Archive for the 'Phaseout Profit Theory' category

How Much For 10 Million Barrels Oil Each Day?

Sep 19 2014 Published by under Phaseout Profit Theory

A group of 347 investors holding assets of $24 trillion has called for introducing world wide “carbon pricing”. They want effective climate policy.

I agree with their position.

But there already is a price on carbon. That is the price the market sets for oil (I am restricting my discussion here to oil, but the same is true for coal, lignite, and gas).

That price is changing all the time. But let’s just set it to $100 a barrel for this post.

That means if these investors started buying 10 million barrels a day, they would need to find $1 billion each day for such an investment fund. With $24,000 billion in their portfolios, that looks quite possible.

So, if they start taking 10 million barrels a day off the market, what would happen to the price of oil? World consumption is estimated to be around 92.4 million barrels a day right now. Taking 10 million barrels a day off the market, equal to about one third of OPEC production and over 10% of demand would bring prices up.

Which would be good news for the investors who bought that oil. They can sell their position with a profit, if they are after short term gains.

Anyway, this just shows that a small amount like $1 billion a day may be enough to get phaseout profit going.

And this could be done tomorrow. If these rich investors want higher prices for oil, all they need to do is buy some.

 

 

 

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Do It Again, OPEC

Sep 17 2014 Published by under Phaseout Profit Theory

OPEC is expected to reduce their production next year from 30 million to 29.5 million barrels a day at their next meeting in November, says Reuters. They cite OPEC Secretary General Abdallah Salem el-Badri for this expectation.

Already the news of a possible reduction in production has sent up oil prices to S99.05, from a previous 26 month low of $96.21. That’s an increase of $2.84.

Multiply with the 1.3 trillion barrels of world wide oil reserves, and we  understand that this announcement of a possible reduction next year made the oil owners richer by $3.692 trillion (the increase in the value of their reserves).

So what would happen if they did that again next year, and then for every year until 2020? Announce that they will reduce production by 500.000 barrels each year from 2015 to 2020.

How many trillions of dollars would the worth of their oil reserves go up with such a simple announcement?

The only way to find out would be to do it.

Again.

 

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Germany Dirtiest Country of the World

That’s not a title to be proud of. I like the World Cup win much better.

Unfortunately, Germany is the largest producer of lignite in the World. I just learned this because I read this blog post by Craig Morris about Germany’s large lignite reserves, and their relation to the transition to renewable energy. Morris points out that Germany might continue producing “cheap” lignite electricity even once it is not needed any more domestically and export it.

Wikipedia explains that Germany has over 14 percent of the World’s lignite reserves and is the World’s largest producer. At least the trend is in the correct direction: Production is down to 169 million tons in 2010, from 388 million in 1980.

I think Germany should greatly reduce production of lignite. The way to do this is easy. All that is needed is to stop granting permits to expropriate citizens’ real estate for these projects, which typically require whole villages to relocate. The only way that can be done under German Constitutional law (Article 14 Paragraph 3) is if the project is necessary for the common welfare (Wohl der Allgemeinheit).

Digging lignite out of the ground and burning it to produce electricity is making global warming worse, since that is the most CO2 intensive way of producing electricity. There is no fuel as dirty as lignite. As such digging it out of the ground is incompatible with the common welfare. Common welfare interests require phasing out the dirtiest energy first. They certainly don’t require expanding lignite mining.

If it is impossible to expropriate real estate owners, companies who want to relocate villages to get at the lignite buried below them will have to pay much higher prices. That in turn will remove the only remaining advantage of this dirty fuel: Price.

Another way to increase the price of lignite would be to reduce production (phaseout profit theory). In contrast to coal, lignite is sold at localized prices, since it doesn’t make sense to transport lignite over long distances. Reduce supply each year by 3 percent (which would result in a reduction around 60 percent over the next 30 years) and watch prices go up. That’s good for the owners of these lignite resources, good for people who else would see their home villages disappear in a big hole, good for future generations (who will have left more of the valuable resource left), and good for the climate.

And all it takes to do that is to stop relocating people and destroying whole villages.

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Book Review: The Collapse of Western Civilization: A View from the Future

By Naomi Oreskes and Eric M. Conway. I bought the Kindle version because of this review by Joe Romm at Climate Progress.

I am not quite sure if this is fiction or not.

The basic premise is that in 2393 Chinese historians look back at how global warming has played out and why humanity was not able to solve the problem as long as that was still possible.

That idea appeals to me, since I wrote a novel about a Princess coming back in a time machine from the 24th Century to warn humanity of how horribly global warming has played out (and to solve the problem in the one week she has left to live as a side effect of time travel). It is called “Last Week”. A FREE PDF file is here.

In contrast, this book has no time machines in its plot. It also doesn’t have a plot, or a story, or main characters, or antagonists. I don’t think it qualifies as a novel.

Instead, it reads like a learned article reflecting on what exactly makes humanity miss the obvious need for drastic countermeasures. Much of it is documented with footnotes. If this is science fiction, it is more science as fiction.

But there is also a strong fictional element. The authors tell us how much degrees of global warming we end up with. And how China dealt with the problem of relocating 250 million people from their coast lines. And many other things in the future, which obviously are impossible to document exactly with a footnote. About one third of the book is speculation about what might happen.

The authors blame something they call the “carbon-combustion complex”, which is a parallel to the “military-industrial complex” term already well known.

They may be correct. If so, it would help to have the “carbon-combustion complex” on the other side, the side of the climate activists. That is easily done. All it takes is to realize that oil companies and other fossil fuel owners would realize massive profits from rising fossil fuel prices, and that of course a fast phase-out of fossil fuel means higher prices (less supply).

I am preaching this all the time on this blog under the name of Phaseout Profit Theory.

 

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Bitcoin Based Cap and Trade

Jul 13 2014 Published by under Bitcoin Law, Phaseout Profit Theory

New video in the Youtube Bitcoin 101 series about a crazy idea to develop a Bitcoin-based global CO2 cap and trade system called Sno Cap.

I just saw this at the Reddit Bitcoin forum. I have no idea if it might work. But just like Bitcoin itself is creating a global currency based only on the power of mathematics, it might just be possible to create a global cap and trade system based on the Bitcoin global public ledger.

Anyway, as someone with a strong interest both in Bitcoin and global warming issues, this obviously deserves some attention.

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$950 Billion Invested in Fossil Fuel Supply Last Year

Jul 11 2014 Published by under Phaseout Profit Theory

Says this article at the Telegraph. Thanks to this Tweet by Jeremy Leggett for the link.

The largest chunk of that is oil and gas exploration. Oil exploration investment has gone up by a factor of three since 2000, but output has only increased by 14 percent.

The Telegraph article worries about these assets becoming “stranded”. They say that global warming considerations may require for most of the oil to stay in the ground, in which case it will become difficult to realize any return on these high investments.

I agree in part.

The oil industry should refrain from increasing their exploration investments in this way. Go back to the $230 billion a year they invested in 2000.

The predictable outcome is that supply will become restrained. That in turn will increase oil prices, which will lead to higher profit margins for the oil industry, as well as higher valuations of their existing reserves. And less CO2 emissions from burning oil.

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Book Review: Icarus Rising

Icarus Rising by Dominic Carney was published in January 2012. I bought this because I read a post by the author in the Facebook “The Cli-Fi writers process forum” group.

In my basic distinction of climate fiction novels, this falls into the first category of my “list of global warming fiction books“, which are those that propose a solution to the problem.

The solution proposed by this book is to release more oxygen, which word for some reason I don’t understand is always spelled capitalized (“Oxygen”) throughout the book. That will dilute the CO2 in the atmosphere and radically reduce the greenhouse effect. The necessary large amount of oxygen will come from an underground lake in the Antarctic, lake Vostok. The main character gets this idea by playing around with a cigar and the concept of using viagra. I was not able to understand that part.

When reading this, the first objection I had was that the author must have made up the part about the lake in Antarctica. How is that supposed to be possible? The whole continent is frozen many times over.

As it turns out, there actually is a “Lake Vostok“, and it is the sixth largest lake on the planet. It seems that there are packets of higher temperature under the ice sheets, or something. Anyway, I was wrong about that being impossible.

I still don’t think that this solution would work. With CO2 now at 0.04 percent of the atmosphere and oxygen at 20.949 percent, there is around 523 times more oxygen than CO2. Increasing the share of oxygen by 10 percent to 23.043 percent would require injection of an amount of oxygen that is over 50 times larger than the whole amount of CO2 in the atmosphere, only one third of which has been released by human activity. The numbers just don’t add up. Even if they would, reducing the share of CO2 in the atmosphere would not remove one single CO2 atom from there. And it is the absolute amount of CO2 and not the market share that is responsible for the greenhouse effect.

I also disagree with the basic idea that it would make much of any difference if such a “solution” gets deployed a couple of weeks or months later. It is just not a realistic scenario to have one clear tipping point for the climate. I understand that one would want such a tipping point when writing a novel. I have one in my own global warming science fiction novel “Tasneem”. But this comes at the cost of leaving the area of credible scenarios.

Early in the novel there is a part where oxygen comes up from the drilling well and somehow causes a fire. I had trouble understanding that. Obviously, oxygen doesn’t burn. Fuel does.

There are a lot of violent fighting scenes in this novel. Some of them seem to be rather lacking in realism. Twice we see characters who have multiple guns pointed at them from short range somehow kill the people pointing the guns. In the second case there is the additional question why the murderers would wake up the main character in the first place instead of just putting a bullet through his head, if that is what they want.

The motivation of the main villain (a leader of a fossil fuel company) was rather interesting for me. That’s because contrary to what one would expect he has his company investing in low carbon energy and is motivated by a desire to suppress voices critical of the scientific consensus on global warming. He doesn’t want his investments in renewable energy go sour.

If so, then there is not much reason to attack the main character, whose warnings make such investments an even more urgent priority.

But this motivation is exactly what I want to have fossil fuel industry leaders in a novel as well as in real life, though for different reasons. The global warming problem is the best thing that could happen to the fossil fuel industry. If Bill McKibben and Greenpeace win and we start strongly reducing the amount of CO2 that can be legally blown in the atmosphere, fossil fuel prices will go way up. I call this idea “phaseout profit theory”, and it is one of the main themes of this blog as well as of my own global warming novels. So yes, it actually makes sense to have a fossil fuel industry leader want to affirm the scientific consensus on global warming.

Update: Carney kindly answers here. He says that indeed, some of the science in the novel does not exactly work out, but that that is not important. He compares it to the Godzilla story. The scientific basis for that does not exist either. And his aim is to get people thinking about geoengineering.

 

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ExxonMobil Report “Energy and Carbon – Managing the Risks”

Apr 29 2014 Published by under Phaseout Profit Theory

ExxonMobil has published that report in March. It discusses their view of the question if they face a risk from climate related regulation.

In the mid-term until 2040, they think that it is “highly unlikely” that governments restrict hydrocarbon production in a way to reduce GHG emissions 80 percent during the Outlook period (page 12).

If true, that would be bad news for the climate. But it would also be bad news for the bottom line of ExxonMobil.

This report gives some interesting figures on the proven reserves of ExxonMobil, the world’s largest oil company. On page 24, they report proven reserves at the end of 2013 of 13.238 billion barrels of oil. That means that for every dollar the price of oil rises, the value ExxonMobil’s reserves rises by over 13 billion dollars.

Their profit in 2013 was only 32.58 billion dollars. Getting oil valuations up by only 5 dollars per barrel would result in a value increase of over 66 billion dollars, or double the 2013 profit, before the first barrel of oil is sold to anyone.

It was always clear to me that an oil company like ExxonMobil would see massive profits if oil prices increase because they scale back production. But these numbers give an idea of how vast those profits would be.

Page 28 reports revenue per barrel of oil as $95.25, and earnings as $17.45. Again, obviously increasing the average price of one barrel of oil by $5 would increase profits, by around $1 per barrel.

Double that average oil price to $190.50 (oil has gone up by a factor of fifty over the last forty years) and ExxonMobil is looking at more than doubling their earnings per unit. And in that case, the value of their reserves would go up by $1260.92 billion dollars.

In the long term, fossil fuel will run out. And before that happens, climate protection regulation will get serious in limiting oil use.

The trick for the oil companies would be to reduce production before they are actually forced to do so, and while price elasticity is low. Produce less, sell at higher prices, get more profit.

And solve climate change as well.

 

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Angel Wins Her Bet

Mar 23 2014 Published by under Last Week, Phaseout Profit Theory

Part 48 of my third global warming science fiction novel “Last Week”. Link to Part 1: “Back To Paradise Era”.

MONDAY, FEBRUARY 21 2023 1:37 P.M.

“I have one thing that would seem to be fun,” Satoshi said. “I want to get it done before you’re gone.”

“What would that be?”

“I want to make you win your bet. Remember? You bet John Baker four bucks that he would stop production at the Canadian tar sands before you die.”

“Yes. But we tried this morning. He’s stubborn.”

“Let’s try again. I have an idea.”

“What idea?”

“You’ll see. Let’s go and visit him once more.”

Satoshi took out his phone and called John Baker’s office. He got another short appointment without problems. John Baker liked talking to the World’s richest man. Especially if there was some major business for Non Standard Oil involved.

“Thank you, Mr. Baker, for receiving us on such short notice. Again.”

“You’re welcome. I’m always happy to talk to Satoshi Nakamoto. And Your Majesty, Princess Angel from the 24th Century.”

“What? Your Majesty? Have you finally seen the light?” Angel said.

“Of course not. I’m just going along with your publicity stunt. Just as a matter of basic courtesy. I understand it will be over tomorrow. This time for good.”

“And there I was thinking that the hypnotic power of the Glaring Glasses had worked on you after all,” Angel said.

“What is it about that hypnotic power? And why doesn’t it work on me?” John Baker seemed rather interested in the topic. He had studied a lot of hypnotic techniques for magic trick applications.

“I don’t know myself exactly,” Satoshi said. “But I can tell you what I do know.”

“Please do so,” John Baker said.

“Let’s start with that unfortunate incident last week. Where you tried to rob Angel of the Glaring Glasses. It didn’t work. As you may recall, that was a very unpleasant experience for you.”

“I sure do recall that,” John Baker said.

“The way this works, the Glaring Glasses are under my control right now. Princess Angel has transferred that root control to me before she was supposed to die last Tuesday. It’s only possible to do if the person transferring control is willingly doing so, you can’t force someone into doing it. Anybody who tries using the Glaring Glasses without authorization will be quickly dissuaded from the idea.”

“I see. And what about the hypnotic force?”

“One of the powers these Glaring Glasses have is getting anybody in sight under hypnotic mind control. But the weird part is, they don’t work on everyone in that mode. They didn’t work on me. They didn’t work on Senator Nutt. And they didn’t work on you. There’s no way I could just put you under mind control. And there’s no way to know if they work or not, short of actually trying.”

“So you don’t know why they don’t work on you? Or me?”

“No. I have no idea. But there is another mode that works all the time, except with the person who has root control. It’s mind reading mode. I would like to try it on you, if you don’t object to the idea.”

“Couldn’t you just do it anyway? Is my consent necessary?” John Baker said.

“I could. I certainly could. But I wouldn’t want to. That would not be appropriate. I need your cooperation for the 24th Century Princess Angel Fund, after all. So, I would like to ask for your kind cooperation. And it’s not a one-sided deal. I had this idea of what I’d like to try. Care to hear about it?” Satoshi said.

“Go ahead,” John Baker said.

“Listen. You go first. You take the Glaring Glasses, and read Princess Angel’s mind. You will find it most interesting. Then it’s my turn. I take them back and read your mind. How about it?”

“I’m not sure I want those Glasses on me ever again,” John Baker said, his face slightly pale.

“It’s safe. You get them with my consent this time. Be advised, though, that that consent is limited to five minutes. You’ll need to give them back before those five minutes run out, or it’s back to the solar cross. I wouldn’t want to give you any funny ideas about trying to keep them,” Satoshi explained.

“I’m not sure,” John Baker said.

“Give it a try,” Angel said. “I don’t mind. This is your one and only chance to read the mind of a 24th Century Princess. Don’t blow it.”

“Okay. Two minutes max. I’ll try it.”

Satoshi handed the Glaring Glasses to John Baker. Satoshi had concealed his eyes under the Glaring Glasses with a veil that allowed him to see through but prevented any security cameras John Baker might have had installed in his office from getting a picture.

Angel sat down right in front of John Baker. He put the Glaring Glasses on.

Instantly, he heard loud rock music playing. Lucky Man, by Emerson Lake and Palmer.

And instantly, he understood that Angel really thought she was a Princess from the 24th Century. She wasn’t lying to him, or to the World.

But he also understood that all of that was an illusion that would end the next day. Angel would wake up as Thusnelda Sneeze, a common girl and clerk in a bookstore.

He couldn’t read anything about the romantic feelings of Angel for Satoshi. That area had been put off limits.

John Baker took the Glaring Glasses off, rather hastily. He didn’t want to risk going over the time limit. He handed them back to Satoshi.

“I am sorry, Your Majesty,” John Baker said. He had decided to go along with the illusion for this last day. That was something he was actually doing on a regular basis when performing magic tricks. “I really am sorry. I now know for a fact that your story was true. You really are Princess Angel from the 24th Century. I am deeply honored to receive your visit today.”

“I forgive you,” Angel said. “It was my fault. I should have done that the first time I came here.”

Satoshi had put the Glaring Glasses back on.

“So, now it’s my turn. You’re ready to go ahead with it?”

“I’m not sure. You’ll be able to see everything I think and feel?”

“I would. But I’m going to restrict access now to everything you think and feel about your business. I’m not interested in your private life.”

“Okay. Let’s do this,” John Baker said.

Satoshi activated the Glaring Glasses and looked into John Baker’s mind.

First off, he saw three things.

One giant dollar sign.

Another giant dollar sign.

And yet another giant dollar sign.

Satoshi concluded that John Baker was interested in making money, and in nothing else.

Then, somewhat in the background, he saw some interest in magic, especially in hypnotic effects, and a lot of experience in using them to his advantage in business negotiations.

Satoshi deactivated the Glaring Glasses.

“Thank you. Here is what I saw. Nothing of it is really news to me, but for the record, I saw three giant dollar signs. I understand you have some interest in making money, which makes sense for someone in your position.”

“Did you see anything about his thoughts on the Canadian tar sands?” Angel asked.

“Actually, no,” Satoshi said.

“I can tell you my thoughts on that,” John Baker said. “They haven’t changed. I’m not going to stop production there.”

“Of course you won’t. You would lose four dollars in your bet with Princess Angel,” Satoshi said, grinning.

“I see,” Angel said. “I lost. I brought four dollar bills. Here you are.”

She took four dollar bills out of her pocket.

“Wait a minute,” Satoshi said. “You might still win.”

“I don’t think so,” John Baker said.

“This bet doesn’t say how long you need to stop production. What if you just announce now that you will stop production for exactly one day tomorrow, in honor of Princess Angel’s death?”

“Why should I do that?”

“Well, for one, I would like to see Angel win this last bet. It doesn’t mean much in the big picture, but it would be a nice thing to do for her on her last day. Don’t you agree? But there’s another side to it.”

“I see. I probably could go along with that. What’s that other side?”

“You could see how the markets react to your announcement. We have already seen some reactions to our own announcements related to the 24th Century Princess Angel Fund.”

“Yes. I have seen that. Oil is already up in price by twelve dollars over last week, even though you haven’t bought the first barrel yet with your new multi-trillion dollar fund. People are starting to figure your activities into their market analysis,” John Baker said.

“What does that price increase of twelve dollars mean for your profits? Do you think they might go up because of it?”

“Of course they’re going to go up. We’re in the business of selling oil. We like high prices.”

“Listen. Announce a one-day production stop at the Canadian tar sands right now. Look what that will do to the oil price and your profits. I think they will go up by at least another four dollars. You’ll be able to pay Angel, and then some.” Satoshi grinned again.

“I see. You have me cornered. I must admit it. Let’s try that little experiment. Congratulations. You got yourself a one-day production stop at the Canadian tar sands. And I’m going to announce it officially as in honor of Princess Angel, the valiant girl from the 24th Century that gave her life to warn us about the dangers of the Moros 27 asteroid. If it really gets prices up, I might even make it a regular holiday each year.”

John Baker ordered his assistant to prepare a short announcement. Then he took out his wallet, slowly counted out four dollars, and handed them over to Angel.

“Congratulations, Your Majesty. You win your bet. I wish you the best for the last day of your life.”

Link to part 49: Last Week’s End

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Elon Musk on 100% Renewable

Mar 20 2014 Published by under Phaseout Profit Theory

It is of course correct that eventually all energy will be renewable, and the only question is how fast that happens. Fossil fuel will run out eventually.

It is also correct (in my opinion) that we should rather not gamble with the amount of CO2 that can be safely released.

The way to speed that transition up is to make fossil fuels more expensive. The way to make that happen is to mine it at a slower pace, and to keep larger reserves. As it happens, such a course of action would be highly profitable for everyone who owns fossil fuel reserves.

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