Energy

It’s a very hot day here in central Massachusetts, which I know because I operate without air conditioning, although my fan is non-negotiable.  My recent experiences with power outages has re-taught me that out of all the energy sources, electricity is just as important to my daily living as is petroleum.  Maybe more so.  By way of irony, my power just went out as I was writing this Insider Report.  It came back on only 45 minutes later, but the point was reinforced; electricity is a non-negotiable element of my modern household.  While I can cut back on driving to preserve gasoline, I cannot figure out how to get my well pump or refrigerator to run on zero electrons.  It seems to be either ‘on’ or ‘off.’

The most important substance to electricity production is coal, bar none.  While we know that China has 49 nuclear plants either under construction or to be started within three years, it is slightly less well-advertised that China is building the equivalent of two 500 MW coal-fired plants each week.

That’s how we got to last week’s somewhat startling pronouncement from the IEA that China had surpassed the US as the number-one energy-consuming nation on the planet.  China is ramping up its electricity production and consumption at double-digit rates.  Which brings us to coal.

There’s an interesting video out that purports to show that oil has come down out of the sky during a rainstorm in LA.  The video is too short for me to conclude anything, and it’s always possible that someone spilled a quart on purpose to create a sensation, but it’s possibly a real event.

At this point, I am ready to be surprised by the events in the Gulf.  If something can go wrong down there, it goes disastrously wrong.

http://www.youtube.com/watch?v=un8co1d4zb4&feature=player_embedded

There is such a tight correlation between energy use (specifically petroleum demand) and economic growth that it is almost unthinkable to suggest that one could actually have a recovery in the economy absent a recovery in petroleum demand.

But that’s what we are being asked to believe, if we put the results of two separate government reports together that both happened to come out today.  The first says that the US economy shrank by only 0.18% percent in the second quarter, or at an annualized rate of 0.7%.  The second says that oil demand in July retreated to a level last seen 13 years ago.

These do not make sense in the least, and one of them has it dead wrong.  You know where I am going with this already, don’t you?

Here’s the first:

What would happen if there was some sort of an oil emergency that required countries to rapidly cut down on their fuel use?  Clearly there would have to be some sort of a triage plan to allocate what oil was available.

There are a number of possible scenarios that could lead to a cessation of oil imports and/or distribution, ranging from hurricanes to wars in the mid-east.

This is worth thinking about, because the impact to your lifestyle could be large, depending on your circumstances.

Luckily, we have a pretty good ‘lens’ into the mindset of the official planners, because in 2005 the IEA completed a study where they assessed the types of policy responses that would save the most oil and at what cost (to implement; not to lower the impact on the economy or your lifestyle, obviously).