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Perhaps the reason Joe Hockey gets so excited about the age of entitlement whenever he travels overseas is because he needs to leave Australia to find an example of it, writes Greg Jericho.
Since the election, Joe Hockey has been talking big about the need for the government to cut expenditure. Unfortunately his sales pitch rests on the fallacious view that Australia needs to end its age of entitlement.
He also seems determined to force Tony Abbott to break his election promise told to SBS News the night before the election that there would be “no cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS”.
On Sunday, news was leaked that the government was likely to cut funding for the ABC, and then Joe Hockey, speaking from Washington DC, made it clear that changing the pensions was very much on the table – from raising the eligibility age to 70, to changing the indexation and the asset test.
You can see why he might consider changing the indexation of the pension from average male weekly earnings to either the inflation rate or the pensioners cost of living index:
Over the past 10 years, average male earnings have increased by nearly 22 per cent more than the inflation rate and 18 per cent more than the ABS’s cost of living index for pensioners. So such a change would certainly temper increases in the government’s pension bill.
However, this would also exacerbate inequality – as has occurred for those attempting to exist on Newstart, which is indexed to CPI.
But behind all the talk about galloping government expenditure is the view that Australia is somehow now a land where entitlement runs riot.
This view is complete bollocks.
Talk of out of control welfare entitlement might sound true when said in a press conference where the vibe can seem more real than actual facts. But the reality is Australia does not have, nor ever has had a large sense of entitlement.
After first attacking the disability-support pension, which, as I noted last month, involved the government ignoring a fair bit of reality, now the talk has shifted to the aged pension.
The reason the pension is a concern is pretty much down to demographics. There are fewer people in the prime earning (and tax revenue paying) age of 25-54, and also fewer young people coming along to replace those retiring:
So yes, it’s an issue – one the previous government took steps to deal with when it changed the pension age to 67 for anyone born from 1957 onwards – around three quarters of the population.
And there is a case for suggesting we could work a bit longer.
Among OECD nations, Australian men retire later than the average and women retire pretty much on average. The reason women retire earlier is mostly because until this year they could. But from now on the retirement ages for men and women are the same.
So we’re not shirkers when it comes to work, but because our life expectancy is among the longest in the world, Australians spend more years retired than most nations.
But before we get too carried away by the problem of paying for our retirees, let’s put Joe Hockey’s words in some context. Hockey loves to talk about our huge welfare bill, and yet you rarely hear him talk up the fact that Australia has one of the smallest welfare budgets in the OECD:
Only Korea, Mexico, Chile and Iceland spend less than Australia does on welfare. And as for it growing out of control, the level spent on benefits in Australia now is slightly below where it was in 2003.
While it has increased since 2007 (as it has for almost all nations due to an increase in unemployment benefits), our increase was well below the average observed by other OECD nations. Part of the reason is that we have one of the best welfare systems in the world.
No bugger it, we have the best welfare system in the world.
As ANU economist Peter Whiteford noted, the OECD has recently published its latest edition of social indicators. It found that Australia directs more of its cash benefits to the poorest 30 per cent and less to the richest 30 per cent than any other nation:
Perhaps one of the reasons why Joe Hockey seems to get so excited about the age of entitlement whenever he travels overseas is because he needs to leave Australia to find an example of it.
But as the OECD notes, when you have a very targeted welfare system like Australia’s, reducing welfare spending tends to hurt low-income earners unless you are very careful.
Even on pensions Australia is not just kicking goals; we are winning the World Cup (to use Tony Abbott’s tortuous analogy). Using the most recent comparable figures, Australia spends the fourth least on pensions as a percentage of our GDP:
Little wonder that German insurance company Allianz named Australia as having “the most sustainable pension system in the world”. It cited the fact that our “two-tiered system of lean public and highly developed funded pensions – seems to be most sustainable in the long run”.
Oddly, no one in the government has been bragging about this report.
But our two-tiered system also provides two ways to approach growing expenditure and declining revenue. For while Australia’s cash benefits system is tightly means tested, our tax system is less so – particularly with regards to superannuation exemptions.
Even now the age that you can access your superannuation (the preservation age) is well below the pension age. Those born after 1964 will be able to access their superannuation at 60 years old – seven years before they will become eligible for the pension. And of course those who can afford to retire only on their superannuation are inherently wealthier than those who need the pension.
But rather than raise the preservation age to that of the pension age, the current system attempts to keep those people in the workforce by providing significant tax benefits for those over the age of 60.
All up, tax concessions for superannuation see the government foregoing around $27.6bn in revenue. To put that in context, the government spent $54.8bn on the aged pension this financial year.
Yes, there is a case for tightening some pension eligibility rules for those with low income but high wealth, but changes to the pension indexation and increasing the age eligibility will save money by mostly hitting the poorest.
Hockey has been talking big about everyone sharing the burden. But he also only talks of expenditure cuts, not revenue increases. He says he wants a discussion about the pension; he also needs to talk about superannuation. He talks about expenditure; he also needs to talk about revenue.
And while he’s at it he might also talk about why he thinks Australia is in an age of entitlement, when it plainly is not.
Greg Jericho writes weekly for The Drum. He tweets at @GrogsGamut. View his full profile here.
“Wait a minute,” you must be saying. “Haven’t we been hearing from the oil industry and from government and international agencies that worldwide oil production has been increasing in the last several years?” The answer, of course, is yes. But, the deeper question is whether this assertion is actually correct.
Here is a key fact that casts doubt on the official reporting: When the industry and the government talk about the price of oil sold on world markets and traded on futures exchanges, they mean one thing. But, when they talk about the total production of oil, they actually mean something quite different–namely, a much broader category that includes all kinds of things that are simply not oil and that could never be sold on the world market as oil.
I’ve written about this issue of the true definition of oil before. But Texas oilman Jeffrey Brown has been bending my ear recently about looking even deeper into the issue. He makes a major clarifying point: If what you’re selling cannot be sold on the world market as crude oil, then it’s not crude oil. It’s such a simple and obvious point that I’m ashamed to have missed it. And, Brown believes that if we could find data that separates all these other non-crude oil things out, the remaining worldwide production number for crude oil alone would be flat to down from 2005 onward.
Brown says the current dual approach to price and supply is like asking the butcher the price of steak, and then, instead of finding out how much steak he has to sell, you inquire about how much beef in total he has on hand–which will, of course, include roasts and ground meat. And, then you proceed to calculate the butcher’s total supply of steak by lumping everything together and simply calling it steak.
“Basically, crude oil peaked [in 2005], but natural gas and natural gas liquids [including lease condensate] didn’t,” he believes. Natural gas production has continued to grow, and as it has, its co-products have also grown–many of which have been lumped in with the oil production statistics.
The general message from the oil industry is that the free market should determine what’s best for our energy economy. There is much to dispute in this view. But, if we take the industry at its word, then we should see what Mr. Market has to say about all the things the industry lumps into total oil production.
Here’s what’s being added to underlying crude oil production and labelled as oil by the oil companies and reporting agencies:
• Biofuels – Essentially ethanol and biodiesel.
• Natural gas plant liquids – Butane, ethane, pentanes, propane and other non-methane components of raw natural gas.
• Lease condensate – Very light hydrocarbons gathered on leased production sites from both oil and natural gas wells, often referred to as “natural gasoline” because it can in a pinch be used to power gasoline engines though it doesn’t have the octane of gasoline produced at refineries.
• Refinery gain – The most puzzling addition of all to crude oil supply calculations. This is merely the increase in the volume of refinery outputs such as gasoline, diesel and jet fuel versus the volume of crude oil inputs. It is due entirely to the expansion of the liquids produced, but indicates no actual gain in energy. In fact, great gobs of energy are EXPENDED in the refinery process to give us what we actually want.
Let’s see if any of these non-oil things are acceptable as oil at major exchanges. Perhaps the most recognizable oil futures contract is the so-called Light Sweet Crude Oil contract. The exchange sponsoring that contract details in seven pages (of a much longer rulebook) what is acceptable to deliver to those who choose to take delivery on their contracts.
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A search for three of the four items (and their subitems) listed above predictably comes up empty. But, the search for lease condensate produces a hit. Here’s what the exchange says about lease condensate when discussing acceptable delivery of oil: “For the purpose of this contract, condensates are excluded from the definition of crude petroleum.”
It’s true that some lease condensate does make its way into the crude oil production stream of refineries. But, its contribution is small and because of its chemical structure, it’s not very versatile compared to crude oil which can be refined not only into gasoline, but also diesel and jet fuel which are more valuable to refiners. Typically, crude oil blended with lease condensate is discounted to refiners in recognition of its lower value. (For the technically minded, this excellent article explains the growth and uses of lease condensate.)
It’s worth noting that the same futures exchange that sponsors the Light Sweet Crude Oil contract has separate contracts for biofuels.
Maybe across the ocean in Great Britain where the world’s other premiere crude oil futures contract is traded, the exchange is a bit more forgiving. Alas, the exchange sponsoring Brent Crude is exceedingly picky about what it will accept as proper delivery to those who take delivery on their contracts. The exchange accepts crude from only four North Sea fields: Brent, Forties, Oseberg and Ekofisk.
This look at what the market actually prices as oil tells us a lot about why Brent Crude, for example, has been trading at the highest average daily price ever for three years running, higher than even 2008, the year of the nominal all-time price peak.
So, if oil production hasn’t really been growing or at least not growing much in the last several years, what’s all the hoopla about? As petroleum geologist and consultant Art Berman likes to say, it’s a retirement party. There is one last, very difficult, costly and energy-intensive store of oil in low-quality deep shales containing crude. These shales–which are accessed using hydraulic fracturing or fracking–would never have been tapped if we were not already seeing a decline in the production of conventional, easy-to-get crude oil, the kind I refer to as Beverly Hillbillies bubbling crude as seen in the opening credits of the popular 1960s sitcom of that name.
The oil from deep shales (properly called “tight oil”) is allowing production to grow in the United States even as production sinks elsewhere in the world. Other countries having shales containing oil will likely try to exploit them. But, the retirement party will only be a few years later for them as a result.
Despite what the public is being led to believe, oil wells in deep shales suffer from very high annual production decline rates–40 percent per year compared to the worldwide average of 4 percent. This implies that swiftly rising production will be followed by equally swiftly declining production in a compressed time frame–a classic boom-bust pattern.
Okay, so what do the worldwide oil production numbers actually look like if we strip out all the non-oil components? Well, we don’t actually know. Brown has been unable to find such numbers anywhere. While the search continues, he thought he’d do a back-of-the-envelope calculation of his own. Here’s what he came up with:
Estimated Global Crude Oil Production
2002 to 2012 in million barrels per day
2002: 60
2003: 62
2004: 65
2005: 67
2006: 65
2007: 65
2008: 66
2009: 64
2010: 66
2011: 65
2012: 67
(For the technically minded, here are the assumptions behind his numbers: The global condensate to crude plus condensate ratio was 10 percent for 2002 to 2005–versus 11 percent for Texas in 2005–and condensate production increased at the same rate as the rate of increase in global dry processed gas production from 2005 to 2012, 2.8 percent per year, according to the U.S. Energy Information Administration. Crude oil is defined as oil with an API gravity of 45 or less per RBN Energy. Data are rounded off to two significant figures.)
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This is really a guess based on incomplete information. But if Brown is roughly correct, his estimate explains why crude oil prices remain near record levels (based on the average daily price) despite all the talk about abundance and an oil renaissance in the United States. Simply put, there is no new abundance. Oil supplies remain constrained.
This does not deny that natural gas production continues to grow and that natural gas and its co-products (butane, ethane, propane and pentanes) are useful. But our current infrastructure is desperate for oil, particularly the transportation sector which is still dominated by oil derivatives. Some substitution in various areas including transportation and chemical feedstocks is taking place. But the rate is slow and the conversion can be costly.
Moreover, the energy content per unit of volume is significantly lower for natural gas plant liquids, between 30 and 40 percent lower than crude oil. To say that barrels of butane are equivalent to barrels of crude oil is more than just a rounding error.
Brown says the reason for the seeming stall in world oil production is actually quite simple. The remaining oil is harder to extract. We’ve taken the easy oil out of the Earth first. He explains that in the seven years ending in 2005, the oil industry invested $1.5 trillion on finding and developing new oil and natural gas fields and the capacity to refine and distribute the products that come from them. During that period oil production consistently rose. In the seven years after 2005 the industry spent $3.5 trillion for what Brown believes is no net increase in the production rate of actual, honest-to-god crude oil.
The notion that oil is becoming abundant all over again is contradicted by the levitating price and by the evidence that actual worldwide crude oil production is either flat or growing at an infinitesimal rate. But the industry doesn’t want the public or policymakers to know this because the current belief in abundance tends to slow down an energy transition away from fossil fuels and toward renewables.
That transition must come sooner or later. But the industry would like to see it come later. And, if policymakers are fooled by the abundance story, that transition will almost certainly come later.
By Kurt Cobb
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Navy researchers at the U.S. Naval Research Laboratory (NRL), Materials Science and Technology Division, demonstrate proof-of-concept of novel NRL technologies developed for the recovery of carbon dioxide (CO2) and hydrogen (H2) from seawater and conversion to a liquid hydrocarbon fuel.
Flying a radio-controlled replica of the historic WWII P-51 Mustang red-tail aircraft—of the legendary Tuskegee Airmen—NRL researchers (l to r) Dr. Jeffrey Baldwin, Dr. Dennis Hardy, Dr. Heather Willauer, and Dr. David Drab (crouched), successfully demonstrate a novel liquid hydrocarbon fuel to power the aircraft’s unmodified two-stroke internal combustion engine. The test provides proof-of-concept for an NRL developed process to extract carbon dioxide (CO2) and produce hydrogen gas (H2) from seawater, subsequently catalytically converting the CO2 and H2 into fuel by a gas-to-liquids process.
(Photo: U.S. Naval Research Laboratory) Fueled by a liquid hydrocarbon—a component of NRL’s novel gas-to-liquid (GTL) process that uses CO2 and H2 as feedstock—the research team demonstrated sustained flight of a radio-controlled (RC) P-51 replica of the legendary Red Tail Squadron, powered by an off-the-shelf (OTS) and unmodified two-stroke internal combustion engine.
Using an innovative and proprietary NRL electrolytic cation exchange module (E-CEM), both dissolved and bound CO2 are removed from seawater at 92 percent efficiency by re-equilibrating carbonate and bicarbonate to CO2 and simultaneously producing H2. The gases are then converted to liquid hydrocarbons by a metal catalyst in a reactor system.
“In close collaboration with the Office of Naval Research P38 Naval Reserve program, NRL has developed a game changing technology for extracting, simultaneously, CO2 and H2 from seawater,” said Dr. Heather Willauer, NRL research chemist. “This is the first time technology of this nature has been demonstrated with the potential for transition, from the laboratory, to full-scale commercial implementation.”
CO2 in the air and in seawater is an abundant carbon resource, but the concentration in the ocean (100 milligrams per liter [mg/L]) is about 140 times greater than that in air, and 1/3 the concentration of CO2 from a stack gas (296 mg/L). Two to three percent of the CO2 in seawater is dissolved CO2 gas in the form of carbonic acid, one percent is carbonate, and the remaining 96 to 97 percent is bound in bicarbonate.
NRL has made significant advances in the development of a gas-to-liquids (GTL) synthesis process to convert CO2 and H2 from seawater to a fuel-like fraction of C9-C16 molecules. In the first patented step, an iron-based catalyst has been developed that can achieve CO2 conversion levels up to 60 percent and decrease unwanted methane production in favor of longer-chain unsaturated hydrocarbons (olefins). These value-added hydrocarbons from this process serve as building blocks for the production of industrial chemicals and designer fuels.
E-CEM Carbon Capture Skid. The E-CEM was mounted onto a portable skid along with a reverse osmosis unit, power supply, pump, proprietary carbon dioxide recovery system, and hydrogen stripper to form a carbon capture system [dimensions of 63″ x 36″ x 60″].
(Photo: U.S. Naval Research Laboratory) In the second step these olefins can be converted to compounds of a higher molecular using controlled polymerization. The resulting liquid contains hydrocarbon molecules in the carbon range, C9-C16, suitable for use a possible renewable replacement for petroleum based jet fuel.
The predicted cost of jet fuel using these technologies is in the range of $3-$6 per gallon, and with sufficient funding and partnerships, this approach could be commercially viable within the next seven to ten years. Pursuing remote land-based options would be the first step towards a future sea-based solution.
The minimum modular carbon capture and fuel synthesis unit is envisioned to be scaled-up by the addition individual E-CEM modules and reactor tubes to meet fuel demands.
NRL operates a lab-scale fixed-bed catalytic reactor system and the outputs of this prototype unit have confirmed the presence of the required C9-C16 molecules in the liquid. This lab-scale system is the first step towards transitioning the NRL technology into commercial modular reactor units that may be scaled-up by increasing the length and number of reactors.
The process efficiencies and the capability to simultaneously produce large quantities of H2, and process the seawater without the need for additional chemicals or pollutants, has made these technologies far superior to previously developed and tested membrane and ion exchange technologies for recovery of CO2 from seawater or air.
Navy researchers demonstrate proof-of-concept in first flight of an internal combustion powered model aircraft fueled by a novel gas-to-liquid process that uses seawater as carbon feedstock.
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About the U.S. Naval Research Laboratory
The U.S. Naval Research Laboratory is the Navy’s full-spectrum corporate laboratory, conducting a broadly based multidisciplinary program of scientific research and advanced technological development. The Laboratory, with a total complement of nearly 2,800 personnel, is located in southwest Washington, D.C., with other major sites at the Stennis Space Center, Miss., and Monterey, Calif. NRL has served the Navy and the nation for over 90 years and continues to meet the complex technological challenges of today’s world. For more information, visit the NRL homepage or join the conversation on Twitter, Facebook, and YouTube.
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Since the discovery of the Antarctic ozone hole, scientists, policymakers, and the public have wondered whether we might someday see a similarly extreme depletion of ozone over the Arctic.
But a new MIT study finds some cause for optimism: Ozone levels in the Arctic haven’t yet sunk to the extreme lows seen in Antarctica, in part because international efforts to limit ozone-depleting chemicals have been successful.
“While there is certainly some depletion of Arctic ozone, the extremes of Antarctica so far are very different from what we find in the Arctic, even in the coldest years,” says Susan Solomon, the Ellen Swallow Richards Professor of Atmospheric Chemistry and Climate Science at MIT, and lead author of a paper published this week in the Proceedings of the National Academy of Sciences.
Frigid temperatures can spur ozone loss because they create prime conditions for the formation of polar stratospheric clouds. When sunlight hits these clouds, it sparks a reaction between chlorine from chlorofluorocarbons (CFCs), human-made chemicals once used for refrigerants, foam blowing, and other applications — ultimately destroying ozone.
‘A success story of science and policy’
After the ozone-attacking properties of CFCs were discovered in the 1980s, countries across the world agreed to phase out their use as part of the 1987 Montreal Protocol treaty. While CFCs are no longer in use, those emitted years ago remain in the atmosphere. As a result, atmospheric concentrations have peaked and are now slowly declining, but it will be several decades before CFCs are totally eliminated from the environment — meaning there is still some risk of ozone depletion caused by CFCs.
“It’s really a success story of science and policy, where the right things were done just in time to avoid broader environmental damage,” says Solomon, who made some of the first measurements in Antarctica that pointed toward CFCs as the primary cause of the ozone hole.
To obtain their findings, the researchers used balloon and satellite data from the heart of the ozone layer over both polar regions. They found that Arctic ozone levels did drop significantly during an extended period of unusual cold in the spring of 2011. While this dip did depress ozone levels, the decrease was nowhere near as drastic as the nearly complete loss of ozone in the heart of the layer seen in many years in Antarctica.
The MIT team’s work also helps to show chemical reasons for the differences, demonstrating that ozone loss in Antarctica is closely associated with reduced levels of nitric acid in air that is colder than that in the Arctic.
“We’ll continue to have cold years with extreme Antarctic ozone holes for a long time to come,” Solomon says. “We can’t be sure that there will never be extreme Arctic ozone losses in an unusually cold future year, but so far, so good — and that’s good news.”
The paper is the first to use observational evidence to confirm the chemical processes in polar stratospheric clouds that lead to ozone loss, says Brian Toon, a professor of atmospheric and oceanic sciences at the University of Colorado at Boulder and an expert on stratospheric ozone loss. Previous studies have used computer models or theories to explain the connection between nitric acid in these clouds and ozone depletion.
“It is an excellent example of the relatively rare paper that is clever and insightful,” says Toon, who was not involved in this most recent study. “[It] goes beyond complex computer calculations to demonstrate from observations an important process occurring in the atmosphere.”
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The above story is based on materials provided by Massachusetts Institute of Technology. The original article was written by Audrey Resutek. Note: Materials may be edited for content and length.
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Massachusetts Institute of Technology. “Plugging an ozone hole: Extreme Antarctic ozone holes have not been replicated in Arctic.” ScienceDaily. ScienceDaily, 14
In the first study of its kind, scientists have compared air pollution rates from 1850 to 2000 and found that anthropogenic (human-made) particles from Asia impact the Pacific storm track that can influence weather over much of the world.
The team, which includes several researchers from Texas A&M University, has had its work published in the current issue of Proceedings of the National Academy of Sciences (PNAS).
Yuan Wang, Yun Lin, Jiaxi Hu, Bowen Pan, Misti Levy and Renyi Zhang of Texas A&M’s Department of Atmospheric Sciences, along with colleagues from Pacific Northwest National Laboratory, the University of California at San Diego and NASA’s Jet Propulsion Laboratory, contributed to the work.
The team used detailed pollution emission data compiled by the Intergovernmental Panel on Climate Change and looked at two scenarios: one for a rate in 1850 — the pre-Industrial era — and from 2000, termed present-day.
By comparing the results from an advanced global climate model, the team found that anthropogenic aerosols conclusively impact cloud formations and mid-latitude cyclones associated with the Pacific storm track.
“There appears to be little doubt that these particles from Asia affect storms sweeping across the Pacific and subsequently the weather patterns in North America and the rest of the world,” Zhang says of the findings.
“The climate model is quite clear on this point. The aerosols formed by human activities from fast-growing Asian economies do impact storm formation and global air circulation downstream. They tend to make storms deeper and stronger and more intense, and these storms also have more precipitation in them. We believe this is the first time that a study has provided such a global perspective.”
In recent years, researchers have learned that atmospheric aerosols affect the climate, either directly by scattering or absorbing solar radiation, and indirectly by altering cloud formations. Increasing levels of such particles have raised concerns because of their potential impacts on regional and global atmospheric circulation.
In addition, Zhang says large amounts of aerosols and their long-term transport from Asia across the Pacific can clearly be seen by satellite images.
The Pacific storm track represents a critical driver in the general global circulation by transporting heat and moisture, the team notes. The transfer of heat and moisture appears to be increased over the storm track downstream, meaning that the Pacific storm track is intensified because of the Asian air pollution outflow.
“Our results support previous findings that show that particles in the air over Asia tend to affect global weather patterns,” Zhang adds.
“It shows they can affect the Earth’s weather significantly.”
Yuan Wang, who conducted the research with Zhang while at Texas A&M, currently works at NASA’s Jet Propulsion Laboratory as a Caltech Postdoctoral Scholar.
The study was funded by grants from NASA, the Department of Energy, Texas A&M’s Supercomputing facilities and the Ministry of Science and Technology of China.
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