EC To Be Sustainable, Green Energy Must Generate Adequate Taxable Revenue

Figure 6 shows that production of oil from shale was developed during the 2011 to 2013 period when oil prices were high. When oil prices suddenly fell in late 2014, shale producers suddenly found production very unprofitable. They cut back on production starting in April 2015. Shale production started rising again in 2017 after prices moved away from their extreme lows. Growth in oil production began to slow in late 2018 when oil prices again began to fall.

The big shut reduction in world oil demand associated with the COVID-19 epidemic began in the second quarter of 2020. Shale production fell in response to low oil prices in March through November of 2021. As of April 2021, production does not seem to have rebounded significantly. We have seen reports that workers were laid off, making it difficult to add new production. If indeed, well-spacing had become too close, this may have played a role in the decision not to ramp up production again. It is quite possible that many drilled but uncompleted wells will permanently remain uncompleted because they are too close to other wells to be useful.

Based on this analysis, it seems likely that US oil production for 2021 will be lower than that for 202o. Ultimately, the lack of adequate profitability can be expected to bring US oil production down.

[4] There are some high-cost oil producers who continue to produce increasing amounts of oil.

Figure 7. Crude oil and condensate production for Canada and Brazil, based on international data of the US Energy Information Administration.

The keys to maintaining high-cost oil production seem to be

  • Large up front investments to make this production possible with little new investment
  • Governments that are not very “needy” in terms of revenue from oil taxes

Even with these considerations, having an unprofitable or barely profitable oil industry weakens a country. Neither Brazil nor Canada is doing very well economically in 2021. These countries will likely reduce new oil investment in the next year or two, if inflation-adjusted oil prices do not rise significantly.

[5] Somehow, “Green Energy” has been allowed to compete in the energy field with huge subsidies. If Green Energy is actually to be successful long-term, it needs to be profitable in the same way that fossil fuel energy needs to be profitable. If wind and solar are truly useful, they need to be very profitable, even without subsidies, so that they can support their governments with taxes.

There tends to be little recognition of the extent of subsidies for renewable energy. For example, allowing the electricity from wind turbines and solar panels to be put on the grid whenever it is generated is a huge subsidy. Such generation mostly substitutes for the coal or natural gas used by electricity-producing plants, rather than the electricity generated by these plants. The many reports we see that compare the cost of intermittent electricity generated by wind turbines and solar panels with the cost of dispatchable electricity generated by fossil fuels are simply misleading.

Furthermore, electricity generated by wind turbines and solar panels doesn’t need to be sufficiently profitable to pay for the much larger grid they require. The larger grid requirement occurs partly because the devices tend to be more distant from users, and partly because the transmission lines need to be sized for the maximum transmission required, which tends to be high for the variable production of renewables.

The lack of adequate of profitability of wind and solar on an unsubsidized basis strongly suggests that they are not really producing net energy, regardless of what EROEI calculations seem to indicate.

It might be noted that in past years, oil exporters have been accused of giving large energy subsidies to their oil-producing companies. What these oil exporters have been doing is charging their their own citizens lower prices for oil products than the high (international) price charged to foreign buyers. Thus, high taxes were collected only on oil exports, not from local citizens. With the fall in oil prices in late 2014 (shown in Figures 5 and 6 below), this practice of differential pricing has largely disappeared.

“Oil subsidies” in the US consist of financial assistance to low income people in the US Northeast who continue to heat their homes with oil. These subsidies, too, have mostly disappeared, with lower oil prices and the availability of less expensive forms of home heating.

[6] It seems to me that an economy really has three different requirements:

View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.