Ponderings about oil and property prices

[Bill.L]

Hi all,

All the talk of peak oil and what will happen has got me thinking a little more laterally about the possible scenarios. At some point when the supply is really constrained the price will go to $2, $3, $5 or who knows what price.

The people who can afford the new electric cars that Michael talks about will be those better off, higher income people. This is especially so because the materials needed to make the batteries will be in limited supply, causing costs to be high.

As the demand for oil/petrol is fairly inelastic, the poorer members of society are the ones that cannot afford the new electric cars, nor afford to move close to public transport. This probably being a large percentage of the population.

What will a government do in such a situation:? the only thing they know how to do, regulate. It will not surprise me to see rationing, coupon style, introduced at some stage in the future.

The price mechanism by itself only helps the well off, but poorer people vote and the only way to help them will be rationing and price subsidies for low income households. If we see this world-wide then big brother here we come.

The future does indeed look scary at some point, just how close we are is anyones guess.

bye

 

[topcropper]

All good. Looking forward to 0% fossil fuel powered vehicles.

That's all well and good for the petrol powered cars. Electric power could work for those, especially in cities and towns where you could plug them in while at work. What about diesel trucks, dozers, tractors, harvesters, all the machinery that keeps everything going? How far would an electric Kenworth B-double go with 40 tonnes on? Or a D-12 CAT pushing rocks. I use 50 thousand litres of diesel a year just on my farm in all my gear, electric power will never replace that.

So I think we use as much diesel as petrol in this country, so I'd say if electric cars replace every petrol car, we could halve the fossil fuel use.

How we make the electricity to charge the grid is another discussion. At least by eliminating the use of petroleum in vehicle engines we set the stage for eliminating the use of fossil fuels for transport altogether when we use alternate sources to charge the grid. Nuclear? Thermal? Solar? Wind? Wave? Tidal? etc. My vote is for Solar for now. Pholtovoltaic cells are getting cheaper by the minute. New technology just around the corner makes this a very cost effective energy capture mechanism.

Solar..?? HE might know all about solar electricity production cause I don't. Currently though, if every house in Australia had solar panels on them, it would still only be supplying 5% or so of power needs. There would have to be some big impovements made to the technology.

I still reckon that electric cars in Australia for a long time to come will really be coal powered cars.


See ya's.

 

[MichaelW]

I still reckon that electric cars in Australia for a long time to come will really be coal powered cars.

Could be right mate. In fact, I reckon Australia is wedded to coal for the foreseeable future. That's why I've got a quiet few shares in Environmental Clean Technologies (ESI). Disclaimer: Don't just buy them because I did or you're a mug!

But I like the concept, dewaters brown coal to produce a black coal substitute using coldry technology. Already got a few agreements in place to build pilot plants in 2010.

I'm sure they're not the only stock out there like this though. Interesting and exciting times ahead.

Cheers,
Michael

 

[HiEquity]

Solar..??

In an attempt to break the obvious information vacuum surrounding these issues, I can provide the following raw LRMC ranges (long run marginal costs) for the associated technologies (no particular order) for new systems you can buy today. Note these are unsubsidised raw costs (in $AUD/MWh) not taking into account carbon costs or other externalities / support schemes. This information is generally available in the public domain if you know where to look. Of course outliers exist for all these numbers but I am talking in general terms about building something today. I used a consistent cost of capital coming up with this and current fuel prices.

Coal 45-60 (must run all the time - price goes up in proportion if it doesn't)
Open cycle gas turbines 70-130 (used when market price peaks during high demand - WA gas much more expensive than east coast)
Combined cycle gas turbines 60-90 (baseload to mid merit plant needs to run more often to pay off higher capital costs)
Wind 100-120 (available around 33% of the time typically)
Nuclear 120-180 (but only when backed by govt guarantee - no information otherwise and must run all the time in very large blocks making other generation sources less efficient as a result). If it could follow load the price would only go up in proportion...
Solar Thermal 300-400 (large scale only - generally peak coincident but available around 30% of the time typically)
Diesel 250-350 (depending on diesel price - very low capital cost which is attractive for mines as they don't pay excise and aren't usually sure about mine life so want something cheap to buy)
Solar PV 400-600 (depending on resource - also circa 30% available and peak coincident)

Technology development may change these numbers and their associated order of merit in future but it hasn't done for many years (decades) now... in fact they have all (with the exception of PV which has come down from around $1000) risen over the last ten years by around the inflation rate.

Smart observers will note that all these numbers are higher than existing wholesale market prices in all States. This is because there is an overhang of (almost) fully depreciated plant from back when State governments overbuilt generation capacity when they had direct control. That is slowly being wound back by the market and prices only justify new investment at the margin in particular regions / niches.

BTW the reason I harp on about the "must run" problem is Australian loads are pitifully small and very peaky. For example the overnight load in WA gets down as low as 1000MW in winter while the peak summer load is circa 3500MW. Lobbing in more "baseload" plant into that mix is exactly what we don't need.

Hope this helps frame the discussion...

 

[Aaron Sice]

The price mechanism by itself only helps the well off, but poorer people vote and the only way to help them will be rationing and price subsidies for low income households. If we see this world-wide then big brother here we come.

The future does indeed look scary at some point, just how close we are is anyones guess.

bye

if the Copenhagen Treaty is signed, then next year.

 

[boz]

In an attempt to break the obvious information vacuum surrounding these issues, I can provide the following raw LRMC ranges (long run marginal costs) for the associated technologies (no particular order) for new systems you can buy today. Note these are unsubsidised raw costs (in $AUD/MWh) not taking into account carbon costs or other externalities / support schemes. This information is generally available in the public domain if you know where to look. Of course outliers exist for all these numbers but I am talking in general terms about building something today. I used a consistent cost of capital coming up with this and current fuel prices.

Coal 45-60 (must run all the time - price goes up in proportion if it doesn't)
Open cycle gas turbines 70-130 (used when market price peaks during high demand - WA gas much more expensive than east coast)
Combined cycle gas turbines 60-90 (baseload to mid merit plant needs to run more often to pay off higher capital costs)
Wind 100-120 (available around 33% of the time typically)
Nuclear 120-180 (but only when backed by govt guarantee - no information otherwise and must run all the time in very large blocks making other generation sources less efficient as a result). If it could follow load the price would only go up in proportion...
Solar Thermal 300-400 (large scale only - generally peak coincident but available around 30% of the time typically)
Diesel 250-350 (depending on diesel price - very low capital cost which is attractive for mines as they don't pay excise and aren't usually sure about mine life so want something cheap to buy)
Solar PV 400-600 (depending on resource - also circa 30% available and peak coincident)

Technology development may change these numbers and their associated order of merit in future but it hasn't done for many years (decades) now... in fact they have all (with the exception of PV which has come down from around $1000) risen over the last ten years by around the inflation rate.

Smart observers will note that all these numbers are higher than existing wholesale market prices in all States. This is because there is an overhang of (almost) fully depreciated plant from back when State governments overbuilt generation capacity when they had direct control. That is slowly being wound back by the market and prices only justify new investment at the margin in particular regions / niches.

BTW the reason I harp on about the "must run" problem is Australian loads are pitifully small and very peaky. For example the overnight load in WA gets down as low as 1000MW in winter while the peak summer load is circa 3500MW. Lobbing in more "baseload" plant into that mix is exactly what we don't need.

Hope this helps frame the discussion...

Thanks for the post Hiequity,
99% of times also in Melbourne or Perth when you get peak heat and max power usage is windy as well...
Anyway, the matter is also weather we have a green energy industry or a water tank industry (power gives you water through desalination).
In any case Topcropper should be better off convert his diesel equipment with a wind generator and electric power

 

[topcropper]

In any case Topcropper should be better off convert his diesel equipment with a wind generator and electric power

Are you saying heavy haulage machinery could be run by wind turbine produced electricity...??
Not likely ever.

See ya's.

 

[HiEquity]

Are you saying heavy haulage machinery could be run by wind turbine produced electricity...??
Not likely ever.

Not quite as far fetched as you might think...

Electricity is electricity and a large chunk of it can come from the wind (up to 50% average (over 90% instantaneous) on some power systems such as the Denham / Rottnest / Hopetoun wind/diesel systems in WA). Heavy haulage machinery that can be setup on a trolley line is very suited to electric power.

Of course this only really helps the mining industry - not many options for farmers along these lines (pardon the pun!) that I'm aware of...

 

[boz]

Are you saying heavy haulage machinery could be run by wind turbine produced electricity...??
Not likely ever.

See ya's.

yes,
but at the bottom line of everything there is energy, i am sure every farmer in Australia would be ready to swap excess energy for water.
If every farmer would put 1 wind generator and use that energy to desalinate water there will be no shortage of water in Australia

 

[lizzie]

if the Copenhagen Treaty is signed, then next year.

just ets, if passed as is, is reported to add around $600 to a households bills each year.

gin and tonic for some - weeks worth of food for others.

 

[topcropper]

yes,
but at the bottom line of everything there is energy, i am sure every farmer in Australia would be ready to swap excess energy for water.
If every farmer would put 1 wind generator and use that energy to desalinate water there will be no shortage of water in Australia

Maybe for drinking water. But that is trivial amounts and who cares anyway about drinking water? Everyone out here catchs rain water for drinking off their house and sheds. I have hundreds of thousands of litres of rainwater.

If your talking growing food though, that's a load of garbage what you just said.

People should only comment on subjects they have a bit of an idea about. Do your realise how much water it takes to grow food? Not one tiny bit! Wake up mate! This is why we are in so much trouble. People are just so naive. The average city person has no single iota of an idea what goes on.

All we have to do is desalinate water and send it inland......
What a bloody joke..!!!



I'll lay it straight here. It takes a lot more than a thousand litres of water to grow a kilo of grain. A kilo of grain is worth 20 cents. Thats gross. So a farmer might make 5 cents profit for that kilo of grain. So that's total profit. So the thousand litres plus of water has to be worth just a few cents. If the thousand litres plus of water was worth just 5 cents, there would be no profit for the farmer.

So your talking about pumping salt water from the coast, 100's of kilometres distance to me, and 350 metres in verticle height, then when it gets to my farm, I desalinate it using a wind turbine, this water has to be worth just a few cents per thousand litres after all that, the pumping hundreds of k's and the desalination, and I put it on my crops and make a profit. This is laughable.



This is how much water it takes in Australia to grow food.
http://www.lenntech.com/water-food-agriculture.htm

It takes 1,500 litres of water to grow 1 kilo of wheat.
It takes 17,000 litres of water to grow 1 kilo of beef.
It takes 900 litres of water to grow 1 litre of milk.



I know these figures are correct, as I can work it out myself. The last 2 wetter than average seasons I've had I've grown 8,000 tonnes of grain. I've also received 800 mills of rain.

800 mls of rain on 1400 hectares equals,
.8 times 1400 times 10,000,
equals 11.2 million tonnes of water.
Or 11.2 billion litres of water.

11.2 billion litres of water grew 8,000 tonnes, or 8 million kilos of grain.
So, it took 1400 litre of water to grow a kilo of grain on my farm last year.
A kilo of grain worth 20 cents....!!!!!!

I'm talking water that falls as rain here. Ask any irrigator and he will tell you that rain is better than irrigation water. But forget that, lets pretend it's the same. To grow food using irrigation takes the same amount of water.



Go through these figures that I've just put down and realise what a stupid thing it is that you have just said. It is not as simple as you think, and you should definately not have made a comment on something you have no idea about.


See ya's.

 

[Ausprop]

wow that's an eye opener. puts my cutting of the shower time down into perspective

 

[Graemsay]

Just to add a few more figures to Topcropper's analysis.

The energy density of fuel is approximately 12 kWh / kg. The best lithium ion batteries are around 200 Wh / kg.

However diesel engines are approximately 30% efficient, whereas electric motors are 90+% efficient, and that closes the gap. Even so, you'd need approximately twenty times the weight of batteries to that of diesel.

In Topcropper's case he uses approximately 50,000 litres per year, or approximately 140 litres per day. So he'd need to strap about three tonnes of batteries onto whatever machinery he uses that day. (Actually, you might want to double that figure as deep cycling batteries wrecks them.)

Given a ten tonne tractor, that's a significant amount of weight. Losing the engine and fuel tanks would save some of this. Maybe splitting the battery packs into smaller units and having to swap them at lunchtime would also improve things.

I don't think that it's feasible for Topcropper to go electric for his farm yet, but it might be a good candidate in a decade or so when battery technology improves, largely because he's operating in a relatively short distance of a home base.

Haulage and shipping would really suffer, as it's hard to recharge batteries when you're away from civilisation.

Incidentally, I'd estimate that the farm could be run off 2000 m2 of solar panels.

I also think that I need to get out more!

 

[boz]

All we have to do is desalinate water and send it inland......
What a bloody joke..!!!

I didn't mean that, I mean who lives near the coast like in the cities can use desalinated water and stop to use the water from inland that can go back t o the farmer like it use to be. The main thing is to stop nagging the people in the city about saving water and water is precious when it is worth far less then 5 cents.
In cities you can't wash your car, boat, garden, fill up pools, etc. just because of bad policy.
EDIT: to put 1 water tank in 1 mil homes in cities would cost far more then 1 bil$, is it worth considering the cost of water? is it not better investing those money in green energy with related building industry/research and developement industry and then use the energy eventually to make fresh water when needed?

 

[topcropper]

EDIT: to put 1 water tank in 1 mil homes in cities would cost far more then 1 bil$, is it worth considering the cost of water? is it not better investing those money in green energy with related building industry/research and developement industry and then use the energy eventually to make fresh water when needed?

I suppose there is no room for city property owners to put a decent sized tank. The standard size people put in out here now is 100 thousand litres. I'm just about to put one on a new shed. It will cost 7 grand. The shed is 18 metres by 24 metres, or 430 sm. With my rainfall, 300thousand litres falls on it's roof per year. If the tank lasts 20 years, it is pretty cheap water.

All this green energy being put in for desalination..?? The 2 billion dollar Sydney plant has 67 turbines down near Canberra for green energy. If it wasn't for the desal plant, these turbines could be added to the grid, reducing coal emissions. But they will instead be producing water.

Not much anyone can do I suppose. NIMBY's and greenies will not let anymore dams go in, and populations are increasing rapidly.


See ya's.

 

[boz]

I suppose there is no room for city property owners to put a decent sized tank. The standard size people put in out here now is 100 thousand litres. I'm just about to put one on a new shed. It will cost 7 grand. The shed is 18 metres by 24 metres, or 430 sm. With my rainfall, 300thousand litres falls on it's roof per year. If the tank lasts 20 years, it is pretty cheap water.

All this green energy being put in for desalination..?? The 2 billion dollar Sydney plant has 67 turbines down near Canberra for green energy. If it wasn't for the desal plant, these turbines could be added to the grid, reducing coal emissions. But they will instead be producing water.

Not much anyone can do I suppose. NIMBY's and greenies will not let anymore dams go in, and populations are increasing rapidly.


See ya's.

well, with 2 bil$ you can build around 285K water tank like your one to provide water to the equivalent of 285K homes how many homes can those 67 turbines provide water to? and, by the way, they would only provide water when dam are empty and get power into the grid if we get rain.
To me those water tanks make sense only in remote area or particulary large areas with lots of space available.
And those 2 bil$ are recicled into the greenhouse industry lowering the costs in the long term. It is policy making to decide weather those money would go into the water tank industry and coal power industry instead.
By the way, in sydney case:
with 4 mil abitants 2 bil$ makes around 500$ each, those wind turbines would last probably 20 years, is it not worth 500$ each to get safety of water for the next 20 years with no watering restriction? or better get 1K$ in grants from government like they did last march?