James Ward, convenor of the Australian Association for Peak Oil and Gas Young-Professionals Working Group, recently attended a Forum in Adelaide on ‘Transport Fuels: Future Prices & Supply Security Risks’. Here is his very much abridged summary of proceedings:
“1. The most optimistic projection (from ExxonMobil) is for world oil production to start declining around 2030, with high prices expected up until then.
2. Statistically, based on the published uncertainty parameters within the US Geological Survey estimates, there is about a 60% chance that global oil production will start declining before 2015.***
3. There is great uncertainty about OPEC reserves and production capacity, yet the whole world is relying on OPEC increasing production to make up for the fact that most non-OPEC countries have gone into declining oil production.
4. Huge growth in China is making it a very major competitor in the global oil stakes.
5. Alternatives to crude oil are expensive and take a very long time to set up; some have dubious energy returns.
6. Australia is incredibly vulnerable due to poor vehicle efficiency, a high level of car dependence in general, and many households are particularly vulnerable due to high levels of debt and increasing interest rates.”
James has also commented that:
“Coal and gas will probably be used as substitutes for oil. Now, Australia’s reserves of coal are only good for a couple of hundred years at current consumption rates, and much less if we continue to increase consumption rates.
… We cannot predict the lifestyle or desires of future generations but I think it is fair to say that if we leave them with no energy resources then they will not be grateful. Or to put it another way, if we leave them with energy resources and they choose not to use them, they will not hate us for it.
I am more concerned about the “paradigm” we will leave to future generations than the physical resources. My children are currently set to inherit a socioeconomic paradigm in which economic growth is believed to continue forever, which is obviously not true (basic mathematics can prove this).”
James also brought to my attention a newly released federal Senate committee report on peak oil: http://www.aph.gov.au/senate/committee/rrat_ctte/oil_supply/.
James has asked my opinion on the various issues raised above, including my thoughts on the paper by Eriks Velins entitled ‘Responding to the Challenge’. A summary of the Velins paper follows.**
I will admit to often finding ‘peak oil’ arguments tedious. The idea that oil supply will plateau some time and that there may be a scramble to find alternative energy sources seems unremarkable. It is interesting to ponder how much oil is actually left and what alternatives already exist, but I find it difficult distinguishing the hyperbole from the fact while assuming that concern about global warming is atleast hastening development of alternatives
As regards future generations, I tend to think our children will be more upset that we let species like the Yangtze River dolphin and Sumatran rhinoceros disapear than that we used up all the oil.
Furthermore, I think concern about economic growth “forever” and resource depletion will become somewhat redundant once global population starts to decline which many predict will happen before the end of this century.
As regards the paper by Erik Velins, I can not agree that biofuels are of limited potential. I am not sure that biodiesel has a big future, but I am hopeful that production of ethanol will become much more efficient in the not too distant future.
** You can read James Ward’s detailed notes on the Forum here: http://www.aspo-australia.org.au/References/Bruce/AIE-NOTES.doc . According to the ASPO-Australia website homepage, presentations from the various speakers will be uploaded soon.
Here’s a summary by James of a paper ‘Responding to the Challenge’, by Eriks Velins: Velins started off talking about the nature of the current crisis. It differs from past crises, in that right now the oil crisis is a result of systematic under-investment by industry and lack of government action (presumably he means the government needs to regulate the industry to make sure it invests for the future). A long term agenda needs to be set that includes the development of new engine and fuel technologies.
The responses to the current crisis from the oil industry are basically to keep supply and demand tight – OPEC producers don’t need any more money so it makes more sense to constrain supply rather than invest huge amounts of money and reduce the price. Another theory is that oil producers are anticipating a reduction in demand as cars become more efficient (eg hybrids).
Velins mentioned that OPEC quoted oil reserves have remained constant for some years despite continuing consumption (OPEC has a reserve-based quota system so a country has an incentive to overstate their reserve figures, the true values of which are generally kept a national secret). Also, different countries quote different figures for their oil reserves – some use the 10% confidence figure, others use the 90% one. Australia adds condensate to its oil reserves. So we don’t know how much oil we’re dealing with.
In the U.S., ethanol production diverts corn away from cattle feed, while in Australia ethanol would mostly come from wheat. In both cases, there is a complex problem with various interests. All in all, he said biofuels are of limited potential. He questioned the usefulness of alternatives like tar sands because of the energy required to extract the oil.
Velins mentioned that the timing of peak oil is now irrelevant as all predictions fall within the planning horizon of the majors. China could be in for real trouble as economic growth depends on energy growth. He then raised an interesting question: Why has the IPCC not factored peak oil into greenhouse gas forecasts?
Because of the limited potential for alternatives, oil and gas will remain the dominant transport fuels for some time, but the price will continue to increase. Governments must act now to prepare for a future of high transport fuel costs. We need “a good decade” to prepare, in terms of establishing the necessary skills and labour, and ensuring mobility. A great quote was that “the greatest skills shortage is leadership!”
Velins have a chilling view of the Middle East. Afghanistan was invaded by the U.S. under the motive of fighting terrorism but a “secondary” motive was stabilising a key piece in the Middle East energy puzzle. Ditto for Iraq. Iran is an interesting case because it is a traditional enemy of the Arabs, and is also an enemy of Israel. Iran has a proven missile delivery mechanism for nuclear weapons. If Iran acquires the oil-fields of Iraq, it could become bigger than Saudi Arabia and would be “the new superpower” of the Middle East. What would this mean for consumers?
His final comments related to market failure, which he said CAN happen. Taxation is an effective tool, eg in Europe where diesel was favoured due to fuel taxes and this encouraged more people to buy diesel cars (which are more efficient than petrol ones). Demand management like this is necessary. We need substantial investment in skills, supply security and most of all, education of the public as to the nature of energy supply & cost.
Points of interest: Because of an upsurge in resource nationalism (eg Venezuela, where Hugo Chavez nationalised the previously private oil industry), oil companies are actually lacking investment opportunities to the point where they are returning capital to shareholders!
The government response of subsidising LPG and ethanol is not useful because it doesn’t help alleviate demand, forces increased reliance on imports and is therefore bad for fuel security.
In response to the recent price hike, in Australia there have been declining sales in 4WDs and large vehicles in general – Velins pointed out that the biggest sufferers of the oil crisis could be the vehicle manufacturers.
There have been large ($billions) cost overruns on high-tech ventures (presumably he means enhanced oil recovery and similar) that have caused a reversion to older, proven technology.
Australia has a “voluntary” fuel efficiency target of 6.8L/100km for cars, and according to Velins it is currently more like 14L/100km, meaning efficiency needs to more than double in 4 years. In contrast, Japan’s target is 4.9L/100km.
***Interestingly, just this morning Rog sent me a media release from the Cambridge Energy Research Associates claiming: “In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by Cambridge Energy Research Associates (CERA) finds that the remaining global oil resource base is actually 3.74 trillion barrels — three times as large as the 1.2 trillion barrels estimated by the theory’s proponents — and that the “peak oil” argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.”
Of course, it is possible to get around without oil. I travelled for two day in this cart with my friend Sheila O’Connor (pictured) back in about 1986. My landrover had not run out of oil, but it did have a mechanical problem leaving us stranded along the Onilahy River near Sept Lacs in south west Madagascar. From memory we travelled just 80 kms in two days.
Shiela in the cart probably somewhere near Tanandava. We were on our way to Tulear.
Ian Mott is a great fan of the bicycle: http://www.jennifermarohasy.com/blog/archives/001478.html.