Peak Oil Matters

Ponder what it means that half of all the oil ever burned has been burned over the past 22 years and wonder about where the supplies will come from to fund the next 22 years. [1]

Thanks to Adam Smith and those who followed him, especially the current neoclassical economic theologians, we have seen such an increase in the world’s wealth and sheer numbers that it is hard to imagine life before the industrial revolution, with its shift from mostly human and animal muscle power to the energy dense fossil fuels—coal, oil, and natural gas. It is also hard to imagine that humanity could someday slide back into another age of scarcer and more expensive energy, but that is a possibility that cannot be excluded from our thinking. [2]

Obligatory disclaimer: We’re not running out of oil; at least not for many decades to come. If that were the only issue Peak Oil focused on, further discussions would be pointless.

But it’s not the only issue….

As difficult as it is to accept, life as we’ve known it and long expected/taken for granted will all too soon no longer be the same. Why?

Industrial civilisation’s entire economy is based on a finite resource we treat as infinite….
Our current global economy is based on continual growth, and that growth depends on cheap energy. [3]

Oil which was previously too expensive to exploit becomes economic with a rising oil price. To the uncritical observer, it might seem as if there is nothing to worry about in the oil market.
Unfortunately, there is something to worry about, at least if we want a healthy economy. The new oil reserves we’re now exploiting are not only more expensive to develop, but they also take much longer between the time the first well is drilled and the when the first oil is produced. That means it takes longer for oil supply to respond to changes in price….
If what we care about are the effects on the economy, it does not matter how much oil is in the ground. Over the last ten years, we have see a structural change in the oil market which will continue to have far-reaching effects on the economy even if we manage to increase the amount of oil produced….[4]

Worldwide, the average EROI* [defined in most cases as Energy Returned On Investment, or EROEI: Energy Returned on Energy Invested, with minor variations - my comment] of oil is down to 20:1 from its original value of 100:1 eighty years ago. This means that our oil-fueled economy simply has less capacity to generate wealth than it did back then, because an increasing share of the energy that used to be dedicated to producing goods and services is being plowed back into securing energy.
Even more troubling than oil’s 20:1 global average is the figure for new oil, just 5 to 1. It takes a lot of energy to drill five miles under the ocean and pump crude back to a refinery, or to cook tar sands to extract a usable fuel. The energy wellspring at the heart of our economy no longer gushes a torrent of wealth; it’s a smaller, much-diminished stream. [5]

* Back in November, in the course of offering some commentary on an article denying the validity of Peak Oil and EROI/EROEI specifically, I quoted from a terrific Jim Quinn article (here) in which Jim explained the concept as follows: “EROEI is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource. When the EROEI of a resource is less than or equal to one, that energy source becomes an ‘energy sink’, and can no longer be used as a primary source of energy. Once it requires 1.1 barrels of oil to obtain a barrel of oil, the gig is up.”

I then added my own observation: “More effort; more costs; more time; more difficulties in general; less inclination for countries to give up all they have left; increasing demand; less supply day-by-day simply because we’re taking out something that isn’t being replenished … all those factors add up to investing more to get less. That’s not good math.”

For all the misplaced optimism in the Magic Technology Fairy riding to the rescue as a result of the wonder of “human ingenuity” and the vast-massive-planets-full of unconventional fossil fuel just waiting for someone to stop by and extract it all, we cannot and will not go back to the means and methods of growth and prosperity we’ve long enjoyed. No one is falling off the cliff tomorrow or “soon”, but the path has been carved out for us.

As Dahr Jamail also noted (from one of the articles referenced above): “Oil touches nearly every single aspect of the lives of those in the industrialised world. Most of our food, clothing, electronics, hygiene products and transportation simply would not exist without this resource.”

I’ve argued consistently that this potentially unpleasant recognition of our dependence on this finite resource and the undertakings necessary to adapt do not equate to failure or decline or defeat unless that is what we choose by neglect or fear or passivity. We have choices….

Not just our “leaders”, but each of us with any concerns about our own future prospects, to say nothing for those in generations to follow, need to start asking and answering some fundamental questions. To state but one: Where and what are the best opportunities for growth and prosperity going forward, given the eventual displacement of abundant fossil fuel resources at the ready?

“Sacrifice” in some measure is the only way to move forward and sustain ourselves. Any insistence on the same business-as-usual models will eventually doom us. In many cases, we are going to have to create industrial, commercial, cultural, and transportations systems entirely anew (or at the very least re-build extensively). Relying on current conditions, false hopes, practices and customs of the past, or just tinkering only along the edges simply won’t work. Just because we won’t necessarily be confronting these realities next month or next year or in three years is not an excuse to postpone the thinking and planning needed.

Eric Zencey added this sobering thought to the quote above: “Everything our economy accomplishes, including health care, government, schools, roads, defense, repairing our aging infrastructure and re-engineering our built environment to handle the changed weather that oil use has given us, is going to have to be financed from a much-diminished EROI.”

Also not good math. We do have choices….

Crisis, or opportunity?

Sources:

[1] http://www.energybulletin.net/stories/2011-10-24/commentary-oil-and-economy; Commentary: Oil and the economy by Chris Martenson – 10.24.11 [Original article: http://www.aspousa.org/index.php/2011/10/oil-and-the-economy-by-chris-martenson/ ]
[2] http://ourfiniteworld.com/2012/01/09/the-faustian-bargain-that-modern-economists-never-mention/; The Faustian Bargain that Modern Economists Never Mention by Dr. Gary Peters – 01.09.12
[3] http://www.truth-out.org/oil-perpetuity-no-more/1329922349; Oil: In Perpetuity No More by Dahr Jamail – 02.22.12
[4] http://www.forbes.com/sites/tomkonrad/2012/01/26/the-end-of-elastic-oil/; The End of Elastic Oil by Tom Konrad – 01.26.12
[5] http://www.energybulletin.net/stories/2011-07-18/new-austerity-and-eroi-squeeze; The new austerity and the EROI squeeze by Eric Zencey – 07.18.11 [Published by The Daly News on Mon, 07/18/2011 - 08:00; Original article: http://steadystate.org/new-austerity-eroi/ ]

What kind of a nation do we want to be?

This will be, if not the most important question we’ll collectively ask ourselves in the months and years to come, in the top 2 or 3.

The answers we produce—“we” being our political leaders, our business leaders, the media, and perhaps most importantly: each and every one of us—will obviously determine the strategies we adopt and the successes and prosperity which (we hope) will remain available to us. In this new series, I’d like to offer my two cents’ worth and provide some talking points to help us sort things out.

If we are not standing at the most critical crossroad of our industrial and economic history, the signs on the side of the road are letting us know it is coming up soon.

We face some challenges. The headlines tell us all we need to know about employment and economic woes, the increasingly disheartening hypocrisy and gamesmanship that continue to define politics here in America, and a growing unease about the direction of our country. I begin writing this post only 24 hours after the tragic, senseless, idiotic massacre in Arizona that nearly claimed the life of a by-all-accounts well-respected Congresswoman, and did in fact kill several other just-as-innocent bystanders. (A nine-year-old girl? Really? How is that justified under even the most insane of insane defenses?)

Climate change evidence continues its daily march into reality—the inability of deniers to grasp simple truths notwithstanding. And atop and amid all of these lovely and encouraging challenges, we have some fossil fuel resource problems knocking on our door.

Let’s hope that the convergence of these issues sparks a different level and quality of public discourse. Most would be hard-pressed to think that that would not be a good thing….

As I and others have taken great pains to explain, if we have not yet reached the point where we have extracted and sent to market the highest level of oil production we’ll ever attain (I think we have, as does the International Energy Agency, among others much more in the know than me), we’re pretty damn close. And as I and those same others have taken other great pains to explain, we’re not on the verge of imminent collapse, either. The process of ever-declining oil production, and thus ever-declining amounts of oil available to us, will unfold over a fairly lengthy period of time. I have no plans for a Chicken-Little-Sky-Is-Falling party anytime soon. Despite the efforts of peak oil deniers to attribute this false claim to us, we are not running out of oil—at least not for many decades.

That does not mean we are problem-free for years or decades to come, however. We need to shine some light on that distinction while starting the very lengthy and complex process of transitioning our everything away from never-ending reliance on fossil fuels … oil, specifically.

There are still many billions of barrels of conventional oil still buried underground, and perhaps many more billions—hundreds, perhaps—of unconventional supplies buried as well. If that’s where the discussion could end, then Peak Oil would indeed be the rantings of another group of paranoid conspirators rightfully ignored as should be those who continue to think President Obama was born on Mars or wherever.

But it’s a wee bit more complicated than that.

The fact that we may have enormous quantities of unconventional reserves/resources underground isn’t the be-all and end-all of the are-we-or-aren’t-we-running-out-of-oil discussion. What must be understood more clearly is that having those presumed resources in the ground is one thing and all fine and well as a starting point. But getting unconventional resources (by fact and definition available only with considerable extra effort, time, and cost) out of the ground and into the marketplace at reasonable costs and in reasonable time frames while conventional supplies continue to decline is a very, very different thing. They are called “unconventional” for a number of reasons, after all!

If it costs more (and let’s not even discuss the environmental degradation and water resource consumption issues that are part and parcel of unconventional oil extraction and production), takes more time to get to the market, is of lesser quality, and clearly much more difficult to extract, the math doesn’t work. Unconventional resources aren’t the answer … not even close. (Tighter supplies of the conventional fossil fuels our engines are designed to burn means higher costs at your local gas station, for one thing. Anyone experiencing anything like that nowadays?)

Demand worldwide is increasing, regardless of where the charts suggest U.S. demand might be right now. As much as we like to admire our exceptionalism and burnish our lofty perch as the One and Only, we’re not alone on the planet, and what we want isn’t the beginning and the end of discussions about resource consumption and supply.

There are many billions of people on this planet who do not now enjoy and have never enjoyed the levels of growth and prosperity this nation has been blessed with, and there are very few among those billions who would not like their own chance at their own version of the American Dream—tarnished and bruised though it may be. We—they—are confronted with a pretty simple yet very powerful obstacle, however.

Finite resources are … finite. Not infinite. Not not finite. Whatever spin one may wish to employ to make the problem go away, the math is what it is. It takes some impressive contortions to suggest that the increasing demand clashing with declining supplies shouldn’t concern any of us. In one sense, those deniers are correct on the “any of us” scale … it concerns all of us.

Production is declining, however slowly that may be; unconventional resources are not making up the difference; alternative energy supplies are many, many years away from supplanting the fossil fuels we’ve depended on for the last 150 years or so, more people are asking for more of this declining resource, we don’t have an infrastructure in place to accommodate the requirements of non-fossil fuel resources, and there is no magic out there which will enable the increasing demand to be satisfied in full, at acceptable prices, quality, or timeliness. That is not going to change, and not going to get better. A month bump-up in production here and there sounds wonderful, but long term, it means next to nothing.

Facts are indeed annoying as hell. But the sooner more of us take the time to understand and appreciate what we must deal with, the sooner we can devise and then employ the strategies we’ll need, and the sooner we unleash the still-awesome capabilities of this nation and its remarkable citizenry to create a future that may just turn out okay despite our seemingly-best efforts to keep screwing it up.

I am by temperament a very optimistic person, and it is that attitude that will guide my efforts in this humble little blog to get us thinking and being and doing differently. Not easy? Check. Highly idealistic at the moment? Double check. Not enough to dissuade me? Triple check.

We need to take a look at where we are and what we are doing in a world now filled with relentless and great change, complexity on levels never before imagined, and widespread hopes for progress intersecting on the back side of a nearly-overwhelming global financial crisis. At the same time, these circumstances demand that we come to some better understandings and decisions about what we are doing to both adapt to energy and environmental concerns as well as participate in that adaptation if we continue to hold on to hope.

That’s the hyper-broad overview….

Recognition that change is taking place is the first step to then embracing it and participating in its evolution. Opportunity, or crises?

I’m no historian, but my vague recollections of American History suggest that “difficult” has never been the one insurmountable obstacle that has kept us from achievement. No reason to change that now.

I’m going with “Opportunity”, and will devote most of my posts in these next few months to exploring what that means and what we might do to seize the moments that now present themselves. Hope you’ll stay tuned.

To be continued next week….

Before I leave to visit my daughter next week (there will be no further scheduled posts until the week of April 4 at the earliest), I thought it was worth mentioning that a recently-issued report (here) strongly suggests we’ll reach Peak Oil in 2014, at least 5 or 6 years earlier than most other predictions. This report (written by a petroleum engineer and his colleagues from Kuwait University) has garnered a fair amount of attention in recent weeks. For those who enjoy more technical explanations, this may do the trick!

While some countries (including the United States) have recently experienced an uptick in oil production in recent months, the general trend by most indications continues to point to Peak Oil’s arrival much sooner than most experts thought as recently as 2 or 3 years ago. The surge in production thus appears temporary at best. A nice article (here) explains why that may be so.

Oil supplies close to half of the world’s energy, and almost all worldwide transportation is fueled by oil. When demand outstrips supply, whether that’s in 2014, 2020, or some date nearby, we’re going to face major upheavals in how we all conduct our lives. The naysayers who suggest we have zillions of barrels of oil still left in the ground do all of us a tremendous disservice by failing to explain that most of those reserves (if indeed they are correct in their estimates) are more difficult to locate, extract, refine, and produce. That means they cost a lot more, and if the price is prohibitively expensive, then it really won’t matter much how much is left in the ground. It will stay there, and while I’m no expert, I am confident that oil (or its cousins like the tar sands or oil shale) won’t do any of us much good buried underground.

My next series of posts will be devoted to a more detailed explanation of oil’s many roles in modern society. We would all be better served if we start thinking how much we rely on oil, how much of our lives will be impacted when the supply is not quite so readily-available or relatively inexpensive at it now is, and just how much will have to change—and how long such changes might take.

The sooner we start considering this, the sooner we can start taking action and seizing opportunities to prepare ourselves for changes that geology is going to impose on us—whether we like it or not.

Hello again!

In my last post, I took a brief look at some of the facts suggesting that we are indeed at or very near the point when our planet’s maximum rate of oil production has been reached.

Today, I’ll point out some of the more popular arguments here in the U.S. disputing Peak Oil. As I’ll do with the information from my prior post, I’ll likewise expand my examination of this material in future discussions.

Four popular arguments against Peak Oil are discussed below (although they are not necessarily the primary debating points). In no particular order, these refutations are as follows:

• there are billions if not trillions of barrels of “unconventional” oil in the shale deposits of the western United States
• there are comparable amounts of unconventional oil in western Canada (the oil or “tar” sands of Alberta), and thus the  combination of these oil resources will supply us with all the oil we need for hundreds of years
• the Arctic region/Arctic National Wildlife Refuge (ANWR)/offshore areas here in the U.S hold billions of barrels of oil
• technology will be developed to boost oil production in existing fields or aid in the discovery of as-yet undiscovered fields

While reminding you that I lack the professional expertise of an engineer or geologist, I nonetheless do not challenge the range of estimated oil resources touted in the Alberta oil sands and America’s oil shale deposits.

Where I take issue is that the related facts and details about production and extraction of shale and sand are all too often conveniently omitted when these massive resources are hailed as the solution to any oil supply problems we might face. Just throwing out the phrase “trillions of barrels” is at best disingenuous. (Despite other arguments suggesting similar amounts of conventional oil reserves, most experts state with about 90% certainty that there are about 1.2 trillion barrels of crude oil reserves. [1]) Resources are not the same as reserves. There are no guarantees that “resources” can ever be successfully produced.

In more than thirty years of attempted production, about 110 million barrels of oil have been produced from oil shale (principally in the Bakken region of Montana and North Dakota). [2] That’s not per year. That’s a thirty-plus year total. (Our nation uses somewhere around 20 million barrels per day; worldwide the usage is approximately 85 million barrels per day). No one has yet managed a commercially viable method of production. One hundred and ten million barrels doesn’t sound quite that impressive when you stack that up against daily usage.

Most experts, even the most optimistic ones, suggest that it will be decades before oil production from oil shale reaches as much as 200,000 barrels per day. With demand expected to rise to over 100 million barrels per day in the next two decades (ignoring depletion rates in existing fields entirely, which the International Energy Association’s World Energy Outlook 2008 estimated at 6.7% a year and rising [3]), that’s not much of a dent.

Most underdeveloped nations aren’t especially inclined to wait a few more decades to improve their lot. Certainly China and India aren’t idling! Demand will increase, supplies will become more strained, and problems will ensue.

Similarly, most experts have pegged maximum lifetime production from the Alberta tar sands at a total of less than two hundred billion barrels. Not an insignificant amount to be sure, but it will take many decades to extract it all. Even the most optimistic supporters of oil sand production don’t expect production rates of more than a couple of million barrels per day—and that is many, many years down the road.

That won’t help much. It’s even less significant when you factor in the environmental degradation wrought by oil sands mining (as will be discussed in an upcoming post). The amounts of water and natural gas required in the process of extracting oil from the sands will cause its own set of problems in the not-too-distant future. Soil and water contamination issues are also prevalent.

As for the Arctic and offshore areas, there may indeed be “significant” finds, but … hello! Exactly how easily and efficiently is that going to be achieved? How many hundreds of billions of dollars and how many years and how much effort will it take if those areas do turn out to be a bit of a boon once again?

There are reportedly about 10.5 billion barrels of oil available in the ANWR, and tens of billions of barrels offshore. Natural topography and climate alone mean that herculean efforts would be needed … and none of that is free! Experts tell us that offshore fields (ignoring the immense difficulties of extraction/production) decline faster and sooner than fields on land.

If we have to go to those lengths and expenses to locate and produce oil, what does that tell you? No expertise required … just a bit of common sense.

Let’s not ignore the fact that as oil exploration becomes more challenging, expensive, and time-consuming, the energy required to locate and extract the oil increases as well, and thus the net energy gained is much less. Crude oil is a remarkably productive source of energy, and for all the talk about oil from the sands and shale, the return on those sources of energy is minimal in comparison. We’ll need a lot more of those resources to produce the same amount of work as crude oil.

As for technology, if one pays attention to the language used, there’s a lot of “potentially’s” and “maybe’s” and “could’s” and “might’s” liberally sprinkled through the optimistic declarations that peak oil is not an issue. My own favorite is “future discoveries of ‘superfields’ of conventional oil reservoirs could boost world production.” [4] Uh, well … ah, yes, I guess that’s true. Not exactly a solution we can count on, though. Future discoveries that indicate we can get oil from mattresses or hats could also boost world production, but….Need I say more?

The notion that higher gas prices will spur development of new technologies conveniently ignores the fact that there are not oodles of new technologies hiding in laboratory closets just waiting to be loosed on planet Earth next week. I have no doubt that technology will continue to improve the quality of our lives, but technology developed and perfected for commercial usage requires time, energy, effort, and money—among other things. What might prove economically or practically feasible 5, 10, 15, or 50 years from now isn’t of much help … now!

There are legitimate and not-so-legitimate arguments for and against peak oil, and like most complicated issues in this day and age, trying to figure out what is right and what is rightfully ignored is no easy task. I’ll do my best in future posts to help you sort through it all and assist you in coming to a better understanding of Peak Oil and its implications.

Next: Some Related Considerations About The Peak Oil Debate

Sources

[1] http://www.canada.com/montrealgazette/news/saturdayextra/story.html?id=153514b8-0a4f-47d8-a68f-24e779264fcd&p=3
        The age of oil is ending – WILLIAM MARSDEN
[2] http://www.theoildrum.com/node/3868
        The Bakken Formation: How Much Will It Help?
[3] http://www.aspousa.org/index.php/2008/11/a-peak-oiler-but-still-in-the-closet-iea/
       A Peak-Oiler, but still in the closet? IEA’s 2008 Report
       By Matt Simmons • on November 17, 2008
[4] Cambridge Energy Research Associates (CERA), as noted in http://science.howstuffworks.com/peak-oil2.htm
       Have we reached peak oil? – Josh Clark