A Crude Awakening: The Oil Crash Oil -
excrement of the devil black blood blood of the dinosaurs bloodstream of the world economy blood of the Earth
Era - cheap, abundant energy -> scarce, hard-to-get, expensive energy - dependent dependent on unstable regimes regimes of the world: important When Society Collapses - increased unemployment - poverty - bankruptcy - starvation PRECIOUS AND NON-RENEWABLE Carbon - essential part in hydrocarbons in crude oil Oil - outcome of millions of years of geological history - great bulk of it was formed at 2 brief moments of extreme global warmi ng: 1. 90 million years ago 2. 150 million years ago How Oil was Formed 1. Animals and plants died in the ocean 2. Compressed by more deposits of sand 3. Deposits squished and compacted more and more 4. Cooked (called "the kitchen") 5. Organic material buried at a depth of about 2000 meters 6. Chemical reactions converted it into oil Average man performing physical labor for 25,000 hours = 1 barrel of oil Barrel of oil pulled out from Iraq = 1 dollar Oil -
so dense essentially free energy nonrenewable capital intensive most invaluable raw natural resource discovered
WE USE IT FOR EVERYTHING! 1960 - wonderful new world of new Fords Oil - our God - people worship petroleum 70% of the barrel of oil - refined into transportation fuels Transportation Fuels - motor gasoline - diesel fuel - jet fuel - railroad fuel
- maritime fuel 98% of all transportation energy - comes from oil Construction of average car = Consumes 27 to 24 barrels of oil Construction of average desktop computer = Consumes 10 times its weight in fossi l fuels Construction of microchip = Consumes 630 times its weight in fossil fuels 1 calorie intake (in the USA and similar nations) = Burns 10 calories of hydroca rbon energy Green Revolution - second half of the 20th Century - consequence: most of the 6.4 billion people in the world are well-fed - large measure of fertilizing land with petrochemicals Petrochemicals - fertilizers derived from petroleum Farming - changed more in the last 50 years than it did in the previous 1000 Farmer's work today = 5 times the land his father worked Petroleum that runs modern "hired hands" - not confined progress and farming to the fields Liquids that come out of oil as it's processed and refined - create the building block for all petrochemical, chemical, plastic, pharmaceutical, zillions of thi ngs FROM BOOM TO BUST Caspian Sea - one of the earliest oil provinces in the world Baku - people were simply digging holes to produce oil - huge industrial center - one of the most affluent cites in the world Oil production really took off - when western oil companies were granted concess ions in the late 1800's 95% of Russian oil - came from Baku by 1900 Oil fields - produced up to 5,000 tons of crude oil a day Venezuela - discovered oil at the beginning of the 20th century - at one time, became the largest exporter in the world 1914 - real first discovery December 16, 1922 - real turning point - blowout in a well being drilled at Cabimas - day of the black rain - 150,000 barrels in the air for 2 or 3 days running USA - was the world's leading producer of oil, not Saudi Arabia - much of their military and industrial might arose out of their giant o il industry - Saudi Arabia of the world until the 1950's McCAMEY, TEXAS 1930 McCamey - boom town for many years - attitude was that this was going to last from now on - people could not forsee that they were ever going to pump all the oil out the ground in that part of Texas - people couldn't picture ever running out of oil because it was everywh
ere and got on everything McCAMEY, TEXAS TODAY - Dead - Supply will deplete sooner or later - Not making a lot of dinosaurs anymore MARACAIBO, VENEZUELA TODAY - Dead BAKU, AZERBAIJAN TODAY - Dead A MAGNET FOR WAR Oil - magnet for war - starts war - associated with war Darfur, Sudan - everybody is treating as an ethnic and religious struggle - in fact, a struggle about major oil finds located in the south - government in the north, a different ethnic and religious makeup, is d isplacing those people and moving them out of the area so that oil revenues belo ng to them WWI and WWII - important elements of oil in them: reason for war, allowing war to go on, way of securing supply WWII - war of engines - continuous supply of oil from Baku ensured the Russian victory against Germans Sadam Hussein's invasion of Kuwait - first war absolutely about oil - seizing an oil field IRAQ, 2003 Iraq oil - giant kept dormant for many years - least explored, least developed, and the least produced USA - did not secure areas of weapons of mass destruction - did, in fact, secure the oil fields - planned to bring in US companies in Iraq where they have previously no t been allowed to operate - maps of oil fields involved in the planning of the war - instead of creating conditions for peace, they are making conditions f or conflict Iraq - reason for interest: geopolitical position and it's right in the middle o f the world's oil patch Iraqis - wanted to get rid of Saddam Hussein - happy that the Americans helped, but look what happened After Saddam Hussein - no institutions - no state - no army - no real police force - people are kidnapped, killed, decapitated, everything -no law: made the country stateless
Oil - more and more of it is going to come from less and less stable places, sec ure places, places that challenge the taking of oil in the first place - fuels war - catalyst for war - prolongs war - intensifies war THE NUMBERS DON'T ADD UP Classification of reserves - depends on the motivations of the person that's cla ssified them Public data - extremely misleading and misunderstood - try to keep people guessing, keep them off-balance Most numbers - seen around the world ven possible
are proven, plus probable, and sometimes e
OPEC - Organization of the Petroleum Exporting Countries - exaggerated how much oil it's got left, for all sorts of political rea sons 50% of Kuwait's reserves - were added overnight in 1985 OPEC quota - amount of oil that the OPEC countries could produce was based on th e reported reserves - more you reported = more you could produce Venezuela's reserves - doubled overnight in 1987 Saudi Arabia - announced enormous increases overnight - reason: to protect their production quota Numbers - have not changed since - absolutely implausible to imagine that they're all the time producing
it should stay the same, when
8 or 9 million barrels a day - same reserves at the end of the year as they were at the beginning, as they were 10 years ago, etc. Plan 1. Produce oil 2. Prove up reserves to offset the oil produced in the year 3. Beginning of the next year, reserves are exactly what they were the y ear before OPEC countries - do not care about what might happen 20 or 30 or 40 years from now - care about what they get now today - politicians, want more money, more money to spend - have budgets but are prisoners of these - what'll happen 20 years from now they don't care: by that time, they'l l be dead PEAKING OUT - We're going to run out of oil and gas a lot sooner that a lot of peopl e think - If it peaks = They've taken more than half of it out of the ground -We're going to come to a time when we don't have oil USA - largest oil producer on Earth for almost a hundred years
- nobody thought they'd ever peak Many geologists - if not all, thought that that was going forever Dr. Hubbert - continuous student of energy resources and their implications in h uman affairs - 20 years ago (1975-20=1955), he pointed out to the petroleum industry that the US would probably reach its peak in petroleum production within 10-15 y ears - virtually laughed out of his profession for making such a ridiculous p rediction - realized that the US peaked in the 1930's and extrapolated that to fig ure out how much oil there would be altogether Hubbert's peak - peak in the production curve Produced 50 billion barrels in 100 years and 100 billion barrels still to go -> how long will it be before an oil shortage? December 1970 - true enough, the US oil peak happened just as Dr. Hubbert said i t would - US peaked at 10.2 million barrels a day -> oil prices went through the roof - drilling boom of epic proportion 10 years later - US was drilling and completing 4 and a half times more oil well s that it was going backed when it peaked - domestic oil production: 10.2 million barrels a day -> 6.9 million bar rels a day Last Great 1. 2. 3.
Frontiers of New Oil Discoveries Alaska North Slope oil (1967) Siberian oil (1968) North Sea oil (1969)
Irony - the better you do the job of exploiting oil and gas, the sooner it is go ne British government - admits that it will be a net importer in the next year (?) - gone by 2020 All promising areas - for oil have been identified - the world has been sufficiently explored "Technology and ingenuity will bring out all these changes." - took 30-35 years to develop all of the great tools - fantastic technology to find oil, seismic surveys which are of unbelie vable resolution to see the smallest formations in the Earth's crust - advanced engineering to produce oil These tools - ended up being great enhanced production techniques - basically super-straws just sucking the last easy oil out of the groun d at faster rates - to NO extent significantly increasing the amount of oil going to be pr oduced: myth Energy used from natural gas to produce oil > energy taken from oil shales and t ar sands 2/3 of the oil reserves - in the Middle East
- Persian Gulf, 10 times as much as any other source Middle East - only region in the world that hasn't peaked 2030 - Middle East producing 50-51 million barrels a day Iran - peaked at 6 million barrels a day in 1978 - struggles to stay 3-3.5 million barrels a day Kuwait - struggles to keep 2.5 million barrels a day intact Qatif Field - only significant exploration success of Saudi Arabia from 1967-200 5 If Saudi Arabia has exceeded its sustainable peak supply -> the world has exeede d sustainable peak supply Whole world has gotten used to the growing side of the mountain range -> has to face the opposite side M. King Hubbert - predicted that the peak should be occuring about the turn of t he century - his prediction slipped a little because of the Arab oil embargo, oil p rince spike highs, and the worldwide recession = reduced the demand for oil quit e significantly and pushed oil peak off until about now 150 years - growth of everything: of industry, transport, trade, agriculture - explosion of the number of people - growth made possible by the cheap, abundant supply of energy AN INSATIABLE DEMAND Supply and Demand - Demand is on the march and supply is flattening out - Supply 80 million barrels a day -> 120 million barrels a day by 2030 - To meet new profile, 200 million barrels a day of new oil must be adde d: compensate for depletion of existing wells Early 70's - over half the world essentially didn't use any oil Only Serious Oil Consumers Back Then - Europe - Japan - USA - Canada - Former Soviet Union Areas Which Don't/Hardly Use Oil Today - Papua New Guinea - 2 or 3 isands in the South Pacific India - demand for energy will only increase as the standard of living rises - economy becomes more diverse and dynamic - continues to narrow the gap with more developed nations China - exponentially expanding their need for energy: just getting started - fastest automobile market on Earth - most urban Chinese believe they will own a car withing 5 years - 1/3 have driver's licences - demand for oil and gasoline is really going to take-off - number 2 importer of oil in the world
25% increase in China's importation of oil -> 14.7% increase in China's use of o il 10% growth of China - a year - doubles in 7 years NOW: 10% 7 YEARS FROM NOW: 10% x 2 = 20% 14 YEARS FROM NOW: 20% x 2 = 40% - 4 times bigger than before China and India - getting into the party when the glass is literally half-empty - have to fight with the rest of the world to get what's left THE END OF THE AMERICAN DREAM Hummer - status symbol - 10 miles per gallon USA - uses 25% of the world's oil - 1 person in 22 - only 2% of the known oil reserves Price of bottled drinking water > Price of gasoline Gasoline - cheapest liquid you can buy in the US To have no economic consequences - anticipate it by 20 years - we don't have 20 years, we don't even have 10 years - we're almost there Political system - controlled by major corporations - requires downscaling to address this America - nation on wheels - automobile and the powers behind it have been major factors in growth - victim of own success Suburbia - in a lot of trouble - concept: commute 30, 40, 50 miles to job and back - only viable so long as there's relatively cheap oil and gas Three Things Needed That are in Short Supply 1. Money - can be borrowed - accumulating debt 2. Time 3. Energy Make energy available to invest and buy time - solution: vigorous conservation p rogram Sunday, July 20, 1969 - first man on Earth prepared to set foot upon the moon Bush administration - closest connections with oil companies themselves in the l ast 40 years - married energy security with national security and the US foreign poli cy USA - imports 2/3 of the world's oil Secure oil supplies and create a more stable world - democratize the Middle East
Oil - one of the materials that is making a truly great contribution to modern c ivilization Exchange of secure, cheap, reliable oil - basis of foreign policy from US from 1 945-today - in return for protection for the governing rulers of Saudi Arabia Exchange = threatened $28,000 - per capita income in Saudi Arabia 10, 15 years ago -> $6, 000 - today - huge drop in the standard of living of the average Saudi Young people in Saudi - coming on to the labor market - feel alienated Saudi Arabia - tension between the oligarchy (power to few) which rules the coun try - government system is corrupt - selling oil to the West -> West is arming the regime -> The regime use s guns against its own population Fundamentalist movement - strong and dangerous Options 1. Militarize the taking of oil - get the population to understand that if they want to continue to consume energy in the way they are, that they will b e in war after war 2. Begin to prepare for what we all see coming - end to the era of cheap oil and to invest in alternative technologies for energy TECHNOLOGY TO THE RESCUE? - Replacement for oil and natural gas - Natural resources can become depleted but human creativity is inexting uishable Hybrid electric automobile - both internal combustion engine and an electric mot or Energy consumed if every car on the road were hybridized = Gasoline consumed in about 5 or 7 years WHY? Each passing year -> economy grows = More and more oil consumed 14 terawatts of energy by 2050 = 220 million barrels of oil per day 700 million internal combustion engines - running around the world Hydrogen - going to do "the trick" and replace oil, eventually - conceptually a good idea - major challenges to the industry - needs substancial breakthroughs in technology: fuel cell technology, h ydrogen production technology, fundamentally unresolved issues. Industry - reluctant to invest in fuel cell technology because there's no hydrog en infrastructure to deliver and produce hydrogen cheaply - not in place because there's no demand for hydrogen: how do you get st arted? 3-6 gallons of gasoline to make enough hydrogen = to drive a car the same distan ce that 1 gallon of gasoline would = IMPRACTICAL Biomass - generally inefficient
Energy inputs in producing ethanol > Energy you get out Quantities from ethanol and biodiesel - very, very small - small percentage of the fuels we consume today How much of our food acreage are we going to convert to growing fuel? How much world hunger can we stand with that fuel of choice? Nuclear energy - expensive - discussion on how to treat the waste and what to do with that 10 terrawatts - energy we consume today = 10,000 of the biggest possible nuclear plants U-235 - burned - worldwide reserves of uranium would be exhausted in 1-2 decades Wind energy - becoming more popular and economically viable - intermittency and low power density: never contribute more than a smal l fraction of energy supply Wind and solar energy - very small Sunlight - plenty of energy - haven't found a way to use it properly Total amount of sunlight that falls on the planet = 20,000 times the amount of f ossil fuel power we're using right now - BARRIER: cost To generate the same amount of power we use now in fossil fuels = Cover land are a roughly half the state of California Solar cells - cover only 10 square km - not impossible, not unthinkable, but a huge technological challenge LIFE AFTER THE PEAK - Evolution is always fowards. We're never going backwards. Air travel - essentially stop Money - people thought made the world go round Cheap supply of energy - what actually made the world go round Time of Christ: 300 million people Coal Came On (End of 18th century): 300 M x 2 = 600 million people Oil Came: 600 M x 6 = 3.6 billion people Without petrochemicals - population of the world cannot be sustained - Does it mean we have to go back to a population before oil? - Whether mankind will carry on living some different, simple way, that' s another question.
