Durango Bill's
Energy Analysis



The Great Rollover Juggernaut

World Oil Depletion and the Inevitable Crisis


A synopsis of the approaching peak in world oil production and the subsequent terminal decline in supply.
This problem is commonly referred to as "oil depletion" and "peak oil".

by Bill Butler



The Problem

Graph showing the gap between oil discoveries and oil consumption

   The above chart courtesy of ExxonMobil illustrates that for two decades we have been using oil faster than new oil is being discovered. (Both discoveries and production are world totals - not just ExxonMobil corporate data.) In both 2001 and 2002 the "present value" of all new oil discoveries was less than the money spent looking for it. 2003 was the first year since the 1920's that no oilfield of 500 million barrels or larger was discovered. (The world uses more than 500 million barrels per week.) The discovery gap continues to widen with time. (Since 2002, discoveries have been even lower than the expectation shown above. (green bars) See graphs in the ASPO model below.)


What does it mean?

   Since 1920, a world economic expansion has been powered by cheap oil. The difference between the minimal work required to obtain cheap oil and the large amount of work that oil can do has produced a large energy profit. This energy profit has led to an agricultural and industrial boom, and a quadrupling of world population. As cheap oil evolves into expensive oil we will lose this profit margin. It will become increasingly difficult to support our industrial base and grow our accustomed supply of food. Our technological economy will suffer if only because there will be insufficient gasoline to transport people from their homes to their jobs. In reality, all segments of the transportation and petrochemical industries will take a direct hit. The historic growth in both the world's economy and population will come to a halt, and then begin to contract - slowly at first, and then more rapidly. This economic rollover will likely be preceded and accompanied by catastrophic declines in world equity markets. The declines in equity prices will take several decades to run their course and will be characterized by multiple steps downward as opposed to a sudden panic. The total drop should exceed the 90% decline that occurred from 1929 to 1932.



The Post Peak World

   This section was added on Dec. 5, 2008. The preceding section (including “This economic rollover will likely be preceded and accompanied by catastrophic declines in world equity markets.”) was posted before the October 9, 2007 top in the U. S. stock market.
 
   EIA data at http://www.eia.doe.gov/emeu/ipsr/t14.xls appears to indicate that the “all liquids” peak in world oil production occurred in July 2008. We now must contend with relentlessly declining oil (also other fossil fuels) production combined with the consequences of a world-wide, out-of-control debt structure.

Added June 15, 2010: July 2008 is still the peak production month but a second, approximately equal peak may occur in late 2010 or 2011. This does not change the long term outlook.

   Our industrial/technological society WAS (note the “past” tense) a product of “cheap oil/energy”. All living/dynamic things require a positive net energy balance if they are to survive. If an organism is going to live, it must take in more energy than it consumes in the effort to obtain energy. If the organism has an inadequate net energy balance, the organism dies.

   Our industrial/technological society was a product of the large amount of net energy available from cheap fossil fuels. The large energy difference between what fossil fuels provided vs. the relatively small effort to acquire this energy produced a large energy profit margin. Our world/population squandered our geological inheritance of cheap energy in an orgy of population explosion. All that is left of our geological inheritance is the remaining dribs and drabs of previously developed sources of “cheap energy”. Future energy resources and/or “alternate energy” sources are expensive and inefficient. They will not provide the energy profit margin that our industrial/technological society requires.

   The energy problem has been compounded by a world wide debt binge based on the false premise that the debt could be repaid (or at least serviced) using “future growth”. When we borrow money, there is an obligation to repay the money. Money is an artificial commodity that is supposed to be backed up by real goods and services - and in particular, energy. Thus, borrowed money contains a promise that there will be future net energy available to repay the debt. However, the future net energy does not exist. Debts based on collateral and promises which in fact do not exist, can not be paid. This includes all U. S. Government debt (Tbills, Tnotes, Tbonds) on down through all other debt. All of these debts will eventually default, and anyone who thinks these pieces of paper represent “value” will eventually be disillusioned.

   The era of growth has ended. The world is entering the downside of an overshoot condition. The results over the next few decades may be far worse than anything we would like to think about.

   Thus, the rest of this paper has become a study in how we got into this mess. I don’t think there is a “nice way” out.



Recent Signs of Trouble

Matt Simmons CSIS 2/24/04 presentation: "Proven reserve write-off is likely worldwide"

Aramco's 2/24/04 definition of Saudi Arabia's "Proved Reserves" - just include all past production.
See slide 19 at http://csis.org/energy/040224_baqiandsaleri.pdf

New York Times 2/24/04: "Ever since its rich reserves were discovered more than a half-century ago, Saudi Arabia has pumped the oil needed to keep pace with rising needs, becoming the mainstay of the global energy markets. But the country's oil fields now are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years.

Wall Street Journal 1/24/04 "Data Cast Doubt on Oil Discoveries"

"Major oil companies appear to have been significantly less successful at discovering petroleum than recent regulatory filings suggest, according to a new report by energy consultant Wood Mackenzie."… "Wood Mackenzie also found that annual exploration costs for the 10 (largest) companies as a group exceeded the estimated value of annual new discoveries made in both 2001 and 2002."

On Jan. 9, 2004 Royal Dutch/Shell announced they are reducing their "Proved Reserves" by 20 %. (El Paso Natural Gas has also cut reserves.) It is an early admission that what is left of the world's oil reserves is shrinking.  Subsequent to this announcement Sir Phillip Watts, Shell's executive chairman, was forced to resign as his reward for disclosing Shell's true reserves. Would you like to guess how many executives of other major oil companies will be eager tell the truth about their reserves?



 
 
The World Oil Supply Report
2004 - 2050 (3rd edition)
The future for global oil production
by Douglas -Westwood

Douglas - Westwood's model for "The Peak"

   If you want to pay big bucks for a study of world oil supplies, it will cost you about $5,000 to get all the details from energy consulting firm Douglas-Westwood. The chart above is a summary of their results. You can get more information about purchasing the report with its country-by-country breakdown at Douglas-Westwood's web site at:
http://www.dw-1.com


   Up to now the steady expansion in oil production has accommodated whatever the world's economy needed. However, there is a geological limit to any natural resource. While there has been a reluctance to recognize that this limit exists, studies by multiple independent research groups have all reached the conclusion that our ability to produce oil will hit a maximum no later than 2010. After that, the annual supply of oil will go into terminal decline. There will be a bidding war for what is available, but no matter what price levels are reached, there will be inadequate supply.


Jean Laherrerer's model at Lisbon 2005 

   The chart above shows Jean Laherrère's (Laherrere) model as presented at Lisbon 2005. This model assumes there are 3000 billion barrels of total liquids available. Yet the peak in oil production still comes before year 2015.


A chart of the basic Hubbert Peak

   The chart above (Courtesy of gulland.ca) shows the Hubbert Curve for world oil resources. In 1956 M. King Hubbert developed his analysis that predicted United States petroleum production would hit a maximum about year 1969 and then go into terminal decline. His forecast was met with derision and ridicule (including attempts to discredit it) by those who "knew" that U. S. oil production could keep increasing forever. In due course, the peak came in 1970 and Hubbert was vindicated. Similar analysis has been applied to the world's supply of oil. The result again forecasts a peak in world oil production about year 2010.

   Even if you disagree with the forecasts that world oil production will roll over about year 2010, the book "Hubbert's Peak" by Kenneth Deffeyes is a must read. It gives an easily understood description about the oil industry itself as well as the famous forecast.

   Recently there have been several other books that have been published that look into the problems concerning "The Peak". Richard Heinberg's book "The Party's Over" is a good source that covers the social and economic consequences of the problem.

   Matthew Simmons has done some deep research regarding what is actually going on inside Saudi Arabia. The result was his best selling book “Twilight in the Desert”. The Saudi’s tell us what they think we want to hear. Matt gives as the real scoop.



USGS says "lots of oil" ASPO says "Crisis coming" Who is right?

The USGS, EIA, IEA Case

   The Energy Information Administration ( http://www.eia.doe.gov ), the International Energy Agency ( http://www.iea.org ), and the USGS ( http://www.usgs.gov ) all say there is plenty of oil and not to worry. A summary of the USGS position was featured in the Nov. 2002 issue of Geotimes and can be read at: http://www.agiweb.org/geotimes/nov02/index.html
The EIA Annual Energy Outlook 2003 (a tome of 267 total pages) can be downloaded from: http://www.eia.doe.gov/oiaf/archive/aeo03/pdf/0383(2003).pdf
The table on page 146 projected world oil production would rise to 122.93 million barrels per day by year 2025. The EIA also forecasted a stable price for oil in the mid $20’s per barrel out to 2025.


The EIA's incorrect price forecast for oil.

   The Print Screen image above is from the EIA’s Annual Energy Outlook 2003. If you relied on their price forecast for oil, where would you be today?

   These optimistic forecasts are utter fiction for two major reasons. First, published tables of world oil reserves are based on what individual countries claim as "proved reserves". These claims are not audited or verified by independent sources. In the case of the Middle East countries, these claimed "proved reserves" are highly inflated and are "cooked books" just as much as the earnings of Enron and WorldCom were cooked books. It is intriguing why people like to have faith in "cooked books" when they don't want to face reality. (This includes the EIA as they continue to use the claimed estimates published in the O&GJ instead of the more realistic revised estimates. See below.)

   In the late 1980's all the Middle East countries inflated their "proved reserves" to maintain their share of OPEC production after Venezuela added "heavy oil" to its reserves. No new oil was found. The increase in the claimed reserves was just to maintain the relative production quotas. You can read all about it at: http://hubbert.mines.edu/news/Ivanhoe_00-2.pdf (Pages 6 & 7.  Page 8 is a little sobering too). An article in the June 17, 2002 issue of the Oil & Gas Journal pointed out these "claimed" estimates should be lowered by 180 billion barrels. If this oil did exist, it would be enough to supply the United States for 25 years. (at 20 million barrels / day). A table showing the changes can be seen on page 5 in ASPO Newsletter # 19. http://www.asponews.org/ASPO.newsletter.019.php

   New data as of April 2003 indicates the situation is even worse. A technical article posted at: http://www.searchanddiscovery.net/documents/gong03/index.htm indicates that remaining expected recovery (reserves) in Iraq's 28 largest oilfields is only 41 billion barrels.  ("Search and Discovery" is an electronic publishing subsidiary of the American Assoc. of Petroleum Geologists.) Smaller fields would add a small amount to this total, but this is 70 billion barrels below the 112 billion barrels bandied about in the media. It is also 50 billion barrels worse than the assumption used in the above paragraph. Also, Iraq's expected "future discoveries" are more likely to be near 20 billion barrels as opposed to the 200 billion barrels number widely circulated in the media.

   As for Saudi Arabia's ability to increase oil production, the following Aug. 2003 quote from Matt Simmons tells the full story: "Over the last year, I have obtained and closely examined more than 100 very technical production reports from Saudi Arabia. What I glean from examining the data is that it is very likely that Saudi Arabia, already a debtor nation, has very likely gone over its Peak. If that is true, then it is a certainty that planet earth has passed its peak of production."

   It appears that Saudi Arabia (and probably most other OPEC countries) have been including past production as part of their "Proved Reserves". Thus when they state "Proved Reserves"… what they are really talking about is "Total Discoveries". They have been pumping oil for decades from these "Total Discoveries". When the "Total Discoveries" don't change with time, it is an indication that they haven't found any new oil. As each year goes by, the cumulative production from these "Total Discoveries" depletes what is left for "Remaining Reserves". It now appears that Saudi Arabia's recoverable remaining reserves may actually be less than 100 billion barrels instead of the 260 billion barrels they claim. (April 2004, ASPO Newsletter).


When Ghawar goes, "The Party's Over"

See "Ghawar is Dying" by Chip Haynes    http://www.newcolonist.com/ghawar.html
Also see Chip Hayes' "Sixty Days, Next Year" (A humorous look at the "Dim Ages")
http://www.newcolonist.com/dim_ages.html

   An interesting tidbit from Matt Simmons concerning the above is information that Ghawar, which produces over half of Saudi Arabia's oil, is showing increasing signs of watering out. Ghawar still produces about 4 ½ million barrels of oil per day, but the water component is now over 1 million barrels per day and is continuing to increase. When Ghawar starts declining, world oil production will be past peak. (Hints from early 2004 - Ghawar will be in decline within 2 or 3 years if it is not already declining.) (Added 8/2/04 - G.R.Morton has an update on the sad state of Ghawar. http://home.entouch.net/dmd/ghawar.htm)

   From the New York Times 2/24/04: "Ever since its rich reserves were discovered more than a half-century ago, Saudi Arabia has pumped the oil needed to keep pace with rising needs, becoming the mainstay of the global energy markets. But the country's oil fields now are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years."

   From the Saudi Aramco presentation at CSIS on 2/24/04 (http://csis.org/energy/040224_baqiandsaleri.pdf)
Based on Slide 19, it appears that when Saudi Arabia claims 260 billion barrels of "Proved Reserves", they are also including what has already been produced. It does not mean, "Can be produced in the future".


Saudi Arabia's claims of "Proved Reserves" actually includes past production



   The second reason these forecasts are fiction derives from the USGS year 2000 forecast that some 700 (+/-) billion barrels of new oil would be found in the 30 year period 1995 to 2025. So far, the discovery rate has been only about half the required rate. If you exclude deepwater oil and just consider conventional oil, the discovery rate is lower yet. Perhaps the greatest laugh in the USGS forecast is the 47 (+/-) billion barrels of new oil that will be found in East Greenland. So far no oil company has rushed in to get this bonanza, but of course the USGS forecast has over 20 years to go. We wait.

   An anonymous insider in Exxon commented on the USGS report: "You get what you pay for - and that came free".



Frequency histogram of remaining reserves of giant fields by M. K. Horn

Figure 12. Frequency histogram of remaining reserves of giant fields, using, in large measure, the same intervals as those for ultimate recovery (Figure 11). 380=fields <320 MMBOE and 535=fields <500 MMBOE.


   M.K.Horn of M.K. Horn & Associates, Tulsa, OK has compiled a database of the total remaining reserves of the world's giant fields. (The world's giant fields basically define what is available.) This 2004 database includes the world's 910 oil and natural gas fields that initially had at least 500 MMBOE reserves. Part of his tabulation shows how much is left (remaining recoverable reserves).

   The chart above is Figure 12 from an article that he presented on the Search and Discovery subsidiary of the American Association of Petroleum Geologists (AAPG). (The original article can be viewed at: http://www.searchanddiscovery.net/documents/2004/horn/index.htm)

   The chart is a histogram that groups these fields via the size of their remaining reserves. A mathematical calculation using this data indicates the world's remaining reserves in these giant fields (oil and natural gas combined) is less than one trillion barrels of oil equivalent. This is split about 50-50 between oil and natural gas. The ~500 billion barrels of oil that is left is significantly less than what is shown in the ASPO base case model (shown below).



The ASPO Model

Recent statements by Matthew Simmons, energy adviser for President Bush:

But it turns out with a little bit of hindsight that the optimists turned out to be wrong. While the optimists estimate, the economist rectifies, the debate still rages on; the jury basically has now rendered the verdict. The optimists have lost. Too much field data now proves their total thesis was wrong….
The pessimists unfortunately and ironically might also be wrong.  But most assume that this day of reckoning is still years away….
But they too might also be too optimistic….
and my analysis is leaning me more by the month, the worry that peaking is at hand; not years away.

(Author's note: As time progresses, Simmons' analysis is looking "Right On".)

The Simmons International web site is at: http://www.simmonsco-intl.com



ASPO's base case model as of May 2008

(The above charts show ASPO's May 2008 base case model)
(Courtesy of Colin Campbell)

   The Association for the Study of Peak Oil has grown out of research work by Colin Campbell and Jean Laherrère. Their original paper appeared in the March 1998 issue of Scientific American, and can be read online at:  http://www.dieoff.org/page140.htm

   The base case ASPO model is shown in the above chart. Readers should do their own research (use links given below), but the basic model has consistently estimated a peak in world oil production about 2010. (The May 2008 update to the model moved the estimated peak year forward to 2007 with a relative plateau out to 2010.) These forecasts are of course subject to variations in the world economy and possible Middle East disruptions due to war, etc. The peak will not become apparent until after the downslide begins, but the important part is that we are essentially at “The Peak”.




Tick, Tick, Tick...


ASPO's first chart as of May 2002

   The chart above shows ASPO’s first published “Base Case” model as published in its May 2002 newsletter. If you compare the two charts, there are two items of extreme importance. First, over six years have passed as we approach “The Peak”. Second, the estimated date of “The Peak” has actually moved forward by a few years. Not only is the clock ticking, it is ticking inward from both ends.




Chris Skrebowski
Editor of Petroleum Review
Author/tabulator of:
Megaprojects, a list of oil fields that are expected to come on stream by 2013


Results of Chris Skrebowski's Megaprojects studies as of April 2006

   The chart above shows the results of Chris Skrebowski’s Megaprojects studies as of April 2006. The gray area illustrates expected oil production from the world’s current (end of 2005) oil fields. As existing fields deplete, their production rate goes down. The colored areas show expected new production from the world’s new megaprojects. These include all new oil projects that are expected to produce 50,000 or more barrels of oil per day. For the next couple of years increases in oil production from new projects will be a little greater than declining production in old fields. (This net increase in production is still less than what the world would like to use.) After 2010, it’s all downhill.





The following are particularly useful websites for research:

ASPO                                                               http://www.peakoil.ie/
The Oil Drum                                                    http://www.theoildrum.com/

Oil Depletion in the United States and the World   
http://rclsgi.eng.ohio-state.edu/~korpela/opmatalk.pdf
The Oil Depletion Analysis Center                       
http://www.odac-info.org
Yahoo Energy Resources Group:                        
http://groups.yahoo.com/group/energyresources/
Hubbert Peak Home Page:                                 
http://www.hubbertpeak.com/
Oilcrisis home page (Similar to the above):          
http://www.oilcrisis.com/
Oil depletion home page:                                   
http://www.oildepletion.org
Dieoff Energy Synopsis - Lots of background and historical data
                                                                      
http://www.dieoff.com/synopsis.htm
Ezboard Petroleum Postings:
                                      
http://pub38.ezboard.com/fdownstreamventurespetroleummarkets?page=1
Energy Bulletin                                                
http://www.energybulletin.net/news.php
       (A new site and highly recommended)
Peak Oil News and Messages                            
http://www.peakoil.com/

Also use the Google search engine and use search words such as:
      oil   depletion   reserves   ASPO…



Alternate sources of hydrocarbon fuels and why most of them can't help.

Natural Gas
   While natural gas will probably last a few decades longer than petroleum, it is not a long-term solution. On a short-term basis there are large reserves in northern Alaska and the Mackenzie Delta of Canada although a pipeline from these areas has yet to be built. There is a lot of natural gas in Siberia and the Middle East, but there is always the problem and expense of getting it to North America. The following article is a little dated, but illustrates the problems that are occurring today: http://hubbert.mines.edu/news/Riva_97-3.pdf


Oil Sands
   The large oil sands (formerly called tar sands) deposits in Canada and Venezuela will see steadily increasing development over the next two decades. The bitumen deposits can be processed to produce hundreds of billions of barrels of crude oil. This in turn can be refined into gasoline and other petroleum products. The downside is that it requires large capital outlays to set up operations, and is most efficient if used for long term development. As of early 2004 it appears that there are about 300 billion barrels of petroleum that can be recovered from the Canadian oil sands. This is more than the true remaining reserves of Saudi Arabia and Iraq combined.

   Up to now, all oil sands operations have used natural gas as a heat source to process bitumen. It is probable that natural gas will run into supply/cost problems a few years in the future, and there has been some concern that this might pose a limit on future oil sands operations. Fortunately, there are economical alternatives.

   One, there are several methods where synthetic natural gas or diesel fuel derived from bitumen could be used as a heat source.

   Two, a new process called "Toe-to-Heel-Air-Injection" (THAI) looks promising. THAI burns some of the bitumen underground with the heat both loosening up and upgrading the remaining bitumen.

   Three, the SAGD (Steam Assisted Gravity Drainage) method for in situ (in site - deep underground) recovery looks like it will benefit greatly by the addition of light hydrocarbons to the steam that is injected via underground horizontal wells. The light hydrocarbons help dissolve the bitumen thereby reducing its viscosity. This means much less steam (heat) will be needed to loosen it up enough to allow ordinary pumping to bring it up to the surface.

   Finally, small nuclear reactors that can be used to produce heat appear ideal for the job. Canada's proposed Advanced CANDU Reactor (ACR) is one possibility.  (See http://www.nuclearfaq.ca/cnf_sectionC.htm#oilsands)  Pebble Bed Modular Reactors (PBMR) may be an even better source of heat.


Potential “De Facto” Nationalization of Oil Sands Companies
A worrisome long term problem was revealed on Oct. 25, 2007 when the Alberta government announced that they intend to change the royalty/taxation rules in the middle of the game. This decision is sending the following message to the business community:

1) “If you take a risk and lose, it's your problem.”
2) “If you take a risk and win, we will change the rules and take your winnings away from you.”

As Don Coxe pointed out in his Oct. 26, 2007 webcast, the Alberta government has gone back on its word and Alberta is “no longer a politically secure area”.



Hydrogen / Fuel Cells ("Fool Cells")
   This is everyone's "favorite solution" to the gasoline problem. Nice, clean, efficient hydrogen for fuel cells to power automobiles. It is quite true that if you have an adequate supply of hydrogen, you could use it instead of the present internal combustion engine. There is a bit of a problem that everyone ignores. Where do you get the hydrogen and how much will it cost?

   Today hydrogen is produced by reacting methane gas and steam yielding carbon monoxide and hydrogen. (The carbon monoxide also reacts with steam yielding more hydrogen and carbon dioxide.) In terms of useful energy, this is less efficient than just burning the methane. As noted above, natural gas is going to be in short supply after a couple of decades. Scratch natural gas as a source for hydrogen. Perhaps nuclear or "renewable" based electric power can produce hydrogen via electrolysis (or some other electric process), or some biomass-based reaction can produce hydrogen sometime in the distant future, but this is at best decades away - and very expensive.

   A lengthy technical report titled "Energy and the Hydrogen Economy" can be found at:
http://www.methanol.org/pdfFrame.cfm?pdf=HydrogenEconomyReport2003.pdf
Their conclusion states, "Mankind cannot afford to waste energy for idealistic goals, but economy will look for practical solutions and select the most energy-saving procedures. The 'Pure-Hydrogen-Only-Solution' may never become reality." A follow-up report at  http://www.efcf.com/reports/hydrogen_economy.pdf   comes to the same conclusion.

   Another excellent "White Paper" report on the fantasy of a "Hydrogen Economy" is available at: http://www.tmgtech.com/pages/7/index.htm. It is recommended reading for anyone who would like to check out the real facts involving hydrogen.

   For a layman’s guide to why “The laws of physics mean the hydrogen economy will always be an energy sink.” please see “The Hydrogen Economy - Energy and Economic Black Hole”.
http://www.energypulse.net/centers/article/article_print.cfm?a_id=940

   A quote from the "Questions about a Hydrogen Economy" article in the May 2004 issue of Scientific American. "Ultimately hydrogen may not be the universal cure-all, although it may be appropriate for certain applications. Transportation may not be one of them."

   The March 2005 issue of Scientific American followed this up with an 8 page analysis under the front cover heading “Fuel-Cell Cars: The Future May Be Stuck in Neutral”.

   In addition to being a highly flammable fuel, hydrogen will diffuse through any storage material including your future car’s fuel tank. It will accumulate in your garage if your car is parked there. Subsequently, if you want to drive your “Hindenburg Sedan”, you will press the garage door opener – and possibly generate an electric spark in the process. You will succeed in getting the garage door out of the way.

Summary for hydrogen: Hydrogen is not an energy source. Hydrogen is an energy sink. Oil that is extracted from the ground is an energy source as the end product has more useful energy than the energy required to extract and refine it. Hydrogen has to be manufactured. The energy input to manufacture it will ALWAYS! be greater than the energy available in the resulting hydrogen. This will be true for any possible utilization of the hydrogen. (Note: The energy input for any hydrogen manufacturing process has to include the inherent energy component of the raw materials consumed by the process. Any claim that states there is net energy production is a SCAM.)


Ethanol
   "If we want more we just grow it". If you are an influential senator from Kansas, Iowa, etc., you have no trouble getting a pork barrel program for the voters back home. Actually, most studies show that ethanol production has a negative energy return on energy investment. See: http://hubbert.mines.edu/news/Pimentel_98-2.pdf

   Even if future ethanol processing turns marginally profitable, there isn’t enough land to grow what we need. The following gal. vs. gal. calculation overly simplifies things, but it is a useful ballpark estimate of what we would need.

   The U. S. uses about 21 million barrels of oil per day, times 42 gal. per barrel, times 365 days per year ~= 3.2E+11 gallons of oil per year.

   An acre of corn can produce about 140 bushels of corn times 2.8 gals. of ethanol per bushel times 640 acres per square mile ~= 251,000 gals. of ethanol per square mile per year. (And we are ignoring all the required energy input to do this.)

  We would have to devote 3.2E+11 / 251,000 ~= 1.275 million square miles of new farmland per year to grow corn to produce ethanol. This is double the amount of land in the U. S. that is used to grow all our present crops.

(Added 3/9/2007) The theoretical numbers for ethanol from switchgrass (switch grass) are not any better. Even if bioengineering efforts can come up with a microorganism that can readily break down cellulous into starches/sugar there is little difference in the land requirement. An acre of switchgrass can produce about 5 to 10 tons of biomass per year. If these yet-to-be-bioengineered organisms can break this cellulous down to 50 - 100 gallons of ethanol per ton, then the ethanol yield would be about 500 gallons per acre - or about 320,000 gallons per square mile. This is the same ballpark that we derived for corn based ethanol. (End of 3/9/2007 addition)

   Ethanol from sugar cane may be marginally energy net positive. However, the glowing reports from Brazil should be taken with “a bit” of skepticism as their ethanol production is highly subsidized. Any palliative that involves hidden subsidization should be closely examined before the “press releases” are accepted at face value.

Little known fact: You get fewer miles per gallon from ethanol (and ethanol blends) than you get from ordinary gasoline.


Oil Shale
   Shale "oil" is actually kerogen imbedded in organic marlstone. Years ago stock promoters inserted the "oil" in the phrase, as it is much easier to sucker "investors" if you tout "billions of barrels of oil" vs. billions of barrels of organic marlstone. (And there were a lot of suckers that are still waiting for a return on their investments.)

   "Oil Shale" has at best a break-even energy return on energy investment. You might get 100 billion barrels of oil out of the mountains, but you have to put 100 billion barrels of oil energy into it to accomplish this. Net result - no energy product that you can sell for a profit. On top of that, processing requires lots of water. Want to be the volunteer that tells California, Nevada, and Arizona that we are preempting the rest of their water supply?

   In the late 1970's the major oil companies poured billions into an effort to develop oil shale in northwestern Colorado. The project was abandoned and the "company town" has been turned into a retirement village (Battlement Mesa, CO). In late 2003, the Stuart Oil Shale Project in Australia went belly up. Want to invest in the next big oil shale project?

   "Oil shale" is directly flammable. It is technically possible to crush the ore and use it as fuel for an electric power plant. While it is unlikely to ever be used to produce oil, it may have some future use in the production of electricity.

For more on oil shale please see: http://hubbert.mines.edu/news/Youngquist_98-4.pdf

   An Aug. 2005 article in World Oil outlines Shell Oil’s latest attempt to produce oil from “oil shale”. The company claims that the oil produced has 3.5 times the energy used to produce it. If this were true Shell would not need the Government subsidy that it is asking for. Details at:
http://www.worldoil.com/magazine/MAGAZINE_DETAIL.asp?ART_ID=2659&MONTH_YEAR=Aug-2005




Renewable sources of energy
   Outside of hydroelectric power, none of the renewable sources of energy has the energy profit margin that cheap oil provides. On top of that, most of them can't deliver power on demand when it is needed. Perhaps the best of these renewable sources is wind energy to produce electricity. Electricity from wind turbines is not reliable as a "power on demand" source, but it may be useful for the production of hydrogen.


The Myth of "Renewable/Sustainable" Oil
   Of late, there has been a widely circulated "urban myth" that oil may be a renewable resource. This myth is based on the hypothesis of the late Thomas Gold that oil has an abiotic (non biologic) origin. The myth frequently cites the "refilling" of the Eugene Island Field in the Gulf of Mexico.

   In practice the Eugene Island Field is a complex of over 100 separate reservoirs - some of which are connected by faults. (See the very technical article at http://www.searchanddiscovery.com/documents/97015/eugene.htm) In the past, oil and gas have been pumped out of some of these reservoirs, thus reducing their internal pressure. Nearby reservoirs that had not been tapped yet still had their original pressure. Oil and gas subsequently flowed along the fault zones from the untapped high-pressure zones into these produced areas that now had a lower pressure. This "refilling" is the source of the myth about "renewable" oil. Jean Laherrère has a short analysis of the Eugene Island Field on page 14 of his Zurich presentation the "Future of oil Supplies"  (http://www.oilcrisis.com/laherrere/zurich.pdf). His conclusion for the "abiotic renewal" of oil is: "It is really nonsense".

   In Sweden a well was drilled 4 miles deep in search of "abiotic" oil. It turned out to be one of the world's deepest "Wild goose chases". Dale Ffeiffer has concluded: "The proposed proofs of evidence of abiogenic origin in the Dnieper-Donets basin and in refilling fields are dismissed in front of real data."(See: http://www.911-strike.com/pfeiffer.htm)  Richard Heinberg (author of “The Party’s Over”) has also debunked the abiotic oil myth. (http://www.energybulletin.net/2423.html)

   Further, one of the technical presentations at the AAPG Research Conference at Calgary, Alberta, Canada June 18, 2005, Calgary states: “Present-day analysis of petroleum systems, when performed integrated with direct geochemistry, remote sense and high resolution geochemistry technology (HRGT), can provide irrefutable proof that 99.99999% of all the oil and gas accumulations found up to know in the planet earth have a biologic origin.” http://www.searchanddiscovery.net/documents/abstracts/2005research_calgary/abstracts/extended/mello/mello.htm

   Finally, let's assume full credibility for "renewable oil" by assuming that the earth's 2 trillion barrels of oil (total discoveries) had an abiotic origin and have accumulated over the 4 billion years that the earth has had its present crust. This yields an accumulation/renewal rate of 500 barrels per year. We are currently using oil at 80+ million barrels per day. The "renewal rate" wouldn't be of much help.


Creationism and Abiotic Oil
   Ignorance of geology seems to be a common trait shared by both Young Earth Creationists and believers in “Abiotic oil”. Misguided faith in general (including faith in Abiotic oil) is covered on the Creationism = Willful Ignorance and other pages. The “Abiotic oil” people believe that somehow the earth will supply an infinite amount of oil. They believe that “the earth” will provide. You can substitute the words “God” and/or “the Intelligent Designer” for “the earth”. Both the Abiotic oil believers and the Creationists illustrate a faith that has no basis in reality.



Nuclear - Fission
   Nuclear power plants are one possible source to generate electricity that could be used to produce hydrogen for fuel cells. However, hydrogen is a poor choice if you are going to manufacture a synthetic fuel. A far better choice would be to manufacture a fuel that is a liquid at ordinary temperatures. In this regard ethanol and methanol can be distributed and stored easily. This is still far more expensive than current petroleum fuels for transportation, but at least it is feasible.

   At one time it looked like there may not be enough uranium for large-scale nuclear production of electricity. However, newer reactor designs plus the possibility of using thorium for fuel appear to have solved this problem. There is widespread aversion to using nuclear reactors - especially in the United States. However, the choice appears to narrow down to: Either use nuclear or freeze in the dark.


Nuclear - Fusion
   For decades there have been attempts to harness the power of the sun. The object is to force hydrogen isotopes to fuse into helium with vast amounts of energy released in the process. (The Deuterium - Tritium reaction is "easiest") One method that has been attempted is to squeeze a hydrogen plasma in a magnetic bottle; and hold it together long enough, hot enough, and with a high enough density until you get more energy out of it then you put in. Lithium would also be part of the containment mechanism to help breed more tritium. The other method is to use high-energy lasers to hit a small pellet of hydrogen to produce the necessary heating and compression. There is no sign that either method will produce success for decades to come.


Methane Hydrates
   If the methane hydrates on the ocean floor could be economically retrieved, there would not be a looming energy crisis. The available energy is staggering - many times larger than all known oil and gas fields. Unfortunately, the ice-like hydrates are not stable at ordinary pressures and temperatures. To mine them would require a strip mine operation that could dig up the ocean floor, get rid of everything except the methane, and store the methane in a large pressurized container. All of this would have to be done by remote control at the bottom of the ocean. The technology to do this hasn't been invented yet. (However, Japan is doing some meaningful research.)

   Methane hydrates also exist in artic areas. Research has been conducted in several areas including the McKenzie Delta of northern Canada. There has been no conclusion to date as to whether these deposits can ever be used commercially.

   Added 6/28/04: In the last few years, estimates of world resources for methane hydrates (both oceanic and arctic) have been drastically reduced. There still is no known method to economically recover these reduced estimates.


Coal
   At last, an alternative even if it's expensive. It is possible to make synthetic gasoline and even hydrogen from coal. Germany made synthetic gasoline in World War II. Using coal will have a major adverse effect on the environment, but it may be the only alternative. It will also let us run our good old internal combustion engines for a few more decades. There are many sources of information for coal to gasoline conversion, but the following is an introduction:
http://www.wws.princeton.edu/cgi-bin/byteserv.prl/~ota/disk3/1982/8208/820803.PDF

   China is tentatively planning to build two coal to liquid conversion plants costing $3 billion each using technology from South Africa's Sasol.


Solar
Comments from Lee Raymond's (CEO of Exxon Mobil) interview on Charlie Rose (PBS)

Solar energy is not a viable replacement. He made the comment that it would take 84 square miles of solar panels to replace the energy that a single gas station sells on a single day. It would take solar panels covering all of New Jersey to replace the energy dispensed by just 100 gas stations in a single day. Exxon has 3,000 gas stations in the US and only has 13% of the market, and in his words "Do the math" nothing else is feasible to replace oil as an energy source!



The “Head in the Sand” Optimists
(Added late Nov. 2006)

   Everyone wants to believe that we can continue to grow our economy forever. No one wants to believe that the party will end. There are “paid shills” that cater to our “need to believe” that the party can continue forever.

   One of the most vociferous of these shills is CERA - Cambridge Energy Research Associates. They produce “Don’t Worry - Be Happy” reports that distort and misrepresent reality to tell us what we want to hear, instead of what we should learn.

   In Nov. 2006 CERA produced a report titled “Why the Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources”. It may take a year or two before additional energy price increases will prove how misguided CERA is, but you might want to keep track of their latest attempt at “disinformation” for future reference. It is a case study in our “need to believe” - as opposed to facing reality.

   In a November 2004 column in Forbes Magazine, Daniel Yergin (co-founder of CERA) predicted that oil prices would drop to $38 per barrel by November of 2005. (The average price of oil in Nov. 2004 was $48.84 and $58.81 in Nov. 2005) It is interesting how many people want to believe a proven loser simply because they still have their “need to believe”.

“Stop sweating over oil, Yergin told a group of CEOs at a Forbes conference last fall. Oil will slide to $40 a barrel sometime in 2005.”
http://www.forbes.com/business/global/2005/0425/035.html

“Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil.”
Forbes Nov. 1, 2004   http://www.forbes.com/technology/free_forbes/2004/1101/041.html
But the cornucopian economists still have a “need to believe”.




The Future

   Our industrial world has become dependant on fossil fuels. In particular we, and especially the United States, have become addicted to using large amounts of oil. If an individual becomes addicted to heroin, and if the only way to satisfy this addiction is to kill and steal, then he will kill and steal for a heroin fix. If countries are addicted to oil and the only way to obtain a large but temporary supply is to wage war to steal the other guy's supply, then such countries will attack others in order to obtain one more fix. At first the winning country will obtain its fix, but in turn it will disintegrate internally as factions form to fight over the last scraps. This is the long-term prospect for humanity. 

   For a grim view of the magnitude of the upcoming problem please see: "Eating Fossil Foods" by Dale Allen Pfeiffer at: http://groups.yahoo.com/group/energyresources/message/42571

"…conditions will deteriorate so badly that the surviving human population would be a negligible fraction of the present population. And those survivors would suffer from the trauma of living through the death of their civilization, their neighbors, their friends and their families. Those survivors will have seen their world crushed into nothing."

   In the early 1970's, the book "The Limits to Growth" warned us of the approaching population problem, and advised us that we should use "our intelligence" to prevent a disaster. We have done nothing. It is now too late. Starting before 2020 and continuing through most of the current century, Mother Nature will cut the earth's population to one half (or less) of its current value.


Mother Nature's deputies are the Four Horsemen of the Apocalypse.
Specifically these are:   War, Pestilence, Famine, and Death.




Also: Please see The Oil Crunch and The End of Growth
and “Less Than 2 Baseball Parks per Capita




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