Lots of papers today reported that Iran's oil industry is slated for collapse in about ten years. This is from USAToday:
Iran earns about $50 billion a year in oil exports. The decline is estimated at 10% to 12% annually. In less than five years exports could be halved and then disappear by 2015, Stern predicted.He said oil production is declining and both gas and oil are being sold domestically at highly subsidized rates. At the same time, Iran is neglecting to reinvest in its oil production.
Iran produces about 3.7 million barrels a day, about 300,000 barrels below the quota set for Iran by the oil cartel, the Organization of Petroleum Exporting Countries.
The shortfall represents a loss of about $5.5 billion a year, Stern said. In 2004, Iran's oil profits were 65% of the government's revenues.
"If we look at that shortfall, and failure to rectify leaks in their refineries, that adds up to a loss of about $10 billion to $11 billion a year," he said. "That is a picture of an industry in collapse."
The AP article is based on a forthcoming paper by Roger Stern, an Economist with the Department of Geography and Environmental Environmental Engineering at John Hopkins.
Notably, the paper is not about Iran's imminent collapse, but rather about the error of some long-standing assumptions about oil scarcity and U.S. national security. The AP barely conceals an agenda to stop any military action against Iran in conjunction with its nuclear program. In some version of the article, its even explicitly stated that Iran may in fact need nuclear reactors as a result of its burgeoning domestic energy needs and its declining production.
Someone needs to put the AP out of business before it writes again.
The paper is a bit dense with formula representations of economic relationships, so let me condense some of his very good points:
The oil weapon is a myth, and yet our foreign policy has been based on it for almost a century. in October 1973 Saudi threatened the U.S. with a 5% per month reduction in supply if Israel did not return to the pre-1967 border and a selective embargo of the U.S. and Holland. That lasted a month.
Producers did not take into account third-party sellers. Saudi had to sell oil, because that's what makes it economy grow. The fungible nature of the market makes it impossible to selectively punish certain nations, and cuts in production are easily made up by other producers who are positioned to enjoy higher prices and higher production. The Saudis only served to shoot themselves in the foot, and it took many years for its market share to recover.
Stern then demonstrates the mechanism by which OPEC controls inventories.
The chasm that separates capacity cost from investment returns
suggests that the cartel exerts market power by investment restraint.That's particularly relevant because while the AP is characterizing the Iranian disinvestment in its oil infrastructure as a picture of an industry in collapse, Stern's conclusion is that this is part and parcel of a deliberate strategy to control market price for oil. In other words, Iran shorts its quote, the price rises so that revenues increase or remain equal despite the reduced production. The investment is instead redirected towards the nuclear program. This is not unlike the familiar corporate practice of mass layoffs to boost the stock price--the lower wage costs make the bottom line look better and the stock price rises--a twofer. The problem with the AP article is that it assumes a straight-line trend, but the reality is that Iran can invest in its oil infrastructure at any time. The lag between investment and production is quite short these days, so an investment in 2007, could produce a return in 2009. In the meantime, Iran boosts the cash-on-hand needed for its nuclear program.
Stern also comments on foreign policy:
...the rationale for Gulf force projection was no longer to protect supply, as is still commonly supposed, but to preempt the superpower that would emerge if one firm-state could aggregate monopoly rents of its neighbors via wars of seizure.Although a reasonable policy in most ways, Wolfowitz has one outstanding flaw. While force projection has deterred wars of seizure, in so doing it inadvertently guarantees an orderly market for wtcOPEC (wealth transfer cumulative OPEC) collections. Wolfowitz thus protects a status quo in which monopolist firm-states can accumulate wt (wealth transfer) sufficient to acquire weapons that confer near-superpower status, even without prerequisite wars of seizure. The U.S. has thereby been drawn to the web of market power as its protector, while within the protected states wt underwrites novel threats.
The novel threats in this case being Saudi Arabia's almost singular support for radical Islam.
Ironically, the use of the oil weapon would probably help us in the war on terror since 78% of Saudi GDP derives from oil sales. Even a marginal decrease in revenues would have profound affects on the Saudi economy and likely destabilize the regime, not to mention cut off the money supply to al Qaeda. Conversely, our current foreign policy insures the status quo, and thus funding for radical Islam.
The bottom line for Stern is that we needn't fear the oil weapon and therefore it doesn't not need to constrain our range of action as it concerns the Gulf states. While U.S. foreign policy does need to interdict the rise of a Gulf state superpower, it also needs to concern itself with ways of breaking the market power of OPEC. The most obvious way of doing this is simply pitching our irrational fear of supply interruptions. Ultimately, they need us far more than we need them.
















Comments (4)
MANDATORY RENEWABLE ENERGY – THE ENERGY EVOLUTION –R1
In order to insure energy and economic independence as well as better economic growth without being blackmailed by foreign countries, our country, the United States of America’s Utilization of Energy sources must change. Our continued dependence on fossil fuels could and will lead to catastrophic consequences.
The federal, state and local government should implement a mandatory renewable energy installation program for residential and commercial property on new construction and remodeling projects with the use of energy efficient material, mechanical systems, appliances, lighting, etc. The source of energy must by renewable energy such as Solar-Photovoltaic, Geothermal, Wind, Biofuels, etc. including utilizing water from lakes, rivers and oceans to circulate in cooling towers to produce air conditioning and the utilization of proper landscaping to reduce energy consumption.
The implementation could be done on a gradual scale over the next 10 years. At the end of the 10 year period all construction and energy use in the structures throughout the United States must be 100% powered by renewable energy.
In addition, the governments must impose laws, rules and regulations whereby the utility companies must comply with a fair “NET METERING” (the buying of excess generation from the consumer), including the promotion of research and production of “renewable energy technology” with various long term incentives and grants. The various foundations in existence should be used to contribute to this cause.
A mandatory time table should also be established for the automobile industry to gradually produce an automobile powered by renewable energy. The American automobile industry is surely capable of accomplishing this task.
This is a way to expedite our energy independence and economic growth. It will take maximum effort and a relentless pursuit of the private, commercial and industrial government sectors commitment to renewable energy – energy generation (wind, solar, hydro, biofuels, geothermal, energy storage (fuel cells, advance batteries), energy infrastructure (management, transmission) and energy efficiency (lighting, sensors, automation, conservation) in order to achieve our energy independence.
Jay Draiman
Northridge, CA. 91325
12-28-2006
P.S. I have a very deep belief in America's capabilities. Within the next 10 years we can accomplish our energy independence, if we as a nation truly set our goals to accomplish this.
I happen to believe that we can do it. In another crisis--the one in 1942--President Franklin D. Roosevelt said this country would build 60,000 [50,000] military aircraft. By 1943, production in that program had reached 125,000 aircraft annually. They did it then. We can do it now.
Posted by Jay Draiman | December 28, 2006 7:32 PM
Posted on December 28, 2006 19:32
Energy Independence begins with Energy efficiency - It's cheaper to save energy than to make energy (“Out of Oil, Here Comes the Sun”)
Why high oil prices haven't cut demand.
As oil at $100 and over going to $200 .
Bigger economic incentives needed to conserve energy
Driving habits little changed by gas prices
May 12: American motorists continue to fork over more money at the pump and are not changing their driving behavior despite rising fuel prices.
Despite higher fuel prices, demand hasn't fallen as it did after the 1970s oil shocks. Energy researchers say it will take greater economic incentives to boost energy efficiency and cut consumption. Accelerate the implementation of renewable energy generation, Solar, Wind, etc..
Updated May 17, 2008
MANDATORY RENEWABLE ENERGY – THE ENERGY EVOLUTION –R31
by Jay Draiman, Energy Consultant
Sustainability - "We strive to meet the needs of the present generation without compromising the ability of future generations to meet their own needs".
Today’s energy industry is perhaps the world’s most powerful. Energy is the basis of this entire world’s wealth, and for perhaps earth’s entire history, the sun’s energy has fueled all ecological and economic systems. If early humans did not learn to exploit new sources of energy, humankind would still be living in the tropical forests. Without the continual exploitation of new energy sources, there would have been no civilization, no Industrial Revolution and no looming global catastrophe.
In order to insure energy and economic independence as well as better economic growth without being blackmailed by foreign countries, our country, the United States of America’s Utilization of Energy Sources must change.
"Energy drives our entire economy.” We must protect it. "Let's face it, without energy the whole economy and economic society we have set up would come to a halt. So you want to have control over such an important resource that you need for your society and your economy." The American way of life is not negotiable.
Our continued dependence on fossil fuels could and will lead to catastrophic consequences.
The federal, state and local government should implement a mandatory renewable energy installation program for residential and commercial property on new construction and remodeling projects, replacement of appliances, motors, HVAC with the use of energy efficient materials-products, mechanical systems, appliances, lighting, insulation, retrofits etc. The source of energy must be by renewable energy such as Solar-Photovoltaic, Geothermal, Wind, Biofuels, Ocean-Tidal, Hydrogen-Fuel Cell etc. This includes the utilizing of water from lakes, rivers and oceans to circulate in cooling towers to produce air conditioning, increase the use of outside air for ventilation and cooling (which also reduces indoor pollution and healthier), and the utilization of proper landscaping to reduce energy consumption. (Sales tax on renewable energy products and energy efficiency should be reduced or eliminated) (Construct new transmission lines and renewable energy zones) (We should also utilize solar energy for ocean water desalinization to alleviate the increasing water shortages – the scientists are claiming ocean levels are elevating – population, economic advancement and technology are increasing which increases demand)
“OUT OF OIL, HERE COMES THE SUN” SOLAR ENERGY
The implementation of mandatory renewable energy could be done on a gradual scale over the next 10 years. At the end of the 10 year period all construction and energy use in the structures throughout the United States must be 100% powered by renewable energy. (This can be done by amending building code)
In addition, the governments must impose laws, rules and regulations whereby the utility companies must comply with a fair “NET METERING” (the buying of excess generation from the consumer at market price), including the promotion of research and production of “renewable energy technology” with various long term incentives and grants. The various foundations in existence should be used to contribute to this cause.
A mandatory time table should also be established for the automobile industry to gradually produce an automobile powered by renewable energy. The American automobile industry is surely capable of accomplishing this task. As an inducement to buy hybrid automobiles (sales tax should be reduced or eliminated on American manufactured automobiles).
This is a way to expedite our energy independence and economic growth. (This will also create a substantial amount of new jobs). It will take maximum effort and a relentless pursuit of the private, commercial and industrial government sectors’ commitment to renewable energy – energy generation (wind, solar, hydro, biofuels, geothermal, energy storage (fuel cells, advance batteries), energy infrastructure (management, transmission) and energy efficiency (lighting, sensors, automation, conservation) (rainwater harvesting, water conservation) (energy and natural resources conservation) in order to achieve our energy independence.
For the benefit of mankind, maintain the quality of life and preserve the tranquility of world population. Water resources must be preserved to sustain humanity. We should utilize solar and or other source of renewable energy to operate desalinization projects from the oceans. As world population increases the scarcity of water will become a cause for conflict, unless we take steps now to develop other sources of water for drinking, rainwater harvesting and graywater utilization.
To preserve the future generations sustainability, we should look into urban farming – vertical farming. The term "urban farming" may conjure up a community garden where locals grow a few heads of lettuce. But some academics envision something quite different for the increasingly hungry world of the 21st century: a vertical farm that will do for agriculture what the skyscraper did for office space. Greenhouse giant: By stacking floors full of produce, a vertical farm could rake in $18 million a year.
I believe what America needs are cool headed government leaders who understand how markets function and can work with consumers, voters and oil industry leaders to develop a viable energy strategy that will help and not hinder as our nation transitions to our new energy reality.
For German Homeowners Renewable Energy is No Longer a Choice
All new homes built in Germany from January 1st 2009 will be required to install renewable energy heating systems under a new law called the Renewable Energies Heating Law
"To succeed, you have to believe in something with such a passion that it becomes a reality."
Jay Draiman, Energy Consultant
Northridge, CA. 91324
January 31, 2008
P.S. I have a very deep belief in America's capabilities. Within the next 10 years we can accomplish our energy independence, if we as a nation truly set our goals to accomplish this.
I happen to believe that we can do it. In another crisis--the one in 1942--President Franklin D. Roosevelt said this country would build 60,000 [50,000] military aircraft. By 1943, production in that program had reached 125,000 aircraft annually. They did it then. We can do it now.
"The way we produce and use energy must fundamentally change."
The American people resilience and determination to retain the way of life is unconquerable and we as a nation will succeed in this endeavor of Energy Independence.
The Oil Companies should be required to invest a substantial percentage of their profit in renewable energy R&D and implementation. Those who do not will be panelized by the public at large by boy cutting their products.
Solar energy is the source of all energy on the earth (excepting volcanic geothermal). Wind, wave and fossil fuels all get their energy from the sun. Fossil fuels are only a battery which will eventually run out. The sooner we can exploit all forms of Solar energy (cost effectively or not against dubiously cheap FFs) the better off we will all be. If the battery runs out first, the survivors will all be living like in the 18th century again.
Every new home built should come with a solar package. A 1.5 kW per bedroom is a good rule of thumb. The formula 1.5 X's 5 hrs per day X's 30 days will produce about 225 kWh per bedroom monthly. This peak production period will offset 17 to 2
4 cents per kWh with a potential of $160 per month or about $60,000 over the 30-year mortgage period for a three-bedroom home. It is economically feasible at the current energy price and the interest portion of the loan is deductible. Why not?
Title 24 has been mandated forcing developers to build energy efficient homes. Their bull-headedness put them in that position and now they see that Title 24 works with little added cost. Solar should also be mandated and if the developer designs a home that solar is impossible to do then they should pay an equivalent mitigation fee allowing others to put solar on in place of their negligence. (Installation should be paid “performance based”).
Installation of renewable energy and its performance should be paid to the installer and manufacturer based on "performance based" (that means they are held accountable for the performance of the product - that includes the automobile industry). This will gain the trust and confidence of the end-user to proceed with such a project; it will also prove to the public that it is a viable avenue of energy conservation.
Installing a renewable energy system on your home or business increases the value of the property and provides a marketing advantage. It also decreases our trade deficit.
Nations of the world should unite and join together in a cohesive effort to develop and implement MANDATORY RENEWABLE ENERGY for the sake of humankind and future generations.
The head of the U.S. government's renewable energy lab said Monday (Feb. 5) that the federal government is doing "embarrassingly few things" to foster renewable energy, leaving leadership to the states at a time of opportunity to change the nation's energy future. "I see little happening at the federal level. Much more needs to happen." What's needed, he said, is a change of our national mind set. Instead of viewing the hurdles that still face renewable sources and setting national energy goals with those hurdles in mind, we should set ambitious national renewable energy goals and set about overcoming the hurdles to meet them. We have an opportunity, an opportunity we can take advantage of or an opportunity we can squander and let go,"
Solar energy - the direct conversion of sunlight with solar cells, either into electricity or hydrogen, faces cost hurdles independent of their intrinsic efficiency. Ways must be found to lower production costs and design better conversion and storage systems.
Disenco Energy of the UK has announced it has reached important
milestones leading to full commercialization, such as the completion of
field trials for its home, micro combined heat and power plant (m-CHP).
The company expects to begin a product roll out in the second quarter of
2008.
Operating at over 90 percent efficiency, the m-CHP will be able to
provide 15 kilowatts of thermal energy (about 50,000 Btu’s) for heat and
hot water and generate 3 kilowatts of electricity. The m-CHP uses a
Stirling engine generator and would be a direct replacement for a home’s
boiler.
Running on piped-in natural gas the unit would create some independence
from the power grid, but still remain connected to the gas supply
network.
Whereas heat is supplied only when the generator is running (or
conversely electricity is generated only when heat is needed) a back-up
battery system and heavily insulated hot water storage tank seem
eventual options for more complete energy independence.
FEDERAL BUILDINGS WITH SOLAR ENERGY – Renewable Energy
All government buildings, Federal, State, County, City etc. should be mandated to be energy efficient and must use renewable energy on all new structures and structures that are been remodeled/upgraded.
"The government should serve as an example to its citizens"
A new innovative renewable energy generating technology is in development. The idea behind Promethean Power came from Matthew Orosz, an MIT graduate student who has worked as a Peace Corps volunteer in the African nation of Lesotho. Orosz wanted to provide electric power, refrigeration, and hot water to people without electricity. He and some MIT colleagues designed a set of mirrors that focus sunlight onto tubes filled with coolant. The hot coolant turns to pressurized vapor, which turns a turbine to make electricity. The leftover heat can be used to warm a tank of water and to run a refrigerator or an air conditioner, using a gas-absorption process that chills liquid ammonia by first heating it.
IS TECHNOLOGY BEING HELD BACK
New Solar Electric Cells - 80% efficient
Mr. Marks says solar panels made with Lepcon or Lumeloid, the materials he patented, ... Most photovoltaic cells are only about 15 percent efficient. ...
In late July 2007 University of Delaware researchers Honsberg, 40, and Barnett, 67, set a world record for solar efficiency, converting 42.8% of the sun's radiation into electricity with their prototype cell. That's almost three times as efficient as commercial solar cells. "We think we can do 50%," says Barnett. He and Honsberg are working to build practical devices by 2010, with support from the U.S. military and an industrial group led by DuPont
A major increase in daily petroleum output is deemed essential to meet U.S. and international oil requirements in 2020, and so we should expect recurring oil shortages and price increases. Only by expediting the diminishing our day-to-day consumption of petroleum and implementing of efficiency and renewable energy policy can we hope to reduce our exposure to costly oil-supply disruptions and lower the risk of economic strangulation.
Quick Facts
Energy is vital to every sector of the U.S. economy. As our economy grows, the demand for energy rises.
Total energy consumption is projected to increase 35 percent by 2030.
Energy-efficiency improvements have played a major role in meeting national energy needs since the 1970s, relative to new supply.
ULTRACAPACITORS - But what if you could harness a technology that would enable you to drive 500 miles round-trip on a 5-minute charge?
That's the promise of U.S. Patent No. 7,033,406 which promises, maybe even threatens, to do away with the internal combustion engine, and the traditional car battery, all in one swoop.
The patent is the property of Austin-based startup called EEStor, which touts "technologies for replacement of electrochemical batteries." In layman's terms, that means you could use the EEStor technology to drive from Boston to Philly and back without a drop of gasoline.
The Vertical Farm is a concept that seeks to address the major concerns of the environmental degradation of the modern city by composting, recycling waste and farming in a standard tenement building. The "ecological footprint" of the city will be lessened and therefore the city will become a more sustainable setting. The reduction of wastes and the production of foods for consumption will in turn increase the quality of life for all those within the city and its surrounding area. The reduction in transportation of both wastes and of food products and the use of abandoned buildings will directly increase the quality of the urban settling.
Inverse Offshore Pump Accumulation station (IOPAC). The concept is a relative (and sort of the inverse) of onshore pumped storage hydroelectric facilities where water is pumped to high elevation ponds with surplus power, then released when needed for peak power demands on the grid.
THE BATTLE FOR YOUR ELECTRIC BILL Private-equity buyout funds are targeting electric power companies in deals that generate massive debt, stop the building of better plants and jack up rates. They take the profits and stick consumers with the cost.
In three detailed future scenarios, the SRA describes concrete outcomes of sustainable chemistry in health care, energy efficient housing and industrial bioprocesses.
The energy-generating home scenario demonstrates how smart materials and energy management can, for instance, help reduce heat loss, improve energy efficiency and transform kinetic energy into electricity. These technologies will turn tomorrow’s home into an independent mini power plant capable of exceeding its own energy requirements.
Personalized health care to meet the growing demands of an ageing society are another application of SusChem’s SRA. Using future nano and biotechnologies and materials, sustainable chemistry will help accelerate intervention using remote monitoring and intervention systems, improve diagnostics through advanced medical imaging techniques, and reduce the intrusiveness of the medical treatment overall.
A Guide for the Survival of Humankind, and Improving the World, Society, and Yourself!
Yet who can the world trust to be idealistic and moral enough to help all of humanity and the environment, and at the same time, be practical enough to make extremely difficult decisions that can and will harm a great deal of people?
STEP INTO THE LIGHT – AND OUT TO THE WORLD.
THE NEW DAWN OF SOLAR
A California firm “Nanosolar of San Jose” says it is producing solar panels for 30 cents per watt. If true, then a power plant made from these solar panels should produce electricity cheaper than a coal plant.
Nanosolar’s cells use no silicon, and the company’s manufacturing process allows it to create cells that are as efficient as most commercial cells for as little as 30 cents a watt. “You’re talking about printing rolls of the stuff—printing it on the roofs of 18-wheeler trailers, printing it on garages, printing it wherever you want it,” says Dan Kammen, founding director of the Renewable and Appropriate Energy Laboratory at the University of California at Berkeley. “It really is quite a big deal in terms of altering the way we think about solar and in inherently altering the economics of solar.”
IBM Planning to Bring Solar Costs to $2 / W - Friday, 16 May 2008
IBM) today announced a research breakthrough in photovoltaics technology that could significantly reduce the cost of harnessing the Sun's power for electricity.
By mimicking the antics of a child using a magnifying glass to burn a leaf or a camper to start a fire, IBM scientists are using a large lens to concentrate the Sun’s power, capturing a record 230 watts onto a centimeter square solar cell, in a technology known as concentrator photovoltaics, or CPV. That energy is then converted into 70 watts of usable electrical power, about five times the electrical power density generated by typical cells using CPV technology in solar farms.
Energy Recovery Ventilators (ERV). ERV is the technology that completes an HVAC system. The "V" in HVAC can no longer be ignored and higher ventilation loads require a new design approach. Whether you are a home owner, business owner, building administrator or engineer, it is essential to realize the importance of indoor air quality (IAQ) and fresh air ventilation. It reduces the cooling load and saves energy.
Jay Draiman, Energy Consultant
Northridge, CA 91324
Email: renewableenergy2@msn.com
Posted on: 5/17//2008
Posted by Jay Draiman | May 18, 2008 3:17 PM
Posted on May 18, 2008 15:17
There is a thread of naivete running through this excitement over new energy technologies and conservation.
The difference between a promising idea and a mature technology is like the grand canyon--unbelievably big.
There is no doubt that the future holds some really promising technologies that will reduce, perhaps even eliminate our dependance on fossil fuels for transportation--but that day is not yet come.
What should we do in the meantime?
The bottom line is that the world runs on oil and the Democrat's notion that we can just shut off the tap and by some miracle we'll all be driving fusion-powered flying cars is just ridiculous.
Posted by Mick Stockinger | May 20, 2008 6:35 PM
Posted on May 20, 2008 18:35
Our war for energy independence and economic sustainability
The US government and other governments are not serious about energy efficiency and renewable energy development and implementation – they are too busy playing politics and capitulating to the Oil Companies.
IT is time to get series to avert an economic catastrophe – I hope it is not too late
The world needs to invest $50 trillion in energy in coming decades, building some 1,400 nuclear power plants and vastly expanding wind power, solar power, geothermal energy in order to halve greenhouse gas emissions by 2050, according to an energy study released Friday.
The report by the Paris-based International Energy Agency envisions an "energy revolution" that would greatly reduce the world's dependence on fossil fuels while maintaining steady economic growth.
"Meeting this target of 50 percent cut in emissions and replacing fossil fuel represents a formidable challenge, and we would require immediate policy action and technological transition on an unprecedented scale," IEA Executive Director Nobuo Tanaka said.
The scenario for deeper cuts would require massive investment in energy technology development and deployment, a wide-ranging campaign to dramatically increase energy efficiency, and a wholesale shift to renewable sources of energy.
Assuming an average 3.4 percent global economic growth over the 2010-2050 period, governments and the private sector would have to make additional investments of $50 trillion in energy, or 1.2 percent of the world's gross domestic product, the report said.
That would be an investment more than three times the current size of the entire U.S. economy.
In addition, the world would have to construct 38 new nuclear power plants each year, and wind-power turbines would have to be increased by 18,000 units annually, solar energy output would have to be increased 20 fold every year.
Let us not forget as we are increasing the use of renewable energy and energy efficiency – the world population is increasing – the demand for energy by advancement in technology worldwide is also increasing. We have to take these factors into account.
Oil is going to hit at least $200 per barrel, gasoline at the pump will hit $6 or more per gallon, in some countries it is already $10 per gallon.
Most of the money would be in the commercialization of energy technologies developed by governments and the private sector.
"If industry is convinced there will be policy for serious, actions for accelerated development of renewable energy and efficiency, then these investments will be made by the private sector."
People are hurting financially and economically, this must end, we should strive for a thriving economy with new technology for renewable energy and efficiency.
We have the technology and knowhow let us stop playing politics – unite our people and our nation in a common goal to avert an economic disaster and maintain our quality of life for generations to come.
Let us serve as an example to the rest of the world.
Jay Draiman, Energy Analyst – June 8, 2008
Posted by JaJy Draiman, Energy Analyst | June 8, 2008 11:52 AM
Posted on June 8, 2008 11:52