Saturday, March 21, 2020

Oil Price Crashes in Wake of Coronavirus (COVID-19).

The global oil price has crashed, mainly as a result of the coronavirus (COVID-19), and earlier in the week hit lows not seen for two decades, of around $20 a barrel for WTI and $24 for Brent crude. Reductions in the global mobility of passengers and goods, along with the closure of businesses, offices and schools, and the cancellation of conferences and public events, in an effort to control the virus, have led to a reduction in the demand for oil by 10 million barrels a day (10% of total liquids production). Indeed, it is thought that 2020 may be the first year in a decade that demand for oil will actually shrink. The current oversupply of oil has been compounded by Saudi Arabia’s decision to launch a price war with Russia, to which end it has slashed its oil export price, and Saudi Aramco has received a directive from the Ministry of Energy to increase maximum sustainable capacity to 13 million barrels a day. Russia too, has promised to increase its output of oil.
While the current overall curbing of activity has led to reduced carbon emissions, the economic consequences are likely to be severe. For example, it has been predicted that reductions in air travel could cost the aviation industry $100 billion, and that bailouts might be necessary to keep it going. Reduced demand for transportation fuels, and hence the oil they are refined from, will magnify the oversupply of oil to the global market, meaning that the prospects of a price recovery in 2020, back to the $60 it was trading at in January, are looking vanishingly small.
How this finally plays out, is partly a game of endurance between Saudi, Russia and the US, but once one gives in, the oversupply of oil may begin to ebb. Cost elements are complex, but while Saudi can produce oil at under $10 a barrel, it needs $85, as a fiscal breakeven price. With deep pockets, the kingdom may well hold out for longer than the US frackers, who need more rapid returns, of nearer $50, and may struggle to withstand a prolonged far lower oil price. 
The importance of oil to society cannot be overemphasised, as is highlighted by a recent report commissioned by the Finnish government, which proposes that crude oil should be regarded as the most important member of the EU’s “Critical Raw Material” list. To stress, “‘Critical Raw Materials’ (CRMs) are those raw materials which are economically and strategically important for the European economy, but have a high-risk associated with their supply."
The majority (71%) of the growth in oil production since 2005 is from light tight oil, induced to flow out of shale by the process of hydraulic fracturing ("fracking"), and in 2018, this accounted for 98% of global oil production growth. Hence, the security of the overall global supply of oil, and its ability to meet increasing demand, depends critically on the durability of the shale industry. When all unconventional sources are considered, including oil sands and kerogen shale, it is not that there is a lack of "oil" in the ground, but that it is increasingly expensive, both in terms of energy and money, to bring it to the surface in useful form.
Low oil prices discourage investment in new production, meaning less new oil coming on stream, year on year, to make up for lost existing production. A sustained low oil price through 2020 and beyond, would act as a further brake on investment, and may derail the fracking industry
In all probability, the oversupply, at least to the present degree, is temporary; to be followed by rising prices, as the decline in existing conventional production progressively enlarges. However, a stalling of the fracking industry could cause a dramatic contraction, since as noted, rising demand growth has been met primarily through its output.
Meanwhile, a perfect storm rages, with reduced oil demand and increasing supply tearing away from one another to enlarge the excess of oil, in a complex nexus of geopolitics, resources, economics, and an all-out struggle to combat the globally assailing COVID-19 virus. How, when, or if, the global economy will be restored even once the virus is vanquished remains to be seen. Businesses cannot simply be “switched back on”, having been in the doldrums for a period of months, or closed altogether.
And against this backdrop the urgency to ameliorate climate change persists. The Executive Director of the International Energy Agency, Fatih Birol, is quoted as saying, “We should not allow today’s crisis to compromise the clean energy transition.”  He further expressed some optimism that due to the much cheaper renewable technologies now available, along with significant progress in electric vehicles having been made, and a financial community that is supportive of the clean energy transition, there are opportunities to be had, so long as the right policies are implemented.

However, time is of the essence, and the longer term effect of the overall systemic shock we are currently experiencing is by no means clear.

Sunday, February 09, 2020

Human Consumption of Natural Resources Exceeds an Annual 100 Billion Tonnes.

In 1969, the late Professor Albert Bartlett famously delivered a lecture, entitled "Arithmetic, Population and Energy", which begins with the observation that, "The greatest shortcoming of the human race is our inability to understand the exponential function." The truth of this is profound and irrefutable, as is further compounded by Bartlett’s averment, as the first law of sustainability, that "You cannot sustain population growth and/or growth in the rates of consumption of resources”. Nonetheless, exponential growth has continued, unabated, over the past half century, as is attested by an increase in the consumption of natural resources from 27 billion tonnes in 1970, to 92 billion tonnes in 2017, which corresponds to around 12 tonnes/year for every person on Earth. If recycled material is also included, the total rises to 100.6 billion tonnes, and hence 13 tonnes for every breathing human on the planet. Significantly, however, the proportion being recycled has fallen from 9.1% to 8.6% in the past two years. On the basis of a BAU, “take-make-waste” economic model, this rate of material consumption is expected to rise to between 170 and 184 billion tonnes by 2050, which equates to more than 18 tonnes per person, given an expected population of 9.8 billion by then
Over the entire 1970-2017 period, a compound annual growth rate (CAGR) for resource consumption of 2.6% may be deduced, and hence we may infer that, by 2021, total annual demand for virgin natural resources will have exceeded 100 billion tonnes. The breakdown of this tally into individual components is interesting, and for 2017 amounts to: 24.06 billion tonnes [Gigatonnes (Gt)] of biomass, 43.83 Gt of non-metallic minerals, 15.05 Gt of fossil fuels, and 9.12 Gt of metallic ores; when these figures are compared with those for 1970 (9.00 Gt biomass, 9.20 Gt of non-metallic minerals, 6.21 Gt of fossil fuels, 2.58 Gt of metallic minerals), some patterns begin to emerge. Thus, the corresponding (2017/1970) ratios are: 2.67 (biomass), 4.76 (non-metallic minerals), 2.42 (fossil fuels), 3.53 (metallic ores). It is notable that all the other ratios are larger than that for the fossil fuels, which signifies that while use of energy is often taken as a proxy for overall economic growth, the latter does not depend only on energy, but all resources that are consumed in its wake, and which require increasing amounts of energy to place them into human hands.

Thus, the increased extraction and use of non-metallic minerals (4.76) is very striking, and represents mainly the mining and processing of sand and gravel, used to furnish concrete, glass and asphalt, but also silicone polymers, and electronic devices. An explosion in the use of these materials is being driven by urbanization and global population growth, especially in China, India and Africa, and according to one estimate, by 2060, annual demand will have risen to 82 Gt. In many parts of the world, sand mining is not regulated, and is the province of "sand mafias"; sand has also been described as a "conflict mineral". The growth in metallic ore consumption represents, primarily, an increasing demand for iron and steel, aluminium, copper, zinc, lead and nickel, as are used for construction purposes, and to make an enlarging variety and number of consumer goods.

Perhaps the baseline metric for overall consumption is the increase in population, over a given time period, which was 3.70 billion (1970) and 7.55 billion (2017), thus giving a ratio of 2.04; hence, it is clear that the increased rate of consumption for all resource types has advanced greatly beyond this, demonstrating that the enlargement in resource use is not simply in step with the increasing number of feet on the planet, but reflects the expansion of industrialisation and development of a global consumer culture. The ratio for the consumption of biomass (2.67) is larger than that for fossil fuels (2.42), although, the additional fossil fuel ratio (use) drives all other production/consumption increases.

The term biomass includes crops, crop residues, grazed biomass, timber, and wild-caught fish, and in 1970, one third of all extracted materials could thus be accounted for. However, by 2017, the proportion of total natural resources being used in the form of biomass had fallen to around one quarter, even though the total biomass being consumed increased from 9.0 Gt to 24.1 Gt over the same period. In many ways this is little surprise, since countries depend more on biomass-based materials and energy systems in the earlier phases of their economic development, while the increasing industrialization of the global population during the 1970-2017 period has meant a rising demand for materials and energy systems that are based on mineral resources.

Nonetheless, despite its falling share of the total, the total amount of biomass used per capita has continued to grow since 1970, averaging at a global CAGR of 2.1%, to be compared with the global population CAGR of 1.5%. In 2017, Some 40%  of the total biomass extracted (9.5 Gt) was from crop harvesting, which showed a similar average growth rate since 1970 as for grazed biomass to feed livestock animals, in reflection of the increased adoption of animal and dairy based food products by an expanding middle class in many parts of the world. The growth is shallowest for those kinds of biomass - such as wood, used to provide both fuel and building materials - which are most easily substituted by alternatives, and where yields cannot be readily enhanced through technological improvements - such as for wild-caught fish.

The expected, relentless increase in resource use is due to a prevailing reliance on extracting virgin materials to fuel growth, rather than using those resources, already recovered, more effectively. For every tonne of resources that is reused, more than 10 tonnes are extracted, and no country is living within its own limits Nearly half the materials that enter the economy are used in long-term products such as housing, infrastructure and heavy machinery. However, through better design of products, so they can be reused, and an expansion of end-of-life reprocessing facilities, the consumption of virgin materials might be curbed, acting within the framework of a circular economy. Indeed, such circular design follows the example of nature, in which there is no waste: for example, in a forest, where the leaf litter from the previous season becomes nourishment for the soil from which new life is put forth in the next, and nutrients and water are cycled as an intrinsic part of its living mechanism. To recast the "take-make-waste" model to provide a system that is not only sustainable but regenerative is undeniably a sobering challenge, but really is the only viable course of action, since to even maintain, let alone grow, present levels of resource extraction is a patently untenable exercise.

Sunday, January 05, 2020

Endangered elements, critical raw materials and conflict minerals.

The following is a fairly lengthy abstract of a quite detailed article published in the journal Science Progress dealing with humankind's use of natural resources, currently being consumed at a rate of almost 100 billion tonnes per year.

Amid present concerns over a potential scarcity of critical elements and raw materials that are essential for modern technology, including those for low-carbon energy production, a survey of the present situation, and how it may unfold, both in the immediate and the longer term,  appears warranted. For elements such as indium, current recycling rates are woefully low, and although a far more effective recycling programme is necessary for most materials, it is likely that a full scale inauguration of a global renewable energy system will require substitution of many scarcer elements by more Earth-abundant material (EAM) alternatives. Currently, however, it is fossil fuels that are needed to process them, and many putative EAM technologies are insufficiently close to the level of commercial viability required to begin to supplant their fossil fuel equivalents, necessarily rapidly and at scale. As part of a significant expansion of renewable energy production, it will be necessary to recycle elements from wind turbines, and solar panels (especially thin-film cells). The interconnected nature of particular materials, e.g. cadmium, gallium, germanium, indium, tellurium, all mainly being recovered from the production of zinc, aluminium and copper, and helium from natural gas, means that the availability of such “hitchhiker” elements, is a function of the reserve size and production rate of the primary (or “attractor”) material. Even for those elements that are relatively abundant on Earth, limitations in their production rates/supply may well be experienced on a timescale of decades, and so a more efficient (reduced) use of them, coupled with effective collection and recycling strategies should be embarked upon urgently.
Of all essential commodities, the fossil fuels may well run into production limits during the next few decades, and indeed, the underpinning determinant of how we extract resources, inducing those of energy, is the availability of energy itself, and those resources that provide it. As we, inevitably, use up high grade ores, and move on to poorer quality deposits, in which the desired element is increasingly diluted by other materials, the energy input to the whole extractive and processing mechanism increases: in terms of the production of energy resources, this is expressed as declining Energy Return on Investment (EROI). As the quality of mineral deposits declines, the volume of material that needs to be exhumed from the Earth, and processed, enlarges relentlessly, leading overall to increasing amounts of waste for each mass unit of metal, or other element, recovered, and much more additional energy is needed. A coupling between the declining quality both of ores and energy sources can only compound the situation.
It has been indicated that there are insufficient, proven, reserves (and resources too, in certain cases) of several metals required to build a fully renewable energy system, to meet the global demand for energy that is expected by 2050. For scarce elements, recycling is indicated to be of limited value. It is possible that incorporating potentially less efficient technologies (but based on elements that are more widely available) might prove a viable strategy for reducing the risks of supply constraints . The future development of renewables may also rely on the recovery of materials from conflict zones and other politically unstable regions, which could pose problems for its large scale expansion. Moreover, how such a fully renewable energy system might be maintained, beyond 2050, remains a serious open question.  Meanwhile, major changes in our global demand for energy are necessary, and it may be wise to spend the fossil fuel equivalent of our remaining carbon budget on the extraction of metals required for low-carbon energy technologies.
Current consumption of resources means that the global materials base is unsustainable, and it is necessary to optimize our use of energy, to close material cycles, and to curb irreversible material losses, of all kinds. Mining of sand and gravel, used to furnish concrete, glass, asphalt and electronic devices, has risen to the point that their supply too is a matter of concern; levels of freshwater use are also now approaching newly defined planetary boundary limits. Natural resources are being consumed on an unprecedented scale, and currently, an annual 92 billion tonnes of raw materials are being extracted, which corresponds to around 12 tonnes for every person on the planet. The timescale of our intentions regarding the use of resources is critical, and the question of whether technology can solve our current problems, and meet future needs “sustainably”, has yet to be answered fully. Perhaps such considerations of what is sustainable only properly make sense, if societal viability over the duration of a civilization (say, 500 years) is planned for; yet we have only the next few decades, at most, to undertake the appropriate actions to establish  this. In regard to the sustainable use and regeneration of essential natural resources, it seems likely that the Earth Stewardship scenario, with the design system of permaculture as a creative response pathway toward achieving it, may be the most effective option.

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