World ASPO Conference - Final thoughts
Sunday, October 29, 2006 at 9:31PM I have learned that ASPO-USA will be posting the PowerPoint presentations from the conference in a week, so I will spare myself the labor of transcribing my notes. That is, unless there is a great popular outcry for immediate gratification.
I will, however, offer up some observations about what I heard and saw over those two days.
The ASPO crowd, both presenters and audience, were a heterogeneous lot. I saw a lot of business suits and professional casual, and a few “soul patch” beards and dreadlocks. Some were touting oil shale and coal liquefaction, while others dismissed that and promoted renewable energy. There were contradictory presentations in sequence by Bill Reinert, the president of Toyota USA and Andy Frank of UC Davis on the speed and feasibility of the introduction of plug-in hybrid vehicles (PHEVs). Reinert spoke of a slow, difficult development and introduction with a long time before serious market penetration, while Frank said exactly the opposite.
Nevertheless, there was general agreement on some main points. These had a lot to do with the timing of both fossil fuel depletion and the responses to it.
1) There’s not a huge gap between the optimists and the pessimists on peak oil.
The range of predictions for peak oil varied from December of 2005 to 2020, with a cluster around 2012. Robert Kaufmann, one of the old hands of depletion modeling, pointed out that one could vary the number for the amount of oil reserves left by a factor of two and still not shift the peak by more than about six years.
2) Increased exploration and drilling isn’t paying off.
David Hughes, a Canadian Government geologist, along with a number of others, pointed out that the physical and financial efforts around the world to find more gas and oil have been increasing dramatically. Meanwhile, the actual amounts of gas and oil discovered are holding steady or declining. The best case scenario is analogous to the Red Queen in Alice in Wonderland, running as fast as she can to stay in one place. The oil and gas situation is worse, with companies multiplying their investments for diminishing returns. Quadrupling the number of gas drilling rigs in North America since 1996 has kept the reserve to production ratio (the theoretical “out of natural gas” date) about ten years ahead, with a 3% decline in production.
3) Worldwide demand is increasing despite high prices
Oil is so vital, so interwoven into developed economies, that high price doesn’t destroy demand. In fact, many people in the developing world are trying to get their hands on more of it. In a recent poll, 13% of people in the three largest cities in China intended to buy a car in the next year. At present rates of growth, the number of cars in the world could triple in the next two decades. That is, if there is still enough oil to fuel them. We are cruising towards the peak with the pedal to the metal.
4) The most optimistic assessments keep getting shot down by new data.
For example, the EIA has downgraded its initially optimistic predictions for natural gas production every year since 2001, as new data came in. What was once a healthy graph headed for the sky is now flat.
5) Major oil producers have inflated their reserve numbers, generally by a factor of two.
If you look at a graph of stated reserves for OPEC members, each line, somewhere in the last 25 years, has a sudden jump, with no apparent justification.
6) The alternatives to conventional crude oil are expensive and a long way off.
You can’t pull a coal to oil plant out of your pocket. After all the design and permitting, it still takes about four years to construct and start up. This increases to eight years for an oil shale facility. The cost per barrel is really unknown, except that it will be $70 a barrel and up, with huge upfront capital costs. Likewise, renewable energy sources, although they can deploy quickly, are an infinitesimal part of our present energy picture. Even at breathtaking expansion rates, it would take decades for them to make a significant impact.
7) Many alternatives to conventional oil take too much energy to be practical.
Cutler Cleveland pointed out that even if we take the most optimistic energy profit ratio (EPR, energy used compared to energy gained) for ethanol, it would be impractical to run our present fleet on it. As he put it, “Two thirds of us would be working in the ethanol industry.” The energy profits on oil shale and coal liquefaction are low, as are those for tar sands.
8) The energy profit on fossil fuels is declining
The EPR of newly discovered oil used to be 100:1, that is, it took the energy of one barrel of oil in exploration, equipment, and pumping to get 100 barrels out of the ground. Now newly discovered oil is well below 10:1 and dropping. When we look at numbers for oil reserves, we should consider that the last 20% in the ground might take more energy to extract than it contains, rendering it useless. Some of the new deepwater oil drilling that is being touted as saving us may soon be futile.
9) Market forces won’t work.
The price of oil is so volatile that oil markets can’t get clear signals. Even if they could, these markets hardly ever look more than a couple of years out, and with volatility, even less. Relying on market forces to drive our reaction to oil depletion is like putting an impact sensor on your car’s bumper to tell you that it is time to design and construct a seatbelt. We need a level of forward thinking, hard nosed policy that is now lacking in government at all levels.
10) All the factors above will combine to impose sudden and dramatic lifestyle changes on us.
The effects of fossil fuel depletion and our lack of preparation will have economic, political, military, and social consequences the like of which we have not seen since the first half of the 20th century. We are looking at economic depression, inflation, and rising interest rates, partly due to energy inflation and partly due to the collapse of the dollar as an international reserve currency. We will experience the effects of political unrest at home and abroad. Many of the services, conveniences, and activities we now take for granted will be increasingly expensive. As I have noted in a previous post, some economic models predict that a 4% shortfall in supply would produce a price per barrel of $160. How would you be living if the gasoline that gets you to work, the diesel that grows and delivers your food, and your heating oil all cost $7 a gallon?
The only thing that could change fast enough to make a difference would be human behavior. Likewise, only changes in human behavior can be implemented fast enough to forestall the inevitable shortfall till we are halfway ready for it. The answer lies in the boring inconvenient things: driving less, carpooling, using mass transit, turning the lights off, and easing back on the thermostat, and so on, and so on….
Tragically, it always comes back to our bad habits.
Reader Comments (4)
Coal Liquiefaction is the answer to:
#1 Terrorist Cuts their money supply..let them drink their oil
#2 Clean diesel fuel...meets EPA standards for the next 10 Yrs.
#3 You can't eat Coal..other fuels are made from food products
#4 Revitalizes our Countries economy, good paying jobs
#5 Makes Appalachia a good place to live again
#6 US alone has 250 year coal reserve...do you think we can come up with something better in that time frame?
Thanks so much for your comments--I attended the conference last year and wanted a summary exactly as you provided. I live in the four corners area in Colorado where the peak (or cliff) in coal bed methane is dramatically effecting drilling (more quicker) as production declines.
Seems to me the EIA Annual Energy Outlook 2006 (AEO2006) charts projections for oil and natural gas to 2030 are quite naive. http://www.eia.doe.gov/oiaf/aeo/gas.html
Any discussion about recent advancements in solar and nanotechnology and role of same in PO mitigation?
Wayne Schumacher
Thanks for the responses.
David, point by point:
#1: An underappreciated factor - surreptitious financing of violence by the Saudis and others
#2: The eventual diesel may be burned cleanly, but the coal to liquids process itself carries a 2:1 CO2 penalty compared to crude.
#3: Arable land is not infinite - we need to focus on closing waste loops for biofuel rather than growing crops.
#4: Keeping the money at home is one of the great side benefits of alt-energy.
#5: Mountaintop removal and the resulting environmental destruction and groundwater contamination make me question this. Post-mining remediation cannot bring the land back to what it was.
#6: The U.S. definitely has large coal reserves. How much of thm we can afford to burn, given global warming, is a question, as is the percentage that can be extracted at a positive EROI.
Janine confirms what seems to be happening in every gas producing region: The "Red Queen on Steroids" effect.
Wayne: It seems that everyone at the conference was with you on the EIA - naive optimism. Go to the right-hand sidebar and click on "posts archived by category," and then click on "energy." You'll find an article on a company called Nanosolar.