My men can eat their belts. Give me fuel for my tanks!
-- General Patton

In the second edition of Art of Urban Cycling (which was retitled Art of Cycling), I added a lengthy footnote about what I felt to be a troubling societal dilemma looming in our near future – a growing inability of global energy supply to meet global demand. (Page 37, for those playing along at home.) Anyway, I wanted to check in and see how we’re doing on the energy front one year later.

All year a growing chorus of voices has been making the claim that the global peak in oil production (a.k.a. ‘Peak Oil’) has already come and gone. Most point to May 2005 as the date of peak production in conventional oil. For example, a much-ballyhooed report by the German group Energy Watch claimed that the peak had already passed and production would fall to half of current levels by 2030.

Energy Watch Group's Report on Oil Depletion [pdf]

The precise date of Peak Oil is less important than the rate of decline that comes after. If Energy Watch is right, it means less than 40 million barrels per day will be coming out of the ground in 2030. Compare that with the EIA (Energy Information Administration) estimate that the world will demand and consume about 115 mbpd by then. Something’s gotta give, eh, between these two estimates that are worlds apart. One of them is waaay off. The EIA’s had been accepted as the conventional wisdom until recent years, but a critical mass of evidence mounts that suggests the EIA is completely out to lunch, and based their estimates on little other than hopes and dreams. The EIA is pulling on a wishbone and making a wish.

The EIA's Wish Sandwich

More than anything, independent analysts have been alarmed by the startling declines in production from some of the world’s largest fields. The so-called ‘giants’ account for the majority of global oil production even though they make up only about one percent of all fields in operation. The big North Sea complex is producing about two thirds as much as it did in 1999; Mexico, which provides the US with a few truckloads or so of its oil from the massive Cantarrel field, the biggest by far on this half of the globe, is looking to become an importer itself in as little as a few years; and the biggest fields of the Middle East, in Kuwait and Saudi Arabia, are in decline as well. In terms of the global energy picture, all of those statements deserve multiple exclamation points.

Suddenly, there is much chatter in the mainstream about oil supply, a startling change. CNN did a feature, the History Channel put together some kind of scare-mongering documentary with ‘Apocalypse’ in the title, and the New York Times showed a few cracks in its impressive wall of ignorance on this issue. Celebrity oilman T. Boone Pickens appeared on CNBC to discuss the situation and, instead of parroting the party line that the hike in prices was not at all supported by fundamentals, confirmed that supply was not keeping up with demand, and suggested that it would not be able to. Ah hell, he seemed to think, let’s give em a shot of truth with their morning coffee. It was a bit of a stunner for the bright smiling cheerleaders on CNBC, who were conditioned to expect nothing from oil people but predictions of clear sailing.

While the notion that big-time energy problems are coming down the track could now be considered a mainstream view, many careful observers have been more reserved in their predictions of when and how those problems will arrive. For instance, Robert Rapier, an energy consultant and blogger, has repeatedly cautioned that the declarations of a peak in production have been premature. The International Energy Agency's figures for production of ‘total liquids’ from the past two months suggest he was correct at least about that category.

…I think it is very likely that a new all-liquids peak will be set in November. In fact the IEA's new production numbers for October (the full report is now available for free) show a (preliminary) new record. The total liquids production rate in October was reported to be 86.43 million bpd (see Table 3). That is up almost 2 million bpd over August, and 300,000 bpd above the previous July 2006 record of 86.13 million bpd … The IEA doesn't break out just crude + condensate, but with all-liquids in that neighborhood, C+C should be near record territory as well. (“This Week in Petroleum 11–28-07,” http://i-r-squared.blogspot.com)

But even Rapier thinks the peak is essentially upon us and the demand and supply lines shall go along their merry ways never to meet again. He’s not one of these guys who thinks Mother Earth will magically cough up previously undiscovered giant fields or enough ‘unconventional oil’ to fuel unfettered growth in demand as far as the eye can see. Nobody but the shameless ‘cornucopian’ buys the EIA’s prediction that global production will soar past 110 million barrels per day to meet rising demand. Like many other sober observers, Rapier thinks the price of oil is currently inflated and is due for a correction of perhaps fifteen or twenty bucks; but he sees the price resuming its ascent from there, based on the fundamentals of supply and demand. Fifty-dollar oil is a thing of the past.[1]

There is a consensus brewing that a peak is imminent, that production will steadily decline thereafter while the price climbs and climbs. There is little consensus about what consequences this new paradigm will bring to civilization. Predictions are wide-ranging, to say the least. Some feel the effects will actually be very positive, as an era of alternative energy is painlessly (and profitably) ushered in through the hidden hand of the free market. On the other side of the spectrum are those who think an emerging oil crisis will cause a die-off of perhaps several billion and a more-or-less complete collapse of Western civilization. Count me somewhere in the middle there, between Pollyanna and Debbie Doomer.

If production starts to fall near the rate predicted by the Energy Watch Group, think those famous Canadian tar sands can make up the difference? The tar sands, while containing an almost incomprehensible amount of oil to be sure, are only good for a flow rate of a few million barrels per day. It’s not easy oil. Like the other sources of ‘unconventional oil,’ it’s oil that can only be recovered using huge inputs of energy, that is, oil, to run fantastically large strip-mining machines, and natural gas to make steam to inject into the ground to loosen up the good stuff. Canada is slated to use so much natural gas in the Alberta tar sands that it will have to cut NG exports to the US. Law of diminishing returns. Keep in mind that civilization as we know it depends not just on oil, but cheap oil. In the old days, we used to stick a spigot in the ground and out popped light sweet crude. It was on that something-for-almost-nothing reality that we built our ‘modern society’ and all its quirks. That reality has ridden off into the sunset, folks. It has left the building.

Speaking of diminishing returns. As the few remaining oil-rich countries grow fat on your powerful stream of ‘petro-dollars’, they consume an ever-larger amount of their own domestic oil production (building things like nuclear weapons programs and shiny, abstract-shaped casinos and hotel highrises on man-made islands) and export less. Not only is our oil under their sand, they’re using more and more of it themselves even as their production tanks. Unacceptable! I’m talking to you Iran. This means that the amount of oil available for export could drop quite a bit faster than the figures for global production would suggest. This is when certain world leaders start reaching for their cruise missiles.

Isn’t there a plethora of alternative energy sources we could tap to rescue us from this pickle? What happened to hydrogen? Forget about it. We all fell in love with the visual of cars puttering around farting out water vapors, but kiss that happy hallucination goodbye, hippy. Hydrogen is not a source of energy; and the process of ‘charging’ hydrogen is an energy sink. Likewise with corn ethanol, which quite possibly has a negative EROEI (Energy Returned on Energy Invested) – could it be that the more corn ethanol we create, the less energy we actually end up with? Would we be better off just burning oil? Could ethanol simply be some sick scam perpetrated on a gullible public by agribusiness and certain Midwestern congressmen? The answers to these questions are emerging and they don’t look good. Some think we could continue our current rate of energy consumption by powering our fleet of vehicles with electricity created by wind power, but few appreciate the biblical sea of turbines that would be needed to achieve this, not to mention replacing the auto fleet, all of which would require a tremendous investment of energy, time and other resources. I'm not saying it would be impossible to transition to a solar-electric economy or wind economy, but at some point we actually need to begin this colossal undertaking. How ‘bout nuclear? Two words, pal: Peak Uranium. You probably think I’m kidding. Once again it is the German Energy Watch Group ready to toss a glass of cold water in our face:

Taking account of the uncertainty of the resource data it can be concluded that by between 2015-2030 an uranium supply gap will arise when stocks are exhausted and production cannot be increased as will be necessary to meet the rising demand. Later on production will decline again after a few years of adequate supply due to shrinking resources. Therefore it is very unlikely that beyond 2040 even the present nuclear capacity can still be supplied adequately. If not all of the reasonably assured and inferred resources can be converted into produced volumes, or if stocks turn out to be smaller than the estimated 210 kt U, then this gap will occur even earlier. (“Uranium Resources and Nuclear Energy,” Energy Watch Group, 2006 [pdf].)

Many will say it is ridiculous to think that nuclear power, which has a tremendously attractive EROEI, is constrained in the slightest by supply issues; they tell us there is essentially a boundless amount of fissile material available for the taking. This is a very contentious issue, as seen in this discussion over at the Oil Drum: (The Oil Drum is a good resource for information and a good place to sit in on ongoing discussions about important energy-related issues).

One thing we still seem to have a lot of, frighteningly enough, is coal. Count on the burning of ever-larger mountains of dirty, dirty coal as the oil supply diminishes and time marches on. Not just in America. China, which is already producing a toxic drift from its coal-burning power plants that is affecting the western US, is planning on building 500-600 more of these plants in the near future.[2] The intensified burning of coal as oil diminishes will be bad for the world, maybe the end of it. As for the possibility of making fuel for internal combustion engines from coal, it’s possible but the process of coal-to-liquid is slow and of course energy-intensive. Just ask Hitler (when you meet him in Hell I mean) – he invaded the USSR to escape the tyranny of coal-to-liquid and to get at some cheap, easy oil in the Caucasus. He failed.

Undoubtedly, there are a number of possible sources of energy – from solar to geothermal to wind to nuke to all brands of remaining fossil fuels – that we could use to mitigate a steady decline in oil. But could they provide enough energy to keep us moving at the same rate? And if they could, can we get these new energy sources on-line fast enough to prevent major disruption? Have to say, it doesn’t look good. As Robert Hirsch (of Science Applications International Corporation) wrote in a 2005 report for the US Department of Energy that was not originally intended for the eyes of the public, “Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.” Oops on that one.

The “Hirsch Report” (“Peaking of World Oil Production: Impacts, Mitigation, and Risk Management,” SAIC, 2005.[pdf])

Looking around, we find a distinct lack of any deus ex machina that will drop down just in the nick of time and allow us to continue consuming the same fantastic amount of energy that we did when Dick Ch*ney famously proclaimed: the American lifestyle is not negotiable. I’ll tell you what really isn’t negotiable Dick: Geology. America will indeed have to negotiate and compromise in the face of geological reality.

I believe any significant downward trend in global oil production is likely to result in some degree of energy deficit for powering the transportation sector of the American nation at the level at which it is used to being powered. In other words, I believe we are going to be forced to cut back substantially on our energy consumption, because of limited supply (if the recession doesn’t get us first). I don’t think alternative sources will ever entirely fill the hole left by diminishing supplies of good old-fashioned cheap oil. We will have to ‘power down,’ at least a bit, and live somewhat differently.

I don’t think this has to be some kind of catastrophe for the US. Look around. Much, if not most, of American energy consumption is frivolous. Transportation in the US accounts for two thirds of domestic oil consumption and almost twenty percent of global oil consumption. What percentage of that is truly necessary? America drives to work but America also drives to the mall just to look at girls. America drives to Del Taco when there’s a pantry full of food at home. America drives everywhere – one person, one car. This means that, even though growth in demand will be driven by China and India into the foreseeable future, we could significantly affect the global energy picture and our degree of enslavement to it just by cutting out the frivolous trips here at home, or by learning to carpool. America is like an obese kid sitting on the couch with a jumbo bag of Cheetos watching daytime television. He powers through bag after bag and keeps demanding more Cheetos. Well, the Cheetos factory just called, kid, and they’re running out of yellow stuff. Time for Plan B.

Think of the oil crunch as a stomach stapling for American society. If we have to stop driving so much for every little reason, it’s not going to kill us. The Cheetos might. The subprime fiasco might.

Wishing everyone out there a happy holiday season,

Robert

1. Predicting the movements in the price of oil has been more art than science. There are supply and demand fundamentals, yes, but also complex feedback relationships between price, supply, and demand as gains in price cause ‘demand destruction’ (an extreme example: spike in oil prices causes a global depression, which destroys global demand and causes the price to plummet. Peak Demand -- how does that grab ya?). The equation is then attacked by the forces of chaos from all sides: Bad data…smoke and mirrors and outright lies from producing countries and oil companies…sketchy numbers on inventory from the EIA…rumors[3] …talk from the American President of World War III...somebody sneezes in Abu Dhabi…explosions like the one in the Midwest the other day which killed two people…attacks by rebel forces on installations in Nigeria and Ethiopia…kidnappings of oil personnel…really, really bad weather…the speculation of youthful or novice traders…mysterious high-volume trading activity on the NYMEX and other assorted mischief… ... If supply falls noticeably and inexorably the direction of movement in price will become pretty unambiguous, unlike the current situation characterized by wild swings in price. This volatility at the top of the production curve was predicted long ago by Peak Oil theorists; they called it the “bumpy plateau.”

Check the current price for a barrel of oil here.

2. Washington Post, November 17, 2007. Peak coal is actually a Thing as well.

3. Last week the price ticked down on calculated noise from OPEC about raising production – but can they really control prices through production increases just like the old days? There is a lot of justified skepticism about that. The cartel will announce any supposed increase at its meeting on December 5. Don’t believe what they say, watch what they do.