Re: Rudd calls on G8 to pressure OPEC
So can't the governments knock out the speculators or just switch to a new form of energy asap? Would that screw the economy?
It's a massively comnplex situation, I'll explain (and try to stick to layman's terms)...
Petrol ,diesel etc aren't simply fuels for running engines. The crude oil from which they are made is an energy
source rather than an energy
carrier
The main energy sources used in the developed world are oil, coal, natural gas, nuclear and hydro. All of these things are
sources of energy.
Examples of energy carriers are batteries, ethanol and hydrogen. They do not provide energy as such, they are simply a means of taking one form of energy (eg biomass or coal) and transforming it into some other form that is more practical for end users.
Take a laptop computer for example. Start with coal in the ground (energy source). Burn the coal to generate electricity (energy carrier). Use that electricity to charge the battery (also an energy carrier). Then use the battery to run the computer. The energy source is NOT the battery, that is simply the energy carrier. The energy source running the laptop is in fact coal.
The problem we have with oil is that it is our largest energy source. It varies somewhat by location but it's roughly 40% of our total energy.
So if we're going to use something else to run cars (eg hydrogen or batteries) then that in itself doesn't fix the problem. It only works if we increase the supply of some other energy
source - otherwise we have no means of charging the batteries or making the hydrogen.
Efficiency is another problem. If you start with oil and refine it into petrol, diesel, kero etc then that process is highly efficient. Most of the energy contained in the oil makes it through to the petrol etc with only a small amount lost in the process.
But consider electricity. Starting with coal we lose only a few percent in mining (fuel for equipment etc) and transport. But by the time we've converted it to electricity (which is the major use of coal) and transmitted that to your home, we've lost fully two thirds of the energy the coal contained.
That's why electricity is so polluting - burn 3 units of fuel to get 1 unit of energy at your home or business. So say you need 10 MJ (megajoules) of heat energy put into some water. You'll have to burn 30 MJ of coal to do it with electricity.
But it's even worse once batteries or hydrogen are introduced. To get that 10 MJ out of a battery means, due to the loses involved, burning about 43 MJ of coal. And to get it from hydrogen produced from electricity means burning about 50 MJ of coal.
But right now we get 10 MJ into the petrol tank from about 11 MJ of crude oil.
So if we're going to switch to something else then we need a LOT more of some non-oil form of energy. That means a lot more coal, gas (itself a limited resource so forget that other than in the short term), nuclear or renewables.
It's not simply a matter of building a hydrogen factory or plugging electric cars into the nearest power point. Nor is it simply a matter of building a few more power stations to make that work. What we need is a lot more energy to run a lot more power stations - and that's not an easy task.
Take Victoria for example. You've got some depleted oil fields - not much help from those. You've got some gas but it's disappearing fast enough as it is - using even more just doesn't stack up. You've got some hydro but it's only a small amount of existing electricity and there's no way it can scale up enough to supply even present demand. And you've got a lot of brown coal - Victoria's major energy resource. But brown coal pollutes big time.
So what do we do? Either we're going to use a lot less energy in total as oil and then gas supplies decline. Or we're going to expand something else in a big way. Then we use that expanded production to run electric cars, hydrogen or whatever. But don't forget that hydrogen, batteries etc etc simply carry energy produced from something else and don't actually produce any energy themselves.
So overall it's a major expansion of the total amount of energy supplied from coal, nuclear and renewables. They don't have to increase individually, but in total they do. Or alternatively it's a permanent ongoing decrease in consumption. They are the only two options.
In a technical (as in mechanics etc not stock charts) sense the easiest option is to switch to gas for running vehicles. But gas as a resource is fairly limited so that means we have to switch existing gas use to something else.
And what do we use to replace gas in its current uses? Coal gasification is the easiest answer there (that's where gas used to come from by the way - Sydney, Melbourne etc all had coal gasification plants 40 years ago). But if we do that then there's a problem. Do we accept a major rise in greenhouse gas emissions with this shift to coal? Or do we offset it by using less coal in power stations? And if we do that then where do we get electricity from? Nuclear or renewables become the only answer there and , unless we can get geothermal going in a big way, nuclear is the only one that works in a technical sense at an affordable price (though it's still not cheap).
My personal best guess is we'll do a bit of everything. Rising prices crimp consumption growth. Gas gets expensive too (already happening by the way) so we see less used for power generation than most are expecting. We do some renewables but not enough. We build a nuclear plant or two but again not enough. We end up using more coal than we'd like and greenhouse gas emissions rise as a result.
I'd also add that the "petrol price crisis" will spread to become a general energy crisis at least in price terms. We'll see gas prices rise (taking electricity with them whilst governments keep pushing gas-fired power) thus flowing onto both household etc gas and electricity. Then all forms of energy used by ordinary consumers - petrol, gas and electricity - will be a lot more expensive. That's actually already happening, it's just that your bills don't reflect it yet due to contractual and regulatory arrangements - but they won't protect you forever.
In the 1980's and 90's we had lots of government-built big non-oil or gas power stations keeping electricity cheap. And we had booming oil production from Alaska, Bass Strait, North Sea etc keeping OPEC in check. Now we have the opposite - deregulated electricity markets where few will invest in high capital cost coal, nuclear or hydro plant and falling oil production in most countries. Add the depletion of gas in North America and the North Sea and it's not a good mix globally.
Think about the overall situation this way. Country or state X uses 40% oil, 35% coal, 20% gas and 5% hydro as it's energy source. If you take out that oil, then you can't simply replace it with coal, gas or hydro unless you have a lot more of them (or some other alternative - but 40% from wind and solar ain't happening anytime soon).