The Future of Our Energy Supply
In this blog, we discuss that because the World is so dependant on oil society needs to start moving in the direction of other energy sources immediately to offset future economic, social and political consequences of peak oil. Add in the environmental reasons and the direction is obvious: Renewable Energies must be integrated into the energy mix starting now.
Currently the World does need oil and the World is dependant on oil. World consumption this year reached a record high 84 million barrels per day (mbpd), just over 1000 barrels per second (remember this number for later). Note that I don’t particularly like to quote George Bush, but even he has admitted: “here we have a serious problem, America is addicted to oil”. In Canada, we are no different, and perhaps even more reliant with our colder climate and long transport distances.
It is unwise, naive, unsustainable and ignorant for us to believe that we can go on consuming non-renewable energy sources forever. That is the exact definition of non-renewable. Fossil fuels are finite and are being depleted, period. One day in the future, when half of the total amount of existing resources have been extracted, worldwide production will begin to decline irreversibly regardless of demand, regardless of investment, regardless of new wells drilled. This is a physical reality and is called Peak Oil.
The concept of Peak Oil was first defined by M King Hubert in the 1960’s when he announced to the world that the United States would reach peak sometime between 1965-1970. His colleagues mocked him believing that advances in technology would drill the US out of any oil shortage. In retrospect, his prediction was correct as seen in this chart showing US Oil Production and Imports:
US is now a net importer of oil- they consume approximately 20 mbpd yet produce only 6 million barrels.
Every existing reservoir has this same bell-shaped curve production profile and it is only commonsense that the worldwide production profile will assume the same shape. When will world Peak Oil occur? No one knows with any certainty but there are numerous analysts and scientists vigorously studying this question and oil production is in decline in 33 of the 48 largest oil-producing countries.
A quick google search of “Peak Oil” proves that this event is on the minds of a lot of people- including Michelle and I. We have spent the last few years closely following publications, have read 4 books and seen three documentaries on the subject (all listed below), talked to numerous people, followed Internet websites and tried to ensure that we are well informed. Unfortunately, what we have learnt is a little frightening.
Here we have a chart compiling world production forecasts from numerous sources including: ASPO (The Association for the Study of Peak Oil), British Petroleum, Deffeyes (A geologist formerly at Shell and now a professor at Princeton University) and other reputable scholars and energy analysts.
World production forecast Made by Khebab of The Oil Drum:
Also listed in the table below are a number of other petroleum geologists, analysts, economists and scientists with their estimated peak production date. Click on the hyperlink if you want more information on any of the sources.
Matthew Simmons – 2007-2009, Skrebowski – After 2007, Deffeyes – Before 2009, Goodstein – Before 2010, Colin Campbell – Around 2010,World Energy Council – After 2010,Laherrere – 2010-2020, EIA (Nominal) – 2011, CERA – After 2020,Shell – 2025 or later.
And so, it appears from the above that many well-reputable energy experts and scientists are expecting the World Oil Production to peak in the very near future (0-15 years).
Alright, what does all this mean? What are the consequences? Nobody is entirely sure, but as peaking is approached (or surpassed) fuel prices and price volatility will surely increase dramatically.
We are used to, and have built our entire modern infrastructure on the basis of cheap abundant energy. To give you an idea of how addicted we are, here are some facts and statistics that you may find interesting:
- The majority of our food supplied is entirely dependant on oil. For every calorie of food, the average North American consumes 10 calories of hydrocarbon energy. Hydrocarbons are used in the tilling of soil, planting, fertilizing, pesticides, harvesting, transporting, processing, packaging, distribution to stores, refrigeration, and finally in cooking.
- World transportation (land-based vehicles, ships, planes) is over 98% dependant on petroleum. Also, in North America, 2/3 of the total amount of energy is attributed to transportation.
- A barrel of oil contains the energy equivalent of almost 25,000 hours of human labour.
- According to the American Automobile Manufacturer?s association, 1 out of every 7 jobs in the US is dependant on automobile manufacture.
A recent report commissioned by the US Department of Energy was prepared by Dr. Robert Hirsch. Hirsch investigated how long it would take to transition the economy from oil to alternate forms of energy. He also investigated the economic, social and political costs of inaction or untimely mitigation.
The main conclusions of his report are:
- World oil peaking is going to happen, and will likely be abrupt.
- Oil peaking will adversely affect global economies, particularly those most dependent on oil.
- Mitigation efforts will require substantial time: 20 years is required to transition without substantial impacts.
- A 10 year rush transition with moderate impacts is possible with extraordinary efforts from governments, industry, and consumers.
- Late initiation of mitigation may result in severe consequences.
Hmmm… let me recap the two last points: (a) it appears that an optimistic prediction of world oil production peak is within 20 years (estimate from Shell) and (b) a 20 year transition is required to relieve the world of substantial economic, social and political impacts. This is a clear indication that although the World currently needs oil and is dependant on oil we need to start moving in the direction of other energy sources immediately. Add in the environmental reasons and the direction is obvious: Renewable Energy must be integrated into the energy mix starting now, and it must be the way of the future.
Alright, now you may be thinking, “this guy is a crazy, there is no way that oil is in short supply… how can he claim that the world is running out of oil??”. And so let me make this clear: I did not say the world is running out of oil, I am discussing Peak Oil, i.e. when we’ve hit the half-way point and the point of time in which supply exceeds demand.
What about technological advances? Won’t technology advances continue to allow the human civilization to maintain the increase in the production of oil? In response, here are two quotes from respected energy gurus:
Colin Campbell: “there is a strange irony related to this subject, that is, the better that you do the job of exploiting oil and gas the sooner it is gone.” Mathew Simmons: “All of these great tools that ended up being great enhanced production techniques were basically super straws just sucking the last easy oil out of the ground at faster rates, and to no extent significantly increasing the amount of oil from a significant oil field.”
What about the Oil Sands? Isn’t there more oil in the Alberta Oil Sands than in Saudi Arabia? This is true however tar sands oil is much harder to extract than conventional reserves. In the early days of North American conventional oil, the net energy yield was greater than 100:1. This has declined and is now at closer than 20:1. Oil Sand extraction results in something like 1.5 units of energy yielded for 1 unit of energy expended. Add in the substantial cost increases and overruns seen by all of the Oil Sands projects and it is clear why Oil Sands oil costs nearly $28/barrel while Iraqi oil costs roughly $2. Currently the Alberta Oil Sands produce approximately 1mbpd with an anticipated production of 3 mbpd by 2015. Remember that number from the beginning of this blog? 1/84= 1.2%. The Oil Sands contribute less than 2% of the current global consumption. Even at 3 mbpd, this contribution to global supply is not significant, especially considering that demand will have increased while global supply may be decline?
What about the Middle East? This is somewhat complicated to discuss in what was meant to be a short blog, but I will highly recommend, for those interested, Mathew Simmons recent book “Twilight in the Desert”. In the book Simmons explains how the Middle East is basically out of capacity.
What about Nuclear? My views on that subject deserve (and will receive) a separate blog. Briefly, consider that a large scale switch over to nuclear power would take 10,000 of the largest nuclear power plants to produce the same amount of energy use from fossil fuels for North America alone. And this does not even solve the transportation issue. At 3-5 billion dollars per plant (not including the decommissioning costs) and the 10-15 year timeframe from planning to construction, I do not believe nuclear to be a realistic option. Above all, I do not believe Nuclear to be a “green” energy solution.
Albeit worrisome, all of this provides a great opportunity for new technologies and the advancement of Renewables. In one of our next blogs we will talk about how the Thisted community here in Denmark uses over 80% renewable energy for household heating and electrification of the grid.
Peak Oil Books: (i) The Party is Over, Richard Heindberg. (ii) Twilight in The Desert, Mathew Simmons. (iii) High Noon for Natural Gas, Julian Darley. (iv) A Thousand Barrels Per Second, Peter Tertzakian.