Coal to fertiliser plant for Southland?

Eastern Southland’s lignite coal could be turned in to fertiliser if joint investigations by farmer-owned co-operative Ravensdown and Solid Energy are successful.

Solid Energy, and agricultural fertiliser supplier, Ravensdown, are jointly investigating the viability of building a US$1 billion plus coal-to-fertiliser plant in Eastern Southland, harnessing the region’s world-scale lignite resource and making New Zealand self sufficient in, and potentially an exporter of, urea fertiliser.

The study will consider the economics and possible location of a plant producing up to 1.2 million tonnes a year of urea – a nitrogen fertiliser used to enhance grass growth – from up to 2 million tonnes a year of lignite mined from Solid Energy’s extensive lignite resources. At last year’s urea prices – up to US$800/tonne – this plant would have generated the equivalent of about NZ$1.5 billion per annum in export equivalent revenue – through a combination of import replacement and direct exports.

The venture could created up to 500 new jobs. The study should be completed early next year when the companies will decide if they proceed to the next stage. If they decide to go ahead construction could start by 2012 and the plant might be operating by late 2014.

Solid Energy’s Chief Executive Officer, Dr Don Elder, says: “. . . Agriculture is our most important economic sector . . .. Urea is a key input to increased farm productivity, but is mostly imported at present, which exposes our farmers to world supply volatility, and prices that can fluctuate widely. Producing urea from our vast lignite resources is a prime example of how New Zealand can capitalise on our position as one of the richest countries in the world in natural resources per capita.”

The lignite to uerea study is running in parallel with work to investigate producing diesel.

“Developing a urea plant in advance of constructing a lignite-to-diesel plant would allow New Zealand to have advanced gasification industry competency and capabilities in place at an earlier stage, to substantially facilitate further and larger developments. Alternatively the two developments could take place in parallel and form the basis of a “syngas park”, supplying clean syngas to multiple downstream applications including diesel and urea.”

Federated Farmers  president Don Nicolson said the responsible exploitation of our mineral wealth would play an important part in increasing productivity.

“The numbers involved in this feasibility study are mind-boggling.  Even if annually it converts two-million tonnes of lignite into fertiliser, there are enough proven lignite reserves to keep the plant ticking over for some 650 years.

“The study opens up the prospect of 500 new jobs and the construction of a state of the art facility in an investment worth some $1.4 billion.

“Given New Zealand imports some half million tonnes of gas or coal based urea each year, the new plant will likely be built to the latest environmental standards.  This has obvious benefits from a global climate change perspective.

“The really exciting thing is the potential of turning New Zealand from an importer into an exporter, generating the equivalent of $1.5 billion in export equivalent income each year. 

“That amount represents one and a half times the size of the wine industry or three times the current value of the wool clip.

“It’s also an example where companies can leverage off agriculture, New Zealand’s most important industry, into completely new areas.  In this case taking a low value mineral which occurs in vast quantities and turning that mineral into a high value export.

Turning a low value resource into fertiliser, replacing imports, creating jobs in rural Southland, doing it all to meet the highest environmental requirements . . .  If investigations show the project is feasable it will be very good news indeed.

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34 Responses to Coal to fertiliser plant for Southland?

  1. gravedodger says:

    We wont have to wait long for the great green clobbering machine to wind up but to me it looks a very good idea. Not having a grasp of the logistics, chemistry or energy requirement lets hope that the dopys allow the investigation to proceed so we can all make an informed decision to use or not to use the low quality coal we have so much of.

  2. murrayg1 says:

    I don’t – as I’ve said before – do personal attack.
    Seems to me that some folk need to come along to the UNI, and indulge in getting informed. I did three lectures back-to-back last Friday – 2 hours at Physics, and hour listening to – and questioning – Rod Oram, and two hours with a retired Prof of Geology.
    This isn’t about clobbering, this is about a species which has gotten so numerous, and so voracious, that it has gone into overshoot. By three times.
    That species is now responsible for the chemical and physical balance of the planet – given that we have a responsibility to future generations not to stuff it.
    One-off extractions of a finite resource are – by definition – not sustainable.Sooner or later we have to cut our cloth to fit, why not now?
    One answer – greed.
    End of story.

  3. JC says:

    This is a great idea. Take a relatively bulky and low value product and turn it into high value, then further refine it again into high grade fuel and then later on.. a big spin off into all sorts of chemicals.

    I’ve read that the potential long term future of coal is chemicals rather than fuel, and if lignite has similar qualities we could be on to something pretty good.

    JC

  4. gravedodger says:

    IMHO and not having had the advantage of higher education, I wish more of the people who enjoy the cloistered life behind the ivy walls without having to risk their capital, their health and their time in wealth creation, some exposure to that ghastly reality that creates the funding they enjoy. Then they may better understand the difference between success and greed, progress and progressive, personal responsibility and abdication to the welfare state, education and enlightenment, capitalism and socialism etc.
    I appreciate your comment Murrayg1 and I await the intellectual bash I deserve in your eyes. I only suggested that we all wait for the outcome of the investigation then have a rational discussion on our two obviously differing views on the future of the planet.

  5. What would Hayek say says:

    Murrayg1 – a bit of chemistry rather than physics might help you understand what urea is. Add some economics and then you might have an understanding about resource/product substitutes and innovation leading to a better environmental/economic and social future.

  6. PaulL says:

    gravedodger: well said.

    Murrayg1: You can only arrive at one answer if you start with the presumptions that:
    – resources are finite
    – the technology we have today is the technology we’ll have in the future
    – we must never reduce the resources available to future generations
    Given those presumptions you must come to the conclusion that absolutely no fossil fuels or mineral ores can be extracted, and absolutely no farming should be undertaken.

    To do that would have some effect on our lifestyles, and probably our ability to fund some of the luxuries of our modern socialist state – such as education, health and social welfare.

    I understand that you have spent considerable time thinking about or studying the implications of those presumptions. Which is surely a worthy thing to spend my taxes on. I wonder whether it would be useful for you to consider whether those presumptions are or should be universal truths.

    I would suggest that they are not, in fact, universal truths. Taking each in turn.

    I don’t believe that resources are finite, at least in a human meaningful way. What I mean by that is that if we agree the universe is finite (which I think we do), then logically any given resource is finite. But many of our resources exist in sufficient quantity that they will not be consumed in any forseeable future. For example, fusing deuterium into helium exploits a theoretically limited resource. Of course, that resource is hydrogen, which the most abundant element in the universe, but it is nonetheless limited. Should we make sure we don’t use any of that (remembering that the sun burns some massive amount every second, and that any usage by humans would pale into insignificance)?

    By expressing finite v’s infinite as an absolute, you leave no room to use anything. But if we express it relatively – so a resource of which only a tiny amount remains on earth requires more conservation than a resource that we have a 650 year supply of – then we can make much better decisions.

    Next, to technology. Do we think that in 100 years time we’ll still be burning coal for our energy? What I can say is that if we stop all forward progress by destroying our economy, that will almost certainly be true. But if we continue to progress, I find it very unlikely that our primary source of energy will be fossil fuels. Look at our civilisation 100 years ago, and compare to today. Compare the rate of change in the last century to the one before. Notice the exponential increase in technology? Now tell me again that you are sure our descendants in 650 years will give a flying F about how much lignite is left in the ground in South Otago.

    Now take those two, and consider the third – never reducing resources available to future generations. Consider resources to include technological base. I now say to you, it is a crime to reduce the technical sophistication, and therefore the life and civilisation, available to our descendants through ruining our economy today in the name of conserving something that they most likely won’t need anyway.

    Interested in your thoughts.

  7. murrayg1 says:

    Fully understand what urea is. Resource substitutes run into the Hubbert curve/linearisation too. Doesn’t matter what they are, they’re finite. Neo-classic economics has been taken as gospel, but it was a short-term construct – only worked on the up-side of resource-take.
    Your problem – and it means that not half the flurry of mega-projects can get off the ground – is ‘doubling time’. We are well into the last doubling now – any project moot beyond 2012 or so won’t get the energy, too much competition for a dwindling supply of lowered EROEI.
    Those of us in physics say the peak was a year ago. Peak energy/per/head was 1979. Peak resources per head must have been Adam and his missus.
    Balance – so touted at the moment – is a hogwash. Just an excuse for an incremental carving of a finite cake, by an exponentially growing, exponentially greedier populace.
    Or do you think we can grow forever?
    Why not look at a closed system – where does the urea end up, again?

  8. PaulL says:

    Murrayg1: the system is only closed under an assumption of unchanging technology. We only run out of energy under an assumption of unchanging technology. We only need the same unit input of energy per unit of production under an assumption of unchanging technology. Are you sure that assumption is correct?

  9. PaulL says:

    And are you sure our population is growing exponentially? Last I looked any economy that became sufficiently wealthy immediately tapered off population growth. Surely one of the best things we could do for the global environment is to help the poor countries get rich as fast as possible? For better or for worse, capitalism and the neo-classical (new classical – is that an oxymoron?) economics have made more people wealthier than any other system yet devised by man.

  10. What would Hayek say says:

    Murrayg1 – your making the classic Malthusian mistake of ignoring that productivity and growth are multipliers.

    Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply (see Paul Romer – econlib).

    A great example is knowledge – new knowledge is being generated faster now than at any time in history – 6 billion people means we learn and innovate faster and faster moving us from a world of deminishing returns to one of increasing returns to scale.

    You might want to have a better look at exogenous and endogenous growth to help your thinking.

    PS: Urea ends up back on the ground.

  11. murrayg1 says:

    Reasonable devil’s advocacy. I’ll respond – take it from the top. This is a finite little tennis ball, and we are too far from another for that to be an option.
    Lets forget other species for a bit. We, as a species, for all our smarts, still need to drink, breathe, and eat. That has two requirements – that the planet’s chemistry be kept within the parameters we can exist between, and that the planet’s physics be kept within similar parameters. Eating is intake of energy.
    All life, all activity, requires energy. If a cheetah spends more energy chasing prey than the eating delivers, he dies. It’s an energy equation. We are depleting long (very long) stored sources of solar energy (fossil fuels), at a rate which has peaked, will decline rapidly, and there is no relpacement on the horizon. Other resources have already peaked – we’ve gone past ‘peak gold’ for instance.
    Even if population stopped increasing overnight, demand would rock on. Energy is the key one, though, the Achille’s Heel. Direct solar is the only long-term option (hydro and wind are secondary solar, neither would happen without sun) and local is best – no transmission loss. Has to be done while we still have oil, though. You can’t change an empirically-grown juggernaut like our oil-based society around AFTER we run out.
    Check out EROEI. Or my op/ed in the ODT, about energy. We are simply running out of transition-time.
    Unfortunately, we cannot help poor countries get wealthy anymore. We are globally in resource overshoot (the paddock is overstocked by a factor of three) and the supplies are not there. We listened too long to a cult which said you just substitute what you run out of. That needed an infinite planet, presumably flat. No other configuration delivers.
    An example is logs to China – “we never saw it coming”. Hey, I did. It’s called exponential demand vs a finite rate of supply.
    Technology – any technology – still has to conform to the second law of thermodynamics, unless we recreate the sun. That was ’20 years off’ when I started investigating in the ’70’s, and is ’20 years off’ today.
    A good yardstick as to what is real and what is not, is to Google it. If you Google carbon sequestration, you get a lot of computer-generated images, but no reality. It doesn’t exist. This is what Brownlee and Elder are saying they will use successfully – at this stage totally pie-in-the-sky.
    Capitalism (think about it) is in overshoot too. Investigate leaving the gold standard (Nixon circa 1970) and ‘fractional reserve banking’. Lever on lever on lever smoke-and-mirrors. Not enough of anything real to underwrite it anymore. Hasn’t been since 1970.
    I could have told you for 3 decades the weasel would pop this decade, and for 10 years, could have told you between 2005 (peak light sweet crude) and 2010 (last chance for peak all-liquids). Can’t peak work beyond peak energy, and you can’t do anything else without it. Try it – don’t fill your tank, and stop eating . I don’t care what technology you used, you stopped driving then you died. Too simple.
    The real worry is that if we don’t get established with renewables while we can use the oil to get there, there may never be another chance. Not enough available energy to kick-start another rise.
    I can give you a real discourse, happy to trade emails cheers M

  12. gravedodger says:

    Thanks PaulL for what I see as the very well constructed expansion of my views.
    Murrayg1, how long will you survive on your share of our country in its native state ie growing bush scrub or tussock, without the production of the food you may need after a few hours of ‘sustainable living rough’, or will you pop down to the nearest McD’s for a top up. Do you want all progress to stop, regression to what the dinosaur from wigram calls the ‘good old days’ or do you, as I expect enjoy most of the progress that science, innovation, evolution and acceptance of a lesser standard of living that some of the providers of what you call your needs, endure, to enable you to enjoy them. You mentioned in an earlier post how you provide energy for your needs. When building our present house we looked long and hard at alternatives but after some exhaustive research, admittedly incomplete, we decided that with our limited knowledge, inherent fear of the unknown and doubt as to our ability to achieve a pay back decided to use some of our planet saving surplus in our ecobank and hooked to the grid. I suspect that some small part of the development of the technology that enables you to claim the energy cost to you and the nation is reduced has come at a considerable consumption of the resources that you claim to be concerned about.
    BTW my thoughts on one of the finite resources that in my lifetime has been replaced/substituted – copper
    Every home built in my early life had a copper for laundry, a copper cylinder for hot water, copper waterpipes, copper alloy taps. copper spoutings and roofing(in some cases),and the power and communication lines. Now all those uses of copper have been replaced or in some cases miniaturised and the modern home we have now is virtually free of copper.Two major exceptions are gas, safety and aircon, where the conductivity is required. The cylinder is glasslined steel, there is no copper for laundry, the pipes are plastic, the copper lines are aluminum or alloy and the new world is fibre. It is observable change such as this that gives me hope that as a shortage looms a solution will be found for the foreseeable future.

  13. What would Hayek say says:

    Murrayg1 – err lignite to urea is not about carbon sequestration, urea the end product goes back on the ground. Actually it helps increase the yield of a field (more wheat less space) at a rate higher than population growth. You need to ask yourself why the long term price of commodities has become cheaper in real terms than compared to 50 years ago – seriously.

    The world no longer has a food shortage – we have a worldwide food surplus, the only issue is distribution and that is a problem caused by governments.

    Peak oil is irrelevant and ps the theory said we ran out of oil ten years ago, no wait it was ten yers before that, actually no it was in the 1950’s. Ignore known and unknown stocks , they may run out, but look a the new technology growth. Think about “moore’s law” in which the number of transistors that can be placed inexpensively on an integrated circuit has doubled approximately every two years.

    Thats doubled! and the same law is successfully replicated in many other technology and social fields, as well as business activity.

    Murray – the world is getting better and growing productively and you haven’t seen what it is yet to be capable of. Tommorrow will not be a world of doom but one of massive opportunity.

    You just need to stop reading the works of the fearful and look at what has been achieved.

  14. murrayg1 says:

    Sorry, we are – dare I say it – worlds apart. For all of the commenters, Malthus was never ‘disproved’, merely circumvented by technology, with the important caveat: thus far. Moore’s law also runs into the law of diminishing returns – it’s called molecular cross-talk. No justification of continuance of any activity or trend, can be had by extrapolating the to-date and projecting it forward. That’s just nonsense. Start eating a block of chocolate, with 100 squares. Double what you eat, each day. 1,2,4,8,16,32. On the sixth day, you eat 32 squares, and have eaten a total of 63 squares, leaving 37 left, but tomorrow you want 64. Oh Dear. You are arguing, from the point of view of day 6, that doubling can go on forever. Can’t unless you (very quickly)find an infinite supply of choccy.
    Business activity is either based on the use/extraction/processing/consumption of real resources, or it’s a zero-sum game (a paper-go-round). Economics as a construct, captured our society almost totally. National Radio Business: “An economist believes”. Three times recently – first time I’ve heard it in religious form….
    Growth there is exponential too. I reckon it’s peaked. What greater rate of what can it do with what? and it’s already trillions overdrawn!!!!
    Only Hubbert, in 1967, pre oil-shock predicted 2000 peak oil. Peak light sweet crude was 2005, never been topped since – even with big $$ per barrel last year.
    I think the difference is that I’m looking out the windscreen, you’re looking in the rear-view mirror. Cornucopian, I think, is what that is….
    Don’t get into ‘fearful’, it only gets ‘optimistic’ thrown back at you. Facts are betterer.
    Go well………while you can..

  15. What would Hayek say says:

    Murrayg1 – Your say malthus was never disproved – merely circumvented by technology.

    This is were you and I fundamentally differ as an economists I don’t beleive. Economists are empiricists – we use real data from real life behaviour to show what goes on in the world. We can’t falsify reality.

    Yes Malthus was circumvented by technology. That is empirical evidence that his theory/model was not compatible with reality – something else happened that the theory did not predict. For an economist, you then ask why? and take on board the lesson so that you don’t make the same mistake again and again -that is don’t falsify reality.

    I you do that all you have is a belief system that is not substantiated by reality – good luck with that.

    I’ll finish with this quote from from Alfred Marshall (who popularised the use of demand and supply functions)on formal inquiry in economics:

    1) Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life (5) Burn the mathematics. (6) If you can’t succeed in 4, burn 3. This I do often.”

    In short hand: if your inquiry doesn’t match reality, you have to try again until you get it right.

    Oh and diminishing returns has an opposite – Increasing returns. Your chocolate story is really a discussion of marginal utility, something slightly different.

  16. PaulL says:

    Murray, happy to discuss further. In order to allow others to join in, would rather discuss here than in e-mail, although either is good for me.

    You view primary solar as the only possible energy source, and you’re worried about transition time. My view is that we have other very viable options. Nuclear fission has demonstrated commercial viability, and more than sufficient reserves for many many generations of power. The French use it for 60% of their power. That is by far my preferred stepping stone into a low carbon economy.

    Primary solar is interesting technology, but not really yet viable for two reasons. The first is that the payback isn’t there today, the second is that the technology is progressing so fast that any installation today will be obsolete tomorrow. In my view the second is actually a larger barrier than the first.

    I think primary solar will eventually come into it’s own, and I think we will largely get primary solar from space. That means no consumption of land area, no need to build supporting structures, no shading of your neighbours. The downside is the need for a transmission mechanism, but there are technologies on the drawing board that can do that.

    In terms of other non-renewable resources on earth, there are very few resources that we have that become useless after we consume them. Gold, for example, is very recyclable, so peak gold really isn’t a large concern. And gold can be extracted from seawater if the sale price justifies it.

    As for our relationship with the poor, your view is it is too late. My view is that it is never too late. To subscribe to your world view is to agree to cast NZ loose from the international community, and to decide that all those living in poverty in other countries can die – we no longer care about them. I will always reject that view. My view is that if we (the first world) stopped putting obstacles in their way, the third world would be doing a much better job of hauling themselves out of poverty. Every time a union complains about “offshoring of jobs”, every time we run a buy NZ made campaign, every time we impose a trade barrier or impose some nebulous social standards on imported goods, we are condemning those in the third world to poverty.

    We have enough food today to feed everyone, we would have more if we weren’t busily diverting it into pointless exercises like producing methanol. We have the technology to help those countries move directly from low carbon (poor) economies to low carbon (energy efficient / alternate fuel) economies. We choose not to do so, and in fact choose not to do so for ourselves.

    And as for the likelihood that global warming will render our tennis ball uninhabitable any time soon – sorry, not within 200 years. That is more than enough time to help the poor get rich, for their population to shrink, and for us to finally embrace the nuclear age that started (and was killed by the Greens) in the 60s.

  17. PaulL says:

    PS: Homepaddock – if you’d like us to take the discussion elsewhere, let us know.

  18. homepaddock says:

    Paul – I’m enjoying the discussion, you’re weclome to continue it here.

  19. PaulL says:

    Hayek – when we turn lignite into urea – what is the chemical reaction (not being silly – not a chemist so I don’t know). Is there excess energy or production of CO2 involved?

    I see on wikipedia (http://en.wikipedia.org/wiki/Urea) that urea is (NH2)2CO. The carbon and the hydrogen presumably come from the coal, the nitrogen and maybe oxygen from the atmosphere. I think coal has more than 4 hydrogen atoms per carbon, so arguably this reaction could result in no net carbon emission, and also result in some of the excess hydrogen coming out as water (and therefore is presumably an exothermic – maybe self sustaining – reaction?)

    In short, it looks at least possible to me that making urea from coal could result in no carbon emissions and could be a net producer of energy, or at least require no energy input? If so, I’m not sure what it is that murrayg1 is concerned about. Is that what you were getting at?

  20. murrayg1 says:

    Thanks HP. My understanding was that there is a bigger picture here – there’s always a bigger picture! I didn’t think urea was the major part here. I know this isn’t DoC Estate, but it wasn’t the Minister of Conservation fired the opening shot there – it was the Minister of energy. Gerry Brownlee on Morning Report said “we are facing a global energy crisis”. My recent (you should see what was abridged) letter to the ODT editor, and Brownlee’s “yes” reply, confirm it. He has acknowledged he is working from the IEA 2008 report, and he’s panicked (it’s optimistic by a provable margin – see ‘slide 7’,the red area). This is about coal (or lignite, everyone seems to be mixing them up) to diesel. That’s the real driver. The problem is that will require sequestration, which doesn’t exist. Some of us were hopeful (I’ve been a petrol-head much of my life, till I did my homework) that the North Sea experiment would work, but it quietly foundered. There are no other examples, outside the lab.
    If I get it right, urea takes CO2, drops it back on the paddock. Great sequestration for the coal-to-diesel offset, not much use to the farmer though. I might be wrong – Will check but that’s my take.
    Economists are dead-set wrong. How many said of the last couple of years “I didn’t see it coming”. Read, I was too busy being greedy myself, to question the hand that…..
    I saw it coming – and timed it. Timed the one real-estate shift we’ve ever done, to fit it. Stayed off the grid because of it, and debt-free ditto.
    But of course the ones who never saw it coming know better – how can I argue…
    You only have to look – too many resources (economists call them ‘commodities’) are in too-much demand now, not so much boom-bust, but boom-boom. We are technically ‘out of a recession’ because after dropping like a stone, we have stopped dropping. Why? Because even in curtailed times, the growth of real activity pulls the bottom-line up – in this case, Chinese demand for timber. We only have one way we’ve ever dealt with oer-demand for recources – we scrap over the in-contention resource, and the strongest contender wins. Age of Empires one.
    Now to the third world. You are repressing them now – every time you buy petrol from a firm in Nigeria, or Angola, or ….just about anywhere. Again, the curtailment is energy, and resources.
    Our media has something to answer for in all this – Rwanda for instance wasn’t a ‘genocide’, in areas where there were only Hutu, the death-rates were almost identical to the mixed-race areas. This was a simple overcrowding/land degradation issue. They inherit land, subdivided between siblings. Smaller and smaller plots. Overfarmed, became mud, slid down onto each other. No way out, but to reduce the population. That’s only a curtain-raiser. Try Haiti, try google-earthing it, then across the border (theres only the two) See the difference? Too many people, and that becomes the norm.
    I’m off to have a red wine in my solar-panel-powered house (total set-up cost $3,200, yes it does pay back)and chill out. A curse on all cornucopian’s houses!

  21. Paul Corrigan says:

    So, Murray:
    In words of one syllable, preferably, and in a couple of sentences of about 19 words each, you’re saying … what?

  22. gravedodger says:

    Murrayg1 the international community left the gold standard at the Bretton Woods conference in 1949(I think)if that is at all relevant to this discussion

  23. PaulL says:

    Hmm. A real grab bag of concepts there murrayg1. I’ll try to do justice to them, but I may miss some.

    If we can make urea and diesel from the coal, and all the excess CO2 goes into the urea, then that would be good not bad. Carbon on the soil is actually very good for it – essentially humus. In this case, the carbon is an essential component of urea, without the carbon it wouldn’t be urea, it would be ammonia I think. Not sure that would be so good on pastureland. So if the main game is really coal->diesel, and the excess carbon can be used as part of making urea, that sounds like a great idea.

    Economists are dead set wrong….hmmm. I’m not aware of any economist that claims to be able to pick the timing of a downturn. If they could, they wouldn’t be economists, they’d be financial traders. Very very many economists said that the markets looked over valued on historic fundamentals, and that nothing seemed to have changed to justify it. Many economists said that things were over leveraged, that risk wasn’t being priced properly. Hell, even Alan Greenspan (remember irrational exuberence). Not knowing the date and time of the crash is different from not pointing out it was going to happen. It is quite simply untrue to suggest that classical economics didn’t predict the crash.

    I don’t believe that the only way we’ve ever dealt with excess demand is war. For some time we’ve dealt with excess demand through increases in price, and then substitution or increased supply. Again, that is classical economics.

    Third world. How do I repress them when I buy petrol? An enormous amount of money flows into those countries from the oil industry. Problem is that it gets wasted by their total lack of accountable institutions, by the lack of education of the populace, by many things. The reality is that until those countries have a broad-based economy in which people get wealthy by participating rather than by rent seeking, that things won’t get better. Oil isn’t the cause of the problem, it certainly isn’t helping either.

    Rwanda – yes, a shambles. UN did nothing. Your point?

    Your overriding concern seems to be an energy deficit. I think that is a great place to think about – most problems in the world can be resolved with enough energy. Shortage of water – with enough energy you can desalinate or pump. Too hot or cold – energy fixes that. Energy can be used to make products, and to increase food production given other inputs. In short, if we run out of energy we’re all in trouble, if we have excess energy we’re rolling in wealth.

    Your contention seems to be that we’re going to run out of energy soon. I don’t see why you’d think that. We have enormous energy reserves – NZ has many rivers that could make energy if we wanted to, we have enormous fossil reserves, we have wind, we have geothermal, we have OK solar (too much cloud). Other places in the world have uranium, and thorium is 3-4 times more abundant and is a very good material for nuclear reactors (better than uranium due to fewer radioactive by products, but doesn’t create materials for bombs, so wasn’t originally used). http://www.resourceinvestor.com/News/2006/2/Pages/Thorium–An-Alternative-to-Uranium.aspx

    Places like Australia have enormous solar potential (not many clouds in the outback, and lots of empty space). As we get more technology, space-based solar offers almost limitless power.

    To the extent that energy is our biggest problem, it is a very solveable one. The key is to continue to progress so that we get more energy, not to start putting limits on our economies and those of other countries, inevitably leading to decline of civilisation, war and starvation. If we choose that to happen, then I agree that our future would be pretty poor indeed. What you don’t seem to be considering is that that is a choice, not an inevitability.

  24. murrayg1 says:

    Hmmmmm one of the problems is what we see here – that all subjects interlock, and that they have to be kept in proportion/perspective. By the time you do that properly, you’re into a literary version of boolian algebra.
    Someone up there trotted out the old economists no-need-to-think dirge that the price goes up with csarcity, and at some point you just substitute. That doesn’t happen forever in a finite system, happens for less with exponential consumption, and the same applies to the substitute. As I’ve said, the linch-pin is energy, and it isn’t as easy as we’d like. Oil is more energy-dense and transportable, than anything. You don’t – and are never likely to – run a 4wd tractor on batteries.
    Nuclear – thus far – is a finite resource. All conform to the Hubbert Curve. Energy is indeed a very solvable problem – you just get to use less. That, however, won’t support the way of life you and I have gotten used to. In the face of a finite supply, you have no choice about anything – it simply runs out.
    Third world? We differ. Google Cheney, Bush, bin Laden, Enron, Haliburton, Chevron, and do them in combination. An oil company has two issues. Access, and price. Both are dealt with by corrupting the government, or replacing it with one which is. Chicken or egg?
    I picked the ‘economic crisis’ peak and crash, by tracking energy supplies – NOTHING ELSE. Think on that. I’ll try and find the URL from The Oil Drum, from January 2007, and I’ll add it below, tomorrow. Talk about prescient – it’s a crystal ball. All done by watching oil…..
    If economic activity picks up from here, you’ll know it. The price of oil (ironically they still call it Brent Crude, but theres sod-all more Brent left) will tell you. At $140 US 2008 equivalent, we fall apart, truckies demonstrate, and airlines fall out of the sky. We know this.
    Last for the night – we don’t have massive reserves of energy. The North Sea, now 85% depleted, would power the world for 4 months. Our Southern Basin most optimistic estimate – 2 months. The big find off Brazil? 4 months – but the Chinese own that all now. The IEA state that we need to find 4 new Saudi Arabias – just to maintain production. See ’em anywhere? Discoveries peaked worldwide – by a clear margin – in 1964.
    Gerry Brownlee was right – we are facing a global energy crisis….. nothing else counts.
    I’d better switch off the! Cheers for the debate, I never get that kind of optimism and faith in my circles.

  25. PaulL says:

    Nuclear is finite, yes. But back to my earlier argument – finite and 1000 years in the future isn’t a concern. Finite and running out next year is. The combination of uranium and thorium reserves already discovered is sufficient to power the world for an extremely long time. If someone hasn’t worked out either fusion or space based solar by then, something is wrong with our technology progress.

  26. gravedodger says:

    Perhaps murrayg1 could I respectfully suggest, widen your circle and get out more, our world is still working, producing and having fun doing it. My father predated cars,aircraft, nuclear, moonshots ,penicillin, open heart surgery,tv, radio, plus many more advances and at 93 when he died he was still positive for the future of the planet. One of our biggest failures in the eyes of those who follow us would be to become defeatist. My children would never forgive that.

  27. murrayg1 says:

    Gravedodger – you are right about Bretton Woods, with one caveat. The gold still underwrote the ‘fractional reserve’, but gave up in 1970. I wrote this a year ago –

    http://www.odt.co.nz/opinion/opinion/34180/hard-times-here-to-stay

    For the economist – that 2007 prediction I can’t locate, but this is the 2008 one – just as prescient:

    http://www.theoildrum.com/node/3382

    There are two ways to look at things. One is looking ahead and questioning (me) the other is by looking backwards and assuming (most commenters here). Sooner or later every society (see Prof Jared Diamond’s ‘Collapse’) falls over – in every case through overshoot. This is the first time we have run the experiment on a global scale, but we have the experiences of the Greenland Norse, the Easter Islanders, Romans, Mayan, etc etc. They all developed complex societies, has writing, poets, medicine, incredible buildings, learning. All are gone – but we won’t?
    Only if we apply the lessons their experiences taught. To not do so is arrogant/ignorant.
    I try not to be either…
    You miss the point, realism isn’t defeatism – that’s only when seen from a skewed base-line.
    I see it as a challenge to be tackled – and I’m a long way down the track – but you have to acknowledge the pending issues to scope the challenge.

  28. homepaddock says:

    Murray – sorry about the delay in your comment appearing. It went to the pending file (probably because it had two links) and I’ve only just found it.

  29. murrayg1 says:

    No worries Ele –

    the best read of the lot – for everyone – is this:

    http://campfire.theoildrum.com/node/5816#more

    Think on it carefully, without prejudice. The comments too…
    Reading over the above, I’d love to ask Gravedodger what his plastic pipes are made of!
    Go well, I’m off to walk the dog on a drizzly beach.
    cheers, Murray

  30. PaulL says:

    Sorry murray. I had a read, and it looks like a doomsday cult to me.

    I always find it interesting that when people draw an exponential curve, they always set the scale such that it appears that we’ve reached an unsustainable point.

    You can easily take that same curve, extend it to the right by about 100 times, and set the scale on the y axis such that we now look like we’re in the nearly linear bit of the curve. Just because something is exponential doesn’t mean that the world ended yesterday.

    I think what we come back to with that site is a bunch of people noting that our resources appear finite, and our current consumption of those resources appears to be growing exponentially. They then reach the logical conclusion that this cannot continue forever. Throw in some random statements about how most species overshoot carrying capacity, some beliefs in peak oil having occurred, and doomsday is upon us.

    If you look at the Hubbert curve, you’ll see you get different results from doing a Hubbert curve for the world as a whole than if you do one per country or region, then add them together. The world’s population growth is a bit the same – the world as a whole continues to have population growth, but break it down by country and you suddenly see that it isn’t an exponential curve that rises forever – in fact population growth tapers off very quickly with wealth, and many countries in the world have flat or negative population growth.

    If I call into question the underlying assumption that population growth is exponential, then most of that doomsday prediction falls apart.

  31. murrayg1 says:

    I never mind debating a thinker! Good on you for taking the time.
    The folk at that site, and me for 30 years until I stumbled across them, basically realised the point on the Hubbert curve that is irrefutable, is the peak. I worked that out in 1975. They and I have been watching for it ever since.
    This is not beliefs that peak oil has occurred. It is the culmination of a lot of monitoring, and learning too – not the place to go into it here, but happy to bore you witless with it anytime.
    The problem with wealth is that it is based on energy and commodities (money alone is useless) and they in turn are finite. Beyond peak energy, how do you get more wealth? Sure, you can eliminate the trip to the beach I just did, and use it in ‘productive’ ways, but that forcing follows a path of diminishing returns, at any rate (sorry about the pun).
    In the case of oil, the danger is that market forces are reactive, not anticipatory. You have to hit the wall before ‘the market’ knows it’s there. The wall, in this case, was the Hubbert Peak, and the (noisy data) wobble-across-the-top looks like 2005-10. None of us care except academically, but we think mid-2008 was the historical spot.
    Take a look down a supermarket aisle, or a peak-hour city arterial, and tell me how we grow that, or even keep it up, on the downside of the Curve? I suggest we will be in ‘triage’ mode – keeping water, food, medicine, ditching the private car, conferencing electronically, letting less-used roads go (nuclear energy makes electricity, not bitumen).
    Population growth slowing is a given – graphs show 9 billion by 2050. It won’t get there by a large margin – and I guess that is where we differ…I think we are in overshoot by such a margin, that depletion rates will overcome the projected line.
    Thank you for taking the time…

  32. What would Hayek say says:

    PaulL – sorry for not responding earlier (kids and the weekend – I try to turn off one part ofworld for a little while and deal with a more fun reality) but the short answer is yes to your comment at
    PaulL Says:
    September 25, 2009 at 6:34 pm

    Other than that I agree with the rest of your responses – very well presented and reasoned.

  33. gravedodger says:

    Thanks Ele the recent comments box alerted me to the fact that this fire was still smoldering. We in the fire service make dam sure the fire is out before we go home as a second call to a flare up because we did not do that brings the “egg on face syndrome” and thats embarrassing. This has all the hallmarks of a forest fire that can burn under the surface for weeks then break out again.
    However Murray you know as well as I do that the pipes in my house will be made from petrochemicals and they will be made in future from a resource such as lignite. My point, as you also well know, was the substitution of the copper. The home of my childhood had IMO, no petrochemical content.
    BTW I hope you took a recycled container to retrieve your dogs doggydoos at the beach and washed (optional) and dried it for next time.
    I accept you are in possession of more knowledge than I am but sometimes IMHO more is not always best.
    I concur with PaulL’s comments on population plateauing and often declining following increased wealth and population increase per se is a greater fear for me than the consumption of resources that started this debate.
    BTW I had a small smile at the start of this discussion with your opening”that you don’t do personal attacks” but I found it somewhat patronising since mine was the only comment before yours. I have done some ongoing studies in my adult life at polytech level and one thing that is apparent to me is that the so called teacher has in some cases been in the atmosphere for too long and the views of those working in the compost at ground level cannot know all the facts. That also is not always best.

  34. murrayg1 says:

    good luck with the EROEI of that lignite – I wouldn’t bargain on getting pipes from it….

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