Is the hydrogen economy really the future? Or Is it all a farce? I don’t want to get too far ahead of myself, but it’s somewhere in between…
All the math and science behind using hydrogen checks out. And yes, it removes the carbon question from the equation, but where do you get the hydrogen from? Ideally, we would use clean energy sources to separate water molecules, but that’s too energy intensive for solar and wind to get us there this century. We could source it from fossil fuels, but it would be more carbon-intensive than what we do now. So no utopia for us quite yet.
Some bridge technology uses ammonia to create hydrogen, but it’s not all sunshine and rainbows. Ammonia comprises one nitrogen and three hydrogen atoms; unfortunately, nitrogen is critical for much of the world’s fertilizers. And when you have to choose between having food with dirty energy or starving to death w/ clean energy…the answer is pretty straightforward.
So while this is interesting technology and SHOULD be experimented with, that does NOT mean we should start implementing this tech at scale. We’re working with finite resources here, so the tech needs to be thoroughly vetted and proven before we take that next step.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Today’s video comes to you from the peak of Mount Evans.
Is the superconductor of every Green’s dreams finally here? I hate to burst your bubble, but the LK-99 is just too good to be true.
Despite their claims, these ‘new’ studies on LK-99 have largely been dismissed by the scientific community due to inconsistencies in the methodologies used. In reality, we haven’t gotten any closer to the superconductors we’ll need for the green transition to stick.
One of the big problems with green energy comes down to transmission. Once your solar panels or wind turbines generate all this power, you still need to get it to the people who will use it. If you can’t do that, then what’s the point?
While this might not be the answer to our superconductor needs, at least this topic will get some new eyes on it and much-needed attention. And who knows, maybe it will even kickstart policy reform…
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here coming to you from the peak of Mount Evans. Behind me is Mount Bear Start and Square Top. And behind that, Geneva and Silver and Decatur and treasurer and all the others. Today we’re in talk about something a lot of you have written in about, and that is the 99 superconductor information that has recently been leaked onto Twitter and Reddit.
The idea of a superconductor is it doesn’t lose any of its throughput regardless of distance. And if you can do that over long distances, you can transfer power from anywhere to anywhere relatively easily and cheaply. That’s the idea anyway. The short version for Elk 99 is that it’s probably nothing. The reports in question date back over 15 years, and the only thing that’s new is that they were leaked and they were put online and a number of institutions within Korea, because that’s where the first tests were done.
I’ve already come out and saying that at best they’re flawed, but none of them have ever been replicated, including by the team that did the original report. So there’s probably nothing here. It’s just that it’s getting a little bit of fresh air all of a sudden. Now, if you want to bet on semiconductors, I welcome you to to it.
It’s one of the materials science breakthroughs that we really need if we’re going to make the green transition stick. One of the problems we have with the green transition is that you can generate a lot of solar in the southwest and a lot of wind power in the Great Plains, but that’s not where most of the American population lives.
And even in the United States, where people only, only live, a couple thousand miles away from those zones, that’s much better than you’ve got in, say, Europe, where you’d have to basically go to the great Eurasian steppe for wind and into the Sahara for solar. So if you can solve the semiconductor and the transmission problem, great. There’s also another issue in the United States, because it’s hard to transmit power.
And, you know, very, very, very, very loose rule of thumb. If you transport power about 500 miles, it costs almost as much to do that transmission because of the loss as it does to generate the power in the first place. So you’re generally not going to send electricity very far. What that means is in the United States, most electrical concerns, all the utilities are local.
So each town or each county has their own. There are very few large utilities in the United States. And if you want to make solar and wind work at scale, you either need larger and larger and larger entities, or you need the ability to transfer power across jurisdictional lines, especially state and grid boundaries. Superconductors would, in theory, allow us to do that technically, but we still need the legal structure to do it.
Now you can do high voltage lines, which will double, triple, maybe even quadruple the distance. You can send power in an economically viable manner. But until you can cross those boundaries, it doesn’t really matter. So what we need now, even before we get superconductors, is a multiple acts of Congress to break down the legal jurisdictions to allow power to be sent long distances.
And as soon as Congress does that, a number of states will sue. Because right now this has been a local and a state legal prerogative. So we need a significant legal overhaul before we can really do the green transition, even if we did have superconductors. So I’d say start now and get the laws changed. And then hopefully we can have that physical science breakthrough that is necessary to do this at scale and over distance.
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Our next video in the ‘Ask Peter’ series comes to you from just above Loveland Pass at about 13,000 ft. As the Biden administration piles on more drilling restrictions on public land, will America’s energy independence be jeopardized?
Quick backstory on America’s energy journey. The US was a net energy exporter until 1973. Once we used up all the “easy-access” oil, we became the world’s largest oil importer, peaking in the mid-2000s. Then the Shale Revolution changed everything.
Fracking gave the US access to a boatload of new oil (this technology has been around for a while but wasn’t popularized until the early 2000s). Fast forward to today, and the US is once again energy independent (minus a little COVID hiccup).
So will the Biden administration’s new restrictions on public land drilling set us back again? Oil from public lands accounts for such a marginal amount of the total US output that any of these regulations aren’t going to move the needle much. As long as there’s an incentive for these private landowners to be successful, this shouldn’t be a problem…
Offshore drilling is a little different. The quick and dirty is that short-term market moves aren’t the primary motivator in this space, so longer approval periods and stricter regulations aren’t of too much concern.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Coming to you from the edge of Giants Playground in CO’s Lost Wilderness. Today we’re talking about Mexico’s energy sector.
As I was heading out on this trip, a fire broke out in Mexico’s Cantarell oil field, which has long been Mexico’s largest oil-producing asset. However, even before this fire, oil production from this field was already down to but 1/8 of peak production.
The Cantarell field was developed over a century ago and has accounted for most energy production in modern Mexican history. This meant Mexico never had to develop the infrastructure or workforce for a broad-based energy sector.
Even though Mexico has plenty of accessible oil fields, they can’t develop them due to a lack of skill and strict anti-investment laws. So energy production in Mexico is falling off, and there’s no reason to expect that to stop anytime soon. Within a few years, I expect Mexico to become a net energy importer (with most of that being refined product coming from the US).
But it’s not all bad…Mexican energy production might be slowing, but consumption is also rising. And thanks to NAFTA, Mexico is tied at the hip to the US. So even without a strong energy sector, Mexico’s future still looks bright. If government officials would stop lining their pockets and put that money where it should be, Mexico’s future could be even brighter.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here. Coming to you from the edge of the Giants playground in Colorado’s Lost Wilderness. Today, we’re talking about energy in Mexico. Specifically, just before I left on this trip, there was a fire at the Cantarell offshore oil field, which has long been Mexico’s single largest oil producing asset. At its peak, it was producing about 2 million barrels a day. It’s down to less than an eighth of that now. And that was before the fire. Probably talking about about 150 right now as – 150,000 barrels per day that is – as they go through recovery operations.
Now, the Cantarelll was originally developed over a century ago, and it’s unique as formations go in that it’s a giant, basically a volcano with all the pressure building to the top. And so all you have to do is put a few holes in the cap rocket attack offshore and the pressure does the rest. You can see every well that taps the controls to per field from all of the other wells. And it has been the mainstay of Mexican energy production for the entirety of modern Mexico’s history. That means that we’ve got a problem here. The Mexicans never had to develop what you consider a broad based energy sector, and so they never had to really develop the intellectual capacity and the labor force to do broad scale oil production in multiple zones. And so there’s a lot of oil production in Mexico that by global standards would be very easy to develop. But the Mexicans absolutely lack the techniques and the skills and the capital that is necessary to do it themselves. In addition, they have the world’s most draconian anti investment laws. Makes it almost impossible for anyone outside the United States to play. Now, as a country that borders the United States, those laws were set up with the idea of keeping the Americans out because they see that as a geopolitical weakness. I can see that point from them, their point of view. But it does mean that Mexico has seen their energy production drop bit by bit by bit for decades, and there’s really no hope to expect it to reverse anytime soon, even though they do have some super fields, some of which are onshore, they just can’t develop them themselves.
Now, there’s another problem because of the general incompetence of the Mexican state oil company Pemex. Mexico also is one of the world’s largest importers of refined product, even though they’re still technically a exporter of crude. And every drop of that comes from the United States. It’s gotten so bad in recent years that Mexico, at least on paper, is actually using more American refined fuels than they generate for themselves. The current government, under AMLO, that’s Lopez Obrador, is his last name, is building a refinery that honestly, they probably don’t know how to operate. And even if they did, it’s kind of hard to have confidence that it’s going to work because they already have refineries that are doing horribly. So we’ve got a bit of a boondoggle where the money should have been spent on things like, I don’t know, skills development that is estén instead going on white elephant projects that are designed to make Mexico City sound good to itself.
Where this takes us is Mexico is in basically a not so slow motion collapse as an energy producer of any type. And within the next few years, Mexico will certainly be a net energy importer no matter how you’re going to run the math. Now, that’s not as bad as it sounds. It’s not just the production that is falling. It’s also consumption that is rising. Remember that courtesy of NAFTA, NAFTA to Mexico or the United States are bolted together at the hip. And. Whereas, the United States is really good at the high end labor stuff for things like semiconductors and tech design, it’s also really good at the low end stuff would use a shale revolution and turns it into things like precursor materials, plastics. Mexico’s good at everything in the middle, and it’s value add is arguably the best in the world. So it’s not that the Mexicans don’t have skills. They just don’t have energy skills in the state monopoly sector. So it’s perfectly capable for Mexico to have a successful future, even as it becomes more and more vulnerable to anything the United States does in energy. Now, with a country that is literally leaking mechanics and is excellent in middle manufacturing, should we get a change in approach in Mexico City? The idea that Mexico can get back into the energy game is not, it’s not a ridiculous idea. But the current government is definitely more interested in lining its own pockets and making ideological statements than solving any of the endemic, misaligned skills and corruption issues that have plagued the Mexican energy sector for the bulk of the last century.
So at a minimum, we need a change at the top before we can get a change in the energy sector. I don’t see that happening this year. We can talk about it next year or the year after.
What are my thoughts on Environmental, Social, and Governance (ESG)? It is the idea that business has a role in pushing society towards certain norms and positive outcomes regarding environmental and social issues. We must look at what ESG should be, what it is, and what it is not.
What ESG should be…Until now, American business has played a minimal role in the political system. With the American political system in flux, it is only natural that companies would reevaluate their place in society and create policies that align with the ESG mission.
What ESG is today…The new policies businesses implement can be equated to attempting to climb Mt. Everest before ever learning to walk. Without benchmarks or industry standards, these companies can’t even make it Everest base camp; this process will be long and iterative.
What ESG is not…It isn’t a global conspiracy to destroy the US economy. When Elton John gets invited to a week-long confab in the Alps, you know the WEF isn’t plotting with the Illuminati…they’re just partying.
To this point, most ESG has been influenced by activists pushing policy from the outside OR activist investors making policy from within. The international stage doesn’t have much say, making ESG a domestic conversation of politics and culture.
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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zieihan here. The clouds have become a little bit more serious. Well, on the upside, it means that all the mountain bikers have bugged out. So I’ve got to turn to myself. But my ears bailout points five miles. So who? Who? This is the latest in our Ask Peter series. And today, the question is about ESG. What do I think about it in general?
Do I think it has a future? Is it a conspiracy to destroy us all? ESG, at least nominally, is called, is short for environmental and social governance. And the idea is that business has a responsibility to play a role in society and push it towards certain norms or positive outcomes. As regards things such as environmental issues or racial inclusion.
And so each corporation should have a series of ESG policies that help them achieve those goals. So let’s talk about what it is or what it should be, then what it actually is and then what it’s not. So first, what it should be and why we probably should consider some form of ESG. For the longest time, American business has really only been involved in the political system when it comes to, say, developmental policy, civic expansion, contracting or regulatory discussions.
They’ve tried to stay out of all the social issues, the get loud especially thing regarding the culture war, because it’s not something that they have the aptitude for. And they have a wide array of shareholders and investors and managers and employees and customers who are all going to have radically different opinions on really anything that matters. So why get involved in it?
Well, for those of you who’ve been following me for a while, you know that our political system is currently in flux and all the factions that make up the parties are in motion specifically for the business community. The Trump administration kicked them out of the Republican coalition. So they’re swing voters right now. So if you look at where the business community is in the concept of ESG, the idea that now when they’re not part of the political process, when we’re going through all of these changes, when our political system looks like a washing machine, it makes sense for them to reevaluate their place in society.
And coming up with policies as they struggle with that fits very nicely with the very concept of ESG. Now we can argue about whether they want to or whether they’re adopting the right policies. And that’s when we get to what ESG actually is today, because this is something that’s done at the corporate level on an ad hoc basis, company by company.
There is no overarching structure. There’s no regulatory guidelines for this. It’s just what individual companies have decided to do. And as you know from your personal life, there are things that you’re good at and there are things that you’re not good at. And if you have spent the last century assiduously not paying attention to cultural or environmental issues, and then all of a sudden you want to redefine your personal life based on those, you’re not going to get it right on the first try.
And I would argue that no company in the United States that had gone down that route has really put together even remotely productive or coherent set of policies to implement the supposed goals. The environmental ones are probably the ones that have been the worst because they equate things like adopting electronic vehicles with being a good but based on who you are and what you’re doing and where you are.
That may be one of the most environmentally damaging things you can do. So like if you get an electric truck and you’re running around the northeast, which is mostly fossil fuel powered, and this is a vehicle that has a huge carbon footprint to build in the first place. You’ve actually made the situation significantly worse, but by your scheme that works, you’re right on the path.
What we need is a little bit more coherence and intelligence and regularity for these sorts of regulations, for them to make any sort of sense. And we’re not going to get that on the first try. And it’s difficult to see us getting that within a decade without some sort of benchmark. And since by its very definition, this is not a government initiative, it’s hard to see us getting that benchmark.
So ESG may be a great idea, at least in concept. It may fit the times for business community. That doesn’t mean it is or will be done very well. Now what ESG is not, it is absolutely not some global conspiracy to destroy the United States. I’ve heard that a lot of late kind of pisses me off because, I mean, think about this.
Most people point towards like the world economic Forum and the build back better and all that good stuff. No. Okay. So the World Economic Forum is not a shadowy cabal of international Illuminati who are seeking to push their will on the United States. A majority of the people there who are matter are American, for one from all political stripes.
In addition, whenever you see Elton John going to a week long confab on international affairs, you know it is not a week long confab on international affairs. It’s a party. Klaus Schwab, the guys who are in charge of the World Economic Forum, I know he’s got the great hair that makes him look like a villain. But really, just think of him as a deejay for the rich and everyone getting together in Davos, Switzerland, for a week of body shots or their equivalent for rich people.
It’s not that WEF is pointless, it’s that it’s entertainment. And to think that there’s any sort of policy coming out of that is kind of funny. Most ESG to this point is a product of one of two things. Number one, the activist culture in the United States that protests and tries to get impose policies on the business community from the outside.
And then secondly, activist investors who are within the company probably have minority stakes who are trying to get the company to shift its policies from within. That’s almost every little bit of it. The international pressure has almost no impact. And you can tell that because the international companies generally have less aggressive ESG policies than American national ones. This is a domestic, political and cultural evolution.
If it was really strong internationally, you would expect the international companies to be the ones that are leading the way and they most certainly are not. Okay. Ooh, that was lightning. Well, the next one might be really exciting.
Democrat Joe Manchin managed to sneak a few clauses into the debt ceiling extension deal for the completion of his Mountain Valley Pipeline. Environmentalists are pissed, and fossil fuel lovers gave Machin a double thumbs up. So who’s right and who’s wrong?
For those who think wind and solar are the future and there’s no use case for fossil fuels, you might want to check the math. For wind and solar to be viable, they need a complimentary energy source…and natural gas is the best option.
For those natural gas lovers who think green energy can only work with massive subsidies, your math needs some checking too. In the right geographies, solar and wind are the cheapest energy option on an hour-by-hour basis.
While the Mountain Valley Pipeline might seem to benefit only one side of the aisle, Manchin moved us one step closer to the inevitable future of American energy. It’s not green. It’s not fossil fuels. It’s both. And I’m okay with that.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan coming to you from the ever increasingly foggy Docman Trail. This is the next in our Ask Peter series that was born out of my airline delay. Today, the question is about Joe Manchin, the Republican excuse me, the Democrat, from West Virginia, who has managed to insert a couple of clauses into the deal with the White House to extend the debt ceiling. Specifically, it’s something that it mentioned has been after a while, which is permitting and federal approval to get a new pipeline built through West Virginia to ship natural gas. Environmentalists hate it because it’s natural gas, pro fossil fuel folks obviously think it’s okay. The truth is that everyone’s right and everyone’s wrong. So let me kind of lay out what it means.
Let’s start with the green side. For those of you who think that solar and wind is the future of energy and that any sort of fossil fuel is just antithetical to that future. You’re clearly very bad at math. Just think of every day in your life when the sun goes down. Solar. No longer works. And while you can’t use batteries a little bit, the United States right now has less than a couple of minutes of battery storage and there is not enough lithium on the planet for the United States to get to 4 hours of battery storage. And we don’t have a battery chemistry that would allow us to go not just through the night, but through the winter and through periods where there’s usually not a lot of sun, which, if you live in the American Northeast, is the vast majority of the year. So you need a complementary power source that can work with solar and wind. And the best way to do that is with natural gas. You basically use solar when it’s available and you have a combined cycle natural gas plant that can spin up in 10 to 15 minutes whenever it gets cloudy or whenever the sun goes down, you know, every day for the foreseeable future, until we have a better, better technology or better solar or probably better wind is what would get there first. This is just where we’re going to go. So if you want to build solar and wind without a complementary system, you’re then basically forcing anyone who needs emergency power to use a diesel generator. And as we’ve seen in the case of Germany, they have used Lignite coal as the backup. And you can’t spin that up and down in ten or 15 minutes. You have to leave that on the whole time. So despite $2 trillion in green tech build out, Germany’s carbon emissions have actually gone up. So, you know, there’s a problem.
Now, for those of you on the fossil fuel side who say that intermittency of solar and wind means it’s not a viable power source and it can only exist with subsidies. You’re not very good with math either. Solar and wind in the right geographies are now the cheapest way of generating power on an hour by hour basis. Now, hour by hour being the key word there, there’s something that some folks like to use called the levelized cost of operation, meaning that you average the cost out over the 24 hour, three, 24 hour day three in a 65 day year period. That’s really not a great measure, because when the sun stops shining, the power goes down to zero. You still need it. And that’s not reflected in the levelized cost, or at least not sufficiently, in my opinion, because, you know, when you don’t have power and you need power, you will pay whatever you have to do to get power. There are parts of the country that can do more of one or the other. So if you’re in the American Northeast, which is neither sunny nor windy, you know, fossil fuels are going to be a much bigger part of your power mix going forward than it can be in the rest of the world. However, if you’re in the southwest, you’re in a place that has great sun, and if you were the Southwest overlaps with the Great Plains, you’ve great, great sun and wind. And that means ultimately more and more and more things like what Manchin is after. Keep in mind the pipeline he was so much in love with the way he wants to get this done is not just a one off approval for a pipeline across a state line; he wants that for all energy infrastructure. And obviously the green zealots think this only means pipes, but it also means power lines, because if we’re going to move to a cleaner, greener future, we have to be able to move electric ones from where they can be generated with solar and wind to where we actually live. And since the single largest concentration of population is on the American Northeast coast, and that’s where none of the green power comes from, we’re ultimately going to have to run this in by wire from other places. So we need more and more transmission, more than we need something like batteries right now, at least with today’s technology.
So the future of American electricity isn’t green, but it’s also not fossil fuels. It’s both. I’m okay with that.
There’s one massive hole we’ll need to fill if the green movement will ever work in the US…mineral resources. Thankfully we just struck a deal with our Aussie allies, who happen to have many of the key minerals and resources we need.
This deal will enable the Australians to contribute mineral resources to the American greentech industry in a way that will allow them to benefit from the incentives and subsidies in the Inflation Reduction Act (IRA).
While Australia is a significant producer of many necessary Greentech resources, it’s not a one-stop shop for everything. They’re also great at producing the raw ore, but the value add component isn’t their thing. Thanks to subsidies from the IRA, there will be an opportunity to bring value-add capabilities to the Outback.
But what about all the other US allies? Will they be able to tap into this deal? We must remember that there is an inner circle and an outer circle of allies…for now, only the inner circle gets to play.
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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey Peter Zeihan here coming to you from chilly Phoenix, where it’s a balmy 102 at ten in the morning. I don’t know how people do it. It’s only May. Anyway, back on May 20th or 21st, you’re gonna see this a few days later. The Americans strike a deal with the Australians that will allow the Australians to contribute their mineral resources to the American greentech industry in a way that they will benefit from the incentives and the subsidies that are part of the Inflation Reduction Act.
There’s a real hullabaloo of late about which countries can get access and which can’t, and Australia is a tight ally. It’s part of the inner circle and most importantly it has a preexisting free trade agreement with the United States. And so they are the source of roughly half of the world’s lithium. And they are a significant producer of rare earths and zinc and copper as well. So this definitely scratches a lot of it, just not all of them. They don’t do molybdenum, they don’t do silver or they don’t do a huge amount of bauxite, although they have some. No chromium. So, you know, it’s not like this is a one stop shop for everything The United States needs, but it’s a real big step in the right direction.
Kind of two follow on thoughts from here.Number one, while the Australians are great at producing the raw ore. They do very little value add themselves and one of the things that the IRA is attempting to do is to build up a parallel supply chain that’s independent from China for processing of these raw materials into metals and then on into intermediate products. Australia is a logical place for a lot of that. I mean, yes, Labor costs are high relative to other places in the world, but since the minerals are right there and the energy is cheap, especially if you want to do stuff with solar in the freaking outback, there’s a lot of upward potential. They just need the investment and a decision that they want to move up the value added chain and the IRA will probably help with that, now you’ll have some American Australian fusion projects that are located on both sides of the Pacific. The second thing are the countries that may be able to join the Australians in kind of this inner circle. The United States has a handful of free trade agreements. Obviously the most famous one is NAFTA, and obviously they already qualify for these incentives. But the U.S. also has trade deals with the Koreans and the Japanese and in the world to come. These are countries that are involved in manufacturing. They’re going to do one more and more processing in the value add for things like battery chassis themselves. And so it still needs to be negotiated, but it’s starting from a very strong position and we should expect those to join.
Who’s not going to join is the European Union. Getting a free trade deal with the European Union has always been something that on both sides of the Atlantic has been flirted with, but it’s never really gone anywhere. A lot of the European countries, most notably the French, are highly protectionist, and the idea of exposing themselves to the American market at all is just not something they are even willing to consider. But more importantly, Europe is in demographic collapse and they’ve simply run out of people who are under age 40, the folks who normally do the consumption. So the United States no longer has any sort of economic rationale for an economic partnership over the long term with Europe, because it would just mean that Europe would be product dumping on the Americans. Similar situation for Korea and Japan, but there’s a big strategic argument that these are allies that have to be kept close as part of maintaining a presence in the Asian theater. In the case of Europe, in many cases, it’s a little bit more of a problem than it’s worth. And while there are independent European powers like the Brits or maybe the Swedes or in the Poles, that may be worth it. If it’s all part of a network of the EU, then the cost is simply too high. So there’s definitely an inner circle and an outer circle among the allies. And when it comes to greentech, only the inner circle can play. Alright, that’s it. Everyone take care.
The economics of green energy are vastly different from traditional fossil fuels, and we must understand their differences if the transition to green energy will ever be successful.
When building a traditional power plant, most of the costs come from the fuel used to manufacture the plant, which can be paid over time by the fuel you sell. Most of the expenses for green energy plants come from the plant’s initial construction, which requires lots of capital on the front end.
There are two complications with the transition to green energy. First, the cost of capital is rising and will continue for the next 10+ years, making those upfront costs even heftier. Second, energy costs are traditionally inelastic. So as the system is converted to green energy, the cost of components will have to be factored in.
The bottom line is not that we shouldn’t go green; instead, we should only put these plants where the technology matches the geography. Putting solar where it’s sunny and wind where it’s windy. Once we can figure that out, we’ll just need some help from the tech space and Congress to help with the transmission side of things.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey, everybody. Peter Zeihan here. Coming to you from the hike and bike trail in downtown Austin. Today I wanted to talk a little bit about energy economics, specifically green energy economics.
Now, the idea that once you’ve paid for the sunk cost of the solar or the wind system, that you’re in the clear. You know, to a degree that’s true. But you first have to get the thing built. There’s two complications here that we’re facing. The first is capital. So when you’re going to build like a normal thermal power plant, about three quarters, 60%, three quarters of the cost of that plant is actually in the fuel that you are going to burn over the lifespan of the project. You don’t have to finance that upfront. You pay for that as you go. And you typically use the income that you get from selling your electricity to your customers to pay for that. So the only part that you have to finance is that initial construction, which is typically a quarter to a third of the total.
With GreenTech, that’s not how it goes. With green tech, roughly 80% of the cost of the project over the life span is in construction. And even if you can get into a situation where you’re in a sufficiently sunny or windy place that the per cost for the kilowatt hour or the power you generate is or over the lifespan of the project, the same as it is for a fossil fuel system. You still have to finance that all upfront. And with the baby boomers moving into mass retirement and liquidating all over their holdings because they can’t take a shock of a currency crash or a market crash anymore, the cost of capital in the United States is going up, and it will remain high until such time as the Millennials are the capital rich group in our population. That won’t happen until most of them are in their fifties, and that won’t happen for another 10 to 12 years. So we’ve got this period of much higher capital costs, which means much higher development costs for electricity projects in the green space. There’s really no way around that.
The second problem has to do with the elasticity of energy costs. So let’s say you need a gallon of gasoline in order to drive to work. If you can only get 9/10 of a gallon, it’s not like you park your car and walk the rest of the way and just leave your car for all time and up. You will pay whatever you have to pay to get that last 10th. And that price then applies to the entire market. And if you have a shift in demand of only like 10 to 15%, you can easily see a change in price of 50 to 100%. And we know this is true for electricity, for coal, for natural gas, for oil, and even for nuclear fuel. Now, if we decide we are really going to go with the green transition in mass, then all of a sudden a lot of the components that go into electricity generation are going to become power fuels. That’s chromium, that’s copper, that’s aluminum, that’s fiberglass, that’s graphite, that’s lithium. We have not priced in that the system.
The bottom line of all this is not don’t go green. The bottom line of this is you only put these technologies in places where the geography matches the capacity for these things to work. So you put up solar where it’s sunny, you put up wind power where it’s windy and if you’re going to put it somewhere else. Not only do you have to think of the cost over the long term in an entirely different light, you’ve got to change the metrics because it’s going to cost more to build and is going to cost more to finance. And that means we ultimately need better technologies than what we have now, especially in transmission, so that we can bring the electricity from where it’s produced in a reasonable manner to where most people actually live. And that requires, among other things, multiple acts of Congress, both to appropriate the money for that research and to make it easier for power to pass through different states, jurisdictions, and especially between the three power grids that the United States shares.
Alright. That’s it for me. Talk to you guys later.
What do Chicago, Denver, and DFW all have in common? Yes, they are all major metro areas in the US, but more importantly, they’re colocated with green energy sources. As the world adopts more and more clean energy, these regions with localized energy sources will have a huge leg up on places like New York, Berlin, and London.
Finding a metro (where people actually want to live) surrounded by wind and solar potential is rare…it just so happens that the US is home to most of these regions. For places not so geographically blessed, the main concern becomes transporting the power from the source to the city. This can often span hundreds, even thousands of miles, and that distance puts up a number of red flags.
There are the obvious concerns of transmission loss, equipment, and overall economic viability, but once you start transporting power across states and grids, you have to deal with regulatory issues as well. The federal system in the US means that national, state, and local governments all share power. So transporting energy is no simple task.
It will take an act (or two or three) of Congress before the flow of green energy is freed up; that’s not going to be a quick process. The metros with green energy sources nearby will have a huge advantage in the years to come. So if you need a place to move, I hear DFW could use a few more green-friendly folks.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey Everybody. Peter Zeihan here coming to you from very chilly northern Illinois. Behind me, of course, we have a wind turbine which is one of literally hundreds in the immediate area around me. We are at the edge of the Great Plains here. I mean, technically, yes, we’re in more of the Midwest, but we are in one of the world’s great wind zones, Great Plains, going into the northern Midwest is all pretty good wind space. And what is unique about this turbine in particular is it is supporting the metro region that is the Chicagoland zone, which is the fourth largest metro in the United States. In most places of the world, it doesn’t matter what continent you’re on, what country you’re in, it is very rare for there to be good wind or solar potential near a major metro. And so even if you are able to build out the system to generate the power, then you have to transmit hundreds, maybe even thousands of miles. Chicago is one of the handful of cities in the world that is an exception to that rule. Northern Illinois, especially northeastern Illinois, you’ve got decent wind right at the doorstep of the metro zone. And so you don’t need high voltage lines in order to transmit the power up to the urban section effectively. You can use more lower load bearing facilities and equipment, and that means that Chicago is able to reach out not just to northern Illinois, but also southern Wisconsin, eastern Iowa, something a little bit of western Iowa and into Ohio as well in order to generate electricity. Now, there are very, very, very, very few places in the world where this works, but most of them are in the United States. So my adopted hometown of Denver is at the edge of the Great Plains great wind zone. Phoenix is obviously at the heart of a great solar zone, as is Albuquerque and Dallas Fort Worth is probably the American metro that has the most green potential of all because it’s where the Great Plains meet the Southwest. And so Dallas Fort Worth is likely to be the first major American metro zone to go 100% green, despite the fact that there are only like four environmentalists in the entire metro zone.
Now, if you’re going to try to make a green impact, it’s very important to co-locate power with your urban centers, because it’s very rare anywhere in the world to locate power generation more than 500 miles, because at that point, the transmission loss becomes so high that it’s really not worth it from an economic point of view anyway. And in the United States, we’re one of the very few places that actually has the metro zones that meet those criteria. But you can’t do that in New York. You can’t do that in Toronto. You can’t do that in Paris. You can’t do that in Berlin or London or Moscow or Beijing. It’s really only in the United States where we have that co-location. If you don’t have that co-location, then you have to have high voltage lines that are designed for a long range transmission, and those are not cheap.
Now, in most countries, you have a unified power grid. The United States is not. In most countries, we do things a little bit differently. Most of our utilities are set at the state or even local level. And that means if you want to transmit power from, say, Utah to Los Angeles, you have to cross through different states, regulatory authorities and each of them have their own rules for transmission and for even just raising the capital to do it in the first place. And, God forbid, you want to cross between different grids because the United States has three. Roughly everything west of the Rockies is on one. Roughly everything east of the Rockies is on another. And then, of course, Texas has its own thing. If if if the goal is to decarbonize the power system, not only do we need a lot of solar and wind, we would also need several acts of Congress that would break down the regulatory burdens that exist across these different grid systems and across the different states and across industries, municipalities. The problem the Americans face is that the United States is a federal system where the national government, the state governments and the local governments all share power. They all have about the same amount. And Congress would need to break that down within the power sector in order to encourage a more unified grid space that allows green electrons to travel more freely.
That would trigger dozens of lawsuits from the state and localities, which would rightly challenge the power grab from the federal government, which means, at least in the near term, the next decade, maybe two, most of the stories for green power penetration into the American grid have to happen at the local level. And that gives cities like Chicago, Albuquerque, Phoenix, Denver and of course, Dallas, Fort Worth, a huge leg up over everyone else whose local electricity resources, when it comes to green tech, simply aren’t that great.
Okay, everybody. That’s it for me. See you next time.
Horrible views today up on the Isthmus Peak Trail in New Zealand.
Europe’s energy situation looked pretty dire last year as concerns began to mount over the impending winter season. Thankfully they dodged a bullet this year, but how many more bullets can the Europeans dodge?
The issue with Europe’s lucky streak is that none of what saved them can be replicated. Industrial demand has already plummeted, and maintaining these levels would have detrimental effects. Paying through their teeth for liquified natural gas isn’t sustainable. And unless the Europeans have Mother Nature on speed dial, they can’t expect another moderate winter like this year.
Unfortunately for all of us, current global energy supplies are likely the best they’ll be for years to come. So the Europeans need to say thanks for the extra time and head back to the drawing board to get out of this pickle.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everyone. Peter Zeihan here coming to you from New Zealand on the Isthmus Peak Trail just came down off the summit where it was a breezy, negative five degrees centigrade, complete with. What was that called again – grapple – grappling. And when that was no fun at all. Anyway, we found a nice spot with a backdrop here. I want to talk to you about what’s going on with energy in Europe now in the aftermath of the Ukraine war.
We all know that between damage to pipelines and boycotts and shut offs on the Russian side and war damage that the Europeans are using, a lot less natural gas from Russia. And Russia was their primary supplier providing the continent with about a quarter of the total natural gas. And in the case of Germany, specifically, over 40% coming from a single pipeline.
Now, for those of you who’ve been following me for a year, you know that I was really concerned that over the winter, natural gas was going to just not be available. Because if you look at historical trends when it comes to storage and pricing and usage…it looked pretty dire? And in fact, in the aftermath of Nord Stream being blown off back in September, we saw natural gas prices go up by a factor of five, six, seven. And at one point they were about $70 per thousand cubic feet. Apologies for those of you who speak metric. Most of my audience is American, blah blah blah. Anyway, but over the winter, prices have plummeted to historic lows.
Now three things have happened that have enabled that to occur and to prevent just a complete meltdown in Europe or freeze up, I guess.
Number one, the Europeans, especially the Germans, shut down most industrial demand. So they just stopped smelting aluminum and steel and stopped fabricating petrochemicals and fertilizers. That is something you can sustain, but only at the cost of absolutely massive damage to your economic system. This is more of a problem for Germany than the rest. I mean, it’s a problem for everybody. But for the Germans, the petrochemical systems that they use are fueled by natural gas and those petrochemical outputs then go to the base materials for their manufacturing sector. So by shutting this stuff down, they are now dependent upon intermediate products that come from a continent away which are not nearly as reliable and are much higher cost. So the capacity, the profitability, the sustainability of the entire German industrial model is now in severe doubt. And in the best case scenario, the Germans probably only have about two years left that they can operate like this, assuming nothing else goes wrong.
Second, the Europeans paid five, six, seven, eight, nine times the prices that they were paying before in order to tap natural gas and liquefied form. Now, natural gas is kind of hard to move. It’s a gas. You have to have a pipeline system that links production to transport, to distribution, to usage all at the same time, because storage is relatively expensive. And the Europeans were obviously dependent on the Russians for that. But if you have a lot of extra infrastructure here, you can at a point of export near a point of production. You can chill the stuff down, basically with a giant freezer tied -300 odd degrees and make natural gas an actual liquid and then ship the liquid like you would any other liquid, although specialized tanker. And then once you get it to the end destination and you can warm it back up, gassify and pump into your system per normal. And Europeans tapped the global market for that at a scale we have never seen the Europeans do before, and they paid through the teeth to do that. LNG on average costs about triple what the gas cost because of the costs of cooling and in transport and regasification. Excuse me, but it was either that or not have power. So the Europeans generally did that and that triggered a series of energy problems all around the world, especially in countries like Japan and Korea and Taiwan, who normally rely on LNG as their primary source of energy. So that was the second thing.
The third thing is they got really lucky. Temperatures for the last nine, ten weeks across all of Europe have been 20 to 30 degrees above historical average. It has been the warmest winter on record. And in that sort of environment, demand for natural gas, for heating just hasn’t been as robust as it normally is.
Now, the problem for the Europeans is none of these things are really replicable. I mean, you can’t count on Mother Nature being that nice. More than one year in a row. The Russian supplies that are piped aren’t coming back this summer, which is normally when the Europeans would refill their stocks. So the only way that they can refill them is to go back to the international market and tap even more LNG. But it takes 5 to 7 years to build an LNG liquefaction facility. So global supplies are as good as they’re going to get for the appreciable future and they could keep all of their industry offline in order to reduce demand. That might be their only option, but that comes as a critical economic cost over the long term, not just in terms of competitiveness, but the very existence of some of these heavy manufacturing sectors.
So no good solutions. The Europeans dodged several bullets this year, and they should consider themselves very, very lucky. But we are only at the beginning of a multi-year transition to what is next. And the Europeans were simply fortunate that they have a little bit more time to work on other things.
Oh, yeah. One more thing that helped the Europeans out. If you remember back to November, December and January, that’s when the Chinese were imploding over COVID. We still don’t have good numbers, but assuming that the COVID strain that the Chinese were dealing with matches what the anti-vaxxers in the United States suggested was the actual authority rate for COVID. They lost a million people. And in that period, economic activity basically crashed. So for roughly three months, the Chinese were not importing a lot of liquefied natural gas themselves. At the same time, the Europeans desperately needed whatever molecules they could get. So we had a three month period where natural gas prices globally in the liquefied market was just weird and it benefited the Europeans the most you could possibly imagine…DONE.
