COMPARATIVE INVENTORY & GAS STORAGE REPORT MAY 19, 2022 (2022-20)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MAY 18, 2022 (2022-20)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MAY 12, 2022 (2022-19)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MAY 11, 2022 (2022-19)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MAY 5, 2022 (2022-18)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MAY 3, 2022 (2022-18)

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Art Berman May Newsletter Preview

Art Berman May Newsletter Preview

The trajectory of oil prices has changed course since early March and it is downward.

Analysts continue talking about incredibly tight supply and prices going to $185 or higher but WTI price appears to be converging on about $100 per barrel.

This follows two years of price discovery after the April 2020 price collapse in which price fell to -$38 and then increased to $124 (Figure 1). After averaging only $20 from March 15 through May 15, 2020, the annual average recovered to $39. In 2021, the average price rose to $72 and is now $97 per barrel so far in 2022.

Figure 1. WTI futures prices may be approaching a period of relative stability following two years of price discovery after the April 2020 price collapse.Source: CME & Labyrinth Consulting Services, Inc.

Price peaked at $123.70 on March 8 and has since decreased to $102.41 (Figure 2).  Higher frequency cycles since early March have exhibited lower highs and flat-to-slightly rising lows. The triangle or wedge pattern shown in Figure 2 gives no clear direction for prices going forward—only that WTI price discovery has been achieved for the near term at around $100 per barrel.

Figure 2. WTI futures price appears to be converging on about $100 per barrel for the near-term. Source: CME & Labyrinth Consulting Services, Inc.

Key Factors for Price Stabilization

A key factor for price stabilization is that markets no longer expect Russian oil exports to fall as much as initially feared following the Ukraine invasion. Russia exported an average of 7.5 mmb/d of crude oil and refined products in 2020 and 2021. Exports were boosted to an average of 8.1 mmb/d from October 2021 through March 2022, probably in anticipation of sanctions (Figure 3).

Exports were about -0.9 mmb/d lower in April than in January 2022 and EIA’s Short Term Energy Outlookprojects a decrease to -1.4 mmb/d lower by year-end & -1.6 mmb/d lower by December 2023. If this is correct, Russian exports by the end of 2023 would be slightly more than at the depth of the Covid price collapse in mid-2020.

The take-away is that the loss of Russian liquids is expected to be about -0.34 mmb/d more than 2021 levels. It comes at a bad time for global supply but the loss is not nearly as serious as many analysts imagine when put into its proper context.

Figure 3. Figure 3. Russian exports were about -0.9 mmb/d lower in April than in January 2022 and expected to decrease to -1.4 mmb/d by year-end & -1.6 mmb/d by December 2023. Source: EIA STEO & Labyrinth Consulting Services, Inc.

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ART BERMAN NEWSLETTER: MAY 2022 (2022-4)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT APRIL 28, 2022 (2022-17)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT APRIL 27, 2022 (2022-17)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT APRIL 21, 2022 (2022-16)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT APRIL 20, 2022 (2022-16)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT APRIL 14, 2022 (2022-15)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT APRIL 13, 2022 (2022-15)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT APRIL 7, 2022 (2022-14)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT APRIL 6, 2022 (2022-14)

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ART BERMAN NEWSLETTER: APRIL 2022 (2022-3)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MARCH 31, 2022 (2022-13)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MARCH 30, 2022 (2022-13)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MARCH 24, 2022 (2022-12)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MARCH 23, 2022 (2022-12)

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Subsistence Energy, Enron Economy: Art Berman talks energy with Jed Dorsheimer

The Misunderstanding of Oil Underinvestment

Analysts are sounding the alarm that oil industry underinvestment is responsible for higher oil prices. Their concern is based on a misunderstanding of how the oil business works.

In fact, the level of oil investment over the last several years has been exactly right based on market price and investor expectations. The oil business is not a service industry nor is it part of the Consumer Protection Agency.

The logic behind the case for underinvestment is as follows: because industry capex fell after 2014, and fell again in 2020, and because there is now a supply shortage, industry is to blame for underinvesting (Figure 1).

Figure 1. The risk of peak investment in oil and gas is significant. Source: Boston Consulting Group.

This argument fails to acknowledge that 2006 through 2014 was the longest period of high prices and capital expenditures in the history of oil markets (Figure 2). Over-supply and collapse of prices after 2014 did not justify as much capex as before, nor was there any reason to expect higher prices until very recently—remember ‘lower for longer’? To compare the last few years to 2014 results in a distorted perspective of the present.

Figure 2. 2020 global E&P capital expenditures were low compared with the previous decade but were higher than any year from 1986 through 2003 in real $2021 dollars. Source: EIA 2013 UFR, FR 2020 & Labyrinth Consulting Services, Inc.

If an oil company decides to drill a well today, most of its reserves will be produced at prices two to five years from now. No one knows what those may be. That is why oil is a risky business. Periods of major capital investment are based reasonable expectation of multi-year high oil prices and that has only happened twice during the last fifty years.

The first oil shortage and price shock began with the Yom Kippur War in 1973 when Brent was $24 per barrel in 2020 dollars (Figure 3). Price increased to $121 by 1980 when more than 6 mmb/d were removed from the market because of the Iran-Iraq War. The shock ended when oil prices fell to $36 in 1986 when supply exceeded demand.

Investment based on higher oil prices from 1974 to 1986 led to 7 mmb/d of new production from the North Sea, China and Mexico (wedge at bottom on Figure 3). But that’s only half of the story. Saudi Arabia’s output dropped 6.5 mmb/d from 1981 through 1985 as it tried to accommodate both new supply and demand destruction from high oil prices (gold fill in upper left part of Figure 3).

Figure 3. 7 mmb/d new production after 1st price shock & 5 mmb/d after 2nd price shock. Saudi Arabia output dropped -6.5 mmb/d 1981-1985 Iran-Iraq production fell -6.3 mmb/d from 1979-1981. Source: EIA & Labyrinth Consulting Services, Inc.

The second oil-price shock began in about 2002 when price was $38 and peaked in 2011 when  it reached $134. Price increased initially because of rising demand from China but flat world output from 2005 through 2011 (Figure 4). It peaked in 2011 when 1.5 mmb/d of Libyan oil was removed from the market during that country’s civil war (cyan fill in upper right of Figure 3). The shock ended when prices collapsed from over-supply in 2014 and fell to $49 by 2016.

Almost 5 mmb/d of new unconventional production was added after 2011 from the United States and Canada thanks to massive capital flows based on expectation of prolonged high oil prices (light blue in upper right of Figure 4).

Figure 4. The world was on a an oil supply plateauof about 72 mmb/d of crude oil and condensate from 2005 through 2011. Supply increased to 82 mmb/d because of U.S. tight oil production and tar sand production from Canada. Source: EIA and Labyrinth Consulting Services, Inc.

There is always concern about demand destruction when oil prices are high but history shows that supply destruction is at least as important as demand destruction. In fact, supply decreased more than demand during the oil-price shocks after 1973 (Figure 5).  More than 21 mmb/d were removed from world markets because of lower supply compared with 15 mmb/d from lower demand since 1974 (see table in Figure 5).

Should oil companies be expected to maintain high production levels when demand is low as a public service to consumers?

Figure 4. World oil supply destruction has been 6 mmb/d greater than demand destruction during five price shocks since 1974. Source: OPEC, EIA & Labyrinth Consulting Services, Inc.

The main takeaway from the last 50 years is that investment level is largely outside the control of oil companies. Instead, capital from credit markets is the controlling factor. Since 2014, credit for drilling has contracted and investors have demanded more emphasis on profit margins than on production growth.

An energy shortage began in 2021. The causes are complex but a lower-for-longer complacency about the abundance of relatively cheap oil was part of it. So was the energy-blind idea that oil and gas had a limited future and would soon be replaced by electric power from solar panels and wind turbines. The shortage has worsened in 2022 because of the war in Ukraine and the resulting likelihood of energy supply interruptions from Russia.

The third oil-price shock has begun. It will probably last a decade or more if the past is any guide to the future.

If shortage leads to a period of consistently higher prices, outside capital will probably become available for drilling as it was from 2002 to 2014.  Those who do not understand how the oil business works may blame underinvestment for the emerging oil shortage but reduced capital supply from credit markets is the main reason.

 

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MARCH 17, 2022 (2022-11)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MARCH 16, 2022 (2022-11)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MARCH 11, 2022 (2022-10)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MARCH 10, 2022 (2022-10)

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Video: Worst Oil Price Shock Since 1980 — When Will It End? (If Ever) | Energy Expert Art Berman

Oil Shock

The chain of events set in motion by the Russian invasion of Ukraine will almost certainly change the structure of energy markets for years to come.

“Everything changed…last week…There’s no going back from this. Whatever lies ahead will be profoundly different from what any of us know. Illusions have been shattered, assumptions exposed, paradigms exploded.”
John Mauldin

Energy prices were high before the invasion. They are higher now and will move still higher as the consequences of this war unfold.

Brent price averaged $93.75 for the first three weeks of February before the war began. It has averaged $110.50 since. The extraordinary price and spread signals to producers reflect the market’s extreme sense of supply urgency.

Prices reached a seven-and-a-half high in February but are lower in real dollars than during the last price boom. The February average price of Brent was $97.13. That was almost 25% less than the CPI-adjusted average of $127.59 from 2010 through mid-2014 (Figure 1).

That means that there is plenty of room for prices to increase—if the past is any guide to the future. The only realistic barrier to price growth is demand destruction and economic recession. Both are possible at current prices and probable at even higher prices.

Figure 1. Brent price reached a 7.5-year high in February but remains 25% less than the 2010 – June 2014 CPI-adjusted average price of $128. Source: US Bureau of Labor Statistics, EIA & Labyrinth Consulting Services, Inc

Daily Brent futures price has increased $22 to $120 since the Ukraine invasion began. WTI has risen $24 to $116. The Brent 12-month spread has increased 54% and WTI, 90%. These indicate that markets expect little oil from Russia for some time.

Russia produced 10.6 mmb/d of crude oil and condensate in January—only the U.S. produced more at 11.6 mmb/d. Europe gets about 25% (2.5 mmb/d) of its oil from Russia and most Russian crude trade is currently frozen because of sanctions, freight interruptions and wider political risks.

Ural crude is being deeply discounted but sellers can find few buyers. The market capitalization of the four Russian oil and gas majors has fallen 95% since the Ukraine attack began.

With all of that in mind—not to mention the risk of nuclear war—the higher price of oil is hardly surprising. Yet, what is happening in Ukraine goes well beyond oil. There were already raw material shortages in much of the world. Sharply higher futures prices indicate that those may now accelerate.

Ukraine and Russia provide approximately 25% of the world’s wheat supply, and Russia and Belarus are the world’s second and third largest suppliers of potash and nitrogen for fertilizer. Russia and Ukraine provide about 70% of the world supply of neon and xenon that are important for semi-conductor manufacture. The price of wheat increased 40% last week alone and gasoline rose more than 20% (Figure 2).

Figure 2. Roaring higher: raw materials are on a tear. Source: Mauldin Economics.

Natural gas futures price in the United Kingdom has increased from $30.22 to $61.68 since the Ukraine invasion (Figure 3). The average price had already increased 5-fold since December 2020 before recent events in Ukraine because of the pandemic, supply-chain interruptions and naive reliance on “renewable” energy sources.

Figure 3. UK natural gas futures increased from $30.22 to $61.68 since the Ukraine invasion Friday, February 25. Average price has increased 5-fold since 2020. Source: MarketWatch, CME & Labyrinth Consulting Services, Inc.

World coal futures price is four times higher now than the November-December average of $104 (Figure 4).

Figure 4. Average world coal price has tripled since 2020. March price is 4 times the November-December 2021 average of $104. Source: MarketWatch, CME & Labyrinth Consulting Services, Inc.

Energy is the economy and inflation rates reflect the rising cost of oil, natural gas, coal—and even so-called renewable energy.  Economists routinely ignore or minimize the relationship between natural resource price and availability, and inflation. The factors that economists emphasize—money supply, interest rates, production and capital flows, and wages—are important but energy prices affect the cost of doing business for everyone.

The correlation between oil price and U.S. inflation rates in Figure 5 is hard to dismiss. February estimated U.S. inflation rose from 7.5% to 7.9% and average WTI price increased from $83.22 to $91.64.

Figure 5. Higher oil price is a leading cause of inflation. February estimated U.S. inflation rose from 7.5% to 7.9%. Average WTI price increased to $91.64. Source: US Bureau of Labor Statistics, EIA & Labyrinth Consulting Services, Inc.

The outlook for U.S. economic growth is darkening. The Atlanta Federal Reserve Bank now estimates zero GDP growth for the first quarter of 2022 (Figure 6). This is almost 2% less than the average of consensus forecasts. I will leave the analysis of this information to others but I see a clear relationship between higher energy prices, higher inflation rates and lower economic activity.

Figure 6. Evolution of Atlanta Fed GPDNow real GDP estimate for 2022: Q1. Source: Atlanta Federal Reserve Bank.

It is difficult to imagine a scenario in which oil and energy prices decrease in the near term.

Figure 7 shows world oil supply-demand (S-D) balance and Brent price since 2005. It also shows and the OPEC demand and EIA supply forecast for 2022. The -1.7 mmb/d average S-D balance during the last three quarters of 2021 was the greatest sustained deficit since world data has been publicly available.

That was before events in Ukraine. The 2022 forecast suggests that a serious supply deficit is likely later in 2022 despite supply increases of about 3 mmb/d in the first part of the year. Almost 40% of that increase was expected to come from Russia and that is almost certain not to happen.

Figure 7. Average supply-demand balance of -1.7 mmb/d in 2Q through 4Q 2021 was the greatest sustained deficit on record. Source: OPEC, EIA & Labyrinth Consulting Services, Inc.

Goldman Sachs’ Damien Courvalin recently offered an accounting of potential supply sources for 2022. Saudi Arabia and the UAE are capable of adding approximately 1.5 mmb/d. Iran may add another 0.5 mmb/d if a nuclear agreement with the U.S. can be reached. U.S. tight oil might add 0.5 mmb/d. He summarized as follows: “”If you bring [all the spare] supply online, you have nothing left. It is still bullish even if you can find the supply to meet consumption needs.”

Recent events in Ukraine introduce tremendous uncertainty into energy markets and the world order that may emerge. For those who think that this war will end and things will go more-or-less back to normal, think again.

I don’t think it is an exaggeration to say that the geopolitical consequences are likely to be the most serious in decades. Whatever the military outcome, the  extraordinary financial sanctions imposed on Russia—including freezing its central bank’s foreign assets—will potentially ruin or greatly weaken Russia’s economy. The use of nuclear weapons seems greater than at any time since the 1960s.

What is happening right now is an oil shock. The first was in 1973 with the Yom Kippur war between Israel and its neighbors (Figure 8). WTI price doubled in a month from $26 to $61 in 2022 dollars per barrel. The second was in 1980 when the Iran-Iraq war took about 3 mmb/d off the world market. Oil price increased from $61 in January 1979 to $137 by April 1980 ($2022/b). The rise of China led to the third oil shock. WTI increased from a 2003 through 2005 average price of $63 to $172 ($2022/b) by June 2008.

We are now experiencing the fourth oil shock. The removal of approximately 5 mmb/d of Russian crude oil and condensate exports would be the biggest structural change to the oil market since the Iran-Iraq war in 1980. WTI price averaged $43 in 2020 and $70 in 2021. WTI futures price is $116 this morning and Brent is $120 (March 7 2022).

Figure 8. 2022 is the fourth oil shock. Yom Kippur war & Arab oil embargo (1973), Iran-Iraq war (1980) & rise of China (2008) were the first three oil shocks. Source: EIA, U.S. Bureau of Labor Statistics & Labyrinth Consulting Services, Inc.

I cannot speculate about how far this rally may go but the price for a $150/b June Brent call option doubled on Friday, March 4 and the cost of $180 call options jumped 100%.

Whatever the path forward, markets will be distorted substantially.

This is one of the historic moments for world energy.
–Daniel Yergin

Yergin went on to say that, ““The process that began in the 1990s of Russia…being integrated with the world economy, is very rapidly going into reverse.”

Higher energy prices were likely before events in February. Even higher prices seem inevitable even in the most optimistic forward scenarios that I can imagine. The pandemic was an extraordinary disruption. The energy transition complicated its effect. The potential devolution of Russia will amplify the already fragile state of world energy and economic systems in potentially historic ways.

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COMPARATIVE INVENTORY & GAS STORAGE REPORT MARCH 4, 2022 (2022-9)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT MARCH 3 24, 2022 (2022-9)

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ART BERMAN NEWSLETTER: MARCH 2022 (2022-2)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT FEBRUARY 24, 2022 (2022-8)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT FEBRUARY 24, 2022 (2022-8)

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Steven Koonin’s Unsettled: Much to Like and to Dislike

Steven Koonin’s book Unsettled is a thoughtful and important synthesis of climate science but there are a few things about it that are just wrong.

Koonin eloquently explains how some researchers may have misrepresented or distorted the interpretation of climate science. He skillfully discusses the limitations of climate data and climate modeling. He describes how the policy response by government is commonly illogical, counter-productive and even absurd.

He never questions that climate change is real but many of his views are informed by overly generalized or incorrectly interpreted data.  This leads him to dismiss much the urgency of climate change and to attribute it to natural causes rather than to human activity. He dismisses CO2 as a meaningful factor for climate change and finds little evidence that polar ice loss is reason for alarm.

These three statements less than 250 words into his introduction encapsulate both the strengths and shortcomings of his work:

Humans have had no detectable impact on hurricanes over the past century.

Greenland’s ice sheet isn’t shrinking any more rapidly today than it was eighty years ago.

The net economic impact of human-induced climate change will be minimal through at least the end of this century.

He is correct that there is little evidence to link hurricanes and other extreme events to climate change. Not yet anyway.

His comment on Greenland’s ice loss is is patently false.

His assessment that climate change will have little effect on economic growth is only reasonable if ice loss is no cause for concern and if CO2 is not a major cause of warming.

Let’s start with Greenland Ice loss. Koonin just published an op-ed last week in the Wall Street Journal that provides more detail that he presents in Unsettled. In “Greenland’s Melting Ice is No Cause for Climate-Change Panic,” he presents an argument that “the annual loss has been decreasing in the past decade even as the globe continues to warm.” He does not dispute that a lot of ice has been lost but argues that this is normal and uses the chart below to make his case.

Figure 1. Annual Greenland Ice loss (1900-2021). Source: Wall Street Journal.

He points our that ice loss is not continuous and that it is no greater today than it was in the 1930s. That is just wrong.

“Since human warming influences on the climate have grown steadily—they are now 10 times what they were in 1900— you might expect Greenland to lose more ice each year. Instead there are large swings in the annual ice loss and it is no larger today than it was in the 1930s, when human influences were much smaller. Moreover, the annual loss of ice has been decreasing in the past decade even as the globe continues to warm.”
–Steven Koonin

His ice loss curve is a 10-year average although that is not shown on the chart. A ten-year average of annual data is statistically problematic despite the fact that decadal time-averaging might be appropriate for addressing longer-term climate change.

I reproduced Koonin’s ice loss curve in Figure 2 below. I also included the annual data (gray curve) and the cumulative ice loss (gold curve).

Koonin’s 10-year average ice-loss curve leaves out much of the story. Summing the annual data above and below Koonin’s (blue) curve shows that ice loss far exceeded the 10-year average for the entire period of the chart. The volume of ice loss above the 10-year average (13 trillion metric tons) is 8 times more than loss below the 10-year average (1.5 trillion metric tons). That’s a trend that cannot be seen from Koonin’s single curve in Figure 1.

More importantly, the cumulative gold curve shows that ice loss has almost continuously increased and now accounts for almost 15 trillion metric tons of ice since 1900. The variation in the data is almost all loss—in other words, it varies between greater and lesser loss instead of between loss and gain. That’s another trend that cannot be seen from Koonin’s single curve in Figure 1.

Figure 2. Steven Koonin’s Greenland ice data leaves out much of the story. Greenland ice loss volume above the 10-year average (13 trillion metric tons) is 8 times greater than ice loss below the 10-year average (1.5 trillion metric tons). Source: Program for Monitoring of the Greenland Ice Sheet (PROMISE) & Labyrinth Consulting Services, Inc.

The data table in Figure 2 shows that Koonin’s bullet point above is false (“Greenland’s ice sheet isn’t shrinking any more rapidly today than it was eighty years ago”). 2020 ice loss was 399% greater than ice loss in 1940. Ice loss for the ten years ending in 2020 was 31% greater than the ten years ending in 1940. Ice loss for the three years ending in 2020 was 55% greater than for the three years ending in 1940. Any way you work the data, Koonin has Greenland ice loss wrong.

His statement that ice loss data should reflect the constant warming of the global temperature curve violates one of the key principles he discusses in Unsettled; namely, that global average temperature curves are imprecise and do not honor local variations.

Figure 3 shows local temperature variations in Greenland from 1998 to 2010. It indicates that the ice loss variations in figures 1 and 2 correlate well with changes in ice volume. In other words, what he calls “inconsistent” is normal and fully explained by seasonal temperature variations in Greenland.

Figure 3. Temperature as a function of time with a depth of 6 m. As expected the fluctuations are greater than at depth 10. Remark that the interval containing temperatures has increased. Source: Rasmussen, Magne E., 2020, “Snow and Firn temperature on the Greenland’s ice sheet”, https://doi.org/10.22008/FK2/59EKFO, GEUS Dataverse, V2.

Koonin states that “While a warming globe might eventually be the dominant cause of Greenland’s shrinking ice, natural cycles in temperatures and currents in the North Atlantic that extend for decades have been a much more important influence since 1900.”

Climate is complex and there is no single cause for Greenland ice loss. At the same time, the increase in world fossil fuel consumption provides a reasonable proxy for Greenland ice loss although it has the same potential global vs local disconnect that I mentioned for temperature. Nonetheless, the correlation is at least interesting (Figure 4). Ninety-five percent of ice loss has occurred since 1900 and 96% of total fossil fuel consumption has also been since 1900. Twenty-seven percent of ice loss has taken place since 2000 and 31% of fossil fuel has been used since 2000.

Figure 4. Greenland ice loss correlates with fossil fuel consumption. 95% of ice loss has occurred since 1900 and 27% since 2000. 96% of fossil fuel consumption has occurred since 1900 and 31% since 2000. Source: PROMICE, Our World in Data & Labyrinth Consulting Services, Inc.

 

Koonin states in Unsettled that he doesn’t know of any expert who disputes the rise in CO2 concentration over the past 150 years is due to human activities (p. 65). That said, the way that he minimizes the affect of CO2 on warming is inconsistent with the data that I will show below.

Koonin writes that ” human influences on the climate were negligible prior to 1900…Human influences remained quite small as late as 1950…Variations in the climate before 1950, then, show that other phenomena must have been at play (p.36).”

Figure 5 below is from Unsettled (p. 67) and reveals why Koonin dismisses CO2 as a key factor in climate change.  He states, “By geological standards, today’s Earth is starved for atmospheric CO2.” His graph shows CO2 concentrations compared to 1950 levels. It indicates that current CO2 concentrations are at a 600 million year minimum only equalled during the Permian Period 300 million years ago.

Figure 5. Atmospheric concentration of carbon dioxide beginning at 550 million years ago. Source: Koonin (2021).

Each division in Figure 4 represents 40 million years. Homo sapiens did not appear until after the last data marker on the right-hand side of the graph just before the number zero. Koonin talks a lot about the importance of choosing the correct scaling in science. Figure 5 is a textbook example of choosing the wrong scaling.

Figure 6 shows CO2 concentrations over the last 800,000 years using the same technique as in Koonin’s graph.  It shows that indeed CO2 levels fluctuated before the advent of Homo sapiens about 300,000 years before present. It also shows that those concentrations exceeded the 800,000 year maximum by around the year 1800. That seems to contradict Koonin’s assertion that human activity had negligible effect on climate before 1950. It seems like more than a coincidence that fossil energy consumption began in earnest in the 1700s.

Figure 6. World CO2 levels began to increase above the 800,000 year maximum in 1800. Source: Our World in Data, UN & Labyrinth Consulting Services, Inc.

Zooming in a bit more to the last 2,000 years, we see that his interpretation falls apart completely. Figure 7 shows that CO2 levels were quite flat through most of the last two millennia. Concentrations compared to 1950 increased above the 1750-year average around 1800. Contrary to Koonin’s assertion that human influence was negligible before 1950, it appears that human activity had considerable affect by at least 1850.

Figure 7. World CO2 levels began to increase above the 0-1750 average in about 1800. Source: Our World in Data & Labyrinth Consulting Services, Inc.

Steven Koonin is an accomplished scientist with a distinguished career mostly as an academic teaching theoretical physics. He spent five years at BP working on renewable energy strategies and then served as under-secretary of energy in the Obama administration before returning to academia. Unsettled is informative, engaging and provocative. He is right to question the science and motivation behind the current mainstream of climate science and climate change.

At the same time, Koonin finds himself on the wrong side of paradigm change. He seems unaware of Thomas Kuhn’s 1962 classic The Structure of Scientific RevolutionsMuch of what Koonin complains about is simply part of how paradigms rise and fall.

A paradigm is a ruling theory. It is not speculative but is a model or framework that best links and explains existing data. A paradigm is not static. It changes as new information becomes available. It is a testable hypothesis. At some point it can no longer accommodate new observations and a new paradigm begins to compete and ultimately replaces it.

The previous paradigm was that climate change is dominated by natural forces and processes, and that human activities have negligible effect on climate. Koonin is that paradigm’s defender of the faith. Cracks began to appear in that paradigm in the 1950s. New data began to show that emissions from burning fossil fuels were modifying the seasonal exchange of CO2 between the atmosphere, biosphere and ocean. As more data was collected, a new paradigm emerged suggesting that human activities had become a key factor in climate change. That has become the new paradigm.

Kuhn was clear that a paradigm need not—and in fact never does—explain all the facts with which it is confronted. Paradigms gain their status because they are more successful than their competitors in solving problems that practitioners recognize as important. Once a paradigm is established, theoretical alternatives are strongly resisted. That’s a big part of Koonin’s objection but that’s also the way paradigms evolve.

Plate tectonics was a hotly debated subject in earth science when I was in undergraduate school in the late 1960s. The ruling paradigm explained the dynamic earth with a model of giant folds called geosynclines that collapsed as the earth cooled and contracted. The new plate tectonic model suggested that crustal plates were put in motion by oceanic spreading centers and that their collisions and separations better explained earth’s structural history. Today, no one talks much about geosynclines.

When I was in graduate school in the 1970s there were two competing paradigms for how oil was formed. One camp thought that oil was generated from organic carbon that came mostly from fossil algae. Another believed that it came from inorganic sources in the earth’s mantle. Today no one talks much about the inorganic origin of oil.

Geosynclines and the inorganic origin of oil were paradigms that didn’t survive the new data that became available as scientific research progressed.

Koonin has placed himself in the unfortunate position of defending a failed paradigm. Just because tens of thousands of scientists support the current climate change paradigm doesn’t mean that it’s right. At the same time, just because Steven Koonin and a much smaller number of scientists disagree doesn’t mean it’s wrong either.

Koonin distinguishes between The Science (upper-case) vs the science (lower-case). The former is how science is represented by politicians, the press and activists; the latter is the actual scientific research and publication work done by scientists. He writes that scientific “institutions frequently seem more concerned with making the science fit a narrative than with ensuring the narrative fits the science” (p.189). But, like it or not, that’s how science works!

“A striking feature of doing research is that the aim is to discover what is known in advance. When the outcome of a research project does not fall into this anticipated result range, it is generally considered a failure. Normal science does not aim at novelties of fact or theory and, when successful, finds none. Fundamental novelties of fact and theory bring about paradigm change.”
–Thomas Kuhn

Most paradigm changes in science take place out of the public view because they concern things that do not directly affect most people’s lives. Climate change is different. People with no real understanding of science or climate are now involved in the discussion. Few of us want to hear that our behavior may be destroying the ecosystem or that our children and grandchildren may inherit a damaged planet.

I often hear non-scientists remark that climate is always changing and that natural processes have caused climate from the beginning. They describe periods in history that were hotter or cooler and use these as evidence that nothing new is really happening today. Do these people honestly think that professional scientists hadn’t thought of those things before they did?

Similarly, people often refer to something written twenty or thirty years ago that didn’t turn out as stated, and use that to discredit climate science. Perhaps they don’t understand that new data changes how scientists interpret things.

This brings me to the title of Dr. Koonin’s book—Unsettled. It’s a good title because we have all heard someone say that “The Science is settled.” Scientists know better. Science is never settled. It’s not about settling anything. As Koonin’s former Cal Tech colleague recently wrote:

“Science doesn’t prove anything.”
–Sean Carroll

Science is mainly about observing and describing. Explanation comes later. Explanation doesn’t mean determining cause. It means connecting what is known into patterns or trends that can be tested for validity. I know that this conflicts with public understanding of science but that’s because the public has a distorted idea of what science really is and what scientists really do. Perhaps critics of climate science should take a moment to ask questions so they might learn what science is.

I completely agree with Koonin’s observation that policies designed to slow or reverse climate change will probably fail. The costs of these government action plans may not justify the climate benefits in the long run. I also agree that complex energy systems and human behavior patterns are unlikely to change as quickly as needed even if money were not an issue. He is also correct that many climate emergency movements are at least as unrealistic as most government policies.

There’s a lot to like in Unsettled but there’s also plenty to dislike. Koonin sees no reason for panic over climate change and believes that humans will adapt.  I suspect that adaptation will be traumatic and will probably involve widespread death and civil disorder.

Whether or not we can do much about climate change, Unsettled fails to provide people realistic expectations about potential future outcomes. Worse, his incorrect interpretations of polar melting and the role of CO2 in warming give skeptics justification to dismiss climate change altogether. For its many merits, people deserve better information and guidance than Unsettled provides.

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COMPARATIVE INVENTORY & GAS STORAGE REPORT FEBRUARY 17, 2022 (2022-7)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT FEBRUARY 16, 2022 (2022-7)

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Nuclear Power is No Solution for The World’s Energy Problems

Nuclear power is no solution to the world’s energy problems. Not even close.

It’s important for electric power but electric power is not even 40% of the world’s energy supply—nor is it expected to increase much over the next 30 years.

IEA projects that nuclear power will account for only 5.5% of world energy supply in 2050 (Figure 1). That’s an increase of only 0.5% from 2020.

Figure 1. IEA most-likely scenario is for nuclear to account for 5.5% of world energy supply in 2050—an increase of 0.5% from 2020. Source: IEA & Labyrinth Consulting Services, Inc.

Nuclear power has limited application beyond electric power generation and some heating capability. Yet the outlook is not much better for nuclear to increase as a major source of electric power either. IEA’s most-likely scenario is for nuclear to account for only 12.5% of electric power supply in 2050 (Figure 2).

Figure 2. IEA most-likely scenario is for nuclear to account for 12.5% of electric power supply in 2050. Source: IEA & Labyrinth Consulting Services, Inc.

Electric power currently accounts for about 39% of world energy supply (Figure 3). IEA estimates that it will only increase to about 41% by 2050.

Figure 3. Electric power will increase from 39% to 41% of world energy supply by 2050. Source: IEA & Labyrinth Consulting Services, Inc.

Many will say that IEA has this all wrong—that it is impossible that nuclear won’t be a bigger part of the energy mix in 30 years. Forecasts are always wrong but double or even triple IEA’s projections and it is still unlikely that nuclear will play a large role in world energy or electric power supply in the future.

Despite its detractors, IEA is a sophisticated organization with excellent data and modeling capability. Most who imagine a brighter future for nuclear power do not present credible alternative scenarios based on data.

Nuclear is hardly a new technology. It has been almost 70 years since Atomic Energy Commission Chairman Lewis Strauss proclaimed that nuclear power would soon be too cheap to meter. Some may argue that the advanced small modular reactors will change things. Regardless of their potential, it is unlikely that any new technology is likely to take nuclear power from 5% to a meaningful proportion of world energy supply in less than decades.

Perhaps the nuclear breakthrough and miracle are just around the corner. The faith that some place in future technology seems like just another way to avoid taking a realistic inventory of the present. Our present energy and ecological crises are too serious to delay by placing hope before experience.

We should keep working on nuclear power because it’s part of our energy future. At the same time, let’s be realistic about what is feasible in the limited time available before energy supply becomes an even bigger crisis.

 

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COMPARATIVE INVENTORY & GAS STORAGE REPORT FEBRUARY 10, 2022 (2022-6)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT FEBRUARY 9, 2022 (2022-6)

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ART BERMAN NEWSLETTER: FEBRUARY 2022 (2022-1)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT FEBRUARY 4, 2022 (2022-5)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT FEBRUARY 2, 2022 (2022-5)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT JANUARY 28, 2022 (2022-4)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT JANUARY 27, 2022 (2022-4)

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COMPARATIVE INVENTORY & GAS STORAGE REPORT JANUARY 21, 2022 (2022-3)

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COMPARATIVE INVENTORY & OIL STORAGE REPORT JANUARY 20, 2022 (2022-3)

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Oil—it was the best of fuels, it was the worst of fuels: Art Berman and Nate Hagens

COMPARATIVE INVENTORY & GAS STORAGE REPORT JANUARY 13, 2022 (2022-1)

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