The oil crash and you

NOTE: A SIGNIFICANT UPDATE ( MARCH 2001) IS APPENDED
The oil crash and you:

Oil shortages soon – evidence of final emptying of wells
Summary
This document reveals that within ten years:

Oil extraction from wells will be physically unable to meet global demand (the evidence is from the oil industry itself)
Alternative energy sources like nuclear and natural gas will fall far short of compensating for expected shortages of oil. There is simply not enough time to convert over to them.
Massive disruptions to transportation and the economy are expected around 2010 when the final peak of production of all petroleum liquids (globally) is followed by decline.
Most significant effects:

Gradual, permanent cut-off of fuel for transport and for industrial machinery. Global trade will greatly decline.
Agriculture (food production) depends heavily on fertilizers and chemicals made from oil.
Shortages of 500,000 other goods made from oil.
Therefore, reduction of virtually all business and government activity.
Difficulty of adapting:

A major part of the problem is that existing equipment is designed only for oil fuels. For example, the world’s 11,000 airliners cannot run on natural gas, nuclear or coal.

By-products of oil:

Cost and decreasing availability of 500,000 known uses of oil: Fertilizers (farms/food supply), medicines, plastics, insulation, computers, asphalt, inks & toners, paints, glues, solvents, antiseptics, golf balls, CDs, trash bags, nail polish, detergents, chewing gum, etc.

Hidden problem:

Not only will the oil supply dwindle, but the shortages and climbing prices will obstruct industry as it attempts to convert society to other forms of energy.

Proof of impending shortages:

Much uninformed literature says oil is plentiful and that better extraction will maintain adequate supply for decades. However, this sheet reveals:

A clear, forty-year trend of less and less discovery of oil, and dwindling outputs from the steadily emptying wells.
Misleading reporting of oil inventories, presented by oil-extracting countries (evidence provided below)
Why alternative energy sources will not prevent shortages:

Alternative fuels have been studied. As replacements for oil they are grossly inadequate both in quantity and versatility of use.
There is insufficient time to prevent heavy impacts.
When, and how bad:

Year when global oil supply first fails to meet global demand: about 2009

Rate of decline of global oil supply:

3% every year from 2009 onward.

Duration of decline:

Forever. Oil takes millions of years to form, in very special geological conditions.

Barrels consumed globally per year:

More than 22 billion in 1999. (About 2 billion barrels per month)

Barrels discovered globally per year:

About 6 billion. Discovery of oil fluctuates each year, but peaked in the 1960s, and has declined at an average of about 9 billion barrels per year over the past 40 years. We’ve mostly just been using up huge old oil fields.

Pre-1973-discovered oil in use today:

More than 70% of present global supply.

Ratio of oil consumed to oil discovered each year:

Four consumed for every one discovered.

Discovered Extracted Consumed
USA during the 15years
from 1977-1991 5 billion barrels 45 billion
(40 billion barrels more than discovered)
92 billion (47 billion were imported)

World during the 10years
from 1982-1991 91billion barrels 221 billion
(130 billion barrels more than discovered
221 billion
(equal to all extracted)

Those figures, & the following graph of discoveries are at: http://users.knsi.com/~tbender/ivanhoe.html

Proportion of global energy provided by oil in developed countries:

40% (1997)

Inadequacy of expected solutions
The “invest more to find it” idea:
Yet-to-be located oil, globally:

After a century of exploration, the earth’s geology and oil resources are generally well known. When the fields are emptying, money only helps to scrape out the hard-to-reach remainder. There are 210 billion barrels left to discover and 1000 billion barrels left to extract. This is indicated by the 40-year decline in discovery of oil. No amount of money will create oil that simply isn’t there.

Number of oil wells already in world/USA:

More than 500,000. In USA, 80% of the wells now produce less than three barrels a day.

Percentage of oil recovered from a typical oil well:

20% to 60%. It relates primarily to the density of the oil. You get less from a heavy oil than a light one because it sticks in the reservoir.

“Technology will solve it” idea
Challenge to technology:

To compensate for the expected 3% oil decline (at today’s 22 billion barrels a year), create and install, by year 2009, permanent supplies of portable energy, equivalent to 660 million barrels of oil a year. Then as oil keeps declining forever, increase this new energy it until it replaces 40% of the world’s energy supply (22 billion barrels a year) OR reduce energy demand equivalently as the global population increases by almost a quarter million people every day.

The “better efficiency” idea
Increases in efficiency usually fail to reduce consumption (more m.p.g. just causes people to travel more or buy two cars, or other goods) unless they are personally determined to reduce their consumption.

What about nuclear power?
Nuclear is currently being abandoned globally.

(International Energy Agency 1999). Its ability to soften the oil crash is very problematic:
Past accidents. Risk of more, and terrorism.
Many more reactors would be needed.
Tons of radioactive materials to transport at risk to public.
Nuclear waste disposal is still the major, unresolved problem, especially breeder reactors producing plutonium a nuclear weapon/terrorist raw material, half-life contamination is 24,000 years.
All abandoned reactors are radioactive for decades or millennia.
Nuclear is not directly suitable for aircraft and vehicles.
Adapting nuclear to make hydrogen or other fuels would be a huge, and energy-expensive project.
Nuclear fusion is still not available, after 40 years’ research and billions of dollars invested.
Natural gas
Proportion of global energy provided by gas:

20% of global energy supply (1997).

As a replacement for oil:

Gas itself will start running out from 2020 on. Demand for natural gas in North America is already outstripping supply, especially as power utilities take the remaining gas to generate electricity.

Gas is not suited for existing jet aircraft, ships, vehicles, and equipment for agriculture and other products.Conversion consumes large amounts of energy as well as money. Natural gas also does not provide the huge array of chemical by-products that we depend on oil for.

Hydro-electric
Present use: 2.3% of global energy supply (1997).

As a replacement for oil:

Very small compared with 40% provided at present by oil. Unsuitable for aircraft and the present 722 million existing vehicles.

Coal
Current global use:

24% of global energy supply.

As a replacement for oil:

Is 50% to 200% heavier than oil per energy unit. Bulky and dirty. Would require expansion of coal mining, leading to land ruin and increase in greenhouse gas emissions.

Hard to fine-control the rate of burn

Tuning the rate of burn of oil and gas fuels is easy, but coal is different. It is therefore is used in power stations to make electricity, wasting half of its energy content.

Coal mining operations run on oil fuels

Present coal-mining machinery and transportation runs not on coal, but on oil-based fuels.

Pollution

A single coal-fired station can produce a million tons of solid waste each year. Burning coal in homes pollutes air with acrid smog containing acid gases and particles. Large pollution & environmental problems: (Smog, greenhouse gases, and acid rain).

Liquid fuels from coal:

Very inefficient, and huge amounts of water required.
Solar and wind
Global solar use:

Is about 0.006% of global energy supply. Energy varies constantly with weather or day/night. Not storable or portable energy like oil or natural gas so unsuited for present vehicles and industry. Batteries bulky, expensive, wear out in 5-10 years.
Photovoltaic solar equipment (US$4/watt) is about 15% efficient, giving about 100 watts of the 1 kW per square meter exposed to bright sunshine (enough for one light bulb). A typical solar water panel array can deliver 50% to 85% of a home’s hot water though.
Using some of our precious remaining crude oil as fuel for manufacturing solar & wind equipment may be wise.
Global wind power use:

0.07% of 1990 global energy supply. As with solar, energy varies greatly with weather, and is not portable or storable like oil and gas. Each wind turbine from Denmark produces an average of 698 kW averaged over a year.

Hydrogen
Current global use:

US (only) 1998 consumption is 0.01% of global energy.

As a replacement for oil:

Hydrogen is currently manufactured from methane gas. It takes more energy to create it than the hydrogen actually provides. It is therefore an energy “carrier” not a source. Liquid hydrogen occupies four to eleven times the bulk of equivalent gasoline or diesel.
Existing vehicles and aircraft and existing distribution systems are not suited to it. Solar hydrogen might be an option in some of the hot countries.
Other sources of energy
Options:

Shale, tar sand, coalbed methane, ethanol, biomass (from vegetation), etc.

Effectiveness as replacements for oil:

Huge investment in research and infrastructure to exploit them, plus large amounts of now-expiring oil supply. 6% of US gas is from non-conventional generation.

The major problem is that they cannot be exploited before the oil shocks cripple attempts to bring them on line, and the rate of extraction is far too slow to meet the huge global energy demand.

How it will affect us
Food supply
Food production & delivery depends on oil

Food grains now contain between 4 and 10 calories of fossil fuel for every 1 calorie of solar energy. Four percent of US energy budget is used to grow food, while 10 to 13 percent is needed to put it onto our plates. The worsening oil shortages will make production increasingly expensive. Putting food production closer to cities will be vital, feeding animals is questionable.

Percentage of US grain used to feed cattle:

70%

Efficiency:

The meat feeds 1/5 as many people as the grain could.

Number of cats & dogs in USA:

131 million

Food given to pets:

North American pet food business is $30 billion/yr, and is growing.

“Future food” being consumed by using gasoline in vehicles:

Gasoline consumed ‘now’ will deprive future agriculture of energy for producing food. Below are examples of how much “future food” a 30 mile-per-gallon vehicle is “eating” now. Also shown is the heavy physical labor humans will have to do in future when gasoline is unavailable for farm/industrial/office/home machinery:

Bread, 1 kg loaf = 6 miles= one slice per 422 yards That 1/5 gallon=human heavy farm labor for 23 hrs
Beef, 1 kg = consumed by driving 76.2 miles That 2.5 gallon=human heavy farm labor 300 hrs
Canned corn 1 kg= consumed by driving 5.4 miles Again, 1/5 gallon=human heavy farm labor 20 hrs
Transportation, business, globalization
Oil for transportation

Automobiles, globally: 722 million
Automobiles, USA: 132 million
Trucks (all types, in USA): 1.5 million
Buses: (all types, in USA): more than 654,000
Locomotives: (USA) 26,000
World aircraft fleet: 11,000 aircraft more than 100 passengers. All 11,000 designed for oil-based fuel.
World shipping: 85,000 ships in world.
Decked fishing boats in the world: 1.2 million
Globalization:

Will end. (Fuel costs & scarcity).

Oil for industry

Construction industry example: Energy to build an energy-efficient home is equivalent to 6,500 gallons of gasoline.

Number of by-products of oil:

Over 500,000 including fertilizers (they are the most vital), medicines, lubricants, plastics (computers, phones, shower curtains, disposables, toys, etc.), asphalt (roading and roofs), insulation, glues/paints/ caulking, rubber tires and boots, carpets, synthetic fabrics/clothing, stockings, insect repellent.

Government services, economy
City drinking water, government services

Number of cities in the world: over 55,000
Services to consider: Water supply pumping, sewage disposal, garbage disposal, street/park maintenance, hospitals & health systems, police, fire services. National defense (land, sea, air).
Possibility of wars over remaining oil.
Economy and employment

International oil import costs: Sharp rises (increasing global competition for dwindling oil available from five Middle-Eastern countries and former Soviet Union). International tensions. Military also obstructed by oil shortages.
National debt, inflation: Money goes out of country to oil producers. Money gets scarce. Interest/mortgage rise up. Government prints more money to pay overseas energy bills. Money devalues. Prices rise.
Poverty: Public, and businesses become poorer paying higher energy costs. Less spending, less sales. Layoffs.
Welfare payments, taxes: Taxes up. Pensions for aging/disabled population reduced or discontinued.
Other serious quality-of-life aspects

Heating and cooling: In cold regions oil heats buildings (burned as fuel in homes or in oil-fired electric power stations). In hot areas oil power provides air conditioning. As natural gas is substituted for oil, the gas price itself will rise.
Smog: Energy price and shortages will increase wood and coal burning in homes, increasing city smog.
Why public warning is so late
Normal business and political posturing
For business and political reasons, there have been very misleading reports of sizes of stocks of oil:

(a) By firstly understating discoveries, and then later overstating discoveries, oil companies have given the false, but pleasing impression of an increasing discovery trend. Investors respond accordingly, and finance more exploration.

(b) The seven major oil-extracting countries have for years reported unchanged reserves (even though they were extracting and selling billions of barrels of oil, and that the reserves would therefore be less each year). See table of “spurious reserve revisions” shown below.

(c) In 1988 five of those countries claimed they each had about twice as much reserve oil as in 1987. See graph based on that table.

The table’s green areas show where countries reported that their oil stocks were “not declining”, even though oil was being taken out, steadily emptying the wells.

The red areas show where countries spectacularly increased the reported quantities of oil in stock, so that OPEC would recognize them as bigger suppliers and allow them to export more, increasing revenues. They were desperately competing with each other to make up their revenue by having a bigger slice of market share, because the price per barrel had plunged to about $12 per barrel. The history graph of the prices is at http://www.eia.doe.gov/emeu/cabs/chron.html

(d) We, the public have enjoyed using up the gasoline, heating oil, plastics, and countless other oil products for decades. The oil kept flowing generously. We “looked on the bright side” and mostly ignored warnings by environmentalists that fossil fuels would run out. Media constantly announced new oil discoveries, and increasing stocks of oil. Emptying wells seemed decades in the future. Nobody planned for it. Now they really are running empty.

(e) OPEC countries need to earn as much oil revenue as possible to support rapidly growing populations where the public health care, education and other services are provided free, from oil revenues, not by taxes. They seem especially frightened of alternative energy sources, even though when examined closely, those alternative sources are drastically too small to compensate for oil. “As a group of fossil fuel exporters, OPEC stands to lose more than most from any proposals that threatens to cut oil consumption,” – Rilwanu Lukman, the Secretary General of OPEC, speaking at the 16th World Petroleum Congress, Calgary, 2000. (Globe & Mail Newspaper, June 5, 2000)

Economic theory says exhausted resources always replaced
Economists have taught us the illusory theory that market demand will always generate suitable solutions. This ignores any physical limitations of the earth, human resourcefulness, or time needed. Example quote:

“Minerals are inexhaustible and will never be depleted. A stream of investment creates additions to proved reserves, a very large in-ground inventory, constantly renewed as it is extracted๏ฟฝ How much was in the ground at the start and how much will be left at the end are unknown and irrelevant.”

That is from Professor of Economics, Emeritus, Morry Adelman, who has long been one of the world’s foremost energy and resource economists and a leading analyst of international oil and gas markets. The quote is on page xi of his book, The Economics of Petroleum Supply, M.A. Adelman, published 1993.

What you can do
Personal preparations:

Reduce energy dependence of family, home, lifestyle. The less fuels and goods you consume, the less the impacts will be, and the more we will delay the oil shocks.

Workplace:

‘Same. Work on it with friends: Workmates, neighborhood, city, governments. The ideal use for remaining oil and mineral reserves is into industries that create inexhaustible alternative energy equipment like windmills, solar water heaters, biomass (vegetation that creates fuels), etc.

Share your feeling with others.

Try to stay positive and active rather than ignore it or blame people for it. Where there’s life there’s hope, especially if we all collaborate and are creative.

“It’s not that new”. Humans have always faced hardships, and many among us do so constantly now. Learn from them.

Possible emergency measures to consider:

Alert the entire public so people will accept preparations for the oil shortages, participate in implementing solutions
Relocate food production nearer to cities
Relocate workplaces nearer to homes or homes nearer to workplaces
Prepare for conserving and rationing of dwindling oil/other resources that are created using oil
Population control to prevent children being born into extremely harsh conditions that seem likely, and to conserve soon-scarce resources for those already alive.
Re-localize, to reverse globalization
Strengthen the police to deal with likely social chaos and to control distribution of vital supplies.
Alert national leaders to cooperate against this major threat that faces us all.
Special plea to US citizens:

“The USA has the exceptional position as the largest and a growing importer. US imports deny somebody else access to oil. For example, starving Africans result. Tax on gasoline is lower in the USA than in other countries by a large factor. So the US could easily curb its excess. In fact it has no option. The worst thing the US can do is press OPEC to increase production, which will simply make the peak higher and the decline steeper. It is just digging itself into a bigger hole, morality apart.” Colin Campbell, in private email, June 2000.

More information, and contacts
Documented evidence

You can obtain two versions of the “Convince Sheet” at http://www.egroups.com/files/RunningOnEmpty/ in various file formats:

“Shorter Version”, available as a two-sided, one-sheet handbill that you can give to other people (It contains most of the contents of this web page).
“Full version”, a 12-page resource for researchers and journalists, containing extra references and authorities, and more explanations and links
Web sites

Both of the following sites are conveniently keyword-searchable for research. They have lots of scientific and oil industry literature about energy resources and the ecology generally. They are heavily annotated with authoritative references and links.

www.hubbertpeak.com Named after the late Dr. M. King Hubbert, geophysicist, this website provides data, analysis and recommendations regarding the upcoming peak in the rate of global oil extraction.
www.dieoff.org A very large assemblage of energy-related and environment-related reports and papers, created by researcher Jay Hanson.
Discussion forum – Technical/scientific:

www.egroups.com/group/energyresources (restricted membership at about 370, but thousands of previous postings keyword searchable)

Discussion forum- Implications, action:

www.egroups.com/group/RunningOnEmpty (membership about 360 so far, thousands of previous postings keyword searchable)

Author of the “Convince Sheet” (which is the paper version of this web page):

Bruce Thomson, who is a technical writer in Toronto, and is the moderator of that RunningOnEmpty internet forum. Members of that group have assisted in the research. There is no institutional financial sponsoring or influence of this web page or the forum.

Some moral authority to expose the Convince Sheet to the public was gained. After weeks of debate (3,100 forum message) there was a poll of 280 members. We all knew the announcement would be disturbing, with possibly serious impacts on the public, the stock market and general business and personal confidence. Of those 280 polled, 62 members responded, and over 85% of them voted in favor of exposing the truth.

Perceived advantages of informing the public were:

People might cooperate better with governments, instead of innocently demanding more energy or insisting on lower fuel taxes (As fuel imports cost more and more, cutting taxes will just impoverish governments, and cause cuts in services like health care, education and social welfare. A great deal of energy conservation is possible, and is a better solution.)
People can make correct decisions for themselves personally (to have less children, plan cheaper transport, safer jobs, pay off debts, consume less, conserve energy more, etc.
All the cleverest minds and wisest leaders of the world could work on the problem. With them helping, and an understanding public, we may might fare better than if everyone continues innocently wasting the remaining energy and bringing the oil crash to us faster and sooner.
You may copy freely to others…
This web page (you can refer people to it: www.runningonempty.org )
The Convince Sheet files (this shorter one, and the full version are each downloadable at http://www.egroups.com/files/RunningOnEmpty/
Comments about the oil crash, or this web page to: bruce@sympatico.ca

Visits to this site since starting September 2000 =
WebCounter from http://www.digits.com/

SIGNIFICANT UPDATE: March 2001
The following indicates that natural gas decline may be sooner and even more significant than oil decline.

About 80% of US natural gas is used for generating electricty.

Electricity is used for running computers, air conditioners, electric motors in all industrial, business and domestic machines, municipal water pumps and sewage pumps, electric trains, etc.

Natural gas in North America will decline sharply before year 2010, as described in a November 2000 by Richard C. Duncan, Ph.D. Pardee Keynote Symposia Geological Society of America Summit 2000 Reno, Nevada http://www.hubbertpeak.com/duncan/olduvai2000.htm

In the following March 5, 2001 email, Duncan asserts that widespread, permanent, crippling electrical blackouts may occur as soon as year 2007, and possibly sooner if gas reserves expire earlier than calculated.

The term “Olduvai Gorge” refers to a valley in Tanzania where 600,000-year-old relics revealed signs of very primitive humans.

Duncan’s “Olduvai Theory” suggests that after about year 2030 when fossil fuels like oil and gas are exhausted by our indusrial civilization, humans may be forced to return to living as primitively as those early humans did.

THE OLDUVAI CLIFF EVENT: ca. 2007 ABSTRACT

The Olduvai theory states that the life-expectancy of Industrial Civilization, defined in terms of world energy use per capita (e), is less than or equal to 100 years.

HISTORY:

We know that the peak of e occurred in 1979 and that e declined from 1979 to 1999 (the ‘slope’).

FUTURE:

The Olduvai theory predicts that e will decline even faster from 2000 to the so-named ‘cliff event’ (the ‘slide’). A previous study put the ‘cliff event’ in year 2012 (Duncan, 2001). However, it now appears that 2012 was TOO OPTIMISTIC. The following study indicates that the ‘cliff event’ will occur about 5 years earlier than 2012 due an epidemic of ‘rolling blackouts’ that have already begun in the US. This ‘electrical epidemic’ spreads nationwide, then worldwide, and by ca. 2007 most of the blackouts are permanent. The ‘modern way of life’ is history by ca. 2025.

DEFINITIONS:

‘NA’ means North America. ‘NG’ means natural gas. ‘Tcf’ means trillion (10^12) cubic feet. ‘bcfd’ means billion cubic feet per day. ‘BP’ means ‘British Petroleum Statistical Review of World Energy’ (an ongoing annual series). ‘USGS 2000’ means ‘US Geological Survey World Petroleum Assessment 2000’ (a 5-year study issued in March 2000). ‘EUR’ means ‘expected ultimate recovery’ in Tcf. ‘GCPE’ (a USGS term) means ‘grown conventional petroleum endowment’ in Tcf. In this discussion, ‘GCPE’ and ‘EUR’ mean the same thing.

PRELUDE:

The Olduvai theory has evolved over 22 years with four major advances to date. The first in 1979 was that industrial civilization can be described by a single pulse waveform (i.e. overshoot and collapse). The second in 1989 was a robust definition of the Olduvai theory (i.e. per K. Popper, a scientific theory must be falsifiable). The third in 1993 used data and mathematics to demonstrate that the peak of world energy use per capita occurred in 1979. The fourth in 2000 identified electrical energy (specifically: communication, computation and control: the vital ‘C^3 functions’) as the sin-quo- non of ‘the modern way of life’ (not fossil fuels, per se). A fifth advance is proposed in this study. It forecasts that electrical blackouts in the US — due to a shortage of natural gas in North America — will precipitate the Olduvai ‘cliff event’ worldwide (i.e. ‘avalanche’ or ‘trigger’) in ca. 2007.

INTRODUCTION:

In November 2000 I gave a talk to the Pardee Keynote Symposia, Geological Society of America, Summit 2000, “The Peak of World Oil Production and the Road to the Olduvai Gorge”. It was soon posted on the web and generated many responses: pro, con, skeptical, hostile, uninformed, and even one personal threat. Nonetheless, all responses proved ‘useful’ in one way or another. Figure 4 in my GSA paper shows the Olduvai ‘schema’ — a graph that depicts the ‘cliff event’ in year 2012 (soon to be published in Duncan, 2001). This schema depicts US and worldwide blackouts as the ‘trigger’ of the Olduvai cliff.

However, at least two perceptive reviewers, namely Perry Arnett and Bruce Thomson, surprised me by saying that they thought the Olduvai ‘cliff event’ in 2012 was TOO OPTIMISTIC because (to paraphrase) “things just can’t hold together that long.” Was I TOO OPTIMISTIC? If so, what could cause the blackouts (i.e. the ‘cliff event’) before 2012? It wasn’t likely to be directly caused by the world oil peak because very little oil is burned in power plants (too expensive). Nuclear power has its problems (i.e. $$$, hot wastes, etc.), but overall it’s reliable. And there’s lots of coal (albeit dirty, it’s cheap). But Whoa! Could it be a shortage of natural gas (NG)?

So I called a colleague and suggested that we forecast world NG production because of the skyrocketing demand for gas-turbine power plants. But he quickly observed, “We don’t have enough reliable data to forecast WORLD natural gas production.” Thus I dropped the idea — momentarily. Then on 17 December 2000 Jay Hanson wrote:
> Subject: North American Gas
> > Have you ever thought about modeling North American gas? I have production 1985-1998 (except Mexico).
> > Jay

Hey, Jay’s got it! North America (specifically the US!) is the bellwether to the world. (“As goes California, so goes the US. As goes the US, ….”) So I again called my colleague who confirmed, “Yes. There’s good data. Go for it”.

Thus, on 26 December I wrote Jay:
> Great idea! Crucial! NA NG is dyno-mite!! As you know, I’ve started to focus
> on electric power systems (in addition to oil forecasting). However, 272 new
> NG powered generating units are now in construction or on order in the US.
> Thus it’s all the same problem (i.e. NA NG = NA/US electricity), per the
> “Trigger Effect”, as you’ve correctly emphasized.
> In short: Considering the looming NA NG peak, NG power plants are just a
> band-aide approach to bigger energy problem — NA/US electricity.
> I’ve got NA NG data for US, Canada, and Mexico from 1950 to 1999 (annual
> production and reserve estimates on BP Statistical Review disks). And my
> modeling approach is perfect for the problem.
> Proposal: I’ll be able to start this project in about one week and complete
> the first forecast for NA NG in about 2 weeks or so. Then I’ll send the
> completed models, data, and forecasts to you (as tables and graphs in the free
> Stella download) to have a look, try out the models for yourself
> (i.e. familiarize yourself with the process and results). Then we’ll decide
> where to go from there.
> > Lemme know. OK.
> > Rich
In addition to the BP data, I now have the USGS Assessment 2000 ‘reserve estimates’ for the US, Canada, and Mexico for NG (F95, F50, F5, and Mean). Using both sets of data, I built separate models to forecast the NG production for the US, Canada, and Mexico from 2000 to 2040. These curves were then summed to get the curve for NA historic production (1960-1999) and the NA NG production forecast (2000-2040).

The results of these models are the basis for this study. US NATURAL GAS: MODEL RESULTS: US NG production in 1999 comprised a remarkable 73.5% of the total North America production. US production peaked in 1971 at 22.0 Tcf (i.e. one year after the US oil peak) and from 1971 to 1999 US gas production declined by an average of 0.50 %/year. A secondary US peak is forecast to occur in 2007 at 20.1 Tcf. Then from 2007 to 2040, US production falls by some 41% — an average decline of 1.5 %/year during 33 years.

My US model forecasts the US EUR = 1,840 Tcf. The USGS report forecasts the US MEAN GCPE = 1,910 Tcf. Note carefully that it is the USGS Mean value for US gas (i.e. not the USGS F95 value!) that is in good agreement with my US model. “The U.S. reserve level is barely more than half what it was when it peaked at 293 Tcf in 1967, before starting a steady decline. … offshore Gulf of Mexico reserves are being depleted at a rate of 25- 30% per year of remaining reserves.” (Parent, 2001)

“US consumption of all primary sources of energy except nuclear power will increase this year. The biggest gainer will be natural gas, demand for which is expected to rise 2.4% to 23.45 quads. … This year’s energy from natural gas will set a record high level due to increased demand in the electric utility and industrial sectors, and because of near-normal winter weather.” (Radler, 2001b, p. 67)

The US Energy Information Agency (EIA) forecasts: “For 2020, … pushed by expected demand growth for gas, primarily for electricity generation … [sic] US natural gas demand will increase by 62% during 1999-2020, rising to 34.7 Tcf from 21.4 Tcf. Natural gas demand for electricity generation … will triple over that period, as 89% of the generation capacity built over the next 2 decades will be gas-fired.” (True, 2001)

But President George W Bush isn’t so confident as the US EIA. “To develop a national energy policy is a matter of high concern for this administration, because it’s a matter of high concern for our nation.

It’s becoming very clear to the country that demand is outstripping supply, that there are more users of electricity and natural gas than there is new units being found, and we’ve got to do something about that.” (quoted in Crow, 2001)

CANADA NATURAL GAS: MODEL RESULTS:

Canada NG production in 1999 comprised a sizeable 21.5% of NA production.
From 1983 to 1995, Canada production grew by an astounding 114%, i.e. an average growth rate of 6.0 %/year during 12 years. Then from 1995 to 1999 growth slowed to 2.1 %/year. Canada NG production is forecast to peak in 2005 at 6.1 Tcf. Then from 2005 to 2040, Canada production plunges by 86% — an average drop of 4.3 %/year during 35 years.

My model forecasts Canada EUR = 290 Tcf, in exact agreement with the USGS Canada Mean GCPE = 290 Tcf. “Canadian gas marketing has experienced strong growth in recent years, to the extent that production has outstripped reserve additions for the past several years, resulting in a continuing decline in remaining reserves.” (Parent, 2001) ”

Despite Canada’s drilling of a record number of wells, deliverability has increased only marginally. The per-well average has been declining, due in part to the drilling of an increasing number of low-deliverability shallow wells. To offset the annual decline in production from existing wells, production from new wells must amount to 20% of current production, a formidable barrier to increasing production.” (Parent, 2001)

MEXICO NATURAL GAS: MODEL RESULTS:

Mexico NG production in 1999 comprised a mere 5.4% of NA production. Mexico production shows an early (i.e. ‘local’) peak in 1982 at 1.3 Tcf, followed by an overall decline through 1995. However, from 1995 to 1999 production grew by a strong 29% — a notable average of 6.4 %/year.

Mexico NG production is forecast to peak in 2011 at 1.5 Tcf. Then from 2011 to 2040, production falls by some 56% — an average decline of 2.7 %/year for 29 years.

But now arises an apparent disagreement. Namely: My model forecasts Mexico EUR = 85 Tcf, whereas the USGS forecasts the Mean GCPE = 150 Tcf. I think this difference can be explained in that the USGS 2000 report used data normalized to 1995. However, in 1999 Mexico (Pemex) revised downward its “proved reserves” of NG to 30.1 Tcf from 63.5 Tcf. This was a decrease of 53% in one fell swoop. (Pemex now admits that it exaggerated its reserves.) Thus, if we now multiply the USGS value of 150 Tcf by 53% we get 80 Tcf — in good agreement with my 85 Tcf.

We will see, however, that the “true” value of Mexico’s NG reserves is of little consequence to this study because Mexico (1) is a minor player in NA NG, (2) its now a net importer of NG from the US, and (3) its domestic demand is fast outstripping its production. “In 1994-99 demand for natural gas in Mexico had increased by 6% annually. Electric power demand had increased at an even higher rate, 9%, based in large part on the increased use of combined-cycle turbine technology that requires natural gas.” (Baker, 2001) “At present, Pemex’s ability to supply gas for the domestic market is in question. … it is doubtful that any significant quantity of gas would become available for long-term contracts to the US.” (Baker, 2001) “Gas production in Mexico dipped last year to average 4.69 bcfd from 4.79 bcfd in 1999, while demand is estimated to have grown as much as 10%. …

With demand for natural gas in the US as strong as it is, it is hard to believe that Mexico can continue to rely on imports from the north much longer.” (Radler, 2001a, p. 17) “Pemex has acknowledged the alarming rate of growth in Mexican gas demand growth in recent years. … From 1995-99, the demand for gas grew at a rate of 4.4 %/year. … In some scenarios of prospective use, projections indicate expectations of an increase in demand for natural gas of 9 %/year over the next decade. … Just one change in current practice, the switch from heating oil to natural gas in combined-cycle turbine power plants, would be capable of increasing the annual rate of growth in gas demand to 16%.” (Barbosa, 2001) “Mexico is expected to be a net importer of gas from the U.S. for the foreseeable future.” (Parent, 2001)

NORTH AMERICA NATURAL GAS AND ELECTRICITY: MODEL RESULTS:

North America NG production in 1999 was 26.23 Tcf. The NA NG production curve, as previously mentioned, is the sum of the production for the US, Canada, and Mexico. An early (i.e. ‘local’) NA peak occurred in 1972 at 25.0 Tcf. Then from 1972 to 1986 NA production declined by some 20%. Next, the trend quickly reversed and from 1986 to 1999 NA production increased by a solid 2.0 %/year for 13 years. Looking ahead however, North America NG production is forecast to peak in 2007 at 28.5 Tcf.

Then from 2007 to 2040 NA production falls by 51%, i.e. an average decrease of 2.1 %/year during 33 years. “The shortage of natural gas is not limited to the US but has also become a problem in Mexico. … volumes coming to the US from Mexico fell from a total of more than 54 bcf in 1999 to just 4.71 bcf in 2000 and than to nothing. Mexican domestic demand for gas no longer allowed for exports.” (Radler, 2001a, p. 17)

“Canada will be stepping up its resource development program. Mexico will be moving up the curve of energy development and utilization, but will need gas from the U.S. for the foreseeable future. Look for more imports, including LNG, to bolster U.S. supply alternatives. Look for energy efficiency and conservation to come back into vogue, as consumers seek ways to deal with higher energy costs. There may not be a 30 Tcf [North American] market out there.” (Parent, 2001)

“And the California crisis poses concerns for the US natural gas industry in particular. The power sector is expected to account for the fastest-growing area of natural gas demand in the years to come. The vast majority of the more than 200 power plants slated to come on stream in the US in the early part of this decade are expected to be fueled by gas.” (Rouffignac, 2001)

“The crisis in California arose out of a political system that discourages energy development. At the core of the state’s ruinous electric shortage lies a chronic deficiency of generation capacity. … The US must not follow its bellwether state down the same costly path.” (O&GJ;, 2001. p. 19)

THE OLDUVAI CLIFF EVENT: AN EPIDEMIC OF BLACKOUTS — WORLDWIDE

It was MIT Professor Jay Forrester, I think, who first related ‘technological fixes’ to the hierarchy of physical limits to growth (a paraphrase follows): “We can use technology to remove physical limits to growth, but each time we do we always bump into a new, more recalcitrant, limit to growth. Ultimately — all technological fixes fail.” Recall that the US EIA forecasts that “US natural gas demand will increase by 62% … rising to 34.7 Tcf in 2020.” In contrast, it is widely recognized (by both the analysts and my forecasts) that the US cannot rely on future exports from either Mexico or Canada.

And US production itself is in doubt. Meanwhile, a voracious ‘increase in demand is expected’ from the NA residential, commercial, industrial, and electric utility sectors. For example: More that 200 power plants are slated to come on line in the US alone(!) — the vast majority are expected (i.e. designed) to be fueled by natural gas. With due respect to the analysts quoted in this study, none of them seem to understand the serious consequences of the looming ‘shortages’ of natural gas in North America.

For that we must turn to my forecasting models and the Olduvai theory. It is true, given sufficient capital, that we can build a lot of new gas-turbine power plants and transmission lines and thereby remove the ‘ruinous shortage of electrical generation and transmission capacity’. However — per Jay Forrester — we immediately run into a higher and stiffer limit to growth: natural gas. Then we can (again) try nuclear power……. And after that coal……… And finally wood……. And that puts us right back into the 18th century. The Golden State leads the way down the road to the Olduvai Gorge.