The World in 2050: Four Forces Shaping Civilization's Northern Future (9 page)

What About Oil?

Much less ambiguous is the long-term outlook for conventional oil.
Conventional
means oil in the traditional sense: a low-viscosity liquid that is relatively easy to pump from the ground.
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Unlike metals, oil cannot be recycled because we burn about 70% of every barrel as transportation fuel. And unlike metal ores, which are diffused in varying grades throughout the Earth’s crust, conventional oil is a pure liquid and found only in a narrow range of geological settings. Therefore, after a new oil field is first developed, over the course of several decades its production will inevitably rise, peak at some maximum, and then decline. This sequence is normal and predictable and observed in all oil fields ever drilled on Earth.
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For over one hundred years the United States was the world’s dominant oil producer. Then, in October 1970. its domestic production peaked at just over ten million barrels per day—about the same as Saudi Arabia’s production today—before beginning to fall.

American oil companies launched an epic search to find new domestic reserves. Within ten years the United States was drilling four times as many wells as during the peak, but its production still dropped anyway—to 8.5 million barrels per day and falling. By December 2009 it was down to just 5.3 million barrels per day.
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So much for “drill, baby, drill” as the solution to energy supply problems.

This story is not unique to America. Azerbaijan’s Baku oil fields—once Russia’s biggest supplier and the target of Adolf Hitler’s eastern front invasion in World War II—are now mostly empty except for littered hulks of rusting junk. Venezuela’s enormous Lake Maracaibo Basin is in decline. Iran’s oil production peaked in 1978 and now produces barely half the six million barrels per day that it did then.

Most of the world’s oil still comes from giant and supergiant oil fields discovered more than fifty years ago. Many of them have now begun their decline, including Alaska’s North Slope region, Kuwait’s Burgan oil field, the North Sea, and Canterell in Mexico. Saudi Arabia is so far maintaining production from its massive Ghawar field—currently providing over 6% of the world’s oil—but eventually it, too, must decline.
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A common debate, which to me is not a very interesting one, is whether world production of conventional oil has “peaked” already or whether that day still lies ahead—say in thirty or forty years. Beyond that time window, the chances of finding huge new discoveries of conventional oil—of sizes needed to maintain even our current rate of oil consumption, let alone meet projected growth in demand—grow dim. New oil is still being found, and exploration and extraction technologies continue to improve, but it is now quite clear that conventional oil production cannot grow fast enough to keep up with projected increases in demand over the next forty years.

The reasons for this go even beyond geological scarcity to include “above-ground” challenges in geopolitics, infrastructure, environmental protection, and an aging industry workforce. Many of the fields awaiting development are in parts of the Caucasus and Africa that are dangerously unstable.
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It takes decades and enormous investments of capital to develop an oil field, and will cost increasingly more in blood and treasure than energy investors are accustomed to. Further supply tightening derives from the fact that oil producers have a long-term financial incentive in limiting production of what is, after all, a finite resource. A large fraction of the world’s oil is now controlled by national rather than transnational oil companies. These companies, notes former U.S. secretary of energy Samuel Bodman, are beginning to wonder why they should produce now, when the same oil could make them even more money in the future.
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The world currently consumes some 85 million barrels of oil every day and is forecast to demand 106 million barrels per day by 2030, despite the 2008-09 economic contraction and the creation of new government policies encouraging alternative energy sources.
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To meet this demand, as another former U.S. secretary of energy, James Schlesinger, recently noted, means that we must find and develop the equivalent of nine Saudi Arabias. The probability of this happening is vanishingly small.

Even if total world oil production can be increased, if production cannot keep up with demand, that is still a supply decline. Disturbing twenty-first-century scenarios of intense competition for oil—even to the point of economic collapse and violent warfare—are described in the books
Out of Gas
by David Goodstein,
Resource Wars
and
Rising Powers, Shrinking Planet: The New Geopolitics of Energy
by Michael Klare, and
Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy
by Matt Simmons.
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These authors are neither hacks nor alarmists. Simmons is a lifelong Republican and oil industry insider, and is widely respected as one of the smartest data analysts in the business. Goodstein is a Caltech physicist, and Klare has long experience in military policy. “Of all the resources discussed in this book,” writes Klare in
Resource Wars,
“none is more likely to provoke conflict between states in the twenty-first century than oil.” There is ample empirical evidence to support this, including the 2003 U.S. invasion of Iraq and a 2008 war between Russia and Georgia over South Ossetia, a breakaway republic proximate to a highly strategic transport corridor for Caspian oil and gas. A struggle for control of Sudan’s south-central oil fields has contributed to ongoing unrest in a country that has seen perhaps three hundred thousand people killed and two million more displaced since 2003.

It’s true that we’re always just one borehole away from a huge new oil discovery. But realistically speaking, despite great leaps forward in geophysical exploration technology, we stopped finding those about fifty years ago. All of the world’s supergiant fields still producing significantly today were discovered in the late 1960s. World production is still rising, but to achieve it we are expending many times the effort to find fewer and smaller pockets of oil. To make matters worse, not only do these smaller fields hold less to begin with, they also decline more precipitously than big fields after they’ve peaked.
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According to Simmons’ research in
Twilight in the Desert,
a far more likely scenario than a big find is a big crash in the Middle East—home to two-thirds of the world’s conventional oil supply—brought on by years of overstatement about the size of Saudi reserves.

Also more likely than a giant new find are supply problems with the reserves we have already. There are plenty of geopolitical problems with oil besides the nationalization trend described earlier. All oil-importing countries worry incessantly about supply disruptions and vulnerabilities. Oil infrastructure is under constant threat from oil spills and terrorism, for example, at Saudi Arabia’s Abqaia facility, where Saudi forces thwarted an Al Qaeda attack in 2007.
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More than two-thirds of all the oil shipped in the world passes through the heavily militarized bottlenecks of the Strait of Hormuz or the Strait of Malacca. When prices hit one hundred dollars a barrel, the United States sends roughly a half-trillion dollars per year to oil-producing countries—including political foes like Venezuela—just to secure its transportation fuel. Few would dispute that securing stable access to oil supplies is a driving force behind U.S.-led military actions in the Middle East.

In light of all this, world leaders, financial markets, and even oil companies have already decided that it’s time to add other options to the energy basket. They know the world is entering a time of unprecedented energy demand just as our great oil fields are aging and new ones are harder to find and more expensive to tap. Future production will increasingly come from new discoveries that are smaller, deeper, and riskier; the remnants of depleted giants; and unconventional sources like tar sands. It seems probable that the world will eventually begin regulating carbon emissions one way or another, at least by a token amount. For all of these reasons the cost of
using
oil—regardless of geological supply—is expected to rise.

Obviously, energy conservation measures are the cheapest and most immediate way to soften this blow, and will comprise a key part of its solution. But however we end up feeding our vehicles in 2050, it won’t be the same as how we did it back in 2010. We are moving from a narrow fossil-fuel economy to something much more diverse—and likely safer and more resilient—than what we have today. We will explore this exciting range of possible energy futures next.

“You got five minutes?”

It was two o’clock in the afternoon and my weight-lifting neighbor, whose hobby is driving racing cars, was standing at my front door. He was grinning fiendishly.

Moments later, my happy excitement had curdled to pure adrenaline and fear and the feeling that I was about to die. My neighbor tapped the accelerator and there again was that terrifying sensation of heart and lungs being pressed against the back of my chest cavity. My body sank into the open-air cockpit, inches above the mountain curves of Mulholland Drive, as the Tesla Roadster screamed silently around them at ninety miles an hour. Flower-fragrant Southern California air pushed up my nose. Smells like a funeral, I thought weakly, and gripped the windshield frame harder. Someone was howling, probably me. I was trapped in the fastest roller coaster of my life and there were no rails pinning it to the ground.

It felt like an hour, but true to his word, my maniac neighbor had me back home safely in five minutes. He was on his way to Universal Studios to give the CEO a ride. The day before, it had been Anthony Kiedis, lead singer of the Red Hot Chili Peppers. “Faster than a Ferrari from thirty to sixty, and just two cents a mile!” he said, beaming and waving as he drove off. I wandered inside, collapsed on my couch, and wondered if I might be having a heart attack. That’s when I realized that electric cars weren’t just for eco-pansies anymore.

It is rapidly becoming obvious that plug-in electric cars will be the great bridging technology between the cars of today and the cars of a hydrogen fuel-cell economy later this century (should there be one
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). Plug-ins differ from conventional cars and hybrids (like the Toyota Prius, first sold in Japan in 1997) because they are powered mainly or exclusively from the electric grid, not by gasoline. And because plug-ins emit very little tailpipe exhaust (zero for fully electric cars with no hybrid conventional motor), that means urban air quality is about to become cleaner.

One of the biggest reasons to be happy about the phase-in of plug-in electric cars has less to with solving climate change or reducing dependency on foreign oil, and more to do with quality of life for all those new city people. Take, for example, my home. It’s only a thousand square feet in size, with one bedroom and one bath, but my wife and I love it. It clings to the Hollywood Hills, high above everything, with sweeping views of the downtown Los Angeles skyline and beyond. Every morning one of the first things I do is step out on the deck to check out the view. It’s usually crummy, the skyscrapers and distant mountains obscured by the orange-stained smog of ten million belching tailpipes. But on good days, when winds clear out the fumes, we win a breathtaking vista spanning over fifty miles, from blue ocean in the west to snow-covered peaks in the east. It’s stunning, and I’m looking forward to those rare views becoming downright ordinary over the next forty years. The public health benefits of this are obvious. Today, as a resident of Los Angeles, I suffer a 25%-30% higher chance of dying from a respiratory disease than my parents, who live on the Great Plains.
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This is not to suggest that electric cars are environmentally benign, because they aren’t. All of that new electricity must come from somewhere, and for the foreseeable future it will mostly come from power plants burning coal and natural gas. And while the vehicles themselves emit virtually no pollution, these power plants do.
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Producing millions of electric batteries also requires mining huge volumes of nickel, lithium, and cobalt. There are many technology hurdles remaining with battery lifetime, disposal, and price. Mileage rates are improving (the Chevrolet Volt goes 40 miles, the Tesla 244 miles as of 2010) but still well below the range of a conventional car. Recharging takes several hours unless a system of battery-exchange service stations can be set up. For these reasons and others most first-generation plug-in electrics will likely be hybrids, with a small gasoline or diesel motor that kicks in when the battery range is exceeded. To the extent that they are driven beyond this range, cars will continue to emit pollution and greenhouse gas from their tailpipes.