The Oil Drum

25 comments on Can we get by with fossil fuels ?

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cactus on February 28, 2006 - 2:31pm

My first post here, but have been visiting The Oil Drum since to old days (pre-Katrina). I have also recently read Jaccard's book, and I personally found it interesting from the perspective of gaining greater insight into an economist's view of energy and Peak Oil.

Referring to Peak Oil, Jaccard asks the question whether peaking of conventional oil really matters?. Consumers don't care if the gasoline comes from conventional oil, non-conventional oil, coal-to-liquids (CTL) or oil shale. All we care about is price. We have abundant coal, presumably enough for 250-1000y (pick your own number), and therefore CTL will act as the "backstop technology" that will provide a "ceiling" on oil prices. The argument goes that liquid fuels from CTL can be produced for $35/bbl (the magic number), and once investors are confident that prices will remain above $35, they will flock to invest in CTL, and drive the price down to $35/bbl or perhaps lower (p. 158) (maybe add a few dollars more for sequestration). He comes up with this whopper "Ironically, the cost of gasoline might actually trend downward over the next fifty years even as we exhaust our highly valued supplies of conventional oil" (p. 161). (Perhaps it will become too cheap to meter!).

IMHO, the major flaw in this argument on liquid fuel supply is whether CTL can be scaled up to offset decline or lack of growth in conventional oil supply. He acknowledges this as a concern of the peak oil "prophets of doom" (p. 155), but does not address this scaling issue that I could see. 2% demand growth plus 2% decline equals 3.4 million bbl/day, or the equivalent of thirty-four 100,000 bbl/day CTL plants every year (at about $6 billion each). China (scroll down to China to Invest US$15 Billion in Coal-to-Liquids Plants) is developing the equivalent of about three of these plants over the next 5-10 years that will supply 5% of its current consumption (which is increasing at 7% p.a.).

Perhaps scaling up CTL is economically and technically feasible. I haven't done the detailed analysis, nor has Jaccard.

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Leanan on February 28, 2006 - 3:52pm

David Goodstein doesn't think we have hundreds of years' worth of coal:

It's possible for us to revert either to natural gas or to coal or both. Among consequences are the increasing global climate change. But another consequence is, let us suppose you tried to substitute coal for oil. Natural gas is a good substitute and it will last for a while but it will have its own peak one or two decades after oil, so it's only a temporary solution. If you turn to coal, we're now using twice as much energy from oil as we are from coal. So if you want to liquefy coal as a substitute for oil in transportation--which is its most important application--you would have to mine coal at a rate that's many, many times at the rate of what we're doing now. But the conversion process is very inefficient. So you'd have to mine much more than that. If you put that together with the growing world population and the fact that the rest of the world wants to increase its standard of living, you realize that the estimates that say we have hundreds of years worth of coal in the ground are wrong by a factor of ten or more. So we will run out of all fossil fuels. Coal will peak just like any natural resource. We will reach the peak for all fossil fuels by the end of the century.

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davebygolly on February 28, 2006 - 6:49pm

Unfortunately, it doesn't matter how much longer the coal will last -- all that matters is that it will last longer than the oil. Once you've eaten the leaves, you go for the bark.

Oil and and gas are near perfect fuels for transportation and heating. But of these two, oil is more fundamental to our economy - if for no other reason than the military machine runs on oil. But there are other reasons: the whole suburban way of life, the whole country in other words, turns in a big pile of junk. So, CTL is the only way to go for those who are unwilling to make significant changes in our way of life. Ha! I just contradicted myself - correction: for those who are unwilling to see a drastic asset devaluation.

My daughter lives in W. Va., although the eastern part. In the western part, there's already a huge movement opposing removing mountain tops. When one considers the (low) energy density of coal and the conversion loss, and then figures out what it will take to replace any significant fraction our current oil budget, well, I can't begin to imagine what the future will be like. But next time I go down, I'm going to visit western W Va -- visit the future.

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Leanan on March 1, 2006 - 2:12am

Oh, I don't doubt we'll go with coal. So will China, Russia, and any other countries that have coal reserves. I'm just saying I doubt we have hundreds of years' worth. Not if we start using coal to run our cars.

But I do wonder if we'll be able to build the infrastructure in time to do that. It's going to be much harder as energy gets pricier. We may not be able to scale up in time to keep the American way of life going for even a few decades longer. The wealthy will still be driving, I'm sure, but only the wealthy driving is not enough to support the highway system.

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Agric on March 1, 2006 - 12:01am

Welcome, and a fair question, Cactus.

You are, in many senses, right to think of oil and oil substitutes in the wider sense. After all, it only really matters what quantity of usable, portable, liquid hydrocarbon fuel we have (until we devise alternative means). The statistics we tend to watch and debate here as the mesure of peak oil are those released by the EIA and IEA. These are based on exactly the wide definition you suggest - including oil sands, oil shales, deepwater, NGL, ethanol, biodiesel.

No doubt they do / will include CTL if and when that becomes more than a microbe on the belly of oil production. It hasn't, as far as I know, become at all significant yet. Odds are that Jaccard's irony is wishful and willful delusion, the investment required to compensate for oil decline from CTL is likely to exceed anything practically achievable, but I haven't done the sums.

I'd bet my savings on $200 bbl oil rather than $20 bbl oil ;)

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