Future of Oil & Gas

Interesting opinion piece in the NYT by a couple of professors of policy and international affairs. They ask, "Assuming that renewable energy sources continue to make inroads, what does that mean for countries like Russia and Saudi Arabia who produce a lot of fossil fuels?" What it does NOT mean is that they will fade away: their products will be in demand for awhile, though of course the overall demand for them will drop. The authors conclude

1) Price volatility will continue: demand will rise and fall, and that will create winners and losers. Unfortunately Russia and Saudi Arabia can produce fossil fuels really cheaply, so through the ups and downs they are likely to continue to run the show. 

2) As pressure rises on Western companies such as BP and Shell, and those companies begin scaling back their use (and invest more into renewables) that will clear the way for Russia & the Saudis to have even more influence over the market. 

3) At least some amount of fossil fuels will be continue to be relied on for the foreseeable future, and those countries will be the providers. 

"OPEC and its partners will make up a growing share of a shrinking pie, giving them outsize influence until demand falls to much lower levels. The same is likely to be true for the share of Europe’s natural gas that comes from Russia, which is the lowest-cost supplier to the continent."

Followup, 2/2/22, from the boss himself: "'We have an OPEC+ agreement, and I have to honor my colleagues and my friends,' Saudi oil minister Prince Abdulaziz bin Salman told S&P Global Platts in January at a conference in Dubai."

Dairy wasteland

An interesting conundrum: in this Tweet, this Professor takes issues with a giant Chinese project that turns desert into a giant dairy yard. While advocates (linked in the tweet) talk about all of the positive environmental consequences, Prof. Hayek concludes the reverse, that it will have a huge and overwhelmingly negative impact on the environment.

While the particulars are different, California is more or less the same thing: they irrigated some tremendously fertile soil... that happens to be in a desert... and now it's really productive land. The California central valley averages 5-20 inches of rainfall a year in different parts, but uses that water (heavily supplemented by pumping out aquifers) to produce $17 billion worth of over 250 crops. 

As a fairly random aside, a large share of the world's supply of almonds is among these crops. Estimates for 2021 show that California was on track to produce over 3 billion pounds, On the other hand, the rest of the world's entire production capacity was about a tenth of that. See FAO and OWID for bits of data.

Coal is still kickin'

Strangely, the topic sentence for the article appears at the end of the seventh paragraph. :P "Despite its rapid decline, coal still generates about 20 percent of the nation’s electricity and has strong political backing in pockets of the country."

"[state's attorney Ladd] Erickson described Coal Creek Station as a “critical piece of national security infrastructure,” because it provides reliable power at a time of growing strain on the electricity grid.

Erickson also described himself as a “big believer” in climate change and said these anti-renewable ordinances would be temporary. He added that he has been meeting regularly with wind-power developers and working on revised rules so they can operate in this part of North Dakota once the power plant’s sale is final. But the prospect that wind energy would replace the area’s lignite industry wasn’t acceptable, he said.

“If the wind turbines were the one to replace the plant, that wasn’t something we wanted,” he said. “Our miners are very important.”

Welcome to 2022!

I teach my Resource Econ class in the spring, and when that happens my eyes are opened to the resource Econ issues all around me, including things I see on Reddit, Twitter, in the news, etc. Here are a few.

1) Twitter thread on the health impacts of gas stoves. Burning gas produces NO2 which contributes to asthma, particularly among children; electric stoves are cleaner. Of course, there are many other relevant issues, from the emissions associated with the extraction of natural gas to the % of coal that still keeps the lights on for many of us.... [Update Jan 27: a recent study has found that homes with stoves create lots of methane, contributing to climate change as well as the health issues.]

2) It turns out that to cut your carbon footprint by half, all you need to do is give up beef! If you eat chicken instead of beef, that cuts your emissions by 48%, or so says this link. Vox.com chimes in noting that over a billion chickens a year are wasted; they are raised but end up in the landfill. Ouch.

3) And as antidote to the tendency to assume the world depends on your dietary choices, here's a reminder of the role of giant systems. To preserve gate access at some airport, Lufthansa airlines recently made 18,000 flights... that were EMPTY. Basically no passengers or cargo: just keeping up appearances in hopes of future profit. 

4) While we're on the subject of externalities, just saw this tax being imposed in Quebec. If you don't get vaccinated, you will have to pay a fee. (!)

5) Someone else who is paying fees is Bayer (formerly known as Monsanto). The cost of lawsuits associated with the herbicide RoundUp is adding up, and they are taking their product off the market for home use. Interestingly, the RoundUp-Ready GMO is still so ultraprofitable both for the company and for agricultural producers that they don't seem worried about related lawsuits.

That's all for now!