Carpe Diem, Economics, Energy and the Environment

Sunday energy links

The renewable energy bubble has burst
1. Washington Times — “Is green energy a fad that has run its course? The investment community seems to think so. RENIXX World, the Renewable Energy Industrial Index of the world’s top green energy companies, hit an all-time low below 146 on November 21, down more than 90 percent from the December 2007 peak (see chart above).”
Predict forecast

2. RigZone - The impressive investment returns in the Eagle Ford Shale in Texas continue to attract investment capital – an expected $28 billion in 2013, according to Wood Mckenzie, which will represent 27% of the total capital expenditures for oil and gas investments in the lower 48 states next year. In terms of overall investment from 2012 through 2015, capital expenditures in the Eagle Ford are expected to surpass the projected capital expenditures of the entire Kashagan project in Kazakhstan, the world’s most expensive standalone energy project to date.

3. Matt Ridley encourages the U.K. to follow America’s lead and “get fracking”:

“Cheap energy is the surest way to encourage economic growth. It was cheap coal that fueled the Industrial Revolution, enabling British workers with steam-driven machinery to be far more productive than their competitors in Asia and Europe in the 19th century. The discovery, 12 years ago, of how to use pressurized water (with less than 1 percent kitchen-sink chemicals added) to crack shale and release gas has now unleashed an energy revolution almost as far-reaching as the harnessing of Newcastle’s coal.”

“Thanks to the shale gas revolution, the price of natural gas in the US is now one third of the price in Britain. This explains why America’s chemical companies and manufacturing firms are busy “reshoring” their operations from Europe and Asia to states like Pennsylvania, where energy is dirt cheap. America’s energy cost advantage now beats China’s labor cost advantage. In other words, if we do not treat the shale gas revolution as a huge opportunity for Britain, then it will become a dire threat to our economy: if we do not dash for cheap gas, we will lose much of what’s left of our manufacturing to countries that do.”

4. Joel Kotkin on President Obama’s energy dilemma:

“Stronger economic growth remains the only way to solve our nation’s fundamental fiscal problems other than either huge tax hikes or crippling austerity. With America about to join the ranks of major natural-gas exporters and with the nation’s rising oil production reducing imports, the energy boom seems poised to both boost our global competitiveness and drive economic growth well above today’s paltry levels.”

“This puts President Obama in a dilemma. To please his core green constituency, he can strangle the incipient energy-led boom in its cradle through dictates of federal regulators. On the other hand, he can choose to take credit for an economic expansion that could not only improve the lives of millions of middle- and working-class Americans, but also could assure Democratic political dominance for a decade or more.”

“Ultimately the decision on embracing an energy-led growth strategy may well determine whether President Obama can improve middle-class prospects. In the coming months, he will need to choose between pleasing the green purists around him and generating a long boom that would elevate him to Mount Rushmore levels and assure his party’s political dominion for a generation.”

HT: Warren Smith

15 thoughts on “Sunday energy links

  1. Ironically, if output, employment, and oil consumption were back to the 2007 level, the price of oil would be much higher and investment in renewable energy much greater.

    • Not even close. Since crude is dollar denominated like all commodities and the US$ is now near all-time lows, your “analysis” is fatally flawed.

        • You are dead wrong on that one. Like all commodities, crude is dollar denominated. The value of the dollar vis a vis a very broad measure of 100 other currencies, when trade weighted trade and adjusted for inflation, is the lowest its been in HISTORY. ITS NEVER BEEN LOWER. NEVER. Your charts is misleading and it cherry-picks a very narrow and limited currency base.

          What it says is that a dollar today buys less overseas than at almost any time in modern history.

          • MacDaddyWatch, your entire statement is incorrect.

            The U.S. dollar index and the trade weighted dollar index move roughly the same way, like the Dow Industrials and the S&P 500.

            Basically, they’ve been flat for years, because every major economy has been printing more money to get out of this global depression.

            There’s less U.S. demand for foreign goods. So, there’s less foreign production.

            All the major economies are paying more for oil. However, since the U.S. dollar is the world’s reserve currency, our trading partners are also paying more for U.S. Treasury bonds and still need to sell their goods to buy oil.

            Less oil is needed in a global depression (also, conservation, efficiency, alternative fuel, etc. reduce demand). Yet, oil prices remain high, because of fixed supply.

  2. “[Obama] will need to choose between pleasing the green purists around him and generating a long boom that would elevate him to Mount Rushmore levels.”

    So far, he’s spent trillions of additional dollars for trillions of dollars of lost output.

    His solution: The people who actually work need to work harder and pay more taxes.

    This isn’t the Clinton economy:

    http://research.stlouisfed.org/fred2/series/EMRATIO/

    • So far, he’s spent trillions of additional dollars for trillions of dollars of lost output“…

      Hmmm, well pt maybe people are beginning to wake up to the fact that green/renewable energy isn’t the panacea Obama and others are claiming…

      Note the following from the Master Resource blog site about what happened in Michigan:

      Defeating Big-Government Renewables in Michigan (Prop. 3′s “suicide by gluttony”)

      Proposition 3, sponsored by by Michigan Energy-Michigan Jobs (MEMJ), would have forced utilities to produce 25 percent of Michigan’s electricity by 2025 from renewable sources, primarily industrial wind. Despite national backing and a lot of money spent, Michigan voters rejected the “25×25″ measure by a 64–36% margin.

  3. What is missing again is a look at the economics of shale production. We saw the gas hype die off when the projects outside of the core areas could not be self financed and companies had to sell off their leases in order to say in business. I see no reason to expect anything different on the new shale areas unless there is a new technology that could increase yields and lower costs.

  4. Forgive me, but I am a tad less optimistic that this particular bubble has burst. I think the Great Recession set it back, sure, but I don’t think it is gone.

    I am not trying to diminish what you are writing about. These things should be celebrated, and in a normal situation I’d agree with you.

    However, the Green Movement has taken on a religious fervor that probably rivals that of the Crusades. There is a complete disregard for facts. I am not even talking about denying climate change. When one shows charts about falling CO2 per capita emissions, they go nuts trying to deny it.

    Why I say this is a rest rather than a burst is what we saw this past summer: in the midst of the worst drought since the Dust Bowl, the Obama Administration refused to temporarily waive the ethanol requirements. This whole ethanol thing is the modern equivalent of fiddling while Rome burns. The world’s most fertile nation uses its food for (inferior) fuel while the world goes hungry. It’s shameful. But I digress.

    I am optimistic that our technology will keep getting cleaner. Fracking will help.

    But I also fear that more and more money will be poured into inferior technologies once the world economies emerge from this morass and growth quickens.

  5. So, was it the Fed that made the renewable energy sector boom and bust?

    Side note: Apple just announced they are making computers in the USA again. Probably more and more—product cycles shrinking, need new product constantly.

    Need engineers to actually know how to design for manufacturing quickly….

  6. benji-

    i think it was the federal government that drove the renewables bubble and bust. vast subsidies, preferential tax treatment, “stimulus”, and all manner of regulation that made traditional energy more difficult and required the use of things like ethanol are what drove it and even that could not stop economic reality from ultimately winning out.

    where are you getting this notion that it was the fed? (though with rates so low, all equities benefit, so one could argue that they made it easier to form an equity bubble)

    perhaps it’s time for an energy start up that generates power by burning the stock certificates of defunct alt energy companies (and perhaps the hard copies of eco legislation)?

    • perhaps it’s time for an energy start up that generates power by burning the stock certificates of defunct alt energy companies (and perhaps the hard copies of eco legislation)?

      There is precedent for that idea.

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