Congressional Briefing: Can Oil Production Meet Rising Demand?
Posted by Gail the Actuary on October 15, 2010 - 10:30am
On Thursday, October 7, the Environmental and Energy Study Institute (EESI) conducted a congressional briefing on challenges of the oil industry to keep pace with rising global demand, and the potential implications for oil prices, national security and the world economy.
The panelists included a combination of some people in Washington DC for the ASPO-USA meeting (Robert Hirsch, Tad Patzek, and Arthur Berman) and some people currently or recently involved with government offices (including Franklin Rusco, Director of Energy at the GAO, and Guy Caruso, Former Administrator of the EIA). I found it especially interesting that the latter two, especially Guy Caruso, were concerned about oil supply. As head of the EIA from 2002 to 2008, Guy Caruso did not seem to voice these concerns.
This video can be found at Can Oil Production Meet Rising Demand? An mp3 recording and copies of presentations can be found at the EESI site. Below the fold I show some of the slides and mention a few of the comments made by the presenters.
The overall theme of the presentations seemed to be that there are many types of risks that supply will be inadequate to meet demand--rising demand from emerging economies, inadequate investment, and oil that cannot be pulled out of the ground fast enough, even though the appearance is that there is plenty of oil available. The result is likely to be high prices leading to recession. Alternatives are not scaling up quickly enough to be likely to be very helpful for a very long time - 25 years according to Art Berman.
Below, I summarize the presentations. Note that I have not shown all of the slides. You will need to look at the individual presentations (linked for the individual presenters) to get all of the slides.
Franklin Rusco's Presentation
The first person to give a presentation was Franklin Rusco, Director of Energy, Government Accountability Office. (The GAO put out a report in 2007 called CRUDE OIL: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production.)
Rusco quotes the high reserve to production ratio for oil, then asks, "Why be concerned?" Whether or not oil peaks, he has concerns about the possibility of rising demand possibly leading to a spike in prices, and therefore leading to recessionary impacts. There is also an issue with reserves being in unstable areas, so one cannot count on supply. One can see many of his points from these slides.
Tad Patzek's Presentation
Tad Patzek, who is a professor at the University of Texas, gave his presentation next. He summarized his main point as, "It is all about the rate, stupid."
This is a good visual depiction of the problem!
The above graph shows the share of electricity generation from different sources. (Click on any of the images for a larger view.) The numbers on the right hand side show the days out of 365 that the fuels would provide electricity. From the bottom up, the fuels are coal, natural gas, nuclear, hydroelecric, and "rest". The "rest" is 23 days out of 365. This amount is about the same at the beginning and the end of the period shown.
The above graph shows a breakout of the "rest". Petroleum consumption is decreasing (now mostly in Hawaii), and wind has recently increased. In 2008, it would account for 5 days out of 365 days of electricity generation.
The above graph shows different liquid fuels, divided into the number of days out of 365 they would provide fuel for. Ethanol is the little sliver in red, which would amount to eight days out of 365.
Tad Patzek's point relating to the above graph was that there is not a lot of additional oil production through Enhanced Oil Recovery now (or at least when the graph was made in 2007). So we shouldn't hold out huge expectations for the future.
Guy Caruso's Presentation
Guy Caruso is Senior Advisor, Center for Strategic and International Studies and Former Administrator, U.S. Energy Information Administration (EIA). At some point along the line, he also worked for the International Energy Agency (IEA). As I indicated above, I found his testimony the most surprising, since while at the EIA from 2002-2008, he didn't seem to mention any problems. Caruso started out his talk by saying this is a topic "near and dear to my heart".
In his presentation, Caruso talked about the National Petroleum Council's (NPC) 2007 report, Facing Hard Truths About Energy. He says that in that report, and in the view of the EIA, the big concerns were above ground factors--access to reserves, adequate investment, and geopolitics. (When you include adequate investment as one of the above-ground factors, it seems to me that you are getting back to the Limits to Growth view of the limit on oil production--we reach the point where we can't invest enough to keep pulling oil out fast enough, because the net energy of what is being extracted is too low.)
In his talk, Guy Caruso says that current liquid fuels production is 85 million barrels a day. "Maybe we will get to 100 million barrels a day; maybe we won't. That is the debate we are talking about today." I found this comment pretty amazing, for someone recently with the EIA.
Guy Caruso also had some interesting things to say about the IEA (not EIA). He said that the IEA has been very much influenced by the work of Robert Hirsch and Matt Simmons. He also said that in the new IEA forecasts (expected out in about three weeks), the forecast amount of oil consumption in 2030 will drop below the 100 million barrels a day for 2030, so it will be lower than last year's forecast. He also said that forecast crude oil production for 2030 will only be in the 60+ million barrels a day range, in the new IEA forecast. He didn't say that this is a decline from current production, but it is.
In the above graph of NPC forecasts, the "ASPO" figure quoted is Jean LaHerrere of ASPO Paris's number.
Robert Hirsch's Presentation
Robert Hirsch explains that when he says we have a liquids fuels problem, not an energy problem, his point is that all the windmills in the world, or other types of electrical energy, won't run the vehicles currently in operation that are built to operate on petroleum based fuels.
Arthur Berman's Presentation
Art's presentation was short, only a single slide. He elaborates on the points shown in the slide below.
He starts off by saying that we are not getting off oil now, and in his view we are not getting off oil in any meaningful way in 25 years. Currently fossil fuels make up 87% of our energy use. It is really very difficult for alternative forms of energy to account for very much, and you can't put them in your car.
It is going to be nearly impossible for the US to become energy independent in the next 25 years. In fact, it is unlikely that the share we can produce ourselves will increase in the next 25 years.
Peak oil is less an issue about oil supply than it is about cost. Oil will cost more. This higher cost oil brings the economy, if not to a halt, to a "screeching slow down". We are using three times as much oil as we are finding. This has not changed in the 32 years he has worked in the field.
The various fuels shown in the EIA and IEA analyses are not interchangeable. For example, you can't put natural gas liquids in a car or airplane. Ethanol has limited uses, and requires a lot of natural gas for production.
While there still are undiscovered reserves, the new fields we are finding are smaller and smaller, and in more remote locations. The cost of production rises for these fields, adding to the high cost and recessionary impacts noted previously.