The Economics of Natural Gas For Those With Poor Memories

February 21st, 2010
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Natural gas is cheap and plentiful, eh? Really? It’s the source we should use for energy because it’s so common we’ll never have to worry about a supply crunch?

Dang, well, I like to think I’m young, but I’m pretty sure I remember in my lifetime this not being the case. Actually, I’m damn sure of it. Believe it or not, the natural gas market is just about as volatile as the petroleum market. For those who don’t remember, around 1999-2000, gasoline was under a dollar a gallon. Ten years is really not all that long ago, especially when you’re about infrastructure and building it – as infrastructure tends to last more than ten years. Natural gas doesn’t tend to be much more stable.

In fact, the cost of natural gas and its availability is effected by a number of things: politics in countries like Qatar and Russia, the worldwide demand for plastics and various chemical products, the severity of winter and the cost of oil and the volume of heavy crude being refined, the availability of pipelines and well heads all factor in to how much natural gas is being consumed and whether enough can be provided.

Based on television ads and the general opinion of many on natural gas, it would seem like this isn’t the case. Unfortunately, reality stays the same no matter how much you say something.

So now, for those with a poor memory, here’s a refresher:

This entry was posted on Sunday, February 21st, 2010 at 9:19 pm and is filed under Bad Science, Enviornment, History, media, Obfuscation, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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19 Responses to “The Economics of Natural Gas For Those With Poor Memories”

  1. 1
    Jim Says:

    This isn’t specifically in response to your post, but I was wondering if you or any of the other commenters here saw the 60 minutes piece today on Bloom Energy and their “revolutionary” fuel cell technology. They mentioned that fuel cells often use natural gas, which is why I thought of it when I read your post. I know very little about the company or the technology in general, but something about the proponents and the credulous way that the 60 Minutes reporter was parroting their claims made my skeptical sense tingle. I’d love to hear from anyone with some objective knowledge of the subject. I’ll post the link for anyone who didn’t see the piece:

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  2. 2
    DV82XL Says:

    There are three immediate problems, as far as I can see. First, the sources of natural gas (NG) are often fairly politically confounding. For the US this might not be such a big deal, but for those that are sucking on the Russian gas pipe it may well be.

    Second, NG is mainly methane, which is a greenhouse gas. There’s less of it in our atmosphere, but it’s far more powerful than CO2 at trapping heat and it has been increasing at a similarly fast clip in the last two hundred years (although stalled slightly recently for complex reasons). In fact this isn’t a problem in the way you’d expect, because when you burn NG for fuel it converts into CO2 and water. The natural gas industry only pumps methane into the atmosphere when it’s mining and through huge pipeline leaks. (The oil industry is even worse – the two industries combined send up approximately 17% of the planet’s methane emissions a year)

    But third, natural gas is a finite fossil fuel, just like coal and oil. We’ve probably got about fifty years worth of gas left, even if new sources like shale and clathrates are exploited, before the costs make it non-competitive with nuclear. In fact the whole alternate source economics, depends on the price of gas going up by as much as five times the current ten-year average .

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  3. 3
    Chris Says:

    Well now we do need to point out that the spikes shown on the chart are partically the result of scamming the system by the Enron types. They did the same thing to the NG market that they did to the Electricity market – that is why they are in jail (oh wait….they are in jail right?)….

    Give me a choice and I prefer NG over Coal or fuel oil….but nukes and hydro are my favs….

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  4. 4
    Franck Says:

    To Jim, fuel cells are nothing new, but the point is to know where it can be usefull (hint: you don’t see many around).

    The principle of fuel cells is to use a catalyst (such as platinium) to perform the controlled oxydation of the fuel, which generates a steady electrical potential.
    So it turns chemical energy into electricity without the need for heat and/or mechanical intermediate steps with a quite good conversion factor.

    Theorically, it can easily scale up or down, you only need to adjust the rection surface. But scaling up rapidly gets very expensive (platinium costs more than gold) and not very efficient compared to good old internal combustion engines, and scaling down, while theorically easy, forces you to deal with small compressed gas canisters where a simple dirt-cheap AC to DC converter and a Li-Ion battery do the job quite well.

    The only commercially viable application I can think of would be to back up batteries in an electric car: the cell output is already similar to the battery, so it would be easy to swap from one source to the other, and the potential owners are already ready to pay the price of a sport car for the performances of a golf cart.

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  5. 5
    gman Says:

    Well, I didn’t see this 60 Minutes piece, and I don’t know much about fuel cells… But I do have something to say about 60 Minutes: In the few cases where they did a story about something I do know about, they have been way off the path of truth in their search for sensationalism. This show masquerades as ‘news’ but it is really nothing but entertainment – a far cry from what CBS news used to produce. They should be ashamed of themselves, but you know what, they’re not.

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  6. 6
    Gordon Says:

    When the cost of oil is high, production at the Alberta tar sands gets ramped up and it becomes economical to recover the heaviest tar for refining. They use an enormous amount of natural gas in the process of steaming the oil out of the sand and then refining the oil, because its so heavy it needs more refining than light sweet crude. So much is used that they wanted to build up to six or eight CANDU-6 reactors to provide steam but that never went anywhere. That has to have an impact on gas price.

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  7. 7
    Photomaniacal » Blog Archive » Some Monday Morning Nuclear Blog Clips to Read Says:

    [...] Depleted Cranium came out with another great piece that refreshes everyone’s memories about gas prices by using a colorful graph. Rod Adams, as always, has something to say about gas – his latest on the gas industry’s [...]

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  8. 8
    ps Says:

    It is worth seeing the 60 Minutes video. Essentially doubling the efficiency converting fuels to electricity.

    And then look at the breakthrough in the production of cellulosic alcohol. It is a reality now:

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  9. 9
    Burya Rubenstein Says:

    I hear there are oceans of the stuff (“natural gas”) on the moons of Saturn and Jupiter. Too bad it would take more energy to get it here than is in the fuel. (Or would it?)

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  10. 10
    DV82XL Says:

    The fuel cell that they were showing on 60 Minutes is basically a way to burn NG, hopefully with more efficiency than in a combined-cycle plant. Like all NG apparatus, it will make CO2 while working. So while it may be an improvement, it is not the answer.

    Before anyone starts up with biogas and other syngas fuels, keep in mind that they must have a significant net energy gain, that is to say they must produce more energy in the end than it takes to make them. Also that difference must be end-over-end, and be economically viable, and be available in large enough quantities to make an impact.

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  11. 11
    drbuzz0 Says:

    I am not terribly hopeful for fuel cells to radically improve natural gas utilization. Combined cycle plants are already very effecient and a fuel cell stack is going to have some pretty high capital cost.

    It still makes CO2. It still uses fossil fuel. It still is tied to the fluctuation in the natural gas supply and market.

    I’m really starting to think that backing natural gas is a bad idea. A lot of pro-nukes seem to tolerate natural gas because it’s the lesser of the two big evils and it works pretty well for reserve and load following. While I am willing to tolerate that natural gas will be with us for a while for peaking, I’m seeing the industry as more and more of a threat to economics and the enviornment. Natural gas has played the hand they have with a lot of skill and they’re starting to increasingly get the electric supply by the balls and lobby for more gas on the grid.

    The fact that it’s not quite as filthy as coal is starting to become cold comfort.

    I’d rather we stop building more gas power plants. AS it is, I’m concerned we have too many and even a brief supply crunch or spike in price could hit hard. Natural gas power plants should be seen as auxiliary capacity and not for base-load. Natural gas is way too important to other industries, such as chemical and fertilizer production. Given that it’s likely to be the best hydrogenb-rich feedstock for a while, I’d rather we cut down on burning the stuff.

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  12. 12
    G.R.L. Cowan Says:

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  13. 13
    Depleted Cranium » Blog Archive » MIT/Gas Industry Report Says Gas is the Way to Go Says:

    [...] the darker side of things.  Gas prices, it claims, could be stabilized and gas remain cheap. Yet historically, natural gas prices have been as volatile as oil and sometimes worse. The report also includes statements concerning the future of US natural gas production, painting a [...]

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  14. 14
    atomikrabbit Says:

    Now here’s some people who hate NG, and understandably:

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  15. 15
    Robin R Says:

    Well, I fully realize that the below link to this article is not directly applicable to gas fired power plants but it certainly does highlight the danger of getting that NG to those plants. Irrespective of the volatility of the price of NG, one cannot argue with the inherent explodability of the stuff!

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  16. 16
    Anon Says:

    Turns out methane is actually the safest of the fossil fuels (though it’s still pretty bad even compared to renewable energy, let alone the even safer nuclear fission).

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  17. 17
    John Reynolds Says:

    My personal preference is definetly NG over fossel fules and this article has provided some interesting facts in relation to this. Ultimately we need to continue more toward a sustainable fuel and remove our reliance for other costly and prevalent sources. Elon Musk is a pioneer in this regard and is really leading the way in our move into a better, brighter future. Good article.

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  18. 18
    Anon Says:

            John Reynolds said:

    My personal preference is definetly NG over fossel fules and this article has provided some interesting facts in relation to this.


    Stupid spammer doesn’t realise that natural gas is a fossil fuel.

            John Reynolds said:

    Ultimately we need to continue more toward a sustainable fuel and remove our reliance for other costly and prevalent sources. Elon Musk is a pioneer in this regard and is really leading the way in our move into a better, brighter future.

    Not really, it’s a pity he’s wasting money he could use on SpaceX on electric cars and solar panels.

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  19. 19
    DV82XL Says:

            Anon said:

    Not really, it’s a pity he’s wasting money he could use on SpaceX on electric cars and solar panels.

    But then he would have to actually produce something other than hype – that’s the problem with staying focused on one thing: you’re expected to succeed eventually or be deemed a failure. His car isn’t that success. It’s essentially a bespoke product for very rich folk. Nor is this battery scheme of his anything to get excited about, the cost-recovery numbers just don’t look all that real to me.

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