Decoupling of oil price and renewables

Geoff Styles has a post titled "Will $100 oil help renewables?", in which he argues the counterintuitive answer that, "no, not that much." Worth reading in full, but since I like to practice synthesis:

Today, gas predominantly sets the marginal price of power generation, and gas prices have decoupled from oil due to abundant shale gas supply. Transport is minimally electrified, so renewable power cannot yet substitute oil in that sphere. And prices for commodity input often rise along with oil, increasing renewable costs (a.k.a. the "receding horizon").

The first, I totally agree with. The second is broadly speaking true, although paths like CNG, gas-to-liquids and coal-to-liquids become economically viable with high oil prices and could re-strengthen the link between transport and electric power (as could increasing EV penetration over the longer term). The third is directionally true, but not absolute (and not entirely causal). Many second-gen biofuels use waste inputs which are not otherwise traded, so higher oil prices are an unmitigated boon for them. The prices of silicon and corn are often correlated with crude, but probably more because of overall economic growth than because crude drives their price. It will be interesting to see if corn starts to price off of its value as ethanol, as it did back in 2008. Not good for food security, if it does.

Watch the crush spread

Trying to chase down cause and effect in energy and resource markets can be frustrating - it is hard to follow a linear path to a new, coherent equilibrium. Take, for example, Geoff Styles' recent line of thought on the impact of Egyptian unrest on renewable energy.

... since the protests started on January 25, and without any actual disruption in oil deliveries, the price of UK Brent crude... has climbed by around $5 per barrel and now trades solidly above $100.

... [Ethanol and biodiesel] stand to gain if oil prices are driven up by factors that don't also push up the prices of the commodities from which they're made [emphasis mine].

That last bit is critical, and can't be taken for granted. In late 2008 ethanol was clearly the marginal use of corn and corn became priced off of its value in use as ethanol, squeezing margins despite high oil prices. If biofuels come back in a big way, this dynamic is likely to kick in (leading, incidentally, to even higher food prices, not good for most people).

Harmful emission trade-offs

How much CO2 is a ton of SO2 worth?

Valero's Benicia, Calif., refinery releases an additional 16,000 metric tons of carbon dioxide because of the extra energy needed to operate the ULSD unit for a year, while the "corresponding reduction in tailpipe emissions expressed as reduced SO2 [sulfur dioxide] is about 200 tons" for that fuel, Cuffel said.

A question for ecologists, environmental economists, and the broader public to contemplate together…

"Food miles" are stupid

This is not news, but I hadn't really appreciated it until digging into the impressive success story of Kenyan horticulture recently. Feeling threatened by Kenya's initial success, UK's organic trade organization proposed stigmatizing - or even outright banning - products flown in from far-off countries on the basis of greenhouse gas emissions.

This ignores, unfortunately, the emissions from many other phases of food production, e.g. heating greenhouses to grow tomatoes in the winter in northern Europe. Here are a few choice quotes from a good Guardian article on "How the myth of food miles hurts the planet":

But the idea that 'only local is good' has come under attack. For a start, food grown in areas where there is high use of fertilisers and tractors is likely to be anything but carbon-friendly, it is pointed out. At the same time the argument against food miles - which show how far a product has been shipped and therefore how much carbon has been emitted in its transport - has been savaged by experts. 'The concept of food miles is unhelpful and stupid. It doesn't inform about anything except the distance travelled,' Dr Adrian Williams, of the National Resources Management Centre at Cranfield University, told The Observer last week.

'Half the people who boycott air-freighted beans think they are doing some good for the environment. Then they go on a budget airline holiday to Prague the next weekend,' adds Bill Vorley, head of sustainable markets for the International Institute for Environment and Development. 'They are just making gestures.'

Efficiency is the best transition fuel

Geoff Styles runs the back-of-the-envelope numbers and surprises himself with the conclusion:

To my surprise, it doesn't require very aggressive assumptions concerning improvements in fuel economy, reductions in vehicle miles traveled, and additional oil supplies to cover the needs of a significantly larger number of cars in the world.

The bulk of the improvement appears to come from improved mileage standards (he imagines 40 mpg in 2020) - with an additional boost from reducing vehicle miles traveled to 9,000/year (versus I'm not sure what today).

As he rightly points out, this should not lull us into complacency with regard to developing new technologies:

So while our transportation energy mix in the next couple of decades is still likely to include a much greater variety of fuels and an increasing penetration of electricity, we should not lose sight of the potential for realistically-achievable fuel economy improvements and non-efficiency conservation--driving personal cars less and relying more on mass transit and electronic trip substitution--to be the most important "transition fuel" in our arsenal, as we reduce our present reliance on oil as we tackle energy security and climate change.

I think this conclusion is spot-on, and kudos to Geoff for running the numbers and his even-handed, open-minded reaction to the results.