable fuels by 2012).
Source: Goldman Sachs Commodities Research
PeakOil is You
Trader's Corner 2007
Re: Trader's Corner 2007
by MrBill » Thu 25 Jan 2007, 04:32:57
January 24, 2007
Hooking back to the thread yesterday about big, powerful cars in Germany versus efficient autos we said that only physical shortages were likely to change consumer tastes not just higher prices.
Can one not see the energy security debate in the same vein? The EROEI of ethanol may be lousy, but there is scope for improvement once critical mass and economies of scale kick-in as well as the steep learning curve. We know corn is not as good as sugar cane, and we hope efforts to develop cellulosic ethanol will be an improvement on corn.
But that is dull, boring economics and not US national security. Afterall we are talking about a country that does not care one way or the other about deficits, so what is a few hundred billion more here or there?
Part of the SPR and ethanol debate, just like US foreign policy in the ME, has to be about security of supply as much as price. And clearly ethanol as a stop-gap measure has a role to play. At least in policy makers' minds.
According the GS, and many on peak oil dot com, it will not make a hill of beans worth of difference to the country's energy mix, but I think it needs to be seen in terms of bridging any short-term supply interuption rather than as a long-term solution whatever the political rhetoric used to justify it. Stationary power from coal, nuclear or alternatives used to produce liquid fuel in the form of ethanol, bio-diesel or hydrogen may not be as efficient as good old gasoline, but you can burn it for transport fuel.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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MrBill - Expert
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Re: Trader's Corner 2007
by MrBill » Fri 26 Jan 2007, 10:26:32
Crude is rolling into the weekend on a weaker note. Refining margins slipped back to $8-9 per barrel while nat gas is under $7 per mmbtu again after I thought was a rather decent draw in stocks yesterday? Mind you it is warm and sunny here in Cyprus, so wherever there is real winter it does not seem to be phasing the sellers one iota.
But I bought a small 5 lot for technical reasons just to follow my model.
I booked tickets for skiing in mid-March, so it had better snow sometime between now and then! I missed last year completely, the first time in over 20-years, and it was a fantastic season. Now, this year, a late start and who knows with el Nino and climate change what it will look like by then? Judging by the futures market which are by their nature forward looking I guess not a great deal colder than now?
Cyprus made it into the global energy news today. There is a first! There is offshore oil & gas in the eastern Mediterranean Sea between Cyprus, Lebanon and Egypt. I know where I would be locating my onshore operations for servicing those offshore blocks! But in any case, Cyprus is divided and now that there is booty to be had the Republic of Northern Cyprus, the Turkish controlled enclave, wants its due. Typical. Just another issue to resolve or not as the case may be?
Well, Cyprus is going to need their natural gas. That is for sure. The island is suffering from a lack of rain and snow and the resevoirs are 88% empty. Oops! Another dry summer and they will not only be rationing water, but also having to burn nat gas (or coal I assume) to desalinate sea water. With the level of building activity on the island and all those new villas needing air conditioning all summer, plus the tourist hotels, and it all adds up to plenty of new demand for electricity and expensive desalinated potable water.
From what I understand from regional climate change is that the semi-arid area of N. Africa and the ME between 20 & 30 degrees north is potentially extending its range over the coming years to between 30 & 40 degrees north in latitude. That is a huge shift in climate terms. A dryer, hotter climate area extending northwards will effect southern Europe as well. Even as the glaciers are disappearing from the Alps farther north. This was an area of the temperate world where excessive heating and cooling was not absolutely necessary if houses were well-constructed. Nevermind a reduction in the agricultural productivity and/or more reliance on manmade irrigation that can cause erosion and soil salination as well. Did I mention collapsing fish stocks in the Med basin as well? About as productive in marine life as your bathtub I am afraid.
This is my Malthusian take on coal to liquids via cellulosic ethanol and/or bio-diesel. Basically, we know it has a lower EROEI than petroleum made into gasoline or diesel, but it is viable as a source - reduced efficiency, not as good as petroleum - of liquid transport fuel. And sufficient to suffice for some applications.
However, the productivity gains of switching from draught or animal power to the internal combustion engine freed up approximately 25-percent of the agricultural land from growing animal feed to producing crops for human consumption.
Now, if you take 25-percent of your annual cereal production or land out of cereal production for growing your switch grass or whatever then you lose some of all of those productivity gains when you have to burn that bio-mass via ethanol or bio-diesel as a transport fuel some of which is then used for agriculture itself.
That is assuming you cannot grow bio-mass on marginal land not currently under cultivation, but due to climate change, population growth and perhaps rising oceans you are talking about losing acreage in any case. Any bets what happens then to Sri Lanka or Bangledesh?
So the long-term trade is not just profiting from a run-up in crude oil prices, but all commodities getting more expensive from a confluence of events like population growth and climate change.
The search for energy alternatives is where the money is even if it is an elusive goal using current technologies. Simply because we have no choice. And seriously, unless you can convince a lot of people to freeze to death in the dark we will be burning coal and running nuclear power plants as we look at alternative sources of energy inputs as supplies of petroleum decline. The London pea souper will be back, but on a regional, if not global scale. And they call me a cornocopian? ; - )
All of which makes lower crude prices hard to justify. However, sometimes we need to be patient, and start building our arcs before it starts raining.
Especially, as there seems to be no such a thing as a slowdown in China's rapid growth?
$this->bbcode_second_pass_quote('', ' ') Sales of oil products in China rose
by more than a third last year as the world's fastest-growing
major economy expanded 10.7 percent and strained to meet energy
saving targets.
Oil-product sales jumped 36.2 percent, the National Bureau
of Statistics said in Beijing today. Raw materials, fuel and
power purchasing prices climbed 6 percent last year and gained 5
percent in December from a year earlier, the bureau said.
Demand for fuels to run power plants and metals for use in
cars, buildings and machinery has surged, prompting China to
intensify the search for resources at home and abroad. Oil
imports rose 14.5 percent to 145.2 million tons last year, with
the cost soaring 39.2 percent to $66.4 billion, according to
customs figures.
Source: Bloomberg, January 25, 2006But I bought a small 5 lot for technical reasons just to follow my model.
I booked tickets for skiing in mid-March, so it had better snow sometime between now and then! I missed last year completely, the first time in over 20-years, and it was a fantastic season. Now, this year, a late start and who knows with el Nino and climate change what it will look like by then? Judging by the futures market which are by their nature forward looking I guess not a great deal colder than now?
Cyprus made it into the global energy news today. There is a first! There is offshore oil & gas in the eastern Mediterranean Sea between Cyprus, Lebanon and Egypt. I know where I would be locating my onshore operations for servicing those offshore blocks! But in any case, Cyprus is divided and now that there is booty to be had the Republic of Northern Cyprus, the Turkish controlled enclave, wants its due. Typical. Just another issue to resolve or not as the case may be?
Well, Cyprus is going to need their natural gas. That is for sure. The island is suffering from a lack of rain and snow and the resevoirs are 88% empty. Oops! Another dry summer and they will not only be rationing water, but also having to burn nat gas (or coal I assume) to desalinate sea water. With the level of building activity on the island and all those new villas needing air conditioning all summer, plus the tourist hotels, and it all adds up to plenty of new demand for electricity and expensive desalinated potable water.
From what I understand from regional climate change is that the semi-arid area of N. Africa and the ME between 20 & 30 degrees north is potentially extending its range over the coming years to between 30 & 40 degrees north in latitude. That is a huge shift in climate terms. A dryer, hotter climate area extending northwards will effect southern Europe as well. Even as the glaciers are disappearing from the Alps farther north. This was an area of the temperate world where excessive heating and cooling was not absolutely necessary if houses were well-constructed. Nevermind a reduction in the agricultural productivity and/or more reliance on manmade irrigation that can cause erosion and soil salination as well. Did I mention collapsing fish stocks in the Med basin as well? About as productive in marine life as your bathtub I am afraid.
This is my Malthusian take on coal to liquids via cellulosic ethanol and/or bio-diesel. Basically, we know it has a lower EROEI than petroleum made into gasoline or diesel, but it is viable as a source - reduced efficiency, not as good as petroleum - of liquid transport fuel. And sufficient to suffice for some applications.
However, the productivity gains of switching from draught or animal power to the internal combustion engine freed up approximately 25-percent of the agricultural land from growing animal feed to producing crops for human consumption.
Now, if you take 25-percent of your annual cereal production or land out of cereal production for growing your switch grass or whatever then you lose some of all of those productivity gains when you have to burn that bio-mass via ethanol or bio-diesel as a transport fuel some of which is then used for agriculture itself.
That is assuming you cannot grow bio-mass on marginal land not currently under cultivation, but due to climate change, population growth and perhaps rising oceans you are talking about losing acreage in any case. Any bets what happens then to Sri Lanka or Bangledesh?
So the long-term trade is not just profiting from a run-up in crude oil prices, but all commodities getting more expensive from a confluence of events like population growth and climate change.
The search for energy alternatives is where the money is even if it is an elusive goal using current technologies. Simply because we have no choice. And seriously, unless you can convince a lot of people to freeze to death in the dark we will be burning coal and running nuclear power plants as we look at alternative sources of energy inputs as supplies of petroleum decline. The London pea souper will be back, but on a regional, if not global scale. And they call me a cornocopian? ; - )
All of which makes lower crude prices hard to justify. However, sometimes we need to be patient, and start building our arcs before it starts raining.
Especially, as there seems to be no such a thing as a slowdown in China's rapid growth?
$this->bbcode_second_pass_quote('', ' ') Sales of oil products in China rose
by more than a third last year as the world's fastest-growing
major economy expanded 10.7 percent and strained to meet energy
saving targets.
Oil-product sales jumped 36.2 percent, the National Bureau
of Statistics said in Beijing today. Raw materials, fuel and
power purchasing prices climbed 6 percent last year and gained 5
percent in December from a year earlier, the bureau said.
Demand for fuels to run power plants and metals for use in
cars, buildings and machinery has surged, prompting China to
intensify the search for resources at home and abroad. Oil
imports rose 14.5 percent to 145.2 million tons last year, with
the cost soaring 39.2 percent to $66.4 billion, according to
customs figures.
But those who over-exaggerate the price of crude's importance to over-all costs to the economy should check-out the numbers out of S. Korea. A country that imports ALL of its fuel requirements.
$this->bbcode_second_pass_quote('', '[')b]South Korea, which imports almost all
its crude oil, may spend 2 percent less buying the fuel this year
because of declining prices, the country's Ministry of Commerce,
Industry and Energy said.
The nation's crude oil import bill may fall to $54.8 billion
in 2007 from an estimated $55.9 billion last year, the ministry
said in an e-mailed statement today. The volume of oil imports
may increase 1 percent to 895.8 million barrels.
Crude oil prices in New York averaged $66.25 a barrel last
year and have fallen 30 percent from the record $78.40 a barrel
set July 14. Dubai crude oil prices, South Korea's benchmark,
averaged $61.53 a barrel last year and is down 8.8 percent so far
this year.
South Korea's oil-product exports may decline 26 percent to
$15.4 billion this year, or to 235.7 million barrels, as product
prices and refining margins fall, the ministry said. A stronger
South Korean currency is also weakening price competition, it
said. Oil product imports are projected to gain 3 percent to
$11.6 billion, or to 195.1 million barrels, it said.
The country may consume 775 million barrels of oil in 2007,
an increase of 1.4 percent, as petrochemical companies expand
capacity, boosting their demand for naphtha, a chemical raw
material produced from crude oil, the ministry said.
Prices are down 30% from their peaks and it may save S. Korea 2% on its fuel buying needs this year? BFD! Mind you S. Korea is an important petroleum prouct exporter as well to the rest of Asia. So the net import bill has to be weighed against receipts from re-export. I am too tired to do the math. But I guess the main take-away is that with prices coming down it will not be high crude prices that derail rapid Asian growth this year.
Short of an attack on Iran or a nuclear accident somewhere 2007 is shaping up already to be a very quiet year and it is not even the end of January! What am I missing? Have I done a Donald Rumsfield and gone from "knowing what we don't know to not knowing what we don't know?"
I think it will take more than the threat of geopolitical supply cuts this year to re-ignite a bull rally in crude. Too many burned their speculative fingers last year. So we will have to see real barrels disappearing from inventories in order to see significantly higher prices. So, as Homer Simpson would say, "now, we play the old waiting game. Doh!"
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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MrBill - Expert
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Re: Trader's Corner 2007
by cube » Fri 26 Jan 2007, 13:52:02
$this->bbcode_second_pass_quote('MrBill', '.')...
I think it will take more than the threat of geopolitical supply cuts this year to re-ignite a bull rally in crude. Too many burned their speculative fingers last year.
...
There's no such thing as "tenureship" in this line of business. I think it will take more than the threat of geopolitical supply cuts this year to re-ignite a bull rally in crude. Too many burned their speculative fingers last year.
...
$this->bbcode_second_pass_quote('MrBill', '.')...
So we will have to see real barrels disappearing from inventories in order to see significantly higher prices. So, as Homer Simpson would say, "now, we play the old waiting game. Doh!"
Here's my question.....WHERE?.....WHICH COUNTRY?
Don't get me wrong. I'm not trying to say PO is going to happen next year.....it's just ridiculously sad when a media outlet can be so vague but still maintain their respectability and their reputation. It's garbage like that which makes me NOT want to read the news.
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