Energy and the Fossil Fuel Situation: Douglas Woodard
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Introduction:
Probably the first point that needs to be grasped is that, while many
assume that market processes will raise prices in anticipation of
shortages and automatically encourage the development of renewable
sources of energy, this is in fact unlikely.
In a recent article, Douglas B. Reynolds of the University of Alaska
at Fairbanks reviews the economic literature and concludes in his
abstract
"...The problem is that the true size of the resource base is
never known. Society does not know if technology is actually overcoming
scarcity or not until demand for a resource outstrips supplies. It
is even possible for a price shock of incredible magnitude to surprise
an economy within one or two years after a hundred years of declining
prices and increasing production."
See his article "The mineral economy: how prices and costs can
falsely signal decreasing scarcity" in
Ecological Economics Volume 31, Issue 1 October 1999, pp. 155-166
The abstract can be read on the website of the publisher, Elsevier,
at
http://www.sciencedirect.com/science/journal/09218009
Access to the full article requires purchase or a subscription. If
you can visit a university library, most have electronic subscriptions
to Elsevier journals accessible on the library's computer terminals.
The journal is published by the International Society for Ecological
Economics,
http://www.ecologicaleconomics.org
It appears that the world's production of conventional oil will
peak sometime in the period 2005 to 2015. The peak will probably be
flat-topped and about 10 years after the centre of the peak a decline
of around 3% per year will be established.
The world natural gas peak is predicted for about 15 years after
the oil peak. However, the leading countries for natural gas reserves
are Russia and Iran. North America is not well favoured. The North
American natural gas peak is probably occurring now. Due to certain
characteristics of natural gas wells, the peak will be sharper than
for oil.
Reserves of unconventional oil in the form of tar-like bitumen deposits
occur in northern Alberta and in Venezuela. Alberta has accessible
reserves equal to about 10 years of world oil consumption at current
rates, with a further 60 years worth for which accessibility is doubtful
to unlikely. Venezuela has about as much again.
One problem with these bitumen deposits is that about 15% (at present)
of the gross energy available in the bitumen must be consumed directly
to extract and process the material to oil. A much higher capital
investment is needed than for conventional oil wells, and this plant
requires aditional energy for its construction. Therefore, the "net
energy" (please remember this idea) available from "tar
sands" deposits is less.
This problem of declining net energy also appears in drilling deeper
wells on land and in accessing oil and gas deposits under the sea.
Some fossil fuel deposits will be left in the earth, because getting
them out would devour so much energy that the effort would be profitless
in energy terms alone.
Probably the net energy yield of tar sands will decline in future.
As the tar sands deposits are landlocked, transport from them is
expensive and the bitumen is mixed with sand and other materials,
processing must take place near the deposits. This means that the
air pollution from burning very large amounts of fossil fuels will
be concentrated in northern Alberta and northwestern Saskatchewan,
which will be especially serious in winter. It is estimated that the
extraction of the roughly 300 billion barrels (oil equivalent) which
appears to be accessible with current or foreseeable technology will
result in the creation of a lake of oily water and sludge the size
of Lake Ontario. Thus the exploitation of the tar sands on a very
large scale would involve the relegation of much of northeastern Alberta
and northwestern Saskatchewan to the status of continental sacrifice
areas, to be destroyed for the benefit of the urban lifestyles, and
the "car culture" of the more densely inhabited areas of
the continent.
Due to the high capital investment needed, labour requirements and
environmental factors, industry opinion seems to be that the tar sands
will be exploited in a different pattern than conventional oil, much
more steadily over a period of 100 years or more.
However, social and political pressures as other sources of fossil
fuel decline, may clash with economics and the environment. The energy
economics will likely win, but there may be some "collateral
damage" in this battle. If the process by which future American
leaders learn from reality follows the same pattern as for the current
administration, which is to say they learn through high-impact collisions,
the outlook for Canadians is not good.
At this point you should start to switch to the central source for
information on the fossil fuel problem, the website
http://www.oilcrisis.com
Give your attention especially to the list on the left hand side
of the page. Among the experts, Campbell, Deffeyes and Laherrere are
especially pertinent.
Among the sites, particularly Oil Analytics, and within that site
particularly the discussion of "Net Energy".
As well, video and audio interviews, and some transcripts of interviews
with experts on fossil fuels and other environmentally related topics
can be found at
http://www.globalpublicmedia.com
The crucial information:
The most important source of hard information about the world fossil
fuel situation comes from the relationship between world oil discovery
and oil production and consumption. The declining curve of oil discovery
crossed the rising curve of oil consumption about 1980. Discovery
is now below 40% of consumption in most years. This is not a situation
that can continue indefinitely. As reserves are drawn down, eventually
consumption must be constrained by discovery. See especially a recent
messsage to the energyresources list by Jean Laherrere:
http://groups.yahoo.com/group/energyresources/message/29923
ASPO newsletter
A useful source of information is the newsletter of the Association
for the Study of Peak Oil, edited by Colin Campbell:
http://energiekrise.de/e/news/aspo.html
A new book on oil decline is scheduled for publication in Canada
in April. A knowledgeable person who has had the opportunity to read
an advance copy recommends it highly:
The Party's Over: Oil, War and the Fate of Industrial Society,
by Richard Heinberg (New Society Publishers)
See the review at
http://groups.yahoo.com/group/energyresources/message/29716
The (slowly) searchable message archive and files at
http://groups.yahoo.com/group/energyresources
contain much useful information amid a large amount of chitchat
and political comment.
Oil and the limits to growth
-----------------------------------------
An excellent paper by the oil and gas industry investment banker
Matthew Simmons, on the Club of Rome, the "Limits to Growth",
and the world's supplies of oil and gas. See
http://www.greatchange.org/ov-simmons,club_of_rome_revisted.html
Other papers by Matthew Simmons and his colleagues can be read at
http://www.simmonsco-intl.com
(You will need a recent Adobe Acrobat Reader there.)
-----------------------------------------
For an overview of the outlook for fossil fuel production in Alberta:
http://www.eub.gov.ab.ca/bbs/products/STs/ST98-2002.pdf
Natural Resources Canada has a publication on the energy outlook:
http://www2.nrcan.gc.ca/es/es/energypicture/index_e.cfm
For Canadian natural gas, see the publications of the Canadian Gas
Potential Committee at
http://www.canadiangaspotential.com/papers.html
Implications:
Given that the near term supply of natural gas in North America is
unlikely to maintain existing consumption let alone provide for increases,
proposals for switching coal fired electricity plants directly to
natural gas are mistaken. The very real pollution concerns of coal
burning will have to be dealt with in other, longer-term ways as described
below.
Given the declining supply of fossil fuels and the high capital
investment required for renewable energy, we need
1. maximum exploitation of opportunities for energy efficiency and
energy conservation with special attention to the removal of institutional
barriers to market function in this field, which discourage people
and businesses from taking advantage of profitable opportunities for
saving, and the development of methods to loan capital for efficiency
improvements to those who have difficulty paying up front but can
pay from the savings in consumption.
2. Rapid development of renewable energy through
* gradually incorporating in the prices of fossil fuels, through
taxes, the costs which extracting and burning them imposes on the
public, or, in economists' language, internalizing the external costs
of fossil fuels.
* using the tax revenue to at once pay generators of renewable energy
for the costs to the public which the use of renewable energy avoids.
As shown by the experience of Denmark, Germany and Spain, a consistent
and reliable policy of this kind is the best way to ensure investment
in renewable energy converters and to spur development of the technology.
* using the same mechanism to apply to fossil fuels the costs of
their foreseeable future scarcity, and to transmit to the generators
of renewable energy their future cost advantage in that condition
of fossil fuel scarcity. It would be wise to do this in a cautious,
step by step way. It would be unwise not to do it at all.
* In general, the use of market mechanisms is essential to the kind
of complex, integrated and highly innovative adaptation to a renewable
energy future that we need. However, this process depends completely
on appropriate prices incorporating "external costs". These
will not be supplied by private markets. They require collective action
through governments, in the form of taxes. Given that North American
governments have been slow in grasping necessities, improvements in
governance and a more effective democracy are needed. Proportional
representation and the reform of political financing are the first
steps, and they are already starting to get underway. Everyone who
wants a sustainable future for our grandchildren should get behind
them and push.
3. In addition,
* Where renewable energy is already cost competitive, as for partial
heating of water and buildings, it would be sensible to use regulation
to enforce its use to the extent that it is cost competitive. The
higher capital cost needs to be compensated by making loans available
where necessary.
* We need to encourage the use of heat storage both short term and
seasonal.
* We need to encourage combined heat and power plants in all sizes
including those for single family dwellings, and we need to integrate
such plants into the electric grid and provide for their coordinated
switching among electrical generation, heat generation for immediate
use, and heat storage.
* We need to ensure that the incentives for energy saving felt by
owners of buildings and equipment are also felt by those who build
and purchase structures for rent or sale to others.
* Transportation patterns, land use planning, the education of planners,
engineers, and technicians and their codes of professional practice
all need to be brought into line with the new energy realities.
* A major barrier to the operation of market mechanisms for the switch
to energy efficiency, conservation and renewable energy, is the lack
of reliable information. Government has a crucial role to play here,
for both businesses and households.
While there are still considerably larger reserves of coal than of
oil and gas, the net energy return from coal is inferior and will
continue to decline. It is not an accident that a great increase in
consumption standards in industrial countries occured in the 1950's
and 1960's during the switch from coal to oil.
Burning coal also produces much more CO2 per unit of energy released
(and especially per unit of net energy obtained) with a correspondingly
much larger effect on climate change. Attempts to sequester CO2 would
decrease net energy considerably.
It should be clearly understood that we need to start the transition
to renewables at once in order to build our capacity to capture renewable
energy with cheap fossil fuel energy while it lasts.
It also needs to be clearly understood that energy conservation and
efficiency are and will continue to be cheaper than any other source
of energy, and we need to exploit them fully to minimize the need
for costly investments in the supply of renewable energy.
We need to understand that fossil fuels are now required to maintain
the food supply as well as the incomes of almost everyone on the planet.
Therefore, freeing ourselves from dependence on fossil fuels in
time is not just a matter of preventing pollution and climate
change, but, in David Suzuki's words, "It's a question
of survival".
The international scene:
An obstacle to attempts in Ontario and in Canada generally to dealing
with our energy problems is the attitude of the current administration
in the United States. Given that we live in a world economy, that
40% of Canada's GDP is involved with trade with the U.S., and that
the U.S. with 5% of the world's population burns 25% of its fuel a
substantial part of which it obtains from Canada, and that we are
obliged by several treaties to share our fuel resources with the rest
of the world and especially with the United States, the determined
lack of realism in U.S. energy and foreign policy will impose limits
on our ability to deal effectively with our own problems independently.
In case you have not realized just what the policy of those in control
of the U.S. for the time being is,
The National Security Strategy of the United States http://www.whitehouse.gov/nsc/nss.html
http://www.whitehouse.gov/nsc/nss.pdf
background at
http://www.nssg.gov/Reports/reports.htm
and related, in book form
The Grand Chessboard: American Primacy and Its Geostrategic Imperatives,
by Zbigniew Brzezinski (Basic Books, hardcover 1997, softcover 1998)
For interim internal strategy, see the statement of the White House
press secretary on 8 May 2001, on the President's position on the
question as to whether Americans needed to change their lifestyles
to reduce energy consumption:
"That's a big no. The President believes that it's an
American way of life, and that it should be the goal of policy makers
to protect the American way of life. The American way of life is a
blessed one."
This is said to be an extract from a draft copy of the Pentagon's
1992 budgetary planning guide (written when Dick Cheney, now Vice-President,
was Secreatry of Defense), quoted from Year 501: The Conquest Continues,
by Noam Chomsky [sorry, no citation provided by author---Editor].
"The US must hold global power and a monopoly of force. It
will then protect the new order while allowing others to pursue their
legitimate interests as Washington defines them. The US must account
sufficiently for the interests of the advanced industrial nations
to discourage them from challenging our leadership, or seeking to
overturn the established political order, or even aspiring to a larger
regional or global role."
..."we will retain the preeminent responsibility for addressing
selectively those wrongs which threaten not only our interests but
also those of our allies or friends. The United States alone will
determine what are wrongs, and when they are to be selectively righted."
See http://www.zmag.org/chomskycampbell.htm
While there may not be much that we in Canada can do to influence
events in the U.S. directly, we can do our best to serve as a model
of good policy, good action, and good governance, across the back
fence.
In the words of Edmund Burke, "Example is the school of mankind,
they will learn at no other."
Those seeking information on the details of a sustainable energy
future will find the following sites among the best of the many that
exist:
The David Suzuki Foundation
http://www.davidsuzuki.org
The Pembina Institute
http://www.pembina.org
The Wuppertal Institute for Climate, Environment, Energy
http://www.wupperinst.org
The Tellus Institute (U.S.)
http://www.tellus.org
The Union of Concerned Scientists (U.S.)
http:www.ucsusa.org/
The Rocky Mountain Institute (U.S.)
http://www.rmi.org
Sustainable Minnesota (U.S.)
http://www.me3.org
"*Feasta* aims to explore and promote the characteristics -
economic, cultural and environmental - that a society must have in
order to be truly sustainable" (Ireland)
http://www.feasta.org
Remember that the details must fit with the words of Donella Meadows,
Herman Daly and their colleagues:
"...the most important distinction we shall make... is the one
between *growth* and *development*.
'Following the dictionary distinction... TO GROW means to increase
in size by the assimilation or accretion of materials. TO DEVELOP
means to expand or realize the potentialities of; to bring to a fuller,
greater, or better state. When something grows it gets quantitatively
bigger; when it develops it get qualitatively better, or at least
different. Quantitative growth and qualitative improvement folow different
laws. Our planet develops over time without growing. Our economy,
a subsystem of the finite and non-growing earth, must eventually adapt
to a similar pattern of development.'
"We think that there is no more important distinction to keep
straight than that one. It tells us that, although there are limits
to growth, there need be no limits to development." (Ref. 1)
Reference 1. Beyond the Limits. Donella H. Meadows, Dennis L. Meadows,
and Jorgen Randers. White River Junction, Vermont: Chelsea Green,
1992. Page xix.
Central portion quoted from Robert Goodland, Herman Daly, and Salah
El Serafy, introduction to "Environmentally Sustainable
Economic Development: Building on Brundtland", (The World
Bank Environment Working Paper, No. 46, July 1991, 2-3).
Doug Woodard is 60 years old, was born in Alberta, grew up in Quebec,
lives in St. Catharines, Ontario and has been a Green Party member
most of the time since 1984. He has been thinking Green and trying
to work his way deeper since about 1947.
Issue
1, Volume 1