The Paradox: How Cold Fusion will cause Oil Prices to Rise (Oaklandthinktank)

The following post has been submitted by Oaklandthinktank

If Rossi demonstrates his device publicly, in October, or whenever any of the players in the market makes a convincing demonstration or begins selling a working device, the price of oil, natural gas, and coal will leap upwards. The reason is simple: to pay down their debts.

Most of the financing for fuel extraction happens with debt, and the proven reserves are the collateral. A public acceptance of cold fusion would drive down the value of those proven reserves, but the debt doesn’t go away. Those fuel producers would need to continue paying debts, yet, they would have an expectation that future prices will be dramatically lower.

To pay those debts when fuel is cheap, they’ll need plenty of cash on hand. That necessitates an increase in prices, before cold fusion saturates the market. Get all the cash, now, so that debts can be paid, later.
Some fuel extra ctors have more debt than others, but they all have some debt. The *faster* a cold fusion device could saturate the market, the *more* those extractors will have to charge. Consider: you have $10 billion in debt, that you expect to be able to pay over 30 years at current prices. If cold fusion prices you out of the market in 15 years, your debt burden has doubled – you’ll need to charge more, today, to have enough cash in 15 years.

Yet, if cold fusion prices you out in 10 years, your debt burden triples. And, if one producer has lower production costs, compared to others in the fuel market, they will survive longer, before being priced out. They might have a 15 year timeline before cold fusion takes enough market to make their oil unprofitable, while high-cost producers ha ve a 10-year timeline – Saudi Arabia, compared to Venezuela, for example. The Saudis don’t *need* to raise prices as much as Venezuela, because they have a longer time until they are priced out of the market, and thus, a lower annual debt burden. However, the Venezuelans will be raising their prices, because of a 10-year timeline… so, the Saudis might as well match those prices. The market price will increase according to the debt burdens of the most-quickly-priced-out producers. Lower-cost producers will be happy to take that windfall, before fuels become dirt cheap.

And, as each fuel producer is priced-out of the market, the price will fall to match the debt burdens of the next highest-cost producer. They will step-ladder prices downward, matching the portion of energy that cold fusion supplies. Suppose, 15 years after a public device, that only the Saudis are still pumping oil, albeit with only tiny profits; natural gas producers are still somewhat profitable. Only when cold fusion threatens to completely supplant that remaining fuel production, would price at the pump finally collapse.
So, my prediction: natural gas producers, already a low cost operator, will see a huge windfall from the oil-spike. And, expensive oil will simultaneously deliver more value to solar and wind. Not that anyone would plan to build new wind farms, when they could just wait for the delivery of their Quark – the existing wind farms would see a larger profit.

And, worth considering: if the Quark X is as spectacular as Rossi claims (and, I have a peculiar feeling that he has found the winning design… moire imply that special conditions can allow this sort of thing), his device could saturate the market *very* quickly. Many fuel producers would be confronted by this: “I need to make enough money in the next five years, that I can pay back all these debts. I’ve been operating at a 5% margin, at $50/barrel, which barely covers my debts. To pay the debts within this crimped timeline, my barrels will need to pull six times as much gross. That’s still only $62.50/barrel. I can do that. But, I could also make a profit, because the *last barrel* sold sets the price for all the barrels… how much profit could I really get out of this, before it folds?” Stock prices will tank, unless the barrels become *very* expensive. And, most cons umers will still need to buy the oil, because cold fusion wouldn’t be saturating the market, yet. The faster cold fusion can replace oil, the more likely that fuel producers will gouge prices, as a last-ditch effort to walk away with cash in their pockets.

– Oaklandthinktank

  • AdrianAshfield

    If the E-Cats are successful it will be very difficult for carbon based industries to sell their in-ground inventories.
    My suspicion is that these companies will muddle along, kicking the debt down the road, until they face bankruptcy.
    It will probably take longer than you suppose for oil to disappear as a fuel and it will still be required for plastics and other uses.

    • roseland67

      Adrian,

      I suggest it will take longer than any of us suppose to see a working Ecat where
      Energy Out > Energy In.

      IF,
      The Ecat works as stated, I believe the oil market would see an instantaneous move to the downside, 10-15% in the 1st week.

      Will be great fun to watch this, but I just don’t think it will come from Rossi.

  • Hi all

    It has already begun but it only affects those involved in Fraking, other traditional large field sources are not affected.

    As I pointed out a while back the Oil Companies are no longer in the owning oil fields business except for a few cash cows they can run into the ground.

    Kind Regards walker

  • Omega Z

    What will actually happen is what no one would expect. Life is strange that way.

    The biggest cost of energy is the energy it takes to obtain it. E-cat technology would actually make it MUCH cheaper to obtain. An increase in profit. Even with reduced demand, overall profits wouldn’t fall as much. LENR success could actually prolong the use of fossil energy.

    Simply put, I have a new car that gets 40 mpg and suddenly, I can buy gas for 50 cents a gallon. I will drive that car till it falls apart before moving on. “I think the process would be more gradual then sudden, but the end results will be the same.”

    Oil, coal and gas have far more uses where it is not used because of price. With lower priced resources, there will be a transion in this realm as well. While 1 area of fossil use of will decrease, other areas will increase tho to a lesser degree. Anyway, economic realities will determine market transition which will be over decades.

    The success of LENR will actually slow it’s transition. How many here have considered that?

  • Dr. Mike

    The hypothesis that Rossi will make a convincing demonstration or will begin selling commercial units anytime in the near future might not be correct. IMO Rossi’s demonstration will show an output power close to 20W per device (but without a control proving his calorimetry is accurate) and an input power whatever he claims (with no measurement of input system power and no verification that the device is not being supplied with additional unmeasured high frequency power). Even Rossi says the E-Cat QX is only now in the R&D phase with no estimated time for commercial introduction.

    • Omega Z

      I think he meant QX is still in R&D. He also indicated to someone that he expects sigma 5 by the time of the demo, tho I hope for clarification on that. Sometimes Rossi’s answer aren’t very clear…

      • Dr. Mike

        I agree that it is the QX that Rossi says is still in R&D. However, he also said that the QX makes the older E-Cats obsolete, which I assume means that the older E-Cats will never go into production. Rossi also has his own meaning of “sigma 5”. To even begin to think about starting up commercial production, he needs to do reliability tests to demonstrate that the devices and systems will last for the time period claimed. In the semiconductor industry reliability testing can be done using accelerated life tests. My guess is that there will be a learning curve to determine the proper testing for reliability for the QX devices, but can the reliability testing be accelerated? Also, since a commercial unit will have hundreds of devices connected in either parallel or series, it must be verified that a failed device is not a “short” for parallel connected devices or an “open” for series connected devices if the system is to have any chance of being reliable. I’m not sure that Rossi has the background to know what needs to be done in terms of reliability testing before introducing a commercial product.

        • Omega Z

          Rossi’s sigma 5 is about the reliability. The special ceramic formula or what ever material he ultimately came up with needs to last longer then the fuel charge. He also aims to have reached that point before the demo.

          Yrka July 27, 2017

          Dear Dr. Andrea Rossi.

          1. You have a research plan.
          When do you plan to get to Sigma5?
          (Much before the presentation?).

          Andrea Rossi July 28, 2017

          Yrka:
          1- Before

    • AdrianAshfield

      I think you are probably wrong. I expect the calorimetry to be good this time, and with a COP of hundreds and a SSM of 67% you would need a huge error for the device to be a failure.

      • Dr. Mike

        I didn’t say the device will be a failure. I think the calorimetry will be poor in that the device won’t be replaced by a resistive heating element as a control to calibrate the calorimetry. Also, Rossi most likely will demonstrate an input power in a manner similar to that of the published paper, which did not have proper instrumentation for the measurement of the power being supplied to the device. The COP calculation probably will be shown to be in the “hundreds”; however, the calculation will be based on Rossi’s word, rather than proper scientific measurements.

        • AdrianAshfield

          It is not really possible to do a strict control run, as one could for the Hot Cat.
          I think you are being pessimistic, but time will tell. I prefer not to prejudge the demo but wait for the results.

  • nietsnie

    I think that plan could work in China, where the state sets the price, but in a market economy, the price is set by supply and demand – and there is currently more supply than demand. The first company that raises its price will see reduced sales rather than increased profit (or pay-down).

    As an industry, they could collude to reduce supply (although that couldn’t legally happen in the US…) but the biggest producer, Saudi Arabia, has already seen the writing on the wall and is trying to price out newcomers (which it has not been successful in doing) in order to continue to own the market by lowering prices while they simultaneously transition to industries other than oil for the future. In contrast, raising the price causes currently un-profitable wells from companies that *also* have debt to become profitable – thus increasing the supply and exacerbating their problem.

    In the event that the oil industry is on the verge of collapse I think it’s more likely that they’ll run it to the edge and then declare bankruptcy – thus allowing the debt to become someone else’s (banks, pensions, stockholders…) problem. That would likely reduce supply (temporarily as electric transportation takes over) and drive the price up for those that are left – which would be good for them. But the majority will be out of business – and the US suppliers will be among the first. I think that the economic consequences of a quick acceptance of a successful LENR industry are so catastrophic *in the short term* that they are hard to exaggerate – but that’s off topic here.

    Additionally, I think it will take some time for the world to accept that LENR is the future before drastic surrender measures would be taken anyway. And even then it will have to demonstrate that it can be done commercially without serious bugs. One demonstration (or should I say – yet another demonstration) of a LENR practice device won’t push the needle any more than previous one’s have.

  • Gittyup

    This article is garbage. Markets don’t work this way. The amount of debt companies have plays no part in determining prices. The very simple reason is because new entrants can enter the market with no debt and take over where these over indebted companies can’t compete. They will file for bankruptcy and their assets sold for pennies on the dollar. The banks and funds that are providing this debt will take massive losses

    The more likely scenario is an small immediate drop in oil prices with the futures oil curve changing to reflect the amount of time needed to bring the product to market in a meaningful way. The shape and duration of the oil curve change will be the driver of what happens to these companies.

    • Publius

      Oil and energy are commodities and traded on the world market. The debt of the producer has no impact on price. This is not how supply and demand works. The current supply of oil is relatively high because of the debt loads, but this does not dictate prices. Oil companies produce oil and have to continue to produce it to service that debt. I’m an LENR enthusiast, but progress appears stalled, so we are perpetually “a few years” from a breakthrough. If a breakthrough happens, we are then “a few years” away from commercialization. Then we are “a few years” away from market penetration and “a few years” away from a meaningful swing in the demand for oil. You get the point.

  • bfast

    Nope! When the world sees the end of its product, it’ll get it out on the market with the smallest of profit margin. I mean, Saudi Arabia is sitting on oil it can profitably sell for about $15 per barrel. The Canadian tar sands needs about $70 to turn a profit. If these guys are right, the tar sands will want the price to rise from its current $50 up past $70 so that they can do business. But the Saudis will want to sell as much as they can, and will happily do so at $30. Now who’s buying Canadian tar oil at $70 when they can buy Saudi oil at $30.

    The price will be set by the marketplace. The marketplace doesn’t give a hoot how much debt some company has. The other guys will sell cheaper because they see a shelf life to their product. The price will go down.

    That said, at $1 to $2 per watt, the e-cat QX will not shake the foundations of the energy market all that quickly. The move to LENR is likely to start out pretty gentle. It’ll take a decade or two to become cheaper, to become truly disruptive.

  • Tommy Svensson

    You are forgetting one important thing, government regulations Once the QX has proven it’s value, no green house gases, high energy density, low price, … there will be quick and harsh regulations enforced by governments to soften the blow of all the emitted green house gases on the planet.

    • Buck

      Only by those governments deeply in thrall to vested interests centered on fossil fuels.

      There are many governments who are eager for clean energy and are not beholden to domestic fossil fuel concerns . . . the first that comes to mind is Japan, eager to find a clean safe substitute to Fukushima/Nuclear Energy. It is my belief that the Scandinavian countries as a rule are also open to this new form of energy. India for another . . . . etc. . . . . etc. . . . etc.

      While regulation is inevitable, there will be countries focused upon aiding and guiding the switch to LENR.

    • Omega Z

      They are much more interested in collecting their carbon taxes. 100’s of billions on the line.

  • Gerard McEk

    If AR really can show a working QX and convince the world that it has a high COP, than most energy companies face an immediate enormous drop in share price. Oil price will sharply drop. That may quickly lead closure of the most expensive oil, gas, coal and tar fields. Some energy suppliers will go bankrupt.
    This may lead to a temporary drop in production leading to higher prices again. I expect very wild varying oil prices for a while.
    People will try to buy the QX, it’s price will move up and down as well, depending on availability.
    In short: I expect ten years of chaos if governments don’t do anything to smooth this. But they will. I have no idea if they can though….

    • Omega Z

      “Oil price will sharply drop.”

      Possibly, as a knee jerk reaction then it will recover. It will take years for this to traverse to the auto industry or any others as well. An oil shortage the day after would send prices skyrocketing.

      A possible bumper field crop next year has little impact on today’s prices or even the near future until the next harvest is close to begin.

      Government can smooth anything. It’s called death by regulation.

      • Gerard McEk

        I guess so, see also my answer to cashmemorz above.

    • cashmemorz

      In Ontario, Canada the current government has already done something. They used to regulate the electric power producers to be non-profit. About a year and a half ago the government started selling off large sectors of the power producton utilities into private hands. Just before that sell-off the solar and wind producers were given a huge incentive to produce power and invest and sell power back to the grid. A large increase in capacity in the system base on thenew producers required the now privatized utilities to improve the capacity which cost them billions. This cost, plus the profits of the new owners as inveswtment return, was passed on to the consumers. My bill used to be about $100 for two months on average. Recently it grew to $600. People complained. Sothe government mortgaged the cost by having everyon pay less now byh about 25%. The rest to be paid off within 30 years on a contining basis of mortgage and repayment to the stake holders, the new owners and their investors. So, if I even wanted and could get a LENR device to get off the grid it would be a cost that would lower my grid costs but drive up the grid cost of the rest of the grid power users. The more that got off the grid, would make the mortgage repaymentr extend into the future farther and farther and maybe increase the current monthly payments until something has to give. The mortgage holders won’t let the government just stop or even lower the rate at which the government, actually the future bill payers, will be paying the lending rate of the mortgage. What could happen then, to get the government off the hook, is to increase taxes across the board to get those who are on or off the grid to pay the mortgage. Looking at this scenario, I get afraid to put an unnecessary burden on my kids in their future power payments, be that a mortgage or more taxes, by installing a LENR device, just to lower my current power bills. Also if those taxes become a reality, then the LENR device cost will be an early extra cost that causes those extra taxes to become a reality. A catch 22. If the government had not sold the utilities, the government could still raise taxes to cover the ongoing costs of running a less and less used grid. So LENR could be the cause of even more taxes

      • Gerard McEk

        No doubt that will happen. The governments need to get money from somewhere. Energy, petrol, fuel are a considerable part the milking cows for indirect tax. When they are lost for them, they will find another way.
        It will be interesting to see how they will do that. Obviously CO2 reduction will also play a part and maybe they will first stimulate LENR introduction but once it is there, they may tax it. However, if people can build a reactor themselves, it may make that route more difficult. I expect a total reshuffle of the ‘earning model’ of the governments. Next to the energy prices that may be another chaotic issue in our future life.

        • Omega Z

          Income Tax, Sales Tax,,,
          Problem solved.

    • Mike Rion

      Your last paragraph says it all, at least in the U.S. Just like the banks in 2008, the energy producers are too big to fail. I expect they will become either purveyors or owners of Cold Fusion technology either through government subsidy or edict. One form of energy will be simply substituted for another. Pricing will be based on demand rather than the lower cost of production so the consumer will benefit little from that advantage.

      The government will get involved due to the possible health risk of Fusion reactors, especially in houses or cars. In order to insure public safety the energy companies will be tasked to produce and lease safe modular reactors to private users.

      • Gerard McEk

        Yes, in principle they would. The issue is though, that I expect that this type of atomic energy can be generated with relatively simple means. The needed materials and equipment are abundantly available on the market now. When people start to tinker these reactors together in their backyard, then the situation can easily run out of hands and become extremely dangerous. (Think of the neutrons that can be released when small quantities of vanadium or titanium are near to the reaction zone).

        • Omega Z

          If people tinker in the garage, it will be of curiousty. It’s rare when you can make something yourself that is cheaper then mass produced. In addition, manufactured goods have guarantees, cerifications that meet insurance standards and support along with standardization.

          Reality will be people will get their electricty from a grid as they do now. Few people care to maintain a system that would cost more per kilowatt then the grid would supply. One difference I think will be the grids are more localized and because of this more dependable. You wont lose power due to weather related causes a 100 miles away.

          • Gerard McEk

            The issue with energy from atomic sources is that the fuel you need is extremely little (about a million times less that oil or gas). There is now way to tax this abundant material effectively. So what the government may do is to tax the reactors e.g. that you can only ‘lease’ it to a relatively high cost. That would lead people to tinker in their garage and assemble the reactor themselves.

          • Omega Z

            There are an untold number of legal pitfalls manufacturing them themselves for use. Besides, All the Government needs to do is raise income or property taxes among others. Besides that, Utilities make up a very small portion of tax revenue in the U.S..

            As far as motor fuel taxes, An alternative tax is already starting to be implemented because of electric vehicles. A mileage tax has already been approved in several states.. To think you can avoid taxes is silly. No offense toward you intended. In the U.S. we say 2 things in life are certain. Death and Taxes and if you have anything of value at your death, they will still collect any taxes due.

            In the U.S., one may become so indebted that you file bankruptcy. But even bankruptcy doesn’t erase debt to the Government.

  • Ophelia Rump

    This presumes a low rate of adoption, the flip side of the coin is that if there is a high rate of adoption, then raising prices drives higher adoption and becomes a form of financial suicide. As with the adoption of most technological paradigm shifts, people fail to consider the exponential rate of change which comes with them. Just ask Ray Kurzweil.

    • Buck

      This isn’t the only adoption curve that will have an impact upon the demand for oil over the next 10 years or so.

      Electric vehicles and their cousins the hybrids have been around for some time. It is just becoming known to some that electric vehicles are VERY inexpensive to maintain and operate, ignoring the cost of purchase. The number of moving parts for example goes down by a log factor of 2 to about 200 moving parts. The new Tesla S, with a price tag down from about $100k for the original to $35K is a lightning rod to the existing auto manufacturers.

      This shift to electric vehicles has engendered analysis of the situation. One points to how the shift further along the S-Curve of adoption could cause a material impact on oil demand.

      Link>> http://www.businessinsider.com/r-cheaper-renewables-to-halt-coal-and-oil-demand-growth-from-2020-research-2017-2

      • Omega Z

        Cars appear to be the least suited use for E-cat/LENR technology. I suspect it will be many years before the 1st production cars are certified and seen in production.

        Note the biggest hindrance to adoption will be finance. As available funds quickly become strained, interest will sky rocket. Likely we’ll see prime rates hit double digits within a short time.

        • Buck

          I agree and I apologize for not making my point clearer. I don’t see electric cars being converted to LENR for a long time. However, I do see the existing form of electric cars as being near a point where adoption may increase to the degree that the demand for gasoline is decreased by a factor of 3-5%, a figure that seems to be sufficient to depress the crude oil market.

          Regarding the prime rate, it currently stands at 4.25%. You are suggesting a >5.75% jump . . . I didn’t know that Trump was going to appoint Paul Volcker to the Fed. ๐Ÿ˜‰

          • Omega Z

            The Fed doesn’t actually set the interest rate. They set the rate that banks can charge each other overnight for money. Money is a commodity like grain etc in the world of banking. There’s a set amount available. If demand outstrips the supply, they can raise the rates. Just as the price of corn increases when demand is high. Prime rate is what banks charge preferred(low risk) customers.

            If the Fed thinks rates are getting to high, they can increase the money supply. Unless they think growth is increasing to fast and will lead to runaway or high rates of inflation. ie, If transition happens to fast, interest rates will rise. If growth is to fast, money supply is restricted and recession.

            I understand what Fed tries to do. I also understand they are very bad at doing it.
            —————————-
            Electric cars: With the completion of Musks Mega plant (2020?), the capacity to supply batteries enables the production of about 1 million cars a year. Or around 1% of global annual sales. They need about 200+ more mega plants(5 Billion$ each) to replace current car production. Current battery production has increased the price of Lithium by about 400% since 2015. Lithium is going for a minor cost component to a more serious cost component. Takes as much as 10 years to develop a new source. The same MSM that bad mouths LENR are the same MSM that hypes solar/wind. Most don’t know what they are talking about.

            EXTRA: George posted an article about windows being solar panels. They were about to roll out a similar type product in the early 1980’s(similar to auto window tinting film) as well as a paint on solar product for the outside of your home. To be dirt cheap. It’s 2017. Rossi-6 years. He has a ways to go to strain my patients. I’ve learned everything takes longer then anyone ever expects. Including the inventor.

          • Buck

            Yes, I agree. The Fed sets the Feds Funds Rate and not the Prime rate. However, they are generally highly correlated at about 3% difference.

            As to how they can be a detriment, just watch PBS Frontline’s “The Warning”. It took me days, weeks to get beyond it. Even now, the main characters refuse to talk about what they did to Brooksley Born and in effect the Global Economy.
            Link>> http://www.pbs.org/wgbh/frontline/film/warning/

            Regarding Electric Cars. It will be something to watch the ramping up. At this point, I wonder which battery tech will rise to the top. Personally, I hope it is carbon/graphene based due to the ubiquity of the element.

  • AnthonyRepetto

    Thank you for your thoughtful responses! I’ll attempt to address some of your criticisms:

    @opheliarump:disqus : “raising prices drives higher adoption and becomes a form of financial suicide…people fail to consider the exponential rate of change”

    I agree that adoption will follow an S-curve. What that exponential means is that there is an early period with low adoption, then, a rapid “phase-change” into higher adoption, with a slow-down as it approaches full saturation. Further, the macro adoption rate will be composed of many industry-specific adoption curves. Coal plants may reach a phase-change long before diesel vehicles, and plastics production will not be replaced for some time.

    And, yes, a higher price would push that phase-change to an earlier year – the dramatic shift would happen faster. Yet, fuel producers must consider (net)*(time). For instance, suppose that an oil producer expects the phase-change to happen in 10 years at current prices, or in 8 years, at a 20% price gouge. It would seem that the oil producer would want to keep prices low, because a price-increase would hasten their demise. However, a 20% increase in prices would give that producer triple the profit margins. Supposing profits of $10mil/yr, for 10 years, they would walk away with $100mil; meanwhile, profits of $30mil/yr for 8 years yields $240mil – a much larger take! Producers would always prefer to raise prices, if they can get away with it, /because profits are much more sensitive to the marginal rate of price increases/. Even though that speeds their replacement.

    @disqus_LsWIidAfHn:disqus : “the Saudis will want to sell as much as they can, and will happily do so at $30”

    Not really. They would like to sell for the *highest price* they can. If tar sands need to sell at $70, the Saudis will gladly sell at $68, not $30. If a fuel producer does not raise their prices, then the market can expect that the producer will eventually be unable to pay their debts, and their share price and debt rating will drop. Devaluation and insolvency will impact producers immediately, long before Quarks actually replace demand. To maintain share price, producers will need to convince investors that they can pay their debts – by raising prices.

    If some producers collapse early, that diminishes production. If fuel production is at even a *tiny* shortfall, prices rise dramatically. Fuel demand does keep growing each year, so there is a continuous demand for developing new fields. Yet, those new entrants would be limited by the looming transition: how would a new rig acquire financing, to set up? They would need to convince investors that they can pay down their costs in a decade or less, instead of 30 years or more! That is a huge increase in the barrier to entry. If it’s more expensive (in debt per year) to develop new fields, then new fields will only be developed when the price of fuel increases.

    The market attains an equilibrium; if the cost of entry rises (from shorter debt horizon), then producers can /raise prices up to that cost of entry/. Only at that high price will new fields be developed, to compete. (Without new field development, supply drops and prices rise; prices rise to the point where they encourage new developments, to meet demand. If debt horizons shorten, that increases the price for new entrants; prices increase overall. macro-econ!)

    @@disqus_0XS5kuOBQE:disqus : “The amount of debt companies have plays no part in determining prices. The very simple reason is because new entrants can enter the market with no debt and take over where these over indebted companies can’t compete. They will file for bankruptcy and their assets sold for pennies on the dollar.”

    As I mentioned above, new entrants will still need financing, and they will face a much shorter debt horizon, which would increase their annual debt payments. ‘enter the market with no debt’ simply doesn’t happen. Much of the cost for fracking is debt. And, long-time producers who have paid down their debt (or went bankrupt and sold assets) would gladly raise prices to match, because it would be their last opportunity for profits. The Saudis wouldn’t want to just *break even* for ten years.

    The banks and creditors will have fair warning; bankruptcy won’t happen immediately. There will be intense pressure to raise prices, or else stock prices of producers (and banks!) fall precipitously. *Most* participants experience these pressures, and so, it will be natural for them to price gouge.

    A drop in shares and bankruptcy, followed by cheap assets, only happens if prices *drop*. With price gouging, all players maintain profitability. It doesn’t require ‘collusion’ – it relies upon the fact that /new entrants must finance on a very short debt horizon/, which means a higher annual operating cost for new entrants.

    @facebook-100002656573372:disqus : “you have to maximise market share”

    Not exactly – if you push prices down by over-pumping, then you fail to maximize profits. It’s called a price war. OPEC exists to enforce under-production, exactly *because* that drives up prices and leads to larger margins, larger profits. Saudis *don’t* pump all they can, because they want to maximize profits, not market share. If companies colluded, they could all agree to raise prices, and make huge profits. They just need to suppress new entrants, to preserve their advantage – they may even *lose* some market share, but the higher price allows their profits to still be greater than they would, in a price-war scenario.

    Imagine a fracker going to a bank, after LENR is popular: “Help me buy a rig and land, and I’ll pay you back in 30 years.” “No,” replies the bank, “we know that you won’t be making money, in just 10 years – you’ll need to pay us back triple, annually.” That’s an *increased barrier to entry*. Without a constant influx of new entrants, supply actually drops – and demand for energy will still increase during those 10 years, because of increased economic activity. OPEC can preserve *most* of their market share, while increasing prices. So, they will. ๐Ÿ™‚

    – Oaklandthinktank

  • cashmemorz

    The oil producers have been using their knowledge about LENR becoming a possibility as much as they have learned about other replacements of oil like solar, wind, biomass, better nuclear power plant designs, to start early in adapting their markets. Plastics products and chemicals based on oil will become cheaper to drive their greater use. I expect more things besides energy use to get a greater share of oil and the products based on that. The financial side of oil sure might change but not as much as what the article implies. Oil producers keep tweeking their business models to stay profitable and use many other means to keep alive as long as possible.

  • Bernie Koppenhofer

    What!? Oil Company reserves will decrease in value. Requiring Oil Companies to revalue reserves on their balance sheets. This will result in a decrease in the net worth of oil companies and their stock price.

  • Axil Axil

    This theory of economics also applies to adoption of electric cars.

    • Buck

      And is subject to the same weakness outlined below by Ophelia Rump:

      “This presumes a low rate of adoption, the flip side of the coin is that
      if there is a high rate of adoption, then raising prices drives higher
      adoption and becomes a form of financial suicide. As with the adoption
      of most technological paradigm shifts, people fail to consider the
      exponential rate of change which comes with them.”

      The important distinction between LENR and electric cars is that LENR would be an entirely new technology and electric cars have been part of the consumer environment for some time, over 100 years if you include the very early types of automobiles . . . in effect, electric cars are further along in the adoption curve and may reach a tipping point far sooner than LENR. Some argue that the new Tesla S at $35K may be a driving force of that transformative shift.

      • cashmemorz

        I expect a low rate of adoption during the first few years, because of disbelieve. “How could there possibly be a contendeer for what hot fusion was promising, with so few knowing about it(LENR)”. The few who adopt LENR won’t be shouting it from the roof tops. More likely keeping quiet to not let the competition know the advantage one has. So slow uptake, maybe for a year or two for sure. Then someone will talk because of a leak or to show off, but later than sooner. Depends on how tight a ship the users have in regards to leaks.

        I had a temporary job at Westinghouse, a division that made small items for the transportation: train, aircraft sectors. Their plant was one of the first to be fully robotised. One of their inventions was a fully automated fork lift for goods movement for use in the plant only. On my first day, apparently someone had their communications crossed, the humans I mean, and because of that, they promised me a tour of the plant to show what kind of environment I would be working in. That tour never materialized, since it became known that I was only temporary. The take away, was that no one, that could take their know how to the competition, was allowed any where near their invention. If that is how LENR will be treated, then it will be a while before anyone knows for sure that it is being used in the field on a growing basis. What Rossi, says one way or the other won’t make much difference.

        • Buck

          I understand your point and I agree with your premise: early adopting LENR customers will keep their mouths shut so as to maintain competitive advantage.

          However, a market place is made up with more that just existing customers. I simply don’t know how all the other participants in a market will respond.

          When you are talking of a technology that can generate heat with a cost savings of 100:1, where $100 of old heat can now be generated for $1, people eager for cost savings will find out.

          When you are talking of a technology that is about as clean as you can get, then those who see the advantage of a Green Energy revolution will talk. Not all news flows through the MSM. There are trade/industry publications that have their industries as heart.

          I don’t think that the TALC (Technology Adoption Life Cycle) s-curve will disappear . . . I just don’t know how quickly specific industries will move through the early adoption phase. And it is important to recognize we are talking about Industries not End-Consumers. Industries are driven by the profit motive. End-Consumers by satisfaction and want. This suggests to me that industries are far more open to a very profitable energy solution that happens to be an entirely new technology.

          • cashmemorz

            As an end- consumer myself, I was always taught by my parents to be as frugal as humanly possible. And I am. I feel strongly, as do most of my siblings, to not buy anything at all unless it fits an absolute need. Anything else is a luxury. That is why I have very little in the house apart from one computer and one old tv as luxuries. If I were as strict as my oldest sister, I wouldn’t even have that. The older ones grew up during the first world war, the Russian famine and the second war. So they know the value of a dollar and have no credit cards, a full bank account and give to their kids despite earning only a pension. The satisfaction thing is foreign to me. Satisfaction is knowing your needs are fullfilled not the other guys pocket. Must be a new brain washing concept to live according to some “satisfaction” and less so really unneeded “want”. People lack self control to their own detriment and allow others to control them these days.

          • Buck

            I hear you . . . it is fair to say that how you describe your family is the exception rather than the rule.

        • Axil Axil

          Rossi’s tech should be used to convert fission plants to LENR. This would provide base load power and protect Rossi’s IP while still produces loads of power.

          • Omega Z

            They will not allow replacement of nuclear fuel rods with E-cats. Anything installed would become radioactive. In addition, most nuclear plants are at end of life+. The boilers are stressed and becoming dangerously brittle..They also use a double heat transfer for safety reasons and are very inefficient requiring 4 watts input to 1 watt out.

            All said, it would be cheaper to build from scratch. They could be smaller and locally distributed where even the waste heat could be utilized.. Note the larger the turbine, the more precision they need to be to maintain balance and the more material, time and cost involved.

            I know you’re aware of the 10MW Supercritical CO2 turbine. Imagine units of 5, 10, 20 Megawatt units that could easily be sized to region installing 4 units in a circuit,. You’ve now satisfied any safety concerns by creating a grid. You can easily add additional units should needs increase.

            These small systems can be mass produced in a factory assembly line far more economical then massive plants that take 5 or more years to build on site. They can be lifted in by helicopter or trucked in on flatbed trucks. They can even be mobile for emergencies and as a backup, you would merely need a 200-KW Genset. Because of their small size, you merely need small water or air cooling towers. No rivers or large reservoirs needed. No rail lines to haul coal, no slurry ponds or N-gas lines to build.

            With Supercritical CO2 systems, they should within a few years be able to achieve 60% efficiencies. Thus. requiring 40% less heat input per kilowatt. ie, less e-cats needed to replace the current system. Even with this scheme, the transition will be very costly and it will still require several decades.

          • Axil Axil

            https://www.nextbigfuture.com/wp-content/uploads/2016/12/nuclearrepowering-1-730×430.jpg?x71037

            https://www.nextbigfuture.com/2016/12/chinas-plans-to-begin-converting-coal.html

            The major cost factor in a coal or nuclear plant is the electrical equipment. Replace the equipment that produces steam and reuse the rurbognetators, switch gear, transformers, and transmission lines.

          • Omega Z

            I understand the U.S. has shut down like 8 of it’s 104 Nuke plants. And that the turbines are radioactive from the many years of use. But that’s neither here nor there.

            Metal and concrete harden with age even if covered and protected. When new, they flex and they depend on that when they design and build things with these material. When they get to hard, they break under stress instead of flexing. You don’t want to be near by when that happens. The pieces can go through you like a hot knife through butter. Steel and concrete housings don’t always contain them.

            Now you take a turbine spinning at high rpm’s that doesn’t flex, they can shatter and fly apart. Unknown to people in general, a steel wheel bearing that people perceive as super hard, actually gives much like a common kitchen sponge at micro scale. They’ve been known to shatter like glass with age.

            When they designate the life cycle of these plants at 40/45 years, that usually refers to the entire facility wires included unless portions were changed out earlier due to premature failure. You reference China. They can change out many of theirs as about half their plants are about 20 years of age or newer. Most of the Wests power plants are near end of life or already exceeding it under special extended license.

            Note China also has about 1000 plants that were built without consent(illegally) and are well below specs, some only as efficient as 15%.

      • Axil Axil

        http://www.independent.co.uk/voices/brexit-euratom-theresa-may-nuclear-agency-professor-martin-freer-a7877611.html

        “The Governmentโ€™s announcement last week that the UK will ban the sale of petrol and diesel cars by 2040, and redouble its efforts to promote the uptake of electric vehicles, is a positive step in the UKโ€™s decarbonisation journey. ”

        China has the same electric car policy in place.

      • Bernie Koppenhofer

        The $35K Tesla Model 3 has turned into 60K.

        • Buck

          BK,

          nothing new under the sun when it comes to the cost of adding options to the car you want.

          I was surprised that it costs $1000 to get your new baby in Red.

          Link>> http://money.cnn.com/2017/07/30/technology/business/tesla-model-3-extra-costs/index.html?iid=ob_homepage_tech_pool

          • Bernie Koppenhofer

            Buck: Nope, base price is 44,000, that is all they are building now. The 35,000 base price car will come sometime in future. 2019?

          • Buck

            From the Tesla.com website

            “Production of the Standard Battery begins in November” . . . that is November 2017

          • Bernie Koppenhofer

            You want to make a bet on that November date?

          • Buck

            With an order backlog of +455,000, growing at about 1,800/week, the wait time is about 18months depending upon the success of the production ramping.

            Early adopters have a fervor and willingness to pay a premium. That said, the base price is still $35k and your order will be taken at that price. But, you’ll still have to wait the 18 months at this point.

          • Bernie Koppenhofer

            I am an “early adopter”, put my 1000 down May 2016 expecting to get a Model 3 for $35,000 plus maybe 15-20 % for “extras”. The car I want is now 59,500. If I wait I will not get 12,500 in tax incentives. Want to buy my car?

          • Buck

            ๐Ÿ™‚

          • Omega Z

            Yeah, the number of cars eligible for the tax incentive is far less then the number on order. Have to wonder how many will back out. You have to wonder where you are on the list.

      • roseland67

        A more important distinction between LENR and electric cars is that electric cars work, NOW, and anyone can see them working and purchase one.

  • tuder

    Hi, Oaklandthinktank, I am not too sure about your statement “most of the financing for fuel [oil] extraction happens with debt” – this could apply to companies involved mainly in fracking, but the biggest oil majors use a lot their own balance sheets. But I think you are missing one important point: it is natural gas to be the first fuel displaced by LENR devices (should these commercialised), and not oil – so your reasoning should eventually apply to natural gas producers (and outside of the US suppliers are mostly state-owned companies so the Governments can always recapitalise the companies if they can afford to do so). Evidence so far points that the first market niches for LENR would be supplying heat for industrial uses as well as for buildings heating & cooling – and natural gas in these demand sectors has a much larger share than oil – which is mostly used for transportation or for producing feedstocks in the petrochemical industry. As far as transportation is concerned, LENR could compete with oil either if you have cars run by LENR devices combined with sterling engines or much simpler, electric cars with electricity generated by LENR devices combined with turbines. But this would eventually be for phase 2. Phase 1 would be heat.

    • Omega Z

      “it is natural gas to be the first fuel displaced by LENR devices”

      Natural gas will be 2nd after coal. But 1st, I expect wind/solar to stall out. Phase 1 would be heat is exactly the path Rossi has said he will apply this technology to 1st.

  • Gerard McEk

    Yes obviously not everyone will be able to do that. But if the technology would become available on the Internet you will see that still many would try to do it. I guess I am not average, but I managed to launch a PVC pipe of 1.5 meter 160 meter high when I was 18 years old. ๐Ÿ˜‰

  • PappyYokum

    There is something called bankruptcy. When a debt cannot be repaid, assets change hands. The people who made the bad bet lose. The creditor takes the assets of the debtor and sells them. If the proceeds do not cover the debt, the difference is written off.
    When my children were little I asked them how money was created; Under a fiat monetary system money is created when someone promises to pay it back. Then I asked how it is destroyed; Under the same system it is destroyed when it is payed back or it isn’t due to bankruptcy when the debt is written off.
    Producers do not set prices. Consumers do.
    If a producer wants to generate more revenue to pay off debt, he will have to increase output at a lower price in order to get the product sold rather than have it sit in inventory. This increase in supply puts a downward pressure on prices in order to attract customers.
    In energy, assuming LENR is a direct competitor to petroleum, any increase in oil prices will accelerate the market shift to LENR away from petroleum. A drop in oil prices will retard it.
    Indebted oil producers will either be able to make their payments, or they will not. They who get behind and end up being unable to avoid foreclosure will end up in liquidation and their assets redistributed. Any outstanding debt will be written off.

    • cashmemorz

      That assumes a continuity of demand based on the utility of the item in the market between seller and buyer. If there is little or no need for ffor the item then very few or no one buys it. Then it makes no difference how low the price. No one buys junk just because it is low priced. There must first be a use or several uses for it. When coal is superceeded by oil to the point that there is much too little incentive to use the coal then the coal mine can try to lower the price. Beyond a certain low price there is no economical reason to keep selling the coal. Then the producer tries to sell to someone not fully aware of the current lack of need or the buyer knows of a use that the original producer has no knowledge of. Melamine dish ware is one need of coal that has nothingto do with energy production. Does the original owner of the coal mine always aware of new uses for their seemingly defunct item? Sometimes yes, if they do sufficient due diligence. Same with the oil producers. Find new uses. The current plastics sector can be induced to make more plastic items at a sufficiently lower price to make the new produucts so ubuquitous by price, that the newer amount of plastic products takes the place of the same amount of gasoline ands diesel no longer produced. So, the price of oil at the wellhead stays much the same and status quo. Its about due diligence of the producer to stay in the game. Also LENR, instead of replacing oil energy, will be used by oil producers to keep the costs of production very low. So, by increasing use of oil in other areas other than combustion, and the lower costs of production, refining, delivery, etc., can keep oil companies producinbg as much as ever fo the foreseeable future. LENR will then be getting into more than the immediately foreseen areas such as transportation and energy production but actually inside the older industries such as the ones it is supposed to replace, oil, gas,and even coal. Maybe even fission power. So the effect of LENR on other energy sectors can be an up and down process depending on what those in the old or current sectors do to mitigate the effect of LENR or any other “potentially” disruptive newcomer. Threorizing based on ones “known” expetise is just a game of theorizing to shjow off that someone knows something about the area. Wat will actually happen is “anybodies” “quess”.

    • DrD

      Exactly, it’s called Bankruptcy!
      The debt does indeed go away and the rich become less rich, maybe even “poor” in this case.

  • Bernie Koppenhofer

    The majority of Oil compaies have not revalued their reserves, when that happens you will see what I mean.

  • Omega Z

    Not ridiculous when considering the new car price. Also, most people will still be liable for what is still owed on their current vehicle.

    Also, the fuel charge for the vehicle wont be so cheap. On the otherhand, a fuel charge should last 10 years plus for the average individual. ie, fuel charge of 1 year operating is about 8700 hours. How many hours a day do you drive or average per week.

  • Ophelia Rump

    Another thing which I believe they have failed to consider is the rate of profitability and the cycling of that profit back into production.

    If Rossi produces a finished product which costs $100,000 to produce and sells for $1,000,000 that is 900% profit. Assuming he can produce 10 units per day, that is would provide considerable cash feedback into increased production of $9,000,000 per day. Which of course could lead to exponential growth.
    With 500,000 cores produced per day.
    Oil does not even come close to this rate of profitability anywhere in it’s chain from extraction to sale.

    Assuming that the cores cost 2 dollars each to mass produce.
    If Rossi produces only the cores and sells them for $20, making the rest of the required reactor system public domain and allowing others to produce the various components or complete assemblies, that comes to 50,000 cores per megawatt, and $900,000, profit per megawatt.

    If he can by specializing produce more cores on the order of only one million per day, that is twice the production of cores as building ten complete reactors That comes to a cost of $2,000,000 and a profit of $16,000,000 per day with a much lower threshold of difficulty to scale up.

    Of course Rossi needs to produce complete product at first but he would be wise to quickly drive the core production up to a scale which would support a far wider market, gaining market penetration and a domination of the marketplace before a competitor with better financing appears on the scene.

  • Omega Z

    Sorry, I have a U.S. perspective and sometimes forget it is different elsewhere. N-gas is substantially cheaper here then in most countries.

    In the U.S. when the price of N-gas increases and is even marginally profitable to do so, more N-gas is developed and put to market. As long as more sources are available, prices are self moderating. Many U.S. fossil fuel plants are able to use which ever is cheaper and takes only about a month to transition. Of course future price trends effects which they will use.

    Because the U.S. is using more N-gas, reduced demand for coal causes downward price pressure. ie, becomes more competitive with N-gas. This has a bigger impact internationally where N-gas can be 2-3 times higher. Thus, in the last year, U.S. coal production has increased along with exports.

    The projections at the link you provided shows nothing outside normal variations for coal use and “percentages” are deceiving. Keep in mind, in the U.S. different regions are more dependent on various energy sources. If mild weather in 1 part of the country reduces demand for N-gas generated energy, the percentage of coal energy in the mix may increase without additional coal power having increased.

    Also, technology plays a roll. China has replaced some out dated 25/30 percent efficient 1GW coal plants with supercritical 50/52 percent high efficiency coal plants. India has done the same and to the chagrin of environmentalists, even received a carbon credit for reducing the CO2 output of said plant by 50%.

    Point being, don’t blindly read such articles without looking at the details. Details are important and can completely change the narrative.

  • Omega Z

    I found $5 dollars in my left pocket. Sadly it is not a gain. It originally was in my right pocket.

  • Omega Z

    The 200-KW Genset was in reference to a portable generator to start up the E-cat reactor plants should they be fully shut down for whatever reason. Also to power them up when 1st installed when grid power is not available.

    With current technology development and should the ECQX be able to produce and maintain 900`C steam, Smaller plants could be very efficient. However, I will make no claim on just how small a scale plant could be. 500KW, 1MW or whatever is yet to be seen.

    Yes, do to safety issues, Nuclear plants operate at lower temperatures and as a rule are rated at 25% to 30% efficient.(varies by plant) Older plants such as those in the U.S.(about 50 years old) tend to the lower side. They do not have the benefit of more recent tech advances.

    Nuclear plants also have slower ramp up thus when demand temporarily drops, they usually maintain operating temps even when the generators are ramped down. Your burning fuel. This must be taken into consideration as with any fuel. That is why they are designated as base load energy.

    Plants of deficiencies and dangerous operation. China has many that were built illegally all over China. For over 20 years, illegal(unapproved) plants(about 1 per week) were built almost as fast as the Government was building new power plants. Many are on the smaller side with efficiencies in the 15% to 20% range. Some apparently as low as 10%. China also has hundreds of illegal coal mines that supply the coal to these illegal plants..

    This can be hard to fathom in the west. I can only think many of these were done with a nod and a wink of officialdom. Or maybe not.

  • roseland67

    Countries and companies would be sitting
    on hundreds of millions, (billions?) of barrels
    of a rapidly depreciating stranded asset.
    They would sell their oil at any price they could get as quickly as possible.

    But that’s IF The Ecat ever produces more
    Energy out > Energy In