Monday Message Board (on Tuesday)

It’s time for the Monday Message Board, a day late due to the “Queens Birthday” public holiday. Please post your thoughts on any topic. Civilised discussion and no coarse language, please. Suggested starter – a new public holiday to replace this anachronism?

43 thoughts on “Monday Message Board (on Tuesday)

  1. So you won’t be getting a tax cut in just over two week’s time?

    Well yes, but because my income is about one fifth what it was a few years ago (thank you surging AUD) it won’t do much for me.

    Personally, I import goods from the US and we’re doing great – after cutting our prices by around 25% over the pat years which I suspect my customers are pretty happy about to.

    I’m an exporter. I export 75% of my product to the U.S. I am forced to price in USD and all my costs are salaries in AUD. I’m laying people off this week. Its not pleasant.

    So while you bring in fully imported product and just flog it, I layoff engineers who developed product in Australia from scratch, product that is technically as good as anything in the world, but can’t be sold profitably anymore because my costs have doubled in USD terms.

    I used to believe in the “clever country”, but the current economic environment rewards laziness and punishes cleverness. This is no reflection on you, you can and should take advantage of the economic opportunities, I’m just a tad p*ssed off at the moment.

  2. Carbonsink,

    I really do understand what you’re going through – I was in much the same situation back when the Australian dollar bottomed-out at under US 50 cents.

  3. We’ve discussed the future of aviation here on a a number of occasions.

    This is an interesting link to a company which apparently uses fuel ethanol as a feedstock to produce a much more energy-dense fuel suitable for both aviation fuels and internal combustion.

    The 30% greater energy content actually translates into greater range and the fuel is supposedly cheaper than conventional av-fuel.

    http://www.gizmag.com/designer-fuel-offers-more-mpg-less-emissions-less-cost/9467/

    http://www.swiftenterprises.com/Swift%20Fuel.html

  4. Socrates,

    Thank you for the clarification. While I assumed you were looking at data pertaining to the big players on Wall Street, it is much better to know the sample. The question you raise about fiduciary duty to shareholders has an easy answer if one takes Finance textbooks as a starting point. But it is a very difficult question in general and with respect to financial institutions in particular. Unless you explicitly wish to continue with this for me interesting topic, I’d rather not say another word for I may attract the wrath of SJ and I don’t want to spend time with his way of trying to say something.

  5. I really do understand what you’re going through – I was in much the same situation back when the Australian dollar bottomed-out at under US 50 cents.

    Yes, but dare I say it, if you were to go out of business because of a low dollar you could far more easily start back up (when conditions are more favourable) than I could. When I layoff my core engineers I lose my ability to innovate and create new products, and even if I rehire a few years down the track, it will be years later before the new engineers are up to speed. For you (presumably) its just matter of calling your suppliers and distributors when things improve. I’m sure it wouldn’t be easy, but as an exporter that designs and creates product in Australia, I have all your problems plus so much more.

    I would also argue that exporters that innovate, create and develop product in Australia, should be more highly valued than importers. Clearly that is not the case at the moment. The “chosen people” right now are miners and importers.

    I don’t see any easy answers, and I’m not about to argue for protectionism, but its clear to me Australia is in the process of deindustrialising. We are suffering our own version of the Dutch Disease.

  6. Ian, SwiftFuel is a replacement for Avgas, the fuel used in piston-engined aircraft. Its not a replacement for jet fuel (kerosene).

    Ethanol has around two-thirds the energy density of petrol, so whatever SwiftFuel is, its not ethanol. I imagine its some kind of synthetic fuel that has considerable fossil fuel and energy inputs. I’m not a chemist, but I could run it past a chemist if you like.

  7. “Ian, SwiftFuel is a replacement for Avgas, the fuel used in piston-engined aircraft. Its not a replacement for jet fuel (kerosene).”

    If you read the Gizmag article they’re also claiming it’s suitable for jet fuel.

    “Ethanol has around two-thirds the energy density of petrol, so whatever SwiftFuel is, its not ethanol. I imagine its some kind of synthetic fuel that has considerable fossil fuel and energy inputs.”

    Hence my statement that they’re using ethanol as a feedstock.

    They’re being deliberately obscure about the exact composition of the fuel.

    As for the additional energy input, assuming they aren’t working on the basis of two litres of ethanol for every litre of their fuel out put and aren’t using some of the final product as fuel for the process, then yes currently much of the additional energy would likely come from fossil sources.

    This is probably why they only claim a 15% reduction in carbon dioxide emissions compared to av-gas.

    But the aviation industry is facing two crises – carbon dioxide emissions AND the current lack of any technically feasible replacement for liquid fuels.

    Swift Fuels seem to be the only people who can currently address the second of those.

  8. I really hate to suggest we could learn anything from Iran but this may be one example:

    http://english.farsnews.com/newstext.php?nn=8703220982

    “TEHRAN (FNA)- Iran is to scale down production of gasoline-powered vehicles and increase its manufacture of cars with dual-fuel and natural gas engines.

    “Sixty percent of passenger cars produced this year will use natural gas as fuel or will be dual-fuel, and the remaining 40 percent will run on regular gasoline,” read a statement released by the Cabinet of President Mahmoud Ahmadinejad, press tv reported.

    Dual-fuel vehicles produced in Iran can consume both gasoline and compressed natural gas.

    The decision also requires that 80 percent of vehicles manufactured for public transportation by Iranian automakers and 80 percent of pickup trucks must have dual-fuel engines or be powered by natural gas.”

    Australia may be running low on local petroleum but we’ve got plenty of natural gas.

  9. Australia may be running low on local petroleum but we’ve got plenty of natural gas.

    Well, perhaps not…
    Australian Natural Gas – How Much Do We Have And How long Will It Last ?

    Conclusion

    I think its safe to assume that if we start treating natural gas as a silver bullet we will run out in less than 40 years – with gas fired power for new generation being much less intensive in its use of gas than using GTL/CNG for transport.

    If you’d like to disagree with this, please point me to an equally well researched document.

  10. Well for starters it appears to overlook entirely the emerging coal seam methane industry.

    Secondly, “less than forty years” is likely to be long enough for the technologies we’re all hoping for to mature – electric cars; solar, wind and geothermal power; cellulosic ethanol.

    It’s also long enough for the essentially the entire national car fleet to trun over 3-4 times.

    Meaning that if we start making CNG cars tomorrow, it’ll be around 2020 before their share of the vehicle fleet reaches a peak and we can phase rhem out starting in 2020 well within the 40 year horizon.

    I’m working today, I may have a more in-depth look this evening and comment further.

  11. Well for starters it appears to overlook entirely the emerging coal seam methane industry.

    Er, did you actually read it?

    3. “Unconventional” gas sources, Coal Seam Methane and Shale Gas

    The real X-factor for gas production in Australia is unconventional gas sources, in particular coal seam methane and gas from shale. As both coal and shale are plentiful (and likely to remain so for some time), these are likely to provide significant quantities of gas.

    No one seems to be attempting to extract gas from shale in Australia at this point in time, so I won’t attempt to quantify how much gas we could possibly obtain from this source (see this post for a discussion of unconventional gas, including from shale, in the US).

    Coal seam methane, on the other hand, is now the focus of a boom in Queensland. As there has been so much activity in the area lately (and reserves numbers are so vague) I’ll make this the subject of a separate post – and re-run the scenarios based on various estimates of CSM potential.

  12. Admitting you don’t know how much coal seam methane there is and saying you’ll address it later is pretty much “ignoring it completely”.

  13. Mate if you know more, please share your wisdom on the thread at TOD.

    As Gav says:

    As there has been so much activity in the area lately (and reserves numbers are so vague) I’ll make this the subject of a separate post – and re-run the scenarios based on various estimates of CSM potential

    All you’ve done so far is assert “we’ve got plenty of natural gas” with nothing to back it up.

  14. We seem to have wandered into some inverted version of John’s Library of Tlon where I wrote something like “We have enoguh natural gas ot last us for ever so let’s convert every car in Australia to run on it and ignore any other action on global warming.”

    As I’ve already pointed out, it’d take a decade to replace a sizable fraction of the Australian car fleet with CNG vehicles and even allowing for that the entire car fleet including the CNG vehicles will likely be replaced once or twice within Gav’s 40-odd year timeframe.

    CNG cars produce significantly lower Carbon dioxide emissions than equivalent petrol vehciels and with current gas prices, represent a reasonable strategy for Australia to bridge the gap until electrcial vehicles powered by renewables are widely available.

    As fro coal seam methane, people who are in a position to know are sufficiently confident of future supply to invest billions of dollars in infrastructure.

    Back in 2003. ABARE estimated that there were at least 250,000 Petajoules worth of coal seam methane just in Queensland and New South Wales. That was based on studies dating back to 1995 and 1996, given the extensive exploration done since then we can assume current reserves are almost definitely higher.

    http://www.abareconomics.com/publications_html/energy/energy_02/gas.pdf

    The oil drum article says total Australian consumption and exports are currently around 1700 PJ (omitting biogas from waste dumps).

    So at an extremely conservative minimum we probably have at least an additional 15 years of current consumption in coal seam methane.

  15. I don’t have a problem with Australia converting a substantial proportion of our vehicle fleet to CNG — its a good medium term option for Australia — but if we do that, as well as export most of our gas as LNG, its quite possible our seemingly vast gas resources may be depleted far faster than the media would have us believe.

    Most media reports on Australia’s gas reserves simply divide reserves by production (the infamous R/P ratio) and conclude we have enough gas to last us 200 years or somesuch. Clearly this is nonsense because production will increase substantially in the near term, and in the long term gas production will peak and decline.

    Do we really want to end up like the UK, that burnt through its North Sea oil and gas bonanza in 40 years, and now finds itself at the mercy of Putin?

    As I understand, it the problem with CSM is not the size of the reserves, its the cost of extraction and the flow rates. Its a bit like the tar sands in Canada. People keep quoting the massive reserve number, but no-one seems to have noticed that even with tens of billions invested the Canadians aren’t expecting to produce any more than 2mbpd of synthetic crude by 2020.

    Ditto for oil shale, methane hydrates, and the other ‘backstop hydrocarbons’ that are bandied about.

    The ABARE paper you linked to says:

    Second, the flow properties of CSM and natural gas differ significantly. Importantly, in the case of CSM, a producer’s ability to ramp up or increase production is almost entirely dependant on geological factors and significant increases in flow rates are more costly than is the case for natural gas.

    I have no doubt CSM is, or soon will be, economically viable, but whether it can be produced at a rate that supplies a vehicle fleet of millions and an LNG export industry is debatable.

    Anyway Gav is away for a week. I’m looking forward to his CSM update.

  16. We’re in a state of furious agreement.

    CNG may play a useful role in easing the economic pain as we transition to either pure electric vehicles or plug-in hybrids running on biofuels.

    One minor point – a lot has happened in the six years since the ABARE report and many of the problems with coal seam methane have been addressed.

    The industry does have a big environmental impact and we shouldn’t ignore that. One of the major problems is the contaminated water that comes out with the methane and which needs to be disposed of.

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