Reference Links
| Campbell Interview | Recent interview with Colin Campbell in From the Wilderness. Campbell thinks that the downslope of oil production will bring rough times indeed--war, famine, and recession, leading who knows where. |
A companion note on the future of oil concluded that "pessimistic" oil geologists of the late M. King Hubbert school of production analysis appear closer to being correct than the "optimistic" oil economists in forecasting "Hubbert's Peak". That's the point at which conventional oil production peaks. After that, production will begin to decline, not from a lack of demand, but because new oil discoveries are too small and too few to offset declining production in mature fields. These geologists say it will happen in as little as ten years. However, world oil production outside of the Persian Gulf region has either peaked already, or is showing signs of being close to peaking. Saudi Arabia and other countries around the Persian Gulf have the reserves to support growth for another ten years, in principle. However, political turmoil and war in the region could limit oil production and drive up oil prices at any time. The rest of the world simply lacks the production capability to offset any shortfall in Middle East supplies.
So what will the world after Hubbert's Peak be like? There will still be a lot of oil flowing, but it will be a seller's market. We'll see higher oil prices, for certain, for at least a period of time, until the world can adjust. But how much higher? And is there anything we could be doing to prepare, to help minimize the disruption? Is there perhaps a technological "ace in the hole" we can play to keep us out the mess to begin with?
The answer to that last question is a "definite maybe". There are a number of good possibilities, but whether our current "business as usual" approach to development will bring them to readiness in time to avert a crisis is doubtful. That would probably require decisive federal action, and it's unlikely to happen. As a nation, we seem often incapable of taking action until a crisis is upon us and drawing headlines. So it seems likely that we will have to endure some painful times.
Or not. Perhaps conservative economists' faith in the power of the free market will prove warranted, and forward-looking investors will manage to pull our energy chestnuts out of the fire (so to speak). Or, from the other side, perhaps a growing "green awareness" will persuade us to voluntarily curb our consumption before the downturn. Then we would avoid the economic disruption of a price-enforced matching of demand to a diminishing supply.
Perhaps pigs will fly?
Avoiding Hubbert's Peak
Actually, avoiding a crisis ought not to be all that difficult. There isn't now, never has been, and never will be a genuine "energy crisis", in absolute terms. There's plenty of energy in the world. Solar, wind, breeder-based nuclear--any one of these could easily supply enough energy to support a population of 10 billion indefinitely, even at the high consumption levels of the US. In the long term, there isn't even an issue of cost. All three of those energy sources could ultimately become as cheap as fossil fuels are today, if they enjoyed a market large and sustained enough to justify the efforts needed to advance their technology. This is an example of what I call Arnold's generalization of Moore's law (q.v.).
The problems that we'll face in passing Hubbert's peak will be problems of transition and adjustment. As they say, falling from a high place won't hurt you; what hurts is when you suddenly stop falling. Ideally, we'd take advantage of energy efficiency improvements to reduce demand and postpone running into a supply-limited oil production peak until we've managed to switch over to sustainable sources. However, encouraging efficiency and switching smoothly to sustainable sources will probably require the use of oil taxes, in a manner similar to European practice. Although the technologies needed for a sustainable future have all been demonstrated, it's extremely hard for them to advance beyond the demonstration phase when oil is so cheap.
A companion note on policy and technology options suggests a roadmap that could allow us to avoid a painful collision with Hubbert's peak. Although for political reasons it doesn't seem likely that we'll end up following it, it's worth thinking about.
Environmental Impact
Suppose we don't manage to avoid running into a supply-limited oil production peak? Wouldn't higher oil prices and enforced conservation still be good for the environment? Perhaps. But there are less beneficial (and, unfortunately, all too likely) possibilities that should be considered.
Over the long term, there is a good deal of what economists term "elasticity" in the demand for oil. If prices are high enough for long enough, demand does go down. A perfect example is in the contrast in per-capita oil consumption between Western Europe and the US. For decades, European governments levied heavy taxes on gasoline. Europeans were accustomed to paying prices at the pump that averaged up to three times higher than US consumers enjoyed. As a result, per-capita oil consumption for transportation in Europe is only 40% of what it is in North America. Europeans, on the average, drive smaller, more efficient cars, and drive fewer miles per year than we do. Their quality of life has not suffered, as the high gasoline taxes have helped to support a network of passenger rail and public transport that is the envy of most visiting Americans.
There is no reason to think that Americans would not adopt a pattern similar to Europe for their transportation needs, if they had to pay similar prices for gasoline. But it couldn't happen quickly. Even if we wanted to, we couldn't simply all show up one day at our nearest Toyota dealer to turn in our SUVs and each drive home in a Prius. In the oil crisis of the 70's, new car buying patterns shifted fairly quickly after oil prices shot up, but it took several years before newer, more efficient cars made up a sufficient percentage of vehicles on the road to have much affect on oil consumption.
All of which is to say that in the short term, there is painfully little elasticity in the demand for oil. Likewise, when most producers are already delivering all the oil they can pump, there is very little elasticity in supply. The result is that even a small imbalance in supply and demand can have a large effect on prices--as we are indeed seeing, with the production losses in Venezuela. That could have very bad effects on an already weakened world economy. And while the result might gratify some as being "just punishment" for our sins of over-consumption, a devastated world economy would not be good for the environment. Preserving wildlife habitat is not a priority when you're worried about your next meal.
We should also recognize that when the oil production peak arrives, renewable sources will not be the first recourse to which the world turns. When conventional oil begins to decline, the first place we'll look for our next oil fix will be.. non-conventional oil. That means oil derived from heavy oils and tar sands, or synthesized from natural gas and coal.
Many environmental activists oppose synthetic fuel production with a passion once reserved for nuclear energy. In terms of GHG emissions, they have some cause. Not only is CO2 emitted when synthetic fuel is consumed, but CO2 is a major waste product of the synthesis process itself. This applies most strongly to synthesis from coal, but it also applies to oil derived from tar sands and other heavy oil deposits.
Despite this, methods of producing synthetic fuels from coal, natural gas, and heavy crude are well-known, and are economically feasible at current oil prices. The production cost for synthetic crude oil refined from the portions of the Athabascan oil sands currently being mined is reportedly about $12 a barrel. Only a fraction of the oil sand deposits lie close enough to the surface to be mined that cheaply, but the deposits are huge. With world oil prices now over $30/bbl, production is being ramped up as quickly as it can be managed. The coal liquifaction plants operated by Sasol in South Africa have also been profitable for several years (q.v.) They no longer require government subsidies.
The most immediate environmental damage that will accompany the rise of non-conventional oil will not be global warming from GHG emissions, but simply the localized damage to wildlife habitats, scenery, and water quality that go with large scale strip mining. CO2 production is mitigated by the fact that the refining and synthesis processes produce (or can be modified to produce) pure C02 waste streams. As noted in a sister page on non-conventional oil, pure CO2 waste streams are likely to become valuable for use in recovering oil from aging, low-producing oil fields.
Hubbert's Peak and Hydrogen
How will shortfalls in conventional oil production affect prospects for the anticipated "hydrogen economy"? Will higher oil price hikes accelerate the transition to hydrogen-powered vehicles? Conversely, is there a chance that the introduction of hydrogen powered vehicles will reduce oil demand enough to avoid an oil crisis?
It seems unlikely that oil price hikes, per se, will do much to advance hydrogen power. They will focus public attention, and will increase the "buzz" around solar, wind, and biomass. But "buzz" drives demonstration programs and PR campaigns, not serious, large-scale investment. That's driven by hard-nosed economic analysis. So long as non-conventional oil supplies and coal remain cheap and plentiful, the economic analysis will tend to favor their development over renewables. In fact, if oil investors even decide that the current price of crude ($US 33 a barrel) is stable, they will start building coal liquefaction plants, and new refineries that can produce gasoline and diesel fuel from Venezuelan Orimulsion. Both would be highly profitable, if current prices were to hold. The only reason that's not happening is that investors fear a repeat of what occurred in the late 70's. Just as synthetic fuels efforts were about to leave the launch pad, conventional oil production rose. That dropped prices, leaving companies that had invested in non-conventional oil holding white elephants. We aren't likely to see a strong move back into synthetic fuels until investors are reasonably certain that Arabian oil has peaked, and that OPEC can't pull the rug out from under them.
Unfortunately, we're not likely to see a big move toward renewable hydrogen, either. The problem is that, despite the hype, hydrogen is not a substitute for oil, as an energy source. Energy must be expended to produce hydrogen, and the cheapest energy for doing so is found in fossil hydrocarbons. That will remain true even if conventional oil prices skyrocket, because coal and non-conventional oil are abundant and will remain cheap. The cost of producing hydrogen from coal sets a very low price ceiling that hydrogen from renewables will have to squeeze under, to be competetive. Until it is able to do so, using hydrogen to deliver energy will be just a complicated way to burn fossil fuels.
Environmentalists who are unhappy about that situation have basically three choices:
Being an engineer, my preference is for the first option. It's a very challenging problem, but not, I think, hopeless. For more on that, see this page.
The second option is one with which many activists will feel right at home. Depending on how the legislation is formulated, I would support it.
What is needed to seriously advance renewables is a "carbon tax" on all fossil fuels. The tax should reflect the cost of permanently sequestering an amount of CO2 equal to what would be produced when the fuel is burned. The tax would 'level the playing field" and make renewables more attactive, relative to fossil fuels. It would also encourage fossil fuels to be used in ways that make carbon sequestration easier. Examples are generation of hydrogen from fossil fuels and advanced processes for power generation combining high temperature fuel cells with non-combustion turbines.