THE WAY THINGS ARE GOING TO BE
By Gary W. Harding
Times are good; at least for most of us. We have had five decades of relative
prosperity. The stock market is soaring. Unemployment and the inflation-adjusted price of gasoline are the lowest that they have been for a long time. Can
we expect the good times to continue for another five decades, or more? The
answer to this question is assumed to be a resounding, YES!! But, are the
underlying assumptions about the future course of controlling forces justified?
Are there serious problems ahead which are being ignored? Unfortunately, the
answer to this last question is also, YES!!
ENERGY
You are not going to want to accept this, but we are about to run out of
cheap oil. Let me make it perfectly clear, we are not running out of oil, just the
cheap and abundant oil that has fueled our recent economic prosperity. The data
supporting this presumably outrageous contention are clear and pressing. Oil-industry experts have conducted comprehensive analyses which clearly show that
this assertion is true. What these experts are talking about is the discovery and
production of conventional oil, the oil that we all think of when this term is used.
M. King Hubbert first identified the cycle of production and depletion of oil
(or any finite resource) in the mid 1950s (see Youngquist, 1997). Hubbert
observed that, upon the beginning of utility, oil production would increase until
half has been produced. Thereafter, production would decrease until it has been
exhausted. Production and depletion of conventional oil follows what has been
called the "Hubbert Curve", a bell shaped distribution which reaches its peak
(The Hubbert Peak) when half of oil has been produced. This happens because
the easier oil and larger fields have been discovered and produced first. Once
half of the total is gone, the remainder is harder to find, in smaller fields, and
more expensive to produce.
Ivanhoe (1996) performed an update of Hubbert's work. He analyzed past,
present and likely future oil discovery and production, showing that they follow
the Hubbert Curve. He reported: "It is concluded that the critical date, per
USGS discovery records, when global oil demand will exceed world production,
will fall sometime between 2000 and 2010, and may occur very suddenly due to
unpredictable political events. This is within the lifetime of most people now
alive; and this foreseeable energy crisis will affect everyone on Earth."
The most detailed analysis of oil discovery and production has been done by
Colin J. Campbell (1997), an analyst for Petroconsultants of Geneva Switzerland.
Petroconsultants is an independent oil-industry consulting firm which maintains
the worlds largest and most complete database on petroleum (oil and natural
gas). From these data (corrected for political and economic bias), Campbell
assembled the history of oil discovery and production, field by field and added
them up. He then projected therefrom, the logical future of conventional oil. His
findings are as follows: 1600 billion barrels (Gbo) of conventional oil have been
discovered since the beginning of the oil age; of that, 900 Gbo will have been
produced by the end of the year 2001; and there are 200 Gbo of conventional oil
yet to be found (yielding an ultimately recoverable total of 1800 Gbo). Oil
production will be relatively constant from 2001 through 2008 and the price of
crude oil will double during this period. Thereafter, production will decline at
3.25% per year and there will be steep price rises, about $80 per barrel by 2030.
Fig. 1: Discovery (hatched bars; green) and production (solid bars; red) of
conventional oil by decade. Discovery and production projections beyond the
year 1997 are from Campbell (1997); a plateau from 2001 to 2008, followed by a
3.25% per year decline. Each series has been fitted with a Hubbert Curve
showing the discovery cycle (green) and the production/depletion cycle (red),
respectively (see also Ivanhoe, 1996). The sum of the discovery bars is equal to
the sum of the production bars. The area under the discovery curve is equal to
the area under the production curve.
Campbell also shows that the production and depletion of conventional oil
follows the Hubbert Curve. Figure 1 shows this inevitable process for
conventional oil. Discovery began in the late 1800s and peaked in the 1960s.
Thereafter, discovery has fallen, until in the 1990s, it is less than 4% of the
previous total. Meanwhile, production began to rise significantly in the early
1900s (Fig. 1) and will peak in the first decade of the next century. Thereafter,
production will fall until the supply of conventional oil is nearly exhausted, at the
end of the 21st century. Notice that the peak of the discovery cycle has preceded the
peak of the production cycle by 4 decades. Secondly, total production must equal total
discovery. Thus, the clear pattern of declining discovery can only be followed by
a decline in production.
When it comes to oil, people believe that all we have to do is find more.
However, the discovery pattern shown in Figure 1 demonstrates that there is little
more to find. Campbell states that the Earth has been extensively explored for oil
and that there is little that we do not already know about. Furthermore, what is
left to be produced and what is yet to be found is going to be increasingly
expensive.
The declining energy from conventional-oil production will have to be
replaced from other sources. The most obvious sources are natural gas and coal.
However, natural-gas discovery, production and depletion has followed the same
pattern as that for conventional oil; the only difference being about a decade of
delay. Over the short term, coal is relatively abundant. But, coal is not oil and
significantly increased production presents serious collateral problems.
To see how the coming decline in the world production of oil and natural gas
will impact our energy future, we must look at how they fit into the energy mix.
Today, we get our energy from a variety of sources. Percentage-wise, the largest
source is conventional and unconventional oil (37% & 3%, respectively).
Unconventional oil is heavy oil, tar sand, and shale oil. Next largest is coal (26%)
followed by natural gas (15%) and natural gas liquids (6%). Natural gas liquids
(NGL) are butane, propane and the like. Nuclear and hydro electric energy
account for a small percentage (5%, each). Renewable energy in all its forms
(solar, wind, geothermal, wave, tide, trash & biomass; including wood, and dung)
is the smallest fraction (3%). These data are shown in Table 1, columns 1 and 2.
Table 1: WORLD PRODUCTION OF PRIMARY ENERGY
Column 1 2 3 4 5 6 7 8
--------------|----------------------------------------------------
| 1997 1997 Energy 2030 Product 2030 Product
| % Gboe eqv exptd factor needed factor
Source | Gboe Gboe
--------------|----------------------------------------------------
PETROLEUM |
Conv Oil | 37 23 1.0 11 - 11 -
Unconv Oil | 3 2 0.4 5 6.25 5 6.25
Natural Gas | 15 9 0.8 12 1.67 12 1.67
NGL | 6 4 0.8 5 1.56 5 1.56
OTHER |
Coal | 26 16 0.4 20 3.13 40 6.25
Nuclear-elc | 5 3 (1.0) 4 1.33 5 1.67
Hydro-elc | 5 3 (1.0) 6 2.00 9 3.00
Renewable | 3 2 0.4 10 12.50 20 25.00
--------------|----------------------------------------------------
Total | 100 62 - 73 - 107 -
Double Dmnd | -124 -124
Consrv/Effncy | 10 17
Shortfall | -41 0
The world presently produces 23 billion barrels (Gbo) of conventional oil a
year. For direct comparison and to show replacement of declining oil supplies,
the energy in the sources other than oil are expressed in equivalent barrels of oil
(Gboe). From the above percentages, we can calculate the Gboe for the other
sources as shown in column 3. However, the amount of energy in a barrel of oil
is larger than the equivalent weight of the other energy sources. Column 4 lists
the energy for an equivalently equal weight of the source relative to a barrel of
conventional oil. For example, the energy in a 320 pound barrel of oil is
equivalent to that in 800 pounds of coal; an energy equivalent of 0.4 (320/800).
We divide the Gboe for the source by the energy equivalent to get the amount of
that source which replaces a barrel of oil (production factor: col 6 = col 5 / col 3
/ col 4; col 8 = col 7 / col 3 / col 4). The energy equivalent for Nuclear and
Hydro electric is arbitrarily set to 1.0 because there is no direct conversion.
Based upon reliable sources (see references), column 5 lists optimistic
projections of energy production from all sources in Gboe for the year 2030.
Production of conventional oil has declined to 11 Gbo per year. Unconventional
oil production has increased from 2 to 5 Gboe. Natural gas production, having
first risen and then begun to fall, is 12 Gboe. Natural gas liquids production has
increased from 4 to 5 Gboe. As shown in column 6, coal production has
increased more than three fold in order to achieve a 25% increase in Gboe.
Nuclear electric energy has increased moderately and hydro electric production
has doubled. [Note: nearly all nuclear power plants in the US are scheduled for
shutdown within the next three decades and no new ones are planned. Expected
growth in the number of plants includes replacement of old plants and increases
in the number of new ones. It is likely that this will have to occur outside of the
US and Western Europe.] Renewable sources have increased by a factor of 12.5.
Net primary energy has increased from 62 Gboe to 73 Gboe. This increase
(11 Gboe) is equivalent to about half of today's total energy from conventional
oil. However, population and per capita energy growth (1.5% / year each) has
doubled demand. The amount of energy needed to meet this demand (124 Gboe)
has not been met. Assuming that an 8% saving can be gained through
conservation and efficiency (10 Gboe), this leaves a 41 Gboe shortfall. This
shortfall is greater than today's production from all forms of petroleum combined
(oil and natural gas; 38 Gboe).
What would we have to do in order to meet unfettered energy demand in the
year 2030? The answer is shown in columns 7 and 8. Petroleum production
would be the same as that in column 5 and the shortfall must be made up from
the other sources. Coal production would have to increase more than six fold.
Nuclear electric production would have to nearly double from what it is now.
Hydro electric production would have to triple. Renewable energy sources
would have to increase by a factor of 25. A savings of 17 Gboe from
conservation and efficiency would have to be achieved. The most optimistic
projections for alternative energy production three decades from now do not
come close to meeting these requirements. Even if Campbell's 200 Gbo estimate
of yet-to-find oil is overly pessimistic (see Youngquist, 1997), a doubling to 400
Gbo would only delay the above scenario by at most eight years.
A great deal of faith has been placed in renewable energy as our salvation.
However, reality checks on the likely output from renewable sources suggests
that the move to renewables will fall far short of the energy needed to replace
declining petroleum supplies (Youngquist, 1997). Producing energy takes
energy. To be viable, the energy-out to energy-in ratio (O/I) must be greater
than 1.0 (e.g., the O/I for conventional oil is about 5.0). The basic problem for
most renewable sources is that O/I is just a little greater than 1.0; for some, it is
actually less than 1.0. Alcohol from grain, for example, is only economically
viable because of the 79 cents per gallon average of state and federal subsidies.
More importantly, it takes 1.5 units of petroleum energy to produce 1.0 unit of
alcohol energy (O/I = .67; see Youngquist, 1997) which results in a substantial
net energy loss. When grain alcohol is mixed in gasoline at 10%, mileage drops
as much as 17%. This produces a further energy loss because it takes more
gasoline (0.9 gal of gasoline / gal of gasohol) to get the same number of miles as
0.9 gallons of pure gasoline. There are also environmental costs which must be
taken into account.
The same considerations as above apply to the much touted move to a
hydrogen (fuel cell) rather than carbon based energy supply. The energy-in must
come from somewhere and, as we have seen, the sources of this energy are
questionable. Nonetheless, all renewable sources that are viable, and which are
not dependant upon petroleum for production, must be taken advantage of.
A great deal of hope for our energy future has been placed in nuclear fusion.
This process would create miniature Suns here on Earth to produce abundant
energy. The likelihood that scientists and engineers can make fusion work is
questionable at best. Even if they succeed, there will be no fusion power plants
under design, let alone construction, within the next three decades.
Energy pervades every aspect of economies and our daily life, particularly in
countries which depend upon a lot of energy. The US, with 5% of the world's
population, consumes 25% of the world's annual production of primary energy.
The energy shortfall over the next few decades portends severe economic
problems, not only for the US, but for everyone else. The following are just a
few examples of what will happen over the next three decades as energy costs
increase substantially and availability declines: As energy costs inflate (eventually
at double-digit rates), so will the costs of everything else; Modern agriculture is
the process where land [and water] are used to convert petroleum into food
(Youngquist, 1997). This process has been called the "green revolution", but it
has been achieved with black gold; The demand for energy at any cost will result
in extreme pressure on environmental ethics and laws; Carbon emissions into the
atmosphere will rise at an even faster rate than they already are; There will be a
massive flow of capital from the developed countries to the countries who own
the remainder of petroleum. US oil production reached its Hubbert Peak in the
1960s. We have been importing more and more oil ever since.
The last point is indeed ironic. It turns out that, due to the embargo, Iraq has
the oil supply likely to last the longest. All Saddam Hussein has to do is hang on
a little longer and he will be in the driver's seat. No doubt, he will sell his oil to
Asia and tell the US and the rest of the developed countries to buzz off.
Voluntary conservation of energy and energy efficiency would help
ameliorate the consequences of the decline in petroleum. A significant
proportion of energy use today is essentially wasted. However, strict
conservation and efficiency measures invoked today will be too little, too late.
Conservation and efficiency will, of course, be imposed in the future by the
controlling influences of price and availability.
Given what has been presented here, wouldn't it make sense to plan and act
now, as individuals and as governments, to minimize the consequences from the
end of cheap oil? If we instead poke our heads into the sands of denial, the
coming oil crisis will be catastrophic. A mere 6% decline of world oil production
in 1973 produced a steep rise in gasoline prices and rationing almost overnight.
We will face this situation again in just four or five years. But this time, it
will be permanent.
Postscripts
Shortly after this article was originally posted, a summary article on THE COMING OIL
CRISIS (1997) by C. Campbell and J. Laherrere (Petroconsultants) was published in the
March 1998 issue of SCIENTIFIC AMERICAN, along with several overly-optimistic articles
on alternative petroleum sources and replacements (see Youngquist, 1997).
The 21 August, 1998 issue of the prestigious journal SCIENCE, presents a news-focus
article which corroborates much of the material which has been documented here.
REFERENCES:
Campbell, C. J. (1997) THE COMING OIL CRISIS. Multi-Science Publishing Co. &
Petroconsultants, S. A., Essex, England, 210 pgs.
Ivanhoe, L. F. (1996) Updated Hubbert curves analyze world oil supply.
World Oil, November, p. 91-94.
Kerr, R. A. (1998) The next oil crisis looms large - and perhaps close. Science 281:
1128-1131.
Youngquist, W. L. (1997) GEODESTINIES: THE INEVITABLE CONTROL OF EARTH
RESOURCES OVER NATIONS AND INDIVIDUALS. National Book Co., Portland OR, 499 pgs.
Further information is available at:
Hubbert Peak &
The Department of Energy
© 1998 Gary W. Harding
Correspondence: trajcom@aol.com
Last Updated: 14 September 1998
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