For red-hot news I use www.energybulletin.net which is an electronic clipping service for all things energy. The home page is updated daily as stuff comes in, and older material is archived – as in 150 web pages on crude oil alone. A splendid source.

It is difficult to find anyone knowledgeable who will deny that peak oil will occur sometime in the reasonably near future. They virtually all agree one thing – inflation will be the inevitable result. The only questions are how much inflation and how might it be dealt with or at least partially avoided.

Demand for petroleum is rapidly rising – the CEO of Chevron says unprecedented growth – and is expected to continue doing so for the foreseeable future. For once the U.S. is not leading the charge – the Chinese are the present champs. Their demand is rising in double digit territory annually. India is not quite as greedy but they’re learning. Between those two countries they represent an awful big chunk of the world’s population. This rise in demand is coupled with a decline of production in many of the world’s oil fields – Chevron says it suffered a 16.5% drop in U.S. oil production last year.

Not much about petroleum is simple. For instance only about 30% of the oil in an oil field can presently be recovered. Could we perhaps double the amount? Some are optimistic, others are not. The pessimists ask what the heck you think oil companies have been doing for the past four decades while U.S. oil production has been fading? True, part of the problem is how much it costs to get more out; with higher oil prices they will perhaps be encouraged to make additional investments. There are known but undeveloped oil fields, but the staggering costs associated with their development has previously made companies hesitant to proceed. $60 oil is encouraging some, like Chevron, to proceed in the expectation of drawing profits. They really need new sources because old ones are drying up. As an example, drilling platforms in water over 20,000 ft. deep are beginning to happen. Costs about a billion dollars to build the platform.

Okay, so increasing the supply of petroleum looks dicey. How about alternate fuels? Oil sands are presently being mined and processed into liquid fuel in Canada. Consider world demand at about 100 million barrels per day. We’re not quite there yet, but will be in a jiffy. Canadian oil sands are producing 0.6 million BPD, with an estimated final capacity of 4 million BPD several years from now. Not good enough. How about oil shale? Well, that’s petroleum that has rotted out and left something very like bitumen trapped in rock. You could mine with large amounts of high explosive, truck it all to a facility, process it, combine it with additives, and finally have a product to sell at the pump.

The energy input required of oil sand processing is only slightly less than the energy output from the product. Pricey? You bet. What’s it doing to the atmosphere? Multiply (as in double) the carbon dioxide loading, that’s what. Oil shale is more difficult. It’s in hard rock, not sand. Will there be any kind of net energy gain? I dunno. What they’re doing is trading one form of energy, hopefully one with a price advantage, for another.

Hydrogen has been touted as a possible automotive fuel – it’s really technically quite feasible. But it is a certain energy loser. You’re trading more than one unit of electrical energy for one unit of something with which to run a personal vehicle. Generation of electricity from fossil fuels is less than 20% efficient, the internal combustion engine is less than 20% efficient. A lot of fossil fuel was used for not all that much gain. You could have taken a bus or a train.

Then there is demand reduction. That’s what’s really going to happen, but only because people can no longer afford to pay for as much fuel. We tried, in the 1977 with the Energy Bill, to limit demand in this country. The electorate was enraged and promptly threw out of office those politicians who supported the bill and no politician yet has dared to raise the subject again. So price is going to be the determinant. The U.S. has 5% of the world population, uses 25% of the world’s petroleum. Of the 20 million BPD, 45%, or 9 million BPD, fuel private transportation in the U.S.. How much will drivers pay to fill the tank? We don’t know, but we’re going to find out. It’s demand that will set the price. Imagine telling a 16 year old he can’t have a car…well, a truck!

55% of U.S. demand is not for personal vehicles. There are several sectors that are probably more price sensitive than personal transportation. Aviation and long-haul truck fleets are deeply vulnerable, which holds serious implications. Food typically goes through several stages of transportation, preparation and distribution. All these sectors require substantial energy.. Presently, every calory of food on your table requires about 10 calories of energy to put it there. Supermarkets may not be able to keep fresh produce and sea foods pouring in from all over the world. Let’s just hope somebody figures out a way to keep agricultural chemicals – most particularly fertilizer – coming. There will be an awful lot of dying going on otherwise. Possibly 85% of world population.

The possibility, if not the probability, of wildly out of control inflation is the unprecedented challenge that inspired Robert L. Hirsch to ring the alarm bell Look at www.energybulletin.net and you’ll find a whole lot of alarm bells going off. Try reading James Kunstler on the subject. He says you live in a big house out in the country with an equally big mortgage and maxed out credit cards, you’re dead. Wages do not keep up with prices during inflationary periods. If you don’t have a comfortable economic cushion and live close to your work you blew it. Much of that happens and whole doggone country blew it.

Is there possible mitigation? Yup. Next time.

This entry was posted on Monday, March 13th, 2006 at 8:36 am and is filed under Energy Future, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.