Ecobella Blog

The world will never ran out of oil.  That is the simple truth, whether you like it or not.

To keep demand and supply balanced, the price of oil will rise.

At a given point, other fuels will start replacing oil.

In the future our economy will no longer depend on oil.

This would be the happy ending of a fairy tale.

Hold on…  While this transition takes place, hundreds of millions (maybe even billions) of people will see their well being vanished.  At the same time, the world will see new billionaires (maybe even a trillionaire) flourish.

Are we in agreement?

The big million-dollar question is what happens from here to there…and what can we do to be prepared?

No doubt the transition is going to challenge our civilization.  It’s our challenge.

So what happens when there is a net decrease in energy flow through our civilization for we are absolutely dependent upon increasing flows of concentrated energy to evolve, grow, to form and maintain our complex civilization?

This point is not rhetorical, access to increasing flows of concentrated energy, which can be transformed into work and dispersed energy, is the foundation upon which our civilization stands. Yet we are at a point where these flows are, with high probability, about to begin decreasing.

There is growing concern, as expressed by Maquarie Bank, Goldman Sachs, McKinsey consultants, the International Energy Agency and the Saudi Oil minister Ali Naimi amongst others, that as the global economy begins to recover we will experience another rise in oil prices which will choke off further growth or in the words of Ali Naimi, constrained or declining oil production will “take the wheels of an already derailed global economy”.

Oil contributes to about 40% of global energy production, but over 90% of all transport fuel. It provided the physical linkages of good and people across the globalised economy.

We should intuit that an energy withdrawal should have major systemic implications, for without energy flows nothing happens.

Once the effects of decline become apparent, we could lose much of what we might call the operational fabric of our civilization. The operational fabric comprises the given conditions at any time that support system wide functionality. This includes functioning markets, financing, monetary stability, operational supply-chains, transport, digital infrastructure, command & control, health service, institutions of trust, and sociopolitical stability. It is what we casually assume does and will exist, and which provides the structural foundation for any project we wish to develop.

How could our economy choke? How could we loose grip?

When oil was at $135 per barrel, the US was spending the equivalent of $1Trillion per annum for oil, which is equivalent to 15% of US take-home pay for all taxpayers, nor does this percentage account for indirect rises associated with food (highly fossil-fuel dependent, and competitive with bio-fuels), and natural gas (price correlated). This hit discretionary consumption and put pressure on peoples‟ ability to service their loans.

Current biofuel production is 1.45 mb/d. However the energy content of a barrel of biofuels is much less than the energy content of a barrel of oil that is replacing, so in energy terms current biofuel production is about 1mb/d. To produce at this level has taken years of growth and subsidies, we would need to expand the industry by 275% in the first year alone, when even at the industries height it had a maximum growth rate of less than 30%.

Global food production is already straining against a rising demand and the stresses of soil degradation, water constraints, over-fishing, and the burgeoning effects of climate change. It is estimated that between seven and ten calories of fossil fuel energy go into every one calorie of food energy we consume. For example, it has been estimated that without nitrogen fertilizer, produced from natural gas, no more than 48% of today’s population could be fed at the inadequate per capital level of 1900. Today it is true to say that no country is self-sufficient in food production.

Do you think this is pessimistic science fiction?

Well two-thirds of oil producing countries has already passed their local peak. For example, the United States peaked in 1970, and the United Kingdom in 1999 and decline has continued in both cases. It should be noted that both countries contain the worlds‟ best universities, most dynamic financial markets, most technologically able exploration and production companies, and stable pro-business political environments. Nevertheless, in neither case has decline been halted.

As large old fields producing cheap oil decline, more and more effort must be made to maintain production with the discovery and production from smaller and more expensive fields. In financial terms, adding each new barrel of production (the marginal barrel) becomes more expensive. Sadad al-Huseini said in 2007 that the technical floor (the basic cost of producing oil) was about $70 per barrel on the margin, and that this would rise by $12 per annum (assuming demand was maintained by economic growth). This rapid escalation in the marginal cost of producing oil is recent. In early 2002, the marginal barrel was $20.

Manfred KISSLING

Editor

Related article:  FEASTA

• Shortfall could reach 10m barrels a day, report says
• Cost of crude oil is predicted to top $100 a barrel

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: “While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”

The US military says its views cannot be taken as US government policy but admits they are meant to provide the Joint Forces with “an intellectual foundation upon which we will construct the concept to guide out future force developments.”

The warning is the latest in a series from around the world that has turned peak oil – the moment when demand exceeds supply – from a distant threat to a more immediate risk.

The Wicks Review on UK energy policy published last summer effectively dismissed fears but Lord Hunt, the British energy minister, met concerned industrialists two weeks ago in a sign that it is rapidly changing its mind on the seriousness of the issue.

The Paris-based International Energy Agency remains confident that there is no short-term risk of oil shortages but privately some senior officials have admitted there is considerable disagreement internally about this upbeat stance.

Future fuel supplies are of acute importance to the US army because it is believed to be the biggest single user of petrol in the world. BP chief executive, Tony Hayward, said recently that there was little chance of crude from the carbon-heavy Canadian tar sands being banned in America because the US military like to have local supplies rather than rely on the politically unstable Middle East.

But there are signs that the US Department of Energy might also be changing its stance on peak oil. In a recent interview with French newspaper, Le Monde, Glen Sweetnam, main oil adviser to the Obama administration, admitted that “a chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 if the investment was not forthcoming.

Lionel Badal, a post-graduate student at Kings College, London, who has been researching peak oil theories, said the review by the American military moves the debate on.

“It’s surprising to see that the US Army, unlike the US Department of Energy, publicly warns of major oil shortages in the near-term. Now it could be interesting to know on which study the information is based on,” he said.

“The Energy Information Administration (of the department of energy) has been saying for years that Peak Oil was “decades away”. In light of the report from the US Joint Forces Command, is the EIA still confident of its previous highly optimistic conclusions?”

The Joint Operating Environment report paints a bleak picture of what can happen on occasions when there is serious economic upheaval. “One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest,” it points out.

Source:  The Guardian

China’s demand for oil jumped by an “astonishing” 28% in January compared with the same month a year earlier, the International Energy Agency (IEA) says.

The body added that demand for oil in 2010 would be underpinned by rising demand from emerging markets, with half of all growth coming from Asia.

But the IEA predicted demand in developed countries would fall by 0.3%.

The IEA has increased its global oil demand forecast for 2010 by 1.8% to 86.6 million barrels a day.

Oil prices were above $83 a barrel earlier today, the highest in two months, but dropped back to closer to $80 in late afternoon trading.

The IEA said the high price level was due to “heightening of geopolitical tensions affecting some producing countries”, but that this had been balanced by “ample physical oil supplies”.

Crude oil production by countries in the oil producers’ cartel Opec rose to a 14-month high of 29.2 million barrels a day in February.

During February, Iraq pumped an extra 115,000 barrels a day.

Opec is due to meet on 17 March and the IEA expects it will maintain its current production targets.

Source: BBC

• For Darpa, the support for algae is part of a broader mission for the US military to obtain half of its fuel from renewable energy sources by 2016. That time line meant that the Pentagon needed to develop technologies to make its hardware “fuel agnostic”, capable that is of running on any energy source including methane and propane.
• The US Air Force wants its entire fleet of jet fighters and transport aircraft to test-fly a 50-50 blend of petroleum-based fuel and other sources – including algae – by next year.

Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise. A cheap, low-carbon fuel would not only help the US military, the nation’s single largest consumer of energy, to wean itself off its oil addiction, but would also hold the promise of low-carbon driving and flying for all.

Darpa’s research projects have already extracted oil from algal ponds at a cost of $2 per gallon. It is now on track to begin large-scale refining of that oil into jet fuel, at a cost of less than $3 a gallon, according to Barbara McQuiston, special assistant for energy at Darpa.

“Darpa has achieved the base goal to date,” she said. “Oil from algae is projected at $2 per gallon, headed towards $1 per gallon.”

McQuiston said a larger-scale refining operation, producing 50 million gallons a year, would come on line in 2011 and she was hopeful the costs would drop still further – ensuring that the algae-based fuel would be competitive with fossil fuels. She said the projects, run by private firms SAIC and General Atomics, expected to yield 1,000 gallons of oil per acre from the algal farm.

Unlike corn-based ethanol, algal farms do not threaten food supplies. Some strains are being grown on household waste and in brackish water. Algae draw carbon dioxide from the atmosphere when growing; when the derived fuel is burned, the same CO₂ is released, making the fuel theoretically zero-carbon, although processing and transporting the fuel requires some energy.

Source: The Observer

Mr. Gabrielli, the CEO of Petrobras, gave a presentation in December 2009 in which he shows world oil capacity, including biofuels, peaking in 2010 due to oil capacity additions from new projects being unable to offset world oil decline rates.

Gabrielli states in his presentation that the world needs oil volumes the equivalent of one Saudi Arabia every two years to offset future world oil decline rates.

This is a stronger statement than the one he gave in January 2009 in an interview with Business Week when he said the following.

According to the company’s projections, production from existing fields will fall from a little over 80 million barrels a day to maybe half of that even if new techniques are used to slow their rate of decline. So just keeping global production flat is going to require lots of new fields and requires the world to replace one Saudi Arabia per three years.

Gabrielli is clearly concerned about declining future world oil production. His statements are now in alignment with those of other oil company executives including Sadad al-Husseini, former Aramco executive, who states that world oil production is on a peak plateau, and Total’s CEO, Christophe de Margerie who doesn’t see global oil production ever exceeding 89 million barrels per day (mbd). World oil production in December 2009 was only slightly lower at 86 mbd.

Source: The Oil Drum

In a recent interview, Mr. Bjorn Lomborg, director of the Copenhagen Consensus Center, a think tank, and author of “Cool It: The Skeptical Environmentalist’s Guide to Global Warming,” correctly states, “For almost 20 years, from Rio to Kyoto to Copenhagen, we’ve been wasting time, pursuing the failed strategy of cutting carbon-dioxide emissions. It’s about time we changed course. Do we really want to be remembered as the generation that wasted another decade? For years, we have been spinning our wheels on what I call the Rio-Kyoto-Copenhagen road to nowhere, slavishly following the notion—first endorsed at the 1992 Earth Summit in Rio de Janeiro and then extended in Kyoto 13 years later—that the only way to stop global warming is by means of draconian reductions in carbon dioxide emissions. All we have to show for this devotion is a continuing series of unmet targets, along with a startling increase in the number of people who no longer think climate change is worth worrying about.”

China and India recently announced plans to reduce the carbon intensity, or the amount of carbon-dioxide emissions per unit of gross domestic product, of their economies over the next decade. China, which increased vehicle fuel-efficiency standards in recent years, wants to cut its carbon intensity by as much as 45% from 2005 levels by 2020 while India has targeted a reduction of as much as 25% from 2005 levels over the next decade. The Chinese can promise to do this because they’re modernizing their economy. They’re investing in more efficient energy sources and nuclear power. So this in essence is basically saying, “We’re just going to promise to do what we’re going to do anyway.” The situation is the same for India. Estimates show that India will probably end up, if they do nothing, reducing its carbon intensity by almost 50%.

In order for the world to keep temperatures from rising beyond a ceiling of 1.5 °C to 2 °C above pre-Industrial Revolution levels via solely reducing carbon emissions, it is estimated that the annual cost will be US$40 trillion by the end of the century. Mr. Lomborg estimates that for every dollar spent, the world will avoid only about two cents of climate damage. Furthermore, each dollar spent on traditional cap-and-trade plans only brings about US$0.90 in benefits. However, climate economists predict that if investment in clean energy technology is dramatically increased, for every dollar spent, the world will avoid eleven dollars of climate damage.

“Instead of trying to make fossil fuels more expensive, we should focus on making alternative energy cheaper. The cost of fully implementing the Kyoto Protocol (in terms of lost economic growth) has been estimated at roughly $180 billion a year. For just a little more than half that amount, we could fund a fifty-fold increase in spending on R&D for the kind of game-changing technological breakthroughs—like smart grids, ultra-efficient batteries or even cheap, manageable fusion—we will need to end our addiction to fossil fuels. Such a commitment would resolve many of today’s political challenges. Developing nations would be much more likely to embrace a positive path of innovation than a punitive one that handicaps their ability to grow their economies, ” Mr. Lomborg says. Trying to force drastic carbon emissions cuts in the short-term doesn’t work economically or politically.

Source: Green Car Congress

The world is closer to a peak in oil supply than International Energy Agency estimates admit, UK newspaper The Guardian reported in today’s edition, citing an unidentified “whistleblower” at the IEA.

The IEA, which advises 28 industrialized countries on energy policy, is scheduled to release its World Energy Outlook today. Its 2008 Outlook forecasts world oil supply will rise to 106 million barrels per day in 2030.

“Many inside the organization believe that maintaining oil supplies at even 90 million to 95 million barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further,” the Guardian quoted the IEA source as saying.

Fatih Birol, the IEA’s chief economist, could not immediately be reached by Reuters for comment on the Guardian article, which appeared on the newspaper’s front page.

While the Paris-based IEA has repeatedly warned that a lack of investment could lead to a strain on supply, it maintains that there is enough oil in the ground.

Its 2008 World Energy Outlook said global oil output was “not expected to peak before 2030.”

The peak oil theory – that supply has reached or will soon reach a high point and then fall – has long been confined to the fringes of informed opinion within the industry.

There is also growing interest in peak demand, the view that oil supply will reach a high point because of policies to curb fuel use as part of efforts to counteract global warming, not a lack of supply.

Source: Upstream Online, Reuters

Billionaire T Boone Pickens is working with US Congress and Senate to approve the Natural Gas Act of 2009 that would allow government to give a $65,000 production tax credit to the purchaser of new a class 5 to class 8 Diesel truck – big 18-wheeler trucks- to make up for the difference in price between Diesel engine and Natural Gas engine.

There are 6.5 million big Diesel trucks; so with this legislation its expected that in 5 to 7 years the US could cut in half its oil imports from 4.5 mbpd to 2.5 mbpd.

This would allow the US to take bigger control on its sources of transportation fuel while reducing the huge outflows of money to pay for this imported oil that currently accounts for 2/3 of the trade deficit.  In addition to that it allows reducing emissions from these vehicles by 50%.

Cash for Clunkers Wraps came to a close with nearly 700,000 clunkers taken off the roads, replaced by far more fuel-efficient vehicles. Rebate applications were $2.877 billion.

Cars made in America topped the most-purchased list, from the Ford Focus to the Toyota Corolla to the Honda Civic.

“American consumers and workers were the clear winners thanks to the cash for clunkers program,” said U.S. Transportation Secretary Ray LaHood. “Manufacturing plants have added shifts and recalled workers. Moribund showrooms were brought back to life and consumers bought fuel efficient cars that will save them money and improve the environment.”

In addition, the program provides good news for the environment. That’s because the average fuel economy of the vehicles traded in was 15.8 miles per gallon and the average fuel economy of vehicles purchased is 24.9 mpg, a 58% improvement.

“This is a win for the economy, a win for the environment and a win for American consumers,” Secretary LaHood said.

Cars purchased under the program raised the average fuel economy of the fleet, while getting the dirtiest and most polluting vehicles off the road.

Now assuming the average car drives 20,000 miles per year, means the US saves 324 million gallons of fuel per year, at $2.75 per gallon saves of $890 million per year.  Over a 5 year span, the program provides a 28.3% Internal Rate of Return in fuel savings alone.  The IRR breaks even at 13,000 miles per year and for cars that run 25,000 miles a year the IRR goes to 51.0%.

Other factors like reduced carbon emissions, cleaner environment, savings on spare parts, increase safety, increased economic activity and new jobs are harder to measure and tally into the account.

If the US and other developed nations could replace a sizable proportion of their fleets, it may be an important factor on keeping the price of oil at reasonable levels, save trillions of dollars and thousands of lives.

Two years into development, innovative startup enables path to energy independence; Unveils proprietary production system capable of supplying unlimited quantities of renewable fuel at costs competitive with fossil fuels

Cambridge, Mass.—July 27, 2009—Joule Biotechnologies, Inc., today unveiled a revolutionary process that harnesses sunlight to directly convert carbon dioxide (CO2) into liquid energy. This eco-friendly, direct-to-fuel conversion requires no agricultural land or fresh water, and leverages a highly scalable system capable of producing more than 20,000 gallons of renewable ethanol or hydrocarbons per acre annually—far eclipsing productivity levels of current alternatives while rivaling the costs of fossil fuels.

“There is no question that viable, renewable fuels are vitally important, both for economic and environmental reasons. And while many novel approaches have been explored, none has been able to clear the roadblocks caused by high production costs, environmental burden and lack of real scale,” said Bill Sims, president and CEO of Joule Biotechnologies. “Joule was created for the very purpose of eliminating these roadblocks with the best equation of biotechnology, engineering, scalability and pricing to finally make renewable fuel a reality—all while helping the environment by reducing global CO2 emissions.”

Joule’s transformative process leverages highly-engineered photosynthetic organisms to catalyze the conversion of sunlight and CO2 to usable transportation fuels and chemicals. The scalable system facilitates the entire process—from sunlight capture to product conversion and separation—with minimal resources and polishing operations. This represents a significant advantage over biomass-derived biofuels, including newer algae- and cellulose-based forms, which are hindered by varying obstacles: costly biomass production, numerous processing steps, substantial scale-up risk and capital costs.

The modular design is engineered to meet demand on a global scale while requiring just a fraction of the land needed for biomass-based approaches. It can be easily customized depending on land size, CO2 availability and desired output. The functionality is proven and can readily scale from smaller operations with limited land to extensive commercial plants.

Joule liquid energy has up to 100 times the energy storage density of conventional batteries, and can be very efficiently stored and transported with no degradation of power.

Joule liquid energy meets today’s vehicle fuel specifications and infrastructure, and is expected to achieve widespread production at the energy equivalent of less than $50 per barrel. The company’s first product offering fuel, will be ready for commercial-scale development in 2010.

Source: Joule Biotechnologies