Peak Oil is You
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Page added on October 5, 2014
The future of oil, renewables and EVs
The report asks ‘If I gave you $100B to spend, and your goal was to make energy to propel cars, would you go drill/frack for tight oil, refine it and put it conventional vehicles, or would you build RE tech and power EVs’? The answer they come up with was that onshore wind+EV blew away current tight oil (on a 20 year simple payback model), PV+EV fell a little short, and offshore wind+EV was somewhere in between. Significantly, extrapolating current costs conservatively (up for tight oil, down for RE), showed all wind and PV beating oil in 2025, and doing so decisively (what the kids would call stupidly) by 2035.
Note: This cost analysis DOES NOT include any subsidies or ‘externalities’, just costs in the global marketplace as it exists today!
IOW, if you were the leader of an oil importing country, you would clearly choose to spend money TODAY on RE and EV infrastructure/promotion over giving the cash to your state-run oil co to develop your shale resources.
As you might have heard from me before 
I am a reformed ‘Peak Oil’ Doomer, and have been basically of the view that the world has had ‘peak oil’ scares several times before, resulting in a period of higher prices, followed by the development and fielding of new technology (e.g. offshore oil, artic oil, EOR), followed ultimately by a new period of low prices. So, IMO from a historical perspective, there is no reason to ‘panic’.
In other words, until more convincing evidence came in than the hysterical ravings of the amateurish Peak Oil (PO) crowd, I assumed the Oil Cos would happily take our money (in whatever amount required) and go make us the oil we all crave, as they have for a century or more. Granted, the costs of new extraction technology (now and in the future) were unknown….we would need to wait and see. Maybe we are getting some glimmers now….
The second highlight:
The report linked above basically brings together a number of confluent topics, and paints a picture where the OIl Cos profits (and ability to develop the resources) are at a significant future risk. Basically, their production costs have gone up significantly in the last decade, seem likely to increase further going forward, further increases in price will lead to significant demand destruction, but not so much as to reduce their production costs so much as their profitability.
It basically analyzes the content of the most recent EIA report on the future of oil, and looks at its assumptions. Those are basically that conventional oil will decline (despite assuming v rosy future production for places like Iraq and Saudi) and unconventional (tar sands and fracked) oil will grow, that oil demand per world GDP $ will fall twice as fast as it has for the last decade, AND the price will be basically flat in real terms.
The EIA basically assumes that demand growth will be small, there will be enough unconventional oil to meet new demand and conventional oil decline and that the entire operation can maintain current profit margins, due basically to the inelasticity of the demand, i.e. there are no alternatives.
In this report, in contrast, the analysts think that the oil cos are between a rock and a hard place.
–On the one hand, there is the possibility of demand destruction occurring because of a global climate accord. This is the ‘Carbon Bubble’ scenario that lots of folks have discussed…if laws are passed requiring that FF gets left in the ground, the valuation of all existing FF companies drops >50% the next day. The EIA is not worried about the Carbon Bubble.
–On the other hand, no climate laws are passed, but price trends (up for oil, down for RE) eventually lead to large-scale defections to RE-fueled EVs, collapsing oil prices to close to or below production costs and destroying their business model. The EIA does not project more than 1% EVs in the global fleet by 2050, while EVs are currently >0.5% of vehicle sales in the US 
.
The upshot….there is likely no middle path between these two scenarios. The price of RE keeps falling, oil production costs keep rising AND the odds of a climate accord also keep rising. Basically, the oil cos are eff’ed.
9 Comments on "The future of oil, renewables and EVs"
DMyers on Sun, 5th Oct 2014 10:49 pm
As soon as they start selling EVs at the Dollar Store, I’m going to get me one. But what I hear is them EVs don’t go real fast. Me, I sort of have to drive fast, cause I’m always running late. So, I hope by the time they get to the Dollar Store, them EVs are made to go fast.
While I’m still stuck with gas powered transportation, I’ve found a great way to save fuel. I stay drunk all the time. Can’t drive when I’m drunk, so I don’t go anywhere. This works. I guarantee it.
Maybe the problem being missed here is that RE and FF energy are not necessarily interchangeable. If cost differential is a major factor in market preference, as between two, that is not the only major difference.
As a final note on the subject, EVs are dependent on FFs for their existence, so rising FF costs/prices will fall right back on EV prices. The apparent advantage disappears for the same reason it was thought to be an advantage in the first place.
Kenz300 on Mon, 6th Oct 2014 6:36 am
Quote — ” The price of RE keeps falling, oil production costs keep rising AND the odds of a climate accord also keep rising. Basically, the oil cos are eff’ed.”
The transition to safer, cleaner and cheaper alternative energy sources is growing around the world.
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New Cost Analysis Shows Unsubsidized Renewables Increasingly Rival Fossil Fuels « Breaking Energy – Energy industry news, analysis, and commentary
http://breakingenergy.com/2014/09/25/new-cost-analysis-shows-unsubsidized-renewables-increasingly-rival-fossil-fuels/
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Fossil Fuel Divestment Movement Continues To Grow
http://www.huffingtonpost.com/2014/09/22/fossil-fuel-divestment_n_5861906.html?utm_hp_ref=climate-change
Davy on Mon, 6th Oct 2014 8:17 am
Another “doesn’t quite get the oil dynamics situation” crow. He mentions being a reformed doomer (PO) and seems to be a corn wanna-be at heart. He seems to me just to be confused. The real dynamics of the system are multi-layered and interconnected. Oil supply/demand is rooted and nested in the turbulence BAU is experiencing at all levels. The oil business is among the most complex, energy intense, and capital intensive global businesses. Big Oil’s business is not making plastic Christmas toys designed on computer in the US and produced in sweet shops in Asia this is the equivalent of the moon landings in scope. How the hell do you think the oil complex can remain healthy and grow if all the vital elements supporting this complex are compressing. Limits of growth and diminishing returns are going to affect this industry before the others. Strange things are going to happen because this industry is the central industry to BAU. Expect more confusion from the corns and the greenies. The doomers are in control now with a message of limits of growth and diminishing returns. It is plain as day there is a predicaments that cannot be negotiated away by markets, substitution, and political arrangements.
Chris Hill on Mon, 6th Oct 2014 8:18 am
If I had that kind of money, I’d work on a way to convert renewable energy into a gasoline or diesel replacement. Chemical batteries have poor range and don’t live near as long as a decent gas tank.
Don on Mon, 6th Oct 2014 12:51 pm
Yep, he seems pretty confused to me as well. Oil is a finite resource => we will reach a peak in production. To abandon such a basic concept is to abandon logic. The peak oil dynamic is in its most basic form a differential equation. But it is one that no one has all of the variables or functions for. Just because others predictions haven’t panned out doesn’t mean the basic premise is wrong just that these predictions did not contain all of the relevant unknowns. Eventually we will run out of black swans.
sparks on Mon, 6th Oct 2014 4:01 pm
@ DMyers,
FYI, whoever told you “EVs don’t go real fast” is 100% mistaken. We all know that Tesla’s are fast. But the Chevy Volt is too. I own one, and its electrical torque-on-demand enables me to routinely blow away the in-traffic competition for the ever changing “faster” lane. Not to mention the Volt’s 100-MPH top end, always on tap should you want or need it for whatever reason.
I too am always in a hurry. I find the Volt more effective than my previous 400-HP 2006 Pontiac GTO for providing the commute “time-travel” I need to make up for a late start.
Bob Owens on Mon, 6th Oct 2014 8:47 pm
Why doesn’t everyone just leave a few minutes earlier for work, enjoy the ride, sip a latte, relax with a CD and arrive in a low stress mood? Come on, people! You don’t need a faster car but a better mind-set!
Mike999 on Mon, 6th Oct 2014 10:16 pm
When Exxon cut it’s CAPEX spending by 50% this year, you just hit peak oil. New Oil not profitable at anything lower then 100 dollars a barrel.
No new Wall Street investment in Canadian Tarsand.
Australia government peak oil predicted for 2016.
Tight markets in the future.
You’d better buy your pure EV: A Leaf, or an i3, or a Volt BEFORE 2016.
Kenz300 on Mon, 6th Oct 2014 10:43 pm
Electric, flex-fuel, biofuel, hybrid, CNG, LNG and hydrogen fueled vehicles are the future. It is time to end the oil monopoly on transportation fuels.
As the price of fuel continues to rise more and more people and the cities they live in will decide that the city needs to become more people centered and less auto centered. That means more safe walking and biking paths that connect work, homes, schools and businesses. By the way these bicycles require no oil for fuel………………. The high cost of oil will drive the speed of the change to alternatives. Some of those alternatives will be walking, biking and mass transit because many people either can not afford the cost of a vehicle or have found ways to get by without one.
Streetfacts #1 – Bicycling Not Just for Big Cities – YouTube
https://www.youtube.com/watch?v=8AP25ShR2NQ