Oil Depletion: A Useful Crisis


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  • Another way to look at energy security is to compare the countries production to their proven reserves, and calculate a burn rate. While it is intuitive that increasing domestic production increases energy security, even current rates of production at 5.5M barrels a day, the US will exhaust its conventional oil reserves in 6.5 years. One might be tempted to look to increasing exploration to extend that depletion time. 
  • Unfortunately, discovery of large new sweet crude oil reserves in the US and US waters is highly improbable. This graphic shows global discovery of oil by year, dating back to 1930. This is not an official government or industry chart, but is the work of an association of retired oil industry engineers, and others who study oil depletion. It is an indicator that the geology of the matter is this: even with very advanced technologies that can find remote oil in the polar regions, or 5 or more miles below the surface of the Gulf of Mexico, the 5 years in which the global oil industry discovered the most oil were 1964, 1963, 1962, 1949 and 1948. Since 1990, the world has consumed oil faster than it finds it, with no major oil finds on the horizon—and the gap continues to widen.
  •  Indeed, this fundamental reality is the largest driver of oil prices, although some fraction of the oil price rise can be attributed to Mideast instability and speculation, it is very instructive that as we come out of the deepest recession since the 30s, the price of oil quickly moves back up over $100. On September 20 this AM, oil prices opened at $109, up from an average price of $60 in May 2010.
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  •  Other than the environmental challenges Canadian oil faces, former Canadian Imperial Bank of Commerce chief economist and oil industry analyst Jeff Rubin argues that the economic barriers are significant. “Sure, there is 170 billion barrels of it there, and there is 500 billion barrels in the Orinoco heavy oil belt, but that is not the issue. Depletion is not just the geological concept, it is more fundamentally an economic concept. Because if the cost of extracting that oil from the tar is greater than we can afford to burn, it doesn’t matter how many billion barrels of oil there are in the tar sands.” Some major fraction of the heavy non-conventional oils will be left in the ground, because they cannot be produced at prices we can afford to consume them
  • The need for transportation infrastructure that supports alternatives to oil is increasing, but U.S infrastructureinvestment has had a 50-year decline. Americans annually invest less than 2.5 % of GDP in infrastructure capital and operations, although the nonpartisan Congressional Budget Office reports that 7% could be invested with positive benefits for the economy. EU and China infrastructure investments 5% and 9% GDP annually (capital alone). US has very low gasoline taxes compared to other industrialized nations, a key contributing factor to low investment. (Reported in The Economist.)
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  • Oil Depletion: A Useful Crisis

    1. 1. Oil Depletion:A Useful Crisis . . . . . . . . Minneapolis Citizens’ Environmental Advisory Committee5.02.2012 Michael Noble noble@fresh-energy.org 651 726 7563 (office) www.FRESH-ENERGY.org . . . . . . . .
    2. 2. Proven oil reserves by regionFigure 35. World proved oil reserves by geographic region as of January 1, 2010million barrels Middle East Mideast has more proven North America oil than rest of world Central & South America combined. Africa "Worldwide Look at Eurasia Reserves and Production,‖ Oil & Gas Journal, Vol. 105, No. 48 (December 24, 2009 ), pp. 22-23. Asia World Total: 1,354 Billion Barrels Europe 0 200 400 600 800
    3. 3. Proved oil reserves by country billion barrelsSource: The World Factbook 2009. Washington, DC: Central Intelligence Agency, 2009.
    4. 4. Oil reserve burn rate by country burn rate (annual production of proved reserves)Source: U.S. Energy Information Administration
    5. 5. Oil discoveries falling behind productionSource: Colin Campbell, ASPO International
    6. 6. Oil prices 2002-2011 TFC Commodity Charts Light Crude Oil (CL, NYMEX) Monthly Price Chart
    7. 7. China demand driving increased consumption ofworld liquid fuels
    8. 8. Vehicles per thousand people by countrySource: U.S. Department of Energy, Petroleum and Emissions Data, Transportation Energy Databook, 2010
    9. 9. U.S. DOE estimate of world liquid fuel supply,2008-2030Source: U.S. Department of Energy, Energy Information Agency, Annual Energy Outlook 2009
    10. 10. Projected production of global oil and gas liquidsSource: 2007 Survey of Energy Resources ,World Energy Council
    11. 11. Glo Average Annual Crude Oil ProductionGlobalmbpd 2002-2011
    12. 12. Deepwater drilling at increasing depth, risk andcost
    13. 13. Tar-sands oilCambridge Energy Research Associates:"Growth in oil sands production has been the main driverin making Canada the largest supplier, by far, of foreign oilto the United States.But the growth potential is much bigger—volumes couldbe as much as three to four times higher in 2030 than in2009."
    14. 14. Tar sands of Canada: landscape before and after
    15. 15. Hauling tar sands
    16. 16. Oil depletion is an economic concept:Only a fraction of non-conventional oil can beproduced at a cost of oil we can afford to burn
    17. 17. Environment Research Letters 1 (October– December 2006) Risks of the oil transition A E Farrell and A R Brandt, Energy and Resources Group, University of California, Berkeley, CA
    18. 18. Top strategies for reducing oil consumption• Increasing fuel economy of vehicles• Reducing vehicle miles traveled – Better urban design, walkable and bikable places to live – Better infrastructure for public transportation• Substitute new fuels for oil – Electricity – Biofuels— preferably, non-conventional, non-food – Natural gas
    19. 19. Global passenger vehicle standardsSource: International Council on Clean Transportation
    20. 20. U.S. infrastructure investment,Gas prices/taxes by country U.S. investment in infrastructure, % GDP $ per litre, 4/2011Sources: Congressional Budget Office, Automobile Association, European Commission, U.S. Energy Information Administration:Japanese Oil Information Centre, Natural Resources Canada
    21. 21. Michael Noble noble@fresh-energy.org 612-963-1268 (cell) 651-726-7563 (office) On Twitter: @NobleIdeasAre you a member of Fresh Energy? Please join us in the adventure.
    22. 22. Canadian oil sands extraction faces challengesSource: ―Scraping Bottom: The Canadian Oil Boom,‖ National Geographic photo essay, 2009
    23. 23. World liquid consumption forecast, 2007 and 2035Figure 27. World liquids consumption by region and country group, 2007 and 2035million barrels per day North America 27 16.76 Non-OECD Asia 32 15 OECD Europe 14 8 OECD Asia 2007 8 2035 5 Central and South America 8 6 Middle East 11 Non-OECD Europe and 5 Eurasia 5 3 Africa 5 0 10 20 30 40 EIA, International Energy Statistics database (as of November 2009), web site www.eia.gov/emeu/international. 2035: EIA, World Energy Projection System Plus (2010).
    24. 24. Annual average natural gas prices, 1990-2035 2009 dollars per thousand cubic feetSource: U.S. Energy Information Administration, Annual Energy Outlook, 2011
    25. 25. Renewable energy cost trends Levelized cents/kWh in constant $2,000 40 10 COE cents/kWh 30 0 80 20 60 10 40 0 20 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 0 10 70 15COE cents/kzWh 60 8 12 50 6 40 9 4 30 6 20 3 3 10 0 0 0 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 Source: U.S. Department of Energy National Renewable Energy Laboratory, Energy Analysis Office. Updated 2002
    26. 26. Levelized cost of new power generation resources(coal, gas, renewables) range for total system levelized costs (2009 $/megawatt-hour)Source: U.S. Energy Information Administration, Annual Energy Outlook, 2011
    27. 27. Solar PV declining prices to converge with rising grid price Electricity prices ($/kW-hr) U.S. average (8.6 cents/kWh)Based on the work of Stephen O’Rourke, Deutsche Bank
    28. 28. Delivered coal prices, 2000-2009 Nominal dollars per short tonSources: Energy Information Administration, Quarterly Coal Report, October-December 2009, DOE/EIA-0121(2009/Q4) (Washington, DC April2010); Coal Industry Annual, DOE/EIA-0584, various issues; and Annual Coal Report, DOE/EIA-0584(2003), various issues; Electric PowerMonthly, March 2010, DOE/EIA-0226 (2010/03), (Washington, DC); and U.S. Department of Commerce, Bureau of the Census, "Monthly ReportEM 545" and "Monthly Report IM 145."