How the myth of fossil fuel abundance actually impedes progress on climate change

The great fear among those working to address climate change is that the seemingly vast resources of fossil fuels waiting to be burned will send the world hurtling toward certain catastrophe. By invoking fossil fuel abundance, climate activists believe that their argument for a rapid transition to alternative energy is made more persuasive. But, it is poor strategy to reinforce the myth of fossil fuel abundance when doing so actually makes many people less open to such an argument. And, as it turns out, the abundance argument is also contrary to the available data, logic and prudent risk management principles.

Here is what I mean. First, despite all the hype about marginal gains in U.S. oil production, world oil production has been on a plateau since 2005. Small gains in U.S. production have been offset by declining production in the rest of the world. The news for coal production is only slightly less discouraging as one study suggests that the rate of coal production worldwide could peak as early as 2025. In the United States, while coal tonnage has remained essentially flat from 1998 through 2011, energy content has actually declined. Has the available energy from U.S. coal production already peaked? We can't be sure. But the trend suggests caution. One recent study even concluded that world coal production from existing fields may have peaked last year. But, even if the authors are 10 years early, the prospects for creating a coal economy to follow the oil one are poor at best.

And finally, natural gas--much touted as a less polluting "bridge fuel" to a renewable energy future--may not be so plentiful as we are led to believe. Natural gas derived from deep shale deposits was first portrayed as so abundant that wells could simply be drilled anywhere in the vast shale basins of North America. But the record of drilling to date suggests that such deposits will yield far less than anticipated and be far more costly to develop.

Simple logic and prudent risk management suggests that we should already be making a rapid transition to renewable energy. No one--not the fossil fuel industry, not government, not private forecasters--can know for certain what our future supplies of fossil fuels will be. If those supplies are constrained as current trends and data suggest, then we will be forced to make an energy transition whether we want to or not. If fossil fuels turn out to be more abundant than current trends portend and we make a rapid transition to renewable energy starting now, the worst that can happen is that we will have completed that transition a little earlier than was absolutely necessary. But, if fossil fuel supplies begin to decline in the near future and we've made little additional progress on deploying new energy sources, we will surely be in for considerable economic and social pain, pain that might be so severe as to challenge the very stability of our global system. That's how central fossil fuel energy is to our society.

Many climate activists continue to believe, however, that the above data will make people less concerned about climate change. These activists think that the danger from supposedly overflowing fossil fuel abundance will somehow make it clear that we must move away from such fuels. But, I would contend that the current public relations campaign by the oil and gas industry designed to convince us that oil and natural gas will be abundant for decades to come is actually making the public less supportive of a transition away from fossil fuels. And, I believe that if the public understood the true risks to our energy supplies that come from relying so heavily on fossil fuels, it would be more inclined to support a rapid transition to alternative energy and increased efforts in conservation and efficiency.

Let's look for a moment at the public the way a political campaign does. Every campaign starts with basic triage. First, there are the people who are going to support you no matter what. These people need to be nurtured and encouraged to spread the word about your candidacy to those who can be persuaded to vote for you. Then, there are those who are never going to vote for you. You can't persuade these people, so you shouldn't spend any time on them. Your job is simply to beat them and their candidate on election day. Finally, there are those who can be persuaded to vote for you. Perhaps these people haven't made up their minds. Perhaps they are leaning toward your opponent, but can still be persuaded to vote for you with the right argument.

Naturally, those who support addressing climate change aggressively will be especially concerned about the amount of carbon-based fuels left to burn. But, those who are on the fence--or who, more likely, haven't really put much thought into the issue--are currently being bombarded with the industry's abundance message. Without much commitment one way or the other, their path of least resistance is to accept the industry position. It's an easy path that requires no changes in behavior. And, after all, isn't the fossil fuel industry promising to bring us cleaner burning natural gas in copious quantities? Won't that help use reduce our carbon emissions? And, what about "clean coal"? That should address our concerns about coal, shouldn't it?

Of course, activists will immediately spot the problems embedded in these assertions masquerading as questions. But, none of this would seem relevant to a persuadable member of the public if the myth of abundance hadn't already infected his or her mind. Once the abundance myth is undermined, it follows that we must move quickly to alternative, noncarbon-based energy. All the promises of clean natural gas and clean coal don't matter if their supply is in question. It's dead certain that all fossil fuels will at some point peak in their production and then decline irreversibly. Nobody knows for sure when, and that's a good enough reason to make an energy transition sooner rather than later.

Sowing doubt about the claim of fossil fuel abundance is the surest way to move the persuadable public toward supporting many of those actions which are consistent with addressing climate change. Those so persuaded don't even have to believe that climate change is a problem (though it would certainly help if they did). Why concede the abundance argument--an argument the fossil fuel industry is using like a club against climate change activists--when we don't have to?

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Did oil decide the last three American elections?

Was the most recent American election outcome determined by the presidential debates, changing demographics, voter views on issues, Hurricane Sandy (and the president's reaction to it) or voter turnout? Probably all of these contributed to the result. Energy was actually one of the issues discussed during the campaign, particularly domestic production of oil and natural gas. But, it's not the debate over energy issues that interests me here so much as the price and supply of oil and their effects on voter attitudes.

Let's go back to the summer of 2008. The price of oil had been climbing all year reaching its highest level ever (even adjusted for inflation) at $147.27 a barrel on July 11. From there the price began to decline. Though few people knew it, an economy beleaguered by years of rising oil prices was already in recession. The financial markets eventually crashed that fall. And, the worst slump in the world economy since the Great Depression followed.

The bursting of the U.S. real estate bubble in the previous year was frequently cited as the cause of the crash. And, there is little doubt that stresses in the financial industry combined with the real estate collapse to create a financial meltdown. But, the work of economist James Hamilton suggests that high oil prices were also a significant factor in precipitating the bust and therefore the economic pain felt by American voters. All of this implies that the solid victory of Democrats and Barack Obama in 2008 resulted at least in part from discontent among voters over high oil prices. The conclusion seemed obvious even then.

After dipping into the $30 range in late 2008, oil prices rebounded to around $80 by the beginning of 2010 and remained in the $70 to $80 range through election day that year. If we accept Hamilton's work, then high oil prices produced a significant drag on the economy and may have caused swing voters, frustrated by a slow economic recovery and high unemployment, to hand the party out of power a huge victory. They gave Republicans control of the U.S. House and of many additional governorships and state legislatures.

Fast forward to 2012. Oil prices spent much of the year between $90 and $110 a barrel. As high oil prices continued to put a drag on the still slow economic recovery, the year seemed designed to give Republicans a decisive victory--but only if voters perceived that the Republican Party was still the party out of power. In fact, the flamboyance of the Republican-dominated U.S. House and its defiance of the president combined with the swift passage of the Republican agenda in a large number of states may have made the Republican Party seem to many voters like the party in power--put there to solve the problems not adequately addressed by Democratic politicians which voters had only just installed during the 2008 elections.

As I indicated, there are certainly other factors besides oil prices that determined this year's election outcome. But I can't help thinking that many voters--still frustrated by slow growth due in part to high oil prices--decided that Republican politicians had not acted to address their economic anxieties. So, those voters simply went the opposite direction and voted for Democrats.

If the pattern I see holds, then continuing high oil prices would lead to a resurgence of the Republican Party in the 2014 elections. Naturally, if prices decline and stay down, oil will not be a central issue. But here is the problem. If oil supplies are going to be constrained in the long term, as I believe they will be, then waiting for supply to rise and for prices to fall will not be a useful strategy for either party. Neither will touting the temporary and overhyped gains in domestic oil production that are, in any case, being offset by declines abroad. Keep in mind that oil is a worldwide market, so Americans will continue to pay world prices whether or not domestic production rises.

The party that addresses constraints in worldwide oil supplies by intensifying efforts to reduce U.S. consumption and speeding a transition to alternative energy would probably likely break the cycle of rapid swings from one party to the other every two years--but not in the way that that party would like. Broaching the subject of limits with voters and acting to address those limits could spell political suicide for the party that does it. Surely, during the next election the opposition party would say that we have plenty of oil and offer a vague plan, however preposterous, to overcome production constraints.

It is true that Democrats have emphasized renewable energy and conservation more than Republicans. And yet, President Obama has repeatedly asserted that he is working to increase permitting of oil and natural gas exploration on federal land as quickly as possible. That's hardly the equivalent of grasping the nettle and giving the voters the bad news, namely, that world oil production has been stagnant since 2005 and that there is little prospect that world production--which is what determines the oil price--will grow much from here.

It's possible that the myth of oil abundance and the powerful oil industry lobby behind it has locked us into a politics which will provide neither party with the decisive majority needed to enact the difficult agenda that would move us toward a more sustainable energy economy. But then, that's the way the oil industry must like it--high prices with promises that eventually, someday, perhaps just around the corner, prices will come down. All you have to do is trust us!

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Does the IMF believe we have a peak oil problem?

Does the International Monetary Fund (IMF) believe we have a peak oil problem? The precise answer is that the IMF is currently studying how constraints in world oil supplies might affect economies around the world in two so-called working papers, "The Future of Oil: Geology versus Technology" and "Oil and the World Economy: Some Possible Futures."

We are admonished by the IMF that opinions expressed in working papers are "those of the author(s) and do not necessarily represent those of the IMF or IMF policy." But the fact that the organization has produced two papers on the subject this year gives some indication of how seriously it is taking the issue. One of the co-authors for both papers, Michael Kumhof, a senior researcher and deputy division chief for the fund, hasn't been keeping his concerns secret. In a presentation, he outlined his reasoning for why the price of oil would have to nearly double in real terms in order for oil production to increase the measly 0.9 percent per year projected by the U.S. Energy Information Administration between now and 2020.

Part of the problem is that we have already extracted the easy-to-get oil. Now comes the hard stuff: deepwater drilling, tar sands, arctic oil, and tight oil (often referred to erroneously as shale oil) which is produced by expensive hydraulic fracturing or fracking, something that typically costs millions to perform on a single well.

The new model presented in "The Future of Oil" takes into account both geologic constraints and the effect of price changes on oil production. The model has proven much better at explaining trends in oil production and prices than conventional economic analysis which assumes no long-term geologic production constraints. Standard economic theory--in which oil supplies always increase in response to high prices--has been unable to explain the apparent plateau in world oil production from 2005 onward in the face of record high oil prices.

(IMF researchers are interested in the global picture for oil production and have therefore not been taken in by the hype over recent marginal gains in U.S. oil production, gains that have been offset by declines elsewhere in the world. Because oil can be shipped to wherever the price is highest, it is world output which matters.)

All of this begs the question about how record prices and oil supply constraints are affecting the world economy. Kumhof and his IMF colleague Dirk Muir modeled several scenarios in which oil supplies actually fall for the next 20 years in their paper, "Oil and the World Economy: Some Possible Futures." In their baseline scenario they assume a small, but persistent decline in oil supplies from year to year. As a result oil prices rise by 200 percent in real terms over a 20-year period. GDP shrinks at a rate of 0.2 to 0.4 percent per year in the United States and the Euro area. Surprisingly, the declines are steeper in oil exporting countries. It is a situation that is difficult but not impossible to manage.

The authors then imagine a world economy much more capable of adjusting to declining oil supplies through, for example, switching to other fuels. That scenario would be less distressing for all economies and could lead to continued economic growth in countries other than oil exporters, the United States and Euro area countries.

A third scenario posits just the opposite, an economy which has increasing difficulty substituting other fuels and feedstocks for oil. The assumption is that the easy and obvious substitutions will be made first and subsequent substitutions will be harder to find and deploy. Under these conditions, oil prices increase by 300 percent in real terms over 20 years.

A fourth scenario assumes that oil is so intertwined with the world economy that its contribution to world output is far higher than the 5 percent its cost contribution suggests for what are called "tradeables," items that are easily exchanged in trade (which is most of the things we make) or the 2 percent cost contribution for what are called "nontradeables," items not easily shipped across an ocean for trade. (Public drinking water supply would be an example.) Instead, Kumhof and Muir assume that oil's true contribution is 25 percent and 20 percent respectively. The authors argue that "oil is an essential precondition for the continued viability of many modern technologies." They believe that many processes simply won't work and many devices can't be produced below a minimum supply of oil. They also assume that substitutes are difficult to make. This outlook spikes the price of oil by 400 percent in real terms over 20 years.

The negative economic effects of scenarios three and four are indeed profound. But, the authors recognize that such price increases are probably not realistic, even under the scenarios they posit. They assume that such extreme price outcomes imply "nonlinear effects on GDP" which the model cannot express. Translation: The world economy crashes before prices ever get that high.

There are other scenarios, each more grim than the previous, as problems detailed in earlier scenarios are essentially added to one another and to some new scenarios.

The point of the exercise is not to predict a specific outcome. Rather, the authors want to explore just how sensitive the world economy may be to oil supplies and highlight the uncertainties surrounding those supplies. While there has been much talk about how the world economy is becoming less oil-intensive per dollar of output, the researchers turn this observation on its head:

[I]f it really only takes a one third of one percentage point increase in oil supply per annum to support additional GDP growth of one percentage point, then it must also be true that it would only take a one third of one percentage point decrease in oil supply growth to reduce GDP growth by a full percentage point. And the kinds of declines in oil supply growth that are now being discussed as realistic possibilities are far larger than one third of one percentage point.

The IMF researchers also note that while an energy transition away from oil certainly seems possible, the extent to which oil is critical in the functioning in the world economy implies that such a transition will be costly and may require several decades. They wonder whether we have that kind of time, given that oil supplies have essentially been stagnant since 2005 and that some analysts believe a persistent decline in world oil production may begin within this decade.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Burning Picassos for heat: Why we need to electrify transportation

An oil executive once observed that burning oil for energy is like burning Picassos for heat. Oil is extraordinarily valuable as the basis for so many products we use every day that the thought of simply burning it ought to be unthinkable. So versatile are oil molecules that they can be transformed into substances that serve as clothing, medicines, building materials, carpet, skin care products, sporting goods, agricultural chemicals, perfumes, and myriad other products.

Increasingly, when we make oil-based products for homes and businesses, we are finding ways to reuse those products or recycle the materials they are made from (think: recyclable plastics). But, burning oil is always a one-time, irreversible act that leaves nothing of value behind and produces greenhouse gases and pollutants that harm us. And yet, because oil remains the most cost-effective and widely available source of liquid fuels, we are hooked on it for transportation with little prospect of substitutes on the scale we would require--unless we consider electricity.

It is worth remembering that electricity was a strong contender for powering automobiles at the beginning of the last century and that it ran the trolleys of the era (and still runs many today). Electricity was actually preferred over gasoline for powering cars at the time, especially cars that were used exclusively for local trips. Battery exchange was already available as a quick way to "charge" a car. But improvements in the internal combustion engine and the increasing availability and affordability of gasoline led to the extinction of the electric car no later than the 1930s.

More recently, despite all the hand waving about marginal gains in U.S. oil production, we have been experiencing a plateau in worldwide oil production since 2005. Ongoing tightness in oil supplies has led to high prices for gasoline and diesel, and so the world is turning once again to electricity to power transportation. Of course, many hybrid gas-electric vehicles are already in use, and some all-electric vehicles are now being produced for the mass market. But in a world increasingly faced with energy constraints and climate change, continuing to rely on the automobile as the main source of transportation may be a poor policy choice.

First, astute observers will note that electric vehicles of whatever kind are actually powered primarily by fossil fuels. According to the U.S. Energy Information Administration two-thirds of all electric power worldwide is generated using fossil fuels. That means coal and natural gas are being burned to produce the lion's share of electricity. Some oil is still used, especially in countries that export it and so have cheap supplies available to them.

To reduce overall greenhouse gas emissions, we would have to burn less overall fossil fuel. Only one-third of the heat energy produced in a typical fossil-fueled power plant actually gets turned into electricity. The rest is expelled as waste heat which is why we see huge volumes of steam coming from cooling towers wherever fossil-fueled generating plants operate. Were it not for the fact that renewable energy can be employed to make electricity, electric-powered vehicles on a mass scale would provide little advantage when it comes to pollution and greenhouse gas emissions. These vehicles would, however, still reduce dependence on petroleum.

There are two obvious moves that would substantially reduce our reliance on fossil-fuel produced electricity. One already mentioned would be vastly expanding renewable energy sources such as wind, solar and hydroelectric. Naturally, there are the problems of load-balancing and storage related to intermittent power sources such as wind and solar. These problems would have to be overcome in the long term in order to allow the electrification of transportation based primarily on renewable energy. But, there are plausible paths to such an outcome, especially if overall reductions in energy use are part of the path, something I'll discuss below. Naturally, nuclear generated electricity can also be used to power vehicles. But I am doubtful that in the post-Fukushima era, nuclear power will be a viable option for increasing nonfossil fuel-based electricity production, both for political and technical reasons.

A second move that would reduce our reliance on fossil-fuel based electricity would be a vast expansion of our mass transit systems. Done properly, this expansion would reduce overall energy use in transportation by moving people from energy-intensive automobiles into more efficient mass transit. An overall reduction in energy use is important because, for many reasons, it is unlikely that renewable energy production will be able to match the huge quantities of energy we currently get from fossil fuels. The expansion of mass transit would need to be executed in a way that would make such systems so ubiquitous, convenient and inviting that people would prefer them over cars as many do in major American and European cities.

Much of the mass transit infrastructure can run on electricity and already does including electric-powered subways, commuter trains, buses and trams. To that infrastructure we would need to add electric-powered, high-speed passenger rail service between major cities. That's already in place in Europe and Japan. In the United States such a high-speed rail system would reduce the need for short-haul air travel and thus reduce jet fuel use. And, we'd want to expand and electrify freight traffic over rails, something that would lessen the need for long-haul trucking. Even in trucking, hybrid trucks are starting to appear in commercial fleets, something that can further reduce use of diesel and gasoline.

Of course, some modes of transport are not going to be amenable to electric power. Electric-powered planes are not impossible, but would probably not be able to carry much weight given the current state of battery technology. Ocean-going freighters will likely continue to need liquid fuels, though sails are starting to appear on some to reduce fuel use.

On land we will almost certainly need some liquid fuels for four categories of vehicles: rural transport, farm machinery, heavy equipment and emergency vehicles. It probably isn't cost-effective to string wires in rural areas for local transportation because population densities are too low. Some people are working on electric farm machinery charged using solar cells. But, the work needs to progress further before it can be widely adopted. For some farm tasks, liquid-fueled engines may continue to be the most practical approach for a long time to come. Where construction and mining take place away from sources of electricity, heavy equipment will have to operate using liquid fuels. Emergency vehicles could use electricity, but would have to have liquid-fuel capabilities in case the electricity is unavailable.

In the United States 71 percent of the petroleum products consumed are used in transportation. If the country were able to run its transportation system entirely without oil, the United States would not only cease to import oil, but would have significant surplus oil production. Of course, such a change could only take place over many years. But the advantages to such a transition are so numerous that we should not dismiss it as too difficult or costly.

Only 5 percent of all oil is used to produce petrochemicals--chemicals which form the basis for the almost miraculous materials and substances that we now take for granted. By ceasing to burn the bulk of our oil to move goods and people, we could sustain the production of these products for a very long time. And, properly formulated, many could be recycled almost indefinitely. That seems like a much better use of an energy source that doubles as the "renaissance man" of the chemical industry.

When you add in the reduction in greenhouse gas emissions and air pollution; an end to oil imports for the United States and possibly many other countries adopting the same strategy; and the financial boost of keeping funds previously spent on imports at home, it's hard to see why electrifying transportation would not be a good idea--so long as it is done with any eye toward increasing renewable energy production while reducing overall energy consumption in the transportation sector.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Why the U.S. is NOT the new Saudi Arabia

Last week's energy news included a piece from the Associated Press with a headline reading: "U.S. poised to become world's top oil producer; may soon overtake Saudi Arabia." If the reporter had actually examined figures available from the U.S. Energy Information Administration (EIA) website carefully instead of simply parroting oil industry sycophants, he would have ended up with a headline more like this: "Marginal gains in U.S. oil production mean continuing high prices and imports for Americans."

As it turns out, U.S. crude oil production is averaging 6.2 million barrels per day (mbpd) so far this year compared to Saudi Arabia's 9.9 mbpd. So, how did the reporter and his sources end up with a production number of 10.9 mbpd for the United States?

The problem results from the deceptive redefinition of oil supply by the oil industry itself, one designed to obscure the true oil supply picture and one that, unfortunately, has been adopted by some government agencies. Within the last decade the industry began to count something called natural gas plant liquids (NGPL) as part of oil supply. Here's how I've explained NGPL previously:

NGPL are hydrocarbons other than methane that are separated from raw natural gas at a processing plant. They include ethane, propane, butane and pentane. The amounts vary. For example, raw natural gas extracted off the coast of Malaysia contains 11 percent ethane, 5 percent propane, 2 percent butane and about 2 percent of something called natural gasoline or drip gas, a low-octane fuel that is used today primarily as a solvent. Raw natural gas from the North Slope of Alaska contains a higher percentage of methane and correspondingly smaller percentages of ethane (7 percent), propane (4 percent), butane (1 percent) and other components including carbon dioxide and pentanes (2 percent). In these two cases you can see that ethane makes up about half of the NGPL, propane makes up about a quarter, butane makes up 10 percent of Malaysian NGPL and 7 percent of Alaskan slope NGPL.

As you will note, these products all come from natural gas, not oil. While it is true that propane and butane are used as vehicle fuel in a very limited way, most of the volume of NGPL cannot easily be used as a substitute for oil. And, it is doubtful that either propane or butane could become major vehicle fuels since they make up only a small fraction of natural gas and are limited in their supply by the amount of natural gas extracted. Some NGPL are used as feedstocks for chemical production, just as petroleum is. But the likelihood that NGPL would significantly displace oil in this market as it is currently configured is small.

Also included in the definition of oil supply are biofuels, namely ethanol and biodiesel. While these are direct substitutes for oil, they make up only a small fraction of total liquid fuel, about 1.9 mbpd as of 2010 in a world that consumed 86.8 mbpd of all liquid fuels the same year. In the United States biofuels production reached 0.9 mbpd in 2010. But, there is little reason to believe biofuels will be able to substitute in a big way for oil-derived transportation fuels. Here's how I've described the situation previously:

As for biofuels, America is already approaching the current limit of its ability to absorb the supply of ethanol. Most cars can only run with a 10 percent mixture. Above that engine parts in the vast majority of vehicles start to degrade. Of course, we could continue to increase the ability of automobiles to burn ethanol. But the scale problem is the deciding factor. In North America it would take 1.8 billion acres to grow enough corn to supply enough ethanol to run the North American vehicle fleet. That's four and one-half times the amount of arable land available. And besides, corn ethanol takes more energy to produce than it provides. It's not an energy source so much as an energy carrier. Similar limitations apply to biodiesel which is made from vegetable oil.

If biofuels or NGPL were good substitutes for petroleum-derived liquid fuels, the United States would not still depend on petroleum for 93 percent of its transportation fuel. And, keep in mind that copious amounts of petroleum are needed to grow the crops used to make biofuels. Petroleum products run the farm machinery, are used as feedstocks to make the herbicides and pesticides sprayed on the crops, and power the vehicles that transport those crops to the refinery. Natural gas and coal are typically used to power biofuel refinery operations. And so, biofuels might better be described as a way to transform fossil fuel energy into liquid fuels using crop materials as a medium.

So, what is the real situation in the United States, if it is not as the reporter and his sources describe? First, recognize that the EIA defines crude oil production as "crude oil including lease condensate." Lease condensates are very light hydrocarbons that turn from gases into liquids when released from the pressure of an underground reservoir and are "recovered as a liquid from natural gas wells in lease or field separation facilities and later mixed into the crude stream (my emphasis)." The importance here is that these are the only liquids from natural gas wells that become part of the crude oil supply. NGPL, on the other hand, are separated at natural gas processing plants and therefore do not become part of the crude oil stream.

Production of crude oil including lease condensate has, in fact, been growing in the United States. The key fact, however, is that U.S. production only just recovered last year to levels not seen since before 2005 when Hurricane Katrina badly damaged many offshore oil production facilities in the Gulf of Mexico. This year production has grown further to an average of 6.2 mbpd through June. But that's a far cry from the 10.9 mbpd quoted in the article which includes NGPL, biofuels and something called refinery processing gain--which is the result of the well-known fact that the total volume of products made from crude oil such as gasoline, diesel and kerosene always exceeds the original volume of the crude oil used--hardly something to write home about.

The EIA projects that production of U.S. crude oil (using the proper definition) will rise to 6.7 mbpd by 2020 and begin a gradual decline thereafter. It's certainly possible that the EIA projection is too conservative. But it is worth keeping in mind that U.S. consumption of finished petroleum products this year has averaged 14.1 mbpd. U.S. oil production would have to more than double to meet U.S. needs.

In two previous pieces--"The Oil Industry's Deceitful Promise of American Energy Independence" and "Oil and Gas Industry Uses Deceptive Energy Independence Message to Push U.S. Exports"--I explained why the oil industry wants Americans to believe that we are in the midst of an oil boom that will somehow free us from imports and bring declining average prices for petroleum products. But continuing high prices for crude oil and petroleum products across the world demonstrate that small gains in American production are no match for worldwide depletion which has kept crude oil production range bound between about 72 and 74 mbpd from 2005 through 2011. One should keep in mind that oil is a worldwide commodity that can always be shipped to the highest bidder. So, it is worldwide supply and demand that ultimately determine prices (once transportation costs are taken into account).

The media have become unwitting accomplishes in an oil industry propaganda machine that seeks to soften up the American public for an orgy of drilling--one that will only drain America's limited oil resources more quickly while achieving neither energy independence, nor lower prices, nor an urgently needed transition away from finite petroleum, a transition that would free us from the tyranny of oil and the companies that control it.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Canadians could free themselves from oil imports, but will they?

You are not alone if you think it's odd that Canada--the world's ninth largest exporter of crude oil and petroleum products and the main supplier of oil imports to the United States--is itself a longtime oil importer, importing more than 40 percent of its oil needs this year.

The situation results from historical pipeline development which has left Canada without a major east-west pipeline to bring the huge surplus of oil produced in the western provinces--now primarily from tar sands--to the eastern part of the country. The country's provinces from Ontario eastward currently import a little more than 60 percent of their oil needs from overseas. That may be set to change.

Winston Churchill once said, "You can always count on Americans to do the right thing--after they've tried everything else." It seems he could have been talking about the Canadians and their oil predicament. Earlier this year TransCanada, a major pipeline company, proposed expanding the current pipeline system known as Keystone to carry more western Canadian crude to America's Gulf Coast. But, the pipeline giant was rebuffed by the Obama Administration in an election-year gambit to satisfy environmentalists concerned about the impact of tar sands development on climate change and water quality. Enbridge, another Canadian pipeline company, has proposed the so-called Northern Gateway pipeline route from the tar sands to the British Columbia coast. From there the oil would be exported to satisfy growing Asian demand. But practically everyone along the Northern Gateway route has lined up against it including the British Columbian premier.

Now, yet another route is being considered, one that would allow TransCanada to live up to its name. The company's latest proposal would take an east-west natural gas pipeline which is now being underused and convert it into an oil pipeline to bring western Canadian crude to currently import-dependent eastern Canada. The plan, which will require regulatory approval, may not face the stiff opposition that the other two projects faced since this pipeline is largely complete. It would require only some additional work to convert it and link it to refineries and storage depots.

The result would be a flow of up to 1 million barrels per day of oil to eastern Canada, more than enough to displace all of Canada's current imports and possibly allow for exports of crude oil from the eastern seaboard. Canadians would still be subject to world oil prices since oil would remain a global commodity that can be shipped to the highest bidder. But, the country would no longer be vulnerable to supply disruptions from abroad and would be in a position to prevent exports if a national emergency warranted it.

With this change Canada would move closer to true energy independence. It currently exports electricity to the United States and imports only a tiny amount of U.S. electricity due to historical infrastructure or regional rate differentials. Canada is the world's second largest producer of uranium, providing 17 percent of global supply in 2011. Therefore, the country does not need to import any for use in its own nuclear power plants. In 2011 Canada was the world's 14th largest producer of coal and exported about 30 percent of its production. Some imports were recorded. The long border with the United States, a major coal producer, sometimes makes U.S. imports more economical depending on the type of coal and the shipping distances. When it comes to natural gas, however, Canada's National Energy Board reports that while the country produces 70 percent more than it needs, it still imports the equivalent of 31 percent of its consumption--even as it exports the equivalent of 100 percent of Canadian consumption to the United States. As with oil, historical pipeline infrastructure dictates this unusual arrangement. But that is a story for a future piece.

The oil industry has been working on a way to get growing volumes of oil out of western Canada cheaply for some time. And, the cheapest way is via pipeline. Producers have been suffering steep discounts to world prices with Western Canadian Select crude oil futures trading in New York at a discount of about $20 per barrel compared to American Light Sweet Crude which itself has been trading at approximately a $20 discount to Brent Crude in Europe. So, the total discount to prevailing world prices for western Canadian crude is currently around $40. It's easy to see why the industry is anxious for a pipeline that will allow it take advantage of higher world prices.

With opposition running strong against the two alternatives, the oil industry may be forced to consider the TransCanada pipeline conversion proposal to ship oil to eastern Canada, a proposal that happens to coincide with Canada's national interest. But don't expect to hear industry executives whistling "O Canada" at their desks just yet. It's not clear how much support the project will find among those executives.

That support will be critical because the current Canadian government, which must approve the project, has shown itself congenitally incapable of distinguishing between the national interest and the interests of international oil companies. Therefore, the government isn't likely to force the project on the industry even if the pipeline would be a good idea for Canada as a whole. However, if the oil industry ends up embracing the project, the Canadian government will almost certainly rubber-stamp it. And thus, the government and the industry may inadvertently end up doing what has for a very long time been within Canada's grasp and in its best interest, namely, to free the country from imported oil.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Oil and gas industry uses deceptive energy independence message to push U.S. exports

With gasoline scaling $4 a gallon recently, plans announced last week by international oil giant BP to export U.S.-produced crude oil ought to have Americans howling. For such a plan to be good energy policy--rather than merely profitable for the oil industry--the United States would have to be producing more than enough oil to meet its own needs. But the country produces nowhere near that amount. Nevertheless, the industry's deceptive campaign to make the public and policymakers believe that the United States is on the verge of energy independence seems to be succeeding--a push that is really just a smokescreen for selling the country's oil and natural gas to the highest bidder.

So far this year the United States has produced 6.2 million barrels per day (mbpd) of crude oil plus lease condensate (which is the definition of oil) versus daily net consumption of 13.6 mbpd of finished petroleum products. The country is a long way from being free of oil imports, and as I'll discuss below, there is no realistic prospect that we'll ever produce enough oil domestically to satisfy our needs at the current level of consumption.

That's why to date, except for minor sporadic shipments to a few countries and regular small shipments across the Canadian border, the U.S. government has allowed no other domestic crude oil to be exported. The BP request is presumed to be an attempt to bring oil produced in North Dakota to Canada's refineries on its east coast. The oil produced in North Dakota trades at a $20 discount to oil currently being imported from Europe by Canadian refineries.

Analysts believe BP can ship the North Dakota oil by railcar or other means to Canada and beat the European price. All things being equal that would tend to raise the crude oil price in the United States. The irony, of course, is that Canada exports much of its crude oil production to the United States, making it America's single largest supplier of imported oil. Nevertheless, differences in oil quality and oil transportation infrastructure appear to favor what BP is proposing.

Perhaps of more concern to American consumers is an export license request from a Swiss trading firm, Vitol, which presumably wants the ability to ship U.S. crude anywhere in the world it can get a good price for it. If that request is granted, it's open season on American domestic crude oil supplies.

To be clear, the price of oil in the United States is already based on world prices. This is because oil can be shipped using the world's ocean-going tanker fleet to wherever the price is highest. This tends to equalize prices across the globe once transportation costs are included. But, because the infrastructure in the interior of the United States is inadequate for cheaply moving the oil now being produced there to oil ports, the price of this oil trades at a discount to world prices. So, whenever companies or trading firms believe they can reduce transportation costs such as those from landlocked North Dakota, they will try to move oil that is underpriced to more profitable markets.

Natural gas is another matter. There is not yet an integrated worldwide system for moving natural gas wherever the price is highest. In North America natural gas is essentially a regional product. It can be moved via pipeline between the United States, Canada and Mexico, but there it stops. For that reason the glut of natural gas caused by overdrilling of newly available shale gas deposits has brought prices down dramatically, from $13 per thousand cubic feet (mcf) in mid-2008 to just above $3 per mcf today.

The glut has the industry saying the United States will soon produce all of its own natural gas. In practice, it's not working out that way. With supposedly vast supplies of natural gas now beneath their feet, Americans imported 14.2 percent of their natural gas needs in 2011, almost all of it from Canada, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. For comparison, annual U.S. natural gas imports from 1990 through 2010 averaged 16.8 percent of total U.S. consumption. Progress, but not exactly energy independence.

The EIA projects, however, that U.S. domestic natural gas production will grow sufficiently so that the United States will become a net exporter of natural gas by 2022. Still, some analysts have cast doubts on such forecasts. In fact, claims that the United States has a 100-year supply of natural gas have been widely refuted. First, the claim was based on estimated resources. As I am obliged to remind people again and again, resources are what is thought to be in the Earth's crust based on sketchy evidence at best. Reserves, on the other hand, are what the drillbit has shown can be produced using existing technology at current prices from known fields. Proven and probable reserves of U.S. domestic natural gas add up to only 22 years of supply at the current rate of consumption.

Second, the refuted 100-year figure assumes that we will continue to use natural gas only at the current rate. But that forecast was being quoted by industry boosters who foresee vast new applications such as natural gas-powered vehicles which would greatly increase the rate of consumption and dramatically shorten the time to exhaustion. Here's how I explained the problem in a previous piece:

Simple spreadsheet calculations will tell you what you need to know about what happens to such claims under the pressure of a little exponential growth. At 2 percent per year growth...the 100-year U.S. domestic natural gas supply is exhausted in 56 years. If we assume that production peaks when about 50 percent of the resource is exhausted, this puts the peak within 35 years. Think about it. Even if the optimists are correct, with a production growth rate of just 2 percent per year, the country reaches a peak within 35 years! What will we do after that?

The picture gets acutely worse as the rate of production growth rises. A 3 percent rate implies exhaustion in 47 years and peak in 31 years. A 5 percent growth rates means exhaustion in 37 years and a peak in just 26 years. Now consider that domestic supplies are probably going to be less than claimed, and you'll see why shale gas simply cannot solve our energy problems. (emphasis added)

Third, EIA's estimates of technically recoverable shale gas resources in the United States have fallen dramatically from 827 trillion cubic feet (tcf) to 482 tcf. And, this says little about whether those resources would be economically recoverable. In any case, the previous larger estimate formed the basis for the widely refuted 100-year claim. Fourth, annual production decline rates for U.S. natural gas wells are now running about 32 percent. That means that with no drilling, production would fall by one-third over the next year. So, we now must drill furiously just to maintain, let alone grow our supplies. And, shale gas--which the EIA thinks will make up 49 percent of U.S. domestic natural gas production by 2035--shows decline rates reaching 65 percent in the first year and 80 percent by the second year. It will be difficult to drill enough wells each year to replace lost production if half of all production comes from shale gas deposits.

Regardless of what the future level of natural gas production turns out to be, if U.S. domestic gas is made available on the global market, then American consumers will be forced to bid for it against the rest of the world. Here's how that might look:

Processing plants cool natural gas to approximately -260 degrees F where it becomes a liquid. It is then loaded on liquefied natural gas (LNG) tankers which ship natural gas worldwide. Until recently, however, the United States was an importer of LNG. With the unlocking of vast deposits of shale gas, LNG import terminals have had little business. But one import terminal owner, Cheniere Energy Partners, L.P., has received approval to build an export terminal next to its import facilities. Many others hope to follow suit.

If the natural gas industry gets its way, all of us in the United States, Canada and Mexico will pay the world price for natural gas. In Asia the price has bounced between $13 and $18 this year. In Europe the price has range between $8 and $12. Both continents paid far more than $2 to $3 which those in North America have been paying this year. And, here's the key thing to remember: It won't matter whether the United States produces enough natural gas to supply all its needs. Once the North American gas market is linked to the worldwide LNG market, everyone in North America will be subject to the world price.

The United States is unlikely ever again to achieve oil production high enough to supply all its needs. The last time it did that was 1948. The EIA projects that the current miniboom in U.S. oil production will peak at 6.7 mbpd around 2020, and U.S. production will thereafter decline. While natural gas production may rise for a time, it's unlikely to rise enough to allow the country to substitute natural gas for oil in enough applications to make up for declining U.S. domestic oil production. In fact, if the skeptics are right, domestic natural gas production may never even completely cover domestic needs.

The oil and gas industry is run to serve up profit to its shareholders any way it can, not to help the United States or any country obtain energy independence. The industry is simply using the energy independence idea to get the public and policymakers to go along with increased drilling on public lands and sensitive areas as well as relaxation of environmental regulations. The industry's plan all along has been to sell any oil and gas it extracts to the highest bidder. If the industry were truly concerned about American energy independence, it wouldn't spend its time seeking permission from the federal government to ship oil and gas abroad.

We can look to Canada for an example of what happens when the oil and gas industry essentially determines energy policy. Canada produced 2.9 mbpd of crude oil in 2011. It consumed 2.3 mbpd of petroleum products. The country is the world's ninth largest exporter of crude oil and petroleum products. And yet, Canada imported 43 percent of its oil needs. That's because it's more profitable for the industry to ship Canada's oil--mostly produced in the western part of the country--south to the United States to be refined. Canada's provinces from Ontario eastward import 65 percent of their petroleum needs from overseas, meaning that a country that could easily be energy independent is subject to supply shocks from abroad.

The idea that we can ever truly achieve energy security based on commodities traded in worldwide markets is nothing but a clever deception--one designed to keep us from doing what we really need to do, namely, reduce our reliance on fossil fuels and vastly expand alternative energy production such as solar, wind and hydroelectric that cannot easily be exported across oceans.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

How we misjudge the risks of oil depletion and climate change

This is the sixth of a six-part series introducing readers of The Christian Science Monitor to concepts useful in understanding the Resource Insights blog. Selected posts from Resource Insights are now appearing regularly on the Monitor's Energy Voices blog. To read the previous installments of this series click on the following: Part 1, Part 2, Part 3, Part 4, Part 5

Many people dismiss the risks associated with oil depletion and climate change--even many who accept the two issues as problems. They judge those risks to be small or at least manageable. Since no one can know the future, we cannot be sure whether they are right or wrong. But even if they are right, should we be so sanguine? As we examine this question, keep in mind that we are talking about probabilities and the level of risk, not absolute knowledge which none of us can have about the future.

One reason that so many people discount the risks of oil depletion and climate change is that their experience tells them to do so. We've had high oil prices and tight oil supplies before, and always new supplies and declining prices followed. For many we are just in another market cycle, and there's nothing to be worried about. And, when it comes to climate change, well, we've had hot summers before and even if the climate is warming a bit, we'll adapt.

Both these observations are subject to what's called the problem of induction. In a nutshell, we believe that because a certain event has reliably repeated itself in the past or because certain conditions have prevailed for a long time, we can always expect more of the same in the future. If that were true, there would come a point in our lives when we would never be surprised. But as it turns out, humans are continually surprised, which shows you that the problem of induction lives on.

The classic illustration is the statement: "All swans are white." The statement may be based on thousands, even millions of observations. But, this would not prove that it is true. This is because we cannot possibly observe all swans for eternity. And, it takes only one swan which is not white to prove the statement false. As it turns out, Europeans only realized that this statement was false when they landed in Australia and saw black swans.

So, just because high oil prices in the past have eventually led to low oil prices does not necessarily mean they will this time. Oil is a finite resource. At some point it will never be plentiful again. Has that point come? Is that even the question we should be asking? I'll elaborate below.

When it comes to climate, the globe's warming temperature is an indisputable fact, something that even reluctant oil industry CEOs now accept. So the question for them and for us is whether we can adapt or whether we should try to stop the rise in global temperatures.

Even last summer's intense drought in the United States, dryness in the growing regions of South America and Russia, and wildly wet weather in Great Britain still seem not to have made climate change a priority. Food prices may well exceed their all-time highs of 2008. Yet, we humans are like the man plunging from a 100-story building who, when asked how things are going as he passes a 50th-floor window, replies: "Fine, so far."

This oft-cited illustration shows in a humorous way that we humans are frequently oblivious to dangers that are right in front of us, but which for some reason we cannot immediately sense or comprehend. We base our assessment of risk on the past (in this case the 50 floors from the top traveled so far). The result is that we assign a probability of harm that is too low.

But even if the probability of severe peril from a future ongoing, permanent decline in oil supplies or from climate change is actually small, should we ignore that probability? Let me provide another illustration which may be familiar to many. Let's say that you are offered a free trip to your favorite vacation destination. You are told that the plane arrives safely 95 percent of the time. The other 5 percent of the time it crashes. Pretty good odds, right? Of course, not. You would never board such a plane. You would decline the flight and gladly pay your own way on another safer flight, that is, if you still wanted to go.

So, even a 5 percent chance that you will die on a routine plane flight is too big a risk to take. Yet, the world's political leaders and peoples have been given convincing evidence that the chance that unchecked climate change will imperil the very stability of modern civilization is far more likely than 5 percent. True, it's not certain that this will happen, but then every forecast is uncertain. The question is: How do we handle this uncertainty?

Let me provide another illustration. When it comes to home fires, every sensible person knows how to handle the risk: purchase insurance and take steps to reduce the chance of a fire. At yet, fires that warrant the filing of an insurance claim remain exceedingly rare. So, given the low probability of such an event, why do we insure against it? We do so, of course, because even this very low probability event can have catastrophic consequences should it occur.

And, this frames the proper understanding of risk. Risk is not just about probability; the proper measure of risk is probability times severity. Measured this way, small probability events that are expected to have severe impacts become worthy of preparation.

Oil production will certainly start to decline some day. We know this in advance because oil is a finite resource. There are warning signs, an emerging plateau in world production since 2005 and persistently high prices. These are not definitive, but they are worrisome. Given that a rapid, unexpected decline in oil availability has shocked us before, and given that oil continues to be the central commodity of our age--supplying a third of our energy, 80 percent of our transportation fuel, and the basis for innumerable chemicals essential to modern society--given all this, can we not conclude that a persistent decline in oil supplies might be civilization-wrecking if we are not prepared for it?

We know that climate is changing. The record lows in Arctic sea ice are probably the most telling and troubling result. This ongoing warming at the poles affects weather patterns that already have and will continue to threaten crop yields around the world. We are almost completely certain--nothing is absolutely certain in science--that human activity is the main cause of climate change. It is not a leap to conclude that continuing on our current course has a definite, but not precisely calculable risk of undermining the stability of our society.

Whether you believe that severe outcomes are certain, merely probable or very improbable if our behavior does not change, you are forced by a proper evaluation of risk to agree that at least something ought to be done; the possible outcomes include ones that are simply unacceptable.

We never make policy or even personal decisions based on absolute certainty. Instead, we do formal and informal assessments of the risks of any given path based on the information we have at the time. No one--not you, not me, not the pundits, not the oil industry, not the government, not the world's scientists--can have certain knowledge about future oil supplies. The same applies to the future of climate change. We can, nevertheless, describe the severity of possible outcomes. From a policy and preparedness point of view, benign outcomes need not concern us much. In the case of oil supplies and climate change, however, the possible outcomes include some which are truly alarming.

There are too many variables and unknowns to calculate precisely what the chances are for an irreversible decline in oil production starting, say, by 2020. There are too many variables and unknowns to calculate precisely the course and exact severity of climate change. But our understanding of the possible extreme outcomes should tell us that we need to do a lot to address both problems and soon.

Even if we could calculate that the chances were merely 5 percent that one or both problems might result in civilization-shaking outcomes, it would behoove us to take steps to head off possible disaster--just as we would step off a plane that we know has a 5 percent chance of crashing before it reaches its destination.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Energy transition: We need to do it fast and we're way behind

This is the fifth of a six-part series introducing readers of The Christian Science Monitor to concepts useful in understanding the Resource Insights blog. Selected posts from Resource Insights are now appearing regularly on the Monitor's Energy Voices blog. To read the previous installments of this series click on the following: Part 1, Part 2, Part 3, Part 4

No doubt you've heard people speak of an energy transition from a fossil fuel-based society to one based on renewable energy--energy which by its very nature cannot run out. Here's the short answer to why we need do it fast: climate change and fossil fuel depletion. And, here's the short answer to why we're way behind: History suggests that it can take up to 50 years to replace an existing energy infrastructure, and we don't have that long.

Perhaps the most important thing that people don't realize about building a renewable energy infrastructure is that most of the energy for building it will have to come from fossil fuels. Currently, 84 percent of all the energy consumed worldwide is produced using fossil fuels--oil, natural gas and coal. Fossil fuels are therefore providing the lion's share of power to the factories that make solar cells, wind turbines, geothermal equipment, hydroelectric generators, wave energy converters, and underwater tidal energy turbines. Right now we are producing at or close to the maximum amount of energy we've ever produced from fossil fuels. But the emerging plateau in world oil production, concerns about the sustainability of coal production, and questionable claims about natural gas supplies are warnings that fossil fuels may not remain plentiful long enough to underwrite an uneven and loitering transition to a renewable energy society.

This is what's been dubbed the rate-of-conversion problem. In a nutshell, is our rate of conversion away from fossil fuels fast enough so as to avoid an unexpected drop in total energy available to society? Will we be far enough along in that conversion when fossil fuel supplies begin to decline so that we won't be forced into an energy austerity that could undermine the stability of our society?

The answer can't be known. But the numbers are not reassuring. Based on data from the U.S. Energy Information Administration, it would take more than 70 years to replace the world's current electrical generating capacity with renewables including hydroelectric, wind, solar, tidal, wave, geothermal, biomass and waste at the rate of installation seen from 2005 through 2009, the last years for which such data is available. And, that's if worldwide generating capacity--which has been expanding at a 4 percent clip per year--is instead held steady.

This also doesn't take into account the amount of energy actually produced versus what is called nameplate capacity. Nameplate capacity is what a wind generator could generate if it operated at maximum capacity 100 percent of the time. But in practice, the turbines are only spinning when the wind blows and then not always at the maximum speed. This so-called capacity factor was just 27 percent for wind farms in the United Kingdom from 2007 to 2011 (PDF). For solar photovoltaic the number was 8.3 percent. Even hydroelectric stations ran at only about 35 percent of capacity. This compares to about 42 percent for conventional coal, 61 percent for natural gas, and 60 percent for nuclear power stations (PDF). The contrast is starker using U.S. numbers: 72 percent for coal and 91 percent for nuclear using 2008 figures, though natural gas was only 11 percent, probably because these were primarily plants that only come on to meet peak demand and so don't run very often. (PDF)

What this means is that installing two to three times our current nameplate capacity in the form of renewables may be required to replace existing fossil-fueled plants. So, the transition period would actually turn out to be longer than what I've calculated, perhaps 140 to 210 years using 2005 to 2009 installation figures. Of course, installations of such renewables as wind and solar are accelerating. So, that would tend to shorten this longer transition period--as would leaving existing nuclear power capacity intact. But would we be able to shorten the transition period enough to head off declines in total energy production and prevent additional serious damage to the climate?

Of course, some would say that we need to expand nuclear power generation rapidly to meet these challenges. Whether you support such an expansion or not, there are three key problems. First, building enough nuclear power stations to replace fossil fuel-fired plants would be the largest construction project ever undertaken and require the use of enormous amounts of fossil fuels. Making the necessary concrete alone would be a large new contributor to greenhouse gas emissions. That means that the initial phase of a nuclear transition would actually increase the rate of fossil fuel emissions. The savings on fuel and emissions wouldn't come until much later.

Second, after the Fukushima disaster, there doesn't seem to be much appetite for such a buildout. I'll be very surprised if nuclear power generation even maintains its current level in the next 20 years as Japan and Germany abandon nuclear power. Third, the timeline for such a buildout would be measured in decades, partly because of the sheer logistics involved and partly because of the brake that regulatory approvals put on such projects. Even new, cheaper and easier-to-build designs may not help if they cannot achieve the necessary regulatory approvals promptly. The history of such approvals is not encouraging. The safest thing a nuclear regulatory agency can do is say no.

I haven't even touched on replacing the fuels which power our transportation system and provide heat for our buildings and industrial processes. Transportation offers an extraordinary challenge since 80 percent of all transportation fuel worldwide is still derived from petroleum. In the United States the number is 93 percent. Despite billions of dollars spent and decades of research, we still have no good substitutes that scale to the size necessary to replace petroleum for transportation fuel.

Biofuels offer little hope. Already the ethanol bubble has burst. Biofuels--today mainly ethanol and biodiesel--compete with food. There is simply not a limitless supply of suitable farmland, and so there will be competition with the demand for food until we find substitutes for the industry's main feedstocks, namely corn, sugar and soybeans.

Beyond this the problem of scale is simply unsolvable. To supply the entire U.S. car fleet--assuming it could run on ethanol--we'd have to plant 1.8 billion acres in corn for ethanol continuously. There are only about 440 million acres in the United States in cultivation now. And, it's worth noting that current methods of corn cultivation require the copious use of herbicides and pesticides made from oil; tractors and other vehicles that run on oil to plow, harvest and spray the fields as well as transport the crop; and natural gas-derived nitrogen fertilizers to boost growth and replenish depleted soil. Fossil fuels are currently integral to growing corn, and I cannot see the wisdom of growing organic corn for anything but food.

As for heat for buildings, certainly we could insulate and seal our existing buildings better. And, this points the way to achieving an energy transition within the time we need to achieve it. Since it will probably be impossible to scale renewable energy fast enough to a level sufficient to produce the amount of energy we use today, the one absolute necessity to a successful energy transition is reducing consumption drastically. No politician dares to say anything remotely approaching this. And yet, it would be the cheapest, fastest way to address the twin crises of fossil fuel depletion and climate change.

Now, when I say reduce, I mean on the order of 80 percent over the next 20 to 30 years. For Americans this may seem impossible until they contemplate that the average European lives on half the energy of the average American. So often we hope for technological breakthroughs that will give us all the clean energy we desire. But we ought to focus equally, if not more, on using our prowess to find ways to reduce our energy consumption drastically. This is actually the much easier road. When we are made conscious of our energy use, we can change our behavior quickly to modify it without compromising the quality of our lives. As more homes and businesses are given the means to monitor their energy use, the people in them will change to lower their consumption and costs.

Already we know how to build so-called passive design structures which can lower energy use by 80 percent. And, we desperately need to figure out how to apply these techniques cheaply and economically to existing homes and businesses. In transportation we need to stop thinking that cars equal transportation and instead realize that cars provide the service of transportation which can be obtained in a number of ways, many of which use much less energy.

We may also need to speed the energy transition in electric power generation using so-called feed-in tariffs. These tariffs--which harness the ingenuity of countless small producers--have enabled Germany to expand solar, wind and other alternatives so that they generate 25 percent of its electricity today. Germany, not a particularly sunny place, is currently the world's top generator of solar electricity.

Of course, per person energy consumption in poor countries is only a small fraction of that in rich countries. We cannot expect the world's poor to reduce their energy use by 80 percent. Instead, we must help them to move quickly beyond fossil fuels to renewable energy.

By simultaneously reducing consumption and encouraging a rapid buildout of renewable energy, it is possible that we could mitigate the problem of declining fossil fuel supplies before it becomes so acute that it would cripple that very buildout. And, we could address climate change at the same time. Certainly, there are difficult problems to be solved with renewable energy, storage being the key one. Most renewable energy comes in the form of electricity, and since there is often a mismatch between the time we produce that electricity and the time we need it, we will have to master storage.

But we will need a lot less storage if we focus on reducing consumption. This is the one strategy which will allow us to overcome the rate-of-conversion problem and achieve an energy transition in far less time than we have in the past.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Global oil exports in decline since 2006: What will importing nations do?

This is the fourth of a six-part series introducing readers of The Christian Science Monitor to concepts useful in understanding the Resource Insights blog. Selected posts from Resource Insights are now appearing regularly on the Monitor's Energy Voices blog. To read the previous installments of this series click on the following: Part 1, Part 2, Part 3

It is with trepidation that independent petroleum geologist Jeffrey Brown has watched global oil exports decline since 2006. With all the controversy in the past several years over whether worldwide oil production can rise to quench the world's growing thirst for petroleum, almost no one thought to ask what was happening to the level of oil exports. And yet, each year a dwindling global pool of exports has been generating ever greater competition among importing nations and has become a largely unheralded force behind record high oil prices.

Even though the trend in oil exports has been evident in the data for some time, the analyst community was caught by surprise when a Citigroup report released earlier this month forecast an end to oil exports in 2030 from Saudi Arabia, currently the world's largest oil exporter.

Brown, as you might expect, wasn't surprised at all. His own forecasting model, which he calls the Export Land Model, has been predicting more or less the same thing for some time. He doesn't think the Saudis will actually let exports to go all the way to zero because they'll probably want at least some revenue from exports. But "one to two million barrels per day of exports [from Saudi Arabia] between 2030 and 2040 will not be a big deal in the world," said Brown, who runs a joint venture exploration program based in Ft. Worth.

Brown estimates that worldwide net exports of petroleum liquids--a number that includes both crude oil and refined products such as gasoline and diesel--declined from 45.6 million barrels per day (mbpd) in 2006 to 43.7 mbpd in 2011. He uses the net exports number because importers such as the United States export some of their imported crude back into world markets in the form of refined products such as gasoline and diesel. Even so, the United States remains the world's largest net importer of petroleum products.

The decline in global net exports may seem small for now. But it is persistent and comes in the face of growing demand among the rapidly expanding economies of Asia, particularly China and India. And the trendlines, if they were to continue, would mean that China and India alone would consume all the world's available petroleum exports by around 2030. Something's bound to give before then, but it's not clear exactly what.

Brown focuses on a key number which he calls cumulative net exports (CNE). It's the total expected volume of exports from oil-exporting countries over the entire period from now until global exports are presumed to drop to zero around 2060. It's based on the trajectory established in the data from 2005 through 2011. Though the timetable is likely to change, when he looks at CNE alongside the current rate of decline for exports, it's clear that the world's remaining exports are "front-loaded." The largest portion will be delivered in the years immediately following the export peak. It's why "we've experienced something close to business as usual" since the apparent export peak in 2006, he said.

In analyzing the production and export history of former oil-exporting countries, Brown has discovered a disconcerting pattern. "A rough, but fairly consistent rule of thumb is that [after an exporting country's oil production peaks] half of post-peak CNE tend to be shipped about one-third of the way into the net export decline period, which suggests that post-2005 global CNE would be about half gone around the year 2024," he explained. Think about this for a minute. Brown forecasts that half of all the oil exports that will ever be shipped from now on will have been shipped by 2024. That tells him that the economic pain associated with the loss of global exports is likely to become very acute in the not-too-distant future.

If this happens, the world will be forced to adjust. But that adjustment is likely to be rather wrenching for some. Already, consumers in the United States, for instance, have actually partly accommodated rising demand in Asia by reducing U.S. consumption of oil products from 20.8 mbpd in 2005 to 18.8 mbpd in 2011. But the cutback has been largely a matter of necessity for those who have lost jobs or experienced wage cuts and for businesses which are struggling in a weak economy.

As Brown began to think about the export issue back in 2006, he made two observations which seem obvious once you hear them: First, if the economy of an oil-exporting country grows, that country typically will use more oil to support that growth. Second, once total production peaks and starts to decline in an oil-exporting country, exports almost always decline much faster than total production. This is because exports are typically being squeezed from two sides. Production is falling making less oil available for exports, and consumption is rising with the same effect. (Declining net exports can also occur if domestic consumption is rising faster than production which is what happened in the United States, causing the country to become a net importer for the first time way back in 1948.)

The two observations above led Brown to develop what he dubbed the Export Land Model. It was a simple model that seemed to explain a lot. Here's how he set up his first case: Brown assumed that a hypothetical oil exporter--which he designated as Export Land--had reached its peak in oil production. He assumed that domestic users in Export Land consumed half of all the oil the country produced. He then assumed a 5 percent annual decline in the rate of oil production and a 2.5 percent annual increase in domestic consumption. The results astonished and troubled him. In just nine years oil exports from Export Land went to zero.

He then tried the model out on two real world examples, the United Kingdom and Indonesia. Both countries were consuming about 50 to 60 percent of their own oil production at the time their production peaked, close to Brown's hypothetical case. But the U.K. had a higher production decline rate, -7.8 percent per year and a very modest 0.2 percent annual growth in oil consumption. Indonesia had a lower production decline rate than the hypothetical case, -3.9 percent, but a higher yearly increase in domestic oil consumption, 4.1 percent. Despite these differences, the results were quite similar to the hypothetical case. From its 1997 peak in oil production, Indonesia's net exports took only seven years to fall to zero. From the U.K.'s oil production peak in 2000, it took only six years for net exports to approach zero.

Country/Prod. or Exports	Peak Production Year	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Annual Decline Rate
UK Production	2,909	2,667	2,476	2,463	2,257	2,028	1,809	1,636	-7.8%
UK Net Exports	1,180	963	772	763	534	262	3	-152	-55.7%
Indonesia Production	1,580	1,557	1,520	1,408	1,456	1,387	1,289	1,176	-3.9%
Indonesia Net Exports	657	531	539	384	300	249	105	-34	-28.9%

All production and net export figures in thousands of barrels

After modelling these two real world examples, Brown and his colleague Sam Foucher began tracking petroleum exporting nations with more than 100,000 barrels per day of exports (based on 2005 data). These 33 countries represented 99 percent of the globe's net exports at the time. Strangely, no official energy agency calculates global net exports. So, Brown and Foucher have had to compile data from the U.S. Energy Information Administration, the statistical arm of the U.S. Department of Energy, and the BP Statistical Review of World Energy, a widely cited annual survey produced by oil giant BP. By the end of last year, three of the original 33 countries--Vietnam, Malaysia and Argentina--had dropped off the list and become net importers.

"We're losing one major exporter per year," Brown said. He expects that rate of loss to continue. He added that as a group, oil production in the 33 countries he tracks has hit a plateau, bouncing between 61 and 63 million barrels per day since 2005. If total production from exporting nations starts to fall, look for an acceleration in the decline of net exports. (Total worldwide oil production also appears to have been on a bumpy plateau since 2005.)

Brown said importers around the world are already being forced to respond to an ongoing decline in net exports. "We are on our way to energy independence," he joked. "Just not in the way that we expected." The United States and other developed countries are now being outbid by the developing world for oil and ending up with a declining share of a declining supply of exports. "While the recent rise in U.S. production will help, it will not save us," he added. That's because the rise is too modest to put much of a dent in imports which have declined primarily because Americans have simply cut back their consumption of gasoline and other petroleum products in the face of high prices.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.