The End of
the Oil Age
It is impossible for and unsophisticated
observer to understand the dynamics of what is going on in the petroleum market
and extremely difficult for a sophisticated observer to follow the trends in
supply/demand given the sheer number of voices reporting their opinions.
In this post I want to announce a
stunning new opinion first reported on the blog “Cassandra’s Legacy” authored
by Ugo Bardi who resides in Florence. See: http://cassandralegacy.blogspot.com/2016/07/some-reflections-on-twilight-of-oil-age.html.
In his July
12 2016 blog, Ugo reported on the work by the Hills group
(http://www.thehillsgroup.org). , who are a group of engineers who have
been studying the decline in net delivered energy to society from petroleum.
They posit the shocking opinion that the end of the oil age as we know it could
be upon us in just a decade. They base their opinion of the steady decline in
net energy available since the first well was drilled in Pennsylvania in 1859
to where we are now with various unconventional sources of oil whose extraction
and delivery are demanding ever more energy to deliver the end product to the
consumers. Simply put, it takes oil energy to get oil energy and when we reach
the point where the amount of energy expended matches the energy obtained, the
game is over. Let me post a segment from Ugo’s first of three posts from the
Hills group which illustrates their alarming conclusion:
The end of the Oil Age
is now
If we had a whole century ahead of us to transition, it would be comparatively easy. Unfortunately, we no longer have that leisure since the second key challenge is the remaining timeframe for whole system replacement. What most people miss is that the rapid end of the Oil Age began in 2012 and will be over within some 10 years. To the best of my knowledge, the most advanced material in this matter is the thermodynamic analysis of the oil industry taken as a whole system (OI) produced by The Hill's Group (THG) over the last two years or so (http://www.thehillsgroup.org).
THG are seasoned US oil industry
engineers led by B.W. Hill. I find its
analysis elegant and rock hard. For
example, one of its outputs concerns oil prices. Over a 56 year time period, its correlation
factor with historical data is 0.995. In
consequence, they began to warn in 2013 about the oil price crash that began
late 2014 (see: http://www.thehillsgroup.org/depletion2_022.htm). In what follows I rely on THG’s report and my
own work.
Three figures summarize the
situation we are in rather well, in my view.
For purely thermodynamic reasons net
energy delivered to the globalised industrial world (GIW) per barrel by the oil
industry (OI) is rapidly trending to zero.
By net energy we mean here what the OI delivers to the GIW, essentially
in the form of transport fuels, after the energy used by the OI for
exploration, production, transport, refining and end products delivery have
been deducted.
However, things break down well before reaching “ground zero”; i.e. within 10 years the
OI as we know it will have disintegrated. Actually, a number of analysts from
entities like Deloitte or Chatham House, reading financial tealeaves, are
progressively reaching the same kind of conclusions.[1][1]
The Oil Age is finishing now, not in
a slow, smooth, long slide down from “Peak
Oil”, but in a rapid fizzling out of net energy. This is now combining with things like
climate change and the global debt issues to generate what I call a “Perfect Storm” big enough to bring the
GIW to its knees.
I would urge the interested reader to read the posts and go to the Hills group website to explore the
details of their methodology. To say that their conclusions are earth
shattering would be an understatement.
I have spent time analyzing their data and conclusions and implicit in
their work is that it applies on the margin for new supply. There are legacy
oil fields where the energy expended to deliver the oil is low because of sunk
costs and infrastructure constructed decades ago but for new sources it is a
different story. The Hills Group does
not say that we will have no oil in 10 years. They just state that the energy
costs of acquiring new oil are steadily climbing and as time goes on society
gets less and less energy and less exergy, or the ability to perform work from
each bbl of oil.
From my reading I understand that they are talking about the energy available
just in oil to get oil energy. Other energy sources like coal or gas or nuclear
energy can and is utilized to obtain oil. Their point is on the net oil energy available after
expending oil energy to explore, drill, process and distribute that oil. In
most cases oil energy is the only feasible energy available.
I would like to add a few points some of which were covered in the
Cassandra’s Legacy blog and some not. Fossil fuels supply 86 % of world energy
and the Hills group state that 88% of oil energy is “wasted”. The percentage breakdown of that “waste” was
not broken down in any of the data I was able to examine but the largest waste
was unavoidable thermodynamic waste
inherent in the conversion from the chemical energy in the oil into thermal
energy and mechanical energy as it is burned or oxidized. I assume that the
thermodynamic losses relate to the enthalpy of the reaction combusting the
hydrocarbons. Energy is consumed breaking bonds and energy is released forming
new bonds in the products of combustion. For example cleaving the
carbon/hydrogen bond is an endothermic process. It requires energy to break
that bond. The products are CO2 and H20 which bond formation releases more
energy than breaking the C/H bonds. Most of the energy consumed in an engine or
power plant is wasted and dissipated as heat. Gas engines can be as low as 20%
efficient and diesel engines only slightly better. It is much the same with power
plants whether burning oil or coal. Older coal plants are as low as 30% efficient
and as high as 40% . The latest generation of natural gas power plants called combined cycle gas turbines(CCGT) can approach 60% at full output. After exploration, production, refining, and
delivery energy costs have been deducted, then that oil is burned in engines wasting 70-80% of the fuel's energy. It is pretty shocking how much we waste. In the
case of a 4000 lb automobile, most of the energy is used to get the mass of the
car down the road with the human occupants only a tiny percentage of that car’s
mass. The blog and the monographs also
failed to mention the fact that since about the mid 60’s, the amount of new
discoveries of oil failed to keep pace with world consumption. In 2015, the world used about 32 billion bbls of oil and new discoveries totaled only 2.7 billion bbls. The cost of finding those new marginal has been going up about 7% a year
since about 2000. Source: Bloomberg. Clearly business as usual(BAU) cannot continue with these
numbers. Either we are going to have to use a whole lot less oil or find a
whole lot more. If what new oil we find is too expensive for society, it will
crash the economy. But sustained low oil prices will crash the oil industry. If
the Hills group conclusions are right that the loss of this resource will be driven
by thermodynamics and not financial or debt factors. It is likely we are entering
a new paradigm. My draw from the work of
the Hills group is that oil availability will be rapidly diminishing in the
next 10-15 years and if net energy declines as they propose, this rodeo will be
over. The end of the oil age may be sooner than we think.
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