Running On Empty: Oil, Gas, And Us

In the meantime, as world demand for oil and natural gas climbs – and accelerated with China’s explosive economic growth – a new study indicates that easily accessible reserves of natural gas and light conventional oil may be a lot less than previously thought.

A team of geologists from Sweden’s University of Uppsala reported in the The New Scientist last September that world production levels of oil will peak in about a decade, with natural gas production peaking shortly thereafter. These claims, however, have been challenged.

The Intergovernmental Panel on Climate Change (IPCC) claims that the Swedish numbers are too conservative. IPCC studies show the amount of oil and gas reserves equal to between 5,000 and 18,000 billion barrels while the Uppsala study shows around 3,500 billion barrels. In either case, the lead time for transfer to an alternate energy economy is slim. As Uppsala Professor Kjell Alekett put it:

"The thing we are surprised of is that people in general are not aware of the decline in supplies and the extent to which it will affect production… The decline of oil and gas will affect the world population more than climate change."

If the Uppsala numbers are the more accurate, we may well be up the proverbial creek. On the other hand, if the medium range of the IPCC study is the more accurate (12,500 bb); the production crunch may arrive within three to four decades – at present consumption rates. One thing is certain, higher energy costs are a reality, today.

The majority of the oil we consume is used for transportation. The rest is used in everything from tires and asphalt to plastics, and everything else in a hell-bent, consumerist world. Natural gas is used in the making of fertilizers and herbicides, and of course, electricity. Fossil fuels are us.

If we reach “empty” before a Plan B is well underway, there will be needless suffering and hardship on a scale much larger than what is endured today. Imagine what will happen, if say, 20% of population can no longer afford to heat their homes? This is already happening with car insurance.

Let’s not kid ourselves, short of discovering something on the scale of Star Trek; we need to develop as many alternative energy sources as possible – while conserving what fossil fuels remain.

Be it wind, solar, or tidal energy, a whole mix will be required to help fill the vacuum left by declining supplies (and the rising price) of fossil fuels. These will not replace fossil fuels, however, something more revolutionary is needed for that.

Development of renewable energy sources can buy us some time though, especially if we conserve what fossil fuels remain today. So where is the political leadership you ask? What kind of energy future do our visionary politicians see coming down the pipeline?

Freedom Fuel

Hydrogen was on the lips of George Bush in his 2003 State of the Union address last January. What his administration calls “freedom fuel” was showcased as the perfect route out of foreign reliance on oil. Bush used the occasion to announce The FreedomCAR and Fuel initiative, a program that will ostensibly lower the cost of hydrogen fuel, create effective storage capacity, and develop inexpensive fuel cells for the motoring public.

“Wow” was my first reaction. But reading further down on the U.S. Department of Energy website, one discovers the program is been funded with 1.7 billion dollars - over five years. The first year budget request is for $243 million on top of $720 million for start up. This is a bad joke – this is chump change for the level of expected technology. The whole five year program wouldn’t buy two stealth bombers. In other words it’s a diversion and a cynical political escapade. And yet, it is still an investment, however inadequate. It’s a win/win situation for Bush.

Given current technology, the energy used in extracting hydrogen (usually from natural gas) is nearly equal to that which is gained – or negative in some cases. Hydro power is a relatively efficient means but there isn’t enough hydro surplus (or capacity) around the country (and world) to produce hydrogen on a large scale. Prince Edward Island is presently experimenting with wind generated energy for hydrogen extraction.

There are the additional problems of storage and transportation. Additional energy must be used to compress hydrogen and store it in specialized tanks. And even then, the energy to volume of compressed hydrogen is still much less than in gasoline. All things being equal, a hydrogen service station would need to be replenished fifteen times per day given current technology.

Canada so happens to be a leader in hydrogen technologies. Model hardware, infrastructure, and standards have been created, and are further being developed with the October 2003 announcement that Natural Resources Canada was spending $215 million to further develop hydrogen based technologies. This was part of John Manley’s first and only budget, where a total of $3 billion was committed to reducing green house gases, one billion of which was directed at hydrogen research. No word yet from Paul Martin on the status of this program.

Energy Politics

I don’t mean to sound overly cynical, hydrogen is an ideal fuel, but given current commitments and state of the technology, mass hydrogen consumption as depicted by the Bush plan, in the time frame required, is fantasy.

Ironically, the Bush hydrogen initiative touts the ecological benefits of clean burning hydrogen while at the same time considering coal (and nuclear) as an energy source for its extraction, a move that would increase coal consumption eight fold if we all used coal-extracted hydrogen fuel cells for transportation.

But alas, there is money to be made, barrels of it, from the spike in prices that will occur as easily-accessible oil and gas supplies wind down. In the eyes of big oil it makes sense to invest in the development of alternative energies, but at the right time and in phases, and not fully until every last accessible penny was squeezed out of oil. Let’s hope they’re right on the timing.

This may explain why U.S. Vice President Dick Cheney (like Bush, an oilman) could proclaim, in his only address on Canadian soil, that “conservation is a private virtue.” Dick is well aware of the declining state of the world’s oil supplies – and is indeed counting on the wallet-busting profits to be had, sooner rather than later. Big money, like power, is shortsighted – like post-invasion Iraq.

Speaking of oil and gas government, you may remember the aborted birth of the wind power industry in Alberta in the early nineties. A large German wind turbine manufacturer wanted to set up shop in southwestern Alberta (the most economically depressed region at the time). The rub was that Alberta law allowed only individuals to sell power back into the electrical grid. Not much of a problem there, you would think.

There was also a problem in generation cost. Given the technology of the day, wind generated power was slightly more expensive than coal generated electricity (less so given full-cost accounting *). In addition to changing the law in favor of commercial operators, the government either had to subsidize the higher cost (like its doing now), or have it passed along to consumers. Polls at the time found many Albertans were willing to shoulder the extra cost.

Initially the Klein government was in favor of helping the industry off the ground, as it had done – and is doing - for oil and gas (in the business of business – a Klein mantra). In the end the answer was “no.” Why? Corporate interest trumped public interest, again. Usually does.

Reality Hits

Oil companies are now beginning to jump on the alternative fuel bandwagon, and Europe is well ahead of North America. British Petroleum's new motto is "Beyond Petroleum." Shell Oil is heavily involved in renewable energy developments across Europe - and in Scotland, where the government recently passed legislation establishing a percentage of national consumption to be derived from renewable sources.

Denmark leads the world in wind generated electricity as a percentage of national energy consumption, and is even developing offshore wind farms. Germany employs 45,000 people in the wind energy sector alone. Closer to home, the city of San Francisco derives 20% of its energy from wind power.

In Canada, Ballard Power Systems is developing a fuel cell that uses methane derived from landfill sites. Ballard is supported by the Canadian government and has formed a partnership with DaimlerChrysler – but again, the technology is extremely young.

The ingenuity is certainly here, but we are suffering through a leadership void at a time when development and integration of realistic alternatives must be accelerated - while conserving what oil and gas remains. North American industries, for example, use nearly double the amount of oil to produce a $1,000 worth of GNP as do European countries.

The recent discoveries of vast methyl-hydrate deposits (frozen methane crystals) off Canada’s coastlines, and elsewhere, may further ease the transition to an alternative energy economy, but we shouldn’t count on it, right now. What we can, and should, count on is responsible leadership. But that won’t happen until we demand it. If there was ever a time when the public interest ought to triumph, it is certainly now. As for that new 500 horsepower Ram, preserve it - in a museum.

* The full cost (including health) of coal generated electricity is estimated to be 50% above the market price.
** Enmax, a utility company owned and operated by the City of Calgary, produces and sells wind generated power on a modest but growing scale. Incidentally, this profitable public utility was almost privatized three years ago. The public spoke, and won, this time.

Further Reading:
Fueling the Future: How the Battle Over Energy Is Changing Everything. Edited by Andrew Heintzman and Evan Solomon. Anansi Press, 2003.

Note: car insurance