page-loading-spinner
Home Energy

Energy

by David Collum

Background

I was just trying to figure it all out.

~ Michael Burry, hedge fund manager

Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.

For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4

Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5

2012 Year in Review
by David Collum

Background

I was just trying to figure it all out.

~ Michael Burry, hedge fund manager

Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.

For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4

Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5

by Gregor Macdonald

Executive Summary

  • Peak Oil is a multifactorial concept 
  • Why the IEA forecasts aren't credible
  • Why the data shows Peak Oil is alive & well
  • Where oil prices will head in 2013

If you have not yet read A Tale of Two Forecasts, available free to all readers, please click here to read it first.

The U.S. is currently experiencing its second oil production recovery since 1971, when its supply peaked over 9.5 mbpd.

The first recovery took place over a nine-year period from 1976-1985. That renaissance took U.S. production back up from a low of 8.0 mbpd to nearly 9.0 mbpd. And then, over the next twenty years, U.S. production would fall steadily to its recent nadir of 5 mbpd in 2008. Over the past four years (owing to onshore production in North Dakota and Texas), the U.S. has built back an impressive 1.5 mbpd and is currently producing over 6.5 mbpd of crude oil.

Before we get to the IEA Paris forecast for the future U.S. production, let's take a look at our own Energy Information Administration (EIA) Washington forecast. The IEA Paris forecast is more difficult to understand, as it conflates oil and natural gas liquids. By contrast, the EIA Washington forecast is more specifically focused on oil production, which is easier to compare to U.S. production history. (Remember: Natural gas liquids (NGLs) are not oil. More importantly, they do not contain the same energy as oil. A barrel of oil contains 6 GJ (gigajoules) of energy, but a barrel of NGL contains just 4 GJ.)

Here is the forecast to 2040, from the EIA's (Washington) recent Annual Energy Outlook:

Dissecting the Energy “Boom” Story
PREVIEW by Gregor Macdonald

Executive Summary

  • Peak Oil is a multifactorial concept 
  • Why the IEA forecasts aren't credible
  • Why the data shows Peak Oil is alive & well
  • Where oil prices will head in 2013

If you have not yet read A Tale of Two Forecasts, available free to all readers, please click here to read it first.

The U.S. is currently experiencing its second oil production recovery since 1971, when its supply peaked over 9.5 mbpd.

The first recovery took place over a nine-year period from 1976-1985. That renaissance took U.S. production back up from a low of 8.0 mbpd to nearly 9.0 mbpd. And then, over the next twenty years, U.S. production would fall steadily to its recent nadir of 5 mbpd in 2008. Over the past four years (owing to onshore production in North Dakota and Texas), the U.S. has built back an impressive 1.5 mbpd and is currently producing over 6.5 mbpd of crude oil.

Before we get to the IEA Paris forecast for the future U.S. production, let's take a look at our own Energy Information Administration (EIA) Washington forecast. The IEA Paris forecast is more difficult to understand, as it conflates oil and natural gas liquids. By contrast, the EIA Washington forecast is more specifically focused on oil production, which is easier to compare to U.S. production history. (Remember: Natural gas liquids (NGLs) are not oil. More importantly, they do not contain the same energy as oil. A barrel of oil contains 6 GJ (gigajoules) of energy, but a barrel of NGL contains just 4 GJ.)

Here is the forecast to 2040, from the EIA's (Washington) recent Annual Energy Outlook:

by Gregor Macdonald

Executive Summary

  • The criticality of innovating better storage solutions
  • The pros & cons of investing in energy inputs (coal, oil, etc.) or new energy technologies
  • The impact of increased carbon taxation & higher oil prices
  • Watch where global energy demand is shifting
  • The four ripe sigmoidal growth opportunities
  • Why coal remains the king of fuel

If you have not yet read The New Future of Energy Policy, available free to all readers, please click here to read it first.

As oil went through a price revolution starting in 2004, the venture capital community embraced an array of greentech start-ups. But the first wave of these, which centered on biofuels and other liquid-based replacements for oil, were destined to fail – and fail they did. It has apparently taken a period of digestion and reflection for investors, innovators, and venture capital to quantify better which areas are more promising in the new energy landscape.

Just recently, for example, investment vehicles controlled by Peter Thiel and Bill Gates were among those who funded energy storage company LightSail, which is exploring the use of compressed air as a method for energy storage. This is meaningful.

It indicates an awareness that not only is global energy demand switching over to the grid, but also, that the grid of the future will need much greater flexibility. So, yes, the grid is the future. But storage the ability to retain surplus electricity for release at a later time will be crucial. The reason is that the blend or mix now developing: coal, nuclear, natural gas, hydro, utility-grade wind, and solar (including residential solar) will present a challenge to the grid with its enormous variability in supply.

Storage, to use an economics term, allows for intertemporal supply: the ability to spread power over time. Whether or not LightSail’s technology works and is commercially scalable is a question that awaits an answer. But to target investment in this area, rather than in algae fuels, is right on the mark.

And the need for storage is already becoming critical. The “variability problem” is especially a concern…

Investing Strategies for the New Energy Era
PREVIEW by Gregor Macdonald

Executive Summary

  • The criticality of innovating better storage solutions
  • The pros & cons of investing in energy inputs (coal, oil, etc.) or new energy technologies
  • The impact of increased carbon taxation & higher oil prices
  • Watch where global energy demand is shifting
  • The four ripe sigmoidal growth opportunities
  • Why coal remains the king of fuel

If you have not yet read The New Future of Energy Policy, available free to all readers, please click here to read it first.

As oil went through a price revolution starting in 2004, the venture capital community embraced an array of greentech start-ups. But the first wave of these, which centered on biofuels and other liquid-based replacements for oil, were destined to fail – and fail they did. It has apparently taken a period of digestion and reflection for investors, innovators, and venture capital to quantify better which areas are more promising in the new energy landscape.

Just recently, for example, investment vehicles controlled by Peter Thiel and Bill Gates were among those who funded energy storage company LightSail, which is exploring the use of compressed air as a method for energy storage. This is meaningful.

It indicates an awareness that not only is global energy demand switching over to the grid, but also, that the grid of the future will need much greater flexibility. So, yes, the grid is the future. But storage the ability to retain surplus electricity for release at a later time will be crucial. The reason is that the blend or mix now developing: coal, nuclear, natural gas, hydro, utility-grade wind, and solar (including residential solar) will present a challenge to the grid with its enormous variability in supply.

Storage, to use an economics term, allows for intertemporal supply: the ability to spread power over time. Whether or not LightSail’s technology works and is commercially scalable is a question that awaits an answer. But to target investment in this area, rather than in algae fuels, is right on the mark.

And the need for storage is already becoming critical. The “variability problem” is especially a concern…

by Gregor Macdonald

Flood myths are common to human culture. Swollen rivers, tidal storms, and tsunamis make their appearance frequently in literature. But Hurricane Sandy, which has drawn newly etched high-water marks on the buildings of lower Manhattan (and Brooklyn), has shifted the discussion from storytelling to reality.

Volatility in climate has drawn the attention of policy makers for a decade. But as so often is the case, a dramatic event like superstorm Sandy – the largest storm to hit New York since the colonial era – has punctured the psyche of the densely populated East Coast, including the New York-Washington, DC axis where U.S. policy is made.

Not surprisingly, in the weeks since the historical hurricane made landfall, new attention is being paid to the mounting costs that coastal world megacities may face.

Intriguingly, however, this new conversation about climate, energy policy, and America’s reliance on fossil fuels comes after a five-year period in which the U.S. has dramatically lowered its consumption of oil and seen an equally dramatic upturn in the growth of renewable energy.

The New Future of Energy Policy
by Gregor Macdonald

Flood myths are common to human culture. Swollen rivers, tidal storms, and tsunamis make their appearance frequently in literature. But Hurricane Sandy, which has drawn newly etched high-water marks on the buildings of lower Manhattan (and Brooklyn), has shifted the discussion from storytelling to reality.

Volatility in climate has drawn the attention of policy makers for a decade. But as so often is the case, a dramatic event like superstorm Sandy – the largest storm to hit New York since the colonial era – has punctured the psyche of the densely populated East Coast, including the New York-Washington, DC axis where U.S. policy is made.

Not surprisingly, in the weeks since the historical hurricane made landfall, new attention is being paid to the mounting costs that coastal world megacities may face.

Intriguingly, however, this new conversation about climate, energy policy, and America’s reliance on fossil fuels comes after a five-year period in which the U.S. has dramatically lowered its consumption of oil and seen an equally dramatic upturn in the growth of renewable energy.

Total 609 items