Energy Prices Converge in Flat World

Featuring Diego Parrilla

Diego Parrilla, co-author of The Energy World is Flat, speaks with Real Vision on the future convergence of energy prices, the BTU that broke OPEC’s back, and our shared quest for abundant, cheap and clean energy.

Published on
9 March, 2015
Topic
Technology, Energy Commodities, Geopolitics
Duration
64 minutes
Asset class
Commodities
Rating
18

Comments

  • PT

    Paul T.

    31 7 2018 20:54

    0       0

    I was just dumb founded listening to this interview even after two years. All my queries regarding the industry was answered well to the very nutts and bolts of the field. I enjoyed Marin Katusa last week but this is just organised all the right components in its place. Thanks again!

  • TK

    Thomas K.

    30 6 2017 06:00

    1       0

    Diego's vision will likely prove quite prescient. His thesis of increasing fuel fungibility makes a lot of sense. The one place I have to disagree was his call that Buffett bought BNSF as an energy play.

    The railroads have been down the alt fuels trail many times over the decades: gas turbines running on everything from pulverized coal, to LPG, to bunker B; coal steam turbine electrics; many experiments with conversion kits to CNG, LPG, and LNG; and various experiments with line-haul overhead electric.

    From the various industry reports I've read over the years, LNG is not all it's cracked up to be (no pun intended). Firstly, LNG is only ~95% pure. This is problematic for transport system storage because methane tends to boil off first, leading to concentration of the residual components. It also impacts combustion dynamics. Thus, the railroads would purchase more expensive 99+% pure methane (commercially known as RLM).

    Secondly, there is the issue of the cryogenic tank itself. Because the volume to energy ratio of liquid methane is about 1.7x that of diesel, the RLM tank is too large to fit under a conventional locomotive (particularly once we account for the need for a double-walled tank, insulation, re-gas system, etc. Thus, we have to place a cryogenic tank car in between pairs of locomotives, effectively multiplying the non-productive length at the head-end by almost 1.5x.

    Thirdly, there's the quandary of how to convert a diesel engine to methane service. A simple conversion would lower the compression ratio and add spark plugs, resulting in a ~33% horsepower derate. Other solutions involve injecting both diesel and methane into the cylinders (typically 100% diesel at idle, and a 1--5% / 95--99% diesel/methane mixture at full power). The simpler conversion, where methane is injected at low pressure (bottom of stroke) will result in a ~8% derate. The last option (called high-pressure injection) has yet to be demonstrated as technically feasible. It involves injecting CH4 at ~3000psi, shortly before the diesel ignites. In theory, this should involve negligible engine derate, but nobody has been able to demonstrate a working prototype (GE gave up after several years of R&D in the mid 90s).

    It's important to note that most of North America's rail network is single-tracked, with passing sidings. Train length is limited by passing siding length. Even once high-pressure injection is mastered, the physics of energy density dictate increased overhead due to length lost to tanks. Moreover, lashing two locomotives and a tank together as a unit reduces operational agility. Finally, it's important to note railroads routinely allow their motive power to transfer to other carriers along with a trainload. Motive power sharing creates a significant network effect for diesel.

    I haven't crunched the numbers, but I remain skeptical. Ultimately, it's a route-specific question.

  • RH

    Rob H.

    5 2 2017 16:19

    0       0

    Very thought provoking cometary, he sure does blow holes into peak oil theory. The way he makes his parallels and draws out the framework is visionary. Glad people leave comments it helps with know when the interview was done since they don't date anything.

  • MS

    Matt S.

    26 10 2016 17:55

    0       0

    Is it too much to call this guy a visionary? ANOTHER book to add to my already large stockpile of yet-unread trading/finance books!!

    Oh go on then... one more can't hurt.

  • BA

    Blair A.

    19 2 2016 03:16

    0       0

    Truly landmark commentary on a subject everyone is sure will be the death of the markets at present. As always, we figure a way out to do things faster, better, cheaper more ubiquitous than before!

  • TF

    Tim F.

    2 11 2015 16:16

    0       0

    Excellent! Along with RS a follow-up on the effects on PM's soverign debt.

  • PJ

    Paul J.

    1 8 2015 20:46

    4       0

    This has changed the way I view the Energy arena. Thank you.

  • RO

    Robert O.

    5 4 2015 06:56

    0       0

    Any update on Thorium energy production out of China or India? The Economist ran an article on Thorium in April 2014. Real Vision mentioned other energy sources but Thorium was not discussed.

  • RS

    Rick S.

    21 3 2015 21:00

    1       0

    Great contra view of the energy sector. In a follow-up interview, I'd like to know Diego's thoughts on how these trends will impact the gold/silver mining industry.

  • db

    don b.

    21 3 2015 18:03

    0       1

    Where I disagree is that I think the world is looking at a energy crisis. Tech can drive production to a point but what has driven the boom in the U.S. has been free money and tech.

  • JF

    Jennifer F.

    18 3 2015 05:30

    1       0

    Great to get an insight to and engineers views. It was brilliant to understand the amount of players int the industry and how its priced.

  • MF

    Mike F.

    15 3 2015 03:57

    9       0

    Jaw dropping insights. I'm a chemical engineer that has spent 25 years in the oil & gas industry, and I have been musing about this for years but could never quite articulate the idea. Bravo RVTV.

  • MB

    Mike B.

    15 3 2015 01:52

    1       0

    He has been bullish on Natty Gas for years. Not sure his time frame but he seems to think Nat Gas will power trucks and cars.

  • RP

    Raoul P.

    13 3 2015 11:54

    13       1

    Brilliant. At the core of Diego's analysis is a lesson in Behavioural Economics. This interview is a total eye opener. My mental cogs are whirring!

  • JW

    J W.

    13 3 2015 06:40

    3       0

    Wowza. The only issues I have with RVTV is that there is TOO MUCH amazing content!

  • ms

    mahesh s.

    11 3 2015 21:12

    2       0

    Phenomenal stuff!!!! Hats OFF!!!
    Love to see him again in a year to re assess the GEO POLITICS

  • TJ

    Terry J.

    10 3 2015 16:44

    2       0

    Superb interview, so full of potential market changing insights.

  • NP

    Nirav P.

    10 3 2015 12:00

    2       0

    Realvision continues to be very impressive. Good job guys.

  • sp

    shashwat p.

    10 3 2015 05:33

    22       0

    Good Stuff. Proof that we need more engineers in investing rather than lawyers or MBAs

  • PV

    Peter V.

    9 3 2015 23:12

    5       0

    Great stuff. A priceless interview.

  • BL

    Bruce L.

    9 3 2015 22:27

    7       0

    very thought provoking and informative. frozen methane wow!

  • RF

    Richard F.

    9 3 2015 22:13

    10       0

    Fascinating original thinking, and debunking of some commonly held views of the energy landscape.

  • GT

    Graham T.

    9 3 2015 17:58

    8       0

    outstanding, the last 15 mins were very thought provoking. got my $400 back already.