Talking 'Bout Depletion

(Posted by John)

(Previous posts here: 1, 2.)

Okay, so fossil fuels make up 2/3 of the Earth's energy. Oil alone makes up more than 40% of our total energy use. So it would be nice if we could be assured that all three fossil fuel sources had a long lifespan ahead of them. But they don't.

The first analysis we'll look at is the wrong one. Let's take a simple look at consumption vs. reserves. This should, at the very least, give us an idea of the lifespans of existing resources. But like I said - this analysis is the wrong way to look at things.

Start with oil. Those revolutionaries at the CIA estimate that remaining global oil reserves are just a bit over 1 trillion barrels. This is more or less the consensus figure for remaining reserves, but there are optimists out there who think the number might be as high as 2 trillion. But nobody seriously entertains the notion that there is more than that.

So that's supply. Demand, however, is busting the seams at 85 million barrels per day. Show your work everybody:

85mb/d * 365 = 31.025 billion barrels of oil a year.
1,025 billion barrels / 31.025 billion barrels per year = 33 years.

So at current usage rates, using a reasonable estimate of existing reserves, current oil demand would exhaust global supply before I'm ready to start drawing a pension. Crap.

This isn't terribly difficult math. Even some oil companies are starting to accept that the status quo is unsustainable. But let's put this very clearly: current oil reserves cannot meet current demand, much less the needs of a growing economy, for much more than a single human generation. And suddenly we have to replace or do without 40% of our current energy needs.

So let's look at the prime candidate for substitution, natural gas. NG can be used in a number of the same functions that we use oil for, including cars. It's cleaner, and more efficient. But the same math applies. Current consumption/global reserves gives us a larger number - 62 years instead of oil's 33. And this is current consumption - again, making no allowances for increased demand.

But there's an additional wrinkle for natural gas - it doesn't travel well. To be moved around, NG needs either pipelines or tankers capable of holding it at extremely low temperatures and under pressure - liquefied natural gas (LNG.) While America does get some of it's NG from overseas (12-15%), the majority of North American NG supply comes from within the continent. It doesn't take a genius to figure out the flows, either - Canada and Mexico export huge amounts of NG to the US.

The problem, however, comes from the fact - fact, not theory - that North American natural gas production has peaked. It will eventually begin to decline, meaning that shortfalls will have to be made up from increased LNG shipments. This fact has been confirmed by such anti-American radicals as Lee Raymond, former CEO of ExxonMobil. To make up the domestic shortfall, we're going to need to dramatically expand LNG infrastructure.

A further wrinkle, as if we needed one, comes from the fact that most of the world's natural gas is located in Asia. Indian and Chinese demand for NG is climbing as high or higher than their demand for oil - including recent competition over Central Asian oilfields. While the US currently imports it's largest share of LNG from that energy titan, Trinidad and Tobago, it will eventually come in to competition with the new Asian giants. Further, the US will be sending billions of dollars to places like Putin's Russia and Iran.

Finally, let's take a look at coal. Interestingly, coal consumption is the only of the three fossil fuels whose global use has actually declined over the last few decades - this despite surging Chinese demand. After peaking in the late 1980s, coal consumption is down by almost half. This doesn't seem to be a case of resource depletion - the price simply collapsed in the late 1980s, as the market embraced natural gas for new electrical production. The US is an exception to this trend, where coal production and consumption continues to grow.

How much coal is there? The US Department of Energy says roughly 1 trillion tons of coal, at a global consumption of 5.2 billion tons per year. So we've got roughly two hundred years of coal at current consumption rates. Moreover, North America is the Persian Gulf of coal, with over 25% of global reserves in the continent. This is obviously a much better scenario than oil or natural gas. Further, there is a long history of coal being used to produce liquid fuels - albeit by rather unsavoury regimes, like the Nazis or Apartheid-era South Africa. So it's possible that coal could play a much larger role in energy production - with a few catches.

First off, if coal were to take over the roles played by NG and oil, our consumption would increase by more than eight times. This turns our two centuries' of reserves in to a quarter-century, or less time than oil. This doesn't take in to account any economic growth - just substituting coal for oil and NG. It also doesn't assume any losses for the conversion of coal to liquid fuels, which there would certainly be. While a lot of people assume coal is abundant, the reality is somewhat different. Coal is abundant, but only so long as we use it at the relatively small rates we currently do. So... if we use it less, it lasts longer. Hardly enlightening.

The other big problem with coal, as mentioned before, is the problem of climate change. Coal is, pound for pound, the most CO2-producing fuel there is. (Oil use is actually responsible for more CO2 emissions overall, because of it's much higher use.) A scenario in which the world makes a large switch over to coal is a scenario in which we choose environmental calamity.

So what does this all mean? The first point is that unless we find some huge deposits of oil somewhere, oil will runout before mid-century. Natural gas will follow it shortly, especially if we factor in substitution and economic growth. We could replace these fuels with coal, but only for a few years and at tremendous environmental cost.

And all this doesn't even factor in Hubbert's Peak - the fact that the production of oil and natural gas globally will follow the trend of oil and natural gas in North America: It will peak long before it in fact runs out, and then production will begin to decline, leaving us with daily shorfalls of energy.

That's for the next post.