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Gas is suddenly cheap(er), and the reason is bigger than you think


Photo by Wil C. Fry on Flickr.

Gas prices have fallen below $3 per gallon in much of the US, and the explanation isn’t the simple seasonal differences that always make gas cheaper in autumn. The bigger reason: US oil shale deposits are turning the global oil market on its head.

How did cheap gas happen?

In the simplest terms, supply is up and demand is down.

Travel drops between the summer travel season and the holidays, and cooler fall temperatures actually make gas cheaper to produce. That’s why gas prices always fall in autumn.

But that’s not enough to explain this autumn’s decline, since gas hasn’t dropped this low in years. China is also using less gas than expected, but that’s also only part of the explanation.

The bigger explanation seems to be that supply is also up, in a huge way. North American oil shale is hitting the market like never before, and it’s totally unbalancing the global oil market. Oil shale has become so cheap, and North American shale producers are making such a dent in traditional crude, that some prognosticators are proclaiming that “OPEC is over.”

It’s that serious a shift in the market.

Will this last?

Yes and no.

The annual fall price drop will end by Thanksgiving, just like it always does. Next summer, prices will rise just like they always do. Those dynamics haven’t changed at all.

Likewise, gasoline demand in China and the rest of the developing world will certainly continue to grow. Whether it outpaces or under-performs predictions matters less in the long term than the fact that it will keep rising. That hasn’t changed either.

But the supply issue has definitely changed. Oil shale is here to stay, at least for a while. Oil shale production might keep rising or it might stabilize, but either way OPEC crude is no longer the only game in town.

Of course, oil shale herf=”http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power”>isn’t limitless. Eventually shale will hit peak production just like crude did. When that happens it will inevitably become more expensive as we use up the easy to refine reserves and have to fall back on more expensive sources. That’s a mathematical certainty. But it’s not going to happen tomorrow. In the meantime, oil shale isn’t very scarce.

So the bottom line is that demand will go back up in a matter of weeks, and the supply will probably stabilize, but at higher levels than before.

What does this mean?

Here’s what it doesn’t mean: There’s never going to be another 1990s bonanza of $1/gallon fill-ups. Gas will be cheaper than it was in 2013, but the 20th Century gravy train of truly cheap oil is over.

Oil shale costs more to extract and refine than crude oil. Prices have to be high simply to make refining oil shale worth the cost, which is why we’ve only recently started refining it at large scales. Shale wouldn’t be profitable if prices dropped to 1990s levels. In that sense, oil shale is sort of like HOT lanes on a congested highway, which only provide benefits if the main road remains congested.

So shale can only take gas prices down to a little below current levels. And eventually increased demand will inevitably overwhelm the new supply. How long that will take is anybody’s guess.

In the ultimate long term, oil shale doesn’t change most of the big questions surrounding sustainable energy. Prices are still going to rise, except for occasional blips. We still need better sustainable alternatives. Fossil fuels are still wreaking environmental catastrophe, and the fracking process that’s necessary to produce oil shale is particularly bad. It would be foolish in the extreme for our civilization to abandon the progress we’ve made on those fronts, and go back to the SUV culture of the 20th Century.

There will probably be lasting effects on OPEC economies. The geopolitical situation could become more interesting.

In the meantime, enjoy the windfall.

 Cross-posted at Greater Greater Washington.
 
 
 

October 28th, 2014 | Permalink | {num}Comments
Tags: economy, energy, environment, roads/cars, transportation



US gas is still cheap by international standards

According to an international survey, the price of gasoline in the United States is still lower than in most of the rest of the world’s developed countries. The survey, by Car and Driver magazine, included this handy map showing the average price of 1 gallon of gas in US dollars for most of the world:

January 7th, 2013 | Permalink | {num}Comments
Tags: economy, energy, roads/cars, transportation



Soon to be vacant Mobil headquarters should be redeveloped

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Mobil’s huge property, marked in red. Click to enlarge.

In 1987 the Mobil gasoline corporation moved its corporate headquarters from New York to Merrifield, Virginia. It was a major coup for the DC region, and a big early step in the growth of Fairfax County as a major corporate base. In the style of the times and befitting a major corporation, they built and occupied a massive campus-style building, set back literally acres from any of the surrounding highways. The site is pictured at right.

12 years later, in 1999, Mobil merged with Exxon to form what is today the 3rd largest corporation in the world. ExxonMobil’s headquarters set up in Irving, TX, in suburban Dallas. The Merrifield office became the Downstream headquarters, directing refining, manufacturing and marketing.

And now they are vacating their 1.2 million square foot behemoth office building and consolidating their offices in Houston – the oil capital of America.

Apparently they are shopping the building to other prospective office tenants. Fairfax County says they don’t expect it to be vacant for long.

But should this building still be used? It’s a private fortress set in a huge forest, amidst an otherwise urbanizing area. It’s a dinosaur of 20th Century planning. Inefficient use of land, laid out to require everyone to drive, and surrounded by “open space” that’s impractical for anyone to use as an actual park. Bad bad bad.

On the other hand, it’s a huge piece of land at an absolutely great location. It would make a fantastic town center development. The land is too far from Dunn Loring Metro to be walkable, so it wouldn’t be a TOD, but it could easily accommodate a Reston Town Center or Shirlington-like development, which if not perfect would still be a big improvement over sprawl. And who knows, regional transportation planners are starting to discuss the possibility of light rail on Gallows Road (pdf, see page 2, item #8), so maybe in a few decades that transit connection will be there after all.

It’s unfortunate that the region will lose all the jobs associated with Mobil, but it would be even more unfortunate if this opportunity to redevelop one of the prime pieces of real estate in Fairfax County were missed.

June 8th, 2012 | Permalink | {num}Comments
Tags: economy, energy, lightrail, master planning, proposal, transportation



Are electric buses in the future?

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click to enlarge
Above: A traditional electric trolley bus in San Francisco.
Below: GM’s wireless electric bus prototype.

Electric buses offer many advantages over traditional fossil fuel buses, but they are more expensive and difficult to run. A new model by General Motors may bring them to the mainstream.

The most obvious advantage of electric buses is environmental, but the fact that they don’t spew any harmful gases into the atmosphere is hardly the only benefit. Electric buses are also quieter and smoother to ride than fossil fuel buses, resulting in a more comfortable experience for riders and fewer negative effects to the neighborhoods buses travel through.

Traditionally to run an all electric bus a transit agency had to install overhead wires. This can actually be an advantage as well, since it displays a sense of permanence to the transit line, which gives trolley buses some of the same economic development advantages of actual trolleys. On the other hand, wires can also be a big negative, both visually and fiscally. Installing and maintaining overhead wires adds so much to the cost of running a transit line that very few cities in the US use them.

But what if it were possible to run an electric bus without the wires? You’d lose that permanence advantage, but the environmental, comfort, and noise advantages would all still apply. And if, after all, wireless streetcars are being developed, why shouldn’t a wireless bus be possible too?

It turns out General Motors is working on one, along with a company called Proterra. Their EcoRide BE-35 model bus is fully electric and runs on lithium-ion battery packs that give it a 40-mile range for every 10-minute charge. The 35-foot, low floor bus design is basically comparable to normal city buses otherwise.

The website doesn’t include details such as whether the bus can run air conditioning (certainly a requirement in a muggy place like Washington), but if they can make the idea work it has potential to revolutionize urban busing.

Cross-posted at Greater Greater Washington.
 
 
 

June 17th, 2011 | Permalink | {num}Comments
Tags: bus, energy, environment, transportation



Nuclear knee-jerking

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Radiation doses from a variety of sources.
Image from xkcd.com.

Question: How might the disaster in Japan kill thousands of Americans? Answer: If anti-nuclear knee-jerk reactionaries are successful in using the Japanese tsunami as political leverage to scare Americans from investing in more nuclear power.

How so? Because every year 30,000 Americans die from causes related to coal power production. Thirty thousand. That’s more dead Americans every year than in the entire Revolutionary War. It’s five times as many dead Americans as the Iraq and Afghanistan Wars combined. It’s almost twice the 18,000 estimated Japanese dead from the tsunami disaster.

The longer we use coal instead of nuclear for the majority of our power generation in this country, the more Americans will die.

While we’re on the subject, let’s also talk about how dangerous the nuclear situation in Japan actually is. The chart at right is a snippet from a much larger one comparing radiation doses received for a variety of events. Note that the additional radiation doses received by Japanese citizens in villages near the breaking-down nuclear plant average less than a normal day’s dose (which is to say, they’re getting less than twice the normal daily dose that you get simply by living on the surface of the Earth). They’re less than you get from a dental x-ray, and much less than you get by flying on a jet from New York to Los Angeles.

It’s true that a relatively small number of workers at the plant are getting much higher doses, but the danger to the mass population is quite low. Meanwhile, thousands of people around the world continue to die every day as a result of coal power production. Far more than will ever die as a result of nuclear radiation from any of these Japanese plants. The 30,000 American deaths per year attributed to coal average to more than 80 per day, which is nothing compared to the average of almost 1,400 per day from China’s half-million annual coal deaths.

I don’t mean to imply that we should treat nuclear power lightly. Of course the only reason it’s so safe is that tremendous safety measures are involved. We should absolutely learn from the disaster in Japan to improve safety however possible. But one thing we cannot afford to do is allow knee-jerk reactionaries to stop America from expanding our nuclear production capacity. The human toll of such narrow thinking would simply be too great.

March 21st, 2011 | Permalink | {num}Comments
Tags: energy, environment, history



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