Saturday, June 28, 2008

Dan Yergin on The Charlie Rose Show

Credible, dispassionate, informed: Dan Yergin on The Charlie Rose Show, Friday, June 27, 2008.

Dr. Daniel Yergin is the Chairman of Cambridge Energy Research Associates (CERA), a preeminent source of independent analysis and information on the global energy picture. In Friday's appearance on Charlie Rose, Dr. Yergin gave a nearly hour-long interview on the current energy situation.

Dr. Yergin explained the combination of factors that have given us $140/bbl oil. He described the urgency of expanding our use of energy efficiency to help in the short-term. He suggested the most important energy problem our leaders should focus on is natural gas. With so much natural gas used to produce electricity, we are growing dependent on imported natural gas, which suffers from the same pricing and political risks we see in our dependence on imported oil. Our prodigious consumption of natural gas for electricity generation links electricity prices to the vagaries of natural gas, spreading the impact of natural gas price increases well beyond the home heating market and chemical industry.

After laboring in the "Lovins vineyard" with my colleague, David Bradish, I was refreshed by the remarks of an energy professional who was obviously well informed and clearly dispassionate about the facts. Dan Yergin was not selling a point of view or asking the audience to accept certain assumptions he and his acolytes make about the nature of the problem or range of solutions. He simply shared what he knows from studying the problem very deeply and objectively.

If you would like to hear his profile of the global energy situation, look for a rebroadcast of Friday's show on your local PBS station. The show should also be available in the video archive at the Charlie Rose Show web site soon. Two of Dr. Yergin's previous appearances on the show (March 16, 2005 on alternate energy and May 6, 1996 on oil) are already available there.

FULL DISCLOSURE: In pursuit of well informed, objective sources of energy data and analysis, NEI subscribes to CERA's power and natural gas advisory services.

UPDATE at 9:30am, 6/29: Here's the link to the video. It should be showing in the next couple of days. Hat tip to Eric McErlain.

10 comments:

Rod Adams said...

David:

A couple of months ago, I heard an interview with Patrick Moore where he talked about his knowledge of a plan by major oil companies to ring the US with LNG terminals.

Companies like BP, ExxonMobil, Chevron, and Shell LIKE the idea of shifting our addiction from one source of imported fuel to another because it maintains the value of their capital (both physical and political) and intellectual property base.

Rod Adams said...

Sorry for making two comments in rapid succession, but I am watching Yergin's 2005 interview now. I sure hope that NEI is not spending too much money on its subscription to his prediction services.

Just three years ago, after oil prices touched $55 per barrel, Yergin told Rose that we are in a world of "30s and 40s per barrel." He also said that people have been predicting that oil would be running out since the 1800s but that had never happened.

He said that within two to three years, non OPEC production would be rapidly increasing.

Hmmm. I am looking forward to the way that he explains his position today - with oil prices that are 3-4 times higher than he expected just 3 years ago - compared to that. Recordings are a wonderful thing for people interested in history.

Red Craig said...

I wish someone would explain something to me.

CERA purports to show that nuclear construction costs in North America have risen much faster than energy construction costs in general in the last twenty or so years. Since there hasn't been any nuclear construction, how could anyone determine how fast the cost has risen?

Thanks for any help you can give me on this.

Jim Slider said...

Rod:
Thanks for your comments. I always appreciate your perspective. Whether I agree or disagree with it, I know that yours is always a thoughtful opinion. Similarly, whether we agree or disagree with CERA's perspective, we know that it is based on thoughtful analysis of a breadth of data that would be enormously difficult for us to assemble.

My post was not meant to imply that we do, or anyone should, place blind faith in CERA or any other observer. We recognize that markets, like reactor cores, are highly dynamic, non-linear domains. We understand that predictions about markets contain irreducible uncertainty, so we take all forecasts with substantial skepticism. Still, it is helpful to hear what CERA and others think about the markets and why they hold their views. In the end, however, WE are responsible for the views we hold, not CERA, EIA, or any other analyst.
****
Who have you found to be a credible, dispassionate, informed observer of the energy marketplace with a record of reliable forecasts?

KB said...

Dan Yergin for VP? MarketWatch wishes it were so.

David Bradish said...

red craig,

From what I know, the Index is a compilation of 30 or more price indicators such as labor, commodities, financial metrics and so on. CERA then makes an educated guess as to how much each of the indicators weigh for different types of power plants. To answer your question more fully, though, you would have to pay about $50K per year to subscribe to this Index.

Red Craig said...

David, thanks very much for the explanation.

It seems like such a calculation would leave out technology improvements that have occurred over the last few decades. Not only are reactor designs simpler, but manufacturing and construction methods are more economical.

To me it's scary that a company can put out conclusions without having to justify them, simply by charging prohibitively for the privilege of reviewing its work. And its claim to analyze the unanalyzable is suspect at least.

Anonymous said...

"Since there hasn't been any nuclear construction, how could anyone determine how fast the cost has risen?"

By calculating historical cost increases for the raw materials, commodities, specific skilled labor pools, etc. that are needed to build a new plant.

We may not have built a new plant in 30 years, but we know how much concrete and steel is needed, and what they cost. And we know how many skilled welders are needed, for how long, and what they're making these days.

Red Craig said...

anonymous, thanks for helping me on this. I'm not sure we do know how much concrete and steel is needed, and how many skilled welders are needed, for how long. The new reactor designs take advantage of better core physics. Fabrication techniques are more advanced, allowing for more offsite work. Lasers and computers have made machining cheaper, faster, and more accurate, with less waste. More welding is done by robots. QA was always a major cost, and new techniques are both cheaper and more thorough.

Suppose CERA calculated the costs of a 2008 Cobalt by re-pricing the cost components of a 1980 Malibu sedan. Would that be accurate?

I could suppose that CERA took a modern reactor design and costed it out and compared it with a plant built 30 years ago, but their results purport to show a gradual change, as if they calculated it for each year. That suggests they re-calculated costs for an ancient reactor design without adjusting for new technology.

I think some skepticism about CERA's calculations is appropriate.

Rod Adams said...

@ Jim Slider:

Jim you asked a good question "Who have you found to be a credible, dispassionate, informed observer of the energy marketplace with a record of reliable forecasts?"

I thought about that quite a bit today. I pay attention to the actions of several observers including Matthew Simmons, Boone Pickens, and a few of the regular commenters on The Oil Drum.

Of course, none of them really count as dispassionate. I am also not sure that any of them publish the kinds of study materials that your members might find useful.