Posts Tagged ‘Renewable energy’

file6071284660910We are not good at learning the lessons of the past. Alas, we are not so good at learning the lessons of the recent past. Take the oil price and the way the markets are failing to grasp that there is a thing called a cycle.

This is the theory. When the oil price is high, at first we just carrying on demanding it as before. Economists say that oil demand is price inelastic. But over time, things change. For one thing, when the oil price is high we see masses of investment into finding new sources of oil. For another thing, we change our habits.

So in the 1970s, for example, the US government imposed a speed limit on the roads, so that less petrol was consumed.  In recent years, people have been saving money by opting for more fuel efficient cars, putting solar panels on roofs, insulating lofts, while the likes of Elon Musk promote the electric car and battery bandwagon.

At the same time, we see innovation on the supply side, and we get oil from the Alberta tar sands, and shale gas and oil.

But always, the markets, and even the wise people at the top of business, fail to spot it. Oil is going to be expensive forever, we are running out of it, we are told. “We are at peak oil.”

But things change. Even the rise of China failed to have the impact on the oil price that had been expected, for the simple reason that China made very inefficient use of energy. As it grew, it became more efficient in its use of energy, and its demand did not rise at the pace that had been expected.

So the oil cycle turned, and the oil price collapsed. That is how the market cycle works. Always we seem to forget, and say this time it is for good.

Now the International Energy Agency has warned that Middle East oil producers, such as Saudi Arabia and Iraq have their highest share of world oil markets since the 1970s.

At the same time, the imperative of energy efficiency slowly seems to be in the process of being forgotten. According to the FT, sales of sports utility cars have risen such that sales of these cars now exceed ordinary cars by two and half times. Our habits are changing; we are slowly adjusting to cheaper oil.

Investment into new energy resources has been cut, less money is being spent on oil exploration. Shell maintains its dividend, and invests less in the future, less for the day when oil price starts to rise.

That is why the oil cycle will turn again. And why I suspect that the oil price will surge over $100 before this decade is out.

Now gaze even further into the future. I wonder whether the next turn in the cycle may be the last upwards one. The slump in the oil price has delayed alternatives but that is all it has done.  The internet of things will create unprecedented efficiency. Solar power is becoming ever more efficient. Battery technology is advancing, nano technology may even make it possible for us to create synthetic oil.

The oil cycle will turn upwards within a few years, and then a few years later it will turn down, but then it may not turn anymore.

This article originally appeared at Fresh Business Thinking:


Did you read the one about wind farms that can only produce enough electricity to make a few cups of tea? What a scandal! Why do we need these cursed wind farms? Yet take another look, and it turns out that actually wind farms are growing in importance all the time. The problem is not so much with wind energy; it is the way in which it is portrayed.

The ‘Telegraph’ ran the expose, and its report was widely cited across the Twittersphere. To use the nerdy jargon, it trended. “Some of Britain’s biggest wind farms are at times producing only enough electricity to make a few cups of tea,” stated the ‘Telegraph’ article.

It turns out that official government data has drawn the shocking conclusion that wind farms are not very productive when there is no wind. Here is some more news for you, hot off the press: it is much hotter during the summer. Is that a story? Of course not, to use the jargon, it is somewhat obvious.

So why then run an entire article saying that wind farms don’t do much when the wind is quiet?

But then you might as well ask: why it is that some politicians appear to find it impossible to utter the words wind farm without prefixing them with the word ghastly?

Stuck near the bottom of the ‘Telegraph’ piece, Maf Smith — a spokesperson for RenewableUK — said: “We hit a new record in March, when we generated enough electricity from wind at one point to power four in ten British homes.”

To be fair, the stat saying wind energy powered 40 per cent of British homes is about as meaningless as the one that says at other times it hardly generated wind at all. Presumably this point in March occurred when it wind conditions were optimum and probably in the middle of the night when electricity usage was minimal.

A more interesting quote from the same Maf Smith said: “Government figures show that in 2012 , more than 11 per cent of the UK’s electricity came from renewable sources, with wind providing the lion’s share.”

What we are lacking in the UK is any sense of objectivity. David Cameron jumps on the fracking bandwagon – maybe he is right, but frankly there is no evidence to support the pro or anti lobby yet, so why support it so wholeheartedly at this point?

What we lack in the debate about UK energy be it renewables, shale gas, algae, synthetic energy, or whatever, is any attempt at objectivity.

In fairness, the greens are just as bad as the oil lobby. Bear this in mind, however. According to James Martin in his book ‘The meaning of the 21st century’, the world’s reserves of oil, not counting the undiscovered ones, have a value of about 60 trillion UK dollars. You could say there is an awful lot of money at stake in this one, and the last thing those who hope to make money from these 40 trillion worth of oil reserves want is for us to find a cheaper, and inexhaustible alternative. The last thing they want is an objective debate based on evidence.

© Investment & Business News 2013