The Energy Optimist's Lexicon
25 Nov, 2008 10:18 pm
The world's energy optimists often employ a particular lexicon to make their case for abundance far into the future. Whether that lexicon is used cynically or out of ignorance, the effect is the same: false impressions.
To help readers sort through the thicket of loaded terms often used by the energy optimists, I've constructed a short list of the most pernicious words and phrases that are often used to fool audiences rather than inform them.
Above-ground factors -- The optimists argue that there is plenty of oil, usually for many decades to comes, so long as "above-ground factors" don't prevent its extraction. Factors cited often include wars, social unrest, lack of investment, environmental restrictions on drilling, and political restrictions on foreign ownership or participation in oil development in countries thought to have high potential for oil discovery. (Most, but not all of these, are in the Middle East.)
Of course, the optimists are correct that all these factors can depress oil output. But the assumption behind their lament is that somehow we can easily brush aside these factors. Do these optimists propose that we simply threaten countries or perhaps invade them to force them to allow their untapped fields to be explored and developed? Do they advocate the wholesale dismantling of environmental regulations? Do they have a plan for forcing the oil industry to make the necessary investments in exploration and infrastructure? Usually, they don't say.
But what readers need to understand is that the oil infrastructure is both an above-ground and below-ground system inextricably intertwined. Future petroleum-based fuel supplies will rely on whether this system can produce increasing amounts of crude oil and refined products. Simply ignoring or complaining about above-ground factors won't make them go away. Above-ground factors are likely to continue to have a mostly negative effect on the rate of production of oil and probably also of natural gas for a long time. (For more on "rate of production," see "Resource" below.)
At current rates of consumption -- Quite often energy optimists will say the world has X years of oil, natural gas, coal or uranium "at current rates of consumption." Sometimes they just leave off the phrase "at current rates of consumption" which makes their claim very vague indeed. And, when referring to natural gas and coal, quite often the X is a triple-digit number that implies we have nothing to worry about in our lifetimes.
There are two problems with this measure. First, rates of consumption are not steady. In fact, for oil, natural gas and coal, they are rising exponentially. From 1980 through 2006 the growth rate for worldwide oil consumption was 1.15 percent per year. For worldwide dry natural gas consumption the growth rate was 2.65 percent. For coal it was 1.9 percent. For the period from 2000 to 2006, a period reflecting the high growth in energy use by rising giants such as India and China, the annual worldwide growth rates in consumption for oil, natural gas and coal were 1.7 percent, 2.8 percent, and 4.8 percent, respectively. (These calculations are based on historical production information available from the U. S. Energy Information Administration website.)
A rule of thumb is that 70 divided by the annual growth rate gives us the time to the doubling of consumption. Using the 2000 to 2006 numbers that would mean 41 years for oil, 25 years for natural gas, and 14.5 years for coal. This implies huge increases in consumption. Clearly, such growth rates would drastically reduce the number of years of future supply for any one of these fossil fuel resources.
But, there is a second problem. Fossil fuels are finite and that means that their rate of production will peak long before we run out of them. This decline in the rate of production after the peak poses serious problems for world society whose systems are based on ever-increasing rates of energy consumption. Projections for peak production for oil range from today to 2037. For gas they include projections that range from a few years from now to about 2040. For coal one estimate puts the world peak in production around 2025 though others put it decades later.
These two problems render essentially meaningless any estimates given in years at current rates of consumption.
Clean coal/Carbon capture and sequestration -- Energy optimists base their optimism partly on the idea that coal remains abundant and will be for perhaps a century or two. (See "At current rates of consumption" above and "The Coal Question Revisited" for a corrective to this view.) But they must somehow convince policymakers and the public that coal can be burned at increasing rates without serious pollution and climate effects. It is true that there has been considerable progress in removing harmful impurities from coal, especially sulfur and mercury. But the successful sequestration of carbon dioxide, the main greenhouse gas, in the gargantuan quantities required (i.e., billions of tons per year) remains science fiction. It is true that pilot projects have demonstrated that it can be done. But no one has demonstrated where and how such huge quantities could ever be sequestered safely, not just for decades, but millennia.
Beyond this, the term "clean coal" is often used to mean only the removal of harmful pollutants, but not the sequestration of carbon dioxide. Whenever someone uses the term "clean coal," find out whether it includes the sequestration of carbon dioxide. That way the speaker won't be able to glide over the greenhouse gas problem.
Demand destruction -- This term is a staple among economists. Simply put, it means individuals, households, businesses and even governments stop using something or use less of it when it becomes too expensive. In the case of oil, the record high price in 2008 caused just such behavior. Two positive things resulted from this behavior: 1) People figured out how to do what they wanted to do with less oil, and 2) people sought lower-priced substitutes. (See "Substitution" below.)
But it is the negative effects that economists don't like to talk about. Some people, particularly in poor countries, simply had to forgo the benefits of oil altogether or use far less of it. That wasn't just an inconvenience; it meant hardship for those living on the edge. For some poor areas which rely on diesel-generated power, it meant little or no electricity. Loss of services like that can be life-threatening, especially if there is a medical emergency or if basic sanitation such as sewage treatment or water purification is affected. Demand destruction is no benign process. It can destroy a lot of people.
Then, there's the problem with substitution. There are no ready substitutes for oil on any scale beyond tiny and at any cost except expensive. That means many will have to do without the services of oil if it returns to its old highs. (This is a not-so-unlikely event given the depletion rates of existing oil fields and the recent drastic reduction in exploration and development expenditures in the oil industry.)
Resource -- "Resource" is a widely abused word in the field of energy. Energy optimists are fond of saying that the Earth's resources of oil, natural gas, and coal are very, very large. That is true. But, properly speaking, a resource in the ground is often something only presumed to exist based on sketchy geological surveys. Even when a resource has actually been shown to exist, this does not necessarily mean it is recoverable using current technology and at current prices. Something that is proven and recoverable at current prices using current technology is called a "reserve." And then, even if something is classified as a reserve, this says nothing about the rate at which it can be produced.
Here is the crux of the matter. World economic growth depends not on the size of the resource, but on the rate of extraction. To date we have exploited the resources that are easiest to find and extract which is an entirely rational approach. That leaves the more difficult-to-extract resources. And that means that we cannot expect to extract these resources at the same rate as we have in the past. We already know that unconventional deposits of oil and natural gas such as tar sands and shale gas, respectively, can only be extracted at lower overall rates than the conventional (read: easier-to-extract) resources we're used to.
An analogy might be useful. If you inherit a million dollars with the stipulation that you can only draw out $500 a month, you may be a millionaire, but you will never live like one.
In addition, because of the increasing difficulties of reaching the remaining hydrocarbons, we are unlikely to recover the same percentage of these resources as we did of the previous easy-to-extract hydrocarbons. No resource can be recovered at 100 percent. Recovery of conventional oil in place has averaged between 35 and 40 percent. Expect recovery of unconventional resources to be lower.
Be aware that "resource" and "reserve" are often used interchangeably; but the difference between them is the difference between the Atlantic Ocean and the North Sea. One is quite a bit smaller than the other.
Substitution -- This may also be communicated using the words "substitutes," "alternatives," and "alternative energy." Substitution can take place when prices of existing energy sources rise. Higher prices encourage the development of alternatives and enhance demand for them. All of this is true enough. But there is no guarantee 1) that substitutes will emerge, 2) that they can or will grow to a large enough scale, 3) that in financial or energy terms they will be as cheap as current energy sources, or 4) that they will be deployed in time to prevent significant disruptions to world society. (This last point is sometimes referred to as the rate-of-conversion problem.)
Energy optimists love to talk about substitution, but they often merely assert that market forces will allow a smooth transition from one energy regime to another. And, since by definition no one can prove anything about the future, such assertions become part of what I call "faith-based economics." One must simply believe while disregarding the rather large risks involved. (See "Demand Destruction" above.)
Technically recoverable -- Rocks on the moon are "technically recoverable." We've already proven that during several moon landings. But we wouldn't mine the moon for roadway aggregates. Resources that are technically recoverable may never be economically recoverable and may never provide an energy surplus. In order for a resource to be an actual source of energy, the energy spent to find, extract, refine, transport and utilize that resource must be less than the energy produced by burning or consuming it. Otherwise, it is what is called an energy sink, i.e., it is absorbing rather than providing energy. Many resources that are technically recoverable are actually energy sinks.
Technology -- When all else fails, energy optimists often claim that technology will solve all of our energy supply problems. (This is part of the faith-based economics ideology mentioned above.) While it is true that there have been impressive advances in energy exploration and production technology in the last few decades, it does not appear to be enough. World oil discovery, for example, peaked in the 1960s when technology was considerably less advanced. And, discovery has been falling ever since. In the race of technology with depletion, technology has triumphed for a very long time and has helped to supply enormous amounts of energy to the world. But there will come a time when depletion outpaces technology and that time may be near if it hasn't already arrived.
New technology will be an important part of any response to global energy needs. But it may not prevent the need to reduce our overall energy consumption dramatically in the decades ahead. Whether in the future we'll have all the services we've come to expect will depend as much on our ingenuity in using less energy to get the same services as it does in finding new energy sources.
Unproven/Undiscovered -- Energy optimists often try to mumble or at least gloss over these embarrassing adjectives when they must be used. While it is reasonable to assume that unexplored areas of the globe contain additional energy resources, it is not reasonable to assume that these resources will come in the quantities we require, at the prices we like and at the rates of extraction we desire. We have, after all, extracted most of the easy-to-get energy resources. Now comes the hard stuff. Would you make plans for your new dream home based on your still undiscovered wealth? And yet, this is just what public policymakers and corporate planners are doing when it comes to energy.