At the start of 2014, who would have predicted that oil prices would end up in the doldrums by the end of the year, especially with a slightly more positive economic outlook?
Some of the world’s oil prices are the lowest for over five years with Brent crude oil wallowing below $55 per barrel.
The IEA recently cut the outlook for 2015 global oil demand growth by 230,000 barrels per day to 0.9 million barrels per day on lower expectations for the former Soviet Union and other oil‐exporting countries.
Good luck to those charged with the onerous task of understanding and explaining issues such as the macroeconomics of crude oil.
What we do know is that some of the price deflation is the result of more natural gas being used in the USA, driven by shale gas.
As other countries begin to exploit their own reserves of shale gas, we can expect major oil producing countries to feel the pressure of continuing low oil prices on their economies, unless global demand takes a major u-turn.
At this point, I think it best to leave the economics of world markets to those qualified, but I did want to pick up on the chemical and processing implications of using more natural gas.
Methanol, which is a product of natural gas, is well-known as a common ‘feedstock’ chemical — one that is processed into gasoline and other chemicals such as solvents, adhesives, paints and plastics.
Using some current methods, that processing requires high temperatures, high pressures, expensive catalysts, and typically results in the release of the greenhouse gas carbon dioxide into the atmosphere.
In the US in particular, it has encouraged the industry and researchers to look at making natural gas processing more efficient, with lower expensive production costs, and better emissions control associated with fuel production.
Now some researchers at the University of California, Los Angeles (UCLA) Henry Samueli School of Engineering and Applied Science have developed a more efficient way to turn methanol into useful chemicals, such as liquid fuels, and that would also reduce carbon dioxide emissions.
James C. Liao, UCLA’s Ralph M. Parsons foundation chair in chemical engineering, who was the principal investigator on the research, says: “Our new process offers solutions to one major step of those challenges.”
The UCLA team’s process synthesizes longer-chain molecules like butanol, which can be used for automobile fuel, under room temperature and ambient atmospheric pressures.
They say the method is ‘carbon efficient’. Igor Bogorad, a UCLA PhD student in bioengineering says: “That’s the beautiful part of this process, it completely conserves the carbon.
“Methanol is a largely untapped resource in the bioprocessing industry. The current dogma has been to find better uses of plant-derived sugars. However, methanol offers many advantages and its availability is expected to increase.”
While the research addresses a major step in converting methanol to liquid fuels, UCLA recognise that another major challenge remains in the conversion of methane (the major component in natural gas) to methanol.
I believe I’m fairly confident in saying that the crude oil market is the most important of any of the world’s major commodities. It’s one that’s very difficulty to predict, but I do feel confident in predicting that whatever the trends in energy, chemical engineers, like those at UCLA, will be working to make their production as safe, efficient and climate-friendly as possible.
3 thoughts on “Who’d want to be an economist! (Day 225)”
Thanks Colin for your insightful comments. They do highlight the contrast in accountability of those whose decisions affect the physical wellbeing and safety of the population and those, like economists and dare I say bankers, whose decisions affect our financial wellbeing. As engineers we need to carry out cradle-to-grave analyses of all the consequences of commercial projects – financial, safety, social, energy efficiency, environment including carbon emissions etc. As you point out, exploiting unconventional oil and gas may not make sense if we analyse all these criteria fully – but then so may some of the perceived more sustainable alternatives. There is no such thing as a free lunch! …but at least we should calculate the real cost.
Thank you Geoff; and I wholly agree about calculating the “real cost”, which in energy systems includes the energy used in providing the energy at its point of use!
In his insightful essay “The Fourth Quadrant”, Nassim Nicholas Taleb – he of the “Black Swan” phenomenon and edge.org – observes: “I have nothing against economists: you should let them entertain each other with their theories and elegant mathematics, and help keep college students inside buildings. But beware: they can be plain wrong, yet frame things in a way to make you feel stupid arguing with them. So make sure you do not give them any risk-management responsibilities”. Verb sap.
I’d like to be an economist, please! If as a consultant I get the answer seriously wrong, I get the boot and my public liability insurance has to pay up massively. But an economist is *paid* to explain why they got it wrong! Here’s a good example:
Alongside an informative and numerate article from our president in September’s TCE, was a (disastrously?) non-numerate (though informative in its way) article by Eloise Logan about plans to develop and refine Canada’s oilsands: an industry that moves 20 *billion* tonnes of material per year (yes, that’s 660 tonnes/second: twice the sediment flow of all the world’s rivers). What Eloise doesn’t tell us is how many MJ of cheap energy (mostly natural gas; but also diesel for earthmoving machinery, steam and hydrogen for processing) are needed to produce 1 MJ of higher-valued bitumen energy. Perhaps this number is irrelevant to economists, whose bottom line is untarnished by considerations of energy efficiency and effectiveness. But it signals a real disconnect from the realities (and obligations) of living in a carbon-constrained world.
So step forward, Mr Putin: by flooding the world market with cheap oil, you may succeed in halting (though, I fear, only temporarily) the environmental folly that is the Athabaskan “sand trap”.