Another Wake-Up Call for the World’s Biggest Oil Junkie

May 6, 2010 at 6:45 pm
Contributed by: Chris

I had my first guest post at The Huffington Post today, courtesy of Howie Klein (who’s a real mensch).

I weighed in on the Horizon deepwater oil drilling rig disaster, trying to put it in perspective and get people to understand the reality of our energy situation, all politics aside. As my regular readers well know, this was only the latest in a series of wake-up calls we’ve received. Are you listening now, America?

Another Wake-Up Call for the World’s Biggest Oil Junkie

America Still Doesn’t Get It

By Chris Nelder, GetRealList
May 4, 2010

OK, America, it’s time to get real about energy.

The explosion and destruction of the Horizon deepwater rig and the subsequent oil spill disaster are only the latest in a series of wake-up calls you’ve received. Are you listening now?

Your first warning came in 1956, with the publication of M. King Hubbert’s model of US oil production, which correctly predicted its peak in 1970. When Hubbert updated his model on camera in 1976, he also nailed the peak of worldwide conventional oil production in 2005.

Since then, production has remained flat at roughly 74 million barrels per day (mbpd), despite prices gyrating wildly from $40 to $147 to $33 and back to $86 today. High prices did not deliver more oil to market.

Very simply, the cheap and easy oil is gone. What’s left is smaller, harder to find, of lesser quality, and in much more challenging places–under a mile of water and another five miles of rock, for example. It’s expensive, risky, and yes, dangerous.

American domestic oil production peaked in October, 1970 at just over 10 mbpd. It has been in a steadily declining trend ever since, and now stands at 5.5 mpbd.

Over 30 percent of domestic production is from offshore drilling, of which about three-quarters comes from the Gulf of Mexico. Deepwater oil production has only become possible in recent years with the development of cutting-edge technology. We do it not because it’s without risk, but because we need the oil–badly. Only offshore is it still possible to find a field in North America that can deliver over 100,000 bpd. Just two of the Gulf fields, Thunder Horse and Atlantis, produce a combined 350,000 bpd.

US crude production, 1900-2007

Source: Energy Information Administration, Petroleum Navigator. Source data.

By comparison, the remaining onshore resources in North America are now decidedly marginal. The days of gusher strikes onshore in the U.S. are long gone. About 1.2 mbpd, or over 20 percent of domestic production, comes from thousands of small “stripper wells” producing under 15 (yes, 15) barrels per day. Low-quality resources like tar sands and shale oil are vast but expensive, and so difficult to scale that they can’t reverse the long-term decline.

The U.S now imports 9.4 mbpd of crude. At $85 a barrel, that’s an $800 million-a-day hole in our pocket, or $292 billion a year. And our import dependency is only getting worse.

An oil export crisis has been developing for years, as oil producers consume more of their own output and Asia outbids the West for declining global exports.

Even so, as the world’s most dependent oil junkie, our demand for oil has held firm. The decline in U.S. oil demand from 21 mpbd in 2007 to 18.6 mbpd today was almost entirely due to lost industrial demand; gasoline demand remained virtually flat throughout the entire oil price spike and recession.

For every finger pointed at an oil company, three point back at us.

Like the whaling ships of the late 1800s that would sail to the ends of the earth in search of whale oil, deepwater drilling is proof that we are willing to pay enormous sums and go to extraordinary lengths and depths to get oil. We have chosen to accept the risks of environmental damage, the horror of oil wars, and the deaths of rig workers in exchange for a continuing supply of cheap, convenient fuel.

We built an entire economy and topography of civilization on the premise of endless, cheap fuel, and profited handsomely from the ever-increasing bounty of the Age of Oil. But having reached the point where it can no longer be increased, and the risks have grown intolerable, we whine and accuse and complain like teenagers, claim we were victimized, and act as though our demand for oil were an unfortunate accident we had no part in.

Isn’t it time ask ourselves how much more risk we’re willing to take, to accept the situation like adults, and plan accordingly?

Since Hubbert’s first warning, our wake-up calls have come ever faster: The Arab oil embargo of the early 1970s and the gasoline rationing that followed. Oil spills. Oil wars. Economically devastating oil price spikes driven by hurricanes and shrinking spare production capacity. And the increasingly frequent spectacle of sinking and spilling offshore rigs.

Yet somehow, this stark and deadly serious reality has escaped our notice. The eager search for a scapegoat in the wake of the Horizon disaster is a clear sign that America simply doesn’t get it.

After highly visible disasters like the Santa Barbara oil spill of 1969, the Exxon Valdez spill, and now the Horizon spill, the public understands the risk of offshore oil production. What it doesn’t understand—at all—are the choices we now have to make.

Those calling for an end to offshore oil production in the U.S. apparently don’t understand that it accounts for over 30 percent of our domestic supply. They don’t understand that making offshore oil off-limits would be a double-whammy to our pocketbooks, both restricting our income and forcing us to import even more oil at ever-higher prices. They have an inkling that ethanol production is pressuring food supply, but have no concept that the non-food alternatives, like fuel from algae and cellulosic ethanol, are still puny, and a long way from being ready to scale up and replace oil.

Instead of having a rational discussion about how we’re going to manage our remaining offshore oil resources, we look to technology…as if deepwater drillships and blowout preventers and acoustic shutoff switches were the problem, rather than miraculous solutions only a dedicated junkie could love. These technologies don’t fall from the sky. Every safety measure ever invented came as the result of a lesson learned the hard way.

Instead of discussing how we’re going to break our addiction to oil, we turn to politics…as if yelling “Drill, Baby, Drill” or “Spill, Baby, Spill” even louder, or changing tack on our energy policy every four years, could amount to a solution.

All of our politically-driven energy approaches–carbon caps and trading schemes, offshore leases and moratoriums, short-term incentives for renewables, and so on—are woefully incapable of addressing our long term problem.

It’s easy to vilify oil and its producers, and it’s politically popular to call for an end to drilling, but replacing oil is far more difficult and expensive than anyone seems to understand.

Here’s the real challenge.

Within two to three years, global oil production will begin a long decline. As a rough rule of thumb, the world will lose roughly 25% of its oil supply in 25 years, 50% in 50 years, and 100% in 100 years.

It’s likely that we will also see the peaks of natural gas and coal in the next 20 years. Hydropower and nuclear will do little more than hold their current market share.

By the end of the century, nearly everything will have to be powered by renewably-generated electricity, not liquids or gases.

But scaling up renewables to take over for fossil fuels, and transitioning all the infrastructure, is going to be mind-bogglingly expensive, difficult, and slow. Renewables like solar and wind currently make up less than two percent of the world’s primary energy supply. It will take decades of effort and trillions of dollars in investment to offset a mere 20 percent of global demand with renewables, and we’ll have to do it in an environment of declining fossil fuel supply and shrinking economies.

For another rule of thumb, consider this: To compensate for the decline of oil alone using renewables, the world would need to build the equivalent of all the world’s existing renewable energy capacity, every year. Since that is impossible, efficiency and a long transition to renewably powered infrastructure must make up the shortfall. This will take 50 years or more to achieve.

If we use it wisely, offshore domestic oil could provide a crucial portion of the fuel we’ll need in order to build that new infrastructure. But if we remain in ignorance of our energy reality, letting politics be our guide and scapegoating oil companies upon their every misfortune, we’ll go down in flames as surely as the Horizon did.

One more tool in the deepwater toolbox, be it an acoustic shutoff device or something not even invented yet, will not solve our problems. Scapegoating drillers while we continue to pump gasoline into our tanks is unproductive and hypocritical. Hyping the size of marginal resources like shale without acknowledging their low flow rates is disingenuous. And championing alternatives that can’t even meet half a percent of our needs, like non-food biofuels, while trying to shut down the 10 percent of our supply that deepwater production provides, betrays a suicidal ignorance of our reality.

It’s time to wake up, put politics aside, get a grip on the scale of the problem and its solutions, and develop a serious energy plan.

Until next time,

Chris Nelder

Chris

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7 Comments

  1. Thank you for the essay. You dramatically lay out the problem, and wisely do not ask us to imagine simple solutions. My spouse asked me today, “How long do you think it will be before gasoline is unaffordable for common people to use in their cars?” I said maybe in 5 years, immediately if the US and/or Israel decide to blow up Iran’s nuclear reactors on the shores of the Persian Gulf. About 40% of the world’s oil comes from the Persian Gulf nations (Saudi Arabia, Iran, Kuwait, Iraq and the various emirates), and our leaders are planning to make the Gulf into a war zone, beginning by permanently contaminating it with radioactive fallout. It is hard to imagine our leaders could be so insane, but war with Iran will probably happen. That will not be another “wake-up call” as you say, but a “death knell” for the end of the US economy and social order.

    Comment by SeriousCitizen — May 9, 2010 @ 11:25 am

  2. Renewable energy generators can not generate enough energy to replicate themselves. They are manufactured using the energy from fossil fuels. So how do we manufacture renewable generators when fossil fuels are depleted? We can’t, they are doomed to extinction.
    There is only one solution. Depopulate. All others solutions stated by our eggspurts are BS.

    Comment by Harquebus — May 29, 2010 @ 9:44 am

  3. Excellent article and I have passed it on to several friends and linked to it from our freethinker site.

    One question. You say:

    “American domestic oil production… now stands at 5.5 mpbd.”

    And you say: “The U.S now imports 9.4 mbpd of crude.”

    That equals 14.9 mbpd.

    You then go on to say we use: “18.6 mbpd today”

    Where does that 3.7 mbpd come from if it’s not imported and not generated in the US?

    D.

    Comment by Darrel — May 31, 2010 @ 12:12 pm

  4. Excellent question, Darrel!

    This gets into a fairly complex area of definitions. You’ll see some of the numbers on the EIA’s site:
    http://www.eia.doe.gov/oog/info/twip/twip_crude.html

    The numbers are changing all the time and can vary as you look at weekly, monthly averages, or annualized averages. But 5.5 mbpd is the current crude production in the U.S., and for the week of 5/21 the U.S. imported 9.9 mbpd of crude.

    That crude goes into a refinery and results in various kinds of “product supplied,” which currently stands at 19.7 mbpd.
    http://www.eia.doe.gov/dnav/pet/pet_cons_wpsup_k_w.htm

    In the gap between the crude numbers and the product supplied numbers, you have a lot of different things. This is the “Other Oils” category on that page, which accounts for 3.6 mbpd (week of 5/21). If you look at the definition of that category (http://www.eia.doe.gov/dnav/pet/TblDefs/pet_cons_wpsup_tbldef2.asp) you’ll see:

    Includes aviation gasoline, kerosene, natural gas liquids, LRGs, other hydrocarbons and oxygenates, aviation gasoline blending components, naphtha and other oils for petrochemical feedstock use, special naphthas, lube oils, waxes, coke, asphalt, road oil, and miscellaneous oils. Includes naphtha-type jet fuel beginning in 2004. Propane/propylene were included with other oils prior to 2004.

    Note that in the definitions of the Product Supplied page, ethanol is included in the “Finished Motor Gasoline” category. So biofuels, natural gas liquids, and other imported refined products make up the “missing” stuff you’re looking for.

    I hope that helps!

    Comment by Chris — May 31, 2010 @ 12:44 pm

  5. I live in Florida. My escape plan for when I think it is time to get out of Florida is when gas hits $6 dollars a gallon. At that price it is going to cost me and my family just in fuel alone $2000 to get out of a very heavily populated area which is by no means self sustainable. How long do I have until we reach $6 a gallon?

    Comment by Joseph — July 28, 2010 @ 5:42 am

  6. One statement in particular drew my attention: “the world would need to build the equivalent of all the world’s existing renewable energy capacity, every year. Since that is impossible, …”

    Why is that impossible? You state it as if it is bleeding obvious. But it isn’t.

    (I assume what was meant by ‘renewables’ is non-hydro).

    End 2008, global installed PV was 15 GW. Projections for new capacity this year is 15 GW, so we’re on track to adding the 2008 world’s existing pv capacity this year.

    End 2009, global installed PV was 23 GW. The projections for 2011 vary, but hover around 20 GW. That is nearly equal to the currently installed pv capacity.

    And the growth will not stop after 2011. Many analysts expect one day we’ll be adding 10x today’s installed base per year. We will cross that threshold somewhere in the early 2020′s.

    Then wind, a more mature technology. The CAGR of installed wind power from 2000 – 2009 was ~28%. Last two years were 31% and 30%, so it doesn’t seem to be slowing down. Installed capacity end 2009 is 160 GW. Even if growth drops to a more modest 18%, capacity additions will reach 160 GW per year in about 10 years.

    Impossible? I would be careful with such bold assertions. Renewables have surprised and continue to surprise a lot of people.

    Comment by Anne van der Bom — August 20, 2010 @ 6:20 am

  7. Good rejoinder, Anne, but your data demonstrates that it certainly isn’t happening yet. As I assume you know, installed wind capacity is much larger than installed PV: 159, 213 MW at the end of 2009, where 38, 312 MW was added in 2009. Solar PV still hasn’t completely doubled year on year, and I have a hard time imagining how wind could achieve a 100% CAGR. I was speaking of both, plus geothermal, in totality. It may not be impossible, because that is an awfully big word, but so far we’re nowhere near reaching it…as much as I would like to see that happen!

    Comment by Chris — August 20, 2010 @ 11:21 am

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