The Progression of Fossil Fuels

Although I am clearly a supporter of energy efficiency and cleaner, more renewable energy sources, I do not automatically dismiss something because it supports the oil industry.  Petroleum has allowed us to fuel mass transportation and create plastics, reagents, kerosene, asphalt, and even pharmaceutical products.  It’s cheap abundance has improved our society tremendously, even allowing us to venture out into the solar system and beyond.  What if you even found out that the use of petroleum reduces energy usage in many facets of life?  From a publication entitled “Applications and societal benefits of plastics,” authors Anthony Andrady and Mike Neal write: “Using plastics in transportation, building and even packaging applications invariably results in very significant savings in materials and in fossil fuel energy. For example, a comprehensive study published in January 2005, GUA (Gesellschaft für umfassende Analysen GmbH) established that packaging beverages in PET versus glass or metal reduces energy consumption by 52% (83.2 GJ yr−1 in Europe alone). Greenhouse gas emissions were reduced 55% on the same basis (4.3 million tonnes CO2 eq yr−1 in Europe).” (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2873019/)  These are the things we don’t take into consideration when we only assess the direct economic and environmental damage caused by various resources, such as examining gas prices and looking at carbon emissions levels.

In terms of cost efficiency, coal has always been cheaper than oil.  In 1949, the price of one short ton (2,000 lbs.) of anthracite (high-grade) coal, adjusted for inflation, was $61.38. (http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0709)  The price of one short ton of oil was over $200. (http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp)  However, oil has a distinct advantage in that it has higher energy density and allows for more efficient conversion as a liquid rather than a solid requiring a furnace.  Think of the difficulty of having automobiles and airplanes run on furnaces full of coal!  1 pound of oil has 2.4 x 10^7 Joules of energy.  Multiply by 2204 to receive an answer of 52.896 billion Joules per ton of oil.  One ton of coal carries 3.2 x 10^10 Joules of energy, or 32 billion Joules.  One ton of oil carries about 65% more energy than one ton of coal.  The point is that energy efficiency is the inevitable progression of society.  As society becomes more fast-paced, we require more efficient sources of energy to fuel our everyday lives.  Unfortunately, we have other factors such as limited resources and climate change that create diversions for the path of our energy progression.

When we look at the scope of oil production, reality is simply reality.  The fact of the matter is that petroleum is now expensive.  With oil prices bordering around $4 per gallon in America, and even higher elsewhere in the world, it is inevitable that we will be switching to new sources of energy.  Even throughout the early 20th century, oil prices hovered around a real price of $20 per barrel.  It was only a matter of time before we ran out of easy oil and prices rose substantially.  We hear news all the time that oil companies are breaking ground on a staggering number of new reserves across the world.  However, it is clear that oil will never be cheap again.  Anyone in the oil industry will tell you that the easy oil is now gone.  This is why when we think of the concept of “Peak Petroleum,” it doesn’t really matter how much is in the ground.  The only thing that matters is the point at which the price of oil becomes higher than other sources.  When other forms of energy become more cost effective, oil demand will decrease well before world oil reserves are fully depleted.  All that is required to come to this conclusion is to look at the trend in prices.

As of July 15, 2013, the average price for one gallon of gasoline was $3.61.  The average price for one “gallon” equivalent of natural gas was $2.11.  Natural gas is in a ripe position to take over the market due to this very fact.  The prices clearly exhibit why it is advantageous for people to convert to CNG vehicles.

The reasons you don’t see a highway full of natural gas-powered vehicles are seemingly absurd, but are common problems we see in upcoming industries that face an uphill battle against well-established industries.  First of all, the demand is currently suppressed because the transportation and storage infrastructure for natural gas is not widespread.  At the same time, there is an excess supply of natural gas.  Because the supply is greater than demand, there is an excess supply of natural gas on the market that can’t be sold profitably.  Thus, many businesses in the energy industry are actually switching back to oil!

Personally, I believe this is a temporary issue.  At the moment, natural gas has proven to be extremely profitable when power plants are converted to natural gas-electric power and electric cars can simply charge their batteries at the pump.  This saves tremendous amounts of energy because we don’t have to replace every gas station with stored natural gas.  As quoted from Siemens: “In 2035, according to the IEA, natural gas will account for 25 percent of the global energy supply; the current figure is 20 percent. In fact, some experts are predicting that gas might surpass coal as early as 2030.”

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How a Lack of Personal Responsibility is Responsible for Everything that Goes Wrong in Life

Lençóis Maranhenses, Brazil
Lençóis Maranhenses, Brazil

I was at a store the other day, in the line about to check out at the register.  I was in the company of a nice man who was speaking with the store clerk.  It was a health food store and he ended up on a discussion about children spending too much time on their phones nowadays (I can agree with this).  However, he finally said: “People wonder why everyone is obese these days.  Nobody plays outside anymore!”  The people in his vicinity (except for me) all shook their heads in agreement, but sort of went silent after that.  Now, this man was visibly overweight, if not obese.  Granted he was about 6′ 2″ and looked to have a pretty large frame in general, but that is no excuse to carry 80 lbs. of extra fat on your frame.  One of my other passions is nutrition and fitness and I know that while it can be difficult for endomorphs to lose body fat, it is by NO means impossible.  I’ve seen many with great physiques.  The point is that this man was lacking in “personal responsibility.”

Lack of personal responsibility is a deadly killer.  It’s like the grim reaper.  It sneaks up from behind, under a veil of disguise that everything is good and copacetic.  It is what creates the need for the government to step in and say “As of now, we control this realm of society.  We will tax you for it and you will all whine about it, but we need to take over and protect you against yourselves.” (government-owned parks, laws against animal cruelty, climate change legislation, anti-trust laws, food processing inspectors, etc.)  The problem is that we ALL know what is wrong and what is right.  Cutting down the rain forest is bad, littering is bad and obesity is bad, do I need to add any more platitudes??  The most recent economic recession of 2008 was created, in a large part, by a lack of personal responsibility.  I’m sorry for the tough words of life advice, but if you can’t afford a home worth 500,000 dollars, you cannot buy that home.  You owe that responsibility to society.  If you, yourself, weigh over three hundred pounds, you cannot walk around presenting yourself as a walking paradox for children to see.  If YOU shrug your head and claim we need to stop environmental injustices, look at your own life and see what you need to change.

Does Solar Power Create Wealth? What are the Benefits and Limitations of Solar Power?

So I’ve seen a bunch of articles out there on the benefits of solar power.  Every solar power company pretty much has a sales pitch on their website about the “benefits of going solar!”  By the way, I worked in the solar sales business for a little while.  It was very difficult, primarily because there was a ton of competition between companies and customers still didn’t know anything about solar or energy in general.  Many a disgruntled dads would object that it was destroying our economy because of all of the “subsidies, Solyndras, & socialists.”  Thus, to the best of my abilities, I wanted to prove that solar power is actually incredibly advantageous to the economy by showing you in basic terms whether or not it creates wealth.  I will even overestimate costs on the solar side and underestimate costs on the power utility side.

First, let’s examine the power grid itself.  The power grid has already been built but it does need repairs.  Solar companies will need to start paying a portion of these costs for maintenance proportionate to the percentage of electricity they create.  This is precisely what has been plaguing the utilities for years.  They need to charge at rates inflating in excess of standard US dollar inflation because power grids all across America are just so old they need countless repairs done every year.  In order to account for this mess, we’ll just pretend inflation doesn’t exist on either side!  There we go, easy as that…  We can never assume arbitrage from inflation, so it’s a good idea to just equalize it on both sides.

Now we are able to level the playing field: the cost of solar installations versus the cost of powering a home through a traditional utility.  We will use one of my old prospective customers, whose Pacific Gas & Electric bill I still have on file (no worries, I PROMISE I won’t pay his bill for him…).  The month I have indicates he used 773 kilowatt-hours of electricity.  This is a fairly average amount for a suburban family with a small pool.  The electric portion of his bill for the month was $173.47.  This amount ten years ago would have been significantly less.  However, to prove my point, I will keep his bill at $173.47 for the length of my 20-year calculation.  We multiply ($173.47 x 12 x 20) and see that over 20 years he will pay $41,362 to the electric company.

For our solar calculation, we will use a very high estimate to say that the cost per watt to install solar, including panels, equipment and installation, is $6.12.  I will find the source I used for this if you would like to see it, but it is a very high estimate of solar installation costs.  Because solar companies market so aggressively and there also happens to be a lot of red tape (like permitting), installation costs in America tend to be very high.  Now for 773 kilowatt-hours of electricity, this man would need roughly 3.2 kW worth of panels (14-16 panels).  This is 3200 watts.  We multiply (3200 x $6.12) to get $19,872 for his solar system.  The government subsidy is 30% of the cost of the panels, meaning it only supports at the most, a couple thousand dollars from this installation.  This man’s solar installation used a couple thousand in taxpayer dollars (I will get to this is a bit).

When we calculate ($41,632 – $19,872), we get very conservative estimate of $21,760 in wealth created by this solar system over a standard 20-year lifetime for a solar system.  The wealth would be even higher if we used a 25 or 30-year calculation, which is how long most solar systems are guaranteed to last.  By using let’s say $2,000 in taxpayer subsidies to fund his system, we created $20,000 – $25,000 for him to spend over the course of twenty years.  Now, many opponents (don’t know why they would still be opponents after reading this!) may claim that money also gets siphoned from poor people’s taxes, who can’t afford a “fancy” solar system, in order to fund the rich man’s shiny panels.  However, the government has, in general, skewed the playing field to help poor people with their electricity anyway.  The only reason that basic tiers of electricity stay low is because the government mandates them to stay low in order to allow people with a lot less monetary wealth to pay incredibly low rates for electricity.  It disproportionately loads the increases in power generation towards the wealthy people who are paying upwards of 31 and 35 cents for upper tiers of electricity (in the case of Pacific Gas & Electric).  When you consider this and add the fact that the solar system generates ten times the wealth that it siphons from taxpayers, I think it is fair to say that solar is a good investment for a homeowner as long as this ONE crucial criteria is met:

the homeowner knows how to extract value from the next homeowner upon leaving the home at any time: let’s say the homeowner who had the panels installed only stays for 4 more years following the installation of a 20-year system.  Technically they could charge just under the amount of money the new homeowner would pay to the utility for 16 years.  Should the seller feel more obligated to pass on attractive savings, they could “split the difference” in savings.  Should the homeowner move directly after installing the 20-year system, he could say “I paid around $20,000 for this system; however, you would have paid almost $45,000 to the utility over 20 years given a very conservative rate of inflation.  To include the solar system, I’m going to charge you an extra $32,000 for the home and you will save almost $13,000 in utility costs.”  Even the less skilled or anxious salesman could extract a mere $5,000 for himself and give the remaining $20,000 to the homeowner.

I have to add that solar does, of course, have limitations.  Consider the fact that solar only works when you have a proper roof, very limited shading from trees, and often several years to see the return on your investment.  Oh yes, and at the moment, none of your solar power is being stored…  It simply runs through the distribution lines and powers the grid during the daytime.  Every bit of power used after the sun drops comes from sources independent of the sun’s movement (hydro, oil, gas, nuclear and wind).  No matter where you are, the utility company can give you power.  It does not discriminate, it does not “qualify” you for a system.  You can still get power even if you are deep within the redwood forests with moss growing on your dilapidated rooftop.  So don’t hate on the utility company… but DO respect the power of solar and if you qualify for it, know how to take advantage of the investment should you move from your home.  It will be an incredible benefit to our economy and our environment, especially as costs continue to decrease due to new developments and better economies of scale.