Peak Oil & Peak Everything Lecture at Cornell

Peak Oil and Peak EverythingWill Mar(nwjm228@cornell.eduApril 17, 2012

Lecture Outline• About Me• Peak Oil Intro (5 slides)• Some Economics (4 slides)• Current State of Aﬀairs (6 slides)• Subs(tu(on and the Final Fron(ers (9 slides)• Peak Everything (10 slides)• Outcomes (3 slides)• (~1 minute per slide -‐ so let’s hustle!) 2

Intro Economics Current State Subs(tu(on Peak Everything Outcomes The Scale of the Problem Current Global Oil Mix Current Global Energy Mix• 81%: Transporta(on fuels– 46% for gasoline– 9% for jet fuel– 26% for diesel and other liquid transporta(on fuels • 19%: Industrial & Commercial– Hea(ng oil, electricity genera(on, plas(cs, synthe(c rubber, asphalt and tar, wax, lubricants, adhesives, solvents, explosives, paints, sealants, corrosion inhibitors, cosme(cs, fragrances, pharmaceu(cals, fer(lizer, pes(cides, food ﬂavorings, food addi(ves and other industrial and commercial products. 3

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Addicted to Oil Current Global Oil Mix• 81%: Transporta(on fuels – 46% for gasoline – 9% for jet fuel – 26% for diesel and other liquid transporta(on fuels • 19%: Industrial & Commercial – Hea(ng oil, electricity genera(on, plas(cs, synthe(c rubber, asphalt and tar, wax, lubricants, adhesives, solvents, explosives, paints, sealants, corrosion inhibitors, cosme(cs, fragrances, pharmaceu(cals, fer(lizer, pes(cides, food ﬂavorings, food addi(ves and other industrial and commercial products. 4

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Oil• Peak oil is the point at which we have reached a maximum rate in global oil produc(on. It does not mean that oil is “half gone” Peak oil is about rates not reserves Million Dollar Analogy 5

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Aggregating Oil Field PeaksAlaska Peak Oil United States Peak Oil in 1971 Texas Peak Oil 6

Intro Economics Current State Subs(tu(on Peak Everything OutcomesEventually The World Will Peak 7

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Supply Inelasticity Since 2005, Global Oil Supply Is Almost Totally Inelastic Since 2005, OPEC Oil Supply Is Almost Totally Inelastic$150.00 $150.00$112.50 $112.50 $75.00 $75.00 $37.50 $37.50 $0 $0 75,000 78,750 82,500 86,250 90,000 25,000 28,000 31,000 34,000 37,000 World Oil Supply Jan 2001 - Jan 2005 (Thousand Barrels per Day) OPEC Oil Supply Jan 2001 - Jan 2005 (Thousand Barrels per Day) World Oil Supply Jan 2005 - Oct 2010 (Thousand Barrels per Day) OPEC Oil Supply Jan 2005 - Oct 2010 (Thousand Barrels per Day) 8

Intro Economics Current State Subs(tu(on Peak Everything OutcomesDemand Inelasticity Oil Demand Is Almost Perfectly Inelastic Brent Spot Price FOB (Dollars per Barrel) $150.00 $112.50 $75.00 $37.50 $0 0 13,250 26,500 39,750 53,000 OECD Oil Demand Jan 2001 - Oct 2010 (Thousand Barrels per Day) 9

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Supply and Demand150 US$ Inelas(c Supply Future Price120 US$ Supply Q 90 US$ Demand Q Current Price Demand Q’ 60 US$ 30 US$ Current Produc(on Future Produc(on 75 MMbpd 85 MMbpd 95 MMbpd 10

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Substitution 11

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Oil Forecasts2% deple(on rate = 35 year half life6% deple(on rate = 12 year half life (the same level of oil produc(on as we had in 1959!) 12

Intro Economics Current State Subs(tu(on Peak Everything OutcomesMany Countries Have Peaked Countries That Have Reached Peak Oil Country Peak Year Peak Production Rate % Below (MMbd) Peak TodayUnited States 1970 9.659 34%Iran 1974 6.022 30%Norway 2001 3.418 37%Mexico 2004 3.383 23%United Kingdom 1999 2.649 54%Indonesia 1977 1.686 41%Egypt 1993 0.893 22%Argentina 1998 0.847 27%Australia 2000 0.700 30%Syria 1995 0.623 35%Equatorial Guinea 2011 0.563 23%Brunei 1979 0.501 34%Yemen 2001 0.457 42%Vietnam 2004 0.397 14%Denmark 2004 0.389 36%Gabon 1996 0.370 33%Romania 1976 0.299 72%Trinidad & Tobago 1978 0.234 37%Peru 1985 0.190 20%Tunisia 1984 0.120 33%Italy 2006 0.119 16%Uzbekistan 1995 0.103 54% 13

Intro Economics Current State Subs(tu(on Peak Everything OutcomesThe World’s Megafields Have Peaked The World’s 20 Largest Oil Fields Have Already PeakedField Country Year of Year of Peak 2007 Production as % of Discovery World TotalGhawar Saudi Arabia 1948 1980 7.26%Cantarell Mexico 1977 2003 2.39%Safaniyah Saudi Arabia 1951 1998 2.01%Rumaila N & S Iraq 1953 1979 1.78%Greater Burgan Kuwait 1938 1972 1.67%Samotlor Russia 1960 1980 1.29%Ahwaz Iran 1958 1977 1.10%Zakum Abu Dhabi (UAE) 1964 1998 0.96%Azeri-Chirag- Azerbaijan 1985 2007 0.94%GuneshliPriobskoye Russia 1982 2007 0.93%Bu Hasa Abu Dhabi (UAE) 1962 1973 0.78%Marun Iran 1964 1976 0.73%Raudhatain Kuwait 1955 2007 0.71%Gachsaran Iran 1928 1974 0.71%Qatif Saudi Arabia 1945 2006 0.71%Shaybah Saudi Arabia 1968 2003 0.71%Saertu (Daqing) China 1960 1993 0.67%Samotlor (Main) Russia 1961 1980 0.66%Fedorovo-Surguts Russia 1962 1983 0.65%Zuluf Saudi Arabia 1965 1981 0.64% Total: 27.30% 14

Intro Economics Current State Subs(tu(on Peak Everything OutcomesGlobal Oil Discoveries Have Peaked Global Oil Discoveries Peaked in 1965 90.0 67.5 45.0 22.5 0 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 Global Annual Oil Discoveries (billion barrels) 10 Year Moving Average 15

Intro Economics Current State Subs(tu(on Peak Everything Outcomes A Zero-Sum Game With a Shrinking Pie Global Oil Per Person Peaked in 19796.04.53.01.5 0 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 Global Oil Production Per Person (Bbl/Person/Yr) 16

Intro Economics Current State Subs(tu(on Peak Everything Outcomes New Fields Peak Earlier & Decline Faster Newer Mega-Fields Reach Their Peak Faster Post-Peak Decline Rates Are Much Worse For Newer Fields70.0 13%52.5 10%35.0 7%17.5 3% 0 0% 1928 1934 1940 1946 1952 1958 1964 1970 1976 1982 Pre-1970 1970’s 1980’s 1990’s 2000’s Years Between Discovery and Peak Post-Peak Decline Rate by Year of First Production World Average Post-Peak Decline Rate 17

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Fungibility of SubstitutesElectricity ≠ Liquid Transporta(on Fuels 18

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Limits to Speed of Electrification• In the United States, the average age of 0.1% vehicles on the road is Percent of Chinas 18.5 million new cars each 10 years year that are electric – Ten years ago, the average vehicle age was 8.8 years• At the current 5% scrappage rate, it would take 20 years to turn over the US ﬂeet of cars 19

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Grasping at the Final Frontiers of Oil What’s Left? Limits to Scale-Up of Remaining Oil Substitutes• Ultra-‐Deepwater Oﬀshore• Arc(c Oil • Engineering Problems – Engineering Complexity• Poli(cally Diﬃcult Onshore Oil -‐ (Iraq, Central Africa, etc.) – Environmental Shortages• Heavy Oil (Canadian Tar • Social Problems Sands, Venezuelan Heavy Oil, – Environmental Pollu(on Rocky Mountain Oil Shale) – Poli(cal Issues• Biofuels • Limits From “Peak • Gas-‐to-‐Liquids Everything” – Feedback Loops• Coal-‐to-‐Liquids – Resource Shortages 20

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Engineering Limits to Substitutes• Ultra-‐Deepwater Oﬀshore – Immense Complexity and Cost• Arc(c Oil – Immense Complexity and Cost – Ability to Control Blowouts in the Middle of Winter• Heavy Oil (Canadian Tar Sands, Venezuelan Heavy Oil, Rocky Mountain Oil Shale) – Scale Limited by Water & Natural Gas Availability – Reﬁning Capability and Cost• Biofuels – Scale Limited By Available Land & Water 21

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Cost of SubstitutesSource: A E Farrell & A R Brandt, University of California, Berkeley 22

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Environmental Effects of Substitutes• Ultra-‐Deepwater Oﬀshore – Risk of Oil Spills and Blowouts• Arc(c Oil – Blowouts in Winter: Impossible to Contain• Poli(cally Shaky Land Oil -‐ (Iraq, Central Africa, etc.) – Lack of Environmental Laws• Heavy Oil (Canadian Tar Sands, Venezuelan Heavy Oil, Rocky Mountain Oil Shale) – Massive Water Pollu(on • Athabasca Tailing Ponds Can Be Seen From Space! – Much Higher Greenhouse Gas Emissions• Biofuels• Gas-‐to-‐Liquids• Coal-‐to-‐Liquids 23

Intro Economics Current State Subs(tu(on Peak Everything OutcomesEnvironmental Effects of Substitutes 24

Intro Economics Current State Subs(tu(on Peak Everything OutcomesLimits to Scale of Electrical Substitutes• NIMBY Current Global Energy Mix – Nuclear – Wind – Gas Fracking – Coal Mountaintop Removal• Variability and Intermipency – Solar – Wind• Loca(on Availability – Hydro – Wind 25

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Limits From “Peak Everything” • Feedback Loops • Resource Shortages Receding Horizons • Net Energy:Source: Prof Charles Hall, Syracuse University 26

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Everything• Peak Fossil Fuels – Peak Oil, Peak Natural Gas, Peak Coal• Peak Minerals – Peak Uranium, Peak Metals• Peak Food – Peak Fish, Peak Soil, Peak Water, Peak Fer(lizer (peak gas, peak phosphate rock, peak potash) 27

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Gas Countries That Have Reached Peak Gas US Gas Peaked in 1974 but Decline Has Been Halted by Fracking Country Peak Peak % off from23 Year Production Peak (Bcf/D) United Kingdom 2000 10.45684986 47.15%17 Ukraine 1985 3.75452235 52.19% Romania 1982 3.57715492 70.43% Germany 1979 1.96117317 47.57%12 Italy 1994 1.77870648 58.60% Denmark 2005 1.0107839 21.77% Poland 1978 0.64114656 38.04% 6 The Fracking Treadmill 0 1930 1939 1948 1957 1966 1975 1984 1993 2002 “regardless of their produc(vity, [shale gas wells] exhibit an early peak US Natural Gas Production (Tcf) Fracking of produc(on and then a rapid decline” -‐Interna(onal Energy Agency 28

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Coal Coal Quality Has Been Declining Since the 1960’s Coal Extraction Productivity Peaked in 200026.00 7.0023.25 5.2520.50 3.5017.75 1.7515.00 0 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 US Coal Quality (Million Btu per Short Ton) US Mining Productivity (Short Tons Per Employee Hour) 29

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Coal Countries That Have Reached Peak Coal Appalachian Coal Production Peaked in 1997 Country Peak Year Peak Production % off from Peak700 (Tonnes) Germany 1985 521.6 65.05% Poland 1988 266.51 50.01% Ukraine 1986 193.1 62.04%600 Kazakhstan 1988 143.1 22.57% United Kingdom 1981 127.47 85.75% Czech Republic 1984 124.93 59.47%500 Romania 1989 61.34 49.74% Spain 1983 39.95 81.91% Bulgaria 1987 36.82 21.61% Hungary 1982 26.08 65.20%400 South Korea 1988 24.3 91.42% Thailand 1997 23.39 23.56% France 1981 22.73 99.56%300 Japan 1981 17.69 94.82% 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 Mexico 2007 12.5145 25.33% Venezuela 2004 8.107304 50.93% Brazil 1985 7.71 28.99% US Coal Production East of the Mississippi (Million Short Tons) Zimbabwe 1991 5.62 70.33% 30

Intro Economics Current State Subs(tu(on Peak Everything OutcomesPeak Coal is Leading to Desperation Mountaintop Removal 31

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Metals Gold Production Has Plateaued Since the 1990’s Platinum Group Metals Production Peaked In 2007 3,000 600 2,250 450 1,500 300 750 150 0 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 1945 1952 1959 1966 1973 1980 1987 1994 2001 2008 World production (Metric Tons) World production (Metric Tons) Rare Earth Metal Production Has Leveled Off Is Copper Production Reaching a Plateau?140,000 17,000,000105,000 12,750,000 70,000 8,500,000 35,000 4,250,000 0 0 1990 1993 1996 1999 2002 2005 2008 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 World production (Metric Tons) World production (Metric Tons) 32

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Food All Meat is Net-Energy Negative We Burn 10 Calories of Production system (locale) Edible-protein energy return on Hydrocarbon Fuel For Every investment (EROI)Calorie of Food We Eat in the US Carp — extensive pond culture (various) 1-1.1:1 Chicken (US) .25:1 Tilapia — extensive pond culture (Indonesia) .13:1 Mussel — longline culture (Scandinavia) .1-.5:1 Turkey (US) .1:1 Carp — unspecified culture system (Israel) .084:1 Global fisheries .08:1 Milk (US) .071:1 Swine (US) .071:1 Tilapia — unspecific culture system (Israel) .066:1 Tilapia — pond culture (Zimbabwe) .060:1 Beef — pasture-based (US) .050:1 Catfish — intensive pond culture (US) .040:1 Eggs (US) .025:1 Beef — feedlot (US) .025:1 Tilapia — intensive cage culture (Zimbabwe) .025:1It takes 6 barrels of oil to raise one Atlantic salmon — intensive cage culture (Canada) .025:1 steer Shrimp — semi-intensive culture (Ecuador) Chinook salmon – intensive cage culture (Canada) .025:1 .020:1 Atlantic salmon – intensive cage culture (Sweden) .020:1 Lamb (US) .018:1 Sea bass – intensive culture (Thailand) .015:1 Shrimp – intensive culture (Thailand) .014:1 33

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Food Global food production and global energy consumption have a correlation of 0.99 Food and Fuel Prices Rise Together Food is Energy $150.00 300110.0 12000 $112.50 225 82.5 9000 $75.00 150 55.0 6000 $37.50 75 27.5 3000 $0 0 Jan-90 Jan-97 Jan-04 Jan-11 0 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 Brent Crude Price Oil Price Trendline Food Price Index Food Price TrendlineNet Global Food Production Index Number (2004-2006 = 100)Total World Primary Energy Consumption (million tons of oil equivalent) 34

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Food - Peak Fish Chilean Seabass Capture Has Collapsed Atlantic Cod Capture Has Collapsed 50,0003,000,0002,250,000 37,5001,500,000 25,000 750,000 12,500 0 0 1950 1959 1968 1977 1986 1995 2004 1975 1980 1985 1990 1995 2000 2005 2010 Atlantic Cod Capture (t) Chilean Seabass (Patagonian Toothﬁsh) Capture (t) King Crab Capture Has Collapsed Global Shrimp & Prawn Capture Peaked in 2003 150,000 4,000,000 112,500 3,000,000 75,000 2,000,000 37,500 1,000,000 0 0 1950 1959 1968 1977 1986 1995 2004 1950 1959 1968 1977 1986 1995 2004 King Crab Capture (t) Global Shrimp & Prawn Capture (t) 35

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Peak Food Increasing&World& Popula7on&&&Increasing& Peak Soil Increasing& PerECapital&Resource& Water& Consump7on Demand Peak&Oil• It takes between Aquifer& Deple7on 200 and 1000 years Higher&Electricity& Demand Higher&Fuel& Prices Peak&Gas Peak&Coal Climate& Change or more to create Increasing& More& Glaciers&and& Biofuel& More& just 1 inch of Produc7on& (Food&v&Fuel) Severe& Weather Snowcaps& Mel7ng Draughts topsoil Higher&Plas7cs& Prices Higher&Electricity& More& Floods&in& Some& Increasing&Water& Scarcity&In&Some& Soil& Prices Deple7on Regions Regions• Worldwide, soil is Higher&Pes7cides& Prices being eroded away Higher&Fertalizer& Prices More&Crop&Losses 10 to 40 (mes Higher&Food& Lower&Food& Higher&Produc7on&&& faster than it is Demand Supply Transporta7on&Costs being replenished Higher&Food& Prices 36

Intro Economics Current State Subs(tu(on Peak Everything Outcomes Mad Max or The Jetsons?• Renewable Energy Tehno-‐Utopia – Electric Cars – High Speed Trains – Wind & Solar• Collapse Dystopia – Food Shortages – Economic Depression – Resource Wars 37

Introduc(on Economics Subs(tutes Effects Outcomes Or somewhere in the middle...• “In our view global oil demand peaks in 2016, with oil prices, before a long, tandem, decline.” – Deutsche Bank• Peak Demand & Painful Transi(on – Oil Spikes and Recessions – Basic Materials Get More Expensive – Efficiency Improvements – Electrifica(on of Transporta(on 38

Introduc(on Economics Subs(tutes Effects Outcomes What You Can Do• Home – Living in a walkable neighborhood• Transporta(on – Enjoy cheap interna(onal travel while it lasts – Buy a fuel-‐efficient car• Community – Join a local sustainability group• Poli(cs – Vote for people who understand the issue and are proposing sustainable solu(ons• Career – Work in an industry that will benefit from peak everything (not an airline!)• Personal Finance – Invest for Peak Oil (Buy My Book!!) (wjm228@cornell.edu) 39

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Peak Oil & Peak Everything Lecture at Cornell

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