The start of the energy revolution is evidenced by continued high prices of energy and the successful introduction of hybrid cars by several manufacturers. The revolution is fueled by the tight supplies and resulting price volatility of petroleum products and natural gas. These tight supplies are going to continue over the next 20-30 years, accompanied by further increases in prices, until reliable alternative supplies of energy are found, especially for transportation vehicles. This transition period, in which we have tight energy supplies, while we are continuing to develop vehicles that run on a new energy supply, as well as while we are developing alternate and improved energy sources for electrical generation defines the energy revolution.
Supply - New production capacity of oil is growing at a slower rate than demand. This combined with the fact that refineries are running at very high utilization factors creates conditions that make the prices of gasoline, fuel oil and diesel to be very high and quite volatile.
Population and Demand - The world’s population is currently growing at a rate of about 1.15% per year according to a recent study by the UN. World population growth rate is slowly decreasing, which if continued would result in a stable population or declining population at some time. It is currently forecast that population will level out at about 9 billion people between 2050 and 2075, 50% greater than our current population. Thus if energy per capita were to remain the same, energy demand would go up 50% in about 50 years. Per capita oil consumption varies widely from 1.25-2.5 barrels/capita/year (bcy) in low income fast growing, industrializing countries, to 10-12 bcy in EU nations, Japan, South Korea, Taiwan and Singapore and 25 bcy in the US and Canada.
Historically energy demand has grown about 2% per year and this rate is increasing because of the continued industrialization of underdeveloped countries. A recent article in World Oil reported that in 2004 the world wide demand for oil grew at the unprecedented rate of 3.5% a year. Increases were the greatest in emerging nations, especially China and India. The United States consumed 25% of the production in 2003. China consumed 7.6% and Japan 6.8%. EIA statistics reveal that China's demand for oil increased by 20% in 2004 and the rest of Asia’s demand increased by 5.7%. The OECD counties consumed 61% of the total. The OECD countries consumed 60% of the total. The US must import 60% of its crude oil and increasing quantities of natural gas.
Peak Oil – Our current fossil fuel sources of energy are finite and becoming less dependable as they near their peak of production. This simply means that at some time conventional fossil fuels will not be able to meet our needs. Our standard of living will start to decline if we do not find alternative supplies of energy to replace them. The peak will result in even more volatility to prices that could well last 20 to 30 years. My preliminary assessment of oil supplies, after reviewing about 10 experts widely differing opinions on oil supplies, is that we will reach this peak in 2-10 years. The transportation sector uses about two-thirds of petroleum products in the US and will be the sector that is hardest to transition to an alternative energy source. Thus finding alternative energy sources for the transportation sector is a most immediate concern, requiring an energy policy with a vastly increased emphasis on finding solutions to the near term problems of vehicular propulsion and energy supplies.
Apparently, until recently, use of the term “Peak Oil” has been associated with alarmists and looked upon disparagingly by oil companies and governmental agencies. Some peak oil activists have claimed, for the last 50 years, that the peak was going to occur within a short time. Supposedly the detractors did not like to admit, at least publicly or with such a blatant term, that at some time in foreseeable future there would be a shortage of oil. This has changed now with both major oil companies and the government admitting that an oil shortage is in the not too far distant future.
The term Peak Oil is used to describe the time when world wide production of conventional oil1 reaches its maximum and then goes into permanent decline. This is not to be confused with when the peak of total oil2 production occurs. According to Campbell the peak of conventional oil will occur in 2006 and the peak of total oil in 2007. At the other end of the spectrum is the EIA which forecasts that the peak of total oil will occur in 2037±10 years. Liquid petroleum production from unconventional oil combined with conservation will have to make up the difference between conventional oil production and demand. In 2000 Campbell reported that unconventional oil made up about 6% of production, in 2005 he estimates it will make up about 10%. Development of unconventional oil sources must proceed faster than is now planned. That it will be, in general, more costly than conventional oil is implied by the name – otherwise it would have been developed sooner. Peak oil, whenever it occurs, will cause serious problems in other sectors of the economy. However these sectors rely primarily on electricity, which can be generated from several more abundant sources of energy. What is sure is that peaking is inevitable and it will result in dramatically higher oil prices accompanied by economic havoc.Hirsch, p46 current fuel cell technology is very, very expensive, has insufficient longevity and has poor efficiency. Significantly improved technology with major cost reductions is required. The most optimistic forecasts indicate that fuel celled powered vehicles will not have widespread use until 2020 to 2025, probably too late to relieve the initial impact of declining supplies of liquid fuels. Use of electric cars for transportation is unlikely until a major breakthrough in battery technology is made and thus cannot be considered at the present time.
One or two of my future posts will be exclusively on "Peak Oil" to further explore this topic. In the mean time, if you are so inclined, you could look through my links on peak oil, especially Campbell, Hirsch, EIA, Laherrere, and Simmons. There is inconsistency in the predictions because some forecast conventional oil and some forecast total oil or somewhere in between.
Although there are many alternative sources of energy that are under development, most of them are either suited to producing electricity or too early in their development to be available to help the transportation sector in the early years of the energy revolution. That leaves us with four alternatives based on demonstrated technologies:
- Increasing the standards for fuel efficiency.
- Accelerated use of existing vehicle technology - the diesel engine and hybrid vehicles.
- Increased use of and improvements in enhanced oil recovery.
- Increased use of unconventional oil.
- Accelerated use of renewable fuels, notably ethanol and biodiesel.
Hybrid vehicles are the first step in reducing gasoline consumption. Greater use of diesel powered vehicles, which can reduce fuel consumption by 30% compared to conventional gasoline engines, would also substantially reduce fuel consumption.
Parallel to this and more importantly, we must put an emphasis on increasing the production of unconventional liquid fuels. About 1 million barrels per day of unconventional oil are produced today and the technology and production costs have been well demonstrated. Current technology is competitive with conventional oil at about $50 per barrel. Demand for unconventional oil will continue after the fuel cell is widely deployed. Liquid fuels will continue to be required for other forms of transportation, such as the airplane and large trucks as well as for petrochemicals and residential heating.
Biofuels: ethanol, biodiesel Fischer-Tropsch diesel and pyrolisis oils are emerging as very important technologies. They are especially important since they are renewable - their source is vegetation that can continue to be grown independent of whether we have fossil fuels or not.
One long term solution to propelling our vehicles is to use an alternative form of propulsion that does not use liquid fuels, such as hydrogen powered fuel cells. This is the only alternative that has come to the forefront and it appears that the automotive industry has accepted this technology as being the most likely to succeed.
Depending on scheduled breakthroughs in technology to meet a deadline is one of the greatest risks that can be taken. I have learned this lesson well in my career in R & D and it is inappropriate to take such risks to solve a problem of this magnitude.
In summary I quote from Hirsch, p60, as his final conclusion regarding resolving the problems of the transportation sector “The world has never confronted a problem like this, and the failure to act on a timely basis could have debilitating impacts on the world economy.”
1. Conventional oil is readily pumpable oil from wells plus gas liquids.
2. Unconventional oil includes oil from coal and shale, bitumen, extra-heavy oil and tar sands oil.