The End Of Fossil Fuel
By Chris Nelder, 07.24.09, 03:00 PM EDT
Prepare for a radically different lifestyle as global crude oil production peaks and begins to decline.
You will never see cheap gasoline again. You will probably never see cheap energy again. Oil, natural gas and coal are set to peak and go into decline within the next decade, and no technology can change that.
Peaking is a simple concept. We generally exploit natural resources in a bell-shaped curve, with the rate of extraction increasing over time until we reach a peak and then gradually slowing down until we stop using them.
Peak oil is not about "running out of oil"; it's about reaching the peak rate of oil production. It's not the size of the tank that matters, but the size of the tap.
The peak is usually reached when resources become too difficult to extract, or too expensive, or they are replaced by something cheaper, better or more plentiful. Unfortunately, we have no substitutes for oil that are cheaper or better.
According to the best available data, we are now at the peak rate of oil production. After over a century of continual growth, global conventional crude oil production topped out in 2005 at just over 74 million barrels per day (mbpd) and has remained at that level ever since.
The additional "oil" that brings the oft-cited world total to 84 mbpd today (down from 87 mbpd last year; according to U.S. government data) isn't conventional crude, but, rather, unconventional hydrocarbons, including natural gas liquids, "extra heavy" oil, synthetic oil made from Canadian tar sands, refinery gains, liquids produced from the conversion of coal and natural gas, and biofuels.
Oil production is expected to go into terminal decline around 2014. The principal reason is that the largest and most productive fields are becoming depleted while new discoveries have been progressively smaller and of lesser quality. Discovery of new oil peaked over 40 years ago and has been declining ever since despite furious drilling and unprecedentedly high prices.
When it begins to decline, rate of crude production is projected to fall at 5%, or over four mbpd, per year--roughly equivalent to losing the entire production of Latin America or Europe every year. The decline rate will likely accelerate to over 10% per year by 2030.
The Paris-based International Energy Agency estimates that the world would need to add the equivalent of six new Saudi Arabias by 2030 in order to meet declining production and growing demand. Obviously, there aren't another six Saudi Arabias waiting to be discovered, and unconventional liquid fuels simply cannot fill such a yawning gap.
Natural gas is likewise expected to peak some time around 2010-2020, and coal around 2020-2030. Oil, natural gas and coal together provide 86% of the world's primary energy.
By the end of this century, nearly all of the economically recoverable fossil fuels will be gone. From now until then, what remains will be rationed by price. There will be shortages.
Renewable energy--solar, wind, geothermal--currently makes up less than 2% of the world's primary energy supply, and although growing very rapidly, it is not on course to fill the fossil fuel gap, either.
As fossil fuels peak and then decline, the world's economies will be forced for the first time to live within a shrinking, not expanding, energy budget. They will adapt to this new reality by repeating the cycle we saw over the last 18 months: commodity price spikes, leading to economic destruction, leading to supply destruction, leading back to price spikes. Only in recessionary periods, like now, will there be excess supply.
How this will affect the global economy, and our lifestyles, cannot be overstated. Former chief economist for Canadian Imperial Bank of Commerce World Markets, Jeff Rubin, and oil investment banker Matthew Simmons have concluded that it means no less than the end of globalization.
Americans, who constitute 4% of the world population but consume 25% of its energy, will have radically different lifestyles. Production of everything will have to be re-localized. Instead of our food traveling an average 1,500 miles before it reaches us, it will have to come from nearby and use organic methods instead of requiring 10 calories of fossil fuel inputs for every calorie of food we eat.
Rather than shipping ore to China and shipping it back to the U.S. as steel, we'll need to revive our domestic steel industry. "Bedroom communities" will die and ideally be reborn as fully functional independent communities. It means the end of long commutes.
The coming energy shortage is the most serious crisis the world has ever faced, but it could have a very positive outcome. In theory, the Earth's wind, solar, geothermal and marine resources could each provide more than the total energy the world consumes every day, if we had the ability to harvest them.
As fossil fuel prices rise, the price of renewably generated electricity will continue to fall. If we are wise and lucky, we will rapidly improve the efficiency of our built environment, deploy renewable capacity and convert to an all-electric infrastructure that runs on it. Fortunately, political momentum is now leaning strongly in this direction.
If we move fast to re-localize production and proceed with the renewable revolution, we could end the 21st century with a largely carbon-free economy, putting an end to climate change and averting resource wars. We would have healthier food and a safer, more resilient and equitable world.
(Chris Nelder is the author of Profit from the Peak--The End of Oil and the Greatest Investment Event of the Century and the coauthor of Investing in Renewable Energy.)
I was in New York in the 30’s. I had a box seat at the depression. I can assure you it was a very educational experience. We shut the country down because of monetary reasons. We had manpower and abundant raw materials. Yet we shut the country down. We’re doing the same kind of thing now but with a different material outlook. We are not in the position we were in 1929–30 with regard to the future. Then the physical system was ready to roll. This time it’s not. We are in a crisis in the evolution of human society. It’s unique to both human and geologic history. It has never happened before and it can’t possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered.
~M. King Hubbert, 1983
‘Peak oil’ debate is no longer on hold
BusinessDay, South Africa, 2009/07/21
Put a group of oil experts under one roof for a while and their discussion is likely to drift to the subject of peak oil — a point in time when maximum oil production is reached, after which it goes into permanent decline.
The advent of peak oil has long been brushed aside by some because it seems like a far-fetched, if not a ridiculous, idea concocted by alarmists. This is despite deafening cries that it is a real and serious threat.
Even among those who agree that it will happen, views differ sharply on the date . Some, like author David Strahan, say it could be as soon as 2017.
Recent data show that the debate can no longer be dismissed as a figment of the imagination among peak oil “enthusiasts”.
According to the Washington, US-based Worldwatch Institute, oil production is in decline in 33 of the 48 largest oil-producing countries. The research organisation says most of these countries are past their oil production peaks. Iran peaked in 1974, Nigeria in 1979, Venezuela in 1970 and Mexico in 2004.
Saudi Arabia, the world’s largest oil exporter, is expected to reach its peak in 2014, while in Iraq this is estimated in 2018.
Last year’s study by professional services group Ernst & Young showed that in the period between 2003-07, oil production in the US remained flat at about 1,2-million barrels a day.
Oil companies had difficulty in finding investment and production opportunities, say Ernst & Young.
But not everyone is convinced about peak oil. BP chief economist Christof Rühl says the argument for peak oil is baseless. “Peak oil has been predicted for 150 years. It has never happened, and will stay this way,” Rühl has reportedly said. He says oil is about price and not about availability.
Economist Tony Twine of consultants Econometrix echoes the view that price is everything.
“All energy — gas, oil and coal — is exploitable at a given price. If the price falls below a particular price it becomes worthless to produce. That is why I say many of the peak oil arguments are not well based.
“They all assume an oil price at 30, 60 or 200 a barrel,” he says. What is known as “oil availability” differs at different oil prices, Twine says.
“The projections that are being made about peak oil are sensible in particular contexts. But whether they are universally true is another matter,” he says.
Even in 30-50 years’ time, if oil demand is greater than supply, oil prices will rise “and currently unexploitable deposits will become viable to exploit”, Twine says. Oil wells now considered marginal will become profitable .
Twine says there is a tendency to look at oil in terms of its energy content. “But there is a range of products that come out of a barrel of oil — from fertiliser to solvents that end up in paints, washing powder and synthetic fibres. Almost anything that you can see and feel has a little bit of oil in it.
“As oil becomes scarce and more expensive, its use as a source of energy will diminish. But its use as a feedstock for the chemicals industry will take longer to disappear,” Twine says.
Richard Worthington, climate change programme manager for the World Wildlife Fund in SA, says the advent of peak oil should influence how hydrocarbons are used. “It highlights the need for greater efficiency,” he says. Climate change considerations have superseded peak oil discussions.
Worthington says fears of peak oil should not be the main driver of the move away from fossil- based energy sources. At some stage fossils will be depleted, he says. “Now there is talk of peak oil, then it will be peak energy and then peak coal,” he says.
Indeed, depletion of gas and coal reserves is a double whammy. National oil and gas company PetroSA’s Mossel Bay gas-to- liquids refinery is set to run out of natural gas by 2011.
The offshore fields south of Mossel Bay will not be able to keep up the supply of 36000 barrels a day the refinery needs.
The dwindling gas reserves are to be expected, says Twine.
“Gas and oil fields in SA and Mozambique have always been known to be constrained in terms of reserves. They have always been marginal in terms of big investment spending,” Twine says.
However, he believes that the Mozambique gas fields will have a longer life span and are likely to fuel petrochemicals group Sasol for a longer time. Sasol’s synfuels plant in Secunda gets natural gas from Mozambique through an 865km-long pipeline.
(© BusinessDay, SA)
Initially it will be denied. There will be much lying and obfuscation. Then prices will rise and demand will fall. The rich will outbid the poor for available supplies. The system will initially appear to rebalance. The dash for gas will become more frenzied. People will realize nuclear power stations take up to ten years to build. People will also realize wind, waves, solar and other renewables are all pretty marginal and take a lot of energy to construct. There will be a dash for more fuel-efficient vehicles and equipment. The poor will not be able to afford the investment or the fuel. Exploration and exploitation of oil and gas will become completely frenzied. More and more countries will decide to reserve oil and later gas supplies for their own people. Air quality will be ignored as coal production and consumption expand once more. Once the decline really gets under way, liquids production will fall relentlessly by five percent per year. Energy prices will rise remorselessly. Inflation will become endemic. Resource conflicts will break out.
~Colin Campbell, March 2002
Oil And India
By Dr. Vandana Shiva
Oil is a non-renewable resource. We have always known that yet the world has been behaving as if oil is in endless supply. And we in India who have lived in a biodiversity and biomass energy economy are rushing into oil addiction precisely when the global oil supply is running low and prices are running high.
The Association for the Study of Peak Oil (ASPO), an umbrella organization of oil experts, mainly geologists who helped find oil fields are now warning us that there are only a trillion barrels or less of oil left, and the supply will peak within this decade. "Peak Oil", or the topping point, is the highest amount that can ever be pumped. Beyond "peak oil", there will be an overall decline in production and an increase in oil prices. Oil that costs $5 per barrel to extract could become $ 100 per barrel when confidence in supply erodes and demand increases, and there is recognition that we are in a world of shrinking oil supplies, not growing supplies.
Why are we as a country tying our future to a resource that must shrink and become more costly? As we build more superhighways and mega cities, destroying the decentralized fabric of our socio-economic organization, we need to ask how long will this last?
There is another reason to stop this frenzy of oil addiction, and that is climate change, or more accurately, climate chaos. Climate change is caused by fossil fuel emissions, and stabilizing carbon dioxide emissions is an ecological imperative. This is why the Kyoto Protocol to the climate change convention was signed. The insurance industry, which takes over $ 2 trillion in annual premiums, and is bigger than the oil industry, is now a major player in addressing climate change since they have to pay billions out in insurance as cities flood, cyclones such as Katrina uproot entire communities and heat waves kill.
The costs of climate change to the people of India are extremely high. The 1999 Orissa super cyclone and the Bombay floods of July 2006 are just two better-known extreme events linked to a changing climate.
This winter, we had no rains during the wheat season, and heavy downpours during the wheat harvest. Heavy rains before the monsoon in the catchments of the Ganga and Yamuna destroyed crops so that farmers did not even have seeds to sow. And in Sikkim, heavy rains led to landslides, which disrupted Gangtok's water supply. I was in Sikkim during the crisis and we lived on one bucket a day.
The fossil fuel economy is based on two illusions - one, that we can keep up our oil addiction, and two, that substituting renewable energy with fossil fuel has only benefits, no costs. Climate change is very high cost of an economy based on oil. We are starting to eat oil and drink oil. Oil is at the heart of industrial food production and processing, and long distance food transport. The wheat, India is importing is not just bringing weeds, pests and pesticides. It is also carrying thousands of "food miles". Imagine a Tsunami or cyclone if our food supplies become dependent on wheat from U.S and Australia. And imagine the cost of wheat as oil prices rise, and wheat embodies more oil than nutrition.
We are also drinking oil, not water. When Coca Cola and Pepsi pump 1.5 to 2 million gallons a day to fill their soft drink and water bottles, and transport them to the remotest part of India, water embodies oil both in its extraction and transport. It is increasingly impossible to find clean water in our wells and springs. But Aqua Fina and Kinley has reached every village, selling water which has become oil, packaged in a plastic bottle made from oil.
While the political parties protest against the hike in oil prices, society also needs to start taking a long-term view of the ecological, economic and social costs of our growing oil addition. We need to start addressing strategic issues of real and sustainable energy security in the context of peak oil, the end of cheap oil, and the climate chaos that the era of cheap oil has left as an environmental burden on the planet.
(Dr. Vandana Shiva is a physicist, ecologist, activist, editor, and author of many books.)
“For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.”
Future Demand Will Outstrip Supply And OPEC Can’t Help
By A. F. Alhajji
Either EIA &IEA projections are wrong, or a crisis appears to be imminent. The World Energy Outlook 2000, compiled by the U.S. Energy Information Administration (EIA), and the International Energy Outlook 2001, authored by the International Energy Agence (IEA), indicate that oil production in the Arabian Gulf States must almost double by year 2020 to meet rising world demand.
The EIA outlooks states, 'The reference case projection implies aggressive efforts by investment capital, to implement a wide range of production capacity expansion. However, the combination of potential profitability and the threat of competition from non-OPEC supplies argues for the pursuit of an aggressive expansion strategy.'
"The reference case requires Gulf states to increase their oil production 80% by 2020. This means adding about 13 million bopd by 2020--with Saudi Arabia increasing its capacity by more than 7 million bopd, to about 17 million bopd. This seems highly unrealistic. So, either EIA & IEA or a supply crisis is coming, because Saudi Arabia and its neighbors cannot increase production by 80% for many technical, financial and political reasons."
Mistaken projections. Two recent studies by prominent oil market experts Guy Caruso (Center for Strategic and International Studies, Washington) and Prof. Deromt Gately (New York University) show that such EIA and IEA projections are wrong. In his study, 'How likely is the consensus projection of oil production doubling in the Persian Gulf?', Gately states, 'Such projections are not based on behavioral analysis of Gulf countries' decisions. They are merely the calculated residual demand for OPEC oil, the difference between projected world oil demand and non-OPEC oil supply.'
( A. F. Alhajji, "Will Gulf States Live Up to EIA and IEA Projections?"" World Oil, June 2001)
Petrol..., you have created another problem. Already there are problems. You have created, by so-called civilization, petrol problem. Before these motorcars, the people were living very happily. They were transporting. But there was no such civilization that for your earning livelihood you have to go hundred miles away from your home to work there. Therefore you require vehicle. Then you require petrol. Then you require so many nice road. So many things will be. But formerly, it was village. They will take it, “This is primitive.” But remaining primitive, you were more happy than becoming so-called civilized, creating so many problems.
~ Srila Prabhupada (Lecture on Srimad-Bhagavatam, Hawaii, January 17, 1974)
People are always saying the world will end and it never does. Maybe it won’t this time, either. But, frankly, it’s not looking good.
A World Following In The Footsteps of