Sunday, December 7, 2014

Oil resource needs led to Japan's Pearl Harbor attack on Dec 7, 1941

December 7 is one of those days that are supposed to live in Infamy, because of the surprise Japanese attack on Pearl Harbor on that day in 1941.  In school we are taught Japan's intention was to ensure the U.S. didn't enter the war, but that instead they woke a sleeping giant and that giant won the war, turning the tide of battle not only in the Pacific but in Europe.  What if that's not the whole story, and that instead what instigated Japan's attack was a skirmish in the global Oil War?

Pearl Harbor, October 1941 (Wikimedia)
Fossil Oil is an extremely energy dense substance full of highly valuable chemicals, and for the last 150+ years its presence has caused a number of problems for humanity.  One of which is wars fought for control of or access to fossil oil resources.

On this day of remembrance of December 7, 1941, it's useful to revisit how fossil oil supply agreements caused Japan to launch that infamous attack on the U.S.

Japan didn't have the indigenous fossil oil supplies necessary to fuel its war machines.  Instead, Japan imported its oil from the United States.

In the Summer of 1941, Pres. Roosevelt froze Japan's assets in the U.S. forcing Japan into having to secure licenses for each shipment of goods (including oil) from the U.S. to Japan.  That move gave the U.S. leverage over Japan's whole operation, but Roosevelt didn't use that lever to reign in Japan's ambitions.  However, Japan sought to secure a supply of fossil oil that was outside of U.S. control.

Japan wanted to invade the Dutch East Indies, because of its rich oil deposits, and had previously invaded Indochina seeking to cut off transportation routes to China.  To counter these moves the U.S. moved the Pacific Fleet from San Diego to Hawaii and beefed up its presence in the Philippines.

Japan's expansion into South-East Asia (Indochina a.k.a. Vietnam, and the Dutch East Indies) left them vulnerable to the U.S. military, which wasn't a problem so long as Japan and the U.S. weren't at war with each other.  However, Japan's expansion caused Roosevelt to warn against making further moves.  The reality for Japan was that without a source of fossil oil, their war machine would have ground to a halt by the end of 1941.

During the Summer of 1941, the U.S. did cease oil exports to Japan putting pressure on Japan to do something.  Either pull back or move forward into South East Asia.

U.S.S. Arizona burning after the attack
The attack on Pearl Harbor was meant to disable the Pacific Fleet preventing the U.S. from taking any significant action in the Pacific for awhile.  That would leave Japan free to secure oil supplies in the Dutch East Indies, and perhaps the whole war would be over before the U.S. could mount a response.

The U.S. response that occurred is well documented elsewhere.  It's safe to say that Japan underestimated America's ability to respond, given the subsequent events.  What I want to focus on is the oil supply and oil war aspects to this story.

It's clear from this history (thanks to Wikipedia and an article on Salon for help) it's clear that Japan's access to fossil oil was critical to their chances.

It wasn't just Japan whose war-making plans were dependent on fossil oil resources.  The same held true for Germany and Italy.  One of Germany's first moves was to make a beeline for Romania, a country with significant fossil oil supplies.  The conquering of Romania was followed by making a beeline for the Caspian Sea region, and the significant oil supplies in that area.  And, as we all know, that left German forces vulnerable to the Russian Winter, dooming Germany's over-stretched war effort.  I haven't checked to be sure, but it's likely the German/Italian foray's into North Africa was to secure those fossil oil supplies as well (Libya, Algeria, etc still are rich in oil today).

This seems obvious once you think about it -- military forces need gasoline and diesel fuel to power the war machines.  That makes fossil oil access a strategic war asset.

Oil is humanity's primary transportation fuel - at this time.  That means warships, warplanes, tanks, all the war machines, are powered by Oil.  Well... the U.S. and certain other countries have been building nuclear powered warships for some time, perhaps to give the war machine some independence from the fossil oil strategic vulnerability.

But it's not just the war machine that has to be kept supplied.  It's the economy back home, because a country has to continually resupply its military forces to keep their war going.  Again, modern economies are powered by Oil.  That makes supply of fossil oil to the home country a strategic war asset as well.

That makes control over oil fields, oil refineries, and so forth, a vital target for any war plans in the modern era.

For example - today's grave threat to the peace is the Islamic State - and IS's independence and ability to act on its own is due to their control of oil fields in the area that's theoretically Eastern Iraq.  IS's sale of oil from those fields is funding their war effort.

Another example is that the first act of American troops entering Baghdad in April 2003 was to surround and protect the Oil Ministry and Oil fields.  They didn't protect the national museums against looters, museums containing artifacts from the earliest era's of human history.  (the Cradle of Civilization was in the land now known as Iraq)  Somehow those artifacts weren't worth protecting, but the oil fields were.

As long as our economies and war machines are dependent on fossil oil, we'll keep fighting oil wars.

As oil supplies are starting to dwindle, that should mean an ever-higher urgency to fight over access to fossil oil supplies of all kinds.

Coincidentally, or not, the U.S. military top brass have been talking openly for years of the need to disentangle the U.S. from dependency on fossil oil fueled machines.  It's not for any environmental purpose, but because of the strategic vulnerability we've been discussing.

Ending fossil fuel dependency will mean we humans have one less thing to fight over.  But would that mean an end to all war?  Unfortunately ....

Saturday, December 6, 2014

US failed policies in Iraq War created today's Islamic State - making the anti-IS "war" a phase of the global Oil War

The Islamic State is an egregiously violent movement that's looking to overthrow governments in Syria, Iraq, Jordan and elsewhere.  It's a Sunni dominated version of Islamic governance that's proven itself quite willing to commit genocidal acts.  But is the U.S. at all responsible for its creation or did the Islamic State come into being on its own?  Attached below is a video interview with Mark Danner, a journalist who predicted in mid-2003 that, because of flawed policies undertaken by the Bush43 Administration in Iraq, the insurgency would grow into something like the Islamic State.

Before watching this it's useful to review some history - and why is this a topic for The Long Tail Pipe.

WHY did the U.S. invaded Iraq?  It was to ensure Western Oil Companies would have access to Iraq's oil reserves.  Hence, the Iraq invasion was one of the episodes in the decades-long Oil War between the major powers.

If Danner is correct, the Islamic State is a result of America's addiction to oil, and the ongoing oil war resulting from that addiction.

The U.S. invasion of Iraq in March 2003 didn't have anything to do with the Sept. 11, 2001 attack in New York City.  The Iraqi government had nothing to do with that attack, it was perpetrated by Saudi nationals living in Afghanistan.  There was no presence of al Qaeda in Iraq before the U.S. invasion.  The weapons of mass destruction, the chemical weapons, etc, that Colin Powell went to the UN Security Council in Feb. 2003, promising that Iraq was doing all that dangerous stuff?  It didn't exist, and I believe the U.S. Government knew that stuff didn't exist, putting Colin Powell into the position of lying to the Security Council.

Would it be too much of a distraction to ask which is the worse lie?  "I did not have sex with that woman" or the Bush/Cheney/Rumsfeld/Powell/etc warnings of mushroom clouds and horrific chemical or biological weapons?  Let's not get distracted by that - we have a big problem present right now, one that stems from that period.

The point I want make is that the March 2003 invasion of Iraq had nothing to do with the publicly stated reasons.  No mushroom clouds or chemical weapons were possible because Iraq wasn't doing any of the things Powell et al claimed was happening.  But, during the 1990's the "Neocon's" (Cheney, Rumsfeld, et al, who were to enter service in the Bush Administration) were pushing for a Pax Americana plan.  That with the Fall of the Soviet Union, America was the remaining Superpower, and that it was our Moral Duty to use our Superpowers to fight evil and impose peace all around the world.  Or, more specifically, use our might to impose a New World Order that benefitted the needs of Western Powers such as the U.S.

One of those plans was to first topple the Iraq government and establish a moderate Democracy in the center of the Middle East.  By doing so, moderate democratic ideals would radiate out to the rest of the Middle East.  After regime change in Iraq, the next targets would be either Iran or Syria depending on how the chips fell, again replacing unfriendly regimes with moderate Democracies.  As if you could install democracy by pointing guns at people.

An additional purpose for invading Iraq was that Iraq has/had the 2nd largest oil reserves in the world.  But those oil reserves weren't being efficiently exploited, because of government controlled oil companies, and the Western powers wanted to change Iraq's oil laws so that Western oil companies could freely operate in Iraq.

Now we can start talking about Mark Danner's thesis ... that he wrote in July 2003, publishing it in the New York Review of Books.  (at around the same time I wrote a long blog post fact-checking Colin Powell's UN Security Council appearance, and called for the Impeachment of GW Bush)

His claim:  American policy during the Iraq War in many ways effectively helped incite what was then an emerging insurgency.  That insurgency could have fizzled, but for certain things that Danner warned would give that insurgency free reign, and which did so as those things indeed happened.

Some of his points:

  • There was a de-Baathification of Iraq, and a disbanding of Iraq's army.  That put 400,000+ soldiers and a bunch of powerful people outside the government, leaving them to their own devices, and shamed by having been fired.  
  • There was no effort made to heal the Sunni/Shia split.  Instead it was expected the Sunni minority who had previously led the government would willingly accept a Shia majority government without a fight.
  • Torture of Iraqi's by U.S. soldiers at Abu Ghraib and elsewhere - electrical shock - water boarding - etc - that gave al Qaeda the images for recruitment posters.  It gave the people the righteous anger that this invader, the U.S., was harming Iraq and had to be expelled.

Misstep after misstep occurred in Iraq.  The fight went on for several very violent years in Iraq, while we at home went on with shopping (as Bush43 told us to do on Sept. 12, 2001) and inventing newfangled distractions (opiates for the masses) like Facebook or wardrobe malfunction scandals.

The people who staffed al Qaeda In Iraq were the former army and political leaders who'd been pushed out.  While the insurgency died down thanks to the "surge", when the U.S. pulled out of Iraq a couple years ago that left the insurgency free to operate.  Eventually they became too violent for al Qaeda's taste, and the Islamic State was born.

Wednesday, December 3, 2014

California focusing on workplace and apartment/condo charging, ignoring public fast charging infrastructure

There are big dreams and goals for electric car adoption in California, around the U.S. and around the world.  California's goals are something like 1 million plug-in EV's by 2025 which seems to me to be achievable, unless this dalliance with fuel cell vehicles causes the state to undermine battery EV's, or unless the falling price for gasoline causes a big exodus away from electric vehicles.  Hopefully neither of those EV's-will-fail fears will pan out, and electric vehicle adoption will continue growing purely on their own merits - fuel cost savings, lower environmental footprint, and a host of other benefits.  The question then is - what should the electric vehicle recharging infrastructure look like?

Going by a conference call held today, sponsored by the Antelope Valley Clean Cities group, it might unfortunately be focused on workplace charging and home-based charging, with short shrift given to public charging.

EV Charging Infrastructure Priorities
Source: Mark Duvall, EPRI
The conference call gave several presenters the chance to discuss the challenges in electric vehicle charging infrastructure.  Each talked of how two areas are the top priority :- Workplace Charging, and charging for Multi-Unit-Dwelling residents.  And of those two it was Workplace Charging deployment that garnered the bulk of the attention.

In my mind these priorities are screwed up.   Yes those two areas are important, but so too is public charging.

I imagine their reasoning hits on these points:

  • Single family home dwellers can easily get a charging station at home.  Therefore those people don't need any government help other than streamlining permitting procedures, and maybe a tax break.
  • Employers need serious convincing to offer charging stations to employees.
  • Multi-Unit-Dwelling residents have a huge barrier to charging at home - reluctant landlords.
  • The current crop of electric cars are just city cars with paltry 100ish mile ranges, so therefore nobody in their right mind will take one on a long trip, and therefore public charging isn't all that interesting.
Most of this I wholly agree with, but I hugely disagree with that last point.

I currently live in an apartment complex where the landlord firmly says "no charging infrastructure".  It's not even feasible to charge the car guerrilla style - running an extension cord out to the car, because the place immediately in front of the apartment is a fire lane, and the extension cord therefore would run across the parking lot.  

There are lots of apartment and condo and townhouse dwellers who cannot charge at home.  Let me tell you from personal experience that the inability to charge at home is inconvenient but not an insurmountable challenge to electric vehicle ownership.

The key solution in today's context is public FAST CHARGING.  Public level 2 charging is nearly useless for someone in my situation because of the many hours required for level 2 recharging.  But, it's easy to sit at a fast charging station for a half hour and blop through emails on my iPad while doing so.

In other words, as an apartment dwelling electric car owner, I want more public charging, and I want the user experience to be as close to gasoline station speed as possible.

I also want to do another thing with my electric car - take long trips.  I don't care about the 100ish mile range, I still want to take longer trips, and to do so purely on electricity.  Why should those Model S owners have all the fun?

With that in mind, consider the above pair of maps.  To the left is the current infrastructure as of some time in 2013.  The current infrastructure as of late 2014 is a little better than that, fortunately, but there are still huge gaps.  Also, note those green dots up in Oregon?  That's the southern-most end of the West Coast Electric Highway which is a string of FAST CHARGING stations along highways in Oregon and Washington.  Originally the WCEH was going to cover the WHOLE WEST COAST but California wimped out and didn't fulfill their end of the bargain.

On the right is obviously an idealized what-would-be-perfect map of charging infrastructure.  I've spent time browsing PlugShare looking at places to drive to and certainly hoping there would be as many DC Fast Charging stations on the map as are shown here.

I want to go to Mt. Shasta or Yosemite or to Arcata or a number of other wonderfully remote places in California, but to do so on Electricity.  I've heard that Medicine Lake (East of Mt. Shasta) is a wonderful place, and I want to experience it.  How would I get there?

Right now it's easy to get to the Davis/Sacramento area on fast charging, and reach Redding on level 2 charging.  But beyond that you have mountains and very few official charging stations.  Reaching Arcata is even more difficult because there's a long stretch of extremely underpopulated territory with very few resources of any kind.  Yosemite is a little easier, with Fast Charging stations able to get a driver to the base of the Sierra Nevada mountains, and then several level 2 charging stations on the way to Yosemite National Park.

What we need is implementation of those red dots shown on the right-hand map.    Our friends in Washington and Oregon can (and do) go nearly anywhere because of the extensive Fast Charging infrastructure on the WCEH.

But let's return to the conference call.  As I said it focused on encouraging charging infrastructure at Workplaces and Multi-Unit-Dwellings.

The California Energy Commission is putting limited funds into charging station infrastructure deployment.  The next solicitation is in Q1 2015, and the focus is on - you guessed it - Workplaces and Multi-Unit-Dwellings.

Therefore the CEC funding won't help build out more public fast charging infrastructure.

One might get the impression that I'm negative on workplace and multi-unit-dwelling charging infrastructure.  But that's not true, both of those are necessary.  I'd love to have even just a 120 volt outlet here at my apartment, and if I had a workplace access to charging at the office would make up for some of the inconvenience of no charging at home.

What I'm talking about is the absolute necessity of public fast charging.

Those guys at Tesla Motors are demonstrating the necessity in spades.

Monday, December 1, 2014

NY Times' circumstantial evidence Romanian anti-frackers on Russian payroll

Allegations have resurfaced that Anti-Fracking activists in Europe are on Russia's payroll, according to a NY Times news article.  That article focuses on the anti-fracking protest focused on Pungesti Romania, which I've covered in-depth last winter.  The claim is that if the anti-frackers are successful in banning fracking, they're doing Russia's bidding by ensuring Europe will be dependent on Russia's natural gas, and therefore the anti-frackers must be getting support from Russia.

A version of this idea surfaced last July when then-NATO Secretary General Anders Rasmussen claimed that Russia is using "sophisticated information and disinformation operations" to engage with environmental organizations and other anti-fracking organizations, to tilt the political climate in Europe against hydraulic fracturing, so that Europe would remain dependent on Russian natural gas.

At the time anti-fracking groups denied the allegation proudly saying they would never work for Russia.  The leader of a Bulgarian group, Borislav Sandov, pointed out that years ago when his group opposed the South Stream project (that was to deliver Russian gas to Europe) it was accused his group was being paid by Obama and NATO.  Now that his group is opposing fracking, they're accused of being on Russia's payroll.  Perhaps these groups aren't being paid by either side of the geopolitical tug-of-war and are, like me, honestly opposed to these things.

Romanian's generally have little love for Russians, but instead a distrust.  Life for Romania under the Soviet sphere of influence was bleak.  Further, Romanian culture is decidedly not Slavik, the social identity proudly stems from the Roman Empire, and therefore Romanians don't even have cultural affinity with Russia.

Let's get to the NY Times article, yes?  

Pungesti villiager
It begins by returning us to the small village of Pungesti Romania, deep in the Romanian portion of Moldova.  (Russians took the other half of Moldova following WWII - coincidentally or not, Moldova is voting right now on parliamentary elections that will decide whether Moldova continues to move towards the European Union or to return to Russia's embrace)  

The Mayor, Vlasa Mircia, is back in Pungesti after having been run out of town during the protests.  The locals believe he betrayed the village by making a possibly illegal land deal with Chevron.  For his part Mircia expresses "shock" that they'd never had "protesters" in the area, but suddenly protesters were everywhere.  

Romania PM Victor Ponta
That sentiment is echo'd by national-level Politicians in Romania including Prime Minister Victor Ponta.  To their eyes, the devil is Russia's Gazprom, not America's Chevron.

The NY Times piece says "Gazprom, a state-controlled energy giant, has a clear interest in preventing countries dependent on Russian natural gas from developing their own alternative supplies of energy, they say, preserving a lucrative market for itself — and a potent foreign policy tool for the Kremlin."

Iulian Iancu, chairman of the Romanian Parliament’s industry committee, described by the NY Times as "a firm believer that Russia has had a hand in stirring opposition to shale gas exploration across Eastern Europe" is quoted as saying “It is crucial for Russia to keep this energy dependence. It is playing a dirty game.” Iancu doesn't have proof for his allegation, however.

Romanian PM Victor Ponta is quoted saying “Energy is the most effective weapon today of the Russian Federation — much more effective than aircraft and tanks.”

I believe that these sentiments are true - that Russia wants to gain dominance over Russia through natural gas supplies.  I've made the same argument here on The Long Tail Pipe. But - does that mean Romanian anti-fracking groups are therefore on Russia's payroll?

The proof offered by the NY Times article?

First is that Russia, led by former KGB agent Vladimir Putin, tends to use subterfuge and stealth against its neighbors.  Take for example the annexation of Crimea, led by forces not wearing any insignia that rallied pro-Russia sentiment and kicked out the Ukrainian military.  The same pattern is under-way in Eastern Ukraine.  It's alleged, without solid proof, that these insignia-less forces are Russians.

Romanian anti-fracking protesters
tearing down the fence surrounding Chevron's
drilling site in Pungesti
Next is that Russia doesn't exactly have a history of environmental awareness.  Quite the opposite, the country has a history of environmental disasters.  But when it comes to Fracking, Russians are "enthusiastically green" saying that Fracking has serious environmental problems.  While I agree that Fracking has serious environmental problems, but Russia is probably taking an environmentalist stance for political expediency.

Next is a curious contrast between the vehement protests against Chevron's fracking operation, but no protest against a fracking operation in far western Romania owned by Nis, a subsidiary of Gazprom. Strong protests against an American Fracker, but none against a Russian Fracker? Curious. The NY Times does say that "protest leaders" answer to this complaint is that anti-Chevron protests were because they were about to start exploratory drilling (which Chevron eventually did), while Nis is only doing "geological survey work" ahead of any decision to drill.

The last is attributed to Anca-Maria Cernea, a leader of a conservative political group in Bucharest. While she has no proof, she's sure that the Russians are behind the protests.  She does note the activist groups working against Fracking generally don't work together, but united on this issue.  Some of the groups do have ties to "the heavily Russian influenced security apparatus in neighboring Moldova," according to Ms. Cernea.  Also, Russian news media (especially RT News) were very active in covering the protests.

While RT was no-doubt airing lots of Pungesti coverage - that channel is heavily slanted to airing anything that makes The West look bad - I saw much more coverage from Epoch Times, a news outlet that's not connected to Russia (so far as I know) because it originated from protests of China's treatment of Falun Gong.

Just because Russia and I and the anti-frackers all agree that Fracking is a bad idea, doesn't mean that I or the anti-frackers are on Russia's payroll.   But that's the thrust of the NY Times article.  

All the "proof" offered by the NY Times is circumstantial and without documentation, and rests on this flawed reasoning - that just because I and the anti-frackers are against fracking we're on Russia's payroll.  

Instead - when Russia says fracking is a bad idea, it's not for environmental reasons, but for geopolitical reasons.  But I, and the anti-frackers I'm aware of, say fracking is an environmentally bad thing to do on many levels.

Friday, November 28, 2014

Falling oil prices could doom fracking (yay!) and electric vehicle adoption (booo!) leaving the Climate in the lurch

At the just-concluded OPEC meeting, the oil-powers-that-be decided to maintain OPEC's production level of 30 million barrels per day, despite oil price declines over the last year.  For the people who remain stuck on fossil oil as The Transportation Fuel, this is a good thing because it means gasoline prices will decline to match.  Probably.  High gasoline prices made several things feasible - fracking is an economically viable business only when gasoline prices are high - electric vehicles save money on fuel only when gasoline prices are high.

By maintaining a high production level, OPEC looks to lower the gasoline prices paid in America and elsewhere.  That's going to make it difficult for both fracking and electric vehicles to remain economically viable.

While I'm happy to see the fracking companies die off it's disturbing to think the same causative factor will damage the project of electric vehicle adoption.

OPEC's press release has this to say about oil production levels:
The Conference reviewed the oil market outlook, as presented by the Secretary General, in particular supply/demand projections for the first, second, third and fourth quarters of 2015, with emphasis on the first half of the year. The Conference also considered forecasts for the world economic outlook and noted that the global economic recovery was continuing, albeit very slowly and unevenly spread, with growth forecast at 3.2% for 2014 and 3.6% for 2015. 
The Conference also noted, importantly, that, although world oil demand is forecast to increase during the year 2015, this will, yet again, be offset by the projected increase of 1.36 mb/d in non-OPEC supply. The increase in oil and product stock levels in OECD countries, where days of forward cover are comfortably above the five-year average, coupled with the on-going rise in non-OECD inventories, are indications of an extremely well-supplied market. 
Recording its concern over the rapid decline in oil prices in recent months, the Conference concurred that stable oil prices – at a level which did not affect global economic growth but which, at the same time, allowed producers to receive a decent income and to invest to meet future demand – were vital for world economic wellbeing. Accordingly, in the interest of restoring market equilibrium, the Conference decided to maintain the production level of 30.0 mb/d, as was agreed in December 2011. As always, in taking this decision, Member Countries confirmed their readiness to respond to developments which could have an adverse impact on the maintenance of an orderly and balanced oil market. 
Agreeing on the need to be vigilant given the uncertainties and risks associated with future developments in the world economy, the Conference directed the Secretariat to continue its close monitoring of developments in supply and demand, as well as non-fundamental factors such as speculative activity, keeping Member Countries fully briefed on developments.
Since OPEC is one of the major power brokers on the planet, the real purpose of their action is probably different than what the words say.  Taking the words at face value, the vision expressed is more like a farmer caring for their land so they may continue harvesting crops from that land.   In other words, OPEC claims to be nurturing the economic well-being of the global economy, with the obvious result that OPEC will continue reaping big rewards from selling fossil fuels.

Now - up above I said this will influence both the companies that do fracking, and the electric vehicle market.

A Bloomberg report quotes a Russian Oil Tycoon, Leonid Fedund of Lukoil, saying that today's price ($70/barrel) is close to unprofitable for some oil companies, and that “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again. The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

The issue is that fracking is expensive - it's a very machine-resource-energy-intensive way of extracting oil from solid rock.  An oil company can only make money from fields requiring fracking when the going price for oil is high enough.  Over on The Daily Kos are some figures to support that idea.

According to Reuters, the Saudi Arabia Oil Minister argued that OPEC must declare war upon fracking -- rather, declare war on the U.S. Shale Oil Boom -- by cutting the price for oil low enough to kill U.S. Oil production.  The Shale Oil Bonanza is due to fracking.

OPEC's poorer members wanted a cut in oil production so that oil prices would remain high, because those countries need the income to prop up their local economies.

The basic economic fact is that current Oil production levels are outstripping demand for Oil.  Simple economics says if production is higher than demand, then the price falls.  Global oil markets are only partially under OPEC control.  The U.S. shale oil boom is one source outside OPEC's control, as is the Oil boom in Russia and Brazil.  According to the NY Times, OPEC has lost control over oil markets and is no longer able to dictate prices.  Therefore, OPEC is looking to regain control by driving the frackers out of business.

Another Bloomberg report cites data from the International Energy Agency that only 4% of U.S. Shale Oil production requires prices above $80/barrel to remain profitable.  A large chunk of US production remains profitable at prices below $42/barrel. Torbjoern Kjus, an analyst at DNB ASA, Norway’s biggest bank, asked “The question is, what price level will be low enough to slow U.S. production growth? What price will get U.S. growth to slow to 500,000 barrels a day from this year’s rate of 1.4 million barrels?”

The Daily Kos piece linked above suggests that because the frackers are backed by junk bonds, the economic ramifications of those companies failing will be widespread.  The economical status of the oil producing states (Texas, North Dakota, etc) should also be gravely hurt.  Lower oil prices will benefit other areas of the economy, however.  In the news today are several articles suggesting the airline industry stands to benefit greatly.

Following that line of thinking a little further - after the fracking companies fail, can we expect a rapid oil price increase in a few years as the supply drops off?  The Russian guy earlier suggested OPEC's move will "clean up the American marginal market" (drive the frackers out of business) by 2016.  What happens after that?  Maybe OPEC will have enough leverage to regain control over oil prices and resume manipulating oil prices to keep milking the global economy for all its worth.

Let's turn now to the effect this may have on electric vehicle adoption.

Electricity is a cheaper fuel than gasoline, making electric cars economically more attractive than gasoline powered cars.  I measure this as the cost of fuel to drive a given distance.  A 30 MPG gasoline car takes 1 gallon to drive 30 miles.  An equivalent electric car might require 7 kilowatt-hours of electricity to drive that distance.

At the US national average of $0.11 per kilowatt-hour the electricity cost is about $0.80.  When gasoline was at $4.50 a gallon that $0.80 was a bargain basement price for fuel.  But with oil prices falling rapidly, thanks to OPEC, gasoline prices should be falling as well.

Source GasBuddy
Indeed, we see the national average gasoline price has fallen from $3.60 to about $2.70 per gallon since May 2014.  I added Dallas and San Francisco prices to provide context on the high and low side of the national average.

That makes the electricity fuel cost price advantage fall quite a bit.  At $3.60 per gallon the advantage was about $2.80, and at $2.70 the advantage is about $1.90, for 30 miles of driving.

Since that price advantage has to defray the price premium paid for electric cars, it makes electric vehicles less economically viable than they once were.  There's still a fuel cost advantage but it's not as significant.

It's expected that battery pack costs will shift dramatically in 2-3 years - the Tesla Gigafactory simply being the most prominent indicator of falling battery pack prices.  As that economic factor kicks in the electric car price premium should fall considerably.  Tesla Motors promises to be selling a 200+ mile range electric car in 2017 for a $35,000 MSRP as a result.

But what if falling gasoline prices dries up demand for electric vehicles?  In the past the rise and fall of gasoline prices have caused consumer interest in alternatives to rise and fall as well.

Source GasBuddy
Look carefully and you see this covers a different time period - 2005-2012.  Notice that gasoline prices rose and rose from 2005 until September 2008 - corresponding with the financial markets collapse at that time.

In the summer of 2008 I saw two news articles discussing how rising oil prices were making people look for alternatives such as fuel efficient motorcycles, or electric scooters.  I remember reading in that time period about Texans parking (or selling off) their F150's because gasoline prices were so high.  And my friends who sell electric bicycles and scooters said interest was high at that time.

The massive price drop - $4.40 per gallon to $1.80 per gallon national average gasoline price - was thanks to the economic meltdown in that time frame, and the corresponding decrease in economic activity.  When the Republicans blame the Obama Administration on rising gasoline prices (as they've done repeatedly the last few years) it's wise to remember this gasoline price chart.

Gasoline prices fell to $1.80 per gallon because of the economic meltdown triggered by failed policies of the Bush43 Administration.  That administration saw oil prices rise pretty quickly and as a response had set in motion the early stages of this project to adopt electric cars.

Source GasBuddy
If we broaden the time horizon we see that over the last 11 years gasoline prices rose, and rose, and that between 2011-2014, the new normal for gasoline prices became $3.30-$4 per gallon.

During the 2011-2014 time period electric cars came into their own and are starting to look inevitable.

But - is this project of electric vehicle adoption at risk because OPEC wants to regain control over the oil market?

And what of the hopes we have for solving climate change and other environmental problems?  The primary area for fossil oil consumption is Transportation - cars, trucks, motorcycles, airplanes, etc.

In order to combat climate change we want to electrify the transportation system and otherwise make it more fuel efficient.  Less gasoline or diesel burned means lower climate and environmental impact.

But, if electric vehicles become less economically attractive then ... will people return to gas guzzlers?

Fortunately enough transportation policy decisions became law during the last few years that the shift to fuel efficient and electrified vehicles now has the weight of Government Policy behind it.  Case in point is the 54.5 MPG CAFE Standards for the U.S., enacted during the Obama Administration.

But if fuel efficiency isn't as economically attractive as it was during 2011-2014, maybe the new CAFE standards will come under fire?

My crystal ball is a bit clouded and it's always risky predicting the future.  Events may well turn out differently than the predictions I just floated.

Those of you who made it this far - congratulations for reading all this.  What do you think?

Saturday, November 22, 2014

Elon Musk protesteth allegations Tesla Motors tricked states in Gigafactory negotiations

Tesla Motors CEO Elon Musk penned a blog post yesterday claiming that Tesla's management didn't trick Nevada or any other state in the Gigafactory negotations.  Instead, Musk says Tesla's policy is to create win-win solutions where the other party takes no risk, with Tesla Motors bearing all the risk.  Why?  It's to build trust and goodwill, according to Musk.  For example, offering customers the option to simply return their car if they're dissatisfied is blatantly not the way other carmakers handle leasing arrangements, but it should give customers another smidgeon of security knowing they can back out if necessary.

According to Musk, the rationale for seeking concessions for factory construction is that "It stands to reason that the beneficiaries of a project should also contribute to its creation."  Tesla Motors believes that Nevada will get "the largest and most advanced battery factory in the world and a very large number of high-paying direct and indirect jobs" that is "a no-lose proposition for the state" and "is not merely slightly good for the people of Nevada, it is extremely good."   Therefore, Nevada stands to make huge gains from the Gigafactory, and therefore Nevada should "contribute to its creation".

There's been a certain degree of criticism of the deal between Nevada and Tesla, amid claims that Tesla tricked not only Nevada but the other states who were competing.

According to a piece on about the bidding process, Tesla Motors carefully managed every step.   For example, Tesla would inform each state about the leading bid, to tell them how much bigger other bids were, but without identifying the leading bidders.  It may be this is business-as-usual in negotiating such deals, but it opens the door to lies by Tesla ("We have a bid for $N Billion" when there was no such bid) and other kinds of tricks.

We have Elon's assurances that Tesla didn't pull tricks on the states.  While Tesla's management is maintaining a good appearance of high ethics, I do wonder if or when Tesla will grow so big it's starting to do evil?

What makes this an "extremely good" deal for Nevada?  Didn't Nevada just write a blank check to Tesla for $1.4 billion or so?  Uh, no...

According to Musk ...

  • Tesla is not receiving money directly from Nevada.  The closest is a land swap between Nevada and the developer.  Musk notes that Nevada has oodles of empty unoccupied land to spare.
  • Most of the incentives "consists of alleviating a few percent of annual property and use tax on a huge amount of equipment over the course of 20 years, an average of about $50 million per year after initial construction".
  • After the incentives expire the Gigafactory will (assumably) remain in operation and continue contributing to Nevada's economy.
  • The incentives are performance based, meaning Tesla must achieve various milestones to unlock the incentives and lose them if the company fails to do so.
This isn't the first time performance-based incentives for a clean technology company faced criticism including such-and-such government had simply written a blank check.  That exact complaint was lodged against the Dept. of Energy loans to Fisker Automotive.  Those loans were performance based, and when Fisker failed to perform the DoE froze the loans and within a few months Fisker was seeking buyers, had kicked out its founder, and skirted bankruptcy.  Because they were performance based loans, the DoE only lost out on the portion already loaned to Fisker, and was able to hang onto $300 million or so in undisbursed loans.

Elon Musk does have a history of presenting facts slanted to make Tesla Motors look good.  For example, when the company received the crash test results from the NHTSA they trumpeted the "fact" that the Model S received the absolute highest crash safety rating of any car ever - 5.4 on a 5 point scale.  In actuality, the NHTSA crash safety rating is expressed as an integral number of stars, the most being 5 stars, and there is no rating above five stars.  Tesla Motors exaggerated - not exactly a sin of huge proportions, but not exactly honest either.

Wednesday, November 12, 2014

Lightning Motorcycles delivers LS-218 electric superbike to first paying customer

Yesterday, Lightning Motorcycle CEO Richard Hatfield delivered the very first Lightning LS-218 electric superbike.  Over eight years in development, the LS-218 is the fastest electric motorcycle in production and perhaps the fastest motorcycle of any kind in production.  The company has followed a strategy for several years of innovation through competition, or what they call "race on Sunday sell on Monday" in motorcycle sports.  Prototypes of the Lightning LS-218 have run at racing events since May 2010, with rapid advances and refinements resulting in an astonishing win at the 2013 Pikes Peak International Hill Climb when Carlin Dunne beat every last motorcycle racer by over 20 seconds riding the LS-218.

The Lightning Motorcycles LS-218 is at the very top tier of electric motorcycles, offering performance rivaling the fastest of motorcycles of any power train.  In August 2011, the team set the land speed record for electric motorcycles at 215 miles/hr, and the fastest speed recorded in that session (218 miles/hr) gave them the LS-218 name.  In 2012 at the TTXGP/e-Power race at Laguna Seca (held during the MotoGP weekend) the LS-218, with Michael Barnes on-board, gave lap-times within the ballpark of MotoGP lap-times.  Then in June 2013, as noted earlier, Carlin Dunne rode the Lightning LS-218 to an astonishing victory at the Pikes Peak Hill Climb, beating the entire motorcycle pack by over 20 seconds.

After every one of those wins, Lightning CEO Richard Hatfield promised the Lightning Superbike was for sale.  It wasn't until yesterday that the company fulfilled that promise.

Lightning Motorcycles is a small start-up electric motorcycle manufacturer based in San Carlos, CA.  The company plans to develop a full range of electric motorcycles.  They're using a strategy similar to Tesla Motors of first developing an ultra-high-end electric motorcycle, then plowing profits into developing affordable bikes offering performance more suited to the streets.  (A motorcycle capable of hitting 218 miles/hr isn't quite the right bike for a typical daily commuter)

Someone looking for the ultimate in clean green electric performance might skip past the Tesla Model S P85D (the new dual-motor Model S P85 that does a 3.2 second 0-60 time) and look at the Lightning LS-218.  Where the P85D will run well over $100,000, the Lightning LS-218 is one of a handful of electric motorcycles that capable of beating the P85D's 0-60 performance.  Of those, the LS-218 is the only one where the manufacturer has gotten the bike into production.  Plus, the LS-218 can be had for a fraction of the P85D's cost - the LS-218's base price is $38,000.