Cheap oil and gas will stop many developments

The price of oil and natural gas has dropped over the last years because supply has outstripped demand and this means the price has fallen.   For years people have predicted peak oil and the world coming to an end with the price constantly rising.  That has never seemed realistic to me because as the price rose cheaper alternatives would gain market share and technology would drive the amount of energy needed and the cost to produce it down.

Natural gas has benefited more from fracking than oil because there seem to be more opportunities to unconventional gas that has been opened up by the new technology.  Another change is the emerging global gas market.   Oil has always been a global commodity but natural gas has not been because it is not easy to transport without a pipeline.   Now with the massive global rise in LNG there is a global price emerging and the price is weak everywhere.   Natural gas is the best of the fossil fuels and has a near term future as there is a shift to electricity produced by natural gas, but in the long term it will be replaced by other sources of electrical power,

Oil has seen the addition of a lot of new supply from the tar sands in Canada but also because of fracking, which has lead to a huge increase in US oil production.   As I write this the price of oil is $76 to $80 a barrel, prices not seen since the depth of the global economic crisis in 2009, which was a temporary drop at that time.   From July 2010 to July 2014 the price of Brent oil was about $110 a barrel.   The WTI and Brent prices are not the Canadian prices,the Western Canadian Select price for oil is at $66.03 a barrel today.  

For years now the price of tar sands oil has been significantly lower than the WTI or Brent crude oil prices.   There is two reasons for this, tar sands oil is not as a nice a product as WTI and there is a constraint problem when it comes to delivery, Alberta produces more oil than the pipelines can move.

This lower price for oil makes building more pipeline capacity uneconomic at this time.  There are at least eight tar sands projects that require a much higher price of oil than the current market prices.   These projects represent about $40 billion of capital investment over the next ten years.   That is $4 billion less investment per year in Alberta for the next ten years..

Even the shale oil of North Dakota becomes financially questionable when the price is below $80, the cost to produce a barrel from North Dakota runs from $50 to $90.   The margins will be low, but not too low to stop an expansion of drilling.  

With an ongoing high price of oil for the last decade the public and businesses have found ways to use less oil.  Global demand for oil has been growing slower than rising supply, it has not even been growing as fast the global economy.

Supply is not likely to fall much soon.   As the boom fades the costs to drill for new oil will fall.   This is for two reasons, first the crazy prices that have to be paid for anything to do with drilling will fall and second the drop in price will push more technological advances.   At the same time the oil being produced in the tar sands will not go down because tar sands projects require large up front capital investments to start.  Once the projects have been built the operational costs per barrel is low enough to allow them to continue even with a significant fall in the price of oil.

At the same the cost to produce green electricity has been falling dramatically.   The price for wind, solar and geothermal is dropping quickly and is now rivaling the cost to produce to electricity from fossil fuels.   It seems probable that in the next five to ten years renewables will be cheaper than all the fossil fuels for producing electricity.   Electrical production is a major use of natural gas and coal, without this demand the price will drop.   The still cheaper natural gas and coal will displace some oil and help to keep the price of oil low.

The fossil fuel era will come to an end not through protests or government intervention, but through simple economics.

Do I use fewer resources to live than my parents?

Both my parents were born in Estonia in the 1920s.  Certainly I think it is clear that until the early 1960s my parents used fewer resources than I do now but after that I do use fewer resources than they did.

Where I am Ahead of Parents

Fuel use - As a kid my parents had a station wagon with a V8 engine.  I have no idea what the fuel consumption was but I am sure it was not very good.   They also drove a lot more kilometers ber year than I do now.   

Home heating - My parent's home was not that well insulated, not bad for the 1960s but not great.  It cost them a lot more to keep their home warm than the one I live in now.

Garbage - My family produced two full cans of garbage every week as I was growing,  When recycling came and all of us kids left home it fell to one not full can a week.  I fill an average garbage can about every three to four weeks.  

Electricity use - I may have more things that use electrical power but at the same time my newer fridge, stove, and washer use a lot less power to operate.  The improvement in the white goods along with no longer having vacuum tube screens has really reduced my power use in comparison to my parents.   The biggest difference is that my parents did not have a dryer till the mid 1970s. 

Flying - Starting the 1960s my parents took a major international flight in most years.  The planes from the 1960s and 70s used a lot more fuel than today.  I also happen to fly a lot less then they did.  

Where I am behind

Electronics - Not only do I have a lot more than they ever had, they do not last very long.   A computer that lasts for four years is very old and outdated.   The electronic waste I produce each year is astonishing

Batteries - I go through a huge number of AA and AAA batteries per year.  Growing up we never needed this many batteries

BC Hydro is not isolated from the rest of the grid

BC Hydo is part of a larger grid which means what we do here has an impact on the others, what they impacts us.   All the power we produce in BC is not just our power, it is part of the Western Interconnection.   People in BC need to understand we are not on our own.

In North America the grid is connected north-south as opposed to east west.    What we do in BC is more connected with LA than with Saskatoon.

Interconnections in North America

The idea that we can be power self sufficient in BC is a fallacy because we are part of a much larger grid.  We can produce more power than we need but that does not make us self sufficient.   Our connection to the rest of the interconnection is a benefit to us and the whole interconnection.

Since we produce most of our power from hydroelectric sources, we  are in a position to turn on and off the power.   Large scale coal and nuclear power plants can not shut themselves down overnight.   They have to continue producing power all night.   In BC was are in a position to buy this power over night which means their power is not wasted

Longer term what we can do in BC is displace a lot of coal power in the west.   Each time we add more micro-hydro to the grid, there is less demand from more coal power.    If we were adding the new green power faster, we could push the decommissioning of more coal fired power.

Large scale power plants are big capital investments, they need long term time frames to build.   For a nuclear or coal fired power-plant the initial capital investment means that once it is built you need decades of operation to defray that cost.   It is a reason we have not seen massive decommissioning but it is also a reason new capital intensive power-plants have not been common in North America.

We have seen an oversupply in electrical power in North America for some years now, this has been going on long enough to inhibit new "brown" electrical power.   When the prices do rise again, realistically only smaller scale green power will be able to meet the needs.   Here in BC there are numerous run of the river and wind projects that could be constructed rather quickly when the price does rise.