The Energy Empire of the Sun

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Where does power come from? Why the sun, of course!

We take up the issue of national power and real energy in today’s Daily Reckoning. And we take it up because the fate of nations and the welfare of men and women are directly related to how much sunlight we all get. All power – from the stored solar energy in fossil fuels to the sunlight that makes food grow – comes from energy.

But oh dear, isn’t this problematic? The world’s warming trend ended in 1997, according to the Met Office in the UK. We are at the peak of a sunspot cycle that should correspond to higher temperatures, according to the study. The next cycle, “Cycle 24”, could be the weakest since the Maunder Minimum in the 17th century.

Back then, it got so cold in jolly old England you could ice skate on the Thames. History refers to this cold period between 1645 and 1715 as the “Little Ice Age”. If the Met study is correct, it means the world may actually be getting colder!

Now, we know every time we publish a story on climate change we get dozens of readers cancelling their free subscription and questioning our judgement. Then there are the readers who tell us to stick to our knitting and quit making a fool out of ourselves. So why do we persist?

Well, if you enjoy the Daily Reckoning (or even if you don’t enjoy it but still find value in it) you have to be comfortable with the idea that some of the things you’re told to believe may not be true. You go about finding out whether they’re true by asking questions and being open minded. But all good enquiries begin with doubt.

For example, why would the authors of the Met study conclude that despite the evidence that solar activity may be in decline for a while, temperatures on Earth will still rise? It turns out there’s an answer! The answer is they believe carbon dioxide emissions play a greater role in the Earth’s temperature than the sun.

Read that last line again.

Okay. We’re no climate scientist. But doesn’t the claim that carbon dioxide plays a greater role in the Earth’s temperature than, you know, the sun, strike you as a little curious? The sun is a 4.5 billion old nuclear reactor in the sky raining down radiation on our planet every second of every minute of every hour of every day for all time. It would make sense, you’d think, that the sun would have a lot to do with the Earth’s temperature.

Of course, we’re probably just being ignorant. The Earth’s climate is a complicated system of systems. You have the oceans and the atmosphere and the sun all combining to produce a climate. And there is the matter of human activity.

In any event, don’t expect the Australian government to abandon the carbon tax, even if the world isn’t getting warmer. If the world is getting colder, people will probably have to burn even more fossil fuels just to avoid freezing to death. The carbon tax really is a tax for all seasons!

But speaking of power and energy and people, we thought we’d take a step back to begin the week and look at the world in pictures. That is, look at power relationships as images. We’ve done this a few times before with the help of the maps at www.worldmapper.org. Even though the data driving the map configurations are not quite up to date, the representations of country size in terms of various resources and metrics puts an idea or concept in a different perspective, quite literally. And it’s fun! So let’s have a look.

First, let’s look at the map of the word in terms of population. As you’d expect, India and China are huge. Australia is not. This highlights so much that is positive about Australia’s economic situation. To its north are many millions of people who need resources. Australia is a big country in real terms. But with a small population, it can afford to export a lot of its resource wealth (provided it wants to, and has the labour and capital to extract those resources).

The world’s next billion consumers

The world's next billion consumers

Now there are some grim people out there who view every new human life as an empty mouth to feed. And each new life does need resources to support it (food, water, energy). But we take the view of economist Julian Simon that people are “the ultimate resource”. That is, when you begin to view each new life as a problem to be solved, you’re just a short step away from deciding which 3 billion people you have to exterminate to make the planet liveable for the rest of us (assuming you’re not one of the unfortunates to get exterminated).

Simon’s point is not that the natural world doesn’t impose limits to growth (scarcity). His point is that if market prices work, human beings tend to substitute, adapt, and innovate. The result is that we don’t run out of stuff. At least not yet. Indirectly, the more brains you have working on ideas, the more adaptation and innovation you get. People aren’t just a cost. They’re a benefit!

It’s hard to see it that way sometimes, given the horrible things people do. But Simon has a good point. And Australian meat exporters certainly wouldn’t complain. The second map below shows the world in terms of meat exports. Australia looks like a nice juicy filet mignon, which is another way of saying it exports a lot of meat. That fact itself may make Australia appetising to countries with large appetites for resources. But food as a scarce resource is another issue entirely.

A protein exporting powerhouse

A protein exporting powerhouse

Protein in the form of meat is energy for human beings. But Australia is not just a large exporter of calories. It’s a large exporter of gas and coal. The map below shows that Australia is a global energy powerhouse – keep in mind this map was generated before the US Energy Information Administration released its estimates on unconventional natural gas reserves. Were those included, Australia would be even more bloated with energy abundance (although, to be fair, this is energy stored in hydrocarbons, which are rich in carbon dioxide, which may or may not be heating the planet).

Oil and gas exports

Oil and gas exports

By comparison, Australia vanishes when the map is expressed in terms of oil and gas imports. You can see that Japan and Europe import a lot of gas. This is probably why Japan’s Inpex and France’s Total approved a $32 billion investment in the Ichthys gas project off the coast of Western Australia in mid-January. It’s also why the European Union is rumoured to have lobbied the US Congress to exempt the Shah Deniz gas field off the coast of Azerbaijan from the proposed Iranian oil embargo. An Iranian company has a 10% stake in one of the biggest gas projects in the Caspian Sea. The Europeans want that gas because it doesn’t come from Russia. So British Petroleum may be allowed to export gas from Shah Deniz as an exception. You could say it’s exceptional.

Japan and Europe have a gas problem

Japan and Europe have a gas problem

The gas map has surely changed since the US shale gas revolution. Gas prices in the US have come down so much that some shale players in the US are capping wells and postponing drilling. This, however, isn’t as bearish for gas as it first sounds. The more internationalised the gas market becomes, the more opportunity there will be for unlikely countries to become energy superpowers by virtue of their untapped gas assets. This is the crux of the argument we made in Revolution in the Desert last year.

That is in the future. For now, the map below most clearly illustrates Australia’s best strength and its biggest weakness. The map shows countries in terms of bulk materials and metals ore exports. You can see that Australia, along with Chile (copper) and Brazil (iron ore) is fetchingly rotund when expressed in these terms.

All bulked up: iron ore has been good to Australia

All bulked up: iron ore has been good to Australia

The upside of the ore story is the boom in WA, the flowing resource royalties to state governments, and the still-to-be-sorted-out Mining Tax that would deliver some of this one-off resource wealth to the Federal government. But if you put a giant red dot in the middle of that yellow ball, it would begin to look a bullseye. More on “target Australia” tomorrow.

Regards,

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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17 Comments on "The Energy Empire of the Sun"

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Nathan Chattaway
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Hi Dan, Now you’re getting onto a crucial and very absorbing topic! In response to your article “The Winter of Misdirection” way back on the 4th of July last year, I said: “The only input to the closed system that is our planet is solar radiation (and a few meteorites). So, we need to learn to live within the limits that this imposes. No matter what anyone’s opinion is, this is a fact. Fossil fuel extraction and use is nothing more than Easter Island on a global scale. One day, someone will cut down the last tree. Didn’t we learn… Read more »
Gerry
Guest
Well Dan… Can’t see you disappointed so I need to fire some sort of a shot ….I like the open mind you have and I am bit neutral on carbon related issues but..based on this one I think I will have to reassess wanting you on any jury trying to interpret scientific evidence against me. The change in sunspot cycle and other variables with the sun is only a relative change in the immense heat and energy earth receives from the sun. Any heating which may be occurring within the earths atmosphere only has to be compared with the relative… Read more »
gary
Guest
Long time reader, first time writer. Can’t say that I can agree with you mate on either premise. The UK Met office are saying (read their report) that if solar activity decreases over the next 100 years even in an extreme case to below the Maunder minimum that will likely lower final temperatures by .13 degrees. Not much compared to the (at least) 2.5 degrees it is expected to rise due to CO2 emissions. I tend to think that if 9 of the 10 warmest global years on record have been since 2000, something is happening and a reduction in… Read more »
Garry
Guest
Well written Dan, however it’s far too parochial for me. Especially when economic impacts and market economies were weighed into the conversation as measures of how we might travel the road ahead The simple fact is:: ” The human biomass is already a hundred times larger than that of any other large animal species that has ever walked the Earth.” In other words …too many punters on earth, and mother nature is beginning to react. Given that every chapter of humanity is a mere speck in the geologic time scale, then I think we should look to natures own market… Read more »
Dan
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So, why aren’t we talking about sourcing more resources?

Current rudimentary exploration of the asteroid belt indicates a plentiful supply of resources. It’s only the effort/cost to get there is currently seen as negative.

If the ‘brains’ of the world woke up and had a good long term look (instead of the short term self interest look) we would realise we have the capacity and drive to achieve system-wide sustainable activity…

But I guess this is too ‘sci-fi’ for most people. Much like the exploration of the flat Earth was too much years gone by.

Nathan Chattaway
Guest
Hi Dan, Why aren’t we mining the asteroid belt? Forgetting the technology challenges (which can be solved with energy and time), the real issue is: There is a massive energy investment hurdle to overcome. The energy used to send a mining/retrieval team and vessel on the round trip is likely to be far more than the net energy obtained from such a trip. EROEI – if you can’t make a net energy gain at acceptable risk (= high profit) who is going to do it? Would you burn one barrel worth of oil to run a pump to collect one… Read more »
Dan
Guest
Thanks Nathan. But surely this (the energy investment/return) is only a matter of investment/innovation? Are you saying we will never devise a technology to obtain a return on the energy investment and it is simply not feasible to expand? Should we not try? Should we not invest in researching and development of the technology? And when you equate the acceptable risk = high profit, isn’t this negating the benefits of extra-earth activity as having its own benefit? I understand the economic considerations however I don’t understand the lack of consideration of larger benefits to humans. As the indians say, ‘we… Read more »
Rod Campbell-Ross
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I may as well be one of those you predicted would write. I am not going to comment either way on the solar activity issue – I don’t know anything about that. What I am going to do is talk about the system. More precisely the system called the “Scientific Method”. This is the system that has served us so well over the years. It has ensured the best scientific explanation for the observable phenomena for decades. The method is the same for all science: space, nuclear, cancer, whatever – the same system is used. The same system is used… Read more »
Lachlan
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“would be great to hear which of these explanations applies to DR.” Rod it would be none of those options. Rather option five I created here. (5) The scientific method is widely held to be the best method we have for conducting scientific enquiry. To date (and presuming nothing of the future) the method has deduced that CO2 is no more than an insignificant contributor to global warming. Scientific research used on the pro side of the warming debate has however differed from other areas of scientific enquiry. And this has nothing to do with the validity of scientific method.… Read more »
Garry
Guest
” So, why aren’t we talking about sourcing more resources? ” More is the problem Dan … indeed, in the years to come this “growth” mantra will be found to be the root cause of our demise. The plain fact is humanity is now facing an extinction event. Not that the concept has been grasped yet, other than by the few hard nosed boffins who weigh up the data concerning the Anthropocene. Give it a few more decades though. Meanwhile lets keep talking about “growth” and the global rats-in-a-barrel syndrome, which we all intuitively know is beginning to take hold… Read more »
gary
Guest
” So, why aren’t we talking about sourcing more resources? ” Dan, I’ve been reading your economic opinions for quite a while now and generally find them sensible, entertaining and very useful. I agree with a lot of what you say about our current predicament. However, IMHO, you seem to have the worldview that seems to come packaged with an education in economics. It boils down (in a super simplified description) to being able to solve every problem by throwing enough money at it, or to throw it in a different way. I read the work of EF Schumacher and… Read more »
Dan (not that one!)
Guest
My apologies. It appears I have been mistaken for the author! I am not, just a guy with the same name… To Garry and Gary. I do most enthusiastically agree that we live, for all purposes, in a closed system – here on Earth. I do not believe it is our only option. We have the talent and ability to expand outward and source the resources required for survival. If only we had the corporate and political will to do so. Having said that, I agree ‘growth’ is old thinking and we need to find a more sustainable model. One… Read more »
gary
Guest

Riiight. Sorry Dan(not that one).
I assumed you were the man.

geo
Guest

“The answer is they believe carbon dioxide emissions play a greater role in the Earth’s temperature than the sun. ”

Maybe think about why venus is hotter than mercury, despite receiving 25% less energy from the sun.

John Graham
Guest
No doubt in the past there have been many periods of colder and warmer cycles. But that was over a long period of time. Now in our life times we begin to see another change. The weather is becoming more extreme. Just another period of change or is it caused by carbon dioxide build up? The brave will think things are fine and sail off to the where the edge of the flat Earth begins. The cautious will well they will be cautious. Time will tell. But whereas with most risky things in life the stakes are high but usually… Read more »
Lachlan
Guest

Have CO2 levels actually increased in the last 180 years?

http://www.biomind.de/nogreenhouse/daten/EE%2018-2_Beck.pdf

The truth is that nobody can tell although some interests would have you think the science is settled. No it is not.

Steve
Guest
Wonder when Dan Denning is going to write an apology for spruiking flawed misinformation from right wing tabloid ‘The Mail’. The UK Met Office did not claim the “world’s warming trend ended in 1997”. If you look at the UK Met Office’s website, you will notice that it’s Hadcrut records show the decade from 2001 contained 9 of the 10 warmest years it’s measured. The only year hotter was in 1998, which had the strongest El Nino event in its history, that intensified warmer temperatures. http://www.metoffice.gov.uk/news/releases/archive/2011/2010-global-temperature The UK Met website also displays NASA’s records which show 2010 to be the… Read more »
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