The one, and perhaps only, event that puts energy on the minds of most Americans
is rising prices. And during the past year, crude oil, natural gas, gasoline
and most things hydrocarbon were up 50 percent or more in cost.
The price increase in the case of oil and gasoline was primarily brought on
by a tightened market, chiefly owing to rising demand in the United States and
Asia, especially China.
Over the past few years, the increasing price of world oil and the increase in Chinese imports show near perfect, even if somewhat spurious, correlation. However, the tightening of the market was also due to constrained refining capacity in the United States and elsewhere, which was exacerbated by the shutdown of some Gulf Coast refineries in the aftermath of hurricanes Katrina and Rita.
The tightening of the oil markets turned predictions of catastrophe into a cottage industry, fueling the near-term peakers of global oil production to say that the end of oil is nigh. Houston banker Matt Simmons made one of his commonly dire predictions, this time of triple-digit oil prices (per barrel). Princeton professor Ken Deffeyes boldly picked the peaking of global oil production to occur Thanksgiving Day of this year.
|Political events and natural disasters might well interrupt world oil supplies, but lack of resources and production capability should not.|
Those predicting imminent peaking of global oil production get a lot of attention,
but they are obliged to make narrow, and sometimes even unwarranted, assumptions
to get there. They rightfully assume the obvious, that oil is finite, and wrongly
assume they know what that finite amount is. And sure enough, the amount they
do assume remains is just about what we have consumed to date, and so the midpoint
in M. King Hubberts symmetrical life cycle (Hubberts peak) is invoked,
which is supposed to mean that thereafter, global oil production declines exponentially.
Those predicting an imminent oil peak concentrate on the deficit in new field
discovery relative to production, ignoring or relegating to mythology the recovery
of new reserves from existing fields the source of 70 percent of reserves
growth for the past 30 years.
People with interest in the subject might also go to some other researchers who work with and analyze comprehensive energy data. Tom Ahlbrandt and his colleagues at the U.S. Geological Survey recently completed the most exhaustive analysis of global oil and natural gas resources ever undertaken and calculated that the amount of oil remaining is more than twice the amount consumed to date, pushing any global peaking of oil production significantly into the future; they do, appropriately, include reserves growth.
Pete Stark and his colleagues at IHS Energy calculated a total recoverable remaining oil resources of 2.8 trillion barrels, just about triple the amount consumed to date. They further show, on the basis of a 10-year audit of global resource additions (1993 to 2003), that about 55 billion barrels of oil, on average, is added to the reserves base each year. By incorporating reserves growth, they eliminate the deficit to production; rather, additions are about twice the production level.
Dan Yergin and his colleagues at Cambridge Energy Research Associates, a highly regarded group of energy analysts, recently analyzed scheduled production projects on a global field-by-field basis and calculated that worldwide production capacity could rise by as much as 16 million barrels per day by the end of this decade, with total production capacity exceeding demand by 6 to 7.5 million barrels per day later in the decade. That would alleviate the current tight market. Political events and natural disasters might well interrupt world oil supplies, but lack of resources and production capability should not.
Beyond oil, we are on the threshold of what Jesse Ausubel and his colleagues at Rockefeller University call the methane economy, where hydrogen-rich natural gas becomes not only the fuel of choice, but increasingly the source of hydrogen, as the hydrogen economy begins to emerge in a big way by mid-century. Global demand for natural gas over the next century will likely be on the order of 30,000 trillion cubic feet per year. Signs of entering the methane economy and its large demand for natural gas are here. They include the vastly enlarged need and activity in building and siting liquefied natural gas facilities to move gas on a global scale to energy-consuming markets; and in the application of advanced technology to the development of nonconventional natural gas resources.
Nuclear energy in the United States is also making a comeback of sorts. Although no new plants have been built or commissioned in a long while (the last to come online after 24 years of construction was the Tennessee Valley Authoritys Watts Bar reactor in 1996), in the past five years, some 26 reactors at 15 plants have had licenses extended for 20 years, and an additional 18 applications for extensions are pending. Some interest in building new reactors exists, especially in light of higher natural gas prices. Natural gas provides 17 percent of current U.S. electrical generation, but 90 percent of the power plants under construction are to be fired by natural gas. Therefore, unless currently high natural gas prices stay steady long term, new nuclear power plant construction will likely be limited.
The other principal part of the U.S. energy supply is coal. Coal consumption and production grew steadily for several decades, but have been relatively steady over the past five years as natural gas eats into the role of coal in electrical generation. Substantial effort is being made in clean-coal technology and the sequestration of emitted carbon dioxide in an effort to make coal more environmentally acceptable. Still, coal on a global scale, as a percentage of total energy consumed as a fuel, has been declining for nearly a century. It could be a competitive source of synthetic gas, hydrogen or other hydrocarbon components. Coal also is clearly a major source of natural gas in the form of coalbed methane, but its global role as a burned fuel will continue to diminish.
Renewable energy holds potential in U.S. and global energy supplies, although at present, renewable energy satisfies only 6 percent of U.S. energy consumption, with slightly more than 70 percent of total renewable energy provided by conventional hydroelectric production and the burning of wood wastes in pulp plants. Solar, geothermal, wind and other biomass sources contribute 1.8 percent to U.S. energy supply. Future utility of renewable energy hinges on cost-reducing technologies and the cost of competing energy sources.
Fossil fuels will continue to be the dominant global energy sources well into this century, but the mix will change with coal and oil steadily having less of a role and natural gas more, as the methane economy comes into full play. Sometime after the middle of this century, we should be well into a hydrogen economy, with hydrogen generated from noncarbon sources. But in the transition, we will consume twice our historical consumption of oil and increase our total natural gas consumption 15-fold.