Energy & Power Generation

Suppressing Knowledge About American Oil Resources

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An editorial in Investor’s Business Daily (8/11) contains the following passage:

In 2005, (Barack Obama) voted to kill legislation that would have measured our offshore (oil and gas) reserves.

That effort failed and a preliminary inventory report was produced in February 2006.

But those estimates of what lay beneath the 1.76 billion-acre continental shelf were based on old data obtained from surveys using old exploratory technology.

The Interior Department report stated: “Resource estimates are highly dependent on the current knowledge base, which has not been updated in 20 to 40 years for areas under congressional moratorium . . .”

The reason is that while requiring regular inventory assessments Congress provides no funding to conduct new surveys.

Now Obama is sponsoring S.115, which he calls the “Oil SENSE Act,” which would repeal the 2005 Energy Policy Act’s authorization of these inventories.

His bill would prohibit the expanded use of 3-D seismic techniques to search for and measure undersea oil deposits.

This seemed so unbelievable, even give what I knew about Obama’s ideas on energy, that I had to check for myself to see if it was true.

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A Scary Ratio

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Barrons (7/14) contains the following sentence:

Even more impressive is the value of the oil reserves of petroleum-exporting countries, which now total an estimated $140 trillion, nearly three times the size of global equity markets, which have a combined market value of around $50 trillion. (emphasis added)

There are a couple of things wrong with this comparison. It is not correct, IMNSHO, to compare a cash flow stream which will be recognized over years/decades to a current market value–the cash flow stream should be discounted to present value. (Equity market values already represent, at least in theory, the discounted present value of their corresponding free cash flow streams.) Also, I’m pretty sure reserve value is a gross value, which doesn’t take production costs into account. For a place like Saudi Arabia, these may be minimal at present, but they will not remain minimal over the life of the asset.

But even after these adjustments are applied, you will probably come out with something like:

The value of the oil reserves of petroleum-exporting countries is equal to the size of global equity markets.

Think about what this means. Ownership of the land under which oil resides is roughly equal in value to ownership of the equity interest in all the world’s publicly-traded companies, with their factories, mines, brand values, and intellectual capital…the accumulated work and knowledge of centuries.

This represents in a sense a return to the pre-industrial age, in which the ownership of land was the predominant form of wealth. If this situation is sustained, it will represent a tremendous change in the world economic order, and not at all a positive one.

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A Big Breakthrough

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[See update at end]

Instapundit links to an EEtimes story that claims that MIT  researchers  have created a catalyst that can electrolyze water at 100%  efficiency, meaning that 100% of the  electricity  that goes across the electrodes goes into breaking the bonds between the hydrogen and oxygen atoms in the water.  

If this pans out, this is big, I am talking discovery of nuclear fission big. For one thing, it means the end to concerns about anthropogenic global warming.  

The MIT  breakthrough  is the  equivalent  of someone finding the means to improve a car’s miles-per-gallon rating from 30 to 150.  

It’s big!

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The Return of Commercial Sail?

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In a post on Ships and the Global Economy, I mentioned a sail-assist technology which has been develope by a German company. Operating something like a kite, the SkySails system is said to be capable of lowering vessel fuel costs by 10-35%.

Comes now Compagnie de Transport Maritime à la Voile which has entered the cargo transportation business with a pure-sail approach. The 106-year-old Kathleen & May will be running wine from Bordeaux to Dublin. CMTV has chartered several additional sailing ships and will be using them to ship products such as coffee and jam. The company also intends to have new vessels built to its specifications.

Here’s CMTV’s website. Note that shippers get a “logo sticker” that they can attach to their products, certifying that “goods are transferred to consumers in a clean and socially responsible way that contributes to sustainable development, without neglecting the requirement to exchange necessary goods between people.”

I doubt if pure sail will ever recapture a significant portion of the world ocean transportation industry, but it may well thrive in some niche markets, serving people who want to buy products which are defined as “green” or “sustainable” and who may also enjoy the association with the romance of sail.

Sail-assist technologies for powered vessels, on the other hand, may have a significant role to play, particularly if oil prices continue to climb and if environmental restrictions mandate the replacement of bunker fuel with the more-expensive distillates.

Here’s a report on the test on the SkySails system on the multipurpose cargo ship Michael A. Note the interesting comparison of the tractive force from the sail with the thrust from an Airbus A318 turbine engine.

CMTV item via Checks with Chart.

Watching the News: Saying the Obvious

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The difference between a politician and a statesman is the breadth of their horizons.   But have we ever seen people with horizons as limited as our modern Congress?   Of course their ratings are low we return their judgment of us.   They think we have no sense of deferred gratification; they think we are children and not very bright, not very disciplined children at that.   We return the compliment.

 

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