The fossil fuel industry has no long-term future

January 23, 2009

in Economics, Politics, Science, The environment

Ice on a window

Oil, gas, and coal are all – at best – transitional sources of energy, moving us from muscle power to truly renewable non-muscle sources. To see why, there are two basic facts that must be appreciated:

  1. Only finite quantities of fossil fuels exist on Earth.
  2. Burning all the world’s coal, oil, and gas would cause catastrophic climate change.

It is as though there are two hard barriers to fossil fuel use out there. What we don’t know is how far away they are. The first fact is self-evident, though it is more nuanced to say that there is a finite quantity of fossil fuel that can be extracted for any particular level of price or effort. If oil cost $10,000 a barrel, we would be able to find some pretty unusual geological sources for it. The second fact arises from the basics of climatic science. We have already increased atmospheric concentrations of greenhouse gasses from about 290 parts per million (ppm) to 385 ppm. Continuing to run our economy as we have been (bigger every year, and largely powered by coal, oil, and gas), that figure will be approaching 1000 ppm by the end of the century. Based on the climatic sensitivity estimates of the IPCC and Met Office, that would likely produce 5.5 to 7.1 ° C of warming by 2100, with more to follow afterwards. That would be utterly catastrophic for humanity, quite possibly threatening our ability to endure as a species. We will either stop using fossil fuels, or we will die in the process of trying to burn them all. Due to lags in the climate system, we just might be able to burn them all and leave it to another generation to suffer the fatal consequences.

A useful analogy is that of a factory worker taking methamphetamines to stay awake. This is essentially what all of society is doing with fossil fuels: giving ourselves an unsustainable jolt that gets things moving faster. Of course, extended and heavy use of amphetamines will eventually kill you. If that lethal toxic effect is likely to be achieved before you run out of pills, you are presented with a barrier just as impassable and just as real as the difficulty of their eventual and total depletion.

As such, those who invest in fossil fuel infrastructure and equipment and processes that depend on fossil fuels need to appreciate that this is an industry that will need to peak and then be wound down, even though oil, gas, and coal remain in the ground to be extracted. Greater efficiency of use and technologies like carbon capture and storage can somewhat extend the timeline across which that will need to occur. All the same, a world with a stable climate will be a world that does not use fossil fuels for energy. If we want that stable climate to be one compatible with human welfare, civilization, and prosperity, we must hope that it is established sooner rather than later.

[Update: 8 March 2010]. BuryCoal.com is a site dedicated to making the case for leaving coal, along with unconventional oil and gas, underground.

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{ 20 comments… read them below or add one }

Antonia January 23, 2009 at 7:49 am

The NY Times just did an editorial which seems to indicate gathering US momentum for the idea that clean coal isn’t

. January 23, 2009 at 11:14 am
Milan January 23, 2009 at 12:20 pm

Antonia,

On the one hand, CCS is often used by industry as an excuse to avoid change: no need to change our plants or processes, since cheap CCS is just around the corner.

That being said, it would be very useful if it proved safe, effective, and economical. It would even allow for net-negative emissions from plants that burn biomass. Also, most proposed air capture schemes still require sequestration once the CO2 has been isolated.

. February 4, 2009 at 9:31 pm

We have arrived at a moment of decision. Our home – Earth – is in grave danger. What is at risk of being destroyed is not the planet itself, of course, but the conditions that have made it hospitable for human beings.

Moreover, we must face up to this urgent and unprecedented threat to the existence of our civilization at a time when our country must simultaneously solve two other worsening crises. Our economy is in its deepest recession since the 1930s. And our national security is endangered by a vicious terrorist network and the complex challenge of ending the war in Iraq honorably while winning the military and political struggle in Afghanistan.

As we search for solutions to all three of these challenges, it is becoming clearer that they are linked by a common thread – our dangerous over-reliance on carbon-based fuels. As long as we continue to send hundreds of billions of dollars for foreign oil – year after year – to the most dangerous and unstable regions of the world, our national security will continue to be at risk.

As long as we continue to allow our economy to remain shackled to the OPEC rollercoaster of rising and falling oil prices, our jobs and our way of life will remain at risk.

Moreover, as the demand for oil worldwide grows rapidly over the longer term, even as the rate of new discoveries is falling, it is increasingly obvious that the roller coaster is headed for a crash. And we’re in the front car.

Milan March 3, 2009 at 5:19 pm

This quote is very frequently applicable, when considering the transition to a low-carbon, renewable energy economy:

“The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is lukewarm partly for fear of their adversaries, who have the existing laws on their side, and partly because men are generally incredulous, never really trusting new things unless they have tested them by experience. In consequence, whenever those who oppose the changes can do so, they attack vigorously, and the defence made by the others is only lukewarm. So both the innovator and his friends come to grief.”

Machiavelli

. March 17, 2009 at 11:53 am

World Oil Production Peaked in 2008

As everyone knows, there is never a post on The Oil Drum that the entire staff agrees on. Nonetheless, Tony bases his findings on solid research, and a staff survey shows that most agree with a 2008 peak. A post discussing whether an alternate scenario with a second later peak might be feasible is planned for later.

World oil production peaked in 2008 at 81.73 million barrels/day (mbd) shown in the chart below. This oil definition includes crude oil, lease condensate, oil sands and natural gas plant liquids. If natural gas plant liquids are excluded, then the production peak remains in 2008 but at 73.79 mbd. However, if oil sands are also excluded then crude oil and lease condensate production peaked in 2005 at 72.75 mbd.

The US Energy Information Administration (EIA) and the International Energy Agency (IEA) should make official statements about declining world oil production to renew the focus on oil conservation and alternative energy sources.

. May 17, 2009 at 4:49 pm

Whether peak or plateau, the upshot is the same: Total thinks conventional oil production is approaching its practical limit. That’s why Canada and Venezuela figure so large in the company’s future. They hold the world’s biggest reserves of heavy crude (known as “oil sands” in Canada and “extra heavy oil” in Venezuela). As the easy-to-pump conventional reserves dry up, the thick goo from the frozen north and tropical south will have to fill the gap to forestall a precipitous drop in world production.

At least that’s Total’s theory.

We believe that, because of plateau oil, the oil sands are necessary to supply demand growth,” said Yves-Louis Darricarrère, Total’s exploration and development president.

The company plans to spend as much as $20-billion (U.S.) over the next decade developing its Alberta oil sands portfolio, which was to include UTS Energy Corp., the would-be oil sands developer that in April rejected Total’s sweetened $830-million (Canadian) takeover offer, valued at $1.75 a share.

. May 25, 2009 at 12:34 pm

Are we entering an age of reverse-globalization?

The International Energy Agency is getting a bit worried. It sees that low oil prices — or at least low compared to last summer — have led to under-investment in energy infrastructure, particularly exploration of oil and gas. It also knows that when the economy shifts into recovery mode demand will pick up fast and supply will be slow to respond. It predicts there will be a supply crunch by 2012, and of course that means oil prices will be rocketing back up.

This scenario, of course, may be understating the problem about to hit world economies, says former CIBC chief economist Jeff Rubin, whose new book Why Your World Is Going to Get a Whole Lot Smallerhit the market today. I’ve got a feature book review here, but in a nutshell Rubin believes conventional oil production has already peaked and unconventional production won’t be able to keep up with demand once global economies recover, and not just because of the incredible appetite the Chinese have for oil. Rubin argues that excessive consumption in the Middle East, massive local subsidies there for oil, and the use of oil-fired power plants to run energy-intensive desalination facilities will shrink the amount of oil supply that OPEC puts on the world market. Ultracheap cars to appear in India and likely to spread around the world, thanks to Tata Motors, will mean even more demand for oil products.

. May 25, 2009 at 12:41 pm

Book Review: Why Your World Is About to Get a Whole Lot Smaller
Sunday, May 24, 2009

R-Squared Energy Blog

Jeff Rubin – the former chief economist at CIBC World Markets – has always struck me as someone who “gets it.” I have seen him do a number of interviews, both on television and in print – and he consistently sounds the alarm on peak oil. He understands very well that cheap oil is the lifeblood of the global economy, yet this is an era that will soon come to an end. His new book – Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization – goes through the peak oil story in a way that I initially thought of as “Kunstleresque”, but I changed my mind as I got deeper into the book.

Some will certainly describe Rubin as a ‘doomer.’ However, by the end of the book I had concluded that there are some significant distinctions between the overall message that Rubin is trying to convey and the message Jim Kunstler conveys in The Long Emergency. Maybe it’s because The Long Emergency really slapped me out of complacency, but I recall being mildly shocked after reading Kunstler. I did not experience that same sense of shock while reading Rubin – but those who are only mildly familiar with peak oil may be.

Rubin covers many familiar themes, such as the domestic cannibalization of exports by energy producers, the need to produce and consume more goods locally, corn ethanol (which he describes as a ‘head fake’), and the overall impact of high oil prices on the global economy. For regular readers, you will find that much of the book is familiar territory, and for a while I was thinking “There is nothing here that I haven’t seen before.” But the book ultimately grew on me, partly because there are two themes that distinguish it from other books I have read about peak oil.

. May 29, 2009 at 12:02 am

Arctic contains 13% of remaining oil

Shawn McCarthy Global Energy Reporter Global Energy Reporter

Ottawa — From Friday’s Globe and Mail, Thursday, May. 28, 2009 08:52PM EDT

The forbidding landscape of the Arctic contains 13 per cent of the world’s remaining undiscovered oil and as much as 30 per cent of its natural gas deposits, a new study from the U.S. Geological Survey says.

The updated estimates of the North’s promising oil and gas resources comes as Canada and its polar neighbours aggressively pursue their competing claims to vast areas of continental shelf under the Arctic Ocean.

The estimate of major oil reserves off North America’s northern coast will also increase pressure to open the region to more oil and gas development, adding fuel to the debate over the U.S. government’s refusal to allow drilling in the Arctic National Wildlife Refuge.

. June 1, 2009 at 4:35 pm

New presentation by Matt Simmons: Two Energy Oxymorons: 1. Energy Independence 2. Energy Security (PDF)

DrumBeat: May 30, 2009

Posted by Leanan on May 30, 2009 – 9:16am
Topic: Miscellaneous

. July 13, 2009 at 7:34 pm

Earlier discussion
What’s next for oil and gas?

It dominates our stock market, our household spending, our economy: Because we’re Canadian, there’s no getting away from thinking about the price of energy.

How do you make money on it? Where is oil (CL-FT60.060.370.62%)headed, and what is driving it? Is this the time to buy — or it is better to wait it out?

Ask Stephen Schork in our live, online discussion. The author of The Schork Report will join us at noon (ET) Monday to discuss the prospects for oil and gas. Get a head start by submitting your question here. Your questions and Mr. Schork’s answers will appear in the space below.

Mr. Schork has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance. For most of the 1990s, he was an analyst with Glencore Ltd. and was a key player in Novarco Ltd., Marc Rich’s last venture in the global energy trading arena. Before launching The Schork Report, he spent four years developing mathematical models to present multi-year forecasts of energy prices used as a basis for hedging and trading activities at Conectiv Energy.

. July 29, 2009 at 5:10 pm

Greenpeace study finds oil companies may be doomed

Environmental activist network argues that the oil industry might be approaching a tipping point from fall in the price, advances in technology and policies on climate change

David Teather
guardian.co.uk, Monday 27 July 2009 20.44 BST

A long-term decline in the demand for oil could undermine the huge investments in Canadian tar sands, which have been heavily opposed by environmentalists, according to a report published today.

The report, by Greenpeace, will make uncomfortable reading for the companies that are investing tens of billions of pounds to exploit the hard-to-extract oil in the belief that demand and the price would climb inexorably as countries such as China and India industrialise.

Citing projections from the oil producers’ cartel Opec and the International Energy Agency, as well as various oil experts, the report casts doubt on the conventional assumption that consumption and prices will begin gathering pace once the world pulls itself out of recession.

It argues that alongside the cyclical fall in the oil price there are more fundamental structural changes taking place. These are driven by advances in energy efficiency and alternative energy, cleaner vehicles, government policies on climate change and concerns over energy security. Greenpeace has posted the report to 200 shareholders in Shell and BP, including pension funds, in an effort to put pressure on the companies to think again. BP reports quarterly results tomorrow and Shell on Thursday.

. September 2, 2009 at 11:22 am

One paper, by a team led by Myles Allen, shows that preventing more than two degrees means producing a maximum of half a trillion tonnes of carbon (1830 billion tonnes of carbon dioxide) between now and 2500 – and probably much less. The other paper, written by a team led by Malte Meinshausen, proposes that producing 1000 billion tonnes of CO2 between 2000 and 2050 would deliver a 25% chance of exceeding two degrees of warming.

official reserves of coal, gas and oil amount to 818 billion tonnes of carbon.

The molecular weight of carbon dioxide is 3.667 times that of carbon. This means that current reserves of fossil fuel, even when we ignore unconventional sources such as tar sands and oil shale, would produce 3000 billion tonnes of carbon dioxide if they were burnt. In other words, if we don’t want to exceed two degrees of global warming, we can burn, according to Allen’s paper, a maximum of 60% of current fossil fuel reserves by 2500

Meinshausen says we’ve already used one third of his 2050 budget since 2000, which suggests that we can afford to burn only 22% of current reserves between now and 2050. If you counted unconventional sources (the carbon content is much harder to calculate), the proportion would be even smaller.

R.K. September 2, 2009 at 11:24 am

If that’s what’s necessary, I think we’re doomed.

Milan September 2, 2009 at 12:06 pm

Warming of more than 2°C might be very bad, but it probably wouldn’t ‘doom’ us.

. September 17, 2009 at 1:39 pm

Brazil’s oil policy
Preparing to spend a “millionaire ticket” from offshore

Sep 3rd 2009 | SÃO PAULO
From The Economist print edition
The government has unveiled plans to give the state the lion’s share of the money from vast new oil discoveries. Will this wealth be invested or squandered?

BY TRADITION Brazil invests little and saves less. Brazilians like to borrow and spend, and ao inferno with the future. This may be a legacy of stubbornly high inflation for most of the second half of the 20th century. It may also be an inheritance from further back. Eduardo Giannetti, an economist and philosopher, thinks that the Brazilian ethnic mixture of indigenous nomads, Portuguese settlers seeking a quick fortune and Africans brought to the country in chains bequeathed an entrenched habit of spending now and saving some other time. Whatever the cause, the discovery in 2007 of potentially vast new offshore oil deposits deep beneath the Atlantic seabed will be a crucial test of Brazil’s moral fibre: depending on how it is used, this new wealth could help the country overcome poverty and underdevelopment, or exaggerate its spendthrift ways.

After almost two years in which his government has pondered the question, on August 31st President Luiz Inácio Lula da Silva unveiled four new bills setting out how the windfall should be gathered and spent. His rhetoric on what he called “independence day” was triumphalist. The oil deposits were “a gift from God,”“a millionaire ticket” and “a passport to the future.” But he also pointed to the problems that oil has caused some economies, and explained how Brazil plans to avoid them. The bills, which have to be approved by Congress, will not affect existing exploration and development contracts held by Petrobras, the state-controlled oil company, and five foreign oil companies. These contracts govern parts of the Tupi field, which contains between 5 billion and 8 billion barrels of oil. But plenty of oil and gas would fall under the new laws. Officials believe that in all, there may be up to 50 billion barrels of oil and gas offshore—enough to turn Brazil into an oil giant.

. September 17, 2009 at 1:39 pm

Venezuela’s oil policy
A sticky proposition

Sep 3rd 2009 | CARACAS
From The Economist print edition
Take a tiny bit of it, or leave it

IN A world in which oil is scarcer, the 272 billion barrels of heavy crude that Venezuela reckons are contained in the oil sands of its Orinoco basin ought to seem like a more attractive proposition to multinationals and state oil firms alike. Yet three times this year Petróleos de Venezuela (PDVSA), the state oil company, has postponed bidding for seven blocks in the Orinoco which officials think would yield 1m barrels per day of synthetic oil. The reason: the terms on offer are even stiffer than those being contemplated by Brazil’s government (see article), and the uncertainty is even greater.

The risk is not geological. Everyone knows where the oil is. The upgrading and refining facilities required to turn tar to oil cost billions of dollars, but the technology is tried and tested. Environmentalists, so vocal about Canada’s tar sands (see article), have so far been silent over Venezuela’s bitumen.

Milan September 22, 2009 at 12:53 pm
Milan September 29, 2009 at 4:17 pm

Alongside a massive drive towards renewables, another excellent thing governments could do would be to heavily tax all the fossil fuels that are extracted in their territory – regardless of whether they will be used domestically or exported.

That would reflect the fact that it is cumulative emissions that matter. Just getting more efficient about fossil fuel use isn’t enough. We need to ensure that most of the fossil fuels that remain to be extracted are actually left forever in the ground instead.

Anyone extracting a barrel of oil or a tonne of coal should have to pay for the impact that burning it will have on all future generations everywhere.

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