Monday, May 22, 2006

What Clive Crook Doesn't Know About Energy Will Hurt Him (And Us Too!)

The incurious mind often doesn't know what it doesn't know and so, not surprisingly, doesn't think to ask questions. Such is the case with Clive Crook in his recent piece in The Atlantic Monthly (subscription required, but even if you can't read it, I will outline his main points). While misleading articles about oil and energy are so numerous in the media these days that responding to them all would be an impossible task, it is occasionally worthwhile to critique a typical specimen so as to remain in practice.

In a nutshell, Crook appears to be channeling Daniel Yergin who contends that the main obstacles to an energy-secure future are political, not technical or geological. But Crook should have been more careful to conceal his ignorance of the world's energy landscape. He tells us the following:
Even if prices somewhat lower than those already seen this year were sustained, an array of existing but not yet widely applied technologies would make it economically feasible to extract oil from tar sands or shale, or to convert coal to liquid fuel.

If Crook doesn't know that for many years it has been economically feasible to obtain oil from the tar sands in Alberta and that it is being done currently to the tune of 1 million barrels a day, what else doesn't he know? Apparently, he doesn't know that coal is already being turned into liquid fuel on a large scale in South Africa, either. And, though he tells us in amazement that the economy has not been slowed appreciably by $70 a barrel oil, he doesn't seem to know that this price is about $25 to $30 below the inflation-adjusted high that oil reached in 1980.

Crook also tells us that the American economy is far more efficient in its use of oil and energy in general than it was in 1970. The absolute amount of oil that we use is greater, he admits, but the amount we use per unit of GDP is considerably less. This makes it easier to absorb price increases without hurting economic growth. True, but it never occurs to him to ask how our economy would fare if the amount of oil available actually declined. Then, I think we would find out that we are not less dependent on oil, but, in fact, more dependent on oil since we now balance much more GDP on a given unit of oil. Could our economy grow after even the partial withdrawal of oil supplies? Here we must consider Liebig's Law of the Minimum: an organism's growth is limited by the amount of the least available essential nutrient. In the case of the world economy, that nutrient would be oil.

Crook launches three other obvious canards: 1) that the move toward a service economy is making us less energy dependent, 2) that reserve estimates for oil prove that we have enough oil for decades to come and 3) that some vague group of people is saying that we are running out of oil.

Let's take the claim about the service economy. First, those who work in the service economy depend on mining, agriculture and manufacturing to make what they need to live and work. Those basic sectors of the economy must use more and more resources including energy to make it possible for more people to work in the so-called service sector. But the service sector isn't necessarily all that energy lean. Ask someone who has had to pay the utility bills for a university or a large hotel lately. In fact, some service businesses and institutions are from an energy standpoint nothing but sprawling energy sinks as our large state universities have been finding out recently. Growth in the economy means growth in energy use no matter how that growth occurs. Yes, we've become more efficient. But, nature doesn't care that we are using finite fossil fuels more parsimoniously; it only cares about the absolute drawdown which is getting bigger by the day.

Crook also claims that oil reserve estimates show that we have nothing to worry about for several decades. Here he once again displays his ignorance. He says nothing about the controversy surrounding reserve gains in the late 1980s in nearly all OPEC countries. OPEC was contemplating adjusting production quotas to be commensurate with reserves. Suddenly, OPEC members within the space of a couple years were reporting gains of 50% to 100% in their reserves with no discernible exploration to account for it. The Middle East, where most of OPEC's oil is located, contains 60 percent of the world's remaining reserves. Not mentioning the sudden appearance of these phantom reserves and the recent sudden vanishing of some of the same reserves is no small oversight.

The second error he makes is confining his discussion to reserves. It doesn't matter how big your reserves are if the rate at which you can get oil out of the ground is small. The reserves in the Alberta tar sands are quoted at 180 billion barrels, bigger than that of every OPEC country except Saudi Arabia. But, the tar sands are unlikely to give us much more than 3 million barrels a day by 2025. This sounds like a lot, but it is a mere trickle compared to projected world demand of about 120 million barrels a day.

Another problem with the tar sands and other nonconventional oil sources is that their energy return is poor. Right now, we are running the world economy on oil that gives us about 20 units of energy to use in the non-energy economy for each unit we spend in the energy industry to get it. For tar sands, the ratio is only 1.5 to 1. Efficiencies will surely accrue over time, but it seems quite doubtful that tar sands will approach anything like the 20 to 1 ratio for conventional oil. And, we need to keep in mind that the easiest-to-recover oil from the tar sands is being taken first. The harder-to-get oil, and thus more energy-intensive, will come later. It will be a race between technology and declining grades; but will it be a race up to 20 to 1 returns? I doubt it.

Crook mentions oil shale and indicates that there is ready technology to make it a useful energy source. To date no company has been able to get oil out of oil shale at a profit. Even more important, oil shale remains net energy negative. That means we are getting less than one unit of energy for each unit we put in. In short, it's not an energy source using existing technology, and unless somebody figures out a technique for extracting and processing it which doesn't involve using lots of water, it probably never will be a source of energy. That's because most of the world's oil shale is located on the Colorado plateau where water is already in short supply.

The final canard is a staple among oil optimists: They say the-sky-is-falling pessimists claim that we're running out of oil. This, of course, is an utter straw man. Even the pessimists say that we won't run out of oil anytime soon. What they claim is that we are approaching a peak in the rate of production worldwide. Oil production in every field and in every oil country now in decline has followed the same pattern: a sharp rise in the rate of production, followed by a peak, followed by a decline. No one has convincingly shown why this should not be true for the world. And, in a global economy that is utterly dependent for its growth on ever-expanding supplies of cheap oil, a decline in the rate of production would have profound consequences. If that decline is nearby, we will find that we are simply not ready for it. If it is delayed for many years, we have chance to get ready. But, we will not be ready in time if we stick with the current the-market-will-save-us policies which are in force now.

To his credit Crook notes that global warming also needs to be addressed simultaneously with energy issues. But, he again seems to betray his ignorance by saying that the Kyoto Protocol will "impose immediate, drastic changes at ruinous cost." What he doesn't know or doesn't tell you is that leading climate scientists believe we will have to cut our greenhouse gas emissions by 50 to 70 percent over the next 40 years to save us from disastrous warming. Kyoto only requires reductions of about 5.2 percent below 1990 emissions for industrialized countries only (though these reductions would have meant up to 23 percent for the United States if had it signed the protocol). Unfortunately, total emissions may actually rise because of plans for many new coal-fired power plants in countries not covered by or not ratifying the protocol such as China, India and the United States. If the limits Kyoto calls for are "drastic," then they are clearly not drastic enough.

Crook proposes energy diversification, a carbon tax and subsidies for "oil-saving technologies," all sensible steps. But when it comes to understanding the true nature of our energy predicament, he needs to go back and ask more questions--a lot more questions.

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