Peak Oil is You
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Page added on November 11, 2012
The Real Energy Crisis
Five years ago we got the energy crisis wrong. Predictions of peak oil and declining sources of petroleum supply convinced many of an impending geologic and strategic crisis: the world was physically running out of recoverable oil and the remaining sources of significant supply were declining in number and located in politically unstable areas. This crisis drove major investment into advanced batteries and electric vehicles, which were seen as the best and most flexible way to substitute other fuels for petroleum.
What many did not anticipate at the time were the great advances being made in petroleum production technology. For as much as was invested in new battery technology over the past five years, the amount invested in new oil production technology exceeded the investment in batteries many times over. That investment produced a return. Today new petroleum production technology, such as fracking and ultra-deep water drilling, appears to have taken the urgency out of the energy crisis, at least as that crisis was originally perceived. Unconventional crude oil seems plentiful. It does not appear to be concentrated in a limited number of geographic areas. Sources of possible supply seem diverse.
Today the crisis of five years ago has given way to complacence and even to energy optimism. Both presidential campaigns recently assured us that energy independence is virtually around the corner. All we need to do is drill.
But while our understanding of the energy crisis five years ago may have been flawed (or more correctly, less than prescient), our appreciation that there was a crisis was not. We just misunderstood its details.
The real energy crisis is neither a geologic crisis nor a strategic crisis. The real energy crisis is a slow growth crisis. Although the oil industry has figured out a way technologically to recover large quantities of unconventional oil, the cost of doing so will be staggering. Conventional oil, which may cost $4-6 per barrel to lift out of a Saudi Arabian well, may cost more than $100 per barrel to lift out deep water deposits off the coast of Brazil. And the lift costs will only go up, as each barrel of oil becomes progressively more difficult and expensive to recover.
The result is a hyper-inflation of energy costs, as the fixed, structural cost of petroleum spirals ever higher. As more and more resources must be invested in petroleum production, fewer and fewer resources will be available for other productive parts of the economy.
In ordinary markets, the market self-corrects by incenting substitution for a high priced commodity. But the petroleum market is no ordinary market. The energy needs of the transportation sector are almost entirely dependent upon petroleum; no easy substitutes are available. As a consequence, as petroleum costs hyper inflate, the economy will slow as consumers compensate by using less energy. This lowers demand for oil, which depresses its price, which in turn slows investment in alternate fuel technologies.
The solution is the same one we settled on five years ago: find a way to substitute different fuels for petroleum in the transportation sector. Advanced battery technology was then, and it remains today, the best, most flexible and most technologically feasible way to let different fuels substitute for petroleum. But we must recognize that the nature of the real energy crisis is such that the market alone will not drive transportation sector consumers to substitution. The real energy crisis will instead impose a vicious cycle of higher structural petroleum costs, slower economic growth and the lack of investment capital for alternate fuel technologies.
Governments around the world must not let that to happen. They must re-double investments in advanced battery technology, the world’s best chance to reduce its dependence on petroleum for transportation fuel. They must break the vicious cycle that condemns the world economy to ever slower growth until that dependence is broken.
10 Comments on "The Real Energy Crisis"
Rick on Sun, 11th Nov 2012 9:54 pm
Batteries? Please … more techno BS.
Cloud9 on Sun, 11th Nov 2012 10:08 pm
Your right. Now we think $3.20 for gas is a great deal.
BillT on Sun, 11th Nov 2012 11:54 pm
And where is the natural resources for all of these batteries? Also peaking? And who is going to pay for the change over? You? Accept that the days of energy waste and never ending growth have ended techie. You had the ride, now get off and walk.
Lampert Scratch on Mon, 12th Nov 2012 1:38 am
Anyone who’s looked very deeply into Peak Oil has known for some time that the COST of recovering oil by ever-more energy intensive means would be the problem, not oil disappearing altogether, dumbass. EROEI
MD on Mon, 12th Nov 2012 9:50 am
dude started off by saying we got it wrong, then in the next paragraph makes a very nice definition of peak oil citing it as the *real* problem
*sigh*
Bor on Mon, 12th Nov 2012 3:54 pm
Our existing infrastructure and economy are build on Cheap Oil and Gas. The words Cheap, Oil and Gas are keywords and all three are the must. Expensive oil and/or expensive Gas will not do. The same one can say about all the Western World. And there is no substitute for oil and Gas. None. Any so-called alternatives will NEVER replace Oil and Gas. To think otherwise is believing that inside of our planet is another one,which is much bigger then the outside one.
Bor on Mon, 12th Nov 2012 4:05 pm
What does it mean ‘Cheap Oil/Gas’? It measured in EROEI. One needs to remember how cheap the Nuclear Was in the beginning – ‘… to cheap to measure’. But when everything was applied, including all the protective measures against terrorism, measures against environmental disasters and expensive problems with nuclear waist storage, then it is not so cheap any more. The same thing will happen with so-glorified flacking. OROEI 1 to 6 or higher will probably do but not 1 to 1 or 1 to 2.
Bor on Mon, 12th Nov 2012 4:21 pm
EROEI of Hydraulic fracturing? It may start very well but very soon the well is dried out, and the new well is getting dried and the new well is required. But the land reclamation over the old well will required. The possible leaking of the hydraulic liquid should be covered by insurance. The new road constructions may be considered. Also the possible loss of arable land… Etc., etc. And all of sadden the bunch of massive tort cases on hand… Then the thing is way too expensive to have.
Kenz300 on Mon, 12th Nov 2012 6:32 pm
Quote — ” In ordinary markets, the market self-corrects by incenting substitution for a high priced commodity. But the petroleum market is no ordinary market. The energy needs of the transportation sector are almost entirely dependent upon petroleum; no easy substitutes are available. ”
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The oil monopoly on transportation fuels needs to end. A monopoly is only good for the monopoly and not good for the consumer.
Bring on the electric, biofuel, hybrid, CNG, LNG and hydrogen fueled vehicles. We need choices if capitalism and competition are to work.
Many large companies like WalMart, UPS, FedEx, Staples, Waste Management and others are upgrading their fleets with a combination of electric, flex-fuel, CNG and LNG fueled trucks and cars.
The old saying “don’t put all your eggs in one basket” still holds true. We need more options for transportation fuels.
Having safe walking and bicycle paths that connect work, schools and homes along with greater mass transit options would be helpful. A bicycle can be a good option for many people. It is time for cities to have a more integrated transportation system that relies less on the automobile. There once was a time when trolleys ran thru the center of most major cities in the US. They look like a pretty good option today.
Bob Owens on Tue, 13th Nov 2012 6:57 pm
Why bother with batteries? Just reduce the speed limit on Interstates to 55 and on all other roads to 35. Presto, no need for imported oil, the air is cleaner, less people killed on the roads. What’s not to like? Will it happen? Not likely.