Forget Property prices - the real elephant in the room is Energy

Hi Folks

I've been thinking for a good few weeks now about kicking off a debate on Energy - its funny , over the last couple of months of so I've found the topic jumping up in front of me with increasing regularity , be it a documentary on the journey of a barrel of oil from the north sea to the market , a Primetime report on Irelands energy policy (or lack of) , newspapers articles on global warming , oil prices, a paperback on " the end of the oil " casually picked in an airport transit lounge shop to while away a longhaul flight ,totting up the total amount I've spend on fuel surcharges sending freight around the world this past year (scary - me Financial Controller is still on medication after seeing that one!) etc etc etc.

I guess what Im trying to say , to use that well worn cliche about money not being the most important thing in life, but its a close second to oxygen - I think we'll be categorising energy up there with it very soon - how we generate it, how we transport it , how much we are willing to pay for it and how much we are willing to alter/compromise our environment to have it. No ne the less I've yet to hear much real discussion on the "Street" about an issue I believe is going to fundamentally change our world , particularly our financial and economic world over the next 40 -50 years or so

I realise that this topic is vast – trust me I’ve been ruminating for the last few days on how exactly to approach it because energy use touches damn near every single aspect of our lives, particularly here in the more hi tech modern world. This being a Financial site and the fact that Im posting in the Great Financial debates forum I would like to concentrate on the economic implications as opposed to the environmental concerns , though having said that I believe the latter to be just as valid in an economic sense (if you don’t believe me just wait until next year when the irish government will have to face the European commission on our progress towards the Kyoto emission targets and will have to report that we collectively on this little island of ours have blasted straight through them with the speed and care of a boyracer on mind altering substances and watch the Commission hit us all with large and quite substantial fines for doing so).

Therefore – I will throw up a few opening posers to kick this off

1)Oil
Are we paying a fair price – will it increase or decrease going to the future?
What factors do you think will determine this – have we reached peak oil yet? If we have that means there is only 50% left – and bear in mind over 90% of that has been consumed by less than 14% of the worlds population – other 85% are looking to get on the same lifestyle bandwagon over the next 50 years – Do you think the Arabs will bother selling us any with all these new customers after the West’s carry on in their part of the world over the last century or so?
Should I be investing in Oil stocks? Oil companies? Do you think that "peak oil" is a load of complete bull and there are oceans of undiscovered blackgold lying out there?

Implications for Ireland?

property – will I be able to drive from Longford to Dublin and not have to wait for my next paycheck to be able to drive back?
Electricity and Gas prices will increasing by 20-30% in the coming months - a blip or a sign of things to come? what effect will this have on consumer spending and employment - particualarly as the current plan of a high tech future will be reliant on a plentiful supply of cheap reliable energy.

Transportation - will I get a boarding pass or a can of red bull when Im checking in at the airport in 30 years time? - will air still be a viable means of transportation for the masses or is it time to seriously consider building that tunnel link to the UK?


2)Coal and Gas
They say that there is enough coal to power the world for the next couple of centuries
So can I afford to sit down to a nice coal fire for the rest of my natural life without the nagging doubt in the back of my mind that I’ll be condemning my grand and great grandchildren to a sunless sky and carbon eating algae burgers for their nutrition?
Is it a good time to invest in technology designed to minimise the emissions and produce “clean coal”? technology that will convert and extract gas from coal – will it be cost effective and profitable without drawing excessive carbon taxes? Should I be looking at buying a few disused coal mines down in Castlecomer? – will there be any money in the storage and disposal of such waste? Carbon emission trading – its started in Europe – will this be the way to go for the whole world in the future?

3) renewables

Are renewables the way to go – or just an expensive unreliable sop to the Green Lobby? Windmills , solar panels , tidal energy , geothermal , large scale gov spending or small scale so everybody can become an energy consumer and producer? Is this a serious runner and the answer to Irelands energy needs – will the energy sector be further privatised and the grid modernised so that anybody can sell their surplus energy on to national market place? Anybody know of any hot start ups or green stocks or are willing to take a punt on fuel cells and the like – the next ballard maybe?
Are biofuels the way to go? – We have 2 redundant sugar refineries with most of the gear there already to start this sitting there should the gov make us of these and are we willing to subsidise the launch of this – or will we take the easy option and build apartments on them?

3)Nuclear –(hope I spelt that right – I could feel a touch of the Dubya’s coming on there)

Will we finally have to bite the bullet and go for McWilliams current mot du jour? – Is it a realistic runner? Has the technology improved that much ? Will it be a feasible proposition? Will the nimby’s have any other choice if the we don’t want blackouts at teatime every day?

Nuclear Fusion – a realistic proposition in the next 50 years? – 100 years ? ever?

Barely a few of the thoughts I’ve been looking at over the past while – It is a vast subject but I believe the most important one facing us at this moment in time – It will have massive implications for every aspect of financial activity in this country and the globe – yet is barely discussed in day to day conversation

I would welcome any thoughts , ideas,predictions or experiences or tips on any of the above or any aspect which you feel should be addressed under the heading , keeping ,of course ,within AAM’s posting guidelines and rules.

I will come back and give my two cents on various parts that interest me (hope I won’t be talking to myself tho – then again there would be nothing new in that!)

Later

EDO

I'd like to know what the story is with Gas, more specifically "Irelands" Gas, e.g. What benefit is the benefit to the exchequer for each therm brought ashore and I'm not interested in jobs on site. This relates to the bigger picture above because further discoveries are possible and if we do have susbtantial reserves of Gas offshore how does it bode for us if their is a benefit to the exchequer, could ireland become a manufacturing base for energy intensive industries if we had cheap electricity?

An excellent website is www.lifeaftertheoilcrash.net
and peak oil.
Just type it into your search engine.
I don t know how to do links_sorry.
Honestly the site above is fantastic and has many interesting links and should answer most peoples questions.
Ignore the book ads_just concentrate on the main article.
The basic premise is that peak oil is either now ,or very close and that we are looking at depletng oil supplies at a time of increasing consumption.
Alternatives just won t provide enough energy.
Transportation fuel seems to be irreplacable except by derivatives of fossil fuels such as electricity or biodiesel produced by oil intensive agriculture or hydrogen formed by electrolysis which is energy intensive.
Why one may ask are we doing very little?
Simple. We or our leaders aren t concerned about the future in 10, 20 or 50 years down the road.
We pretend that technology or whatever will solve the problem.
Personally i think humans will use up the remaining fossil fuels and will only go to sustainable methods when no other option is left.
It might be a bit like life in 1910 with computers.
As for gas on the west coast of ireland fueling energy intensive industries i think this is highly unlikely.

This really is pub talk, bit here’s my few cents worth.
The average price for oil since WWII is about 25 USD a barrel. Oil has increased before to higher prices than now, e.g. at the Iranian revolution and the Iran Iraq war in 1981, and between 1973 and 1985 oil was above average. But despite those increases and the current one the average price (inflation adjusted) is still the same. While the economy did suffer from the oil shock in the 70s, by the 80s, under the wise guidance of the two greatest post-WWII leaders – Margaret Thatcher and Ronald Reagan - the economy boomed even though oil prices were above average for most of that period. It’s public policy, entrepreneurship, deregulation, privatisation and new ways of working and creating wealth like the dot com boom that determine prosperity and not oil prices. Increased oil prices may put up the cost of running your car but not should not damage overall prosperity – if we just continue to do what Maggie and Ronnie did.
Investing in oil company stocks makes sense, as these really are energy companies that operate on very long time lines, so the oil majors are also the major players in solar energy, ‘clean coal’, etc. If they can’t make money in oil they’ll make it in something else that is related, in which they can use their skills and experience.
Electricity in Ireland is expensive because the regulator rigs the market in favour of the ESB. It’s a monopoly supplier to the consumer. Electricity is cheaper everywhere else. We’re just being ripped off.
As for coal there’s a ludicrous amount of it around. The Chinese intend to open 544 new coal-burning stations over the next 25 years. http://news.bbc.co.uk/2/hi/programmes/newsnight/4330469.stm. So forget about adopting a ‘low carbon’ lifestyle. The Chinese are going for broke on this one. (And they haven’t touched their oil reserves yet).
Renewables are largely a joke and most windmills will never ‘save’ the amount of CO2 that went into their manufacture. But as the EU intends to rig the market by forcing a certain % of energy to be generated by renewables, there’s probably a few bob to be made by investing in such companies with well defined business plans.
Nuclear is clearly the best, clean, cheap when up and running, no C02, etc. but it is expensive to develop nuclear plants. The real risk for investors here is that the Saudis may cut the price of oil to say 5 USD a barrel thus rendering void any investment in nuclear power. So, unless the state provides guarantees I can’t see such investment in nuclear power by the private sector. (Although the UK appears to be making all the right noises in this area, e.g. http://www.timesonline.co.uk/article/0,,8164-2351724.html)

[broken link removed]

I have a copy of the above book. Now, granted, Feasta is an organisation with an agenda. But some of the papers in the book make interesting reading.

It can be read for free on the Feasta website

http://www.feasta.org/documents/wells/contents.html?sitemap.html

I agree with PMU on one point. Whether oil runs out or runs on forever, the oil companies are a good long term investment. If oil starts to run out it gets expensive and oil companies make big profits. If it keeps running, they supply the fuel for a growing global economy. I'm finding it hard to think of a way to lose money on oil companies!

One useless little factoid, prompted by something PMU said - I think ExxonMobil is one oil company with no investment in alternative energy. I'm open to correction on this.

[FONT=&quot]Sarsfield: I don't want to be accused of 'pumping' certain oil companies but a quick web search will show the oil majors (well the obvious two) are also major providers if not the major providers of solar, bio fuels, and hydrogen technologies. I don't know about the other company you mentioned. So we really have to look at these as energy providers and not 'oil' companies. So I’d say these are long-term investments. If they are not flogging oil they’ll flog some other energy source. So they’ll be around for long time. I'd also look at distribution companies (not here but in the UK). It’s a big market, and regardless of how it's made someone has to pump energy to your house.[/FONT]

I don't think you should dismiss renewables as a joke without references. I installed a geothermal heat pump last year and am very impressed with both the quality of the heat and the running cost (about the same as running a large fridge). Admittedly the installation costs were significantly higher than an oil or gas system, but I expect to make it back. What's the joke, exactly?

By the way if an oil company is starting to get into alternative energy markets that's actually a good sign - it means the oil company is recognizing they are the energy business rather than just the oil business. And if they are investing in alternative energy it suggests there is no "fad" here. Unless you think these guys don't know what they're doing.

Surely the major oil companies have the biggest stake in all this?
I'm of the opinion that they will be the ones who develop the new technologies (fuel cells etc).
It's in their own interests to maintain control of energy production and the easiest way to do that once the oil has run out is to be the main players in the new fuel technology.

[broken link removed]

http://www.fuelcells.org/

Of course if these guys turn out to be right......
http://www.steorn.net/frontpage/default.aspx

extopia said:

I don't think you should dismiss renewables as a joke without references. I installed a geothermal heat pump last year and am very impressed with both the quality of the heat and the running cost (about the same as running a large fridge). Admittedly the installation costs were significantly higher than an oil or gas system, but I expect to make it back. What's the joke, exactly?

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I don't disagree with you on the running costs but I don't understand why you don't just buy the coal and have a coal fire to heat your house. Surely that's much better for the environment than letting the ESB burn the fossil fuel to give you the electricity to run your heat pump. I'd be shocked if it was more efficient. Fair enough if it's 'clean' electricity, but otherwise while economical it's not necessarily good for the environment.

My thoughts:

Generally I think the energy debate is simplified excessively. People seem to think you can't be for Wind Energy and for Nuclear. That's what I am, I'm for all types. Regardless of the cost of energy etc, it's reasonable to assume that going forward we are going to need more and more full stop. Hence I think it's important we generate as much as possible, so I'd like to see us have wind, nuclear & clean coal. I don't believe in the economics of solar power myself. Tidal has too much impact on the environment and Hydroelectric is already everywhere you can pretty much put it.

Wind Energy annoys me for the most part. It's just not feasible to get all your energy from wind but some people/groups want you to believe that it is.

I hope i'm not being too cynical here but, do we really trust our current government with nuclear power? I know its supposed to be more modernised and safer nowadays etc but i'm really not sure about who i'd like looking after something as potentially potent as this. Guy on Newstalk this morning was saying that Sellafield is actually an old cold war establishment that was adapted for nuclear power generation (or words to that effect) and that a new modern station is almost risk free. Still, where on this island could you put it? Just look at Mayo and the current gas problem. Imagine telling those people you're putting a nuclear site round the corner.

elefantfresh said:

Still, where on this island could you put it? Just look at Mayo and the current gas problem. Imagine telling those people you're putting a nuclear site round the corner.

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That would probably be the biggest problem alright but a neat solution could be to get the UK to build one in the North. Let them get all the flak from the locals and then eventually when NI becomes part of the Republic (as demographics dictate it will) - hey presto, we've our own reactor!

Investing in energy companies of various kinds is all very well,but this is different from our future energy supplies and/or needs.
First if you accept that oil and gas are finite resoures,then we are depleting that resoure and oil will become increasingly expensive.
Just because the price goes up , it doesn t mean the supply will increase.
In the last few years oil companies made record profits, even and as a result of tight supplies and big demand.
So even as their reserves declined ,their profits increased.
We are looking at constantly increasing energy prices into the future , barring recessions which can reduce demand.
China burning its coal reserves is going to be bad_imagine the pollution and the effects on global warming and climate change.
China has no oil reserves yet to be exploited_thats why they are going to burn coal and importing oil from around the world.
Renewables should imo be encouraged in ireland.
As a nation we are against nuclear.
I think this opposition would evaporate after a cold winters week without electicity!
In the meantime we might as well use up all the oil and fossil fuels we need,if its the cheapest option.

daveirl said:

People seem to think you can't be for Wind Energy and for Nuclear.

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Indeed. It seems we've learnt nothing from our over-reliance on oil. Diversification is probably the most sensible course of action, however costs may mitigate against that once one particular source win the race to become feasible and economically viable.

daveirl said:

I don't disagree with you on the running costs but I don't understand why you don't just buy the coal and have a coal fire to heat your house. Surely that's much better for the environment than letting the ESB burn the fossil fuel to give you the electricity to run your heat pump. I'd be shocked if it was more efficient. Fair enough if it's 'clean' electricity, but otherwise while economical it's not necessarily good for the environment.

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Problem with that is that you still need a pump behind the coal-fire to heat your radiators.... which is powered by the ESB.

conor_mc said:

Problem with that is that you still need a pump behind the coal-fire to heat your radiators.... which is powered by the ESB.

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Agreeds, sorry my real point is that people have these things and they make out that they are environmentally friendly when they aren't necessarily.

Just a pet peeve. It's the same with a lot of things, people don't necessarily look at the big picture. i.e. I'd be pretty sure locally grown food that's not necessarily organic is better than organic food that's imported from thousands of kilometers away.

daveirl said:

Agreeds, sorry my real point is that people have these things and they make out that they are environmentally friendly when they aren't necessarily.

Just a pet peeve. It's the same with a lot of things, people don't necessarily look at the big picture. i.e. I'd be pretty sure locally grown food that's not necessarily organic is better than organic food that's imported from thousands of kilometers away.

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Aye, fair point. Heard the head of SIMI on the radio the other day telling us how new cars only produce 20% of the carbon emissions of 10-yr old cars, so govt should do another scrappage scheme to tidy up our roads.... which misses the point that driving a 10-yr old car for 10 years probably produces less carbon emissions than building the new car does!

conor_mc said:

Aye, fair point. Heard the head of SIMI on the radio the other day telling us how new cars only produce 20% of the carbon emissions of 10-yr old cars, so govt should do another scrappage scheme to tidy up our roads.... which misses the point that driving a 10-yr old car for 10 years probably produces less carbon emissions than building the new car does!

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Is that conjecture really a valid reason to continue driving the less efficient car? What's the solution then? For them to find a less energy intensive way of manufacturing cars?

AnnR,

Should we all just run out and buy new cars every year because the motor dealers' association tells us it is environmentally friendly? Or should we make up our own minds?

Its very hard to know who is being the most energy efficient , in many decisions one makes.
Buy a new car that used a lot of energy in manufacture, or keep the old one though less fuel efficient, is just one example.
I applaud people who try to conserve energy, but it is difficult to see what difference its going to make in the grand scheme of things, when the majority of people and countries are using energy as if they don t care.
And how many people are using aeroplanes, using vast amount of fuel?
A lot of this conservation is cosmetic.