One of the world’s most…
From being a largely speculative…
What does our world’s energy future look like? Does renewable energy feature as much in the energy production mix as many hope it will? Will natural gas and fracking help reduce our dependence upon oil and how will the world economy and trade fare as supplies of cheap oil continue to dwindle?
To help us take a look at this future scenario we had a chance to chat with Gail Tverberg – a well known commentator on energy issues and author of the popular blog, Our Finite World
In the interview Gail talks about:
• Why natural gas is not the energy savior we were hoping for
• Why renewable energy will not live up to the hype
• Why we shouldn't write off nuclear energy
• Why oil prices could fall in the future
• Why our energy future looks fairly bleak
• Why the government should be investing less in renewable energy
• Why constant economic growth is not a realistic goal
Gail Tverberg is an independent researcher who examines questions related to oil supply, substitutes, and their impact on the economy. Her background is as a casualty actuary, making financial projections within the insurance industry. She became interested in the question of oil shortages in 2005, and has written and spoken about the expected impact of limited oil supply since then to a variety of audiences: insurance, academic, "peak oil", and more general audiences. Her work can be found on her website, Our Finite World.
Interview conducted by. James Stafford of Oilprice.com
Oilprice.com: Do you believe that shale gas is the energy savior we have been hoping for and can deliver all that has been promised? Or have we been oversold on its potential?
Gail Tverberg: I am doubtful that shale gas will be the energy savior that we have been hoping for. There are several issues: (a) It is hard for US natural gas prices to rise to the point where shale gas extraction will truly be profitable, because of competition with coal in electricity generation. (b) While natural gas can be used for transportation, it takes time, investment, and guaranteed long-term supply for it really to happen. This will be a long, slow process, if it occurs. (c) People won’t stand for “fracking” next door, if the end result is LNG for Europe or Japan. We have otherwise “stranded” non-shale gas in Alaska that would be a better option to develop and sell abroad.
If shale gas does come into widespread use, it will take many years. The quantity will be helpful, but not huge. Furthermore, it will still be natural gas, rather than the fuel we really need, which is cheap oil.
Oilprice.com: The old dream of US energy independence has been finding its way into the headlines again as a combination of resurgent domestic oil production, improvements in vehicle fuel efficiency and the shale boom have led many experts to predict that although it is unlikely, it’s no longer the fantasy it once was. What are your thoughts on US energy independence?
Gail Tverberg: I think that the direction in years ahead will be toward reduced trade of all sorts. By definition, every country will become “more independent,” including more “energy independent”. Whether or not current lifestyles are supportable with lower trade is another question.
Oilprice.com: Japan recently made the announcement that they aim to phase out nuclear power by 2040. What is your opinion on this decision and on nuclear energy in general? Can the world live without it?
Gail Tverberg: The decision by Japan is worrisome, because there aren’t many good replacement options available. Japan has volcanoes, so it may have an option to use geothermal as an option. Also, 2040 is far enough away that other options may become available.
Phasing out nuclear in other countries is likely to be difficult. In most countries, this will likely mean “less electricity” or “more coal.” It may also mean higher electricity cost, and lower competitiveness for manufacturers. Germany has already started the process of phasing out nuclear. It will be interesting to see how this works out.
In general, I think we should be taking a closer look at nuclear, because we have so few other low-carbon options. There is considerable dispute about the extent to which radiation from nuclear is a problem. This question needs to be examined more closely. To use nuclear long-term, we need to find ways to do it cheaply and without a huge amount of hot fuel that needs to be kept away from people indefinitely.
Oilprice.com: Renewable energy continues to be a favorite amongst many politicians – yet advances are slow and expensive. Do you see renewables making a meaningful contribution to global energy production? And if so over what time period?
Gail Tverberg: I have a hard time seeing that intermittent renewables (wind and solar photovoltaics) will play a big role in maintaining grid electricity, because of the stress they place on the grid, and the high cost of needed grid upgrades to handle them. Renewables from wood and biomass are hard to scale up, because wood supply is limited and because biomass use tends to compete with food production. Renewables from waste (left over cooking oil, for example) are not something we can count on for the long term, as people stay at home more, and dispose of less waste.
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All renewables depend heavily on our fossil fuel system. For example, it takes fossil fuels to make new wind turbines and solar panels, to maintain the electrical grid, and to repair roads needed for maintaining the grid system. Biofuels depend on our fossil fuel based agricultural system.
I expect that the contribution renewables make will occur primarily during the next 10 or 20 years, and will decline over time, because of their fossil fuel dependence.
Quite a few individuals living off-grid would like to guarantee themselves long-term electricity supply through a few solar panels. This is really a separate application of renewables. It will work as long as the solar-panels work, and there are still the required peripherals (batteries, light bulbs, etc.) available—perhaps 30 years.
Oilprice.com: Are there any renewable energy technologies you are optimistic about and can see breaking away from the pack to help us extend the fossil fuel age?
Gail Tverberg: The technology that is probably best is solar thermal. It works like heating a hot water bottle in the sun. This is especially good for reducing the need to use fossil fuels to heat hot water in warm climates. But even this is not going to do a huge amount to fix our problems, especially if they are primarily financial in nature.
Oilprice.com: Renewable energy innovation has been coming under fire lately, with the Solyndra scandal and now Tesla motors are looking to be in trouble - both of whom were backed by government loan guarantees. Do you believe the government should be investing more or less in renewable energy companies?
Gail Tverberg: Less. I think we should be looking for inexpensive solutions. Anything that is high-priced starts with two strikes against it.
Also, I think if the true picture is considered, the amount of environmental benefits of renewables is very low, or perhaps negative. Their higher cost tends to make countries using them less competitive, sending production to China or other Asian countries where coal is the primary fuel. This may raise world carbon dioxide emissions.
Since 2000, world carbon dioxide emissions have increased far more than would have been expected based on prior patterns. A major cause seems to be the shift in industry to Asian countries, as countries attempted to reduce their own carbon footprint.
Oilprice.com: In a recent article you mentioned that the world economy is currently suffering from high-priced fuel syndrome. Would you be able to let our readers know a little more about this? And also if there is anything that can be done economically to help move beyond this syndrome?
Gail Tverberg: High priced fuel syndrome is primarily (but not entirely) a problem of fuel importers. It has symptoms such as the following:
• Slow economic growth or contraction
• People in discretionary industries laid off from work
• High unemployment rates
• Governments in increasingly poor financial situation
• Declining home and property values
• Rising food prices
Part of the problem seems to occur when fuel prices rise, and people cut back on discretionary spending. The result is layoffs. Fewer people pay taxes, and more collect unemployment benefits, causing financial problems for governments. The other part of the problem seems to be lack of competitiveness with countries (such as China and India) that use a cheaper fuel mix.
While oil is the fuel with the big price-problem in the US, high-priced natural gas contributes to the problem in Europe and Japan. High-priced renewables also contribute to the problem.
To keep costs down, we really need to consider cost first when considering alternatives to oil. Alternatives that need subsidies or mandates are likely to be a problem. Thus, in the US, natural gas right now might “work” as a substitute, but not offshore wind.
Regarding the competitiveness aspect, tariffs on international trade might help, but would reduce world output.
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Oilprice.com: What is your position on peak oil? Have we already reached the peak in oil production? Or do you side with Daniel Yergin in saying we have decades more of production growth?
Gail Tverberg: I think the peak in oil production will be determined based on financial considerations. Such a peak is probably not very far away, because we are already experiencing lower economic growth and the governments of several countries are in dire financial straits.
As the oil price gets too high (or already is too high), governments of oil importing nations will be increasingly stressed by high unemployment and low revenue. Any way of fixing this problem (higher taxes, government layoffs, or reduced programs like Medicare, Social Security, and unemployment insurance) is likely to lead to lower disposable income and less “demand” for (that is, ability to pay for) products using oil.
With lower ability to pay for products using oil, the price of oil will drop. Fewer producers will be able to extract oil at this lower price, and the supply of oil will decrease.
Oilprice.com: What is your view on our energy future? Is it as bleak as some commentators point out – or is there a ray of hope for us?
Gail Tverberg: I see the future as fairly bleak. The big issue is the way high oil prices affect the economy, leading to recession, joblessness, and huge government deficits. The issue is really a lack of cheap oil.
This is an issue that can’t be expected to go away, even with new (high priced) oil supply in the US, or with the possibility of more natural gas supply. We are right now experiencing adverse financial impacts from high oil prices, but these impacts are being disguised by artificially low interest rates and huge amounts of deficit spending.
I find it hard to see much of a ray of hope for avoiding some kind of discontinuity, because the problem seems to be already at hand. For example, I see Europe’s current financial problems and the US’s fiscal cliff as being a direct result of lower energy affordability, especially oil, in recent years.
Oilprice.com: We recently published a news piece on a broker who in a drunken stupor managed to move the oil markets. What do you believe moves oil prices – is it supply and demand or energy market traders – or a bit of both?
Gail Tverberg: I think that over the long run it is mostly supply and demand that moves prices. (Of course, demand has to be read as “affordability”. People who are paying higher taxes can afford less oil products, so “demand” less.)
There may be some short-term impact of energy market traders, but it is likely quite small as a percentage of the total.
Oilprice.com: If oil prices continue to rise do you see Americans changing their driving and energy consumption habits?
Gail Tverberg: I think some changes will take place, but they will not be as fast as many would like. New car buyers are likely to be unwilling to pay large upfront costs for fuel-saving features, because they may not own the car for very long. Getting their money’s worth will depend on getting a high resale price for the car.
People in poor financial condition are more likely to make big changes. People who lose their jobs may sell their cars, and share with others. Teenagers who don’t get jobs will not buy a car. People with low wages and long commutes will look for people to share rides with.
Oilprice.com: A short while ago Forbes ran a piece on Thorium as possibly being the biggest energy breakthrough since fire and both China and India have announced their intentions to develop thorium reactors. What are your thoughts on thorium as a possible replacement for uranium?
Gail Tverberg: From everything I have heard, it is still a long ways away—at least 15 years. If it would work, it would be great.
Oilprice.com: In another article you have linked energy to employment and recession. Are you suggesting that without growth in energy production the economy will not grow, and employment levels will not rise?
Gail Tverberg: It takes external energy to make anything that we make in today’s economy. It takes energy to operate construction equipment, or to operate a computer, or to manufacture and transport goods. Even making “services” requires energy.
So if we have a lot less energy, today’s jobs are likely to be impacted. It is possible that we can create more half-time (and half-pay) jobs, but the result will still be that the world will be a lot poorer. We can still do jobs that don’t require external energy (such as make a basket out of reeds, or wash clothes in a stream), but our productivity will be much lower than when electricity or oil was available to leverage our production.
Oilprice.com: What is the most pressing matter that will affect the world in your opinion? food shortage, water shortage, energy shortage, climate change, etc?
Gail Tverberg: I think the immediate problem will be financial, but caused by high-priced energy.
The big concern I have is that financial problems will lead to political disruption. The natural tendency of countries with less energy supply is to break into smaller units—for example, the Soviet Union broke up into Russia and its member nations. There is now talk about whether Catalonia can become independent from the rest of Spain, and whether the Euro can hold together. If breakups become a major pattern, even spreading to the New World, it could make international trade much more difficult than today.
Financial problems could also lead to debt defaults and rapidly shifting currency relationships. These, too, could lead to a reduction in international trade.
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Oilprice.com: Economic growth is what the public expects, anything less is treated as a recession, but is constant economic growth a realistic goal? Is it achievable?
Gail Tverberg: Constant economic growth is not a realistic goal. We live in a finite world. This is obvious, if a person stops to think about it. There are only a finite number of atoms in the earth. There are interrelated biological systems on earth, and humans are one part. Humans cannot become too numerous without destroying the ecosystems that we depend on.
In a finite world, it is clear that eventually extraction will become more expensive. When we first started extracting fossil fuels, we started with what was easiest (and cheapest) to obtain. As we move to more difficult locations, such as deep under water, or the Arctic, the cost becomes more expensive. It is these high costs that seem to be disturbing economies now.
It appears to me that we are now hitting some version of “Limits to Growth”. Most economists haven’t figured out the connection between the economy and the natural world, so are oblivious to our current predicament.
Oilprice.com: If the transition from fossil fuels to renewable energy is ever actually made, what do you believe will be the effect on GDP?
Gail Tverberg: I don’t see renewable energy as being sustainable on its own. If it were, we might expect a GDP level of perhaps 10% or 15% of today’s GDP.
Oilprice.com: Other than a severe reduction in the global population what solutions are available to humanity as it reaches the limits of the planet?
Gail Tverberg: Unfortunately, solutions seem few and far between. Our biggest problem seems to be a lack of time to fix a financial problem that seems very close at hand.
A partial solution for some people may be a reduced standard of living combined with local agriculture.
Regardless of what happens, we do have quite a lot of “stuff” that humans have made that will cushion any down slope—roads, houses, clothing, and tools, for example. Many people would like a solar panel or two for their long-term use. We also have knowledge that we did not have on the upslope.
The past 10,000 years for humans has been real miracle, first with the discovery of agriculture, and later with the discovery of fossil fuels. If there is a Guiding Hand behind what is happening, there may be other miracles in store, as well.
Oilprice.com: In your opinion, who will make the better president in terms of energy policies and saving the economy, at the upcoming elections?
Gail Tverberg: The last presidential candidate that I had real enthusiasm for was Ross Perot in 1996. He would have put the United States (and the world) on much more of an isolationist path. In retrospect, this is the one thing that would have helped put off the predicament we are in today, because it would have slowed world economic growth, and with it the extraction of resources. World population would probably be lower now, too.
In this election, I would probably slightly favor Romney, because he seems to have some grasp of the issues we are up against. As I look at the numbers, it is absolutely essential that we start cutting programs, if we are to balance the budget. As bad as fossil fuels may be, they provide our jobs, our food, light, and heat so we need to continue to extract them. We don’t seem to have very good alternatives at this time. Even what we consider renewables depend upon fossil fuels.
In the next four years, I expect we will find ourselves doing a U-turn on economic growth. I don’t think either candidate (or for that matter, any leader) will be able to handle this well. Ideally, the new leader should be looking at the issue of how to deal with a low-energy future. Do we move to local agriculture, and if so, how? If rationing is done, how should it be done? If there are not enough jobs for everyone, should we go to more part-time jobs?
Romney has been accused of flip-flopping, but in some ways, with such big changes coming, I think that what we need is someone who is willing to change his views with changing circumstances. We seem to be headed for truly uncharted territory.
Oilprice.com: Gail thank you for taking the time to speak with us. If you are interested in learning more about Gail and her work please do take a moment and visit: Our Finite World
James Stafford is the Editor of Oilprice.com
Thank you Gail Tverberg and thank you James Stafford for interviewing her.
It would have already happened had the Republicans not filibustered The Natural Gas Acts of 2010 and 2011. As long as the Republicans have power, what she says will remain true. However, as soon as we get a filibuster free Democratic Senate we will use our 100 year supply of natural gas to become totally energy independent.
It is OK to be optimistic about finding something to replace the fuels we use now but the realities of life that we face if we don't would suggest that a plan B and C are what will work if the optimists don't make it in time (1).
At the moment the world is configured for growth and global supply chains. As Gail suggests it's not just US leaders but ALL leaders are about 7 years behind the thinking at least:
"In the next four years, I expect we will find ourselves doing a U-turn on economic growth. I don’t think either candidate (or for that matter, any leader) will be able to handle this well. Ideally, the new leader should be looking at the issue of how to deal with a low-energy future. Do we move to local agriculture, and if so, how? If rationing is done, how should it be done? If there are not enough jobs for everyone, should we go to more part-time jobs?"
"Romney has been accused of flip-flopping, but in some ways, with such big changes coming, I think that what we need is someone who is willing to change his views with changing circumstances. We seem to be headed for truly uncharted territory."
And in the UK our leaders are staring in the same headlights. They see all sorts of smog around them and have no answers. They all bicker and snipe to gain political points and blame the EU mess but in doing that they all fall further behind in reaching consensus on a plan B & C that will work if plan A is now a thing of the past.
Yes it will be difficult to deal with but we are all to blame for electing 4 decades of leaders on the basis of plan A.
Everyone had access to the book - limits to growth in the 1970's and the plan A tribe did not read it.
At TTBolton we agree ""In the next four years, I expect we will find ourselves doing a U-turn on economic growth."
Not only because of oil but because many more of the natural resources needed as inputs into todays stock market listed companies (plan A jobs) are in short supply (2) and seeing as that is where many nations hold their pension funds you'd think more alarms would be ringing. If you'd read this right, even with unlimited cheap oil, there is not much left to make stuff out of even if they do get all that gas from the middle east into europe to keep (plan A jobs) going a bit longer (3). Where are the leaders with plan B and C.
We know at least that Gail is one of them & many thanks for the 7 years of public thinking so far.
We agree with Gail: "In the next four years, I expect we will find ourselves doing a U-turn on economic growth"
The leaders will be those who implement - Energy Decent thinking as a priority over (40 more years of plan A jobs). If they don't know what this is we're heading over the cliff, some may have a parachute, but many won't - good luck if you're the one prepared thinking you're gonna land on peaceful ground. The world desperately needs to have this conversation in public.
TTBolton are part of the International Transition Town movement. Consisting of a small group of professionals in and around Bolton UK thinking about plan B/C and staffed by volunteers. www.transitionlinks.org
1. If it takes 20 years for nations to respond to this, at what date in time do national leaders who advocate plan A lifestyles actually talk about it? - Just read the conclusions and you'll have enough to think about. - http://en.wikipedia.org/wiki/Hirsch_report
2. What will stock market listed companies make stuff out of to sell to us - are plan A pensions going to be affected? http://www.green-mondays.com/admin/uploads/media/GMMarch12.Furtherreading.Jeremy Grantham. April 2011 Quarterly Letter. Resource Scarcity.pdf
3. A Primer on the REAL Global Geopolitical Battle? http://tinyurl.com/9l2l4o4
More politcial comments than oil, such as:
"With the Any Rand cultist Paul Ryan"
"important to know what motivates the enemy and the Rand cultists are still with us. As Digby notes Rand's followers are passing out free books."
Please provide a link which states SA goo cost $80 p/b..
BTW, GL in your quest to put this matter at rest...
I once thought you were a formidable thinker but now I am having doubts..
Your dear one sided thinker, Hans
I found one that answers all your questions by Jason Simpkins ,WALL ST.DAILY. entitled " Two reasons oil prices will bounce back sooner than you think " , it was written in May when a lot of pundits were claiming oil was headed way south. I thought it was worthy of an explanation WHY oil should be and will continue to be NORTH of 80/bbl. It's not only good for our industry but good for them.When there is no opposition ,it makes sense to leave the prices alone .Keep the traders out of the boom and bust cycles and everybody's better off. It's when 100/bbl oil enters the marketplace for extended periods of time ,that economy's start to feel the crunch.
Why don't you just admit that your dead wrong and anybody with a pulse on the oil industry knows about OPEC and their reliance on relatively expensive crude to continue their country's welfare ? Wake up!
I would also say that if they sell enough crude over 100/bbl in the first part of the year they would be OK if selling at below 80/bbl for a short time but that is exactly the point. 80/bbl has not only become the benchmark here in N.A.,it IS all over the World. By somebody like Trump making statements that said "He will MAKE the Arabs sell oil to us for 20/bbl", Don't you find that to be a stupid statement. He never really believed ,just grandstanding but the point is ,"some people actually believe this would be a good thing " It would not be. The trick is to neutralize OPEC from being able to go higher and the best way to do that is by finding more energy sources and most importantly ,"PROCESS " our energy ourselves. On shore N.A. crude and on shore NG Dry and liquid as well as C.T.L (coal) all to fuel our selves and sell excess to others .The more renewable's,the more nuclear we develop means more exports of our crude and NG.
We are in the drivers seat here in N.A..All we have to do is convince the public that it's possible to do several things at once. Some of us in the one dimensional realm can't do that.
Eventually electricity will supply all the usual needs as well as transportation (EV's) and heating (heat pumps) / cooling. Electricity supplied by fission, with very minimal environmental impact.
Nothing is 100% carbon free but if we look at the operation of nuclear power we have the most dependable ,most environmentally friendly operation and a lot of technology that looks like recycling and safe disposal is within our grasp.
We can also insist that countries such as Iran that have been "threatening" and claim they only want to be nuclear for power purposes ,be assigned lower refined Uranium (which is a CANDU reactor) or even better ,thorium reactors.
The alternative is to turn left at the lights and follow the road to hell.
"Most Heavy oil production in N.A. requires at minimum about 50/bbl.The Saudi's (barely hanging onto their citizens), need to get about 80/bbl just to break even."
Southpen, I am glad you are not my local newspaper editor.
If you are in Belarus then I extend forbearance, if your tongue is English, then my deepest sympathy to you..
“If we can reach 225,000 barrels of oil per day, the history of Bakken suggest this level would be short-lived – the peak production will probably last for a year or less – because as we shall see below, total Bakken production can be expected to decline to 50% or less of its peak rate within a few years, because of the steep decline rate of individual wells.”
Here is where the Bakken is at today.
That's right - 600K per day. Gail said "short lived peak of 225K per day". We're now more almost tripled that and no sign of slowing.
And that's the Bakken - the Eagle Ford shale play is even hotter.
You'd think with such miscalls in her past Gail would show a little humility and say "hey, maybe I don't understand shale plays all that well". But nooo, she's still pushing her theories. Seems odd to me.
She's certainly a bright lady, but she's clearly stuck on a dogma. "When the facts change, my opinions change. What do you do sir", is a famous quote. It would be well applied to Gail.
Just recently, Bakken production reached 700k and will be the end of this decade top 1.5 million b/d, IMHO...
As for, Ms GET, the information she provides has as much value as an empty drum...
I do not bother commenting on her "work."
Southpen, I am still waiting for your links, which state that NA oil costs $55 p/b to produce...
4 or 5 years ago, skepticism re: shale energy was warranted. Now, shale energy has more than answered it's critics. To continue to publish the same "shale skeptics" runs the risk of turning Oilprice.com into a clearing house for kooks.
But certainly you are right, because she has all to often wrong on energy consumption and production issues...
When someone is wrong more often than not, people begin to stop listening to you...
The Peakers are once again gasping for greenhouse gas.