Tuesday, December 13, 2011

Why won't you die?

I had a discussion with a coworker the other day on the dynamics of oil price and demand response. One of the arguments that she brought up highlighted a critical point in the debate over peak oil. A common argument against the idea that the world will someday simply run out of oil, or that efforts to find alternatives now are counterproductive, is that price signals will soon do their part to "crush" demand such that existing supplies will last longer and more alternatives will be found before there is a catastrophic drop in production.

This is a possible outcome under the law of demand, which states that as the price for a good rises, the quantity demanded will drop (i.e. demand curves have a negative slope). However, it depends heavily on just how much the quantity demanded responds to changes in price. This property, measured by the price elasticity of demand, is the key to understanding the magnitude of these effects. It turns out that the price elasticity of demand for gasoline is remarkably well-studied in the empirical literature. However, even most people with a reasonable understanding of the subject may have missed out on recent work that suggests that the American predicament is more dire than in previous years.

Wednesday, December 7, 2011

The Efficiency Fallacy

One of the most common arguments that I hear against different types of alternative energy is that the respective technologies are inefficient. Solar and wind power are two of the most common subjects to receive this treatment. The argument implies that the low efficiency of many renewable energy processes when compared with fossil fuel processes are an indication of a correspondingly low technical maturity, or still worse, of outright impracticality.

That asinine arguments like this gain traction is a result of efficiency numbers being taken out of context and used to, in effect, compare apples to oranges in more ways than one. Efficiency measures can only be used as a basis for judging technology in the narrowest of cases. Unfortunately, I have yet to find a single case where efficiency is correctly cited in a debate about renewable energy, whether for or against.

This uniform lack of understanding and the sheer ubiquity of the efficiency fallacy makes it one of the most dangerous red herrings in arguments on renewable energy.

Friday, November 18, 2011

Gas extraction hurts

Regarding the issues and controversy surrounding hydraulic fracturing and gas extraction in the US Northeast, it often seems as if I'm looking at two different worlds. I've been trying to make sense of what the information both types of sources are telling me, and cut through the emotional controversy to figure out what, exactly, is happening.

Saturday, November 12, 2011

Thought, and the lack thereof, in the dialogue

Immersion in the contentious world of energy policy and politics is, at times, profoundly depressing. When I first decided to specialize in energy and energy policy as my field of study, some 7 years ago, there were only a few grumblings in the English-speaking world that energy might be a problem at some point in the future. As I've studied and worked my way up into the field, I have been confronted with the reality that while the general level of knowledge of the population has gone up, the tone of the conversation has gone down.

Friday, November 11, 2011

The articles about Keystone XL you aren't reading

Obama's delay of Keystone XL is a move to mend bridges with his environmentalist base before the election. Well, that's transparent.

Canadian Finance minister Jim Flaherty says that the delay of Keystone XL will accelerate Canada's efforts to build a pipeline to its west coast to ship to Asia. So, um, again about how delaying the pipeline does nothing to stop extraction or stop oil from going to China.

Stephen Harper, the Canadian Prime minister, is still hopeful. Good for him. I am frankly surprised that he doesn't feel emasculated, given that American environmentalists are attempting to dictate the environmental policy of the country he nominally governs.

I know the tone of this post is more opinionated and angry than usual, but I just have trouble grappling with how the environmentalist movement has been taken over by people with no knowledge of how ineffective their goals are at accomplishing anything.

Thursday, November 10, 2011

EROEI and Peak Oil

A Forbes blogger by the name of Tim Worstall wrote one of the most technically illiterate posts that I've ever seen about peak oil theory and its connection to EROEI. Even though his example - showing EROEI has no bearing on the price or quantity produced of a nonfuel, premium value product - is completely irrelevant and total "nonsense," as he put it, he does demonstrate one thing very clearly: the linkage between a declining EROEI and smaller quantities of dearer oil is not intuitive. I'm going to try and explain it.

Wednesday, November 9, 2011

An Update on Solar Industry Dynamics

When I wrote about what trends in the industry killed Solyndra (that is, barring outright fraud), I covered the aspects of the business that are driving lower profit margins and consolidation. In light of that, I thought I'd share two recent news items that confirm that picture of the industry.

Saturday, November 5, 2011

Playing the algae game

Note: I am teaching a one-shot class on advanced biofuels in November. While this class is to high school kids, it will still require a lot of organized content to throw at them, so I am gathering my thoughts here.

Now that the epic saga of the Project From Hell XIX, Return of the Spawn of the Scope Creep is over, it seems an appropriate time to gather my thoughts about other sources of next generation biofuels. One of the ones widely acknowledged to be slightly farther off, but promising, is the use of algae as a feedstock for so-called third-generation fuels. However, I'm very, very skeptical of any of the claims being made about algae (I spent about a year trying to work with the finicky little bastards in the lab and know their peculiarities) and even more so about extremely widespread algal biofuel cultivation. Here's why.

Of Cracked Tar and Crack Spreads

On the days it comes out, I usually review every article on The Oil Drum's Drumbeat series, a quarter-weekly roundup on energy-related news. Most every time, something comes up that ticks me off. There are fairly regular appearances in that from extremists on the petrofuels and environmentalist camps. More infuriating, however, are the articles that attempt to remain neutral but show a frustrating lack of analysis or understanding on relevant issues of the day. The two most recent of these are the buzz around Daniel Yergin and his recent book, The Quest, which I've blogged about before, and the debate over the Keystone XL pipeline, which I've also mentioned. It's the latter which really set me off today.

The general theme of my posts on the Keystone XL Pipeline have revolved around disagreeing that the extraction of the tar sands in Alberta will at all be affected by the blocking of the pipeline's construction. That, and the meme that the sands will simply be transshipped to China (which I've also addressed) are the two most commonly cited nationally relevant arguments against the pipeline; others, such as environmental contamination, are generally local issues. In this post, however, I'm going to try and show how the Keystone XL pipeline will bring a critical benefit to the US independently of energy security concerns.

Wednesday, November 2, 2011

Gasification as a route to biofuels

Note: I am teaching a one-shot class on advanced biofuels this November. While this class is to high school kids, it will still require a lot of organized content to throw at them, so I am gathering my thoughts here.

The problem of liquid transportation fuels, in many ways, is filled with less than perfect solutions brought on by our limited development of technology. Corn ethanol is the biggest bogeyman, although these days I'm less certain that its demise is inevitable, for other reasons. The other, lesser-known equivalent is biodiesel, which is a much better fuel in terms of EROEI, GHG balance and competition with food resources. Unfortunately, the size of the resource is miniscule compared to fuel requirements of the world. While new methods of biodiesel production are out there that will make the fuel more easily and make better use of its byproducts (an area I once did research in), the fact remains that the amount of oil that can be gotten from plants and animal wastes aren't going to be making up more than 2-3% of the total liquid fuel supply, simply by virtue of the fact that there will never be enough oil to go around (and yes, I am discounting algae). Plant starch is easier to find in nature than oil, hence the scale of ethanol production from starch being much larger than biodiesel production, which can draw only from the pool of oilseed and rendered animal byproduct markets. The largest resource is, of course, lignocellulosic biomass itself, which is the feedstock of choice for all next generation biofuels that you'll see in the next few years.

So what to do with all this biomass? There has been a lot of focus on fermentation routes from the biofuels community. This is the result of a confluence of infrastructure and human capital from the ethanol industry and  amazing players in enzyme engineering. Enzyme engineering is so good these days that tough cellulosic feedstocks can actually be hydrolyzed into sugars and fermented using parts of the corn ethanol fermentation train. A great example of this is POET's Project Liberty, which will derive a great deal of its cost advantage from being built "over the fence" from a corn ethanol plant.

The other route I feel is getting much less attention is gasification. In this general category of processes, fast pyrolysis of biomass quickly turns most of it into carbon monoxide, hydrogen, and ash/char residue, and the gas is swept downstream into other uses. People have been doing fast pyrolysis for a long time. Before oil products became abundant, many chemicals were made using coal tar from pyrolysis. Steam gasification (a process using steam as a heating medium) of lignite is featuring prominently in coal-to-chemicals industry in China. For example, most of the growth in PVC-making over the past few years has been from vinyl production based on acetylene, which in turn is derived from ethylene and coal-bsed sodium carbide.

I'm cautiously optimistic about gasification as a route to biofuels. It has a few things going for it over biofuels and a few things going against it.

Tuesday, November 1, 2011

A Beacon of Despair

The flywheel grid-stabilization technology company Beacon Power just filed for bankruptcy yesterday, sending another ripple through energy publications. Like Solyndra, Beacon Power had a DOE loan guarantee, though of a much smaller magnitude: $43 million rather than $535 million. Even so, its failure is another indication of the high risk nature of the DOE's loans and, increasingly, the poor management of the loan guarantee program.

From, what I've seen of the DOE's program, the conditions necessary for entry were extremely strict. But then again, that look was had only a few months ago, and applied only to biofuels companies. It is entirely possible that the standards for the program have only been mature for a short time. It is probably also the case that standards for biofuels were more strict than for other, less well-studied industrial sectors or less risky, a suspicion that is borne out by the flow of money to specific industrial sectors from the program. What I'm hearing in the news these days belies my initial impressions.

The thing I actually want to talk about, though, is a larger issue concerned with Beacon Power's technology. Truth is, Beacon Power was one of those companies that I wanted to succeed, not because of anything about the company specifically, but because flywheel grid stabilization technology is so important to the system as a whole. Flywheels can uptake and discharge power faster than any other kind of energy storage technology, and can act as rapid stabilizers for voltage fluctuations caused by renewables, among many other things. It's obvious why this is essential for a modern power grid. The problem is that deregulated power markets make the returns on investment for such an essential service extraordinarily low. Batteries that charge in the night and discharge at peak hours output power slowly but can take advantage of the maximal arbitrage opportunity - not a lot, maybe $15/MWh, but the max. On the other hand, low energy-density flywheels make their money in the minute-to-minute spot market for electricity, buying kilowatt-hours and selling them again at fractions of a cent more expensive than before. But they're also big, heavy, and expensive compared to batteries. Both of the grid stabilization technologies perform essential roles.

Because of that low revenue potential, Beacon Power needed more flywheel farms to get enough revenue to operate, and it needed more capital to build more. It didn't get it. Thankfully, the flywheel technology is still useful and their one current flywheel farm will most likely continue to operate once it is sold for a discount, unlike Solyndra's specialized factories. Even so, I think it highlights an important fact about investment in the electrical grid and what deregulation has done to it.

Without an overall system owner - not just an operator - the positive externalities that result from an otherwise low-return investment in the grid aren't taken into account and underinvestment prevails. Beacon Power provided an important service but it wasn't able to reap all of the benefits of its service to the network; under a regulated monopoly environment, the utility has the overall system in mind and can make those kinds of investments. In contrast, a merchant power environment places the responsibility of the grid on the transmission equipment owner itself, and often regulates the prices it can charge for transporting that power as well. Thus, a grid operator in a deregulated environment gets little revenue and has no incentive to invest in additional infrastructure in order to maximize returns from depreciated capital.

This highlights why I think the 90s-era deregulation blitz was penny-wise and pound-foolish. Sure we got lower electricity prices, but we also got Enron, and ten to fifteen years later a whole lot of crumbling infrastructure and transmission companies in need of government help just to maintain system usability, let alone large amounts of intermittent renewable capacity. It's a fundamental reflection of the "energy is a solved problem" attitude of the 90s that all people cared about was their price point, and not long-run investment.

Wednesday, October 26, 2011

Corn Ethanol: a complicated bogeyman

In terms of biofuels, the ugly kid on the street has been and continues to be corn ethanol. Critics lambast its poor lifecycle GHG balance, its low EROEI, and that it competes directly with our food supply, all compared unfavorably with sugarcane ethanol, and even moreso with cellulosic ethanol. As always, however, the picture is definitely not as simple as media make it out to be.

The more I learn about corn ethanol, the more it seems like it will be around to stay for a few generations yet. It has a lot of things going for it that make it more attractive as a source for biofuels and as a valuable product than you might expect. I'm going to try and go over to show how corn ethanol has value, what it's got going for it over sugarcane ethanol, and why it's probably going to stay around to compete with cellulosics.

Tuesday, October 25, 2011

NGDP targeting and control theory

The economists Scott Sumner, Karl Smith and David Beckworth, among many others, have been pushing for the past two years a branch of macroeconomics sometimes called quasi-monetarism or market-monetarism. The group of people are all bloggers and, unusually, are not so prominent in their fields. Instead, they've grown in prominence since the financial crisis in advocating a policy that the Federal Reserve can undertake to provide stimulus beyond the zero interest rate bound: NGDP targeting.

Monday, October 24, 2011

Climate Skepticism and Epistemic Closure

For some time now I've been regularly reading the postings of a blog called Bit Tooth Energy, run by a former professor at the University of Missouri. While I initially read for excellent descriptions of energy technology, I was also impressed by the way the guy has systematically gone through temperature data for different states in the US and investigated trends - running a weekly, independent analysis of temperature trends, which in the continental US are quite varied. What impressed me more was that it was (and still is) done in a very data-oriented, neutral and technocratic manner.

It's both a confirmation of my own biases and of my ignorance that I was surprised to recently find that he places himself in the camp of climate change "skeptics." I had simply assumed someone running the data on his own would at least feel that the jury is out, if not be leaning towards the climate change-is-real-wake-up crowd. I stand corrected.

But that's not really what this entry is about. Bit Tooth Energy's writer may be a climate change skeptic, but he has thankfully kept any hint of confirmation bias out of his analysis and (most of) his writing. Hell, in order to try and find a broader perspective, I've been trying to find an honest skeptic out there whose interests lie with data analysis, and who values civility and not ad homoniem attacks. Stephen McIntyre may have started out that way, but now he's a jerkwad. Anyway, upon reading this entry, it appears that I've found what I've been looking for, someone who deserves the title of skeptic - even though that post is one that leaves a sour taste in my mouth, it's at the very least reasonable. That's why my visit to the website of a book he recommended, a supposed expose of the IPCC in its relationship with the WWF, was all the more jarring.

Wednesday, October 19, 2011

A new salvo in the fracking debate

Some time ago the town of Dryden, which is a few short miles from Ithaca, banned fracking on the town's land. Their concern about environmental contamination was less significant than in other towns - Dryden is significantly more conservative than Ithaca - and was more or less focused on their rural zoning laws. I can sympathize; besides a section connected to Rt 17 that has some strip malls, Dryden is a quiet rural town, complete with a historic town center and church, and its own speed trap. Ultimately, they decided to class fracking as heavy industry and banned it from their land due to zoning regulations.

That comes into conflict with NYS DEC rulings and with a state law, from the 1970s, that explicitly assigned mineral and energy rights management to the state. The result is an interesting mix, since article IX of the New York State constitution enshrines the local municipality's right to regulate and control its land. There's now a lawsuit in progress over the rights to drill, since a company has apparently invested $5 million in the belief that the town had no jurisdiction. The conflict is probably going to head straight to the state supreme court.

Honestly, while Federal or State land is one issue, my opinion tends towards the town of Dryden here. The people who live there own the land, if not individually then through the town. Regardless of their motivation for the decision, it's up to them whether they want to partake of an opportunity or not. Doubtlessly, though, it will almost certainly come down to the most arcane of points in the judicial ruling. Yet another reason I won't become a lawyer any time soon.

Indian Points

One of the biggest issues coming around in New York these days is the relicensure of the Indian Point Nuclear Reactor by the NRC. Indian Point is coming under attack by the environmental movement in NYC, and they haven't been afraid to raise the Specter of Fukushima over and over again. The very fact that this license renewal is coming at a low-water mark for nuclear energy makes it one of the more hotly contested fights in recent years.

As part of the opening salvos, the NYC Department of Environmental Protection commissioned a study by Charles River Associates, an economics and management consulting firm, and the NRDC and Riverkeeper Inc. fired back with another by Synapse Energy Economics, an energy economics consulting firm, both of Cambridge, MA. Not trusting the news reports, whose science and economics journalism pretty much sucks, I went ahead and read both of them.

Thursday, October 6, 2011

Sugarcane ethanol: o que aconteceu, brasileiro?

Although there's a significant amount of debate as to whether or not the use of food products in biofuels causes a rise in the price of food in general (the so-called "Food vs. Fuel Debate"), when we look at specific markets and feedstocks there are quite a few trends that show the trade-offs between using food sources as fuels. Nowhere is this more apparent these days than in Brazil. The country was once touted as a potential fuel ethanol exporter for the entire world. Its sugarcane fields are vast and it had the mechanization and infrastructure - built in the 1980s, no less - to make ethanol from cane juice. Unlike in corn ethanol, no enzymes are required to liquefy and saccharify (that is, break into digestible sugar monomers) the feedstock; you can almost literally dump raw cane juice into a massive industrial scale fermenter. The only way American corn ethanol got off the ground were stupidly high tariffs on imported ethanol, ostensibly to offset the blending credit but in reality stupidly propping up fuel prices. Let me tell you, trade policy maneuvers like that take some balls; the Bush administration apparently had some to spare.

Ethanol-rich Brazil rode through the era of high gas prices with nary a scratch and blistering economic growth. But this year, Brazil imported ethanol from the United States, and on net terms became a fuel importer. What the hell?

Tuesday, September 27, 2011

In defense of utilitarianism

Every so often, an article pops up on the left or right of the spectrum that claims to debunk Utilitarianism. I've seen it from left-wing people who claim that any cost-benefit analysis is bunk because the underlying philosophy is reprehensible, or from right-wingers who claim that a utilitarian world would feature, almost literally, the strong eating the weak, or a justification of the Nietzchean √úbermensch, or both. The most recent examples for me were two articles in The Economist (only one of which is free to read) that highlighted how supposed "utilitarians" psychologically resembled psychopaths.

Critiques like this tend to send me into a nerd rage. They attack a weak, philosophically indefensible form of Utilitarianism, while ignoring the stronger and more prevalent form that underlies the moral justification of all laws.

Friday, September 23, 2011

Misunderstanding Peak Oil

 Daniel Yergin's book claims to "debunk" the theory of peak oil, and has thousands of misled people gleefully waving it in front of green energy advocates as vindication of their skepticism. The misunderstandings extend even to the Technology Review book review there. I would have expected something that bucked the trend of stupid from an MIT publication, but apparently it'll have to serve as the latest example of people that don't actually get what peak oil means.

Tuesday, September 20, 2011

Why Biodegradable Products Won't Go Mainstream (mostly)

These days, an interesting trend in product offerings is on the rise. Many products, particularly those traditionally tied to the petrochemical industry, are now offering "green" alternatives. One such green trend is the increased offering of biodegradable products, which can be decomposed with varying levels of bacterial treatment into biomass and carbon dioxide, thus returning the materials to the carbon cycle. On paper, it's great - at the end of a product's lifecycle, it will return to the earth.

But reality has some bad news for biodegradable products. The truth is that biodegradability is neither as good as it sounds nor is it a sufficient condition for marketing green products. I'll try to explain why.

Monday, September 19, 2011

More on Keystone XL

I've posted before about the Keystone XL pipeline, but I wanted to emphasize one thing that hasn't been getting any coverage. While America dithers, the Chinese are heavily backing a project (Enbridge's $6.6 billion Northern Gateway) which will ship cracked bitumen to the west coast of Canada - as I mentioned before - where it will be shipped to East Asia.

Again, nothing wrong with selling oil to China, but it again goes to show that radical environmentalists who frame Keystone XL as a battle between "dirty" oil and carbon emissions vs clean energy and less oil dependence are presenting a false choice. Let me say this clearly: stopping Keystone XL will not stop the carbon emissions from bitumen extraction and cracking. It will simply send the oil to China instead of improving American energy security.

This. Debate. Is. Stupid.

I don't want to be against most of the environmental movement here. I really don't. I support their goals - most of them, anyway - and want to see a low-carbon, clean energy economy within my lifetime, even if that goal is ambitious. I want to cut our carbon emissions. I want to reduce dependence on oil in general, and foreign oil especially. And the way to do that is to encourage higher oil prices in America, and the most efficient way to do so is with a carbon tax. And that's that. Burning political capital on this will hurt the movement for years to come.

Furthermore, I'd have a lot of trouble believing that armchair environmentalists have really thought things through, particularly when what they are literally doing is an oblique method of supply disruption that will... uh... well, essentially change the flows of American money from Canada to enriching those lovely regimes in Venezuela, Gabon, Nigeria, and Saudi Arabia. Who would you rather buy from? South Park lifestyle enthusiasts aside, I think I know the answer.

Friday, September 16, 2011

Indium Blues

The NYT has published an article about China's nationalization of its rare earth mining industry. In the typical tradition of he-said, she-said science and policy journalism, it quotes Chinese officials as attempting to improve environmental compliance. However, it is also precipitating consolidation of the industry into state control.

The article explains that invocation of environmental rules might be part of a wider strategy to restrict rare earths sales without falling foul of trade regulations. I think this picture is right. In order to figure out why this is true, we have to look at the two international trade regulations that I think China is breaking most flagrantly, and the legal dodges they are trying to employ.

Sunday, September 11, 2011

Day of Defeat

Everyone remembers their own story about September 11. How couldn't we? For a boy just in his teenage years, not quite reaching the point where world events were at least as important as video games, it was a jarring and sudden wake-up call.

I was in Singapore. It was shortly after 8 p.m. I was upstairs, on the internet as was my wont. I'd just moved overseas, and school had started only a few weeks prior. My dad called me downstairs. Like the rest of the Americans overseas, young and old, my family and I were glued to the television for the rest of our night - what would be for most Americans a long, agonizing day.

You'll often hear that 9/11 changed the character of Americans, fundamentally. I'm told that in the first few days in the country, solidarity was the word of the day, but that the ugly elements of a changed national mood reared their head soon enough.

Looking back, anything America as a whole experienced, I think the overseas community reacted even faster.

Of course there was the solidarity. You didn't have to watch the candlelight vigils on the television when there were four happening in my school alone. What was for me the morning after September 11, I remember everyone in school silent, ignoring the class bells, watching President Bush deliver his address following the attack. It had produced psychological blows that could turn 8th graders somber and brooding.

But in retrospect what I remember most was the fear. At first, the famously tolerant overseas community seemed to be a beacon for the wider national solidarity in Singapore. But then, what seems like a short time afterwards, dark-skinned men with jaunty hats, huge sickle-shaped knives and automatic weaponry showed up outside of my school. I remember the stares that came from the kids on my bus. Then we heard: there'd been a Jemaah Islamiyah plot to bomb the US embassy, The American Club, our school, an MRT station. The reaction to the security was one of relief. It was also a microcosm of what had happened to America: the sudden realization that we were vulnerable. Instead of it taking months in America, for us it was only a few days.

Our buses, which previously had had a huge Singapore American School logo on them, suddenly had them crudely painted over. We were encouraged by our parents to avoid going out with our friends in our school uniforms. People in Little America stood on their porches, keeping vigil over their neighborhood.

I remember when people started cancelling all of their trips to Muslim countries, most from mistaken paranoia. All it brought on was suffering, and in many cases, resentment. It was this fear that doomed Bali to ten years of recession, Eat Pray Love notwithstanding. The first time I visited, in 2003, the tour guide assured us he was Hindu, without any prompting. Why, I thought, should that matter?

For those who lived in cosmopolitan Singapore, with its large Muslim minority, the general attitude continued to be tolerance - at least of Singapore's citizens. But in a lot of other ways, Americans withdrew. My mother wasn't sure if it was safe for me to go to a main shopping street alone. We all banded together in this little bubble of social groups around the American club, a golf resort in Bintan, the American School, and locals went into the background.

Perhaps what was most jarring was the attitude of the newcomers to our little group. After American popularity took a turn for the worse in 2003, the reaction of any newcomer was to circle the wagons. These were kids who thought of Muslims with fear, who assumed anyone foreign might be threatening, and sailed into the life of privilege afforded to most expatriates with a sense of entitlement rivalled only by their desire to be haughtily judgmental. One day I saw a kid trying to tease a building worker, who was a Muslim, with food. It was Ramadan. He was two years older than I. Another time, I had to shout at four stupid kids who thought that our bus driver was a Nazi because he had a red swastika on his bus. They couldn't understand that it was a Buddhist, Hindu and Daoist symbol, but most importantly refused to acknowledge the difference between any of those and a terrorist.

September 11 was a defining moment for my entire generation. I've taken recently, however, to calling it the day of defeat. We lost. Al-Qaeda won. From my vantage point in Singapore, through most of the years of the Bush presidency, I saw how insular and violent America became, the inchoate anger of the rest of the world as they beheld us lashing out at real or imagined demons. I watched how slowly, America enacted laws that made it seem closer to Singapore, still only a slightly relaxed police state, than I was comfortable with.  And most of all, I felt like I was one of the only ones mature enough - even among the adults - to stop and say, "what are we becoming?" I didn't like what I saw. It is especially telling that for three years while I was in high school, I told people that I wasn't an American. A silly sentiment perhaps, but the truth was I found it difficult to identify with the country I had come from.

Osama bin Laden was a twisted sonofabitch, and wanted Muslims to unify against an aggressive America that could be branded a great Satan. He imagined us as petty, insular, drunk on our own power, vicious, uncaring, and utterly intolerant of Muslims, or anyone else for that matter.

Osama bin Laden imagined a caricature of America, and he made it, in many ways, truth.

Friday, September 9, 2011

Solar Industry Dynamics and Solyndra

The solar cell company Solyndra failed last week, taking with it a $535 million DOE loan guarantee and triggering a press blitz in which every single anti-government pundit attacked solar energy as something that "doesn't work" and putting up Solyndra as everything that's wrong with government intervention. There's a much more subtle picture going on here, however, and the media storm glosses over many of the aspects that made Solyndra's failure inevitable well before the current slump in the solar industry hit.

Tuesday, August 30, 2011

Weighing in on the Keystone XL Pipeline

There's been an awful lot of fuss going on about the keystone XL pipeline in the last month or so. Dozens of environmental groups have latched on to the permitting of the pipeline, which is to carry syncrude from Canadian heavy tar oil to the United States, as the issue of their lifetimes. The New York Times carried an editorial by one of them, detailing their rationale and calling on President Obama to make the environmental decision of a lifetime.

I hope he walks out on the White House lawn and slaps this guy on the face.

The Keystone XL pipeline controversy is a farce. Extreme environmentalists have doctored the numbers to suit their propaganda needs and unnecessarily demonized Canadian producers. That editorial is an excellent example of their propaganda: "acidic crude oil" (all crude is acidic, and oil companies routinely handle more acidic and sour crudes), "highly sensitive terrain" (already traversed by multiple pipelines).  Here's the alternative picture:

Syncrude from Canada emits 70% more carbon dioxide during extraction and refining than conventional oil does, its true. But then following extraction and refining, we burn it. Focusing on the extraction stage unnecessarily demonizes the process. Over the entire lifecycle of an oil product from syncrude, emissions are only 7-15% greater.

Will the blocking of the keystone XL pipeline stop syncrude operations in Canada? No. Oil prices are high enough that Canadian producers will simply find a different market, and that market is likely to be in East Asia - i.e. China. Were this pipeline initiative to fail, the most plausible alternative is a pipeline to Canada's west coast, where it'd be sold on the international market.

There isn't much wrong with shipping to China per se, except that shifting our main source of fuels from the middle east to Canada has probably been the single greatest energy security coup in American history. Some energy economists have contended that the building of the Keystone XL pipeline to Houston will still cause the oil to be shipped to China; there are some merits to that argument, namely that foreign producers with stakes in American refining companies will pressure for the purchase of their oil. To me, however, this seems less likely than it might seem to be. Saudi Arabia has recently quit targeting 30% of their exports to the US, and Venezuela has production problems of its own, to name two examples. And even then, this argument continues to ignore that as American energy consumption increases, we can take advantage of the captive supply provided by that pipeline. After all, all things being equal, Canadian producers' delivery point prices will favor American producers. 

So, to summarize, blocking the keystone XL pipeline does a whole lot of nothing to the environment as extraction will continue, doesn't benefit the American economy or American energy security, and isn't as bad as it's made out to be.

"But wait," you might say, "it will extend America's dependence on oil!" Truth is, America is dependent on oil and will remain so for at least the next fifty years at least. Where we get it from won't matter. Stopping the supply of oil from Canada won't do anything to reduce American dependence on liquid hydrocarbons, sustained high prices will. The extent to which blocking a supply pipeline will impact American prices is the only mechanism by which this might act... and frankly, in a liquid global market for oil, it won't do much at all.

The only guaranteed effect I foresee from this pipeline is the mitigation of the price spread between West Texas Intermediate (WTI) at Cushing, OK, and the global price for oil. As I've blogged about before, WTI has been going for cheap because it is landlocked and has had an influx of syncrude from Canada that it can't unload fast enough. The increased WTI prices aren't likely to have an effect on gas prices in the United States as a whole (probably only in Kansas, Oklahoma, and the Texas panhandle due to the limited overland transport radius) and will increase profits for the companies that deliver to that location, including Canadian syncrude manufacturers. I suppose that's why they're doing it.

Environmental short-sightedness like opposition to Keystone XL will only hurt the American economy and our short-term energy security. And as a final, more general comment, it's immature activism like this in the energy arena that makes me want to puke. If you really want to help the environment, reduce dependence on oil and decrease carbon dioxide emissions, then work to build smart grids or build a renewable energy infrastructure. Or spend the money you devoted to going to Washington to retrofit your house with better insulation, double or triple paned windows, or (if it makes sense) small scale solar thermal water heaters or solar PV panels. Handcuffing yourself to the White House fence might be easier and more dramatic, but being a publicity whore is more damaging to the environment than hundreds of other things you can be doing. 

Thursday, August 25, 2011

Pit Bull Chemistry

I just can't get any luck. This Sunday I was attacked by a 90-pound pitbull that had broken loose from its leash and decided to bite a chunk out of my shoulder while I was walking home with groceries. Some anxious murmuring about rabies and a doctor's visit later, I'm now in full recovery and feeling worse from the tetanus booster than from the dog bite. One thing I also got was a 10-day course of a broad spectrum antiobiotic, co-amoxiclav, so that I wouldn't end up with some lovely strain of flesh-eating bacteria.

Besides making my urine smell like I've eaten too much asparagus, wiping out any acne I have left, and giving me the runs, taking said antibiotic has given me a random opportunity to learn a little more about biochemistry. Turns out that co-amoxiclav is a cocktail of amoxicillin and clavulanic acid. Amoxicillin is a penicillin-based beta lactam-type antibiotic. The beta lactam ring is the critical nucleophilic component of the antibiotic. In bacteria, it irreversibly binds to the serine residues of cell wall binding proteins, causing them to be unable to synthesize their cell walls properly and, well, die.

Antibiotic resistant bacteria have popped up that can combat this effect by using beta lactamase, a protein that cleaves the beta lactam ring. The antibiotic resistance this confers is overcome by the clavulanic acid, which is a suicide inhibitor that binds to the reactive serine molecule in beta lactamase's active site. That way, amoxicillin and other penicillin-based drugs can go about doing their business. Yee haw.

Considering my luck with shit happening on the weekends these past few weeks (before this weekend, it was a pulled muscle in my neck), I feel like the incoming hurricane will be the cause of this week's misery. At least I'll face it free of necrotic bacteria.

Monday, July 25, 2011

How the Arizona Solar Tower Actually Would Work

Slashdot recently posted an article on a massive project, currently in the land acquisition and planning stages, to create a massive solar thermal tower in the Arizona desert using a pretty clever and unique design. Rather than using water, glycerin, or even molten sodium as a working fluid, the design is based around air and uses what amounts to greenhouses to power the plant. A field of greenhouses heating air surrounds a massive tower, with turbines in the base of the tower. If they had hired a better PR guy, the greenhouses might even be referred to as heat farms.

Unfortunately, the article does the usual bit of hand-waving about how the system actually works, claiming it's based on "temperature differences" between the hot air and the upper atmosphere. While I'm pretty sure this is, charitably speaking, not wrong, it is only a small part of a larger and more complicated concept. I'm going to endeavor to explain it: the power plant appears instead to be designed around a clever application of the stack effect.

In brief, the stack effect can be explained by looking at a static equilibrium of a stack, or, if you like, chimney, cooling tower, or any other somewhat cylindrical hollow structure full of hot gas. Hot gas, as might be predicted by every gas law you've ever seen, is less dense than cool gas. If we assume that the stack is sealed against air, then all things being equal a stack emitting gas hotter than the ambient air will have lower pressure at its base than ambient air pressure at the datum - the column of air above it is less dense. At the same time, if the stack is sufficiently high, the hot gas at the top will still have enough of a pressure differential with the air at that height to flow out. If it isn't high enough, additional energy has to be added to the gas, which is why most industrial installations have induced draught systems (with fans in the stack) or forced draft systems (fans at the air intake) to add enough pressure difference without having to build a huge stack.

Now suppose we drill a hole in the bottom of the stack. Since there is a pressure differential caused by the stack effect, air will intrude into the stack without any additional energy input.

That's basically what this plant is trying to do: take advantage of that pressure differential to run a few turbines. The tower has to be huge, to maximize the column of hot air overhead to create the maximum pressure differential at the bottom. In addition, since the turbines at the base will actually decrease the exit pressure of the stack gas stream, the stack has to be high enough that when this air reaches the top, it will have more pressure than the surrounding air. Ground-level air from the ambient area will spontaneously flow into the apertures provided on the outside of the solar heat farms, which will warm up the air so that when it flows into the stack it is about as dense as whatever prompted the original driving force.

I think this is a really cool idea. The article mentioned that it would be able to operate under most weather conditions. I believe this, since you can probably take one or more of the turbines offline to give a smaller pressure differential at the base between turbine intake and exit to adjust for varying heat input. I'm pretty certain the only thing necessary to start it up is the provision of an initial hot gas stream in the stack, probably from flaring some natural gas.

Two things bother me though. The first is the expense: a 200MW power plant that can only operate during daylight hours is costing $750 million to build. For that price, you could build a 1 GW top-of-the-line supercritical water-based coal plant. Sure you'd need to buy the fuel, but coal is not all that expensive. I don't have any information about this deal they have with the SoCal Power Authority, so I can't say much else, but it definitely looks to be a little shaky.

The second bit that bothers me is that the Slashdot posting mentioned that food could be grown in the greenhouse if a water source could be found. This was not mentioned in the article, thankfully, because it is a really fucking stupid idea. I'll grant that you might use only the outer parts of the greenhouse solar heat farming complex for growing crops - no one in their right mind would want 90degC air for their growing environment. But even excepting that ambient temperatures in Arizona are already hot enough for most plants. It's the lack of water and soil that really hurts. So why bother growing in a greenhouse if you've already got the temperatures you need?

And let's just suppose that this design is copied and put somewhere that doesn't have soil or water problems. You're still going to need a whole honking lot of water. This system is designed not just to heat, but to circulate. A conventional greenhouse retains water by being a relatively closed system. An open one would literally evaporate all of your water away by continually replacing your hot, humid air with dry air from the outside, which would proceed to warm up, suck up moisture, and leave. Recovery of the water couldn't be done unless you either liked it salty (through a salt dehumidifier) or wanted to make your entire power plant pointless (by cooling the air so water condenses). Growing crops in an environment like that would be insane without unlimited water. And besides, making this plant in a dry area has a secondary benefit: avoiding corrosion. Why'd the designers want to give that up?

Wednesday, July 20, 2011

Economic growth and penises

A new paper out of a Swedish university gives new meaning to the phrase "stimulus package." Apparently, penile length is strongly correlated with economic growth between 1960 and 1985. After a healthy rise, bigger is not apparently that much better, as the correlation is U-shaped and growth potential drops off at average lengths greater than 16cm. It gets better: the authors then attempt to speculate on a possible mechanistic explanation for the macroeconomic effects.

I couldn't make shit up this crazy if I tried.

Friday, July 15, 2011

The Energy-Water Nexus

I've been thinking a lot recently about water issues (which may or may not be related to work). There's been a lot of talk recently about an emerging "Energy-Water Nexus" that threatens future economic growth in the United States. Essentially, it follows from the observation that water supply and energy supply are largely interdependent. This makes a good deal of sense. Thermal electric power generation uses huge amounts of water, for example, to reject heat to the environment at the lower end of the thermodynamic cycle. Vast quantities of water are required for coal mining, gas extraction, and oil production. In turn, surface water and groundwater must be transported or extracted, and saltwater desalinated, for use in industry or in the home.

At first glance, this doesn't seem to be a problem - not particularly at least. After all, the volumes of water we extract have a far lower energy intensity than the water intensity of energy. Four things speak against that simplistic viewpoint - one of them an emerging trend.

First and foremost, the amount of water used in industry faces some pretty stiff competition. More than 70% of the water used worldwide is used in agriculture. Globally, industrial uses - including thermal power generation - account for maybe 16%. This might seem obvious, but for all the energy we expend on purifying and extracting water, only a little bit is going back to extracting and producing more energy.

Second, the amount of water we use is increasing, and pressure is being put on the energy side of things. With population growth comes increased water consumption. That much is obvious; what is less obvious are the first order effects on agriculture. Furthermore, with economic growth, power consumption and thus water devoted to power consumption rises linearly. To put that in perspective, we can compare the global statistics I cited above to the ones for the United States: Fully 53% of our water is used in industry, of which a whopping 49% (that's about 92.5% of what's used in industry as a whole) devoted to power generation. With economic growth in China and India, and soon Africa, starting, water stress suddenly is a whole lot closer to reality.

Third, all water issues are, with rare exception, local issues. Water isn't evenly distributed, and the weight of water makes it difficult to transport, so local areas must find their own solutions to water issues. Some places are already running short of water resources for industry. Two big examples are the middle Yellow River region in China and the Jamnagar industrial district in Gujarat, India. In the former, rampant industrial overinvestment has lead to water-guzzling factories being shut down and heavy rationing instituted. In the latter, overreliance (no pun intended*) on groundwater has caused water tables to fall to dangerously low levels - farmers outside the area have to drill 30ft deeper wells every year, and what they get is increasingly saline because of contamination from seawater.

Fourth, the emerging trend is even more water intensity in our energy consumption, with the rise of biofuels and biochemicals. Irrespective of subsidies, the economics of high oil prices have driven the adoption of these new technologies, almost all of which are water intensive. Consider that the processing of one gallon of corn ethanol requires 30 gallons of water consumed in the most advanced plant in the United States. A more typical case is 300-600 gallons.

So there's a darned good reason that a lot of the power and chemical process industry is starting to care about water issues again.

* The megacomplex of refinery and chemical plants in Jamnagar is owned by Reliance Heavy Industries. Yeah, probably no one got that.

Thursday, July 7, 2011

Humectants and BEEF

I cut most of the beef out of my diet about two years ago; that said, I'll admit that I still have a weakness for the occasional steak. And on the subject of steak, I recently found out something cool about biofuels and animal feed.

Animal feed supply is one of the biggest industries in the United States. Two of the biggest sources of animal feed, particularly for slaughter cattle, are DDGS (dried distiller's grains and solubles) and soy flour. DDGS is the dried byproduct of fermentation from grains, these days typically ethanol but including some beer manufacturers. It's such a huge source of feed that some ranches are now relocating to be near ethanol plants to take advantage of wet distiller's grains (WDG), which have a shorter shelf life but are cheaper since they don't need to be dried.

Soy flour is the other main source of feed; a tiny, TINY proportion of commercially grown soybeans goes to people. The remainder is crushed for its oil, with some having protein extracted by hexane washing, and is toasted and fed to cows. But powdered soy flour isn't directly edible, so typically a feedlot will add a humectant - a moisturizing agent - to make it possible for cows to eat.

Over the past 50 years, this was typically yellow grease. Yellow grease is nasty stuff - it's essentially what comes out of the frialator at restaurants. Most food outlets pay for their used oil to be disposed of by professional retrieval companies, which then sell it on the market. In recent years, yellow grease prices have gone up because it turns out it's an excellent feedstock for biodiesel. Well, not so excellent, since it's got catalyst poison making up 50% of its mass, but there are ways to get around that (no joke). Point is, it's cheaper than virgin oil by a lot, so the biodiesel manufacturers that are smart have equipped themselves to deal with this heavy feedstock.

At first, feedlot owners weren't too happy about that. But recently, feedlot owners have discovered that raw glycerin, a byproduct of the biodiesel process that contains about 50% water, lots of glycerin, and other contaminants, can be relatively cheaply processed without glycerin concentration - the energy-intensive step - to be a humectant for soy flour. And get this - turns out the cows like it even better, and it's cheaper than yellow grease anyway. The biodiesel manufacturers I talked to are currently giving it away for five and a half cents a gallon.

Considering I spent a good two years of my time at MIT trying to find a home for raw glycerin, this makes me very happy. Also it's great not to have my ribeye cut contain recycled Mickey D's. But more importantly, it's now providing an important secondary revenue source for biodiesel manufacturers, letting more of them continue producing even when diesel prices are low.

Wednesday, July 6, 2011

So I herd you liek screwing over Indonesia

Reading the latest edition of World Ethanol & Biofuels report makes me seriously wonder if Europe just wants to shoot itself in the foot. Among many other things, it just reimposed tariffs on imported biodiesel - not just a small one, but 400 Euros per tonne - to punish American manufacturers re-exporting through Canada, which apparently counts as European. There are no words in the English language to describe how stupid this is. The US has spare biodiesel capacity, to the tune of hundreds of millions of gallons per year, but almost no market. Europe has a ridiculous market - and the US already exports regular diesel to them - but somehow it seems fixated on preserving a few, low-skilled jobs, damn the consequences.

Let's get this straight: they allow imported oil with a nominal tariff, and imported American diesel with a nominal tariff, and have no problem with biodiesel, ostensibly because it reduces carbon emissions and stuff. But on the other hand, they let dozens of plants in the US than can produce this green fuel idle, to "preserve" uneconomical jobs in Europe... and spend more carbon to import the caustic soda needed... and don't build any spare capacity... and the net effect on the US biodiesel industry is called "rape." For the poor Indonesian biodiesel industry, which can't export biodiesel to the largest biodiesel market, yet has cheaper soda (from Australia), and is forced to instead export low value-added palm oil instead in exchange for slashing and burning its rainforests, this state of affairs is the same as for the US biodiesel industry, except with the words "no lube" appended.

And above it all European citizens are now complaining that biodiesel is too expensive.


Thursday, June 23, 2011

There is a difference

Many bio-based chemical product companies advertise that their wares are completely identical to petrochemicals of the same type. That's never true. They may be functionally identical, but there's an important aspect that many overlook.

Most everyone has heard of radiocarbon dating - that is, given that Carbon 13 has a half-life of about 6,700 years, you can tell the approximate age of a sample of biomaterial through the relative proportion of 12C vs 13C, since unlike a living organism, a dead one doesn't keep its proportion of 13C constant through biological processes. Now think about the beginning instead of the end.

Petroleum extracted from underneath geological strata are millions of years old. They have almost no 13C left. As a result, the products from petroleum are uniformly lighter than bioproducts, which tend to have the natural background rate of about 1.1% 13C in them. It's the difference between a molar mass per carbon atom of 12.011 vs 12.000, but when you're dealing with huge volumes, turns out it matters, at least to chemical manufacturers.

And that is the end of the only somewhat useless factoid of the day.

Monday, May 23, 2011

Some more on hydrofracking

PNAS published a study on Pennsylvania groundwater contamination from gas wells. The evidence is pretty damning, to be perfectly honest. Something fishy is definitely going on. Let's face it, the empirical data is making me into a regulation advocate, if only to force the short-sighted fools that run drilling operations into doing things properly.

Money graph:

Source: Osborn et al., 2011, as linked above.

Wednesday, May 18, 2011

Lee Kuan Yew Resigns

Singapore has a special place in my heart. I spent a significant amount of time growing up there, and have a lot of fond memories. It also is the reason why I take all of my civil liberties very seriously. Five years in a place that doesn't have them is enough to make you appreciate what you have, a lot. But for the sake of my fond memories, I will always find the time to criticize Singapore because, to paraphrase Baldwin, I love the place.

And inevitably this means that I've got to talk about LKY's resignation from government. On the one hand, I'm not surprised that the grand old man of Singapore is retiring. He said for many years that there was a definite point where he realized that the younger generation needed to take over, and he reiterated that on his farewell. On the other hand, I'm wondering what his departure signals.

Anyone with half a brain knows Singapore isn't a true democracy. Sure it counts its votes fairly, but all credible opposition is sued for defamation into a smoking hole. Vicious self-censorship follows. Candidates that dare run against the old statesmen are ruthlessly attacked by the local media in the name of journalistic integrity while the excesses and failures of the party stalwarts are ignored.

The PAP's support has dropped to 60% of the electorate (despite this, their system of voting rules makes it so that there are maybe 6 opposition candidates that got elected out of 90 voting members). LKY resigned after this relative electoral drubbing (considering that support for the PAP reached 90% in the 80s).

So does LKY's resignation signal that his brand of authoritarianism is coming to a slow and gradual end? Is Singapore moving towards actual accountable democracy? Or is it simply a convenient time for an octogenarian widower statesman to retire and live a quiet life?

I don't know. It's entirely unclear to me what the move symbolizes, even if it is the last of the old guard leaving power. Telling is that LKY is leaving power to his son, the face of the present political dynasty, albeit one that is nominally democratically elected. Additionally, what the PAP has done in the past in response to electoral signals like this is use its formidable majority in parliament to strong-arm through popular programs - not really democratic accountability, but some accountability nonetheless. On the other hand, Singapore has gone through a relatively slow trend of media and electoral liberalization, but whether this is from the aforementioned tendency to placate the plebs is unclear.

Time will tell.


In other news, I finished my thesis this past weekend, and am now going to spend my remaining time in Ithaca with my brother, who is currently passed out on the futon. Our contract is that I cook tasty foods and he stays amusing. It works out well.

Saturday, May 14, 2011

The Beginning of the End

Had my first final today. Risk analysis, and much easier than I'd prepared for - a relief, I suppose. A really interesting subject, all in all, but in the end I think further study in it would not quite be my cup of tea. So long, Professor S, and thanks for all the fish.

One of the most enjoyable aspects of the class for me was some serious study of how people view and process risk - and how the media work it.

It's in this context that I figured I'd share something I found in the Ithaca Journal. As you may or may not know, Tompkins county is currently one of many embroiled in the colossal controversy over hydraulic fracturing, or hydrofracking, extraction of natural gas. It sits on top of one of the largest reserves of gas in the United States, the Marcellus shale, but state and local governments are engaged in a tug-o'-war between advocates of fracking and opponents. In context, opponents of the process are concerned about the impact that it has on unspoiled landscape - wastewater, drilling pads, and possible groundwater contamination - and advocates want it to bring jobs to the chronically depressed rural central upstate region. Also in context, both sides are partially wrong: groundwater contamination is relatively rare, and most of the wealth from exploitation accrues to the landowners with the mineral rights; the gas companies are bringing in their workers from Texas, Louisiana, and other places where fracking was developed.

Anyway, what I wanted to focus on was a recent piece in the Ithaca Journal that pooh-poohed the idea of supercritical propane fracking. It's a new technology that's designed to fracture underground porous rock without the use of water - basically, use the propane in a supercritical state, retrieve it as a gas with the (mainly methane) you harvest, and since propane at low pressure (i.e. 1-5 atm) can be easily liquefied through some basic refrigeration, you recycle your working fluid. As a technology, I think it's brilliant. In addition to all the benefits that accrue from not using large quantities of wastewater, you also have more strong incentives to stop methane leaks from gas operations, lest you lose your propane, so all-in-all it's a win-win-win. At least, from a technical perspective.

What the Ithaca Journal article did was essentially show a very basic lack of trust. It easily dismissed any claim from the gas companies that supercritical propane fracking would benefit their communities and instead engaged in some half-baked speculation that propane fracking is more dangerous because "we store propane outside in tanks." While from a technical perspective this makes me want to hit my head on a wall, I think that is a good case study on how people view risk and what the gas companies ought to do.

Before I fully begin, I have to admit that I think that the Marcellus shale is too valuable of a resource not to exploit. Unlike most green tech, green energy advocates I take a long view on changing energy infrastructure. It's pretty clear to me that we'll be using gas and coal for well over the next 100 years, and moving into fully renewable energy only after the long and slow process of changing post-industrial infrastructure. In that vein, I think Americans shouldn't just want to exploit shale gas, but that they should recognize that we must exploit it and use the energy from it (~50-200 quads in the Marcellus shale alone) to power our transition into renewables.

Now that my position is in the open, I'll tell you what I think is happening and where the gas companies screwed up. When I think about the start of this process, I think Gasland. Gasland is one of the kind of movies I absolutely hate, because from start to finish it pretty clearly has an propagandistic agenda. It reminded me of documentaries produced by Michael Moore. Regardless, it does a good job of showing growing problems with the gas boom, ones that could be expected: corner-cutting, lax safety, sloppy operations and low professionalism. In terms of the psychology of risk, I'm pretty certain that Gasland served as a so-called signal event, which caused a whole lot of people to evaluate the risk.

As soon as media outlets realized reporting on the fracking controversy realized that they could make money off of reporting on this, they began covering the controversy and every accident in amounts completely out of proportion to the severity and likelihood of the hazard. And of course, since humans assess risk based on an availability heuristic and much of that availability comes from (suprise!) radio, tv, and media, people have pretty much seriously started to overestimate the risk.

Gas companies have made it worse. Instead of treating claims of abuse seriously and instituting visible standards on environmental contamination, gas executives have steadfastly denied their involvement, or offered only basic levels of compensation. Moreover, every single appearance I've seen of an engineer in front of a (mostly hostile) audience has left me with an air of their haughtiness. Men with hard hats or men with suits show diagrams of how the Marcellus shale is far below groundwater reserves and how gas contamination of their water is not possible, but they say it as to a child of five. I can understand where they're coming from, honestly, because I know how hard it is to explain engineering to non-scientists or non-engineers. That still doesn't excuse their later behavior under heavier criticism, which is to circle the wagons, repeat the party line, and heap shit on their opponents for being undereducated.

Small wonder these Tompkins county people, who eye the money but love their land, have lost their trust in gas companies. It's so bad now that people are instinctively mistrusting technologies being brought in to benefit the community.

So what should the gas companies do? Eat humble pie. Acknowledge that even though bad things shouldn't happen, they do - and approach communities hat in hand with compensation and effusive offers to clean up. Increase standards of professionalism, stopping gas leaks and paying compensation for claims against drilling operations. And above all, approach communities as equals rather than the local tribesmen to be placated. Nothing infuriates people more. It'll take a few years, but trust from the people whose land you lease is a commodity worth that time.

Fracking bans are now in the works in France, New York is debating doing something at the state level even past its moratorium, and incorporated towns all over upstate New York are banning the practice already. For gas companies, it's turn around and realize that trust needs to be rebuilt, or lose your shirt. Ball's in their court.

Enemy Combatants and More on Higher Ed

The Economist's Will Wilkinson wrote a rather impassioned article on how he thought that America's operation against Osama bin Laden was dubious because it was conducted on foreign soil without notifying the host country (national sovereignty) and because bin Laden was unarmed.I'm going to go ahead with my gut feeling and say that he's wrong on both counts.

Back when I dabbled in philosophy, there was a special emphasis people put on gut feeling, if only because what feels right is usually indicative of some higher moral sense. Well, now I have to justify it, don't I.

From a moral perspective, the idea of killing an unarmed man is what a philosopher would call "problematic." I have a more nuanced view than most because I don't support the death penalty but have had no sympathy for bin Laden's situation. I suppose the difference is the manner and time and place of a killing. The death penalty is an execution. Its victim is someone who has already submitted to or been compelled to submit to state power. In that kind of situation, where the prisoner poses no thread, there is no reason to kill an unarmed, helpless man.

In bin Laden's situation, even if he was unarmed he did have armed men guarding him. He was actively participating in trying to harm others. No matter what he was doing at any given time, bin Laden was a threat to somebody. That he didn't fight back was more likely due to the fact that he had no opportunity to do so than anything else. And moreover, there's an argument to be made that whereas a typical wrongdoer's capture does nothing, bin Laden's life serves as a standard for other loss of life.

War in the traditional sense of nation-states fighting hasn't existed for bin Laden. But there is no doubt that he was at war with the United States (does that mean he was a sovereign over his organization? maybe). I think there is also good reason to think that the death of bin Laden would be any bit as justified as the shooting down of Admiral Yamamoto during WWII or a raid on an enemy headquarters. It's war. Whereas I'm not comfortable with classifying Guantanamo detainees as "enemy combatants" unless they actually did bear arms against the US, with bin Laden I think there's no moral trouble.

And re: sovereignty of Pakistan, let's just say Pakistan hasn't had the teeth to enforce its authority over its own territory for a while now. This is a diplomatic problem, not a moral one.

As an aside on higher education, it was brought to my attention that my focus on cost-benefit analysis is probably best put another way. There are many reasons that someone goes to college - bandwagoning, the "thing to do," actually liking learning, wanting to become a specific profession regardless of income, etc. But I think it's a pretty safe bet to apply a cost-benefit analysis to one major: Business. There's really no reason to major in business other than to make a whole lot of money. I think this is the real reason why it's less problematic of a proposition to use cost-benefit analysis for business education (as Schumpeter has) rather than higher education in general.

Tuesday, May 10, 2011

The Price of Oil Drops

Between Wednesday and Thursday of last week, the price of oil dropped precipitously. WTI spot prices dropped below $100 a barrel from a high of close to $115, though it's now again above $100. This is a pretty darned huge drop. It came pretty close on the heels of Osama bin Laden's death, too.

To me this suggests that the price rises in oil over the past couple of months have been largely speculation driven, though not necessarily for the reasons you may think. It's certainly not demand or supply driven. Supplies in Libya may have contracted, but they provided maybe 2% of world supply. It's pretty much certain that the price elasticity of supply for crude isn't that extreme. Though Libya does provide a significantly larger amount of the world's remaining light sweet crude (i.e., the good stuff), on a macro scale enough refineries are configured to run heavy sour crude nowadays that it shouldn't have affected supply overmuch anywhere except Italy, where the hapless refineries are configured to accept high-quality deliveries from Ras Lanuf. It also wasn't demand. While China has continued growing at a blazing rate, it is difficult to believe that global demand grew enough to increase prices 15% over the course of 2 months. That's a pretty derpy suggestion, in fact; spikes like that are only seen during some pretty extreme cases, like wartime.

So what we have is, I think, pretty clearly a short-term, speculative increase in the price of oil. It's pretty obvious that there were distinct triggering and ending events - rebellion in Libya and assassination of bin Laden, respectively. That doesn't necessarily mean that each phase was sustained by the triggers, however. I think there were other structural factors keeping the speculative capital in the market.

Econbrowser had some interesting analysis on the subject (http://www.econbrowser.com/archives/2011/05/lower_oil_price.html). Broadly, I'd agree with the conclusion that the precipitous price drop is also a function of the fact that after almost stagnating production for the past couple of years, supply is starting to exceed demand, albeit just a little bit. This is starting to impact inventories, driving the price down.

Obviously I don't have enough experience to know what the phase lag in between sustainably higher oil prices and supply increases ought to be, but a gap between world supply and world demand has been ridiculously high from 2001-2008. It follows from my perspective, at least, that supply is only now responding to higher price signals and driving the prices down because of one of two reasons. The first might be the lack of skilled drillers and drilling equipment, or other exogenous supply bottleneck. The second is that it's just getting harder to find enough oil to sustain production. I think both apply. It's important to note that the first bit is a problem that's been around for a while, but that it's gotten more severe as larger oil finds have been rarer and rarer.

As an aside, I went ahead and checked on something else. Unsurprisingly for me, it seems that the Brent-WTI price differential hasn't changed. The structural factors that are keeping buyers at Brent trading at higher prices than in Cushing haven't changed, and aren't likely to. Oh, the joys of a landlocked oil port with too much supply coming from Canada.

I was also thinking of talking about other oil supply trends here, but that might have to wait because I'm going to work on my thesis now.

Monday, May 9, 2011

Rent Seeking in Higher Ed

The Economist's Schumpeter columnist is having a lot of fun awakening the grumpy, overfed dragons of academia and getting them to gnash their teeth. Simply put, he's got a whole lot of people riled up about a possible "bubble" in tertiary education. The argument has a lot of different threads; also, being a business columnist, he focuses on business education. The comment threads are really amusing as they tend to involve exchanges between professionals who agree that undergrad b school education sucks and indignant b school students who drink on weeknights.

One of the reasons Schumpeter is so concerned about a possible bubble is cost inflation. Everyone knows college has gotten a whole lot more expensive in real terms. Inflation in the price of a college since 1978 has outpaced currency inflation by over 400%. A big question for me is, how the hell are colleges able to pull that off? For-profit colleges like the University of Phoenix are making a killing and not necessarily providing the best service - after all, a degree from MIT costs the same as one from U of Phoenix. Why are costs increasing so much, even at non-research, for-profit universities?

It's not a trivial question to answer. People keep going to college and paying the fees, regardless of their actual ability to pay at that time. The average college student is charged $23k a year, and much of that is taken out in loans. Student loans are non-forgivable, even in bankruptcy. There are cases emerging now of thirtysomethings with liens on their salaries to repay delinquent student debt, even as they work at minimum wage jobs.

When I think about the fundamentals of this question, I think of consumer surplus. Is the student getting more value out of a college degree than they are paying? For the past 50 years, the answer has almost certainly been yes. But now I'm not so sure. Costs are high enough that I'm wondering whether the arbitrage condition has been exceeded. But back to value.

The value of a college degree comes in the signalling value of the degree itself and the education you receive. The former comes in handy for obtaining employment, probably partially due to the reputation of your college and partially for the certification in your major (whatever it is) that it implies. The latter will save you some grief at work and give you intellectual satisfaction. Both of these, I think, are falling, while tuition costs are consistently rising. However, I think the real monetary value of the degree comes with the signalling value - let's face it, few people study for the sake of knowledge anymore.

The signal of a college degree has historically been that the bearer of ye olde diploma was
  • able to do a decent amount of work
  • certified in whatever discipline they had on the diploma
  • sharp enough to get through college
The second point is really only relevant to engineering, science, and other professional-oriented disciplines, and I don't think it's much of a problem. Any employer worth his or her salt can simply look up the accreditation of a college's program to figure out if the degree means anything. The first and third points are more interesting, however, if viewed from a historical perspective. For one thing, it's somewhat true that college has become easier. I don't mean any specific college, but college in the aggregate. For another, it's definitely true that you no longer have to be the sharpest tool in the shed to get through college. This I think is the result of a demographic trend.

In the postwar baby boomer years, the people who went to college were pretty much at the top. I don't remember and am unwilling to look up the proportion, but it was under 30% of the population. Fast forward to post-GenX, and almost 50% of the population is going to college. As the population of collegiate students has increased, the number of colleges has increased. Most of these are not community colleges. Call me elitist, but I don't think that the 50% of people who go to college today are as intelligent, on average, as the >30% who went before. It stands to reason then that a whole proliferation of second- and third-tier colleges have now sprung up to cater to these demographics. Not only do they provide lower quality education for those students who are presumably less mature, less intelligent and less motivated, but they also give degrees to them that are in many ways indistinguishable from what might be issued by a genuinely good institution. Both of these results are making a degree less worth it. Employers are beginning to catch on.

So bringing this back to the big picture, we can say two things that gave a degree value in 1950 no longer really apply. First, it's no longer a good measure of innate ability, maturity, or motivation, because the pool of graduates has been so diluted. Second, it's no longer a good signal of "this person won't need that much on-the-job training."

Now look at this from the modern student's perspective, using an unrealistically simplistic thought experiment. When s/he makes the decision to go to college, consciously or unconsciously s/he tries to factor in the benefit that could accrue. However, the historical data on the value of the college degree that the student reviews is flawed: the value of the college degree in the past (in terms of income increase, etc.) encompassed the returns both to superior ability and good education, two things which do not necessarily exist today. Furthermore, the superior ability bit applies after college too, and often cannot be isolated from the income increase data at all. So the prospective frosh goes ahead and merrily assumes a value for a college degree that is unrealistically inflated.

All that speaks to one reason I think colleges have been able to get away with providing shitty service (or virtually the same service) for such a high price: Rent-seeking. I'd be disingenuous to suggest that it's the only reason, but I'd wager its the primary driver of scams like U of Phoenix. Basically, the idea would be to keep adding the price increases to capture as many returns from people's expectations of the value of a college degree as possible. That's how so many universities can get away with this.

Of course, I think that MIT, Harvard, and others don't have this reasoning at all. Their growth in tuition is probably driven by the desire to Do More Research rather than educate, and expand at a rate beyond what their alums can provide in donations. I think that other shittier places are using the top-tier schools' price increases as a signal that they can move up too, to capture more rents.

This is just one small part of the higher education bubble argument. I'd really recommend that anyone interested in this argument go ahead and read Schumpeter's column in The Economist, but I'm going to go ahead and say that I buy it. Most of the evidence I have is anecdotal, but I have a strong suspicion that Schumpeter is right and that some time in the next decade or two college prices are going to collapse.

The other implication of this is, I think, that colleges will try harder to develop a brand to improve the signalling value of their own degrees to put themselves above the languishing generics. I predict more screwing of mildly undesirable students and more shameless self-promotion from all. Ugh.


I suppose that when someone starts a blog, it's for some combination of three reasons. The first reason is that they might want to make money off of it. Simple enough, I suppose. The second reason is that they want to keep in touch with their friends. The third is that a blog appeals to the inner sense of narcissism deep within. The method by which you titillate that sense can vary.

This of course begs the question of why I am starting a blog. I won't kid you, it's not the first time I've attempted to make an online scribble book. What's usually ended up happening with it is that I cared too much about who was reading and never found the time to write more. So this blog is going to be about me, for me, and for whoever else feels like listening in. By and large, it will only marginally be about my life and more often concerned with whatever I feel like writing about, if only to develop my own ideas. I wouldn't mind if other people read, but whatever.

So there you have it - my reason for starting this blog fall somewhere in the 2D space defined by reasons two and three above.

I'm just going to experiment with this for a while. I'm kinda sorta entering a new life stage here. In three weeks, I eclose from my pupal shell, and move to my first real job. In the mean time, I have to finish my thesis, wrap things up here, and somehow still enjoy the last few weeks of freedom from responsibility that I have. Not that I won't be working, or spending some of my time thinking about pipe materials, philosophy, or whatever else comes to mind... and that's where this comes in. I figure if I can quit rambling and get my thoughts out in writing, it beats navel gazing. Also if I post enough, I'll share this with my friends and they can all tell me what a retard I am.

Okay, enough talk. Here goes.