2005 Review / 2006 Outlook | Green Energy News

December 25, 2005 – Vol.10 No.40

2005 REVIEW / 2006 OUTLOOK.

What’s left to say about 2005 that hasn’t been said? Katrina, Rita, Wilma, soaring oil, gasoline and natural gas prices worldwide, were the impressive but disastrous storms caused by global warming? Certainly there was no excess oil and natural gas that would drive prices down. Much of this you’ve probably heard or thought of already.

Ever more powerful, ever more frequent storms may be a regular part of our future. Have Americans in particular awakened to this possibility? We’ll know when home sales on the Gulf of Mexico and Florida slow dramatically.

The oil rig battering storms in the Gulf of Mexico should have been a wake up call to Americans, perhaps the world. As much as most people planet-wide didn’t have any unusual shortages of fuel in 2005 (there were spot shortages), the speed at which supplies can be disrupted should add energy insecurity to people’s concerns.

The lifeblood of the world’s economies can be, at minimum, easily disrupted, at maximum, made very expensive literally overnight.

But Americans woke up briefly after Katrina, then nodded off. Will Americans have to go through an economic nightmare before they rise out of bed and start a new day in a new direction?

(Sorry if I’m hard on my countrymen, but we are the world’s energy gluttons. I’m one myself, relatively speaking.)

Oil and gas are finite, thus insecure, simple enough. Renewable fuels can go on forever, be as secure as can be. You’d think most would beg to be secure.

Further, we’re changing the composition of our atmosphere in ways that if left unchecked may permanently change the way and where we live. It’s simply wrong to let this happen. We need to try to fix it. We need to try.

Aside from regional or national energy security issues, just how secure is the global supply of oil and natural gas anyway? How much recoverable oil is still underground? No one is absolutely certain. No one can go down and measure it with a dipstick. Even with the best computer models and decades of experience the best anyone can do is make an educated guess. To make matters worse, not every oil producing company readily supplies data about their oil reserves.

Publicly traded oil companies like ExxonMobil or Chevron, by law, must submit some, but not all, reserve-specific accounting data to government. Oil reserves data - their inventory - is submitted so investors can have some confidence that the company they own a small share of is doing its job.

But nationally-owned companies, like Saudi Aramco, only have to answer to themselves. Any reserves information is voluntary, an act of good will. Oil reserves held by nationalized oil companies are a closely guarded secret.

In the Spring of 2005, in my eyes, one of the best books in regard to the world’s oil supply was published: Matthew R. Simmons’ Twilight in the Desert, The Coming Saudi Oil Shock and the World Economy.

I highly recommend reading this book. But before you do, acquaint yourself with Mr. Simmons and his company, Simmons & Company International. The more you learn about what he does and who he is will add credibility to what he has to say.

The gist of Twilight is that it is very possible that Saudi Arabia may not have the oil and natural gas reserves they say they have. Worse, they may have been overproducing their oil fields for years. Overproduction can do permanent damage. Since Saudi Aramco doesn’t provide detailed information about their reserves (they only say, trust us we have plenty) Simmons relies on dozens of engineering reports that are readily available that identify ongoing, decades-old problems in the nation’s oil fields.

Unlike many experts, Simmons questions his own thinking throughout the book. Has he missed something? Is Saudi Aramco correct when they say they have plenty? No, he concludes every time. There’s something amiss in the deserts of Saudi Arabia, he thinks.

The book also details much about oil, the oil industry, its history and more. An excellent read. Get it.

On a much more positive note what was significant news from the 2005 green energy season? Frankly it’s all significant, but a few news stories stand out.

The power purchase agreements from Stirling Energy Systems were certainly notable. The agreements for the long-term supply of hundreds of megawatts of solar thermal generated electricity to Southern California Edison (SCE) and San Diego Gas and Electric may make many utilities around the globe look deeper into solar thermal energy as a reliable, though intermittent, supply of electricity.

The Stirling Energy technology could become as successful as wind energy, yet easier to deploy.

The reasons? Like wind turbines, the solar dishes with attached Stirling engine generators are manufactured with technologies little different than making cars, which is certainly inexpensive. The devices are made from metal castings, machined parts and welded bent-metal fabrications - all technologies 100-plus years old. Easy to make means low prices.

Bird strikes aren’t a problem and being much smaller than wind turbines there should be less resistance to siting issues from residents within view.

The contracts Stirling Energy received were for 500 up to a possibility of 850 megawatts to be supplied to Southern California Edison (SCE) and another 300 up to 900 to be supplied to San Diego Gas and Electric (SDG&E).

The near constant flow of news releases announcing yet another biodiesel facility opening up or planned was an ongoing news story that regrettably was rarely covered. It seemed as though every week in 2005 some company, somewhere in the U.S. was planning a new biodiesel plant.

The National Biodiesel Board shows that as of the end of September 2005 there were more than 40 active biodiesel plants in the U.S. More than 50 additional plants were being proposed. At the end of 2004 U.S. annual production of biodiesel was at least 25 million gallons. The 2005 figure should be much larger. That will be a good story for 2006.

The growth of biodiesel is significant in that it means that the business model for biodiesel must work, i.e. it must be profitable and initial investment must be low. How the tax break for biodiesel figures into each business plan I don’t know, but it would be foolhardy for biodiesel entrepreneurs to think it will go on forever. They must have factored in life without a tax credit.

Most of the new entrants in the business are relatively small companies. If it works for the little guys, economies of scale, and the power of marketing will really make it work for the big guys: If they choose to get into the business. It’s hard to imagine that analysts at BP or Shell are NOT looking into the biodiesel business model. BP Into Biodiesel would make a good headline.

Another area of growth, thus news, was in LED (light emitting diode) lighting products. While an inexpensive LED household incandescent replacement bulb is not yet available, specialty bulbs and applications have became commonplace. LED Christmas lights seemed to disappear rapidly off store shelves. Philips was a major supplier. Philips also announced by year’s end that 2005 would be the last time incandescent bulbs were used in the ball that drops down in Times Square on New Year’s Eve. In 2006 it will be lit in LEDs. (A little thing, but they’re obviously paying attention.)

Even if LED lighting never goes beyond specialty lighting and signage it should contribute significantly to energy conservation in the U.S. eventually.

On to 2006

The smartest thing I’ve read lately (regarding energy) is that some so-called oil experts will no longer attempt to predict the price of oil. Good thing. There’s no way to know. Analysts last year at this time were $20 a barrel off the mark they predicted: $40.

That said, let’s take a look at what we already know, and how it will affect oil.

The National Hurricane Center of the U.S. National Oceanic and Atmospheric Administration hasn’t given its 2006 hurricane prediction yet, but it has said that ‘06 could be pretty much the same as ‘05. (And given that the Atlantic is still warm enough two days before the end of the year to spawn a Tropical Storm Zeta makes one think that 2006 could actually be worse than 2005.)

Another busy hurricane season will mean more damage to oil and gas rigs in the Gulf of Mexico, subsequent supply disruptions, and spooked speculators driving the cost of oil and natural gas up.

There’s also the annual gasoline supply shortage in the early spring when refineries switch over from winter grades to summer. Nothing has been done to change that situation so upward pressure on gas prices should be there too.

China and India are still growing and supplying cheap goods to western markets. No end to that growth in sight. Only a very, very serious recession in the U.S. could slow demand. As long as those countries are growing they’ll be gobbling up oil and natural gas in their factories. As more and more people there have money to spend they’ll be buying cars. Their governments already are making sure that hydrocarbons, even renewable energies will be there to feed industry and automobiles.

Wisely, most of the car companies are recognizing the growing world demand for cars even while oil supplies slow. The U.S. market, where a disproportionate share of oil is burned, may slowly be on its way to becoming more like the world market for cars - small and efficient. Honda, Nissan, Mazda, Toyota, DaimlerChrysler, Volvo, Mini, Hyundai, Kia all have new cars headed this way that only a few years ago could not have sold here. There’ll be more hybrids for sure, but for $8000 -10,000 less a number of high-30 to 40 mile per gallon cars should be available by the time you read the 2006 REVIEW / 2007 OUTLOOK.

And what other predictions for 2006? Readers of this publication will continue to look for solutions to world’s energy security problems, ways to fix global warming, and technologies that ensure cleaner air and water while opening the possibility of new business opportunities. And, as readers look for these things, so will I.

All the Best ,

Bruce Mulliken

(Late Breaking: This just in, the Baltimore Sun reports that the state of Maryland will get three new biodiesel refineries within a year or so.)

Visit Simmons & Company International at http://www.simmonsco-intl.com/ , Stirling Energy Systems at http://www.stirlingenergy.com/, the National Biodiesel Board at http://www.biodiesel.org/ , the National Hurricane Center at http://www.nhc.noaa.gov/ .