This sudden energy crisis is absolutely fascinating. I've still not seen a good analysis.
It would be interesting if anyone can come up with the "single event" that precipitated the whole crisis.
Remember Richard Feynman's explanantion for the Challenger disaster? That's what I'm looking for. I'm looking for a Richard Feynman who can show in one simple graph how this energy crisis seemed to have happened overnight.
I
have an idea and will post it later but it will be posted deep in the
blog so I have the time/date stamp for bragging rights, but I want to
bury it so I don't have to put up with a lot of push back from readers
before some time has passed to see how this has played out.
The answer will be in two graphs -- technically four graphs but only two are needed, but I had to expand those two to make it clear.
Some hints:
- the answer is not "under investment" in fossil fuel production;
- the cause of the crisis is not related to supply chain issues;
- to some extent the cause might be geopolitical but that's only part of it;
- some will argue the cause was all about renewable energy, it was not, but there is a connection;
- the explanation is incredibly simple; because it is so simple, the explanation will result in a lot of push back; it's human nature not to accept a simple explanation for something that seems complicated (see the Fehnman link above);
- but again, the challenge is to find the "one thing" that precipitated the current energy crisis
I'm guessing that it was the Covid lockdown last year the drastically changed the supply/demand balence.
ReplyDeleteLoosing that balence set off a bunch of ugly events for the upstream oil business
Demand dropped, so price dropped.
Lots of money lost for the producers.
Ain't cheap or easy poking miles long holes in rock.
Most that drilling prior to Covid was done with borrowed money.
There is a glut of oil and generally speaking oil is not being burned to make electricity worldwide. The surging price of natural gas is pulling the price of oil up but the oil supply imbalance caused by Covid / Covid lock down did not cause the energy crisis that is hitting China, India, or Lebanon. It's something else. I'll eventually post it with the graphs.
Deletecertainly not the one answer you're looking for, but i've noted that despite the big run-up in natural gas prices, working drilling rigs targeting natural gas have slipped from 104 in mid-July to 99 as of Friday...not what i would have expected, given that the natural gas DUC backlog is about half that of oil, percentage-wise..
ReplyDeletefor the situation in Europe, their support of our nonsense sanctions against Russia for supposedly interfering with our elections and the subsequent delays on Nordstream 2 certainly hasn't helped..
I apologize for the trolling, teasing .. delaying my post on this one, but I'm really interested in seeing what others suggest is the cause for this crisis that seemed to have occurred (figuratively) overnight.
DeleteThe crisis is electricity generation, not transportation. There has to be an explanation - a global explanation.
here's one from down your way that just popped up in a newsletter i get:
DeleteWill The Texas Electric Grid Be Able To Handle State’s Bitcoin Mining Rush? – CBS Dallas / Fort Worth
that's very common up here, too...bitcoin miners have been taking over old coal plants around the region, , setting up shop next to wind or solar installations in New York and PA, as well as in Ohio...
Very, very interesting. Decades ago when I first started investing in energy, I knew energy would always be needed. I never even imagined something so energy intensive as bitcoin mining. Thank you.
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