Not saying that we shouldn't look for alternative fuels, but to present the other side of "peak oil"

http://www.prisonplanet.com/archives/peak_oil/index.htm

19,900 miles and (slowly) counting

I think it's sad that people are conned into believing hydrogen is a viable alternative fuel. If large amounts of people were to use electrolysis to make hydrogen, where would that energy come from? The power grid? I don't think so. You are talking about using the chemical energy in coal to produce electricity to electroylze water into hydrogen and oxygen, with losses at every step.

For those who want more information on peak oil in general, i suggest getting a DVD from www.endofsuburbia.com

Jeff

Bless you for speaking the truth about the Hydrogen Economy Hoax. In Minnesota we just spent 10 million dollars on a study to convert wind energy to hydrogen and pipe it several hundred miles to to Minneapolis. Can you imagine the low efficiency and huge cost associated with that boondoogle? At the same time we have 14 megawatts of retired FIRM CAPACITY hydro power going to waste in Minneapolis. Its been deemed more important to watch the water go over the dam than to use the renewable power.

This is my first post after being a lurker for about a month. Also, forgive me if it runs on a bit, it is an occupational hazard of being an academic with a background in the subject.

One aspect of the issue that I haven't seen mentioned in the thread is that even as long-term supply diminishes, it will be poorly relfected in the price of gasoline & other petrol fuels. The Rocky Mountain Institute did a wonderfully thorough study of the relationship between gasoline prices & long-term supply and demand, finding no correlation. They had a wonderful graph that looked like a kid had just scribbled with a pencil in a back & forth & up & down in a loose ball.

We get taught in introductory economics classes that supply and demand determing market price, and hopefully that there are a few distortions that can modify this relationship (e.g., less-than-fully competitive markets, government regulation, and if you had a good teacher, the failure of the market price to include certain costs in the price of the transaction). We then are lead by implication to accept that markets are largely self regulating through a rational, natural working of the invisible hand. The problem (well, one of the bigger problems), is that what you are taught is a snapshot of short-term supply and demand. The real supply & demand situation is substantially more complex, with a shrot-term, several intermediate-term, and long-term supply and demand situations co-existing at any one moment. The short-term supply & demand situation is fairly well reflected in the market price (with the appropriate "all else being equal" caveat). The further away from the short-term you go, the more poorly the market price of almost any good or service (only something that is really very scarce being the obvious exception) reflects the supply & demand situation. In order for the market price to effectively reflect the more complex set of supply & demand curves, a human being(s) with strong rational faculties & some training has to be substituted for the supposed natural rationality of the invisible hand of the market.

Neo-classical economics stresses (compared to classical economics) the importance of "getting the prices right" to send the right signals to the parties in a market transaction to inform their choices. The current price of gas does this fairly poorly. While we have state & federal gas taxes (here in the U.S., and generally higher taxes in many other wealthy nations), they represent only a portion of the costs that have been shifted to parties external to the market transaction. These include government subsidies on exploration & development, extraction, and distribution of oil, and the costs to human health, property, and the environment from the production, distribution, and use of petrol fuels. The failure to accurately reflect the long-term supply and demand in the price is an additional externalized costs, this time shifted onto our future selves and future generations. The only way to have these costs more fully reflected in the market price is through governmental action to reduce production and transport subsidies and raise taxes on the fuels. The government can also take steps outside the market transaction to mitigate the disconnect between costs & price, such as eliminating tax subsidies for gas guzzling vehicles (e.g., the behemouth SUV tax subsidy to small business people), putting tax subsidies on relatively efficient & lower-polluting vehicles (e.g., making the tax credits in the U.S. for hybrids not phase out after a company sells 60,000 qualifying vehicles), and using its regulatory power to increase manufacturer fleet fuel efficiency (CAFE standards), to reduce vehicle emissions, and maintaining & enforcing strict standards to limit pollution and waste in the production, refinement, and distribution of petrol fuels.

In other words, if you are waiting for the market to hit a point where gas prices will soar to reflect long-term supply & demand shortages, you will almost certainly be disappointed. It will come only through political action.

Cheers?!

One of the reaons I have had a difficult time believing peak oil will happen very soon (as in, next few year, it may very well happen in the next few decades IMO) is that oil is still so cheap for something that's expected to hit peak output, and see nothing but increasing demand. I would expect the price would go up merely on anticipation of this if all the oil producers knew they had already or were fast approaching a peak in production levels. I do believe it will happen in the next few decades, but not that it has already happened, or will happen in the next 2-3 years as I've read from several sources.

One of the main reasons why oil has gone up recently, rather than staying at about the same (inflation adjusted) price as it did for decades before, is that China is rapidly becoming more industrialized, and demand for oil there is going up. I would expect this incresed demand in China to outpace oil production even if outputs can increase.


While I agree that something like the price of oil-derived fuels won't simply follow a neat curve like you'd see in an introductory microeconomics class, and won't take into account the complicated externality costs involved in production, shipping, pollution etc. associated with oil, if hundreds of millions of "new" consumers in China begin to demand oil, and supply peaks, I can't imaging why any oil companies would choose to keep fuel prices as low as they are now. They may not go up directly in proportion to the supply/demand, but they will have to go up a lot at some point.

Bravo dkm! I am currently reading a Wealth of Nations to see what The Man really said for myself. I suspect the invisible hand will not be near as harsh and unforgiving or profit centric as it is distorted to by most references today.

Alden Bowles
2005 Toyota Prius II HSD

You are, of course, correct, although the impact will not be as pronounced for many reasons. First, the growth in China has been regionally fairly limited and not as widespread as the hundreds of millions of new consumers argument assumes. Second, there is a good deal of informed speculation that based on the macroeconomic realities of Chinese development, the exceptionally high growth rates are probably not lasting. Third, we will also be seeing the return to the market of Iraqi oil production (although perhaps not as much as if the country stabilized), which has been significantly below capacity for well over a decade due to the UN embargo, the wars, and now the "unrest"/civil war. Iraq is still one of the largest oil producing countries (at least in potential capacity), but prices have been higher than otherwise for a long time without their full participation in international oil markets.

This is not to say that there will not be some protracted price increases, as many of the major oil producers (not just Iraq) are far from slipping into instability.

As we approach a real crisis in long-term supply & demand (probably still several decades away), the market price will increasingly better reflect long-term supply & demand (it will increasingly look like intermediate-term and eventually short-term demand). Still, it is really difficult to imagine a near-term (decade or two) scenario with the worsening long-term supply & demand situation having much effect on oil prices without policy interventions to force the market price to come to reflect the long-term situation better. Could long-term average prices increase? Sure, some- but this will have as much, or likely more, to do with problems with distribution, regulatory changes to protect health & the environment, or a long-term removal of one of the major producing countries from the market due to political conflict, as it would reflecting our long-run oil outlook. It will be a relatively small portion of the actual impact of the long-run supply & demand situation, not to mention the other externalized costs if the market baring political efforts to force the market price to better reflect true cost & long-term supply & demand. Will it be enough to have a significant effect in a fairly inelastic good like oil? Some, but not nearly enough.

The oil market is rife with market failures and distortions which really require a political response, not holding out for a market-driven change. Believe me, I really hope I'm wrong, I just don't think it is a prudent strategy to bet on it.

Cheers,
Dave

Actually, I'm not talking about using coal. I plan to get an electrolyzer for my house someday, and run it off of solar power. All that's lacking is a slightly more efficient solar system. I know that at this time it takes a large solar array to make enough hydrogen to fuel a car for the equivalent of a tank of Gasoline, but there are people working on more efficient solar arrays.

There are cities with Hydrogen buses right now. Palm Springs, CA runs their buses on Hydrogen, and 1/3 of that hydrogen is made from renewable sources right at the point where the buses get their fuel. The rest comes from compressed natural gas. All on site. How is this a hoax? Where's the coal? Where's the grid? You can go visit the facility and take a tour, or look it up online: http://www.sunline.org/home/index.asp


The whole point about the Hydrogen Economy is that it would be DEcentralized, and require no shipping/piping hundreds of miles at high costs. Also, the "Grid" as we know it would be totally different, with lots of small producers contributing.

Hydrogen is abundant. Sunshine is abundant. Enough solar energy hits the earth in one HOUR to fuel the entire energy needs of the entire population of the world (or, if this is not quite correct, the real numbers are still pretty darn impressive). So if we could harness the sun, and make hydrogen, where's the problem?


Maybe I am caught up in the "Hoax", but it sounds pretty good to me, and Rifkin did a good job explaining all the pros and cons (have you read it?) and I have done plenty of research, so I think I've made an informed decision about believing the hoax, myself. Do pardon me for being optimistic...

--A

Amy

Before I comment on hydrogen and Fool cells I would like to say that I respect any one that understands that we have to do something different than what we are doing. I respect your intentions but have serious reservations about economics of the entire hydrogen scenario.

However, I thought I was going to eat some serious crow when I read your post that there were "buses" using hydrogen in California. Upon reading the link you furnished it appears there are four busses total that run on hydrogen. Thats hardly a significant portion of a fleet. The rest run on Natural gas.

Natural gas for transportation? Aren't we already a net importer of Natural Gas mostly becuse the greens use it so wastefully to produce electricity? So we go from being dependent on foreign natural gas instead of foreign oil? Thats a gain?

Now its no great secret to the rest of the world that California basically doesn't understand real world econmics when it comes to energy. Your great Governor (the one with the fleet of Hummers) was going to make California the Pioneer of the new Hydrogen Economy. Remember when he was going to lead the way and convert one of his Hummers to Hydrogen? Hello reality check.

So how much did that Hydrogen bus cost? The reason the figure wasn't published is because nobody would believe the figure if it was published.
I know that the auto industry has published numbers indicating a given unit of power cost 1000 times more than a comperable unit of power obtained from oil.

The overall efficiency of Solar to hydrogen to prime mover is probably the lowest efficiency number ever recorded for use in personal transportation.

To those that believe in the hydogen hoax I say good luck.

Yes, I realized my error shortly after posting. I originally said 1/3 of the hydrogen was made from renewable and all buses were hydrogen. However, it is only 1/3 of the fleet (or less?) runs on hydrogen, and all of the hydrogen is made from renewable resources. Again, where's the coal and the grid? Those four buses are better than none. And it shows it can be done.

Well, I won't get into a discussion about natural gas for transporation because I don't know anything about natural gas, except that it generally produces less smog. So we'll leave that there.

Hey, don't assume everyone voted for our "great" Governor! There was something about 200 hydrogen fueling stations, but I have not heard much since. Politics probably got in the way. I don't actually know much about where that went.

How much did the first computer cost? Could everyone afford one when they first came out? What are you using to post to this list now? A typewriter?
Yes, the technology is new and still expensive. That doesn't mean it won't be affordable in the future.

Before I comment on that comment, I'd like to know more about it. What, exactly, were they comparing? Were they factoring in all government subsidies? There's SO much more to the cost of oil (as evidenced by this entire thread) than the auto industry likes to admit, so I'm not going to believe their numbers right off the bat.

That's not a fault of hydrogen. Hydrogen is actually very efficient. It's solar that is not very efficient at this time.

Yeah, thanks. With critics like you, we'll need it