|Looming Like A Cruel Bird Of Prey.|
Rearing it's ugly head in the high-brow press again are the problems of energy and the question of 'Peak Oil'. So first of all, what is 'Peak Oil'. There are several definitions but the commonest three are:-
a. When global extraction is lower than global usage and the cause is literally oil fields running dry as opposed to man made shortages such as war in production regions, OPEC 'choking' etc.
This is starting to happen now. Some oil fields are exhausted, some are so depleted that it is no longer cost effective to extract the oil unless the price rises significantly. Global oil consumption exceeded supply by 5 million barrels a day last year, according to data compiled by BP, but this in the main was down to OPEC restricting extraction.
b. When global refining capacity is less than global usage.
Crude oil is of no use at all unless you can crack it to it's by-products - petroleum, diesel, kerosene etc etc and to do this you need refineries. There are no new major refineries planned and indeed over the coming decades several will be shut down due to age. This scenario actually happened briefly a couple of years ago when oil rocketed to $147 a barrel. It only fell back because of the global economic downturn and the resulting drop in demand. As it stands, if/when the global economy recovers, should it recover to 2008 usage levels then the price will again skyrocket. It takes ten years minimum to build and activate a major refinery.
c. When the energy expended extracting the oil is higher than the energy contained in it.
When a well is new the oil is under it's own pressure and literally forces it's way to the surface and indeed has to be restrained. As the oil is extracted the pressure drops until eventually pressure needs to be applied. This is done by pumping a mixture of water and gel-producing chemicals down the well under pressure so that the resulting 'gloop' is both dense enough and forceful enough to lift the oil. Now imagine oil wells 200km out in the Saudi desert and how much energy it would require to build water pipelines, pumping stations etc to move the water required to force tens of thousands of tonnes of 'gloop' down a well. Equally, some oil is so difficul to get to - under the polar ice caps, in deep deep water, far under the earth, that the total amount of energy expended in the operations to recover it is less then it will produce.
You can pick which ever definition you like - all will happen sooner or later. Although it would be wrong to say oil is 'finite' it is correct to say that we are using it faster than either Mother Nature can create more of it or we can find new supplies of it. To me it seems that 'b' is the most pressing as it's happened briefly already back in 2008. But whichever, Peak Oil is real, will happen and will have dramatic and very fast, far reaching and permanent economic consequences if counter-measures are not in place beforehand. (I have a theory that those who call Peak Oil a myth also call climate change a myth and vice versa. New extraction and detection technologies might postpone this by a few years, but the inevitable will eventually occur, and bleating on about 'industry' or 'global warming' orchestrated scams, won't wash when reality comes knocking on the door.)
Some very brief and current examples of the consequences of reliance on oil are the overthrow of Mubarak in Egypt, the 'Arab Spring', Libya etc. Contrary to how it is now portrayed - as a downtrodden region seeking emancipation, what actually sparked the fires initially was the rapid increases in price of basic foodstuffs - particulalry grain - and the major underlying cause of that was the rapidly escalating price of fertilisers caused in turn by oil prices. People will reluctantly accept a bit of down-treading if their bellies are full but if you can't feed your people then they will turn on you and very quickly no matter how many tanks you send against them. Closer to home think back to 2000 and recall that thanks to a blockade of refineries by a motley crew of farmers and truck drivers, the UK was just over ten days away from complete systemic collapse and the government seriously considering the ‘nuclear option’ of using troops to forcibly break the blockade. Further back in the 1970's a sudden price rise (caused primarily by the USA suddenly shifting from being a net exporter to being a net importer) caused the three day week and programmed power cuts and ultimately laid the foundations for the IMF bail-out, massive inflation, high interest rates and the Winter of Discontent.But back to the theme.
The German Army's Strategic Planners observed last year in a now officially approved report: "As people become aware that the contraction in global oil supply and economic activity is likely to be a prolonged, indefinite reality, there could be an increasing (and to some degree, self-fulfilling) loss of faith in markets, currencies, financial institutions, and the ability of governments to maintain economic and social order". The International Energy Agency forecasts state that peak crude oil production happened back in 2006. The US Military believes that surplus crude production could cease as early as 2012 with shortages by 2015 and an influential UK industry think-tank 'The UK Industry Task Force Peak Oil Group- who's members include Richard Branson, Stagecoach, Yahoo etc believe similar in their report.So how close are we to having a major problem? Probably a lot closer than we think. What we do know is that there is far less oil reserves than was originally thought.
The 'average' date for the Peak is now 2014 however that was from a review published a couple of weeks before the wikileaks scandal in which one of the leaks stated that Saudi Arabia (amongst others) was guilty of overstating its reserves by as much as 40%. In any case oil production has been on a plateau since 2004 and is not expected to rise much higher if at all.
The problem is very simple - politicians. They are hooked on the idea that economic growth is still the most desirable thing to aim for. At the moment, the economic model to which we adhere demands infinite growth. That the self-same model is underpinned by natural resources which makes it completely vulnerable to any shortage of a range of such commodities. You cannot, ever, have infinite economic growth based on finite resources - it is simply a nonsense..
Some will just say "yes but we can move to alternatives". Where they have slipped up in their understanding of the subject is in respect of what are known as rate-constraints. Put simply, although synthetic crudes can indeed be made from bitumen (tar-sands) or kerogen (oil-shales), it involves the expense of a lot of energy, is painfully slow and is a very messy and hugely inefficient and very expensive process. Those uninterested in environmental matters can focus on "expense of a lot of energy" and " is painfully slow". In essence, this means that the rate of production, in barrels/year, month, week or whatever can never get near that of oil gushing from a well under its own pressure, and will cost far far more to extract. Bottom line is that as a consequence, trying to remain on liquid fuels of this nature will only work if you want to accept rationing. These alternative 'gap-fillers' such as shale oil, tar sands and even algae are not going to do anything except provide something that the bulk of the population will not be able to afford.
Shale oil for instance usually refers to thermally immature kerogen that is chemically different to conventional crude, this is very very viscous so requires more than merely fracturing the porouos rocks to allow it to flow. (What thermal maturity means). The more thermal maturity the higher the API and the less viscous the liquid (flows easier requires less energy to extract) .
The Alberta Tar Sands in Canada is an ecological nightmare. The Green River Resources Corporation (to give it it's proper name) claims in it's mission statement that it is "committed to solving the clean energy needs of the United States by developing a breakthrough technology for extracting naturally occurring hydrocarbons from tar sands, oil sands, and other similar types of geologic structures prevalent in the Mountain West region of North America." Strange that a Canadian Corporation has energy production for the USA as it's primary role and many 'oil insiders' firmly believe that it will never come into serious production until the USA needs it and that Washington views it very much as a US 'strategic reserve' to be used primarily by the US in the event of a rainy day - one insider states that at $130 a barrel it starts to drizzle !! At that point the ambition of "solving the clean enery needs" becomes merely "solving the energy needs" and "clean" can take running jump. It should also be noticed that in order to 'soften' the tar sand so that it can be dug-up, huge quantities of steam are required - quantities that can only be delivered by a nuclear power station or two. So complicated is the process that it is really only capable of supplying one large consumer. Step forward the organisation that is the world's largest consumer of petrols - the US Military.
Some believe other sources such as fermentation of oil-rich algae will fill the gap. Algae are primed to go and just need political impetus caused by shortages of conventional oil to be put into production. However it is an extremely complex and therefore expensive process and so the argument goes that the price of refined oil products (such as petrol) is entirely artificial because of government duty and taxation, so plenty of room for creative taxation to allow algae biofuel to be competitive. However that is only applicable to this and other first world countries. Fuel in the third world does not pay western taxes and duties – those people are already rioting and bringing governments down when they in fact pay 20p or less for a litre of petrol. Algae will never ever be as cheap as crude oil because it is simply not as cheap to harvest, not as cheap to refine and cannot be refined into certain petro-chemical products at all.
Politicians have a real problem in bringing up this issue. As a political leader how do you tell the electorate we have a problem, a shortage of oil, and then tell them you have no solution to this problem. Far better to keep everyone in the dark carrying on as normal and hope a solution comes along. Fear not, we in the UK haven't been sleepwalking through this and back in 2008 the then Prime Minister commissioned Malcolm Wicks MP to write a report. This task he set about with a vengeance and in 2009 he produced a magnificent 130 page extremely scary report. Entitled Energy Security: A national challenge in a changing world it is a wealth of data. In his introduction he states: "We have entered a decade or more of dramatic transition, heralding a century of serious energy uncertainty" . It was supposed to be a sort of reassuring report but when you read it properly you quickly reach the conclusion that we are losing the race against time over this - that we have quite simply hid our heads in the sand for far to long and events are going to overtake us with a resounding thump.
Personally, I think most people simply do not believe and will not accept that the days of cheap energy are coming to an end (energy is still cheap at the moment). That very soon ordinary people will need to live, work,shop and socialise in a very small area and that 25 mile commutes will simply be unaffordable. That because of what is happening and will continue to happen to oil and the extra demands that places on other energy sources, then the price of all energy - not just oil, is going one way and one way only and it will be faster than wages rise. A lot faster and it will be on an accelerating curve.
Here are a couple of good videos to watch. The first one is from ABC News in Australia. It's 12 minutes long and was made in April this year. Watch it here. The second one is slightly longer and is a boffins lecture and lasts about an hour. Stick with it - it explains technical things very well. It can be viewed here.
|Mad Max - Tomorrow Is Closer Than You Think|