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Peak Oil Q&A
By John-Michael Dumais, Executive Director, MICAS
Are we running out of oil?
When discussing Peak Oil, many have the impression that it means running out of oil, like a gas tank running empty. This is not the case. Peak oil means that we are reaching our maximum production capacity worldwide and will go into an irreversible decline, even though oil will still be around for many decades. Soaring demand only worsens the situation, which is likely to include shortages and escalating resource
wars.
During the oil embargoes of the 1970’s, the US and other oil importers were able to develop other sources of oil, in the North Sea for example, to offset losses from OPEC and from domestic production declines. Today, with the world’s sources of oil largely already known, there is almost no excess capacity left in the system. Though Saudi Arabia continues to claim it will be able to pump out millions of extra barrels per day, the evidence against that claim is quite convincing, according to oil investment banker Matthew Simmons, author of the recently released book, Twilight in the Desert: the Coming Saudi Oil Shock.
The reality is that oil production in over two dozen countries is in decline, including even some OPEC countries. The US itself reached its peak in oil production in the early 1970’s, precisely as oil geologist M. King Hubbert predicted some 15 years prior (and for which he was roundly ridiculed). North America is also past its peak in natural gas production, and the scramble is on to try to find other sources around the world. Meantime, China is cutting deals with countries in both hemispheres to secure its future fossil fuel needs, and India is following suit. Only US government intervention prevented China from acquiring Unocal recently. Unfortunately, our government has utterly failed to be proactive in the face of coming energy scarcity.
The biggest sector of the economy to be hit is transportation. Between all the trucks, buses, airplanes, tractors, and passenger cars, the US consumes 14 million bbl
(barrels) each day, about two-thirds of our total petroleum consumption. Beyond transportation, fossil fuel runs the engine of our economy. It is crucial for food production and distribution, manufacturing, and for our very way of life. Most experts agree that there is no combination of alternative energy sources that will allow our current rate of consumption and growth to continue.
What if a new megafield were discovered today? Wouldn’t that take care of the problem?
All of the approximately 100 megafields, that together account for about half of current world oil production, were discovered between 1940 and 1980. Even if one or more new megafields were discovered today – and none has been discovered recently – it takes between 5 and 7 years to bring such fields online. While it is certainly possible that new megafields will be found, there are two larger issues that eclipse these potential discoveries: current oil well declines (7-10%/yr), and demand growth (2-4%/yr). Just between now and 2010, we would need an average annual increase of about 6.5 million bbl/day to offset declines and meet increasing demand. That comes to new production of 39 million bbl/day by the end of 2010 (see graphic, from the conservative International Energy Agency, which shows the per-year increases in oil production required). The Ghawar oilfield in Saudi Arabia, the world's largest megafield, only produces 4.5 Mbbl/day. Saudi Arabia has just predicted peak world production at 93-95 Mbbl/day (currently the world produces 84 Mbbl/day), which would leave us still well short of the mark after 2008, even if all of that new production could be brought online immediately – which it cannot.
I’ve heard that billions of barrels worth of oil is buried in the Canadian tar sands. Won’t this oil easily make up for any shortfalls?
While it is true that somewhere between 500 billion to over 2 trillion of barrels of oil may be extracted from the tar sands (sometimes called oil sands or bitumen), there remain two primary obstacles to this resource: cost of extraction and refinement, and rate of extraction. 1) Cost. A critical measure for the viability of any resource is how much it costs to make the resource into a useable fuel. This measure is called EROEI – energy return on energy invested. For example, Middle Eastern oil has until recently returned 30 units of energy for every unit invested in its extraction. By comparison, coal has a 25 EROEI rating, solar energy rates a 5, and wind energy rates between 4 and 10. Tar sands, on the other hand, return 1.5 units of energy for every 1 unit of energy extracted. Extracting and refining tar sands requires large amounts of natural gas, which is already in decline in North America. It also requires huge amounts of water, which leaves a toxic slurry which poses a real threat to the environment. If the complete costs were considered, including site preparation and restoration and environmental cleanup (this latter cost is often “externalized” – not included on the balance sheet but paid for down the road by taxpayers), in all likelihood, tar sands would rate a negative EROEI. 2) Extraction Rate. Because of the high energy inputs for tar sand extraction and refinement, it cannot be produced very quickly. Already, $3.3 billion has been spent for an expected return of 1.6 billion barrels over 30 years. To put that in perspective-, consider that the world currently requires over 30 billion barrels of oil per year at our current rate of consumption. According to Colin Campbell, “Production from [tar sands] will have a negligible impact on the global peak but will slowly increase afterwards. So far only the easiest places have been exploited so production will get exponentially more costly and difficult. Now they dig away up to 240ft of overburden to get to the deposit: to go deeper would be hugely more expensive. So tar sands oil is no panacea but will slightly ameliorate the post-peak decline.”
What about Ethanol?
The cost of fossil fuel and other inputs – fertilizers, pesticides, mechanized production, water resources, etc., make the production of ethanol from corn a net energy loser.
What about Biodiesel?
Biodiesel is most cost-effective when made from already-produced vegetable oil discarded by restaurants. After all, it was previously considered a waste product. As such, it is a finite resource. Production of crops to create biodiesel is similarly energy-intensive, and it is likely that available land will be used for food production before it is turned over to energy production. While there are some promising developments underway in this field, such as biodiesel derived from algae, currently there is no biodiesel production scenario that can come close to replacing petroleum declines. What biodiesel we are able to make will have to be carefully apportioned to food production, mass transportation, and heating.
What about Solar and Wind energy?
Solar and wind together comprise a mere .17% of our domestic energy. Even if that were quadrupled, it would not even equal 1%. Moreover, sun and wind cannot easily be turned into fuel, except for electric vehicles. These renewable sources of energy, while they should be developed at all costs, nonetheless cannot replace the energy consumed by transportation vehicles.
What about Coal?
The US and world still have plentiful supplies of coal, but most of the easy-to-mine coal has been exploited, and the environmental costs of mining and burning coal are enormous. Caltech physics professor Dr. David Goodstein explains: “We use now about twice as much energy from oil as we do from coal, so if you wanted to mine enough coal to replace the missing oil, you’d have to mine it at a much higher rate, not only to replace the oil, but also because the conversion process to oil is extremely inefficient. You’d have to mine it at levels at least five times beyond those we mine now—a coal-mining industry on an absolutely unimaginable scale.”
What about Hydrogen?
Hydrogen is a form of energy storage, not a form of energy that can be extracted like oil or coal, and as such requires energy to make – either methane or electricity from power plants, for example. With demands on these primary forms of energy already in decline, and the infrastructure to create a hydrogen economy decades away, hydrogen is not a good bet.
Nobody can really know when Peak Oil will hit, so why worry?
Even if Peak Oil were no threat at all, the sustainable practices we are discussing are relevant and necessary given population pressures on the environment, pollution and climate change issues. Even if Peak were 20 years off, we should still, today, be earnestly working towards sustainability, because it takes that between 20 and 30 years to develop the new technology infrastructures. For the most compelling argument on this point, see the Hirsch Report here (PDF) (printed copies of this report are available from MICAS). Written by Robert Hirsch of of SAIC (Science Applications International Corporation -- a military and intelligence company) and commissioned by the US government and published this year and promptly buried, the report is called Peaking of World Oil Production: Impacts, Mitigation, & Risk Management. In the report, Hirsch states: “Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades…If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship…”
What Can We Do?
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