Saturday 4 April 2015

Iran: Green Shoots on Good Friday

The question posed in CU's excellent post last week - Is an Agreement With Iran Wise? - is a whole large step closer to being operative, after another Good Friday agreement of potentially enormous consequence.

As Easter approaches, the optimist in me sees quite a lot of very welcome green shoots appearing in significant places:
  • further downward pressure on oil (though $20 seems a tad unlikely):  $50 for half a decade would be great for getting growth back on track
  • as a piece of pure schadenfreude, it would also annoy the greens a lot:  coal will be phased out all the quicker in the West, being displaced increasingly by gas rather than renewables (not so much green shoots as shoots greens ...)
  • Iran, potentially a much more civilised place than certain of its neighbours (significant numbers of the middle classes there have been educated in the West) can be encouraged to take that path
  • this, as one of our Anons noted on Monday, means lots of business opportunities for both sides: business that western oil & gas companies really need
  • a more mature approach to foreign policy might start to suggest itself to the US and EU, meaning (as Suffragent commented) getting round to the issue of Putin, who really must be allowed to rejoin the mainstream.  At $50, he'll be willing to make the odd pragmatic concession, too
There will be plenty of people quick to observe that, once again, western policy in the region seems to be All About Oil.  To a certain degree, that's true - so what?  Lefties and their new greenie friends - who could find themselves a bit lost for words on this deal, I should imagine - had better just grow up a bit.  That, or just go back to chanting something or other in the corner and let the grown-ups get on with it.



James Higham said...

Bless you, Nick, for being that eternal bull to our bears.

Blue Eyes said...

A common view seems to be that Iran's population is a lot more civilised than its rulers, so if only the anger against The West can be quelled, the electorate might install a more moderate regime.

Also, I have long wanted to go to Iran to check it out, and this geopolitical development may ease that opportunity.

I am all for economical energy, but is imported gas for really the answer for the bulk of our electricity? And even with the oil price fall, solar and wind are looking more and more viable. Maybe gas just eases the transition without killing the economy.

I am optimistic, anyway.

Sebastian Weetabix said...

Solar and wind are NOT more viable. The problem of intermittency cannot be overcome. It is not possible to store AC electricity... which means if this pisspoor technology is to be persisted with, we will need vast investment in the grid in the form of vast numbers of inverters, colossal batteries and god forbid fucking enormous flywheels. If you think windmills are an eyesore just wait until you see a flywheel farm. And we will STILL need spinning reserve of gas/coal to prevent a return to the stone age.

The entire renewables "industry" is bullshit on stilts favoured by magical-thinking, innumerate, rent-seeking malthusian arts graduates.

Blue Eyes said...

NB: "bulk".

dearieme said...

At the time of Bush the Elder's war with Iraq, I remember some chump saying "It's all about oil" to be met with the rejoinder that Saddam wouldn't have invaded Kuwait if all it had done was grow carrots.

Nick Drew said...

James, I assure you I can rehearse the pessemistic case as well - mention of the words "boundary changes" will reliably trigger an attack of gloom

BE - I have met many well-educated, western-oriented Iranians (who often point out what 'aryan' means ...)

Qatar is always a worry when it comes to gas & the semtex option available to so many

but there really is an awful lot of it (gas, that is) around the world: trumps even the ultra-hi-tech coal I would also support if the cost wasn't quite so high: and there's nowt wrong with working hard to keep trade-routes open, both politically and (if necessary) physically

'transition' is fine, it's all we need: in the long run you kinda know there will be a tech breakthrough that makes all this energy-worry a thing of the past

(local solutions will be many and varied but globally, solar + storage look the most plausible to me: the rate of decline of solar costs suggests something like Moore's Law is at work, with loads of new tech-avenues being opened up all the time)

SW - you are of course right as regards wind, but see above: solar+storage will work in many places (solar is beautifully predictable - and in Germany [e.g., though not UK] peak solar coincides with peak demand);

so will 'benign biomass' when there's been a proper breakthrough on AD, which has so much further to go towards the proven efficiency of a cow's stomach!

dearieme - yup, no need to be shy about it is there?!

Suffragent said...

I can’t comment on the Iran situation and I have no knowledge on the tribes involved (We obviously have more educated people on this web site). In the past, conflicts in the ME would have resulted in higher oil prices but as they are using production as a weapon, let them get on with it, just don’t import the people and their problem to this country.
In a free market capitalist society this would mean cheaper living costs to the public but the government has bills to pay (on our behalf) so they will use the green argument to make up the difference. Like the rule makers in F1, the government may make decisions but the free market will find ways round them.

The big question, is this just a flash in the pan? What is the true value of oil? If cheap oil is to be around for half a decade or longer, then it really is a game changer. Society and the market will adapt to the new norm.
Its not just power generation that is effected, it’s the entire industrial process, our lifestyle and buying habits.
I work in auto exhaust after treatment and we are already reducing engine efficiency (mpg) to meet EU/US/China exhaust outlet regulations. Doing so, increases total toxic gases to the environment but reduces particles per million as requested. We are now designing engines for 2022, so a stable environment is more important to us. Under the current situation cars will get bigger (we can’t achieve the next level of exhaust toxins, crash protection for passengers and pedestrians, fuel efficiency and all the must have toys in the space we have.

The previous comments on energy production would be null and void because they are based on our current allocation of energy use and ignore how the market will change. Energy storage is the issue and regardless of the hopes, that some new technology suddenly appears (throwing money at a problem doesn’t guarantee a solution and sometimes you have to question the original hypothesis). Fossil fuels are here to stay for a little time longer.

Nick Drew said...

if cheap oil is to be around for half a decade ...

I don't do forecasts, but I do point out that in the modern age, only once has a big oil price shift (of the sort we saw last year) been reversed inside 12 months, and that was the freakish 2008

in all other instances the new price-paradigm persisted (with a bit of drift) for 5 or more years

Suff said...

ND, I’ll try a little forecast with respect to car sales (for anybody that maybe considering a new purchase). With such a large percentage of vehicles being company cars, in the 90’s, there was a shift in buying criteria from initial cost to depreciation. This saw the rise in volumes of the more expensive German brands, at a cost to ford and GM (and completely decimated what was left of the British car industry).
The next shift in buying criteria will be service cost. Last year I did about 40,000 miles in a 5 year old car and the service costs were 30% higher than the total fuel bill. As we stuff the engine compartment with even more exotic systems (heaters, coolers, sensors, filters….), to meet the next level of output requirements, expect the price of services to skyrocket, they simply won’t have direct access to the components.
This cost may well be the main driver to push people to electric vehicles.

Modification to my drunken comment last night (throwing money at a problem doesn’t guarantee a solution and sometimes you have to question the original hypothesis). I’m not bearish about our ability to find alternative energy production but I don’t think we should be steamrolling the facts and basic maths under the juggernaut of the next political income stream.

“peak solar coincides with peak demand “ and when everybody drives home and plug in their electric cars overnight? :-)

Nick Drew said...

Suff, you are indeed a most welcome additon to our hard-core complement of empiricists and Actual Experts

auto sector is not my specialist subject but I have formed the views that

(a) greatest improvements in efficiency and reduction in transport emissions has been via advances in IC technology - emphatically not the gimmicks of electric vehs or (Heaven help us) hybrids

(b) the decades-long trend of vehs getting ever heavier (offsetting the effciency gains: new Golf GTi being twice the weight of the Mark 1 GTi etc etc) was now over, and use of new lighter materials was reversing that trend

what you have stated abt more and larger (& heavier?) kit now being required is news to me

a bit like the new generation of suburban railway rolling stock, I suppose, which requires vastly greater power per passenger carried than the 1950s-vintage carriages, what with all the heavy-duty windows, electric doors, safety engineering, noise-reducing and ride-smoothening construction, lighting & visual displays, greater and smoother acceleration, aircon, fewer seats per carriage etc etc

but back to elec vehs: if people insist on rapid recharge there will be the effect you allude to

however, surely (surely) pricing structures will be impelmented toincentivise overnight recharge??

DJK said...

Modern cars are too big and heavy.

Model T, length 3.4m. weight 540kg
Ford 105E Anglia, length 3.86m, weight 737kg
VW Golf, length 4.26m, weight 1205kg

Maybe it's due to more gadgets and bigger crumple zones, but I think that as we all get richer, we just want bigger cars.

Suff said...

Thanks Nick. The reason I’m drawn to this sight is the wealth of knowledge and experience of its posts and comments.
As I like to point out to horrified greenies, during our conversations about the ethics of my career choice, “My colleagues and I have done more for the environment and air quality, than all your spinning landscape decorations and expensive roof tiles combined.”
Think of the children. In Europe, we used to be quite sensible about our family car size and would shoehorn in four people, to maintain a size that was suitable for our older roads and parking places. With the advent of the school run and the Chelsea tractor, car size and safety factors have exploded.

Steven_L said...

Personally I'm mourning the death of the normally aspirated motor. These complicated 'euro 6' forced induction engines will be a nightmare.

They cost a fortune too. The last of the 'proper' 2L rev-happy Renaultsport Clio's had a £15k list price. Less than the 'warm' 1L turbo Fiesta.

Has anyone else noticed 'big' cars all cost £25k now too?

E-K said...

Has anyone else noticed 'big' cars all cost £25k now too?


My Mondeo was easily affordable 13 years ago - out of my league now !!!

Jan said...

Cars are the new housing model. ie push the finance and the price can rise accordingly; people will happily go into debt to afford their puchase.

CityUnslicker said...

Jan - woe on the companies trying this. With a house you really don't want to be moving. Handing the keys back on a car, easy.

Quick way to disaster for finance companies I think. Not surprising to see there are so many now with interest rates and borrowing rates so low they can make a killing. However, this will come to a sticky end, as it always does.

Which also tends to be good news as all of a sudden second hand car prices start to drop and then new car prices drop as the factories seek to shift their production.

At this stage in the economic cycle cars are always at their most unaffordable.

hovis said...

@the finance comment

It's a good while since I have worked with implied probabilities of default, however I remember back 10 years, in terms of profit generation Ford was not a motor manufacturer, but a finance company with a manufacturng arm attached. They were really bad numbers.

Elby the Beserk said...

We shall see. One can only recall Bill CLinton's deal with North Korea, in which they dropped their nuke plans in return for aid.

They got their aid. And used it to build nukes.

Way to go Bill.

Way to go Obamanoid.

Elby the Beserk said...

Blue Eyes.

Wind provided 1.8% of the UK's energy needs yesterday. (Gridwatch). What you Greens really don't seem to get is that

a) The wind doesn't blow all the time - indeed, wind as a whole has been lessening for a few years.

b) the sun doesn't shine all the time (hopefully, you are aware of this)

c) that such huge subsidies are required to have any amount of solar or wind demonstrates that on its won, the technology is not economically viable. Indeed, the only thing we know for sure is that this crap has occasioned a huge transfer of dosh from the poor to the rich.