Remember all the talk about peak oil a few years ago? You don’t hear much about it today. The United States, supposedly almost out of oil, began producing more oil than Saudi Arabia a few months ago.
No one thinks there’s an infinite supply of oil in the world, but the peak-oil proponents were claiming that world oil production was about to peak and then head forever downwards just as China and India were consuming more, leading gasoline prices to inexorably rise to $20, $30, even $100 a gallon. This would force everyone out of their cars and onto mass transit, a prediction that was used to justify all sorts of otherwise ridiculous light-rail lines and land-use regulations.
The Antiplanner scrutinized these ideas eight years ago and concluded that those who held them had no understanding of the laws of supply and demand. For one thing, there are plenty of alternative sources of energy that are economically inefficient today but that could come on line if ever oil prices did rise enough.
More important, all of the peak-oil calculations of oil production ignored tar sand oil and shale oil. When you include those kinds of oil, supplies appear plentiful for a century or more. As this paper shows, recent production of tar sand oil in Alberta and shale oils in the United States lend credence to the Antiplanner’s 2005 conclusion. What no one foresaw was the rapid increase in natural gas production through hydraulic fracturing, derisively known as fracking.
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Today, the people who used to cry “peak oil” are now trying to make their predictions self-fulfilling by doing everything they can to blockade the production and delivery of tar sand and shale oil. In fact, the draft supplemental EIS for the latest Keystone pipeline proposal does not find serious environmental effects from the pipeline, at least relative to the more-expensive alternative of shipping the oil by rail.
As a Time magazine writer notes, in opposing Keystone environmentalists are fighting oil consumption by attacking supply, not demand. In this case, the goal of the anti-pipeline groups is to keep the tar-sand oil in the ground, but that’s never going to happen. Although some predict that the extra expense of alternative shipping methods would slow production of Alberta oil fields, the fact is that tar-sand oils are economically extractable so long as the price of oil remains above $40 a barrel. It is currently $92, and no one thinks it will fall below $40 soon.
In a sane world, environmentalists would realize that it is both environmentally and fiscally better to pipe Alberta’s oil to the United States than the alternative, which is to pipe it to Vancouver, then ship it to China, while shipping Saudi oil to the United States. But politics is anything but sane, and this provides one more example of why we should minimize the size of government.
We live in a world of abundant energy, and energy prices fluctuate mainly for political reasons, not because of actual physical limits on supply. It is quite likely that at some point oil will no longer be a major source of energy. But I doubt we will ever reach a point where people will stop driving personal vehicles, partly because their benefits are so great and partly because mass transit uses as much or more energy as individual autos anyway. Given implementation of Obama’s fuel-economy standards, in a decade or so autos will be the greenest form of motorized travel, so those who oppose driving either need to change their tune or come up with another reason why personal mobility is a bad thing.
I’m no geologist or oilman, but can someone please tell me why we can’t have distributed refinement? Are transcontinental pipelines really more efficient than having a refinery in Canada? Why are we pumping oil in Canada, piping it to the gulf coast to make gasoline, putting the gasoline on trucks and driving it back to Canada?
This seems ridiculous to me. If there is an energy crisis, maybe the solution is distributed generation and production.
I am not an expert, but I think refining oil in Canada may be difficult (impossible?) due to the cold weather for several months a year.
And I think after refining it, you would need large barges etc to ship the refined oil – which can’t be done from Canada.
Finally, the Canadian refinery would have to comply with many US national and regional varieties of gasoline and deisel regulations and probably be subject to any politician who wanted to block Canadian refined fuels across our borders.
Build the pipeline now.
” But I doubt we will ever reach a point where people will stop driving personal vehicles, partly because their benefits are so great and partly because mass transit uses as much or more energy as individual autos anyway.”
Many people in the UK are becoming ill due to obesity and a lack of exercise, due to using the car so much – a trend imported from the US, along with the sugar drinks which do so much to create obesity. Yes, people can additionally go to the gym, but that takes time and yet more money – both increasingly in short supply. Cars are finished.
Mass transit works differently to cars, and so it is important to be accurate in working out how much fuel each uses. The fuel consumption numbers for buses, for example, takes into account the efficient peak hours, and also off-peak trips where the buses are largely empty. We have an opportunity to find radical new ways of running buses – for example, running them only during peak hours.
Finally, the role of bicycles has been overlooked. Bicycles have a positive role to play in resolving the last-mile question – by connecting buses directly to the front door. If of course, we can change the infrastructure to allow for bicycles.
It’s hard to think that after thousands of years of technological progress, advances in material science and electricity generating improvements; there’s no better energy saving device better than the Southern facing house. Passive solar technologies use sunlight without active mechanical systems. The Greeks knew it, the Romans knew it, the Chinese knew it and they all built their housing and cities in correlation to the movement to the sun. This isn’t the more expensive photovoltaic, it’s how the house is built. Tall but narrow windows with functional shutters, shaded landscaping. Depending on location reductions in energy usage can be as high as 20-70%. MIT built a house for it’s solar experiments back in 1939.
http://en.wikipedia.org/wiki/File:MIT_Solar_House_One.png
I have fond childhood memories of riding my British-made Raleigh 3-speed to school along Cambridge’s foggy bike paths wearing my duffle coat and black wool uniform shorts. So it is with regret that I note FrancisKing’s prediction (wishful thinking?) that “Cars are dead” is not supported by British car sales data:
Sales of new cars rise as UK consumers take up good deals. Britain’s car industry enjoyed another strong month in February with sales of new cars growing for a twelfth month by 7.9pc as buyers took advantage of good offers.
An auto trade association representative explained: “New models are delivering ever greater fuel efficiency, practicality, refinement, technology and predictable ownership costs, so motorists are seeing the benefit of new car purchases.”
I’ll keep riding my sweet Pinarello Dogma over 100 miles weekly for fun and exercise, but not to take my kids to school, shop for groceries, or commute to work. I do miss the duffle coat.
Andy Stahl: “So it is with regret..,”
No need for the regret. 1000 years ago, Duke William hadn’t conquered England, we hadn’t had steam trains let alone scrapped them – but to some people, cars will go on for another 1000 years. I’d give cars another 100 years at most – by then, something will have been developed to replace it. In 1940, British pilots were taking off with only very limited experience, in Spitfires and Hurricanes. These aircraft could fly at 380 mph (the later ones at 450mph), taking off from grass strips. If you compare this to a car doing 70mph, it is clear that the car is not all it could be. Video conferencing has progressed as well – still an immature technology, but with a lot of potential. Over short distances of a few miles, journeys by bicycle are comparable with cars.
There is usually sticking points, which prevent a market switch. How much an aircraft cost to buy and run? What happens if it isn’t maintained properly? (which suggests a switch to leasing a maintained aircraft). People like companionship rather than taking to a computer, so how can you manage the person side of video conferencing. Hills are a problem for bicycles, until you provide cyclists with a way of getting up the hills – then they provide a free route downhill.
Etc.
Some people have had a good recession – I certainly have. A good income is combined with cheaper products chasing a tightening marketplace.
So, yes, some people will want new cars.
For my part, I’d prefer to walk. It’s cheaper, and I need the exercise.
John100 said: “..the Canadian refinery would have to comply with many US national and regional varieties of gasoline and deisel regulations and probably be subject to any politician who wanted to block …”
Isn’t this essentially what is happening with the pipeline? I mean if the pipeline wasn’t subject to politics it would have already been built, no?
Why not build oil refineries near the Canadian tar sands?
1. Very hard to permit an oil refinery. I don’t think a new one has been built in 20 years.
2. Oil refineries produce multiple products — gasoline, diesel, heating oil, gasses, etc. that would need multiple pipelines out of the area. Much cheaper to send the crude down a pipeline and let existing refineries tie into existing networks.
3. It makes little sense to build a large refinery not near a deepwater port. Many products are sold overseas. Also the Gulf refineries receive crude from the Middle East, South America and elsewhere. Even if the US is a net producer of oil it will still be processing crude from overseas, just as it is a net importer it still exported products to overseas.
“in opposing Keystone environmentalists are fighting oil consumption by attacking supply, not demand. ”
It’s at best an indirect attack on supply by trying to make the oil more expensive to ship. The oil may be exported via pipeline(s) to Vancouver and / or Prince Rupert. From there it could still move by ship to the Gulf just as it would move by ship to Asia. Not as efficient or safe as a pipeline.
The same holds true for rail shipments. They may not be as cheap and safe but they pick up the slack, too. The questions are what is the oil worth to the refineries and what is the cash flow worth the production companies.
Also, claiming that “the tar sands” costs $40 / barrel to produce is incorrect. It’s even more inaccurate to state that as long as oil prices remain above $40 that they will continue to produce it. I don’t mean to be nit picky but there isn’t one 100% uniform deposit. There are variations in what is in those deposits and a variety of costs of production. Even the subtle things aside, there are other sources that claim current operations need $50 or even $60 / barrel market prices to break even.
That aside the problem with peak oil is that it’s just another hypothesis. And it’s one that the only way it stays valid is if it sticks to a strict definition of “conventional deposits”. The problem with that is in doing so, it may stay correct but it becomes irrelevant. What matters is not what labels we slap on some specific method for oil extraction but what prices people are willing to pay for it and what it costs to extract. As the tar sands and oil shale show, we could today loose all of our conventional extraction and still have plenty of oil. And there’s more than plenty of people willing to pay for it at $75 – $125 / barrel to keep plenty of it flowing and keep most people doing what they do now, drive a car.
Lots of comments from lots of dudes, none of whom have invested their life’s savings, all they could beg borrow and steal, their reputations, their families and even risk of prison to found or buy an oil or pipeline company.
Ain’t in wonderful how that kind of risk sharpens the brain?
But of course it is right and proper that a group of Hahvahd lefties who have never taken a risk or missed a luxury in their lives should rule on this, so I await their wisdom.
Thanks Sandy. That’s the best answer I’ve gotten thus far. #2 and 3 on your list make a lot of sense, and may have convinced me that the pipeline is worth while. #1 much like John1000’s point that a new refinery is subject to politics and difficult to build, also applies to transcontinental pipelines. I think the hubbub over the pipeline is proof enough that the difficulty in permitting and avoiding politics for a transcontinental pipeline is comparable to new refineries.
I’m sticking to my guns however. Maybe in the short term the Keystone pipeline makes sense, but distributed refinement makes sense in the long run particularly as new sources of oil become more apparent.
Randal, Randal, Randal. These high-capital wells with their short lifespans are going to be our next bubble. Surely the Kochtopus is looking to gin up some ‘hard hitting’ reporting for their new venture, a la Hearst, but come now. All of us out here are getting durn tired of the smell and the noise from the testing and the lights and the new plume of brown cloud. That’s no solution.
DS