Asset-Level Transition Risk in the Global Coal, Oil, and Gas Supply Chains(github.com)
github.com
Asset-Level Transition Risk in the Global Coal, Oil, and Gas Supply Chains
https://github.com/Lkruitwagen/global-fossil-fuel-supply-chain
37 comments
Fascinating. I wonder if that conclusion holds if, instead of assets being shut down due to lack of demand, links are chopped off by war & geopolitical instability. This is another likely consequence of climate change and we're seeing it already with MidEast instability + Russia/Ukraine war.
The lesson perhaps is that regions and individuals should do their best to disconnect their energy usage from the global fossil-fuel supply chain while it still exists, and develop new energy networks that are entirely in-region. I wonder if California's push to "go green" isn't really to benefit the planet, but to benefit California when the system collapses. It's just an easier sell to say "We're saving the planet" rather than "The planet is fucked, we're doing our best to ensure we survive when everybody else dies."
Edit: Looks like the paper covers this, and counter-intuitively, most supply-shocks do not have far-reaching impacts to the global supply. There are a few exceptions of strongly-connected nodes: most crude oil ones seem to be in Southeast Asia (affecting Japan/Taiwan/Australia) as well as Port Said, Egypt (Suez Canal), while the biggest natural gas impacts come from facilities in the Midwest (primarily affecting the U.S. East Coast). Their data does not include Russia, so it can't model things like the Russia/Ukraine war.
The lesson perhaps is that regions and individuals should do their best to disconnect their energy usage from the global fossil-fuel supply chain while it still exists, and develop new energy networks that are entirely in-region. I wonder if California's push to "go green" isn't really to benefit the planet, but to benefit California when the system collapses. It's just an easier sell to say "We're saving the planet" rather than "The planet is fucked, we're doing our best to ensure we survive when everybody else dies."
Edit: Looks like the paper covers this, and counter-intuitively, most supply-shocks do not have far-reaching impacts to the global supply. There are a few exceptions of strongly-connected nodes: most crude oil ones seem to be in Southeast Asia (affecting Japan/Taiwan/Australia) as well as Port Said, Egypt (Suez Canal), while the biggest natural gas impacts come from facilities in the Midwest (primarily affecting the U.S. East Coast). Their data does not include Russia, so it can't model things like the Russia/Ukraine war.
> Looks like the paper covers this, and counter-intuitively, most supply-shocks do not have far-reaching impacts to the global supply.
Thanks. Yes, I find that counterintuitive too. But note that in the publicly released data and model, the authors make highly simplifying assumptions about the limits of supply sources and edge capacities -- see lines 202-208 of the paper. In the real world, sources have limits at which you just can't get more flow at any cost, and edges have limits at which you can't transport more flow at any cost. I wonder how the responses to supply shocks would look if subject to hard limits on supply sources and edge capacities.
Thanks. Yes, I find that counterintuitive too. But note that in the publicly released data and model, the authors make highly simplifying assumptions about the limits of supply sources and edge capacities -- see lines 202-208 of the paper. In the real world, sources have limits at which you just can't get more flow at any cost, and edges have limits at which you can't transport more flow at any cost. I wonder how the responses to supply shocks would look if subject to hard limits on supply sources and edge capacities.
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Does the field of economics use simulations like this at scale?
It seems valuable to simulate all international trade, asset markets, supply and demand, employment, etc. to make predictions. It could also lead to better ideas to prevent or quell recessions by focusing attention on the correct levers.
It seems valuable to simulate all international trade, asset markets, supply and demand, employment, etc. to make predictions. It could also lead to better ideas to prevent or quell recessions by focusing attention on the correct levers.
Yes and this is exactly what the fed and governmental agencies attempt to model. Modeling such systems is very naive, but so is some cult-like belief in some first principles taught in Econ 101.
I have to wonder about the real-world applicability of any such simulation, under the assumption that the systems in question are chaotic, and so extremely sensitive to initial conditions.
Do we end up needing to simulate the whole world? Because, ultimately these systems are in fact one, and not separate at all.
Do we end up needing to simulate the whole world? Because, ultimately these systems are in fact one, and not separate at all.
Just wondering... do they actually understand that (for instance) coal hasn't been replaced by solar and wind but by solar + wind + natural gas peaking plants and pressure-points related to natural gas are actually under more stress? Or that the regulatory changes in the pipeline business actually make the swings in natural gas shipment more volatile?
not a response to the question but... actually replacing an usage usually change this usage, but the effect on demand when thoses are primary ressources is'nt linked to this change. coal for exemple is a good source of synthetic fuel (fischer-tropsch process) and 1/6 of actual chinese fuel source or the wood demand exploded with coal usage, for mining it, before surface mining. just to point out that there is mostly no such thing as "energy transitionning" in the humain history, it's a cumulative process.
I expect there will be lots of surprising second order effects. Asphalt roads become uneconomical once oil refining stops producing enough bitumen waste. We're in for a wild ride.
I'm not sure about that. Refining right now doesn't just refine (separate into different components). It also changes longer molecules into shorter ones, a process called "cracking". They do this because we want more gasoline than the fraction that naturally occurs in petroleum. This (massively oversimplifying) gives more gasoline and less asphalt.
Well, if we use less gasoline, but we still want asphalt, the answer is to stop cracking, or at least to not crack as much. And the refineries would be happy to do so, since cracking is expensive.
I mean, you could get to a point where, if you just take the natural fractions in petroleum, there still isn't enough asphalt, but that's not going to happen for a while. (If ever. I suspect - but I do not know - that petrochemicals don't primarily want the tar/bitumen/asphalt fraction.)
Well, if we use less gasoline, but we still want asphalt, the answer is to stop cracking, or at least to not crack as much. And the refineries would be happy to do so, since cracking is expensive.
I mean, you could get to a point where, if you just take the natural fractions in petroleum, there still isn't enough asphalt, but that's not going to happen for a while. (If ever. I suspect - but I do not know - that petrochemicals don't primarily want the tar/bitumen/asphalt fraction.)
We're talking about a hypothetical future where total gasoline consumption is trending down. In that world, bitumen is no longer a waste product, and starts having to carry the price of extraction and pipeline cost. That would make new highways much more expensive.
The likelihood and timeframe of that future is a separate issue, and I'm not holding my breath. Even if Europe really does ban new ICEs in the the 2030s, there's a long tail to to it.
The likelihood and timeframe of that future is a separate issue, and I'm not holding my breath. Even if Europe really does ban new ICEs in the the 2030s, there's a long tail to to it.
Financing will cliffdive I would guess, since I would also guess that investing in oil is a 10-year payoff or similar scale. In ten years solar/wind/EV might be half the cost of gas turbine / ICE.
We should probably increase the national supply and use that to smooth the kinks.
And it pains me a diehard environmentalist, but we should probably subsidize the shale/fracking oil industry in North Dakota and other places to ease the transition as well.
We should probably increase the national supply and use that to smooth the kinks.
And it pains me a diehard environmentalist, but we should probably subsidize the shale/fracking oil industry in North Dakota and other places to ease the transition as well.
Wouldn’t this just cause a perpetual yo-yo effect of the oil prices?
If there is a sudden large shortage wouldn’t that cause prices to spike? Could that be what we’re seeing today ?
If there is a sudden large shortage wouldn’t that cause prices to spike? Could that be what we’re seeing today ?
Just pull up a 20 year price chart on crude oil or natural gas.
Couple this with data from Import Yeti on the largest importers of ship-based containers during peak and average times.
Use that to determine that shipping costs across will go up and will affect the margins of retail during peak import seasons (like holiday prepping) and how that will affect their revenue predictions and ultimately stock value...
Use that to determine that shipping costs across will go up and will affect the margins of retail during peak import seasons (like holiday prepping) and how that will affect their revenue predictions and ultimately stock value...
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On a related note, I've been getting increasingly worried that we're imminently and blindly walking into a human catastrophe due to our current energy policies. I'd be interested to hear about holes that anyone here might be able to poke in any of the red flags being raised by people like Anas-Alhajji[1], the Doomberg team[2] and Wil VanLoh[3].
1. https://www.macrovoices.com/1087-macrovoices-328-dr-anas-alh...
2. https://doomberg.substack.com/
3. https://www.realvision.com/shows/the-kyle-bass-interviews/vi...
1. https://www.macrovoices.com/1087-macrovoices-328-dr-anas-alh...
2. https://doomberg.substack.com/
3. https://www.realvision.com/shows/the-kyle-bass-interviews/vi...
Can you elaborate? We most surely are headed for human catastrophe, but which one and where are you referring to?
I recently started a book on a similar subject - "The End of the World is Just the Beginning" by Peter Zeihan. It mainly discusses the coming demographic bust most places in the world will see, and how that will lead to a breakdown of the author calls "The Order" - the American-backed protection of cheap and safe transport of materials across the oceans.
He sees a bright outlook for America, which can create all the energy it needs at home, and a bad outlook for places like China, which imports almost everything.
I recommend the book, but I do think he doesn't do a great job of making a solid argument that the demographic bust must lead to "the end of the world".
He sees a bright outlook for America, which can create all the energy it needs at home, and a bad outlook for places like China, which imports almost everything.
I recommend the book, but I do think he doesn't do a great job of making a solid argument that the demographic bust must lead to "the end of the world".
I’m reading the same book. I think what Peter misses with regards to energy is that roughly 40% of ocean shipments are moving fossil energy around [1]; if you move to renewables, a lot of shipping goes away. China currently generates more power from renewables than all of Europe [2], and the CCP seems to be aware of how foundational cheap, reliable energy is to their economic prospects. They have the will and government system to dictate their energy transformation.
Demographics will cause rapid economic growth deceleration in developed and almost developed countries (China’s TFR hit a low of 1.15 last year and continues to decline [3]), and “the order” will change as globalization somewhat reverses, but this is all opportunity imho (shipping declines but reshoring increases for security and resilience reasons, see manufacturing and semiconductors).
[1] https://qz.com/2113243/forty-percent-of-all-shipping-cargo-c...
[2] https://archive.ph/2022.06.30-103521/https://www.bloomberg.c...
[3] https://www.bbc.com/future/article/20220531-why-chinas-popul...
Demographics will cause rapid economic growth deceleration in developed and almost developed countries (China’s TFR hit a low of 1.15 last year and continues to decline [3]), and “the order” will change as globalization somewhat reverses, but this is all opportunity imho (shipping declines but reshoring increases for security and resilience reasons, see manufacturing and semiconductors).
[1] https://qz.com/2113243/forty-percent-of-all-shipping-cargo-c...
[2] https://archive.ph/2022.06.30-103521/https://www.bloomberg.c...
[3] https://www.bbc.com/future/article/20220531-why-chinas-popul...
That does appear to be a blindspot of his... For all that he likes to write about transformational technology and other factors that can transcend geography, he doesn't like to include stuff like green energy or even climate change in general in his model.
Frankly, at this point, if anyone is prognosticating without reference to climate change, they’re indulging in alternate timelines that bear little relevance to the one we’re on.
Agree, I would say much of what he communicates isn't actionable, it's more history lessons than current geopolitics. Still a fun read regardless, worth the $20.
Peter Zeihan on limitations of green energy.
https://youtu.be/LtH9rJAHbEA
Part 2 https://youtu.be/wuGp4LVMPVk
Part 2 https://youtu.be/wuGp4LVMPVk
I've only watched the first 5 minutes so far, but he clearly has no idea what he is talking about.
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Isn't 50% moving around bananas?
Over the past several months I read all his books. His previous book, Disunited Nations, is probably best for making the demographic argument. He devotes chapters to individual countries, covering their situations in detail, starting with several chapters on China.
(His first book, Accidental Empire, does a good job introducing his overall PoV, applying it to most of the great civilizations in history starting with ancient Egypt. This book predicted in 2014 that Russia would invade the rest of Ukraine by end of 2021. His next book, Absent Superpower, has the most on fossil fuels.)
(His first book, Accidental Empire, does a good job introducing his overall PoV, applying it to most of the great civilizations in history starting with ancient Egypt. This book predicted in 2014 that Russia would invade the rest of Ukraine by end of 2021. His next book, Absent Superpower, has the most on fossil fuels.)
What was his theorized motivation for Russian invasion, geopolitical or otherwise? Was it tied to Nato moving in, as others have advocated, or something different?
Over the course of history, Russia has been invaded 50 times, so they're pretty touchy about that regardless of how peaceful things look at the moment. With their current borders, they have no real geographic barriers. The Soviet Union had pretty good barriers (mountains and such), needing to guard just nine passes, which can be done with relatively limited troops. They currently control just one of those passes. Taking Ukraine restores their control over two more, and provides a base to go further.
Meanwhile, Russia has horrendous demographic problems. Their fertility rate dropped to something like 1.2 children per woman when the Iron Curtain fell, and hasn't recovered. So now their military-age population is aging out. They're not going to have the population to defend Russia with the borders they have now, and right about now is when they start losing the ability to invade countries like Ukraine to expand their borders.
Meanwhile, Russia has horrendous demographic problems. Their fertility rate dropped to something like 1.2 children per woman when the Iron Curtain fell, and hasn't recovered. So now their military-age population is aging out. They're not going to have the population to defend Russia with the borders they have now, and right about now is when they start losing the ability to invade countries like Ukraine to expand their borders.
Reiterating from memory of his lectures on YouTube:
- The Russians consider some nine-odd geographic boundaries of the former union to be crucial to defense (e.g. between mountains and deserts, certain ports). Without fortifying there, a lot of the Rus land area is open and hard to defend. Interestingly, Ukraine contains only one in Crimea (which they already had) but is on the way to ones in Romania, Poland, etc.
- With the fall of the union, there was not only a baby bust but also the collapse of technical training programs. The "demographic cliff" means that not only will the army half in size but, e.g. the rail lines and electric are also in danger.
- While Ukrainian resolve and EU unity were a surprise to even the US, he also sees a leadership failing not unlike the Chinese one - authoritarian that drives out opposition too harshly also drives out the people in the room that push back on bad ideas. FSB had intelligence that overwhelmingly, UA would accept occupation?
Thank you, I came here to mention Zeihan’s excellent book also. I am totally into studying geopolitical stuff while my wife generally hates these topics. I played this as an audiobook while driving for 5 hours yesterday and my wife loved it. My point is that he writes in a generally interesting style.
I am only half way through so I don’t yet know how good his ‘end of the world’ case is.
He does make a compelling case for the advantages that the US has in the potential for self sufficiency, but those advantages go away if we can’t control our political bigotry (i.e., democrats and republicans make sweeping generalizations against the other side with no interest in meaningful dialog - but to be fair, this is planned for easier control of the population).
I am only half way through so I don’t yet know how good his ‘end of the world’ case is.
He does make a compelling case for the advantages that the US has in the potential for self sufficiency, but those advantages go away if we can’t control our political bigotry (i.e., democrats and republicans make sweeping generalizations against the other side with no interest in meaningful dialog - but to be fair, this is planned for easier control of the population).
Does he include the effects of climate change in his analysis? I found it sorely lacking in Accidental Superpower; he tacks it on in an appendix, but it seems a really disingenuous take.
Came to mention this book as well. I am halfway through but while reading the book this research is very complimentary.
This work is another point in a larger trend that I observe since last year: In discussions and news about economics we suddenly read and hear much more concrete information instead of abstract numbers: We produce this quantity of X, we lack Y, there is a disruption of Z.
The last time I noticed this was when I read old texts from (socialist) GDR. Apparently, it is a sign of a fundamental economic crisis.
The last time I noticed this was when I read old texts from (socialist) GDR. Apparently, it is a sign of a fundamental economic crisis.
The authors simulate a network of ~6 million real-world assets used for extracting/processing/using fossil fuels, interconnected by ~16 million ground/maritime transportation flows. The simulations match actual fossil fuel flows at every location. The data and code have been open-sourced.
The authors use the simulation to ask questions such as, "what happens if demand for fossil fuels declines gradually, say, due to a transition to green energy technologies, causing the least profitable fossil-fuel assets to shut down?"
The answer to that particular question is counterintuitive: A gradual reduction in demand for fossil fuels can lead to sudden large shortages and supply-chain backlogs in many parts of the world.
Think of it this way: if enough "seemingly unimportant" assets go offline, all their connections (flows) go offline too, and the remainder of the network's assets and connections (flows) suddenly lack the capacity to get fossil fuel to all the places it needs to go.
I've added the paper to my reading list; I want to read it more carefully.