MORE ECONOMICS...

At least one oil economist does not believe the price of oil will continue to rise; in fact, he predicts that the real price will plummet to half its present price by the end of the decade. North America will be nearly self-sufficient, oil stocks will be dumped, Arab oil will be the cheapest in the world and Sheikh Yamani [or your life] will lecture at the Harvard Business School.

So said Prof. Fred S. Singer of the University of Virginia (a long-time subscriber to this newsletter, by the way) at a recent meeting of the American Independent Petroleum Association in an Francisco, elaborating on his articles in the Wall Street Journal (4 Feb. and 21 Apr. 81). Main reason: substitution of coal and (abroad) nuclear in power plants. Among the other reasons is the Soviets' fuel substitution to enable them exporting oil for hard currency.

Wishful thinking? Wishful or not, it's thinking: He makes his points with persuasive logic based on hard data.

As for the cost of coal vs. nuclear, it seems probable that if the current astronomical cost of delays and prohibitive regulation continues to be inflicted on nuclear power, its cost will be driven beyond that of coal. (Ordinarily, the higher investment in a nuclear plant is more than offset by the far lower fuel cost.) Yet in spite of the persecution, nuclear is still holding its own, and in places even increasing its economic edge.

At the AIF fuel cycle conference in Los Angeles last March, George Rifakes, Vice President of Commonwealth of Chicago, reported his utility's busbar costs of a kilowatt hour for 1980: 7.6 cents for oil, 3.4 cents for coal, 1.7 cents for nuclear (with a smaller, but still distinct edge for new plants, which increases over the life of the two plants). This particularly favorable case is caused, in part, by Chicago's distance from low-sulfur coal fields and by early investment in nuclear plants (i.e., before obstructions jacked up their cost). However, another reason is the superior reliability of nuclear plants in this utility: availability (fraction of time available) averaged 79.5% for nuclear, and 67.6% for coal; capacity factor (average to capacity power) was 63.5% for nuclear and 45% for coal.

But after all these figures comes the tragic punchline: Rifakes warned that utilities now make power plant decisions more by perception of the regulatory future than by economics. A point to be recalled when Lovins masquerades as a free ,marketeer.