To­day I learned things that I think ev­ery en­vi­ron­men­tal­ist and in­vest­ment man­ag­er should know: A co­her­ent ar­gu­ment that we are more or less at Peak Oil. Not the Nineties ver­sion, which wor­ried that we might be run­ning out of fos­sil fu­el­s, but rather that glob­al hu­man petroleum de­mand is about at its all-time peak and about to start drift­ing down. Some of the key da­ta points in­volve elec­tric cars, which I care a lot about, and Chi­na, which is al­ways in­ter­est­ing.

The ef­fects are like­ly not enough to avert the on­com­ing global-warming dis­as­ter, but there are grounds for op­ti­mism about re­duc­ing its dev­as­ta­tion. How­ev­er, this will very like­ly tear the guts out of the glob­al petroleum busi­ness.

Tweet thread

What hap­pened was, I ran across an in­ter­est­ing Twit­ter thread start­ing with the bold claim that the in­ter­nal com­bus­tion engine’s fu­ture had been killed and that the com­ing en­er­gy tran­si­tion would pay for it­self. It was com­pelling and I gave it a retweet, not­ing that peo­ple who live in an environmentalist-green bub­ble (for ex­am­ple, me) need to be skep­ti­cal about things that we’d like to be true. And so we should.

But I was in­trigued enough to buy a 105-page PDF called Oil Fall; you can too, for $9, from its au­thor Gre­gor Mac­don­ald. If you care about these sub­ject­s, you should. I sure en­joyed it.

(If you buy it: While you can read it on a Kindle, don’t try, the type’s too smal­l. It might be OK on an iPad. Or you can just pop it open in Pre­view on a Mac or what­ev­er the Win­dows equiv­a­lent is. It’s nice­ly type­set and il­lus­trat­ed; the print isn’t dense and the 105 pages go by fast.)

Oil Fail by Gregor Macdonald

The larg­er sto­ries  —  of the increasingly-threatening specter of cli­mate change, and the grow­ing vi­a­bil­i­ty of re­new­able en­er­gy  —  aren’t new at al­l. But there’s one piece of new news: The shock­ing surge of Elec­tric Ve­hi­cles (here­inafter EVs) in Chi­na in 2018, con­cur­rent with a de­cline in over­all ve­hi­cle sales there. Prob­a­bly 1.2 mil­lion or so EVs were sol­d, surg­ing to com­prise 7% of all sales to­ward the end of the year. Here are a cou­ple of in­struc­tive links: CleanTech­ni­ca and Quartz.­com.

The ar­gu­ment in Oil Fall spends a lot of time on elec­tric cars, since they are at a point of sur­pris­ing­ly high lever­age in the glob­al en­er­gy econ­o­my.

I’m not go­ing to repli­cate the Oil Fall nar­ra­tive, but here’s a quick sort-of out­line.

  1. Los An­ge­les as a case study in EV adop­tion. It’s not the US lead­er (that’d be the Bay Area) but it’s got huge lever­age.

  2. The pol­i­tics and eco­nomics of re­new­able en­er­gy in Cal­i­for­nia and across the US.

  3. The spe­cial lever­age of the EV on the en­er­gy econ­o­my.

  4. The struc­ture of China’s (his­tor­i­cal­ly coal-dominated) en­er­gy econ­o­my.

  5. Why Chi­na is cru­cial to the fu­ture price of fos­sil fu­el

  6. The tim­ing of the peak in glob­al oil de­mand.

  7. Ef­fi­cien­cies and in­ef­fi­cien­cies in fos­sil and re­new­able en­er­gy sources.

  8. The is­sue of en­er­gy stor­age.

  9. Eco­nom­ic cost of tran­si­tion to re­new­ables; es­ti­mates have been around 2% of GDP, but Mac­don­ald thinks it’ll be clos­er to ze­ro, or even neg­a­tive. That’s what Alexan­dria Ocasio-Cortez and the young US pro­gres­sives are ar­gu­ing with their “Green New Deal” pro­pos­al.

  10. Global-warming prospect­s.

On the writ­ing · I don’t know much about Mac­don­ald. His re­sume sounds re­spectable, and I quote: “He has writ­ten for Na­ture, The Economist In­tel­li­gence Unit, The Fi­nan­cial Times of Lon­don, The Har­vard Busi­ness Re­view, At­lantic Media’s Route Fifty, The Petroleum Economist, and Talk­ing Points Me­mo.”

The text is well-supplied with num­bers and sup­port­ing in­fo­graph­ic­s. He is care­ful to ad­dress, for each key point, the ob­jec­tions to his rea­son­ing and al­ter­na­tive sce­nar­ios that arise in the case that he’s wrong. I didn’t check his num­bers ex­haus­tive­ly, but ev­ery one of those that I did try to ver­i­fy checked out.

The style is that of a pro­fes­sion­al jour­nal­ist: Not col­or­ful but ex­treme­ly clear, read­able, and full of named real-world ex­am­ples il­lus­trat­ing his ar­gu­ments.

I’m go­ing to dig a lit­tle deep­er in­to a cou­ple of points that were new to me and res­onat­ed.

On EVs and stor­age · Any­body who’s a renewable-energy fan needs to have thought a lot about en­er­gy stor­age. The sun on­ly shines dur­ing the day­time and some­times even pre­vail­ing winds don’t blow. Mac­don­ald goes deep on the sub­jec­t, and of­fered a pret­ty com­pelling ar­gu­ment that there are plau­si­ble market-driven so­lu­tions to meet stor­age need­s.

One part of the ar­gu­ment in­volves elec­tric cars, and is ob­vi­ous once you think of it. Planet-wide, we are now build­ing mil­lions per year, and ev­ery one is built around a bat­tery rang­ing in ca­pac­i­ty be­tween 20 and 90KWh. Do some mul­ti­pli­ca­tion and you get a damn big energy-storage ca­pa­bil­i­ty, made up of a huge num­ber of independently-owned con­sumer prod­uct­s. They aren’t ter­ri­bly fussy what time of day you charge them, they are network-connected, and man­ag­ing the net­work to charge them when the ca­pac­i­ty is most avail­able feels like a straight­for­ward ap­pli­ca­tion of the sort that I work on ev­ery day.

On EVs and ne­gawatts · That term “negawatt” was coined way back in 1985 by Amory Lovins, one of the orig­i­nal big energy-policy thinker­s. He did the math and showed that the cheap­est way to get more pow­er while do­ing less dam­age was sim­ply to cut waste. And it’s worked: Our hous­es are bet­ter in­su­lat­ed now, our cars get more mileage, and our ap­pli­ances run cool­er and smarter.

But the glob­al energy-efficiency pic­ture is still ter­ri­ble. The whole fossil-combustion ecosys­tem wastes some­thing in the neigh­bor­hood of 50% of the avail­able en­er­gy. It’s not uni­for­m: For ex­am­ple, a mod­ern natural-gas based gen­er­a­tor wastes less. But internal-combustion ve­hi­cles waste a lot more, even to­day the fig­ure is in the 70%-wasted range.

EVs, on the oth­er hand, turn elec­trons in­to kilo­me­ters at an ef­fi­cien­cy well over 90%. Of course, that doesn’t help if you’re us­ing elec­tric­i­ty that was gen­er­at­ed in a fossil-fueled plan­t; but trav­el­ing in a renewable-fed EV is a rich source of ne­gawatts.

To quote Mac­don­ald: “But, the loss is quite a bit worse with ev­ery gal­lon of petrol poured in­to an in­ter­nal com­bus­tion en­gine. In­deed, if your goal was to waste as much en­er­gy as pos­si­ble, you could do no bet­ter than to feed gaso­line in­to a bil­lion ve­hi­cles, each with their own sep­a­rate en­gine, with mul­ti­ple sur­faces from which heat can rise.”

Is oil over? · Of course not, don’t be sil­ly. Every­one agrees that coal is “over” and yet its us­age hasn’t plum­met­ed, it’s just been drift­ing down for a long time, with a tem­po­rary spike as Chi­na in­dus­tri­al­ized. Petroleum re­mains use­ful in a huge num­ber of in­dus­tri­al chem­i­cal pro­cess­es, and in cer­tain par­tic­u­lar­ly energy-intensive trans­porta­tion ap­pli­ca­tion­s, like heavy trucks and prob­a­bly al­most all avi­a­tion. We don’t need to stamp out oil to save the plan­et, just burn less.

My own par­tic­u­lar guess is that nat­u­ral gas is go­ing to be strate­gic. It’s rel­a­tive­ly energy-dense, straight­for­ward to ex­tract and trans­port, and carbon-light; it feels like a good fit for fill­ing in renewable-energy gap­s.

On in­vest­ing · There’s a trend where “ethical investors” try to steer cap­i­tal away from the petroleum in­dus­tries, and I broad­ly ap­prove, most­ly due to fear of cli­mate change. But if Mac­don­ald is right (and he’s pret­ty con­vinc­ing) this is al­so a good way to re­move a ma­jor source of risk from your port­fo­lio.

Don’t say I didn’t warn you.



Contributions

Comment feed for ongoing:Comments feed

From: Tim (but not THE Tim) (Jan 06 2019, at 23:55)

I wonder why he doesn't also make it available as an ebook and in Kindle format? The software to do so can be used for free (Calibre) and the process isn't terribly hard. If I have time this week I believe I will write him and see if he wants someone to do that.

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From: Jamie Thingelstad (Jan 07 2019, at 05:14)

Thank you for sharing this, it sounds interesting. I read a book a few years ago in my book club (https://rwbook.club) that had a similar concept around using the giant fleet of electric cars as a big, distributed battery. I think you may like it as well. It’s also self-published. Called Sustainable Energy without the Hot Air (https://withouthotair.com) by David MacKay. It’s available on the web, but you can buy a printed version which is quite a bit nicer to read.

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From: Norman Walsh (Jan 07 2019, at 05:24)

I assume "Oil Fail" is a humorous take on the paper's title "Oil Fall", but you appear to have italicized "Oil Fail" as if it *was* the title in (at least) one place. Perhaps the proper title there?

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From: John Cowan (Jan 07 2019, at 15:18)

For what it's worth, I now read almost all PDFs in Chrome (on any OS).

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