Coming 'oil glut' may push global economy into deflation

[HitandRun]

What you are saying is not new.....

I don't pretend that I'm saying anything new or original. I have not questioned the economics of shale oil or tight oil (a term which I prefer), a debate for another day. My point is that natural gas is not equivalent to crude oil although they belong to the same hydrocarbons based fossil fuels family => shale oil is definitely not equivalent to shale gas.

There is nothing in what you have written that refutes my point.

[specuvestor]

Yes I am not refuting your point. Obviously oil and gas are not the same, but they have high correlation to each other in the energy industry dynamics. Most oil formation comes with gas and once gas is able to be extracted, oil is usually next.

I am saying your points are just as valid as those who differentiates thermal and coking coal. There is nothing wrong with the arguments. However the eventual market development makes all the differentiation and detailed analysis interesting discussion but moot if we focus on the results.

[rogerwilco]

http://www.technologyreview.com/news/523...atural-gas
Chasing the Dream of Half-Price Gasoline from Natural Gas
A startup called Siluria thinks it’s solved a mystery that has stymied huge oil companies for decades.

By Kevin Bullis on January 15, 2014

At a pilot plant in Menlo Park, California, a technician pours white pellets into a steel tube and then taps it with a wrench to make sure they settle together. He closes the tube, and oxygen and methane—the main ingredient of natural gas—flow in. Seconds later, water and ethylene, the world’s largest commodity chemical, flow out. Another simple step converts the ethylene into gasoline.

The white pellets are a catalyst developed by the Silicon Valley startup Siluria, which has raised $63.5 million in venture capital. If the catalysts work as well in a large, commercial scale plant as they do in tests, Siluria says, the company could produce gasoline from natural gas at about half the cost of making it from crude oil—at least at today’s cheap natural-gas prices.

If Siluria really can make cheap gasoline from natural gas it will have achieved something that has eluded the world’s top chemists and oil and gas companies for decades. Indeed, finding an inexpensive and direct way to upgrade natural gas into more valuable and useful chemicals and fuels could finally mean a cheap replacement for petroleum.

Natural gas burns much more cleanly than oil—power plants that burn oil emit 50 percent more carbon dioxide than natural gas ones. It also is between two and six times more abundant than oil, and its price has fallen dramatically now that technologies like fracking and horizontal drilling have led to a surge of production from unconventional sources like the Marcellus Shale. While oil costs around $100 a barrel, natural gas sells in the U.S. for the equivalent of $20 a barrel.

But until now oil has maintained a crucial advantage: natural gas is much more difficult to convert into chemicals such as those used to make plastics. And it is relatively expensive to convert natural gas into liquid fuels such as gasoline. It cost Shell $19 billion to build a massive gas-to-liquids plant in Qatar, where natural gas is almost free. The South African energy and chemicals company Sasol is considering a gas-to-liquids plant in Louisiana that it says will cost between $11 billion and $14 billion. Altogether, such plants produce only about 400,000 barrels of liquid fuels and chemicals a day, which is less than half of 1 percent of the 90 million barrels of oil produced daily around the world.

The costs are so high largely because the process is complex and consumes a lot of energy. First high temperatures are required to break methane down into carbon monoxide and hydrogen, creating what is called syngas. The syngas is then subjected to catalytic reactions that turn it into a mixture of hydrocarbons that is costly to refine and separate into products.

For years, chemists have been searching for catalysts that would simplify the process, skipping the syngas step and instead converting methane directly into a specific, desired chemical. Such a process wouldn’t require costly refining and separation steps, and it might consume less energy. But the chemistry is difficult—so much so that some of the world’s top petroleum companies gave up on the idea in the 1980s.

Siluria thinks it can succeed where others have failed not because it understands the chemistry better, but because it has developed new tools for making and screening potential catalysts. Traditionally, chemists have developed catalysts by analyzing how they work and calculating what combination of elements might improve them. Siluria’s basic philosophy is to try out a huge number of catalysts in the hope of getting lucky. The company built an automated system—it looks like a mess of steel and plastic tubes, mass spectrometers, small stainless steel furnaces, and data cables—that can quickly synthesize hundreds of different catalysts at a time and then test how well they convert methane into ethylene.

The system works by varying both what catalysts are made of—the combinations and ratios of various elements—and their microscopic structure. Siluria was founded based on the work of Angela Belcher, a professor of biological engineering at MIT who developed viruses that can assemble atoms of inorganic materials into precise shapes. Siluria uses this and other methods to form nanowires from the materials that make up its catalysts. Sometimes the shape of a nanowire changes the way the catalyst interacts with gases such as methane—and this can transform a useless combination of elements into an effective one. “How you build up the structure of the catalyst matters as much as its composition,” says Erik Scher, Siluria’s vice president of research and development.

The process of making and testing catalysts isn’t completely random—Siluria has the work of earlier chemists to guide it, and it has developed software that sorts out the most efficient way to screen a wide variety of possibilities. The result is that what used to take chemists a year Siluria can now do in a couple of days, Scher says. “We’ve made and screened over 50,000 catalysts at last count,” he says. “And I haven’t been counting in a while.”

Nonetheless, some seasoned chemists are skeptical that Siluria can succeed. Siluria’s process is a version of one that chemists pursued in the 1970s and 1980s known as oxidative coupling, which involves reacting methane with oxygen. The problem with this approach is that it’s hard to get the reaction to stop at ethylene and not keep going to make carbon dioxide and water. “The reaction conditions you need to convert methane to ethylene do at least as good a job, if not better, of converting ethylene into carbon dioxide, which is useless,” says Jay Labinger, a chemist at the Beckman Institute at Caltech.

In the late 1980s, Labinger wrote a paper that warned researchers not to waste their time working on the process. And history seems to have borne him out. The process “hasn’t been, and doesn’t appear at all likely to be” an economically viable one, he says.

Yet in spite of the challenging chemistry, Siluria says the performance of its catalysts at its pilot plant have justified building two larger demonstration plants—one across San Francisco Bay in Hayward, California, that will make gasoline, and one in Houston that will only make ethylene. The plants are designed to prove to investors that the technology can work at a commercial scale, and that the process can be plugged into existing refineries and chemical plants, keeping down capital costs. The company hopes to open its first commercial plants within four years.


Siluria can’t tell you exactly how it’s solved the problem that stymied chemists for decades—if indeed it has. Because of the nature of its throw-everything-at-the-wall approach, it doesn’t know precisely how its new catalyst works. All it knows is that the process appears to work.

The hope for finding more valuable uses for natural gas—and making natural gas a large-scale alternative to oil—doesn’t rest on Siluria alone. The abundance of cheap natural gas has fueled a number of startups with other approaches. Given the challenges that such efforts have faced, there’s good reason to be skeptical that they will succeed, says David Victor, director of the Laboratory on International Law and Regulation at the University of California at San Diego. But should some of them break through, he says, “that would be seismic.”

[HitandRun]

..... but they have high correlation to each other in the energy industry dynamics. Most oil formation comes with gas and once gas is able to be extracted, oil is usually next.

They used to have high correlation in the US..... until 2008 or so when the relationship started to break down. NG mainly caters to a local market while crude is international.

You are right to say that oil is usually found together with NG. But no oilman in his right mind will produce the gas first...And incidentally, a significant amount of associated NG is flared away too.

[HitandRun]

Hi Rogerwilco

In general, companies such as Pacific Ethanol, KiOR, Solyndra, etc. failed not because they cannot pass the POC (proof of concept) stage. The failure is mainly due to their inability to produce their products at a competitive price on a commercial scale.

[rogerwilco]

HitandRun, you are correct, we are yet to see if Siluria's tech can indeed work at a commercial scale but i am pretty sure that advance in battery, electricity consumption efficiency, and gas to gasoline conversion will wean ourselves off oil in the future.

When? now that is a billion dollar question. I hope i will live long enough to see it happened

Here's another interesting article from a VC's blog. Cynic will say the author is just a scifi writer but oh well...

http://www.feld.com/wp/archives/2014/01/...ation.html

The Future of Transportation
January 19th, 2014

William Hertling is one of my favorite science fiction writers. If you are in the tech industry and haven’t read his books Avogadro Corp, A.I. Apocalypse, and The Last Firewall, I encourage you to go get them now on your Kindle and get after it. You’ll thank me later. In the mean time, following are William’s thoughts on the future of transportation for you to chew on this Sunday morning.
There’s always been a sweet spot in my heart for flying cars. I’m a child of the 1970s, who was routinely promised flying cars in the future, and wrote school essays about what life would be like in the year 2000. Flying cars are a trope of science fiction, always promised, but never delivered in real life. In fact, at first glance, they seem no closer to reality now than they did back then.

But maybe they’re not so far away. Let’s look at some trends in transportation.

Electric Cars

Hybrids vehicles, with their combination of both gas and battery power, represent 3% of the cars on the road today, up from zero just ten years ago. Fully electric cars like the Nissan Leaf and Tesla are mere curiosities, representing only 0.1% of all cars purchased in the U.S.

It might seem like a slow start, but electric cars will soon form the majority of all vehicles. Here’s why:

Except for early adopters of technology and diehard environmental customers, most people aren’t buying a fuel type, they’re buying transportation. They may want speed or economical transportation or family-friendly minivans, but how the vehicle is powered isn’t their main concern.

Examples like the Tesla have shown that electric vehicles perform on par with gas-powered cars. What limits their adoption then? Two factors: cost and range (and charging infrastructure, to a lesser extent, but that will be remedied when there is more demand).

The Nissan Leaf battery pack alone costs about $18,000 (though government incentives bring down the overall vehicle cost to the customer). When comparable gas-powered cars are about $20,000, the high cost of the battery pack alone is a huge barrier to widespread adoption, whether the cost passed on to the customer or the government, or hidden by the manufacturer.

Ramez Naam, author of The Infinite Resource: The Power of Ideas on a Finite Planet, recently explained that lithium-ion batteries have a fifteen year history of exponential price reduction. Between 1991 and 2005, the capacity that could be bought with $100 went up by a factor of 11. The trend continues through to the present day.

This exponential reduction in battery cost and improvement in battery technology, more than anything else, will affect both the cost and range of electric cars. By 2025, that Nissan Leaf battery pack will cost less than $1,800, making the cost of the electric motor plus battery pack less than the price of a comparable gasoline motor. Assuming even modest increases in storage capacity, the electric vehicle will rank better on initial cost, range, performance, and ongoing maintenance and fuel costs.

With both lower cost and better performance, electric vehicles will likely overtake gasoline-powered ones by about 2025.

Autonomous Cars

Even ten years ago, most of us couldn’t imagine a self-driving car. When the first DARPA Grand Challenge, a competition to build an autonomous car to complete a 150-mile route, was held in 2004, the concept seemed audacious and it was. Of the fifteen competitors, not a single one could complete the course. The farthest distance traveled was 7.3 miles.

The following year, twenty-two of twenty-three entrants in the 2005 Challenge surpassed the 7.3 mile record of the previous year, and five vehicles completed the entire course. Sebastian Thrun, director of the Stanford Artificial Intelligence Laboratory, led the Stanford University team to win the competition.

Sebastian Thrun went on to head Google’s autonomous car project, which first received press coverage in 2010 and continues to captivate our imagination. Yet despite Google’s technology proof point, and the development work now being done by many vehicle manufacturers, most people still imagine self-driving vehicles to be a long way off.

But Google has essentially shown that self-driving cars are already here: their vehicles have been accident-free for half a million miles whereas human drivers would have had an average of two accidents in the same miles driven.

The real barrier to adoption is cost. In 2010, the cost of Google’s self-driving technology was $150,000, of which $70,000 was just the lidar (a highly accurate laser-based radar). German supplier Ibeo, which manufactures vehicular lidar systems, claims it could mass-produce them as soon as next year for about $250 per vehicle. Computational processing is likely another large component of the overall price, and it has a long history of exponential cost reduction.

If costs come down, are there other barriers?

Some concerns in the media include:

Legislation. Will self driving cars be legal? Nevada, Florida, and California have already legalized them, suggesting this may be less of an issue than anticipated.
Litigation. Who will take the risks and pay up if and when there is an autonomous vehicle fatality?
Fear & Control. Some humans will fear self-driving cars while others will insist on their own manual control of their vehicle.
However, these oppositions aren’t unbreakable laws of physics. They are resistance to change, and they are subject to the forces advocating for autonomous vehicles, such as:

Fewer accidents reduce overall risk and liability, which will cause insurance companies to favor self-driving cars.
A reduction in the number of people killed in motor vehicle accidents (currently 3,200 people are killed every single day) makes a compelling social benefit.
Greater convenience and the recapture of drive time will lead to strong consumer demand.
As a feature differentiator, manufacturers will be eager to sell a profitable new option.
Reduction in drunk driving and increased alcohol consumption will make alcohol companies and restaurants strong supporters.
More efficient use of roads will save governments money in reduced infrastructure costs.
Simply put, the money is with the forces for autonomous vehicles. Insurance companies, liquor companies, vehicle manufacturers, customers, and governments will all want the benefits of self-driving cars.

There’s been talk about halfway solutions: semi-autonomous vehicles that are hands off but require an attentive driver, or need a human to handle certain situations. It’s both cheaper and easier to build an assistive solution than to have full autonomy, which is why we’re starting to see them show up in luxury cars like the Mercedes S-class, which has a driver assistance package (just $7,300 over the starting $92,900 price!) that can help maintain your lane position, distance from drivers ahead of you, and avoid blind-spot accidents.

But the driver is still in control and responsible.

In some ways, this semi-autonomy may be the worst of all worlds. It could encourage drivers to pay less attention to the road even though the vehicle isn’t really up to the task of taking control. As it stands, drivers don’t get much practice with emergency situations. So when emergencies do occur, our reflexes are slow or wrong. How much worse would the average emergency response handling be if drivers got even less practice, and were only called into action when they were either not ready or in a situation so bad that the AI couldn’t handle it? Under these circumstances, it’s unlikely that a human driver would respond in a correct, timely manner. If even airlines pilots fall asleep when the autopilot is on, how likely is it that regular drivers will be attentive?

So when will it happen?

One rule of thumb I learned upon entering the technology industry was that it takes seven years, on average, for new technology to go from laboratory proofs to sellable product. I’m not sure where that rule comes from, but by that measure, we should see the first self driving cars on sale in 2017.

From a cost perspective, we’ve already seen that lidar is likely to drop from $70,000 to $250. We don’t know the breakdown of Google’s other costs, but it could decrease by a factor of ten in ten years (pure computing technology falls faster – about 50x in ten years, more mechanical things slower). That would drop the total price under $10,000 by 2020, a reasonable luxury car option.

By 2030, another ten years out, the price will fall under $1,000, at which point the autonomous option will cost probably less than the annual savings in insurance.

In sum, we already see some limited assistive capabilities now, and should see partial self-driving capabilities around 2017, available as expensive options, with full autonomous capability around 2020, still at a significant cost. By 2030 or slightly earlier, all vehicles should be fully autonomous.

Dude, Where’s my Flying Car?

Now we get to the long-promised but not-yet-realized flying car.

The barrier to flying cars is not in the design or building of a viable airframe. We’ve built small flying vehicles for a while now. A quick Google search shows their amusing variety. We have manned quadcopters, hover bikes, and lots of flying car-like things.

No, the real problem is that piloting is hard. Less than one third of one percent of Americans are pilots. A pilot’s license costs $5,000 to $10,000 and requires months or years of time and study. (Even if a pilot could fly a car in an urban environment, it’s not likely to be an enjoyable experience: think about the difference between a drive on a two-lane country road versus commuting in an urban grid. One is pleasure and the other utility.)

So it’s really the piloting barrier we need to overcome to see flying cars.

That will happen when autopilots, not humans, have achieved the necessary level of sophistication. Companies like Chris Anderson’s 3D Robotics have built, along with the open source community, the ArduPilot, a sub-$500 autopilot for unmanned drones. The ready availability of these consumer-grade autopilots suggests that navigation in open air by software is no more challenging (and may be less so) than navigating ground-level streets.

There will be substantial legislative barriers and not as many forces pushing for flying cars, but we should see at least see concept vehicles, prototypes, and recreational models (possibly outside the U.S.) in the late 2020s, just following the mass-market production of fully autonomous cars.

What about cost? An entry-level plane like the Cessna Skycatcher is a mere $149,000, a price point that’s lower than that of forty currently available automobile models. While entry-level helicopters are twice as expensive as comparable fixed-wing aircraft, quadcopters significantly simplify the design and add fault tolerance at a lower cost than single-rotor copters.

If the legislative barriers can be overcome, flying cars might not be as common a sight as a Ford or Toyota, but they could be more common than a Lamborghini or Aston Martin.

Trains & Hyperloops

I love the train ride between Portland and Seattle, and I’ve taken it dozens of times, including just riding up and back in a single day. Trains are relaxing and roomy, and their inherent energy efficiency appeals to my inner environmentalist.

On the other hand, they also have shortcomings. They’re locked into a track that is sometimes blocked by other trains, leading to unpredictable arrival times, and they go according to timetables that aren’t always convenient.

Elon Musk’s hyperloop may reduce new infrastructure cost, boost speeds, and reduce the timetable problem while maintaining energy efficiency, but I think the hyperloop is a stop-gap measure. That’s because we’ll soon reach an era of cheap electricity.

Photovoltaic cost per watt continues to drop (from $12 per watt in 1998 to $5 per watt in 2013, 14% annually over the long term) at the same time that we’re seeing new innovations in grid-scale energy storage. Ray Kurzweil and others predict that we’ll meet 100% of electrical needs with solar power by 2028. So while efficiency of passenger miles traveled is a key element to sustainable transportation right now, it may be less important in the future, when we have abundant and inexpensive green power.

Green power reduces the energy efficiency advantage of trains and the hyperloop. Of course, the other major benefit of mass transit is freeing the passenger from the tedium of driving, but self-driving vehicles accomplish that just as well.

Transportation Singularity: 2030

In sum, we have several key trends converging on the late 2020s: fully electric fleets, cheap electricity, autonomous vehicles, and flying cars.

Transportation will look very different by 2030. We’re likely to have many autonomous, personal-use vehicles. Since car sharing services are even more useful when the cars drive themselves to you, we may have much less personal ownership of the vehicles. Airline travel is likely to change as well, as self-piloting fast personal vehicles will compete for shorter trips, while the reduction in fuel costs may change the value structure for airlines.

And yes, we’ll finally have our flying cars.

About the Author

William Hertling is the author of Avogadro Corp, A.I. Apocalypse, and The Last Firewall, science fiction novels exploring the role of artificial intelligence and social networks in the near future. Follow him on twitter at @hertling, or visit his blog at www.williamhertling.com to learn more about his writing.

[specuvestor]

..... but they have high correlation to each other in the energy industry dynamics. Most oil formation comes with gas and once gas is able to be extracted, oil is usually next.

They used to have high correlation in the US..... until 2008 or so when the relationship started to break down. NG mainly caters to a local market while crude is international.

You are right to say that oil is usually found together with NG. But no oilman in his right mind will produce the gas first...And incidentally, a significant amount of associated NG is flared away too.

The development of LNG terminals will hopefully change that, and with Singapore positioning with the trend as a regional LNG hub

Flaring is a function of the economic value of transporting NG. When there is no viable way to transport it to extract value, from a pure capitalist point of view, they flare it. But any man in his right mind can see flaring makes no sense in the bigger scheme of things. In recent years even Middle East is using NG as feedstock for their petrochem plants. In Qatar NG has overtaken oil as the main revenue source.

http://www.nytimes.com/2013/10/18/busine...akota.html