Former BP geologist: peak oil is here and it will 'break economies'

Industry expert warns of grim future of 'recession' driven 'resource wars' at University College London lecture

A former British Petroleum (BP) geologist has warned that the age of cheap oil is long gone, bringing with it the danger of "continuous recession" and increased risk of conflict and hunger.

At a lecture on 'Geohazards' earlier this month as part of the postgraduateNatural Hazards for Insurers course at University College London (UCL), Dr. Richard G. Miller, who worked for BP from 1985 before retiring in 2008, said that official data from the International Energy Agency (IEA), US Energy Information Administration (EIA), International Monetary Fund (IMF), among other sources, showed that conventional oil had most likely peaked around 2008.

Dr. Miller critiqued the official industry line that global reserves will last 53 years at current rates of consumption, pointing out that "peaking is the result of declining production rates, not declining reserves." Despite new discoveries and increasing reliance on unconventional oil and gas, 37 countries are already post-peak, and global oil production is declining at about 4.1% per year, or 3.5 million barrels a day (b/d) per year:

"We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply... New discoveries have not matched consumption since 1986. We are drawing down on our reserves, even though reserves are apparently climbing every year. Reserves are growing due to better technology in old fields, raising the amount we can recover – but production is still falling at 4.1% p.a. [per annum]."

Dr. Miller, who prepared annual in-house projections of future oil supply for BP from 2000 to 2007, refers to this as the "ATM problem" – "more money, but still limited daily withdrawals." As a consequence: "Production of conventional liquid oil has been flat since 2008. Growth in liquid supply since then has been largely of natural gas liquids [NGL]- ethane, propane, butane, pentane - and oil-sand bitumen."

Dr. Miller is co-editor of a special edition of the prestigious journal,Philosophical Transactions of the Royal Society A, published this month on the future of oil supply. In an introductory paper co-authored with Dr. Steve R. Sorrel, co-director of the Sussex Energy Group at the University of Sussex in Brighton, they argue that among oil industry experts "there is a growing consensus that the era of cheap oil has passed and that we are entering a new and very different phase." They endorse the conservative conclusions of an extensive earlier study by the government-funded UKEnergy Research Centre (UKERC):

"... a sustained decline in global conventional production appears probable before 2030 and there is significant risk of this beginning before 2020... on current evidence the inclusion of tight oil [shale oil] resources appears unlikely to significantly affect this conclusion, partly because the resource base appears relatively modest."

In fact, increasing dependence on shale could worsen decline rates in the long run:

"Greater reliance upon tight oil resources produced using hydraulic fracturing will exacerbate any rising trend in global average decline rates, since these wells have no plateau and decline extremely fast - for example, by 90% or more in the first 5 years."

Tar sands will fare similarly, they conclude, noting that "the Canadian oil sands will deliver only 5 mb per day by 2030, which represents less than 6% of the IEA projection of all-liquids production by that date."

Despite the cautious projection of global peak oil "before 2020", they also point out that:

"Crude oil production grew at approximately 1.5% per year between 1995 and 2005, but then plateaued with more recent increases in liquids supply largely deriving from NGLs, oil sands and tight oil. These trends are expected to continue... Crude oil production is heavily concentrated in a small number of countries and a small number of giant fields, with approximately 100 fields producing one half of global supply, 25 producing one quarter and a single field (Ghawar in Saudi Arabia) producing approximately 7%. Most of these giant fields are relatively old, many are well past their peak of production, most of the rest seem likely to enter decline within the next decade or so and few new giant fields are expected to be found."

"The final peak is going to be decided by the price - how much can we afford to pay?", Dr. Miller told me in an interview about his work. "If we can afford to pay $150 per barrel, we could certainly produce more given a few years of lead time for new developments, but it would break economies again."

Miller argues that for all intents and purposes, peak oil has arrived as conditions are such that despite volatility, prices can never return to pre-2004 levels:

"The oil price has risen almost continuously since 2004 to date, starting at $30. There was a great spike to $150 and then a collapse in 2008/2009, but it has since climbed to $110 and held there. The price rise brought a lot of new exploration and development, but these new fields have not actually increased production by very much, due to the decline of older fields. This is compatible with the idea that we are pretty much at peak today. This recession is what peak feels like."

Although he is dismissive of shale oil and gas' capacity to prevent a peak and subsequent long decline in global oil production, Miller recognises that there is still some leeway that could bring significant, if temporary dividends for US economic growth - though only as "a relatively short-lived phenomenon":

"We're like a cage of lab rats that have eaten all the cornflakes and discovered that you can eat the cardboard packets too. Yes, we can, but... Tight oil may reach 5 or even 6 million b/d in the US, which will hugely help the US economy, along with shale gas. Shale resources, though, are inappropriate for more densely populated countries like the UK, because the industrialisation of the countryside affects far more people (with far less access to alternative natural space), and the economic benefits are spread more thinly across more people. Tight oil production in the US is likely to peak before 2020. There absolutely will not be enough tight oil production to replace the US' current 9 million b/d of imports."

In turn, by prolonging global economic recession, high oil prices may reduce demand. Peak demand in turn may maintain a longer undulating oil production plateau:

"We are probably in peak oil today, or at least in the foot-hills. Production could rise a little for a few years yet, but not sufficiently to bring the price down; alternatively, continuous recession in much of the world may keep demand essentially flat for years at the $110/bbl price we have today. But we can't grow the supply at average past rates of about 1.5% per year at today's prices."

The fundamental dependence of global economic growth on cheap oil supplies suggests that as we continue into the age of expensive oil and gas, without appropriate efforts to mitigate the impacts and transition to a new energy system, the world faces a future of economic and geopolitical turbulence:

"In the US, high oil prices correlate with recessions, although not all recessions correlate with high oil prices. It does not prove causation, but it is highly likely that when the US pays more than 4% of its GDP for oil, or more than 10% of GDP for primary energy, the economy declines as money is sucked into buying fuel instead of other goods and services... A shortage of oil will affect everything in the economy. I expect more famine, more drought, more resource wars and a steady inflation in the energy cost of all commodities."

According to another study in the Royal Society journal special edition by professor David J. Murphy of Northern Illinois University, an expert in the role of energy in economic growth, the energy return on investment (EROI) for global oil and gas production - the amount of energy produced compared to the amount of energy invested to get, deliver and use that energy - is roughly 15 and declining. For the US, EROI of oil and gas production is 11 and declining; and for unconventional oil and biofuels is largely less than 10. The problem is that as EROI decreases, energy prices increase. Thus, Murphy concludes:

"... the minimum oil price needed to increase the oil supply in the near term is at levels consistent with levels that have induced past economic recessions. From these points, I conclude that, as the EROI of the average barrel of oil declines, long-term economic growth will become harder to achieve and come at an increasingly higher financial, energetic and environmental cost."

Current EROI in the US, Miller said, is simply "not enough to support the US infrastructure, even if America was self-sufficient, without raising production even further than current consumption."

In their introduction to their collection of papers in the Royal Society journal, Miller and Sorrell point out that "most authors" in the special edition "accept that conventional oil resources are at an advanced stage of depletion and that liquid fuels will become more expensive and increasingly scarce." The shale revolution can provide only "short-term relief", but is otherwise "unlikely to make a significant difference in the longer term."

They call for a "coordinated response" to this challenge to mitigate the impact, including "far-reaching changes in global transport systems." While "climate-friendly solutions to 'peak oil' are available" they caution, these will be neither "easy" nor "quick", and imply a model of economic development that accepts lower levels of consumption and mobility. More

 

New Realities: Energy Security in the 2010s and Implications for the U.S. Military

Revolutionary changes among energy producers and dramatically altered patterns of energy consumption across the planet are having profound implications for American national security in general and the U.S. Army specifically.

Panel Discussion on the Military Implications of Energy Security

For example, the reduced saliency of Africa and the Middle East as energy sources for the United States and many of its key allies will alter Washington’s calculations of its vital interests, which will subsequently affect where and how the U.S. Army is wielded as a tool of national policy in the defense of those interests. Meanwhile, burgeoning fossil fuel demand in China, India, and elsewhere may both increase regional and global security competition over energy resources while simultaneously worsening human-induced global climate change and bringing increased risk of humanitarian crises, all of which may compel the United States to utilize military force in defense of vital as well as important interests overseas. For the U.S. Army during a period of contraction and reduced budgetary authority, these strategic factors will force it to give Soldiers and leaders the capability to manage energy status, resources, and performance; to significantly reduce its energy footprint; and to provide flexibility and resiliency by developing alternatives and adaptable capabilities. At the same time, whether in garrison or deployed, the “new realities” of the global energy market will compel the Army to strengthen the capacity to insulate itself from disruption of its energy supply chains, whether in electricity or fuels.

These were just some of the key conclusions reached during a conference on “New Realities: Energy Security in the 2010s and Implications for the U.S. Military,” organized by the Strategic Studies Institute, U.S. Army War College, and hosted by the Defense Education Forum, Reserve Officers Association (ROA). The conference was held on November 19-20, 2013, in Washington, DC, at the ROA’s Minuteman Memorial Building on Capitol Hill. Funding for this conference was provided by generous support from the U.S. Army War College Foundation. Participants included representatives from the U.S. military, government, private industry, Congress, and academia principally from the United States, with a number from European nations. A virtual audience component to the conference accompanied it via a live web feed, and during the event itself, live Tweets were broadcasted via @SSInow.

The academic engagement component of the event included presentations by professors and researchers from the Atlantic Council, Rice University’s Baker Institute, the Carnegie Endowment for International Peace, Case Western Reserve University, the Center for Naval Analyses (CNA), the Center for Strategic and International Studies (CSIS), Jacobs University (Bremen), the Eurasia Group, Hampshire College, Idaho National Laboratory, the Middle East Institute, the National Defense University, the National Science Foundation, the University of California at San Diego, the University of Florida, and the University of St. Andrews, as well as audience participation by a number of U.S. Army War College Senior Fellows.

The New Realities conference was divided into three themes focusing on changes among global energy market suppliers, evolving forms of consumption, and what the implications of these trends represent for the U.S. military. The event was comprised of a total of seven panels with 22 presenters and two keynote lunch speakers—the Honorable Sharon Burke, Assistant Secretary of Defense (Operational Energy Plans and Programs); and the Honorable Katherine Hammack, Assistant Secretary of the Army (Installations, Energy & Environment).

The first four panels focused on current trends in production and consumption and the impact of these trends on the strategic environment. The last three panels addressed the implications of the broad, strategic trends for the U.S. military generally and the Army specifically. Key takeaways included the following:

• The unconventional fossil fuels revolution sweeping across North America and spreading to other continents is the most fundamentally transformative event – in terms of society, economics, and ultimately politics – of the last several decades.
• Europe has two opposite fears about Russian energy behavior primarily focused on natural gas; the first is Russia will continue and intensify the pattern of energy supply manipulation for political purposes as seen in the previous decade; the second fear is that Russia will pursue incompetent policies at home that reduce its ability to supply gas to Europe.
• Criminal organizations and guerillas in Latin America are not viewed as the major challenge to the oil industry. Rather, the inability of governments to equitably distribute rents from the energy industry while simultaneously protecting the environment and public health will undermine confidence in those governments.
• Energy production is shifting from the Middle East to the Western Hemisphere which will have geopolitical implications and will further strengthen U.S. energy security independence and national power. This is an outcome of advances in fracking, deep sea drilling, and other technologies.
• Renewable energies (RE) offer many potential advantages including reducing exposure to price vulnerability, creating greater interdependence for regions, prolonging the stability of hydrocarbon exporters, and reducing nations’ vulnerability to energy being used as a ‘weapon’ against them in international relations. However, for the immediate future Middle East oil will continue to control oil pricing as long as the world’s industrial infrastructure remains oil-based.
• The ubiquity of computer and information technology systems throughout the energy industry is growing, as computerization increasingly dominates energy industry processes from exploration through production and distribution. This increases the vulnerability of cyber technologies supporting U.S. Army missions.
• Increasing American energy independence and a projected decline in African energy production are likely to fundamentally alter U.S. interests in Africa. On the one hand, the United States is likely to have less at stake in Africa if it imports less in terms of energy resources from Africa. On the other hand though, reduced energy production may mean increased economic, social, and political instability across the continent, potentially resulting in humanitarian and other crises that may compel U.S. involvement.
• As a key strategic partner of India and as an emerging energy supplier with a number of proven bilateral mechanisms for energy cooperation already in place, the United States is well positioned to forge even closer civil and military ties to enhance mutual energy security.
• Much more energy is wasted due to inefficiencies in energy generation, transmission, and distribution than is normally imagined. Some Russian natural gas facilities can flare (burn off) up to a third of their gas during the generation process. A number of industrial processes and efficiency technologies offer great potential for energy resource conservation and storage, but this will require less developed energy producers to become more comfortable inviting in Western industry, capital, and technology.
• The U.S. Army, Navy, Air Force, and Marines seek to conduct energy-informed operations, which balance energy capabilities and employment to achieve the greatest net operational benefit. At the same time, the military must maintain balance in terms of the protection, resilience, and sustainability of its forces in the field.
• Ultimately an enterprise approach to energy security will be required for U.S. national and coalition defense needs. This will further the development of both strategic and operational energy concepts, plans and programs, and doctrines, which is vital given the increasing energy requirements of the technologically advanced forces being fielded over the coming decades.

Deliverables from the conference will consist of a compendium of the papers presented, a YouTube archive of the presentations, and a series of executive summaries for use by policymakers and other decisionmakers. More

 

 

Richard Heinberg's Museletter - The Climate-PR Puzzle

How do we effectively communicate an important but difficult message, even as it appears to fall on deaf ears? The first essay in this month's Museletter addresses this thorny issue, one which I face every day in my work here at PCI, and which will be familiar to many of you. The second essay is a reminder that in some places the message is getting through and that change does happen. Richard hopes that you will find some hope in his report from a recent visit to Seoul, Korea.

The Climate-PR Puzzle

If we hope to avert climate apocalypse in the decades ahead, we must make fundamental changes to industrial society. Before those changes can be approved and implemented, citizens and policy makers must first come to understand they are essential to our survival. Public relations—the management of the spread of information between an individual or organization and the public—will be an unavoidably necessary tool in the process.

But a PR message capable of persuading policy makers and citizens to end society’s environmental rampage remains elusive. In this essay I hope to explore why an effective PR message is so hard to formulate, and how the whole project might be reconsidered.

Let’s start with what needs to be conveyed. After years of research and thought, I would summarize our dilemma with three general conclusions:

1. Energy is the biggest single issue facing us as a species.*

Global warming—by far the worst environmental challenge humans have ever confronted—results from our current fossil-fuel energy regime, and averting catastrophic climate change will require us to end our reliance on coal, oil, and natural gas. Ocean acidification is also a consequence of burning fossil fuels, and most other environmental crises (like nitrogen runoff pollution and most air pollution) can be traced to the same source.

Therefore ending our addiction to fossil fuels is essential if we want future generations of humans (and countless other species) to inherit a habitable a planet. But these energy sources are “unsustainable” also in a more basic, economic sense of the term: oil, gas, and coal are depleting, non-renewable resources. Already, depletion of the easy-and-cheap sources of petroleum that drove economic growth in the 20^th century has led to persistently high oil prices, which are a drag on the economy. We have picked the low-hanging fruit of the world’s petroleum resources, and as time goes on all sources of fossil energy will become more financially costly and environmentally risky to extract. This is a big problem because the economy is 100 percent dependent on energy. With lots of cheap energy, problems of all kinds are easy to solve (running out of fresh water? Just build a desalination plant!); when energy becomes expensive and hard to get, problems multiply and converge.

One way or another, whether our concern is the environment or economic growth, it’s mostly about energy.

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*Arguably, overpopulation is as big an issue as our energy-climate conundrum. I’ve chosen not to focus on it here merely to streamline the narrative. There are many feedbacks between population, energy, and climate, and these deserve discussion elsewhere.

2. We are headed toward a (nearly) all-renewable-energy economy one way or the other, and planning is essential if we want to get there in one piece.

If society is to avoid civilization-threatening levels of climate change, the use of fossil fuels will have to be reduced proactively by 80-90 percent by 2050.

At the same time, despite the claims of abundance of unconventional fuels (shale gas, tight oil, tar sands) by the fossil fuel industry, evidence overwhelmingly shows that drillers are investing increasing effort to achieve diminishing returns.

Either way, fossil fuels are on their way out.

Most nations have concluded that nuclear is too costly and risky, and supplies of uranium are limited.

That leaves renewable energy sources—solar, wind, hydro, geothermal, tidal, and wave power—to power the economy of the future.

3. In the process of transition, the ways that society uses energy must change at least as much as the ways society produces energy.

Every energy source possesses a unique set of characteristics: some sources are more portable than others, or more concentrated, intermittent, scalable, diffuse, renewable, environmentally risky, or financially costly. We have built our current economy to take advantage of the special properties of fossil fuels. The renewable energy sources that are available to replace oil, gas, and coal have very different characteristics and will therefore tend to support a different kind of economy—one that is less mobile, more rooted in place; less globalized, more localized; less when-we-want-it, more when-it’s-available; less engineered, more organic.

At the same time, the sheer quantity of energy that will be available during the transition from fossil to renewable sources is in doubt. While ever-more-rapid rates of extraction of fossil fuels powered a growing economy during the 20^th century, society will struggle to maintain current levels of total energy production in the 21^st, let alone grow it to meet projected demand. Indeed, there are credible scenarios in which available energy could decline significantly. And we will have to invest a lot of the fossil energy we do have in building post-fossil energy infrastructure. Energy efficiency can help along the way, but only marginally.

The global economy will almost certainly stagnate or contract accordingly.

There it is. It is a complicated message. I’ve just conveyed it in 661 words punctuated by three short summary sentences (here’s a summation of the summation: it’s all about energy; renewables are the future; growth is over.) However, only readers with a lot of prior knowledge will be able to truly understand some of these words and phrases. And many people who are capable of making sense of what I’ve written would disagree with, or dismiss, much of it. The message faces a tough audience, and it flies against deep-seated interests.

Many economists and politicians don’t buy the assertion that energy is at the core of our species-wide survival challenge. They think the game of human success-or-failure revolves around money, military power, or technological advancement. If we toggle prices, taxes, and interest rates; maintain proper trade rules; invest in technology R&D; and discourage military challenges to the current international order, then growth can continue indefinitely and everything will be fine. Climate change and resource depletion are peripheral problems that can be dealt with through pricing mechanisms or regulations.

Fossil fuel companies may understand the importance of energy, but they have a powerful incentive to avoid acceptance of the message that “renewables are the future.” If humanity is headed toward an all-renewable energy economy, then their business has no future. The industry’s strategy for diverting the general public’s buy-in to conclusion 2 is to claim that there is plenty of oil, gas, and coal available to fuel society for decades to come.

Some policy wonks buy “it’s all about energy,” but are jittery about “renewables are the future” and won’t go anywhere near “growth is over.” A few of these folks like to think of themselves as environmentalists (sometimes calling themselves “bright green”)—including the Breakthrough Institute and writers like Stewart Brand and Mark Lynas. A majority of government officials are effectively in the same camp, viewing nuclear power, natural gas, carbon capture and storage (“clean coal”), and further technological innovation as pathways to the solution of the climate crisis without any need for curtailment of economic growth.

Other environment-friendly folks buy “it’s all about energy” and “renewables are the future,” but still remain allergic to the notion that “growth is over.” They say we can transition to 100 percent renewable power with no sacrifice in terms of economic growth, comfort, or convenience. Stanford professor Mark Jacobson and Amory Lovins of Rocky Mountain Institute are leaders of this chorus. Theirs is a reassuring message, but if it doesn’t happen to be factually true (and there are many energy experts who argue persuasively that it isn’t), then it’s of limited helpfulness because it fails to recommend the kinds or degrees of change in energy usage that are essential to a successful transition.

The general public tends to listen to one or another of these groups, all of which agree that the climate and energy challenge of the 21^st century can be met without sacrificing economic growth. This widespread aversion to the “growth is over” conclusion is entirely understandable: during the last century, the economies of industrial nations were engineered to require continual growth in order to produce jobs, returns on investments, and increasing tax revenues to fund government services. Conclusion 3, which questions whether growth can continue, is therefore deeply subversive. Nearly everyone has an incentive to ignore or avoid it. It’s not only objectionable to economic conservatives, it is abhorent to many progressives who believe economies must continue to grow so that the “under-developed” world can improve standards of living.

But ignoring uncomfortable facts seldom makes them go away. Often it just makes matters worse. Back in the 1970s, when environmental limits were first becoming apparent, catastrophe could have been averted with only a relatively small course correction—a gradual tapering of growth and a slow decline in fossil fuel reliance. Now, only a “cold turkey” approach will suffice. If a critical majority of people couldn’t be persuaded then of the need for a gentle course correction, can they now be talked into undertaking deliberate change on a scale and at a speed that might be nearly as traumatic as the climate collision we’re trying to avoid?

To be sure, there are those who do accept the message that “growth is over”: most are hard-core environmentalists or energy experts. But this is a tiny and poorly organized demographic. If public relations consists of the management of information flowing from an organization to the public, then it surely helps to start with an organization wealthy enough to be able to afford to mount a serious public relations campaign.

This is all quite discouraging, to the point that a fourth conclusion seems justified: More