• 3 minutes Could Venezuela become a net oil importer?
  • 7 minutes Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 12 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 5 hours Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 30 mins The Tony Seba report
  • 12 hours Renewables to generate 50% of worldwide electricity by 2050 (BNEF report)
  • 21 hours Oil prices going Up? NO!
  • 8 hours Kenya Eyes 200+ Oil Wells
  • 8 hours Are Electric Vehicles Really Better For The Environment?
  • 2 hours LNG Shortage on the Way
  • 17 hours Saudi Arabia turns to solar
  • 2 days Could oil demand collapse rapidly? Yup, sure could.
  • 1 day Oil prices going down
  • 1 day China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
  • 8 hours OPEC soap opera daily update
  • 2 mins Sell out now or hold on?
  • 5 hours Could Venezuela become a net oil importer?
  • 2 days Tesla Closing a Dozen Solar Facilities in Nine States
  • 2 days Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
Alt Text

The Fed Is Driving Down Oil Prices

The hawkish U.S. Federal Reserve…

Alt Text

China’s Oil Demand Could Take A Big Hit

In the last three years…

Alt Text

Permian Bottlenecks Begin To Bite

The pipeline bottlenecks in the…

Post Carbon

Post Carbon

Post Carbon Institute provides individuals, communities, businesses, and governments with the resources needed to understand and respond to the interrelated economic, energy, environmental, and equity…

More Info

Trending Discussions

Rising Cost of Fossil Fuels and the Coming Energy Crunch

During the past century, world economic growth has depended largely on ever-expanding use of hydrocarbon energy sources: oil for transportation, coal and natural gas for electricity generation, oil and gas for agricultural production. It is no exaggeration to say that the health of the global economy currently hinges on increasing rates of production of these fuels. However, oil, gas, and coal are non-renewable resources that are typically extracted using the “low-hanging fruit” principle. That is, large concentrations of high-quality and easily accessed fuels tend to be depleted first. Thus, while the world is in no danger of running out of hydrocarbon energy sources anytime soon, oil, gas, and coal extraction efforts are increasingly directed toward low-quality, hard-to-produce fuels that require higher up-front investment and entail increasing environmental costs and risks.

These trends are easily demonstrated in the case of oil.

Dependency: The dependence of the world economy on oil is illustrated by the close correlation between oil price spikes and US economic recessions that has been noted by several analysts.

Declining resource quality: The pace of world oil discoveries has been declining since 1964. Oilfields found during the past decade have tended to be smaller, on average, than those located decades earlier, and tend to require expensive new technologies (including horizontal drilling, deepwater drilling, and hydrofracturing) for their development. As Jeremy Gilbert, former chief petroleum engineer for BP, has put it, “The current fields we are chasing we’ve known about for a long time in many cases, but they were too complex, too fractured, too difficult to chase. Now our technology and understanding [are] better, which is a good thing, because these difficult fields are all that we have left.”

Increasing upstream production costs: The cost of developing a new barrel of oil’s worth of production capacity has increased dramatically in recent years. In 2000, the oil industry remained profitable with prices pivoting around $20 per barrel. Today it is estimated that oil prices of $60 to $80 per barrel are required in order to incentivize new exploration and production in many prospective regions.

Increasing environmental risks and costs: As drillers operate in ever more hostile and fragile environments, accidents can have far worse consequences on ecosystems and human economies that depend on ecosystem services. This trend was forcibly illustrated by the Deepwater Horizon blowout in the Gulf of Mexico in 2010. Lower-quality hydrocarbon resources typically also entail higher carbon emissions per unit of energy produced.

Coal and natural gas likewise exemplify these trends, though in somewhat different ways. While global coal reserves estimates have been used to justify the oft-repeated assertion that the world has hundreds of years of supplies, recent studies suggest world coal production could peak and begin to decline within the next 20 years. The most heralded recent development in natural gas industry is the application of hydraulic fracturing technology to production from low-porosity formations to boost reserves; however, this new technology poses increased environmental risks while entailing higher production costs.

Together, coal, oil, and gas contribute to the overall societal cost of anthropogenic climate change. The ultimate burden of climate change on the world economy has been variously estimated; in the worst-case scenario (a global average temperature increase of five or more degrees Celsius), the economy simply would not survive. On the other hand, however, action by governments to limit climate change will almost certainly directly or indirectly increase the price of fossil fuels, adding to price increases resulting from depletion.

As fossil fuels become more scarce and expensive, international conflict over remaining supplies, especially of oil and gas, is likely to become more heated—a trend already clear in the South China Sea and Central Asia.

The replacement of fossil fuels with alternative sources of energy is clearly necessary, but presents the world with an unprecedented technical challenge. Transport systems (autos, buses, trucks, trains, aircraft, and ships) can in some cases be electrified; in other cases, petroleum-based liquid fuels can be replaced with biofuels. Electricity can be produced from sunlight and wind rather than coal and gas. However, alternative energy sources currently provide only a tiny portion of current world energy, so a build-out will require enormous investment over several decades. Moreover, when the prospects of alternative energy sources are evaluated using all important criteria (including the amount of energy returned on the energy invested in energy production, or EROEI; environmental impacts; size of the resource; and variability in flow rates), it is difficult to identify a realistic scenario in which total world energy supplies can continue to grow—or even remain constant—as fossil fuels deplete.

Thus, even if governments act wisely now to develop energy alternatives at maximum possible rates, the world faces a nearly inevitable energy crunch during the next few decades. Governments must therefore develop strategies for energy conservation. Not only must much greater efficiency be brought to energy production and usage, but essential and non-essential uses of energy must be differentiated, with essential uses prioritized and non-essential uses discouraged.

By. Richard Heinberg

Source: Post Carbon




Back to homepage

Trending Discussions


Leave a comment
  • Anonymous on July 13 2011 said:
    You should get a copy of my new energy economics textbook and do some serious reading, author. Your advocacy of wind and solar - if it came about - means the poor becoming poorer, and the gates of the gated communities becoming stronger. Of course, it is not going to come about. Angela will join those other German-speaking foxes like _____ in Monoco, or Washington, or New York or Brussels or somewhere away from the mess she wants created in Germany, and eventually her nutty idea about eliminating nuclear will be forgotten.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News