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Guest Post: Dangerous Ideas

Tyler Durden's picture




 

Submitted by Chris Martenson

Dangerous Ideas

We are at a key turning moment in history. The actions that we will soon decide to take will be determined by the beliefs we hold. At a time like this, holding the wrong set of beliefs can destroy your wealth, sap your joy, and even prove to be life-shortening.

Knowing the 'right' sets of beliefs to hold is never easy, but it is especially difficult at large turning points because, by definition, most people are holding onto old beliefs. Running against the crowd is difficult for everyone and impossible for many.

“If you think you can or think you cannot, you are correct.” 

~ Henry Ford

Beliefs matter. A lot. 

One’s experiences in life and one’s beliefs are closely connected, an idea that we explore in depth in our seminars. (The next ones are coming up in March and June). For instance, simply believing in the likelihood of success vastly improves the chances of good things happening to us and our accomplishing difficult tasks. 

Whether it is the case that our beliefs help to shape reality, or merely how we experience it, is a distinction without a difference. 

The tricky part is that our beliefs are usually hidden from us. Without conscious examination, they escape notice: lurking, shaping, and coloring our daily lives. Worse, beliefs quite often are not ‘ours’ in the sense that we create them by our individual thoughts and experiences. Instead, they are gifted to us by our society, culture, and media. Of course, when such beliefs are cynically shaped by those wishing to influence us (advertisers and big media come to mind), ‘gifted’ might not be the appropriate word.

Two very obvious efforts at shaping beliefs are currently being run in the US by various parties wishing to shape our collective beliefs to their liking. One is around the ‘necessity’ and desirability of going to war with Iran. The second, which we will examine closely in this report, concerns Peak Oil.

Whether or not Peak Oil is true cannot possibly be in doubt. Within anything other than a geological frame of time, oil is a finite substance. When it is burned, it is gone. Without stretching our brains very far, it is easy to conclude that anything that is finite and consumed will someday be gone. 

Peak Oil, then, is really an observation, not a theory.

It draws upon and has at its disposal decades of experience with individual oil fields, producing basins, and entire countries all repetitively experiencing the exact same behavior: Oil production increases up to a point, and then it decreases afterwards. This is not theory; it is a related set of facts and careful observations.

It's odd that so many people will trust a psychiatrist to administer psychoactive drugs, about which so little is actually known, yet distrust Peak Oil, an idea about which so much is definitively known. As you can see, I am of the opinion that for some people, information (or data) and beliefs have an awkward relationship at best, and a non-existent one at worst. 

The only aspect of Peak Oil that is theory is the precise moment at which the world will experience its final peak in flow rates. When the peak will happen is a theory; Peak Oil itself is not. Because of this, it is flow rates that we care most about, which constitute a description of quantity. But we need to also concern ourselves with the net energy returned from the oil we expend effort to obtain, which is a matter of the quality of the oil.  

Those are the two "Q's" that matter. Quantity and quality.

Given all this, note the headlines of the next two linked articles that recently appeared in the news media. Ask yourself, What sorts of beliefs are they reinforcing? And which ones they are minimizing, if not attacking?

The End of the Peak Oil Theory

Feb 16, 2012

If you haven't noticed, the oil apocalypse has been delayed -- again -- and the doomsday predictors are undoubtedly eating crow while they concoct another mega disaster. "Peak oil," the theory that oil production will soon hit a peak and begin declining, sending the world into an economic disaster, failed to live up to its hype again.

It's amazing how fast perceptions of our energy future can change. One day prevailing wisdom tells us that energy costs are going to rise uncontrollably as oil production declines and new energy sources fail to live up to their promise. The next, our problems are solved, and our reliance on foreign oil appears to be evaporating before our eyes.

(Source)

Citigroup Says Peak Oil Is Dead

Feb 17, 2012

Citigroup announced to the world Thursday that peak oil is dead. The controversial idea that world crude oil production is almost at its peak and will soon begin an irrevocable long-term decline has been laid to rest in the highly productive shale oil formations of North Dakota, with potentially big consequences for oil prices, the bank said.

“The belief that global oil production has peaked, or is on the cusp of doing so, has helped to fuel oil’s more than decade-long rally,” Citigroup said in a note to clients. “This is now all changing because of what is happening in North Dakota,” where new technology has led to a large and unexpected surge in oil production from shale rock.

After decades of decline, “U.S. oil production is now on the rise, entirely because of shale oil production,” said Citigroup. Shale oil could add almost 3.5 million barrels a day to US oil production between 2010 and 2022 and has already slashed 1 million barrels a day from U.S. oil imports. One day it may allow the U.S. and Canada to be self-sufficient in oil, it said.

(Source)

Obviously the idea of Peak Oil as a concept is directly under attack in these articles, but there are a host of underlying beliefs in play as well. One concerns the ability of the US (once again) to become self-sufficient in oil by applying a bit of good old-fashioned ingenuity and a healthy slathering of high technology.

Another seems to be the belief that we might not have to change our ways after all; that the energy will be there in sufficient quantity (and quality!) to support an indefinite continuation of past consumption and growth far into the future.  Don't worry, be happy is the message.

Avoiding Propaganda

The definition of propaganda is "a form of communication that is aimed at influencing the attitude of a community towards some cause or position." It usually involves the selective use of facts or the avoidance of appropriate context, coupled with loaded messages and words, in order to elicit an emotional rather than rational response.

Whether the goal is to lead an otherwise unwilling populace towards war or to drive the purchase of a new car, propaganda is not only alive and well, but getting steadily better. Consider it a technology; like any technology, it is constantly being refined using the latest and greatest research, studies, and testing.

If you'd like to parse the articles further, go back and re-read them, looking for 'shaping' words that create impressions and are designed to elicit confidence, exude authority, or in other ways bypass the reader's own critical thought processes. Examples of such words and phrases would be 'controversial,' 'concoct,' and 'laid to rest.' These are not neutral words, but heavily biased ones, and we are so surrounded by them in what otherwise appear to be (and should be, ideally) informational articles that they often escape notice. 

The emotions being evoked possibly include: feeling silly for holding the wrong ideas (a form of social shame), anger (at being grievously misled by those nasty "Peak Oilers"), and elation ("Yay! No changes necessary!"). 

These same sorts of emotional devices are constantly at work in the fields of finance, politics, investing, and advertising. Propaganda is a means to an end, and some argue that it can be beneficial if it moves us towards a better future and/or outcome. 

But the risk here is that we are faced with propaganda that is sending the exact wrong messages at a very critical time.

What Could Possibly Go Wrong?

For a moment, let's accept the emotional premise of the above articles and shape our decisions around the idea that Peak Oil has been debunked and is a failed concept. What would change? 

For starters, we can drop our concerns about the implications of steadily rising energy prices. Instead of buying smaller cars, more efficient homes, and placing our investments in those sectors that will prove resilient to higher energy costs, we can just go back to ignoring energy costs as a factor, content with knowing that they will be going down, not up.

Next, we can dispense with any concerns we might have had about how we will grow the economy going forward. Because you need energy -- especially oil -- to grow an economy, we can wholeheartedly invest in the stock market, confident that growth will once again emerge as it always has, unchanged and unfettered. 10% real, annualized returns are coming back!

The relief at being able to count on the future resembling the past, only bigger and presumably better, is palpable and seductive. 

The only problem here is, what if that view of the future is wrong? Then what?

Everything. 

All your plans for happiness, safety, wealth, and comfort go right out the window.

And the odd part is that adjusting to the idea of Peak Oil when it can nudge you towards using less energy more efficiently is just good business and good wealth preservation practice under any circumstances, with high oil prices or low. It really makes no sense to internalize any messages that seek to belittle Peak Oil. In fact, it makes sense to spot them and reject them as rapidly as possible. The risks are just too asymmetrical

Is Peak Oil Really Dead?

Okay, now it's time for a little data to put the above claims of Peak Oil being dead into proper context. In Part II of this report we'll examine the data more closely, but for now this chart from the US Department of Energy should suffice to show where we are in terms of the US oil production story.

Yes, the Bakken could produce as much as 2 million barrels per day (bpd) up from roughly 500 thousand bpd, maybe as much as 3 million bpd, but the US imports roughly 8 million bpd today under even severe economic conditions, and as much as 10 million bpd under happier economic conditions. 

The Bakken and other shale plays are simply not going to replace all of that -- ever. Note, too, the slope of the line before the 'Bakken bump,' and observe that whatever gains are realized from shale oil will be fighting depletion losses from the rest of the tired fields under production.

And the Bakken will someday peak, too, and then where will we be? In the same place as before, wondering where we are going to get our next fix.

A Better Narrative

I would not mind the excitement over the Bakken as much as I do if it came along with a suitable narrative that made sense. Something along the lines of, "The Bakken is very exciting because it offers us the chance to use domestic supply to begin to move away from our national oil dependence and towards a more sustainable energy future, one where we are not shackled to the need for endless production increases to fuel exponential economic growth. This transition will even make our monetary system much more healthy and robust."

But it is never packaged that way. Instead the message is always something like, "Don't worry, be happy (and just get back to whatever it is you do, and be sure to shop a lot)!"

At the very least, the Bakken should be telling the authors of the above articles and positions something quite different than what they are relating. For one thing, the amount of technology and constant expertise involved in squeezing the oil out of the formation clearly tells us that the easy, cheap oil is gone.

The complexity is on display if one just bothers to look. Here's a prime example relating to new attempts to squeeze more oil out of the tight shale formation:

While PetroBakken is bullish on dry natural gas injection, the company isn't ruling out the possibility of injecting water-or other fluids-for future projects in other areas of the Bakken.

PetroBakken is using the pilots to test different concepts or well configurations. For example, in the second pilot-which will inject natural gas at a rate of about two million cubic feet per day-gas will be injected along the entire horizontal section of the injection well, so the flood front will hit the toe of each of four perpendicular producing wells.

"As gas breaks through at the toe of each well, we have the ability to simply plug off the toe area of the producing horizontal well and mitigate the cycling of the gas at that port," LaPrade explains.

"The front would continue to move along the horizontal producing leg to the next port, where we would again plug that port off as the gas breaks through."

Typical wells in the Bakken come in at an average 200 barrels of oil per day and decline about 70-75 per cent in the first year before flattening out at 30-40 barrels per day.

(Source)

I think this is incredible ingenuity, and I admire the creativity and engineering on display. But all of this effort to fight the natural tendency of a Bakken well to produce at 30-40 bpd clearly is not the same thing as chunking a vertical well a thousand feet down and getting 1,000 to 10,000 bpd flow rates. The cost to produce a unit of energy is much higher in the Bakken case than in traditional, historical oil plays.  

That is, net energy is lower than in the past, which cycles us back to the quality argument. The difference between cheap and expensive oil is important and clearly on display here, but that subtlety has somehow eluded the authors of the above articles.

Conclusion

Efforts are underway to convince the general populace that our energy concerns are a thing of the past and that the new energy discoveries in the Bakken and other shale formations have proven Peak Oil to be a mistaken idea. Some efforts go even further and flatly state that energy independence is right around the corner.

Nothing could be further from the truth. 

There is a very clear relationship between economic growth and sufficient quantities of high quality energy. A crude measure of energy quality is its price. The lower the price for a unit of energy, the higher its quality (or net energy), but this is a very crude measure that can and often is heavily distorted by subsidies, market pressures, and other factors. As we squint at the world price for oil and note that Brent today is trading at $120 per barrel, it is clear that this high price is signaling that energy is now more expensive than it used to be.

By adopting the belief that Peak Oil has been debunked, one runs the risk of missing the larger story that our current economic model is unsustainable. And that stocks and bonds and other traditional investments that derive a large portion of their current value from expectations of future growth simply may not perform anything like they have in the past. And worse, that recent and continuing efforts to revive the old economy by printing money risk the destruction of the money system itself. 

Given this all-too-human tendency to attempt to preserve the status quo, in this case by printing money, I must reiterate my advice to be sure that gold forms a significant portion of your core portfolio.   

In Part II: Preparing for a Future Defined by Peak Oil, we do the math to show that even using the rosiest estimates, there is no way for the Bakken field to get the US anywhere close to "energy independence" nor stave off the arriving society-changing impact of Peak Oil. 

If that's the case, then what's to be done?

Now, more than ever, is the time to develop a full understanding of what the arrival of Peak Oil will do to world economies, financial investments like stocks and bonds, and our energy-indulgent way of living. As I have been writing for some time now, the next twenty years are certain to be quite different from the past twenty. Use the time you have now to invest in the pursuits -- and there are many -- that will reduce your vulnerability to the effects of rising energy costs, and learn that prosperity in such a future is possible if we lay the groundwork for it now.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

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Wed, 02/22/2012 - 12:20 | 2185040 francis_sawyer
francis_sawyer's picture

Peak "easy street' bitchez!

Wed, 02/22/2012 - 12:23 | 2185052 Roy Bush
Roy Bush's picture

Here's a dangerous idea:

http://www.youtube.com/watch?v=4kZotftLE0A

 

Wed, 02/22/2012 - 12:45 | 2185102 LawsofPhysics
LawsofPhysics's picture

Defining what oil "is" is NOT the problem fucknut.  I worked for a company that engineered bacteria to make oil from various sugars (See LS9 INC).  It is the required FLUX of oil that is required in order to maintain things as they are.  Moreover, it is the capital and ENERGY that needs to be invested relative to the return on that investment (in real terms or BTUs, calories etc.)  If the net energy that is recovered from any process is less than what has to be invested, then the process is no longer profitable.  Wake the fuck up dude.

 

By the way, if you think the cost associated with engineering bacteria to produce oil is low, you are a moron.  Moreover, the cost associated with growing the plants and refining the input sugars is also high.  I don't normally pimp for a company, but LS9's website is worth a look.

here;s the link (for the completely moronic Bob Jones or Liberty University graduate)

 

http://www.ls9.com/

Wed, 02/22/2012 - 12:46 | 2185144 Offtheradar
Offtheradar's picture

Oil typically gushes out of the ground.  We are now literally trying to "squeeze the sponge" (see Canadian tar sands) to just keep up.  Not good.

Wed, 02/22/2012 - 12:53 | 2185165 Roy Bush
Roy Bush's picture

what a load of rubbish...we're going to run all the cars and trucks and heat all our houses with bacteria?! ha ha ha.  That sounds almost as preposterious of GW's idea that we are going to harvest switchgrass. 

The fact of the matter is that there is quite a lot of oil out there....because it primarily comes from the center of the earth.  Yes, oil can also be derived from decaying plant matter, however, oil sands, oil shale and deep-sea drilling will always be around. 

As for the "fuck nut" comment...you sound a little hateful.  I was just throwing an interesting point out to all the ZH readers. Also, I agree with the author in that the world is running out of the easy and cheap "light sweet crude".  A lot of people in this world are going to have to get used to living with more expensive oil or the scientists out there are going to have to come up with some better and more efficient way to power the world.

Wed, 02/22/2012 - 12:57 | 2185184 Flakmeister
Flakmeister's picture

There are no shortage of morons here at the Hedge that think we can run the world on sugar fed-algae....

I'll give you a hint, LoP ain't one one of them...

So, I gather that you ascribe to the Abiotic theory of oil generation... How is the evidence for that theory coming along?

Wed, 02/22/2012 - 13:05 | 2185218 Roy Bush
Roy Bush's picture

Pretty good me thinks...I think the Deep Water Horizon mess pretty much proves it.  What was the depth of that well?  35k feet or something?  Whether or not abiotic oil has enough time to regenerate itself within the total lifespan of mankind is really the question..and I think the answer is no, especially with the population we currently have on this planet.

Wed, 02/22/2012 - 13:11 | 2185241 LawsofPhysics
LawsofPhysics's picture

LOL!!!  Go to B.P.'s website.  The depth of the well was approaching 14,000 feet so you are a bit off.  Moreover this isn't even halfway through the fucking crust, so you still have a LONG way to go in terms of the fucking "center of the earth".

But you got one thing correct, living standards will decline.

Wed, 02/22/2012 - 13:17 | 2185268 Roy Bush
Roy Bush's picture

I think you're wrong on this one....35,050 was the depth.  The deepest well in history in the Tiber oil field off the coast of Texas.

And yes, living standard will decline or some new technology will have to be developed.

Wed, 02/22/2012 - 13:28 | 2185321 LawsofPhysics
LawsofPhysics's picture

Okay, let's assume that B.P. is lying (wouldn't be that unusual).  The earth's crust is 31-40 miles thick, or an average of 192,000 feet.  Again you are not even half-way through.  Man I hope you don't invest using such "qualtiy" information.  details do matter.

Wed, 02/22/2012 - 13:41 | 2185384 Roy Bush
Roy Bush's picture

Is that what you say to yourself to fall asleep at night. Wow. "Details do matter"..."Details do matter"...zzzzzzz

I don't know what you're arguing about.  It's not like I'm saying you can put an oil well over a volcano.  It's a little bit more complex than that. 

Wed, 02/22/2012 - 13:57 | 2185455 Flakmeister
Flakmeister's picture

So, at what depth was the DWH again???

You might want to study this for a while

http://www.halliburton.com/public/solutions/contents/Deep_Water/related_docs/GOM_DWMap.pdf

Wed, 02/22/2012 - 14:06 | 2185502 Buzz Fuzzel
Buzz Fuzzel's picture

Where does it all come from?  What would you think if there was another celestial body in our solar system largely made of hydrocarbons?  When exactly did titan have dinosaurs roaming its surface?

http://en.wikipedia.org/wiki/Lakes_of_Titan

If hydrocarbons occur on other planets in the universe without evidence of life processes forming them is it possible that God is laughing at all of us.  Is it possible that there is a larger plan in play than even the most self assured among us can fathom?

 

Wed, 02/22/2012 - 14:30 | 2185602 donsluck
donsluck's picture

None of this matters. The limits of the hydrocarbon economy is environmental degradation, not consumption. Oil and shale oil in particular are not compatible with life, not even our life.

Wed, 02/22/2012 - 14:35 | 2185620 Flakmeister
Flakmeister's picture

Lets play a little game....

What would happen to a methane "lake" on the earth ~1 billion years ago, even in the absence of oxygen?

Do you know?

I'll give you a two hints

1/2 m <v>2 = 3/2 kT and ve2 = 2GM/r

Get back to me when you catch on....

Wed, 02/22/2012 - 15:01 | 2185740 flyme
flyme's picture

Tapping a Methane "lake" = bad news.

Wed, 02/22/2012 - 15:09 | 2185781 GreenPlease
GreenPlease's picture

The methane "lake" wouldn't be a "lake". It would be our atmosphere. Unlike Titan, temperatures here on earth are too high (and pressures are too low) to maintain methane in its liquid form.  

So, unless there was an oranism that existed 1billion years ago that somehow defied the laws of thermodynamics and had a metabolic pathway that allowed for the conversion of methane to heavier chain hydrocarbon while freeing energy for itself.... or maybe there was a rather prolific organism that somehow replicated FT processes yet science has managed to miss this organism?

Let's not forget that if oil is buried ~>15,000 feet it starts to spontaneously decompose into lighter and lighter hydrocarbons until, eventually, all that's left is methane. The only exceptions to this are wells drilled under water (at which point you use the ocean floor as your starting depth) and oil deposits that are located under geological formations with unusually high thermal conductivity such as the Tupi field in Brazil at which point 18,000 feet is about the limit to how deep oil can exist. 

Abiotic oil = dead theory

Wed, 02/22/2012 - 15:28 | 2185883 snowball777
snowball777's picture

Paging Goddard...

Wed, 02/22/2012 - 16:53 | 2186261 Buzz Fuzzel
Buzz Fuzzel's picture

Lets talk about the rules of the game. . .

"We should take care not to make the intellect our god; it has, of course, powerful muscles, but no personality."  Albert Einstein

"Whoever undertakes to set himself up as a judge of Truth and Knowledge is shipwrecked by the laughter of the Gods."  Albert Einstein

"My religion consists of a humble admiration of the illimitable superior spirit who reveals himself in the slight details we are able to perceive with our frail and feeble mind."  Albert Einstein

"When the solution is simple, God is answering."  Albert Einstein

Get back to me when you catch on....

Wed, 02/22/2012 - 17:02 | 2186290 Flakmeister
Flakmeister's picture

Relying on quotes from Einstein...

Classic DK....

Did you figure out what I was hinting at?

You might want to look at the effects of UV on methane as well... 

Wed, 02/22/2012 - 20:11 | 2187099 Buzz Fuzzel
Buzz Fuzzel's picture

DK?  Perhaps you need to read quote #2 again.  Are you prepared to learn that what you know is not so?  The solution really is quite simple.  Classic DK indeed.

Wed, 02/22/2012 - 20:57 | 2187251 Flakmeister
Flakmeister's picture

BTW, you do know what DK means...do you?

Thu, 02/23/2012 - 02:26 | 2188015 Buzz Fuzzel
Buzz Fuzzel's picture

You seem to be bothered by the lack of certainty.  Not knowing troubles you doesn't it?

For someone who projects scientific certitude you seem remarkably incurious about the thoughts of one of history's greatest scientific minds.  Perhaps you should review those quotes again.  "God is answering"

 

Thu, 02/23/2012 - 11:02 | 2188882 Flakmeister
Flakmeister's picture

Yep....

That's why I own a first edition of "The Meaning of Relativity"

 

Wed, 02/22/2012 - 20:10 | 2187094 New World Chaos
New World Chaos's picture

The methane would escape to space.  In the absence of oxygen, UV rays would strip hydrogen off the methane and the hydrogen would escape to space very quickly, while the carbon forms more complex molecules which ultimately end up on the surface.  This is what happened on Titan. 

If there are large amounts of oil in the mantle left over from the Earth's formation, the rate of bubbling up into the crust should reach equilibrium with the rate of bubbling up onto the surface.  You can debunk abiotic oil as a sustainable energy source simply by realizing that there were never enough La Brea Tar Pits around the world to supply our energy habit.  Whatever comes up from the mantle must be a trickle at best.

Wed, 02/22/2012 - 15:22 | 2185847 Whats that smell
Whats that smell's picture

Certainly  the earth has a creamy nougat center of low-sulfer light crude oil!

God ain't laughing but I am at you.

Wed, 02/22/2012 - 14:16 | 2185547 Matt
Matt's picture

35,000 feet is the depth counting the water on top, plus the distance they drilled thru sedimentary rock. What is sedimentary rock made of? Are you proposing Abiotic Limestone?

The Russians allegedly have drilled down deeper than that, thru igneous rock, where no organic materials were. If that is true, then the oil could have been created abiotically; however, that does not matter.

If it takes 100 million years to produce an oil field containing 50 billion barrels of oil, then it is irrelevant in human time spans. The rate of production of new oil is all that matters when determing what the PEAK of PEAK oil is.

Keep in mind the PEAK of a mountain is the top, not the bottom; no one is talking about running out of oil completely, simply about hitting a maximum level of production, then having declining production from there.

Wed, 02/22/2012 - 15:26 | 2185871 aphlaque_duck
aphlaque_duck's picture

Correct there is still oil post-peak, even quite a lot of oil, but that doesn't mean a steady decline in activity according to the volume of oil produced. Extraction costs are getting really high (diminishing EROI), such that many applications for oil (like ferrying meat bags in 3000lb cars back and forth to their "jobs") would be simply insane to spend any oil on in the future.

Most importantly all assets which have any element of growth expectation priced into them will lose that value.

This is why post-peak is truly a diferent paradigm and not merely "less of the same". Would you invest in a business that is certain to be smaller in the future? As soon as people figure out what is happening they will ALL pile in to traditional money. It's going to be epic.

Wed, 02/22/2012 - 13:33 | 2185339 oddjob
oddjob's picture

In what world do you trust anything that BP says?

Wed, 02/22/2012 - 13:36 | 2185364 LawsofPhysics
LawsofPhysics's picture

not much, but most of the time they do like to stretch the truth on how far they can drill.  You know that "mine is bigger than yours" thing.

Wed, 02/22/2012 - 13:16 | 2185262 Flakmeister
Flakmeister's picture

Umm... The DWH proves it?? One blowout  does it for you?

Why arent we drilling down like that on solid ground??? It would be lot cheaper and easier....

Have you ever looked at a cross section of the GOM geology?

Here, try to reconcile this data with your theory:

Deep Drilling Summary

Wed, 02/22/2012 - 13:13 | 2185248 LawsofPhysics
LawsofPhysics's picture

Hey Falk, Algea make their OWN sugars (photosynthesis), again details do matter.  Ah back to work.

Wed, 02/22/2012 - 13:26 | 2185306 Flakmeister
Flakmeister's picture

This was from a discussion on Solazyme from a guy I know...

AS part of my job I have to evaluate bio-feedstocks for petrochemical production and biofuels. I would be very, very cautious about the europoria over Solazyme. It simply does not add up.

Feeding algae sugar or carbohydrates is not a panacea. Some very simple maths will demonstrate the folly of this so called approach.

Using sucrose as the feed (a hexose sugar) the yield of algae oil could be estimated as follows:

Hexose (C6H12O6) -> 2 Ethanol 2(C2H6O) + 2CO2
MW 180 46 44
Weight 100 51.1 48.9
Energy 17 MJ/Kg 29 MJ/Kg

I have chosen this route as it would be similar to what would be needed to feed the algae i.e the sugar would have to be metabilised.

The above yeild is the theoretical yeild to ethanol. The ethanol would have to be dehydrated. The dehydration of ethanol would yield ethylene which is effectively the Ch2 repeating unit of fuel hydrocarbons.

Ethanol (C2H6O) -> Ethylene (C2H4) + H2O
MW 46 28 18
Weight 100 60.8 39.2
Energy 29MJ/Kg 48 MJ/Kg

The algae oil would be roughly repeating Ch2 units with a fatty acid group and some olefinic bonds. Converting the ethylene units into this structure would invove a further reduction in mass, as the algae would metabilise some of the hydrocarbon to survive as respiration. Thus the yield on algae would be even lower than

1 x 0.51 x 0.608 = 0.31. Theoretical maximum.

A realistic yield, allowing for losses and matabilism would be about 0.2 of the starting weight.

So 1 kg of sugar might produce 0.2 Kg of algae oil which would have to be further refined. The algae oil would have an energy content similar to biodiesel at about 39 MJ/Kg

Efficiency so far

Sugar 17 MJ/Kg

Algae Oil 39 Mj/Kg

39 x 0.2/ 17 = 45%

But the algae oil is not usable and would need further processing. The best option ( not Kior) would be mild hydrocracking to crack the algae into the jet and diesel range. This might produce about 65% of middle distillates and the rest light material, including CO2. The light material could be used a fuel gas(absolute necessity).

The finshed jet/diesel would have an energy content of about 43MJ/Kg

So 0.2 x 0.65 = ~0.13 Kg finished fuel

0.13Kg x 43 MJ/Kg = 5.59 MJ

5.59/17 = 32.8%

Cost of Sugar $460 pmt

Cost of Jet $980 pmt Dec 2011

Very roughly 8 Kg sugar = 1 Kg Jet

8 x 460 = $3680

Hmm. No wonder it has been slow to take off.

Of course the use of pure sugar would not the the route. Sugar cane juice could be used, but the producer would expect an equivalent net back as if he were producing sugar, ethanol or Solazymes algae. Only the US Navy is s dumb that is ploughing million into this type of crackopot idea.

Solazyme will then shift the question over to cellulosic sugars. Great. The biomass will contain something like 50% sugars but you will have one hell of a job getting them out. So far it has not be done on a commercial scale, only a comical ssale, and is nver likely to be done.

See also

http://www.springerlink.com/content/v167k02668505m67/

Wed, 02/22/2012 - 13:34 | 2185348 LawsofPhysics
LawsofPhysics's picture

Initially algae needed to be supplemented in order to make higher oil levels.  Like most things in the natural world, even algae have a tendency to make only what they need for their own consumption survival (evolution is funny like that).

If you want the algae to do more you have to force them to (requires energy) and give them additional sources of sugar (more energy) to sustain.

The ONLY way this becomes profitable is if you can engineer in the production of some high dollar compounds (like wax-esters) for other commercial applications.  basically, the production of oil alone will never be profitable, but I would invest in companies that sell the enzymes comapanies like Solazyme are using, they are still making money.

Wed, 02/22/2012 - 14:05 | 2185495 Flakmeister
Flakmeister's picture

So we basically agree....

You are better off selling picks and shovels to the Gold Diggers than digging for gold yourself....

Wed, 02/22/2012 - 15:33 | 2185929 snowball777
snowball777's picture

Worst foie ever.

Wed, 02/22/2012 - 17:53 | 2186521 George Orwell
George Orwell's picture

Flakmeister, I would like to thank you for all your comments.  You and few other people like Trav, LawsofPhysics, CrashIsOptimistic, etc are the reason why I read the comments on oil stories.    Keep up the good work!

 

 

Wed, 02/22/2012 - 13:05 | 2185220 LawsofPhysics
LawsofPhysics's picture

You clearly don't know how to read.  For if you could actually read and comprehend you would see that we agree on at least one point.  In particular, that life is about to get hard for many people as the FLUX can not be sustained.

As to LS9, it is a real company that can in no way meet demand, but still a very real company none the less.  Let me spell it out for you again slowly;

First, the technology is bacteria that can convert one form of carbon (sugars) into another (Oil).  Again, no where do I say or do they claim that "we're going to run all the cars and trucks and heat all our houses with bacteria" as you said.  Again you either can not read or can not comprehend.  Details matter. 

Second, there is absolutely no peer-reviewed scientific evidence that oil spews from the "center of the earth".  In fact, most of the peer-reviewed scientific data points to a center that is mostly molten iron that is under tremedous pressure and in a unique magnetic/electronic state that is very fluid and gives rise to the magnetic current/field of the earth itself.

Again, educate yourself, there really are people who dedicate their entire lives to making observations and developing technology to sort this kind of shit out.  Propaganda helps no one.

But I digress, it gets ugly moving forward either way, hedge accordingly.

Wed, 02/22/2012 - 15:25 | 2185860 GreenPlease
GreenPlease's picture

While "flux" is the correct term, you might consider using the word "flow" as most readers would be more likely to understand its meaning.

Wed, 02/22/2012 - 12:57 | 2185182 CH1
CH1's picture

Defining what oil "is" is NOT the problem fucknut.

Ah, yes, everyone who disagrees is a fucknut.... and you have 400 years of experience in every field. 

Next!

Wed, 02/22/2012 - 13:20 | 2185277 LawsofPhysics
LawsofPhysics's picture

...and everything that is written on a website or anywhere is the truth.  Sorry, details matter and my "passion" for details sometimes gets the better of me.

Invest in all things physical and trustworthy friends and family as I anticipate more snake oil salemen than ever moving forward.

Wed, 02/22/2012 - 12:50 | 2185159 kaiserhoff
kaiserhoff's picture

Exactly, oil is not a fossil fuel, and if it were, it wouldn't matter.

How do you make oil?

Take any organic matter: leaves, garbage, international bankers..., put it in a tank, pump out the oxygen and add heat.  In a few hours you will get a substance that looks and smells like diesel fuel, because IT IS DIESEL FUEL.

Wed, 02/22/2012 - 12:58 | 2185190 Flakmeister
Flakmeister's picture

So, I presume that you have such an arrangement in your backyard???

 

Wed, 02/22/2012 - 13:08 | 2185228 kaiserhoff
kaiserhoff's picture

Farmers have done it in the midwest for 45 years, but please don't tell the thought police.

It is smelly, messy, has to be carefully filtered, and I wouldn't use it in a brand new engine you're really proud of, because like everything else, there is a learning curve.  No more or less high tech than making your own hootch.

Wed, 02/22/2012 - 13:23 | 2185288 LawsofPhysics
LawsofPhysics's picture

Flux remains the problem.  Even the best eforts on our properties recovers about 1 % of the energy originally invested.  The BTU out/BTU in and RATE with which you can recover is all that matters.

 

But hey, americans could stand to lose a little weight, so its all good.

Wed, 02/22/2012 - 15:27 | 2185881 GreenPlease
GreenPlease's picture

I've been on a lot of farms in the midwest and I've never seen a farmer with his own pyrolysis rig. BTW, it's not diesel, it's tar. A lot of the hydrogen becomes dissociated. So, unless you recover it or catalytically recombine it with carbon, you'll be left with an extremely heavy hydrocarbon.

Wed, 02/22/2012 - 15:35 | 2185942 snowball777
snowball777's picture

What do you provide the heat with again?

Wed, 02/22/2012 - 15:42 | 2185975 GreenPlease
GreenPlease's picture

Ideally you recover and fully oxidize the carbon monoxide and the pure carbon from prior cycles to provide the heat. One of the problems with pyrolysis is that it is most efficiently done in batches but this leads to low capacity utilization and thus a high capital cost per unit. Fluidized beds have been tried but with little success thus far.

Also, centralized facilities don't make much sense because transporting the biomass takes quite a bit of energy (and thus costs a lot). Small pyrolisis units are needed but, again, this increses the capital intensity.

Wed, 02/22/2012 - 14:13 | 2185528 Rockfish
Rockfish's picture

 

 

"There's a dollar sign behind almost everything."

Wed, 02/22/2012 - 14:35 | 2185622 ian807
ian807's picture

If you mean "dangerously stupid" then you're probably correct. This has been debunked so many times, there's little point in going over it again (Look here if you're interested).

Do NOT follow this link or you will be banned from the site!