Predicting the Future in Energy Policy — Thanks to Survey Respondents
My thanks to everyone who has participated in the recent 2GreenEnergy survey. I note that Dr. David Doty, one of the greatest intellects I’ve ever run across, boldly predicted the following for the coming five years:
Oil, coal, and gas will steadily become more expensive at a mean rate of ~20%/year. EVs will have negligible impact on oil usage – for decades.
Global economic growth will still continue at a rate of ~2%/yr, and inflation in the U.S. will remain low.
The gap between the rich and the poor will continue to widen. It will take 10-12 more years of this before something close to revolution (major rioting) comes to the U.S. We will not see another period of sustained strong growth in the U.S. until several years after that happens.
We will not see serious and effective commitment to reduced CO2 emissions until after we’ve seen several years of strong economic growth.
Much of what you’ve written here is so counter to most people’s thinking — not to say that this means it’s wrong. 20% CAGR? That’s doubling every 3.5 years. By “mean rate,” I presume you suggest an average across the three fuels, as well as their price points across the next five years.
Personally, I don’t see anything right now that would tend to make natural gas or coal climb in price. The anti-fracking sentiment here doesn’t seem to be gaining too much momentum, and you can still walk through Wyoming and trip over lumps of coal. I agree about oil, though I believe the oil companies will manipulate the price, and the American sheep-consumer, as long as that’s what’s required to keep us from looking elsewhere for transportation.
I’m even more interested in what you wrote about social chaos. As I’m sure you know, you’re not alone in predicting this. But you must be aware of our fastest growing industry: criminal justice. While even college graduates are having the devil’s own time finding work, one segment’s booming – it’s spending a mint in advertising, and creating a whole new subject in which college students can major, like you and I majored in physics, English, history, or whatever. That’s law enforcement. Enjoy a rewarding career putting those lawless protesters where they belong: behind bars!
Sorry to joke about such a lethally serious subject, but I’m not too bullish on the efficacy of civil disobedience here in the US.
But I do agree with what you write at the end: as long as Americans feel a pinch in their wallets, there will be precious little interest in CO2 emissions. It’s far too easy for the demagogues to convince voters that environmental responsibility means a sluggish economy and that the adoption of an energy policy that embraces renewables will result in job loss.
Again, my thanks to Dr. Doty and to all the others who have responded so far. “Tell your friends,” as they say.
Craig,
A quick note in defense of my father’s predictions regarding the price of energy:
The three fossil fuels are elastically linked – there’s just a lag between one significantly effecting the other. Natural gas and oil use the same drilling rigs. For most of the past three decades, there has consistently been a ratio of ~2:1 of natural gas rigs to oil rigs… as the natural gas wells exhausted themselves more quickly and more wells needed to be drilled, while the price of oil was low and yielded far less profit for the prospective driller. In 2000, for instance, there was ~1300 active rigs drilling for natural gas, while there was only ~600 rigs drilling for oil.
As oil prices have skyrocketed, while natural gas prices have plummetted, the economics have reversed, and in the last three years there has been a rapid shift in new drilling. Last week showed 1372 rigs drilling for oil, and only 598 rigs drilling for gas, with another ~15 rigs or so switching from gas to oil last week alone. Natural gas will begin increasing in price as soon as the current overly large wells start losing production, as there will not be nearly enough new wells to replace them.
Oil and natural gas are closely coupled in demand in the U.S., as price drops in natural gas lead to decreased coal usage and vice versa. During the last three years of low natural gas costs, the usage of coal has plummetted in the U.S. at a far faster rate than anyone could have projected.
But the COST of coal is far closer linked to the price of oil than it is to demand pressures. When U.S. demand is down, we simply produce the same amount and sell more oversees. One of the three highest costs of coal production is the consumption of diesel (the other two being insurance costs and land destruction).. so there is a natural ramp in the cost to supply coal as oil increases in price.
Simply looking at the NYMEX front-month contracts over the last few years shows this clearly: In June of 2008, the front-month contract for a short ton of Appalachian coal peaked at over $140. In 2009, it averaged under $50, then averaged almost $60/ton in 2010, and ~$75 in 2011. In 2012, the warm winter cause such a tremendous crash in the price of natural gas that demand pressure is influencing the price of coal, and the price is lower… but there is no doubt that by this time next year (as excess natural gas inventories are depleted) the balance will be restored and the price of that contract will likely exceed $90.
It’s complicated, but in the end all three fossil fuels overlap in what they provide for society, which means that the market will eliminate extreme imbalances rather quickly.
As for the riots and the continued disintegration of our society – that depends on the course of the next few election cycles. Demographics are shifting, and the republican party will likely render itself irrelevant within the next 8 years. Without the republicans, I do not believe much of the dire social changes my father foresees will come to pass.
I see. That’s fascinating. Thanks very much.