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Wednesday, November 4, 2015

Yes, The Earth Is Not "Running Out Of" Oil And Gas

I had to shake my head at the following Telegraph headline: "The Earth is not running out of oil and gas, BP says." The article itself has highlights from BP's new Technology Outlook, which the Telegraph summarises as "... existing technology [is] capable of unlocking so much that global reserves would almost double by 2050 despite booming consumption." Although there may be some grounds for optimism embedded in the report, the complete lack of understanding what "peak oil" types are worried about is troubling. (The argument is that we would never "run out of" oil, rather extraction flows collapse once they no longer make economic sense.)

Yay, Good News!

 The "energy resources" section on the BP web site argues:
Advances in technology will keep energy supplies plentiful and affordable. We estimate that the energy theoretically accessible in 2050 could be 455 billion tonnes of oil equivalent per year. That’s more than 20 times the amount needed to meet expected demand.
Technology can unlock supplies of almost all forms of energy, from fossil fuels to sunlight and wind. In fact, several of these resources could theoretically meet all primary energy demand on their own.
I am sure that the scientists on BP's research team know at least a bit about what they are writing about. It is clear that there have been a lot of advances that have increased the efficiency of some forms of energy production over the past few years, and they are probably correct to trumpet this good news.

Unless some form of geopolitical accident happens in the Middle East (no risk of that, eh?), there's no reason to fear that the developed world will "run out of" energy in the next couple of decades. Compared to some of the doomsterish predictions that are out there, that is presumably good news.

Of Course, I Have Bad News

Regular readers will not be surprised that I have bad news to offset the good news. I admit that I have strong prior beliefs on this topic. Whenever I hear someone from a corporation or Wall Street extolling the wonders of technology, my first instinct is to hold on to my wallet. If we look back to the history of railroad securities, we find that hucksters have been preying on the optimism of the gullible for centuries. Correspondingly, one needs to be very cautious about claims about technology.

My concerns are not just about "peak oil," rather a more generalised worry about "peak everything." Our industrial civilization depends upon a number of resource inputs, and it appears that non-energy constraints might start to bite before energy constraints. The energy situation has "improved" (as evidenced by relatively low energy costs) courtesy of a general collapse in global economic growth. Amongst the "developed" countries, policymakers have deliberately run tight fiscal policy and strangled growth (particularly in the euro area). Meanwhile, the "developing" world, many countries "developed" into failed states (with increasingly obvious humanitarian costs).

Since I am not particularly optimistic that policies will be put into place that will increase global growth, the energy outlook might be relatively boring over the next couple of decades. Resource constraints may show up in niche industrial minerals, but more likely in the area of food production and fresh water. (This may interact with energy production, as "fracking" consumes a great deal of water.) The richer countries will not "run out of food," rather they will be forced to go on less meat-intensive diet. The outlook for the poorer countries, as usual, is less optimistic.

Potential Energy Is Not Enough

Although I noted that there have been advances in technology, the BP report presents them in such a slanted way that I cannot take the report too seriously. Nobody doubts that various forms of energy generation are technologically possible, the question is whether they are economically viable. There are plenty of processes capable of generating energy, unfortunately the processes' inputs consume more energy than is created. The lack of energy efficiency will eventually show up in the form of the process not being commercially viable.

There are a few sources of energy that have great potential, which presumably could be unlocked by technology.
  • The fracking industry, which is allegedly powered by amazing technological leaps, is devouring financing. Although I am not a corporate securities analyst, it seems that a truly profitable industry would be able to finance itself from cash flow. I do not know whether the fracking industry is a revolutionary application of technology that unlocks a huge amount of potential oil and gas reserves, or is just another Wall Street fee frenzy.
  • The largest source of "potential" energy ("without reference to economic viability") listed by the BP report is solar. Yes, the potential is vast, so long as we cover up huge amounts of crop land with solar farms. We just then need to find "potential food" for people to eat. Solar is a growing source of intermittent power, but it still a small percentage of total energy output. Other constraints (what materials go into the solar cells?) are probably going to kick in long before 2050 for solar energy production.
  • Nuclear fission power is another big "potential" source of energy. Nuclear energy is "solar power for conservatives"; a way to feel optimistic about the future and at the same time shower a favoured industry with subsidies. A nuclear-powered energy utopia has always been just around the corner since the 1950s. Meanwhile, unless breeder (thorium) reactors can get off the ground, uranium has its own severe depletion curve to worry about. "Peak Uranium" is currently masked because we have been using up stockpiles from decommissioned nuclear weapons.
  • Geothermal is interesting; it also has an extremely large potential, but it avoids the problems of the need for sprawling surface infrastructure and the intermittent nature of solar or wind power. My quick reading of the situation for geothermal is that it works extremely well in some favoured locations (e.g., Iceland), but has been been of limited commercial success elsewhere. Given the fact that the earth's crust is more uniform at greater depths, technological breakthroughs might open the range of locations where geothermal is commercially viable.
In summary, it makes little sense to look at "potential" energy; we need to look at what energy can be extracted in a profitable fashion. Obviously, technology breakthroughs could help, but we should not make plans based on the hope that some unknown technology must arise to bail us out.

(c) Brian Romanchuk 2015


  1. Joseph Lalibert√©November 6, 2015 at 5:43 AM

    Weird... I have the exact same view on the subject, and I share your economic approach/views too. We might be close to identical twins on economic/ressources issues.

    1. It's the old "great minds think alike"/"fools follow ruts" question. :-)

  2. Wren Lewis:
    "Genuine answer - we do not really know. The general feeling is that current debt to GDP ratios are too high, but no one has a good idea of what the optimum level might be."
    "I think the relevant question is why you would want to reduce debt (to GDP) levels rapidly (as in fiscal charter) rather than more gradually. Arguments for doing rapid adjustment very weak."


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