Where it comes from

Hint: it’s all about geology and cars and heating and...

Two different estimates

Source: US Dept of Energy

Who will be using it?

Source: US Dept of Energy

Industrialized countries use two-thirds of total now, soon will be about equal

Primary uses are: transportation

and electricity

Petroleum products are useful because they’re portable

which is easily distributed between fixed points for other uses

Both these are growing fields !

EE/FSU=Eastern Europe &Former Soviet Union

We like our cars...and so doeseveryoneelse

NB: Europe & Industrial Asia aren’t projected to grow much; compare w/ other places

Source: US Dept of Energy

Electricity demands are projected to grow over the next 20 years

Note the different geographic distributionSource: US Dept of Energy

Why does energy consumptionincrease?

Note the different geographic distributionSource: US Dept of Energy

1) Popul’n2) Std of Living

Various economic scenarios:

The better off people are, the more energy we’re gonna need.

Source: US Dept of Energy

All right, so there’s a real need. What are our energy sources?

Yep, it’s oil, folks

Oil + Natl Gas= ~ 3 X Coal

others negligible

Source: US Dept of Energy

NB: current usage

Oil prices are interesting...

Source: US Dept of Energy

Prices havevaried by afactor of 6 over the last30 years.

(So why thesmooth projection? )

How good is it for the year 2002?

Didja see any evidence of positive feedback in the oil market on the last slide?

The OPEC oil ministers have declared that they wish to keep the price low enough that further exploration will not be economically viable (Negative feedback)

When Gulf Oil opened the first gas station back in 1913, the price was $0.27/gallon.

That was about 3 hours work at the prevailing average wage.

Scaling into today’s regime, we’d be talking about $25 – 30 for a gallon of gas.

THE REAL COST OF THE REAL COST OF PETROLEUM MOTOR PETROLEUM MOTOR

FUELFUEL

Environmental DamageAgricultural LossesIncreased Health Care

ExpensesHigher Insurance Premiums

U.S. Military Expenses for U.S. Military Expenses for Protecting Middle East Oil Protecting Middle East Oil SuppliesSupplies

0

10

20

30

40

50

60

70

$45/Barrel

$15/Barrel

$9/Barrel

Price of a Barrel of OilPrice of a Barrel of Oil

Actual Cost of Oil is at Least $69 Per Barrel

One man’s opinion on:

Source: Robert Q. Riley Consulting

Back in 1949 a geophysicist named M. King Hubbert,working for Shell, got interested in the total oil supply.Using his geologic estimates for future discoveries,he predicted production levels amazingly accurately:

Hubbert curves showproductionrates in b/yr

This shows 2 of Hubbert’s early projections; notethe peak years

50 years experience makes Hubbert look pretty good overall

This chart addsthe effects of “unconventional” production

--extends our supply a little, butdoesn’t change much

Source: CJ Campbell, Oil & Gas Journal, March, 2000

Note that production curves tail off while need curves just keep increasing!

Basic problem is that discoveryrate is now less than consumption

Discovery peakwas in the ’70’sleading to theproduction peaknow

We now consume 4 times as much as we discover! Source: CJ Campbell, House of

Commons testimony

Oil production lags discovery

Source: CJ Campbell, House of Commons testimony

US oil discovery & production as an example:

Discovery

Prod’n

Source: CJ Campbell, House of Commons testimony

The US was the first country to have an oil industry

The discovery peak was 1930’sProduction peak was 1970’s

For the North Sea and Alaskan fields, it’s only 28 years between discovery & production peaks

This in spite of much more difficult production & distribution conditions --better technology gained us speed

Global discovery peak was in the 1970’s

25 - 30 years of well-funded effort by some very smart people prospecting around the world hasn’t increased the discovery rate

The slowing Discovery Rate:

Includes oil“discovered”in known reservoirs (“backdated”)

-a majorsource of “new” oil for the past 30 years!

Source: CJ Campbell, House of Commons testimony

Fourth Quarter 2001 API Drilling Statistics

WASHINGTON, January 16 — Estimated completions of U.S. oil wells, natural gas wells and dry holes decreased by 8 percent in the fourth quarter of 2001 compared with the same period of 2000, the American Petroleum Institute reported today. Oil well completions dropped 23 percent, and natural gas completions dropped 3 percent for the quarter compared to the same period of 2000.

According to the 2001 Quarterly Well Completion Report: Fourth Quarter, an estimated 8,309 oil wells, natural gas wells and dry holes were completed in the fourth quarter. In the fourth quarter of 2000, there were an estimated 9,038 completions. For the fourth quarter of 2001, gas completions were down 3 percent to 5,365; oil well completions decreased 23 percent to 1,931, and dry holes rose 3 percent to 1,013.

Total exploratory completions were up 26 percent in the fourth quarter and development completions were down 11 percent compared to the same quarter last year.

API also reported a 1 percent increase in total footage drilled in the fourth quarter for a total of 41,534,000 feet.

From the API:

Source: CJ Campbell, House of Commons testimony

Contrast this with the popular image:

“This notionis believedby many Politicians.” --Colin Campbell

Leading to some laughable consumer decisions

In Europe, where gasoline prices have been over $5 per gallon for many years,

…they’ve taken to using cars that you put on like a sweater

The Smart Car serves quite well for most urban purposes

…or even a T-shirt…

(This one’s in Italy & must get a jillion miles per gallon.)

We can do OK in this country, too

Here’s an experimental car built by some students at Berkeley that gets over 1,000 miles per gallon

Not even trying for production, of course…

Production is another matter:

Some serious players think that we could do a lot better than we are:

The 1985 Chevy Blazer got 20 mpg, the 2002 model gets 18

Fleet averages fell from 26 to 24 in the same interval…

Here’s a potentially useful technology:

“Hybrid” cars are an attempt to maximize the relative advantages of gasoline and electrical power systems

Honda and Toyota both have production versions of hybrid cars available in the U.S. now. The price is $20,000, and the gas mileages are 56 & 48 mpg, respectively.

Hubbert curves for all petroleum-like resources that we have fashioned to date change the picture a little

But notmuch

Source: CJ Campbell, House of Commons testimony

The underlying cause is that petroleumoccurrence is a pretty rare thing

Must havethe right:

Initial cond’sHistory Geologic Environm’t

Source: CJ Campbell, House of Commons testimony

So, we are faced with a scenario something like this:

and it’s interesting to note just where the oil reserves are …

-700

-600

-500

-400

-300

-200

-100

0

100

200

WORLD PETROLEUM RESERVES

Billion Barrels

Total Remaining

Total Recovered

UnitedStates

Canada

Mexico,Central America,& South America

WesternEurope

Mid-East

EasternEurope,FormerU.S.S.R.,China

OtherEasternHemisphere

Total Oil Recovered Since 1859 & Total Remaining as of 1990

Protecting Against Limited Supplies, Protecting Against Limited Supplies, Future Monopolies, and Price IncreasesFuture Monopolies, and Price Increases

So it looks like, in YOUR lifetime you will be:

• Paying a LOT more for gasoline • Very concerned with Middle East politics• Trying new energy technologies• Looking for alternate sources of energy

with regard to alternate sources,consider these data on energy available from non-renewable sources:

Source Total Energy (J)

Uranium 1.6 E 23 Coal 1.4 E 23 Syncrude 1.4 E 22 (tar sands, shale oil) Crude oil 1.0 E 22 Nat’l Gas 8.0 E 21

and from renewable ones:

Source Energy (J/yr)

Solar 4.0 E 24 Biomass ~2 E 21 Hydroelectric 9.2 E 19 Geothermal 8.0 E 19 Wind energy unknown

Afterword: Comparing energy prices for different fuels:

Fuel $/MbtuOil 3.49Nat’l Gas 4.29Coal 1.19

How about wood, ethanol, wind, geothermal, solar, tidal, …?