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Nature article: Tar sands pipelines have global impacts and now is the time to improve how we review them

Danielle Droitsch

Posted June 25, 2014 in Moving Beyond Oil

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Eight leading scientists and economists in Canada and the United States have just published an opinion article in Nature magazine that says tar sands pipelines have global impacts but the process to consider them is broken. They provide one more reason why the Keystone XL tar sands pipeline should be denied. They cite the failure of a decision-making system in both countries that ignores how pipelines will collectively present major global impacts to climate, water, and local communities.  The experts argue that governments are only looking individual pipeline proposals rather than how they collectively will facilitate a major expansion of the tar sands industry. 

Credit:  Shannon Ramos

Credit: Shannon Ramos

This incremental approach also has the effect of perpetuating a myth that tar sands development is inevitable because decision-makers try to point to other projects as the culprits, they write.  The experts implored decision-makers to “consider the global impacts of oil pipelines” and change how we look at these controversial decisions.  Here in the U.S. we can start with the Keystone XL tar sands pipeline which is still under consideration by the the U.S. State Department.   Secretary of State Kerry has an opportunity to put the decision around Keystone XL into a broader climate context understanding that the pipeline itself certainly has a major climate impact but that it is already part of a broader scheme enabled by many pipelines to help the tar sands industry grow substantially. It will be one more reason to reject the pipeline.

An incremental approach enables governments to evade the true impact

Currently, decisions reviewing proposals for new or expanded tar sands pipelines are made in isolation and often presented as “a binary choice between project approval and lost economic opportunity,” the article states.  What is lost among this incremental and narrowly focused decision-making is an essential broader context that would take into account global climate obligations.   If the review of a pipeline is set up looking at the short-term consequences, what is lost is a “broader conversation about national and international energy and economic strategies, and their trade-offs with environmental justice and conservation.”

Currently, the U.S. and Canadian governments are evaluating as many as a dozen pipeline proposals all of which would collectively have a significant impact to the global climate given tar sands development is considered one of the most carbon intensive oils in the world.

One of them is the Keystone XL tar sands pipeline which would bring up to 830,000 barrels per day of the high carbon oil from Alberta to the Texas Gulf Coast.  But the tar sands industry has wanted to massively expand its production base which is currently a little over two million barrels a day to over 6 million barrels a day, which will require multiple pipelines.  At this time, tar sands companies are attempting to push ahead with as many as a dozen other projects including:

  •  
    • Northern Gateway:  This pipeline would bring tar sands from Alberta to British Columbia’s west coast carrying up to 525,000 barrels per day.
    • Alberta Clipper expansion:  Tar sands companies want to expand this existing line so it can increase the volume of tar sands flowing through it by over 200,000 barrels per day.
    • Energy East: Trans Canada has proposed this project that could carry up to 1.1 million barrels of tar sands crude oil through Central and Eastern Canada to New Brunswick.

While all three of these proposals have been made, they all face major hurdles including opposition from the public and First Nations.  Even any of these projects moves ahead, however, it will enable the tar sands industry to grow.

Incremental decision-making perpetuates myth that tar sands development is inevitable

At the center of the debate about the proposed Keystone XL tar sands pipeline is whether the pipeline will lead to a significant increase in climate emissions. It will. In fact, tar sands expansion is already beginning to slow due to a lack of new pipelines. Investment in tar sands expansion has been declining for over a year, plans to build several major tar sands expansion mines were recently cancelled, and the tar sands industry’s most recent production forecast showed the rate of tar sands expansion slowing amid pipeline delays.

But despite overwhelming evidence the pipeline will help the tar sands industry grow and expand, the State Department’s review concluded that if it rejected the pipeline, other pipelines and rail transportation would instead facilitate industry expansion.  In short, the State Department did not find its decision would have a climate impact.  There were a number of problems with this conclusion which NRDC outlined in detail here.  But one of the biggest problems with making this conclusion was the State Department’s failure to acknowledge how its decision was part of an industry wide effort to expand pipeline infrastructure to grow this carbon intensive tar sands industry.  Their article concludes “a more coherent approach, one that evaluates all oil-sands projects in the context of broader, integrated energy and climate strategies, is sorely needed.”  What is needed is a bi-national discussion about the cumulative effect of these pipelines including mines, drilling (in situ), refineries, ports and tankers.

A better model for decision-making

As the U.S. and Canada both confront new major pipeline projects which could collectively have a major impact on whether the carbon intensive tar sands industry expands, now is the time to revisit the process for reviewing proposed infrastructure projects.  This is even more critical given the lack of a global climate agreement.   Here are some good first steps according to the Nature article:

Decision-makers can enact policies that acknowledge the global consequences of expanding tar sands development starting with looking at how each project will cumulatively help industry grow production but then a framework for a broad approach for all of these infrastructure projects.

The U.S. and Canada can agree to “share policies that guide development of both carbon-based and low-emissions sources of energy over the coming decades.”  The Nature authors argue that now is the time for the two nations to identify a framework that charts a path for an energy future with a commitment to limit carbon emissions as a starting point. 

The U.S. State Department in particular has a major opportunity to consider how its decisions on tar sands pipelines will help Canada massively increase its tar sands industry which is currently the major reason Canada will fail to meet its international climate obligations.  Canada’s government has projected it will miss its target by a wide margin.  If Secretary of State John Kerry is interested in global climate leadership, then the U.S. ought to consider its role ensuring Canada fail meets its climate obligations. A key way is to reject the Keystone XL pipeline.

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Comments

A Proud CanadianJun 26 2014 12:14 AM

Another article saying nothing.

Danielle lets get to the point. Please answer the following simple question.

You need to fill your car with gas…. You pull up to a gas station and they have 2 pumps. One says “refined in the USA from Canadian oil”. The other says “refined in the USA from Saudi oil”. Which do you choose? Why?

jan FreedJun 26 2014 07:58 PM

Alternatives are available. A "Moon shot effort" can transition to clean energy.

Even if we could pretend climate change isn't a problem, there are many good reasons to say "no" to Keystone.
.
It will not create the jobs claimed* for it, nor will it reduce prices at the pump. In fact, prices may go up as domestic oil finds easier ways overseas.
.
It threatens drinking water supplies and land used for hunting and fishing.. 200.000 gallons spilled in Mayflower Arkansas, and there are dozens of spill per year. Along with the sludge is benzene, a known carcinogen, to dilute the bitumen.
.
But most importantly, the IEA estimates that Keystone could harvest 3 times the carbon that would take us over 2 degrees C, the absolute limit for a catastrophe we might survive, if we're lucky. And other carbon projects are in the wings, taking us up to +6 deg. C, with "massive climate change and irreparable damage" How reckless can we be?
.
See: "IEA acknowledges fossil fuel reserves climate crunch"
http://priceofoil.org/2012/11/...
.
We are warned of this climate abyss by our most trusted messengers, such as NOAA, NASA, every scientific academy, such as the Royal Academy of UK (SIr Isaac Newton was president), the National Academy of Sciences (Einstein was a member), the very conservative World Bank, fact-checked by National Geographic, Scientific American.
.
We are told of current disastrous health effects by the 
American Academy of Pediatrics, the World Health Organization and the AMA.
.
We cannot rely on State Department assessments, if made by employees of the carbon industries.
.
And Keystone could eventually strip forests the size of Florida, forests that might have absorbed enormous quantities of CO2 before they were removed as "overburden".
.
Would Keystone "replace" those forests? They've said they would make good any future
 damage. Laughable.
.
Even 2 degrees itself may be too high - a "prescription for disaster"
says Dr. James Hansen, chief climatologist at NASA (ret.), one who, early on, predicted many of the catastrophic effects that we have seen.
.
Many of us know the bitter taste of the weird weather out there, with just current warming of .8 deg C. Recent consequences over the World and the U.S. are tallied here:

http://www.climatehotmap.org/

http://www.pinterest.com/clima...
.
Shall we roll the dice for our kids and grand kids, saying "let it ride!" beyond 2 degrees and more? More, and we might invite abrupt, irreversible changes.
.
No, taking your kids to to soccer practice or Disney World does not make up for that.
.
With its extremely high risks and very low returns, Keystone XL is not a smart gamble. Better is a price on carbon pollution that will boost sustainable energy (and hybrids) and a rebate check to citizens. . Or the DOD building 50GW of wind/solar, returning revenues to taxpayers.
.

------*
*jobs http://www.ilr.cornell.edu/glo...
A recent State Dept. study said the construction workforce would be 5,000 to 6,000 workers. And once the construction phase ends, almost all of these jobs, however many are created, would go away.

Bruce TeareJun 27 2014 06:03 PM

Extraction of tar sands will destroy the breeding grounds of over 800 species of migratory waterfowl ! This industry is a threat to our national and environmental security ! Fossil fuel is the horse and buggy of the 21st century ! It is time to move forward with green renewable energy ! The age of big oil is over ! Or the age of Homo sapiens will be severely threatened ? Like extinction !!!

Andrea Leon-GrossmannJun 27 2014 08:38 PM

I have been driving an EV for almost two years and I will never, ever, buy an internal combustion engine car again. We do not need tar sands, oil, gas or coal. We have all the energy we need above the ground!

A Proud CanadianJun 28 2014 11:14 AM

Jan,
It is a shame that you keep cutting and pasting the same old stuff here. I will do the same
“jan,
It looks like you've bought in to the rhetoric and misinformation connecting the Keystone to all of the worlds climate change woes. I've replied to Anthony's blogs before on this. Perhaps have a read of them.
One thing that doesn't get raised much is the topic centered around your comment
"And Keystone could eventually strip forests the size of Florida, forests that might have absorbed enormous quantities of CO2 before they were removed as "overburden".
Would Keystone "replace" those forests? They've say they would make good any future damage. Laughable."
A common misconception is that although the oil sands encompass a large area, a small amount of that is mined (where forest stripping occurs). Almost all of that is retrieved using underground steaming techniques like those used in the California heavy oil industry.
So many make the false connection. Hopefully this helped.
A Proud Canadian”

And here you are, now informed, writing the same old tired misinformation. Why do you do that?
So here are a few new ones….
“But most importantly, the IEA estimates that Keystone could harvest 3 times the carbon that would take us over 2 degrees C, the absolute limit for a catastrophe we might survive, if we're lucky. And other carbon projects are in the wings, taking us up to +6 deg. C, with "massive climate change and irreparable damage" How reckless can we be?”
Jan, Please show everyone the numbers for this misleading statement.

“We cannot rely on State Department assessments, if made by employees of the carbon industries.”
Really, you can’t trust your own government?

Boy oh boy the rhetoric is just flying out of you. But let us simplify the conversation. Anthony and Danielle, and other commenters just refuse to answer the question that I now ask you ….. they just hate this question…….

You need to fill your car with gas…. You pull up to a gas station and they have 2 pumps. One says “refined in the USA from Canadian oil”. The other says “refined in the USA from Saudi oil”. Which do you choose? Why?
I predict that although you are a prolific commenter, you won’t answer this one.

Anyone else wish to answer?

Sandra GradyJun 28 2014 03:44 PM

I would much rather buy oil from other countries even if we had to pay more rather than destroy the clean water, air, animal habitats and beauty of our country with disasters in the making like the Tar Sands/Keystone Pipeline. That project will predominately increase the wealth of the Koch brothers..and increase their influence and power over American politics and policies. We have had enough of their "buying of America". Even an over the land rail would be preferable to pipelines that are buried and unseen should leaks occur..it could take days..even weeks to find and repair them..and by then many water systems..aquifiers, rivers and streams, and lakes..may have been permanently destroyed.The American people will not see much if any of the benefits of this project...but they have the most to lose.

A Proud CanadianJun 28 2014 07:59 PM

Sandra Grady,

I didn't ask about other countries. I asked about Saudi Arabia.
Question unanswered.

false choiceJun 28 2014 10:00 PM

Proud Canadian - I think that's a false choice. Why does it have to be between Saudi oil and Canadian oil? If we had the political will, the choice would be oil or electric from renewables. Until we stop building pipelines and enabling the oil addiction, we don't seem to be willing to invest in the infrastructure to give us that choice of renewables.
So today, if I'm presented with the choice of Canadian and Saudi oil...I'll continue to choose living downtown and not having a car, thanks.

A Proud CanadianJun 29 2014 08:01 PM

false choice,
It is the choice that your Country has today and tomorrow until we are off of oil.
Question unanswered.

cloudpointJun 30 2014 11:02 AM

Someone asked if an American pulled into a gasoline station and saw two pumps: ‘Gas Refined from Saudi Arabian Oil’ and ‘Gas Refined from Alberta Oil Sands Oil’, which one would they buy? I’m not sure about Americans, but as a Canadian who knows the consequences of Oil Sands Oil (and is an oil industry worker), I would choose the Saudi Arabian Oil, assuming the price to me was the same.

It’s not a realistic question though. If each oil source could be tracked all the way to the pump then it could also carry with it the costs of its production and this would mean that the Saudi Arabian Oil would be much cheaper, so I’d expect most Americans would choose this option too.

A Proud CanadianJun 30 2014 10:32 PM

So just so I’m clear on why you choose this. What are the consequences of Canadian oil and Saudi Oil in your mind?

cloudpointJul 1 2014 03:38 PM

The problem isn’t Canadian oil. The problem is just with the oil coming from the oil sands, which is primarily Albertan oil. Albertan oil is not a huge global CO2 villain yet. If the oil sands are maintained at their present size, they won’t matter much in climate terms. Oil sands bitumen needs to be steam cooked or upgraded somehow to produce useable oil and then it is sometimes mixed with explosive condensate diluent to move it to the refining point. Being heavy oil, cleanup of any spill is more costly. The local environment is torn up during the extraction process. Specialized and more expensive refineries are needed to handle this kind of crude oil. A lot of petroleum coke residue is produced along the way, something that is worse than coal. There are a lot of risks around extracting, transporting and refining of heavy oil sands oil beyond just the CO2 emissions risk, but the CO2 emissions risk is the most concerning one to me.

The upgrading process adds from 15% to 20% to the total CO2 emitted by the time a consumer burns any oil from the oil sands compared to conventional oil. Oil sands oil costs from $30 to $60 per barrel depending on the specific oil sands site, technology used and when production started (with the newest sites being more costly). Condensate diluent adds another $12 or so a barrel to its cost if it is used in transport. Even at their present size, the Albertan oil sands caused Canada to miserably fail to meet its Kyoto commitments, effectively forcing it to be the only nation to withdraw from the accord, but this is a national embarrassment rather than global climate issue.

Saudi oil comes in an almost ready-to-refine state, mostly lighter or medium oil, costing less than $10 a barrel to produce and there’s enough of it to meet the world’s needs, at least up to the point we can safely burn oil. Venezuela or Azerbaijan conventional oil is similarly cheap. Saudi Arabia has about 267 billion barrels vs 168 billion barrels of proven oil reserves in Alberta’s oil sands. About 15% of Saudi Arabia’s oil production ends up in the USA now. If Albertan oil ever gets to the Gulf, via Keystone XL say, the chances are high that it will be refined in Gulf refineries jointly owned by Saudi Arabia, or just exported out of the USA. Either Americans won’t see much this oil or they will still be benefiting Saudi Arabia by using it. The oil in any oil field can only be pumped so fast, so Saudi Arabian supply can’t meet present daily world demand but their reserves are huge. In general, we should slow our use of oil to the level of conventional oil capacity and then use the conventional reserves first. This actually seems to be happening a bit – world oil demand has flat-lined from 2005 onwards when it had been steadily increasing before that. But it needs to actually decrease to be under conventional oil capacity.

The real problem with the oil sands is some people have visions of a huge expansion of the present operations, from 1.9 million barrels per day in 2012 to 3.8 million barrels per day in 2022. That will make the oil sands matter a lot, maybe even “game over for the climate” as the world’s top climate scientist Dr. Hansen has said. This seems like a hyperbole unless you understand his true meaning. Hansen is saying that the oil sands represent a new direction for humanity – that of sourcing oil and other carbon-based fuels from unconventional sources. This doesn’t make overall sense in a world where 80% of all existing fossil fuel reserves must be left in the ground to keep the society within safe levels of climate warming. The more we substitute unconventional high-emissions sources of fossil fuels for low-emissions conventional sources, the sooner we reach our emissions limit without getting the same societal benefit from the final use of the fossil fuels. Or, in another sense, the percentage we must keep in the ground increases to 85% or more.

The 168 billion barrels of proven oil sands reserves, exploited at the anticipated 2022 level of 3.8 million barrels per day, would take 121 years to exhaust. But society will stop using oil by choice or by force long before this. The oil sands are a huge investment that can’t be safely recouped by Canada, they will be stranded assets. The oil sands are already a major single point source for CO2 emissions (several coal plants worth). Other sources of CO2 emissions come from a very diverse number of points, tailpipes to coal plants, with no single one as big as the oil sands. That makes the oil sands ‘low hanging fruit’ at present, and therefore bit of a target of environmentalists. However, if the oil sands are somehow given an exemption that allows them to expand, then all sources of CO2, conventional and unconventional, will want to be exempt. The line has to be drawn somewhere. Don’t expand the oil sands operations. Harvest their benefits for the short time you have left.

A Proud CanadianJul 1 2014 10:11 PM

Nice speech without any comment on the consequences of Saudi oil.

So in essence, like many on this site, a monochromatic view of the world and not a clue when asked a simple question.

Just a speech on "don't waste your money". On our way to leaving 80% of our oil reserves in the ground, let the OPEC nations step up and not develop theirs. This will allow you to work the oil industry .... I mean stay a Canadian "oil worker" much longer.

cloudpointJul 1 2014 10:39 PM

I suggest reading my earlier comment again. I provided a substantial thought-out answer stating that the consequences of Saudi oil are less climate-altering CO2, less risk from or damage caused during extraction, transport & refining waste, and less overall cost to society to get at their oil in real terms. It appears to me that you could not counter these points so you merely waved everything away claiming it was speech. That's how it appears to me.


Someone needs to leave their oil resources in the ground, and it probably should not be Saudis as long as we still need oil, and we will need it for a while longer yet. I’m more concerned for children’s and grandchildren’s survival than I am for my personal job security. The science is clear that climate change will endanger them.

A Proud CanadianJul 2 2014 08:19 PM

Your answer just reconfirmed my point. You only talk about CO2 related issues. Thus my “monochromatic” comment. Please discuss human rights issues. Discuss regulatory oversight issues. Discuss the Saudi’s role in the Middle east and around the world. Discuss treatment of women, minorities, and the non-Arabic working class.

You may or may not be aware that you and I agree on the need to reduce climate altering CO2, however as we get there we have many choices to make.

It is good to know that you believe that Saudi oil should be extracted while Canadian oil stays in the ground. Incremental CO2 which won’t have any effect on climate change is everything, right?

A Proud CanadianJul 2 2014 08:22 PM

And not one comment from Danielle. Perhaps her thoughts on the treatment of women in Saudi Arabia........

cloudpointJul 2 2014 10:29 PM

You say “monochromatic”! I actually covered many bases. But only one base is an existential threat to our way of life so it obviously dominates my concerns. What consequences do human rights issues in Saudi Arabia have on the continued existence of society as we know it? I think none. I’ve worked in Saudi Arabia so I know that it has issues from our perspective but it isn’t quite as bad as you imply. Those groups you mentioned in Saudi Arabia would describe themselves as experiencing some combination of being pampered and exploited. Everyone is free to leave if they don’t like it there, it’s not North Korea. Besides, oil is fungible commodity. This means that if you buy a type of oil that you deem ethical, the other type of oil that you deem unethical will just be sold to another party with no market effect on any party.


I don’t understand your “incremental CO2” remark. The only choices that society faces are which of several sources of oil to use during the alternatives transition period. It’s not a very difficult choice to make. One source provides more bang for the buck (more ERoEI) and the others don’t. Use the most advantageous source first and only use a less advantageous source later if necessary. The only rationale for using all available options now is if you intend to use them all fully. But that’s collectively committing carbon dioxicide.

A Proud CanadianJul 2 2014 11:00 PM

Yes. Monochromatic. Of one colour. And it seems that that it is rose coloured. Yes Saudi women are free to leave whenever they want. Of course. And any worker is free to leave........ sure they are. Written right into their union agreement.
And my word! fungible ethics? Really. It going to be produced anyway? Should oil sands proponents use that line of reasoning as well?
And the incremental CO2 remark comes from the US State report on Keystone saying this. You should read it if you don’t understand.
Hey Anthony..... where is your opinion? Still waiting.
Question unanswered.

cloudpointJul 3 2014 01:47 AM

Yes modern Saudi woman are free to leave, I often saw them at the airport in Riyadh heading off to London or Bahrain for their regular extravagant shopping trips. That isn’t to say there aren’t some really backward types of men there who treat their woman like slaves, but that’s not promoted by their society. It’s a function of those men and their woman having had almost no education and having grown up in some remote Bedouin village under a local culture that hasn’t changed in centuries. It takes time to modernize a nation, a long time if you live in place where a rigid but desert-tested version of their religion sets the pace of modernization.


Temporary foreign workers in the kingdom (25 to 30% of all workers?) are typically paid one full month of extra pay if they stay until the end of their contracted term. They can leave early but they will lose their bonus and they will need to pay their own ticket home. They usually get an annual trip home or the equivalent flying distance to enjoy their 45 days of annual vacation (on top of the 6+6=12 days of legal holidays during the two religious periods). All this is assuming they don’t get involved in any legal dispute. It is not that lucrative for western workers to go there (maybe a 50% pay premium, free housing and no income taxes) but the workers from developing nations go home as very rich men and women since they earn several multiples of what they could earn back home. Again, there are ignorant bosses that mistreat their workers like anywhere, perhaps more often than should be because Saudi enforcement of their employment rules is somewhat hit and miss. Domestic servants are especially vulnerable, as are the large number of illegal workers in the kingdom. Temporary foreign workers are at risk everywhere they go. Even Canada’s TFW Program is presently being severely curtailed for abuses by employers (are you consistent in advocating not doing business with Canada for its worker mistreatment?).

cloudpointJul 3 2014 01:59 AM

Anyway back on topic … I think I finally have the gist of your argument, which is “I care so much about the poor people of wherever that the much bigger problem that effects everyone on the planet [but whose solution happens to hurt me] should be ignored while we solve all the other lesser problems of those poor people [problems for which have no real solution] by inflicting financial pain on their nation by some kind of market boycott, so that things will become worse for their leaders and they will be nicer to their people [only it won’t really be the leaders that suffer, it will be all the foreign workers that will get sent back home to poverty.]” Each to his own view, I guess.

A Proud CanadianJul 3 2014 06:52 PM

I feel like continuing this line of discussion just to allow you to continue defending the Saudis. Great that they voted for that way of life. Driving here and there (including the airport). Talking with men along the way for directions. Yes. You nailed it.

And of course you have the complete opposite of my “gist”.
Here it is:
The world utilizes 94million bbls of oil per day. That number is rising. The EIA and IEA both predict that number to continue rising. In that environment, the price of oil is also predicted to rise.
If the price of oil does that, then oilsands operations will make money and grow.

If you want to stop oilsands development then you must lower the price of oil. It’s that simple. Stopping pipelines won’t do that. Oil will be sent by rail. New and worse forms will be developed (arctic oil, ultra deep water drilling, burning of kerogen (oil shale).

There are 2 ways to drop the price of oil…. Increase supply or lower demand.
Increase supply doesn’t work because if we could do that, we would have. Now all new supply is in the form of oilsand and fracked shale oil (the stuff the NRDC resists), both of which are expensive to develop.

That leaves demand reduction.

The ONLY way to stop oilsands (and other heavy oil) development is to bring world demand down to around 75Mbpd and have it drop approx. 1Mbpd every year afterwards. The only way to do that is to provide an economic alternative to oil. And the beauty is that when those alternatives arrive, the transition will be natural and self-propelling.
It doesn’t matter if one or a thousand pipelines are built. When that day occurs then the refineries and pipelines that supply them will be abandoned. All investments (private investments) lost.
Until that day, IF that day arrives, Canadian oil over OPEC oil.

All the arm waving about the planet and our children’s children hinge on our ability to reduce demand, not restrict supply. It hinges on reducing the 40,000Mt of CO2 per year the world emits. Not on the additional 1.3Mt that Keystone could add. All the oil that Keystone would bring represents 152Mt of CO2 per year when finally burned in the gas tanks of Americans. But lets focus on the 1.3Mt …. Not the 152Mt. Or the 40,000Mt.

Ask yourself, if our world and our children and our future is in such peril….. why isn’t oil and coal outlawed in the U.S. as of today? Why 30% reduction from coal only by 2030? Why such inaction other than Keystone? An inaccurate and symbolic action which means nothing other than reducing competition for OPEC heavy oil production.
Why not throw a $2/gal tax on gasoline and cut demand that way? Where is brave and courageous leadership in that regard?
These are the solutions that I want. Not symbolic mumbo-jumbo that is only good to beef up the ranks of institutionalized Big-Enviro.

Again. Until that day, IF that day arrives, Canadian oil over OPEC oil. 

cloudpointJul 3 2014 11:39 PM

I’m not defending the Saudis, merely pointing out your inaccuracies about them, which you continually use as a false justification for Canadian oil, which isn’t really Canadian once it hits the fungible oil market anyway. What I’m defending is conventional oil over unconventional oil. There’s no need to expand the oil sands since there’s enough conventional oil from the Saudis and elsewhere with the existing size of the oil sands, UNLESS you intend to burn both. There is no economic or ethical merit to expanding the oil sands to displace conventional oil. Any arguable merit requires a need to burn all oil and that’s not an option most of the world will allow. Wars have been fought to get oil and wars will be fought to stop oil. Oil can’t be ignored.


The EIA and IEA keep revising their projections downwards with each new report and increasing their alternatives projections correspondingly. They have completely underestimated the speed of the revolution that’s happening in the energy markets. Oil demand just isn’t growing. Slap on carbon prices of $25 or $50 a ton, and demand will plummet. That will be in place in most civilized nations by 2020 – the dominoes are already falling. When there's lots of electricity, there isn't much need for oil and its FF friends. The EIA and IEA do agree on the absolute urgency to stop using oil though.


You ask, why isn’t oil and coal outlawed in the U.S. as of today? Vested interests and disinformation played a big role in the past but the main reason has been one missing ingredient - cost effective alternatives. The latter is basically resolved and no one pays attention the former now, just as pro-tobacco advocates are ignored. As such, either my gist is correct, or you are very behind on what’s happening now.


Within 20 years solar energy will be the single largest source of electricity going into the electrical grid – Elon Musk


“For the first time, we’re going to buy solar for under five cents per kilowatt hour, and that puts solar competitive with wind, competitive with natural gas, competitive with coal, and competitive with nuclear. In fact, it beats them all, and that’s a revolution.”


- From “Birthing a Solar Age”
https://www.youtube.com/watch?v=UnUNnW2DH_M
(a must-see Peter Sinclair TED video, 8 mins.)

JakeJul 4 2014 07:30 AM

I like the comment from the person who drives an electric vehicle and says they don't need gas or coal. I would like to invite this person to go cold turkey on power from fossil fuels and only charge their car with renewable energy. Let us know how that works for you.

(And no, paying for "100% green electricity" doesn't count since paying that extra cost does not change where your power comes from.

Idealist environmentalists are so confident until they have to actually face facts.

A Proud CanadianJul 4 2014 02:20 PM

We will let readers make their own evaluation of the Saudis and draw their own opinion.
There is not enough conventional oil to feed the worlds needs. I think that you operate off of a false assumption. Why do you think oil is $100-110/bbl. Do you honestly believe that there are vast swaths of conventional oil ready to come to market and undercut this price. IF you had read my previous comment you know there isn’t that much conventional oil. If you spend 30 seconds researching then you’d know this as well. Oil can’t be ignored. And this “who killed the electric car” conspiracy theory stuff is not worthy of debate. Oil is used by people due to its energy density, portability, and cost efficiency.
But then we agree, the lack of a cost effective alternative IS the problem,
I am absolutely not behind in the way that you think. Gist incorrect. Typical to label a pro-pipeline person an anti-renewables person (I will say it for the umpteenth time).
IF we get down to 5cents per kwhour and renewable electric starts displacing oil and coal based on superior economics, that is EXCACTLY what I want and keep supporting. At that point refineries shutdown and expensive oil production gets shut down. But stopping pipelines doesn’t create 5cent renewables.
Stopping any particular form of oil doesn’t create 5cent renewables.

cloudpointJul 5 2014 09:33 PM

Economics is the dismal science. I studied it but I prefer managing pipeline deliveries. Economics uses the term elasticity to describe how much supply or demand responds to changes in price. If a small change in price produces a large change in demand, demand is said to be elastic. If a large change in price produces a small change in supply, then supply is said to be inelastic.


Oil demand is inelastic as long as production is no more than demand, which you can thank the Saudis for artificially arranging – they cut back their oil production when there is too much supply and produce more oil when there is a shortage. Their goal, along with their OPEC friends, is to keep oil demand inelastic so as to maximize the current price of oil somewhat below the world recession threshold. Their target number is now around $100 a barrel. There are, of course, budgetary limits to their generosity on the cut backs side.


So we have an inelastic oil demand situation because of an oil cartel. However, the moment that demand drops below supply, oil demand suddenly becomes elastic and prices plummet to their lowest production cost. We saw that happen during the 2008/2009 recession when demand dropped too much and too quickly for the Saudis to react. Oil prices fell from over $140 a barrel to under $40 a barrel and averaged $53 until the end of 2009.


There are some lessons to be learned from this:

• The Saudis/OPEC could put all unconventional oil out of business almost overnight by simply maximizing their production (but at a cost to their own treasuries today so they don’t). If they perceive that their oil will become a stranded asset in the not too distant future, this is exactly what they will do.

• Alternatives to oil are catching fire within the energy markets, even without widespread carbon pricing. As these alternatives penetrate into the transportation market (thanks to Elon Musk), oil demand will become more and more elastic.

• Carbon prices are gaining a foothold in many jurisdictions, and will probably apply in most places by 2020. The carbon prices will keep increasing. This will drive down oil demand and the oil prices paid to producers will plummet, though consumers will see them as being higher.


Oil producers know these lessons too. It’s why future production plans are starting to be scaled back in the bitumen oil patch. Don’t be foolish by increasing the oil sands output by three times their current level, as PM Harper is urging though a combination of generous subsidies, low mineral rights charges, and pipeline environmental review neutering.

cloudpointJul 5 2014 10:04 PM

For Jake's consideration … Where I live in North America, the entire electric grid, supplying almost 14 million people, has nearly stopped using fossil fuels. Just 13% of our electricity came from fossil fuels in 2013. A few more solar panels will probably eliminate most of that 13% since solar energy is just a paltry 0.8% of supply so far. It's an ideal jurisdiction for electric vehicles.

JakeJul 5 2014 11:48 PM

Cloudpoint,

Did you really just say that North America does not use fossil fuels for electricity? Please tell me you are kidding.

In the US, something like 70% of electricity is generated from coal and natural gas. I don't know what Canada's and Mexico's ratios are, but they are likely quite high as well.

cloudpointJul 6 2014 12:13 AM

No I said “Where I live” used very little fossil fuels for electricity in 2013, which is in North American (i.e. it’s not Denmark or some other green nation). Read twice and post once.

If you read my earlier comments, you will know I’m in Canada. I just received my electrical bill yesterday and it had a flyer in it with the percentages that I posted. I see no reason that other jurisdictions can’t accomplish the same thing. We used to be heavily dependent on coal plants too but acid rain motivated us to close them down. The last coal plant closed last year so I expect the 2014 percentage will be even lower for fossil fuels. We still have gas plants that are occasionally used for backup generation or in areas that aren't supplied by other power sources.

JakeJul 6 2014 02:30 AM

Cloudpoint,

While I apologize for misunderstanding, you said "the entire electric grid". The electric grid is more than just where you live. For example, there are only 3 electric grids in the US (east, west, and ERCOT). Semantics, I suppose.

In any case, you should not presume that what one small area can do is easily replicated elsewhere. I suspect your main source of power is hydro electric and/or nuclear. It definitely is not wind and solar. Most areas do not have access to sufficient hydro, and nuclear is virtually impossible to build.

Renewables are growing exponentially, but it will take decades and further technological development to become much more significant. If you don't believe me, do some research on the German electric grid. They tried to go renewable and it was a disaster. And now that they have stupidly decided to shut down nuke plants, they are on a tear building coal plants (gas supply too dependent on Russia).

Unintended consequences tend to suck. Making decisions based on idealism rather than science always causes Unintended consequenses. Just ask all the kids with whooping cough because parents didn't vaccinate them to "protect" them from autism.

cloudpointJul 6 2014 03:55 AM

Perhaps I should have used the terminology system-wide (as the flyer did) rather than saying the entire grid. Nuclear energy is the backbone of our system – 58% of our supply, while hydro is just 24%. Nuclear energy is doable anywhere if the will exists, although I don’t think it’s the way of the future anymore – too many political, economic and non-climate environmental problems.

I’m actually well-read on the German experience with renewables (and my own area, but not elsewhere). There were no grid disasters reported in my many readings about Germany's experiences. Their large user electrical rates are average for Europe. Small customers pay a bit more but sometimes the utility pays them to use electricity so maybe it balances out.

Germany is planning to build 19 new efficient cleaner (i.e. reduced CO2 pollution) coal power stations, and a few have been built already. Germany's new coal plants have been on the books for years. They are not adding new capacity, just replacing older less efficient coal plants at their normal end of life, ones that would not have been replaced if they had not decided to close their nuclear plants (which should never be built on ocean coasts and theirs are so I understand their motivation). The latest article I read somewhere is they don’t expect most of the planned new coal plants will ever get built because renewables are working out better than expected.

Germany, the fourth largest economy in the world, agreed on a new policy known as energiewende, meaning energy transition. Its twin centerpieces are an 11-year phase-out of nuclear power plants, in the wake of Japan’s Fukushima disaster earlier that year, and a target of cutting carbon emissions by 80 to 95 percent by mid-century. Under the plan, renewables, predominantly wind and solar, will supply 80 percent of Germany’s electricity and 60 percent of its total energy.

Germany has in the past decade embraced renewables big-time. The country last year got 24 percent of its power from solar and wind — more than any other major industrialized nation. On some sunny weekends, more than a million mini-solar power plants on roofs and land across the country deliver half of Germany’s electricity needs. On stormy winter nights, thousands of wind turbines can achieve the same. Even on winter days after heavy snowfalls, every day last winter saw some solar PV power production.

They insist, however, that it will be done in time to meet their targets for cutting CO2 emissions — by 55 percent from 1990 levels by 2030, 70 percent by 2040 and at least 80 percent by 2050.

Germany is a big country, ¼ of the USA in population, and an industrial giant. What they have installed for solar is a small sliver of what they need, yet they have, at least on one occasion, met 50% of their demand from solar alone in the afternoon. Of course, the goal is not to be all-solar; it’s just to phase out the fossil fuel component and replace it by anything else (except nuclear it seems). If they can do it, what’s wrong with the USA?

cloudpointJul 6 2014 04:13 AM

"Renewables are growing exponentially, but it will take decades ..."

Well, maybe just under two decades. The technology is available and it works now for a cost less than or the same as fossil fuels. Most of the remaining problem is certain people don't like to abandon existing infrastructure until it wears out. But that will become necessary (carbon prices and obsolescence will ensure it). There truly is an energy revolution underway.

Bloomberg New Energy Finance (BNEF) reported in April 2014 that 3000 gigawatts of new build global electricity is projected to come from renewables from 2010 until 2030. Fossil fuels — coal, gas and oil — will account for fewer than 1100 gigawatts over the same period. “We're at a global turning point, where for the first time renewables are becoming the cheapest form of energy available in many regions, even without fickle government subsidies, according to BNEF data.” It's a fundamental change in the structure of the energy sector.

An interesting thought … the same article says that the grid of the future will be more like a public battery, where a house or business with renewables can send excess energy and draw back from it as needed.

Lots of other very detailed data in the same article ...

http://www.bloomberg.com/news/2014-04-09/energy-investors-are-an-uncertain-kitten.html

Don't forget the internet is just over 2 decades old. When something catches on it can get done fast.

A Proud CanadianJul 6 2014 02:58 PM

And so at the end of the day, with renewables coming to replace fossil fuels (perhaps in just under 2 decades), the issue of a pipeline is a mute point.

So why would people at the NRDC as well as Cloudpoint care one way or the other if Keystone is built?

Many talk about the CO2 from keystone over its life. But haven't you just mentioned that its life is only approx 15yrs?

with the energy revolution underway, at this point why are you caring that a private company is making a bad investment decision?

cloudpointJul 6 2014 05:48 PM

APC, I said “Most of the remaining problem is certain people don't like to abandon existing infrastructure until it wears out.” Build Keystone XL and you make it more likely that the Athabasca oil sands will be expanded and that society will be locked into that pipeline infrastructure and that oil source for longer than without it.

I don’t object to the small amount of CO2 attributable to burning the oil flowing through an eventual Keystone XL pipeline – it would be an insignificant fraction of all the CO2 the world emits, even the CO2 emitted from burning the entire oil sands at their present size isn’t a very big fraction. I do object to expanding our global oil addiction from conventional to unconventional oil source of all types. It’s like giving up an opium addiction by substituting a heroin addiction.

JakeJul 6 2014 06:36 PM

Cloudpoint,

Your comments about Germany are misleading at best. After the Fukushima disaster, Germany decided to abandon it's nuclear fleet. As a result, they had to begin building either gas or coal plants to replace it.

Germany's prices are very high precisely because of their efforts to get all their power from renewables. The reason is that wind and solar cannot be counted on all the time. Therefore, to ensure the lights don't go out when it's cloudy and calm, Germany has much more generation capacity than actual power demand. This makes power prices extremely high. And as they purposely shift away from nuclear, their prices will go even higher.

The immense amount of transmission infrastructure required to support all of this is also very expensive.

Also, due to the difficulty of coordinating massive amounts of unreliable wind and solar, Germany's grid is becoming increasingly unreliable.

And to put it bluntly, there is no defending Germany's $0.30/kWh electricity price. But it does work to the benefit of the US as more heavy industry moves here to take advantage of our prices that are generally 50-75% lower.

cloudpointJul 6 2014 10:04 PM

Jake,

Germany has not had to build any coal plants to replace nuclear capacity, yet. The only changes related to coal since March 2011 when Germany announced its energy transition away from nuclear energy concern two plants actively being “planned” and nothing has been built from those plans yet. There are provisions to build more coal plants but it is dubious that they will ever be built. Six of the 19 or 20 original planned projects have already been abandoned. All new coal plants being built or completed (10, I think) since 2011 were planned well before the nuclear phase-out announcement. Coal plants take around five years to build, so don’t expect any new ones as a reaction to an event in March 2011 until 2016. I don’t know of many natural gas turbines being used in Germany (I do know of a few, but I’m not really knowledgeable in this area). Coal gas plants might be more common. Coal is plentiful in Germany – natural gas needs to come from Russia or elsewhere.

The prices that German industry pays per kWh for electricity are not higher than elsewhere in Europe so don’t expect them to flee to the USA. Retail customers do pay a lot more per kWh (about double what I pay) but this seems to be the price of being on the leading edge of something new. Germans grumble about this but I don’t see them asking their government to change its direction. In fact, their energy transition plan enjoys overwhelming popularity within the country. I would say either you have misunderstood its benefits or Germans collectively are a very stupid people. A great many Germans also have solar panels installed at home so their utility bills probably net out to something similar to what other people in Europe pay. I found this statement at the link below: “Most news stories focus on the cost of electricity in Germany, which has some of the highest rates per kilowatt-hour in the world. But they don't note that the average German electricity bill – about $100 a month – is the same as for most Americans.” I wish my bill was that low.

So far, Germany’s supposed high electrical rates or transmission issues are not causing industry to flee. In fact, the German economy is more robust than that of the USA by all measures despite the economic calamities surrounding them in nearby European economies. Would you really want the dirtiest and most energy-wasteful of Germany’s industry to flee to USA? Remember that you will be subsidizing them one way or another. You have enough pollution from your own too many coal plants as it is anyway, don’t build more of them for some dirty jobs. I know in my own area that renewables have made no measureable difference to my rates but we aren’t at Germany’s stage yet (6% renewables vs. 20%+ in Germany, excl. hydro).

A means to store renewable energy is key to using renewable energy sources at high penetration levels. This doesn’t really present an issue at low penetration levels, which is where Germany is still at now, because the renewable fluctuations are lost in the normal demand fluctuations. Like anything else transmission infrastructure needs to be rebuilt eventually – it’s not a new cost. This isn’t needed yet. Local generation may even mean less need for expensive transmission infrastructure. Lots of options exist for transmission and for storage when the time comes. And some new ones are coming…

Isentropic PHES Technology Explained

https://www.youtube.com/watch?v=sIxt6nMf-IQ


My earlier quote comes from:
http://www.renewableenergyworld.com/rea/blog/post/2013/10/3-reasons-germans-are-going-renewable-at-all-costs

JakeJul 7 2014 01:12 PM

Cloudpoint,

I'm not sure where you are getting some of your information from. For example, if you Google "electricity prices by country", you find that Germany's electricity prices are around $0.35/kWh while $0.20-0.30 is more typical of the rest of Europe.

Meanwhile, the US has the lowest energy prices in the world, which is helping drive "on shoring" (not necessarily from Germany).

A Proud CanadianJul 7 2014 09:06 PM

Cloudpoint,
People will abandon or re-purpose existing infrastructure well before it wears out. Pipelines are being reversed. LNG terminal once conceived for natural gas imports are now being built for exports.

“I do object to expanding our global oil addiction from conventional to unconventional oil source of all types. It’s like giving up an opium addiction by substituting a heroin addiction.” – This is wholly inconsistent with our shared goal of the energy revolution that you very correctly pointed out. Oil sources are doomed. Especially unconventional. If electricity is 5cents per kWhr sourced by renewables then pipelines will be abandoned:
1-Refineries will be shut down as demand for finished products decreases and refining profitability drops. Worldwide refineries (including gulf coast refineries) processing heavy oil will likely go first.
2-Oil then becomes cheaper as oversupply conditions occur. Specifically an oversupply of heavy oil will also drive the WTI-WCS differential up.
3-The most expensive oil sources are shut down due to lack of profitability. It is at this point that oilsands shut down as it is one of the more capital intensive sources of oil.

And when oil demand falls, then any infrastructure be it pipeline, refinery, oil tanker, oil railcar, port, deep water drill rig, etc…… will become obsolete. To believe a refinery or a port is a capital investment any different than a pipeline is not correct. Once the demand for refined products drops. The rest takes care of itself. Perhaps the Keystone XL will transport fresh water instead of oil one day.

Back in the day, I once had a Blockbuster video membership….. yet I no longer want VHS tapes of movies anymore. Technology moves on and previous infrastructure fades away. Are we forced today to transatlantic travel by steamship because steamships were built? The stone age didn’t end due to a lack of stones. The oil age won’t end due to a lack of oil. It will be because the next best thing came along. But only when that thing gets here and not before.

So I suggest to you. Don’t waste your time fighting a pipeline. Especially if you don’t object to the small amount of CO2. Put your energy and money into those 5cent renewables.

cloudpointJul 8 2014 01:01 AM

Jake,

You are the only one that stated a kWh price ($0.30/kWh) for Germany, and I did not dispute your price (though I knew it was a bit low). You are merely disputing yourself by stating now that it is actually $0.35/kWh.

What I did quote you was an article saying that German's monthly electrical bills are as low as the USA (not the kWh rates). Bills are what counts, not rates. And the USA is certainly does not have the lowest rates in the world (visit Quebec, $0.06/kW in Montreal).

I don't know what part of the following you don't understand:

1] $0.35/kWh charged to small German consumers (that's an average, sometimes the rate is actually negative and they get paid to consume electricity)

2] less the $0.20/kWh paid back to them by a very generous FIT program for home or community electrical generation (the source of most of Germany's renewable electricity)

3] is equivalent to the $0.09/kWh to $0.22/kWh that lower 48 US state consumers pay, depending on the state.

(FYI - it's $0.12/kWh avg where I live despite a heavy emphasis on expanding renewables and a generous FIT program too.)

And, again, I emphasize that all of German large industry is exempt from these high kWh rates. In fact, their kWh rates have gone down with renewables because they sometimes get cheap renewable electricity (almost free) without having had to pay any of the up front capital costs that factored into the $0.35/kWh rate.

cloudpointJul 8 2014 01:34 AM

APC,

The energy revolution applies to new builds of generating capacity. If climate wasn't a concern, we could let things play out like VCRs and steamships. I sure wouldn't care. But time is short. Even the most optimistic of energy experts only expects 50% of existing capacity to be replaced by 2050 without it being forced to do so earlier (by a carbon price for example), and not even all of that capacity will be replaced by renewables. Renewables won't work in every context or regime yet.

A lot of the cost of a new generating plant is the capital expense (CAPEX). CAPEX is a sunk cost at an already built generating plant. The cost decision for the plant owner is whether 1] to incur new CAPEX by building new renewable capacity to replace a still operating fossil fuel plant and shut down the old plant, or 2] to continue to incur the higher fuel costs of an operating fossil fuel plant.

The second option will win out every time until either the old plant completely wears out at end of life or the fossil fuel it consumes becomes very expensive (or the fuel it consumes runs out completely).

Oil, coal and gas will be needed until all generating plants wear out or carbon prices force the matter earlier. I'd like to slowly force the matter earlier. The only alternative to my option is a climate that won’t be compatible with modern society.

Remember, they didn’t scrap perfectly working steamships midlife. They just didn’t build replacement steamships when they reached the end of their useful life. But that’s not good enough in this situation.

JakeJul 8 2014 12:00 PM

Cloudpoint,

Your comments are getting stranger and stranger. Taking Germany's average price of $0.35 and subtracting the $0.20 paid for home generation to get a net price that is equivalent to US prices makes no sense at all.

There are many other logical inconsistencies in your last comment to me as well.

And BTW, I said the US has the lowest energy prices in the world, not the lowest electricity prices.

A Proud CanadianJul 8 2014 06:53 PM

You do realize there is no consistency between:
-The immanent revolution of 5cent renewables and,
-The notion of forcing a switch to renewables at a higher price than current fossil fuels (aka fossil fuel price + carbon tax).
If you think the switch happens in that price environment then what you are really saying is that we need the price of energy as a whole to rise to make the switch. Can you reconcile this with your previous comments please.

If those in the oil production business see oil demand rising into the future, they will make a business decision to build a pipeline, build a port, construct an ultra-deep water rig, frack, etc…..
Even in a falling demand scenario, capital will still need to be spent to replace declining production rates from conventional (and some unconventional) sources.
This is obviously what they see and this is why they are building. They don’t believe that the revolution will take place within the timeframes that you are saying.

Note that the last steamships were working perfectly when scrapped (as were sailing ships before them). When profitability dropped based on the emergence of aircraft, they were gone. Every technology change has the latecomers lose out (those that don’t believe that the next step is coming). It is impossible to have a clean switchover where we have one technology one day and another technology another day. Infrastructure is left behind.

So while we need oil now and for a few decades yet and for existing refineries…… and as conventional oil depletes, what would you want individuals to spend their oil infrastructure capex on? Nothing?

cloudpointJul 8 2014 11:13 PM

Jake, I would suggest you are getting strange when I need to explain basic arithmetic to you and how billing works. Ask whichever family member pays your bills for you to explain how it all works. And I’m not sure how you would expect someone to understand that you have expanded your energy meaning to include all energy prices when you just finished complaining about and misunderstanding Germany’s electricity pricing scheme.

In any case, it is an even less true statement that the US has low energy prices. Many countries actually subsidize energy prices to their citizens far more than the US does. For example, gasoline is one cent a litre in Venezuela (it is one dollar a litre in the US and one dollar forty in Canada). I used to fill up my tank for $10 in Saudi Arabia when I lived there, about one third of the US cost at that time. Other energy prices typically align with gasoline prices in each country.

A lot of any energy price in advanced countries is tax used to provide government services such as universal medical care that US citizens need to instead pay for individually out-of-pocket (directly to doctors or as insurance premiums or by accepting lower salaries if their employer covers it). I hope you are putting aside your meagre energy savings to pay for your over-priced medical system. Energy prices are essentially the same everywhere absent government interference in either direction. The oil companies are doing no favors to US citizens. If prices were truly higher in other places, the oil companies would sell their entire product elsewhere and say screw you ess, eh!

See “Gasoline Prices, 07-July-2014

http://www.globalpetrolprices.com/gasoline_prices/
__________________________________

If you want to know more about what Germany is really doing with their energy supply, the article at the next link covers it all quite well. It’s too long to summarize here.

http://thinkprogress.org/climate/2014/05/13/3436923/germany-energy-records/

cloudpointJul 8 2014 11:57 PM

APC, Take some university-level macro and micro economics courses and then we can have a proper discussion about demand / supply response. Suffice it to say that when the price goes up, the supply goes up a bit and demand goes down a bit until they meet each other somewhere in the middle. This happens only if the price is paid by the demand party and received by the supply party. The reverse principle holds too.

If the government keeps paying the freight to expand the oil sands, the suppliers will say: ‘what the heck, we will grab some market share from some conventional oil suppliers to feed all those legacy oil users, take the money and run and leave Canada stuck with the cleanup and carbon consequences’. Of course, a lot of oil suppliers are also in disbelief that the world will not expand their oil usage because they know there is a growing demand for new energy and they don’t think alternatives are feasible. These suppliers are being rudely awakened now. But Alberta is used to being a boom and bust place, so it will just be more of the same.

Governments that subsidize the demand side are just as big a problem. Most poor nations with authoritarian governments do this to keep the people quiet, or they just don’t add much tax to their energy prices if they are moderately undemocratic places (e.g. the USA in the sense that big business has a stranglehold on their government policy).

What needs to happen is the price of fossil fuels must increase on the demand side without the supply side reaping the benefit. That breaks the normal demand / supply response. That’s called pricing carbon using any of several available methods.

And, no, business people do not scrap huge capital investments just because some new and better technology comes along. They are not that stupid with their money. It’s rare that any new technology is so much better in the beginning that it merits immediately obsoleting what was there before it. It isn’t even necessary for business people to do anything until their competitors adopt the new technology widely and these competitors won't do that because they are also business people and are in same boat, or steamship.

Soft products like movies rented on VHS tape are more or less services and they follow different rules.

JakeJul 9 2014 08:02 AM

Cloudpoint,

Sticking to one topic at a time, electricity prices in Germany:

Any household or business that does not generate their own electricity is paying the full $0.35/kWh. To subtract the $0.20/kWh self generation credit from that is asinine.

Any household that does generate their own electricity still pays full price for any net power bought from the utility. Any net power sold to the utility would net them the $0.20/kWh. But it is still asinine to suggest that the net price of electricity is $0.35-0.20.

Additionally, by subtracting the $0.20, you are failing to recognize that the self generation price is reflecting what it actually cost the owner to generate that electricity. You are essentially ignoring the cost of the home generation, and pretending that it is somehow free.

The reality is that the self-generation credit of $0.20/kWh reflects the fact that just generating electricity in Germany costs about as much as the all-in price (transmission, distribution, etc) of many other European countries, and nearly double the cost in the US.

As for global energy prices, I was trying to keep my comment short and not write a book like you seem to like doing. Yes, there is a small handful of countries with subsidized prices lower than the US. That's because they are oils exporters with lots of govt owned oil money. However, you still are not looking at total energy prices and have completely ignored natural gas. US and Canadian oil and gas production has given these two countries a major economic advantage, and it is helping create many jobs here.

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