Guest post : Oil in 2050

I have been having an interesting debate with old chum Alan Penny about whether my blog posts on the subject of energy and oil were too alarmist. Eventually I says “How about a guest post ? Have your own say in public.” Alan has risen to the challenge … So … here we go. Ladles and Jellyspoons, I have the honour to preezent to yew, the first, the original, the very alpha of guest posts on Andy’s Blog;  I give you .. Dr  —  Alan  — Penny.


Oil in 2050

Over the next fifty or so years there will be a smooth transition away from our oil-based economy to one based on
 nuclear, coal and renewable energy sources. Or will it all go wrong? This post argues that things will go well.

As oil rose through $96/bbl, $115/bbl to $132/bbl, Andy blogged about the supply problem on Nov 11, Apr 24, and Jun 11, with phrases such as “The Oil Age: nearly
 over”, “Civilisation is about to crack”, and “We’re all going to hell in a handbasket”. Now that prices are falling 
again ($64/bbl today, Oct 29) this post explores the situation in some detail.

First of all here are some of the relevant factors to be aware of:

It’s no big deal

Oil is only a small part of the economy. In the US oil expenditure as a percentage of GDP fell from 5% in 1970 to 3% in 2000. In the UK it is an even
 smaller percentage.  Although the transformation of even 3% of an economy is a significant affair, oil is no big deal. 
Health care, for example, will be much more of a problem in the future.

Price of oil

In 2008 money, the price per barrel started out at $20 from 1880 to
1920 and then fell smoothly to $10 in 1970. It quadrupled to $40 in 1973, then doubled again to $80 in 1979, with an 
average price from 1973 to 1985 of about $60. It then fell again to $30 for 1985 to 2000, rising to $50 by 2005, and
 then surged up to $140 this July, and has now fallen to $65 in October.

World energy production and the uses of oil

World energy figures

Fuel Energy Known Years left
production (EJ/yr) reserves (ZJ)
Oil 180 8 44
Coal 120 290 263
Gas 110 6 57
Nuclear 30 1.3 44
Biomass 30 - -
Hydro 15 - -
Solar heat 3 - -
Wind 2 - -
Geothermal 1 - -
Biofuels 1 - -
Solar photovoltaic 0.2 - -

(The ‘years left’ is at current consumption.)

Uses of petroleum
 products in the US, 2000

Use %
Cars 41
Trucks 13
Plastics, chemicals 10
Air passenger 7
Industrial processes 5
Heating and hot water 5
Oil refineries 3
Asphalt 3
Freight – water 3
Agriculture 2
Electricity 2
Other 6

(‘Other’ includes construction, military, rail and air freight, and recreational vehicles.)

Future supply

The ‘known reserves’ in the table are just that. New oil, coal, gas, uranium and thorium fields are being opened up, so 
the numbers for the reserves and the years left should increase.

Oil

Oil production and reserves have increased steadily over the years, but the amount of oil yet to be discovered is a
 matter of contention, with some claiming there is little left to find, and others saying there is lots more. Andy gave
 an example of this disagreement with the OECD’s International Energy Agency predicting that oil supply in 2030 will be
 up by 30% and the German Green Party pressure group Energy
Watch Group saying it will be down by
 50%.

The most recent IEA report forecasts
 oil consumption in 2030 will be 106m bbl/day compared with the present 84m bbl/day, an 
increase of 20%.

Some estimates of new oil are in the 11 ZJ range, giving 60 more years supply. Then there are some 11 ZJ in oil-shales, which would be extractable on an oil price of
$50-$100/bbl. Taking the known, future and shale figures,together there could be 180 years of future supply.

In addition to this there are the prospect of ‘oil-from-coal’. Already South
 Africa gets some 28% of its fuel needs from this
 process, which is competitive when oil is at $50-$100/bbl. The extent to which large amounts of coal could be diverted 
from energy production is uncertain. Oil could also come from ‘second generation’ biofuels, but although this would be
 a renewable source it is uncertain that sufficient agriculture land could be used without leading to food shortages.

Gas

Estimates for the amount of new gas reserves are in the 10 ZJ range which would give an in total 120 years for gas.

Coal

Proven reserves of coal increased by 20% in the last 20 
years, and the IEA suggests that “additions to proven reserves will continue to occur”.

Nuclear

Nuclear becomes competitive for the generation of electricity at oil price levels in the $50-$100/bbl range. A discussion of nuclear fuel
 resources states that future discoveries will be about the same as proven ones. To this are to be added the use of
 thorium, and even the extraction of uranium from phospates and from sea water. Further advances in nuclear plant
 technology such as reprocessing and fast reactor would stretch reserves to thousands of years.

Renewables

This month, Greenpeace and the European renewable industry pressure group the European Renewable Energy Council claimed that
 with substantial investment in hydro, biomass, solar and other renewables could increase ninefold by 2050 to 270
EJ/year, eliminating two-thirds of the need for oil, coal and gas at current consumption rates.

Future Oil Demand

Oil consumption has grown by 40% 
over the last 25 years. At this rate of increase oil demand would double by 2050. However although world population is 
expected to level off by 2050 at about 30% above present
 value the rate of increase of oil demand may well rise with the rapid industrialisation in China and India. China’s GDP
 is currently doubling every ten years, and such a rate if translated to oil demand would lead to an approximately 
fifteen-fold increase in oil demand by 2050.

However, as part of the response to higher oil prices and the problem of global warming, what Greenpeace describe as
”far reaching energy efficiency measures” could reduce demand considerably. An example of this is the current trend 
away from SUVs to more energy efficient cars, in response to the increase in the price of oil over the last 5 years.
With the current aims of an 80% reduction in greenhouse gases by 2050, there must be a substantial fall in oil demand relative to GDP growth.

Residual oil demand

20% of current oil production is used for chemical manufacturing and air and sea transport, where other energy sources
 cannot be a substitute. With economic growth one could expect these as for total oil demand to double by 2050 to a 
level near present day total demand. The larger increase in GDP discussed above would lead to an even greater 
demand.

Discussion

With proven oil reserves at 44 years, and if consumption doubles, one might think we will be in trouble within the
 next 20-30 years. But positing a price of $50-$100/bbl, then new discoveries, shale oil, and oil-from-coal could result 
in perhaps a hundred years of total reserves, taking into account demand growth.  And oil at $50-$100/bbl is not a major
 economic drag, as we have already learnt over the last twenty years.  There is no immediate problem. Far reaching
 changes in lifestyles will not be needed to deal with oil depletion.

But a major problem could occur if, as seems likely, the GDP growth in developing nations such as China and India leads
 to a much larger oil demand.

But here global warming comes to the rescue. Oil demand should in fact decrease because of  the efforts to deal
 with global warming giving a growth in nuclear and renewables together with fuel efficiencies. Substantial investments 
in nuclear, clean coal, renewables and efficiencies are on their way. The UK government is slowly moving in the correct
 direction, and in the US Obama has the beginnings of the correct policies, although he does appear to be ambivalent about the nuclear component.
 It is possible that in 2050 oil will only be needed for the 20% of demand that cannot be substituted. This critical
 scenario will not depend solely on actions by Europe and the US, but mainly on actions by China, India and other
 developing nations.

By 2050 we should, if developing nations act sensibly, all be wealthier and healthier, following the course of the last 
three hundred years. However much we would like to return to the pre-1973 years of $10/bbl, we do not need to.

An aside on global warming

I am sceptical about the renewable energy lobby’s claim that increasing renewables with efficiency savings could meet
 the needs of that tripled or even fifteen-fold GDP together with the almost complete phasing out of oil, gas and coal
 use. There is a cute BBC calculator which shows how the UK
 could replace fossil fuels for electricity generation in 25 years with nuclear, yet using renewables would lead to much 
higher electricity prices. World-wide, it seems to me that only nuclear could be increased sufficiently to reach this 
goal and also to replace oil as the major source of energy for land transportation. A 20 to 100-fold increase in 
nuclear over the next forty years together with more realistic efficiency savings would suffice. And nuclear fuel 
reserves are good for some hundreds of years. The problem of nuclear waste disposal is not a problem. All we have to do
 is store it for a readily achievable two hundred years, when our descendants can with their advanced technology solve 
the problem. Our descendants will not thank us for wrecking the world economy by ignoring nuclear in order to solve the 
minor, for them, problem of nuclear waste storage. Perhaps an inclusive approach — nuclear, clean-coal, renewables and
 efficiencies will emerge as the optimum approach.

Sources

In addition to the links given in the text, these Wikipedia entries are informative:

Peak Gas, Natural_gas_proven_reserves,
Coal, Energy
consumption, Energy reserves, World_energy_resources_and_consumption,
Peak uranium, Sources of electricity in the
 USA

Alan Penny – 2008 October 29

About these ads

39 Responses to Guest post : Oil in 2050

  1. Tony says:

    It has always struck me as weird that so much money is spent on creating blue carrots and fluorescent pigs when what we really need are microbes that, through some process, generate energy: maybe this week’s news about a fungus that exudes diesel will push more research onto that track.

  2. andyxl says:

    Alan : I am puzzled by the idea that oil is only 3% of the economy. Surely almost all human activity has energy consumption underlying it, and oil provides a large fraction of our energy ? You must be using a narrow definition of economic volume. Put this another way. If you remove oil, coal, gas, and nuclear energy completely, economic activity would be at Elizabethan levels…

  3. Alan Penny says:

    Andy,

    Data for US for 2007. GDP = $17T. Oil consumption = 21M bbl/day

    21M * 365 *60 / 17T = 0.027

    Oil does pervade our economy – see the table above on its usage. But when we talk about replacing it, we are only talking about 3% of our total income. It’s vital and finding new oil and/or replacing it must be done over the fifty or so years. But replacing it is not as financially difficult as (say) dealing with healthcare which is predicted to rise to the current US level of some 14% of our total income. The political and technical problems of oil finding/replacement may be more complex however. It’s pretty easy to do as we do now and ration healthcare.

    Do I deduce from the lack of responses that your readers all agree with me? Or do they think I’m so trivially wrong it’s not worth responding? Or perhaps they are only interested in astronomy funding.

  4. MikeW says:

    Alan: probably too short an attention span to assimilate more than one screenful of info

  5. John Peacock says:

    Alan: I’m having trouble deciding whether your resolutely panglossian post is being deliberately provocative. A more pessimistic (and, I think, realistic) point of view has been put more eloquently than I can manage (and in impressive detail) in a forthcoming book by David MacKay. This is available now for free: see http://www.withouthotair.com/

    My inadequate summary of this is that the correct way to look at it is to ask whether 6 billion people could ever attain the energy intensive lifestyle that I and (probably) you enjoy. MacKay’s analysis is that this will be very difficult indeed. A nice feature of the book is that he leaves you to draw your own conclusions. Mine are as follows: it is not morally sound to expect most of the world to live in povery so that I can carry on as normal, so I should either reduce my personal energy use, or start agitating for a radical solution (MacKay suggests paving the Sahara with solar cells as the sort of thing we need). Given that people are selfish (guilty) and demonstrably incapable of collaborating on the required global scale, I reluctantly conclude that the problem will be solved only when bird flu reduces the world population by a large factor.

  6. Michael Merrifield says:

    Not only interested in astronomy funding, Alan. Just don’t have any facts to add to your article, nor sufficient understanding of the issues to comment on it in an informed way. Of course, there are plenty who would say I am in a similar position with regard to astronomy funding…

  7. andyxl says:

    Alan – the price of crude aint the point, and even the price at the pump (three times as much) understates the point. Oil is not just a commodity. Its the source of energy (along with coal and gas of course). Energy sources must be ultimately behind almost all modern economic activity; value escalates as these things are burned. By your estimates, oil+gas+coal is still only 6-7% of GDP. Do you really believe that if we had oil, no gas, and no coal, that GDP would be 93% of its current value ?

    p.s. don’t think I am a romantic. I’m with Lovelock on this one. We probably have to go gung ho for nuclear.

  8. Michael Merrifield says:

    Andy: I think the point was that even though oil pervades our economy, it doesn’t actually cost that much as a fraction of GDP, so that if getting it or manufacturing a replacement energy source costs twice as much then it won’t have a hugely distorting effect on the World economy. Your argument could equally well be applied to ball bearings, which are as vital to keep the wheels of the economy moving (hence the RAF’s fascination with ball bearing factories in WWII), but no-one would argue that the cost of their manufacture has a major influence on the structure of the World’s economy.

  9. John Peacock says:

    Andy: regarding Lovelock and nuclear, consult p164 of MacKay’s book. He does the sums for various nuclear options there. Mostly he scales to 1000 years, since his definition of sustainability is that we should allow ourselves that long to think of a truly indefinite solution. He calculates that existing uranium in the ground would generate 0.55 kWh per day per person over this period if used as in current nuclear plants. The problem is that the average useage of a Brit is 125 kWh per day – in which case all the uranium would be gone in under 5 years if we tried to give 6 billion people a UK lifestyle from nuclear alone. This demonstrates that either you cling to mass inequality, or you accept that nuclear can only yield a small fraction of our energy “needs” (desires). I’d say it’s only worth taking on the problems of waste disposal and risks of Chernobyl++ if nuclear was to be the dominant source of energy: since this isn’t possible, we have to find another way.

  10. Mike Hapgood says:

    Alan – are you using nuclear as a synonym for fission? Don’t forget fusion as long-term option. The pace of fusion research has picked up in recent years and is a big focus for the plasma physics community with new projects like ITER and HiPER.

  11. andyxl says:

    Alan – according to this BBC news item the IEA say that oil price will be back up soon, and by 2030 will reach $200. Of course they say this isn’t because its running out but because we aren’t investing enough. At current consumption there is enough for forty years they say. So if China and India do their thing, we are looking at fifteen years maybe ?

  12. Martin E. says:

    Thanks to the Aspen Physics Institute I was in town to hear Amory Lovins, founder of the
    Rocky Mountain Institute, talk about our energy future to a bunch of big time capitalists this past summer. [What a crowd - you've never seen so much confidence in one room, and justified too as to summer in Aspen means you've made a pile of dough.]
    Lovins gave a persuasive speech about how _radical_ energy savings can be made through good design. In architecture he cited his own house near Aspen, where he has NO heating source other than solar, and harvests bananas every year since c.1988. He gave similar examples where a design that has low/zero energy usage as a design requirement can produce radical savings. So that makes me confident that we can slash our energy usage without reducing our standard of living; and eat more bananas.

  13. Alan Penny says:

    John:

    If Voltaire had made Dr Pangloss say “In 200 years time, the world population will be ten times greater but we will all be richer and healthier”, he would have been right. I am indeed being provocative for what is the value of comforting people in their prejudices? But I am also trying to be true for what is the value in being deliberately wrong? I am glad to see that my facts (see below) have not been seriously challenged.

    I will read MacKay’s book, but if he really judges nuclear by a 1000-year baseline, he is not a sensible person. Does he really think we will be using current fission reactors in 1000 years time? A 100 to 200 year timescale is reasonable, and even within that time nuclear fusion (see Mike Hapgood’s comment) will probably take over. In any case, the uranium and thorium reserves together with reactor design advances will keep us going for at least 200 years.

    My understanding is that oil (plus new oil, oil shale and oil-from-coal ) will supply the whole world at Western levels for at least a hundred years. The developing nations will be OK. The problem only arises if one wants the whole world to be at 2-3 times present levels in 2050 as I discussed, then oil replacement will be needed through such things as the savings Martin E mentions. With oil replacement the economics get more complicated. But as Andy points out, oil is pervasive. So it might be easy to supply nuclear electricity for electric cars, but at present electric cars cost more than oil cars. The financial aspects of making all cars electric is an interesting topic.

    I intend to make a revised version of this post in my own blog NewsfromtheCottage soon. (thanks to Andy for prompting this blog.)

  14. John Peacock says:

    Alan:

    The typical inhabitant of planet Earth is currently placed in somewhere nasty like the Congo and is probably has a lifestyle a good deal more primitive than that enjoyed by Voltaire. One of the places where we differ is that, when you say “nuclear can keep us going”, you use “us” to refer to a few hundred million privileged westerners. We have to think how to provide for 6 billion: we don’t need to invoke morality for this, since they will want to get what we have.

    But indeed this debate has to be primarily about the facts. Definitions matter too, but only slightly. Mackay adopts 1000 years as infinite for practical purposes; you prefer 100. Whatever: we all agree that less than 100 is not acceptable.

    As for the facts, Mackay’s numbers don’t seem to agree with yours. In his chapter 23, you will find a discussion of fossil fuels. He takes the view that to a good approximation this is entirely coal, and we can neglect oil. Do you agree? MacKay does two calculations, of which the first is to say we continue as we are, even without giving energy to the poor nations, or using coal to substitute for nuclear. Then the coal runs out in 60 years. If you share the coal out among 6 billion, you get 1.6 kWh per day each for 1000 years. Since current western total energy use is 125, this means fossil fuels could supply a western lifestyle to the world for 13 years.

    So indeed this is a serious challenge to your facts.

  15. Michael Merrifield says:

    John: if your argument is one of creating a world in which everyone has an affluence of lifestyle comparable to that currently enjoyed by the wealthy West, surely oil is only a minor component of the problem. Adequate food and clean water supplies, health care, education, and social provision for the elderly and infirm are all rather big ticket items.

  16. Alan Penny says:

    John,

    ‘all be richer’ means Europe richer in 2008 than in 1780 and Africa richer in 2008 than in 1780, not Africa in 2008 richer than Europe in 1780. Although given the miserable peasant life in Europe in 1780 that might be an interesting comparison.

    My post was about oil, not about the totality of energy and/or pace Michael all resources. I was saying that oil supplies will not limit the growth of the whole world to EU 2008 level. To discuss total energy demands is more complex. Certainly coal currently supplies as much energy as oil and gas combined (see table in post) and the Chinese are building 100 coal power stations a year.

    If the entire world suddenly today became as rich as the EU, then current oil/coal/gas would indeed not last long. But we are more realistically talking about a rise of the entire world to EU levels in 50 or 100 years, where I would guess (but have not studied in detail) that the coal and gas would be like my scenario for oil – new supplies would last out while nuclear/renewables/efficiency/perhaps fusion take over.

  17. Martin E. says:

    John: The Economist says that the typical inhabitant of the planet lives in a 3rd world shanty in a megalopolis. It also claims (pinches of salt here) that this is a big improvement over starving in the bush. Sounds like my family history – true founders of the proletariat – who leapt at 14hour a day jobs in Birmingham mills; couldn’t believe their luck at not having to stand in the Midlands mud all day.
    But more interesting is your statement that “it is not morally sound to expect most of the world to live in povery so that I can carry on as normal,” This truly resonates with me and with increasingly many people. But it is not at all normal. From the biblical ‘the poor are always with us’ through the late 19C it was self-evident that inequality is just necessary. That was correct because agricultural economies have ~5% surpluses and can only sustain a minority of healthy educated folks. It is, to zeroth order, our increasing use of energy that allows our new ‘one world’ ethics. And a Good Thing too.
    A lower population, long term, is probably a good idea for a bunch of reasons – basically, like the grain of rice on the chess board doubling to each next square, our impact on the planet is small, small, small, high, overwhelming. But we don’t have to wait for a pan-epidemic to get there. In fact that would destroy the economy. (more on sudden change later). But Italy has now gone well below replacement rate for children, and much of Europe has too. [Scotland would have, but for _certain numerous families_; you know who I mean!] What is never discussed is how to deal with a gradual, 50 year, decline in population to ~50% of todays levels
    Ideas?

  18. John Peacock says:

    Martin: You have several good points. I thought the world is not quite 50% urban dominated yet, but it certainly is very close to that point and moving in the urban direction. Never having been an agricultural peasant or a dweller in a favela, I don’t know which is worse: both as good as zero from where you and I sit. As to the necessity/inevitability of inequality, what matters is the dynamic range. I can live with the fact that my salary is a few times the median in the UK, but not the gap between rich western individuals and the typical global figure. The question of how we get to low population is certainly interesting: a declining UK birth rate tends to be used to justify e.g. an influx of Polish nurses to staff old-age care homes. What should help is for the retirement age to go up, so we get off the idea that society has to be supported by the taxes of young workers. But in the end the old folks like you & me in 20 years will have to stop expecting such a luxurious lifestyle. My mother is 83, and takes about 3 transcontinental trips a year. Part of me admires her energy – but I’m also horrified by the sheer profligacy of her lifestyle. In any case, you have to agree that it would be great if the population went down. I was in London last month, and at 8:30 p.m. on a thursday Kings Cross was heaving with so many bodies that it reminded me of when I visited Bombay in the 80s for the IAU (which was where I met you, I think). I don’t want to live in the 3rd world, and what worries me is that this is where we will end up (or stay, in the case of London) if we can’t put more effort into planning the transition from how we live now. But I don’t know how we plan a stable future. Exponential growth is easy: you just have too many children, and let natural limits hold the total population in check. But once people start having 1.5 children per family, then there’s exponential decline, and where does it stop? Maybe this is how extinction happens: not with a bang, but because creatures can’t be bothered to breed fast enough (cf. the Giant Panda). But there’s a long way to go: the population density of Scotland is *way* below the south of England, and we manage fine (while fossil fuels last). The dream scenario is that the world population asymptotes to preindustrial levels while there’s still some oil left – but as I’ve said above, this requires most of the world to live contentedly in low-energy poverty until their numbers start to decline.

  19. Martin E. says:

    John: Yup, it’s odd how no-one discusses how to handle a real population decline.
    The Japanese, though, are supposed to be working on home-help robots for this reason.
    My ethics point is that we can only have the ethics we can afford. If we can’t all use a lot of energy (cleverly of course, with high conservation) then we will be stuck with a wildly unequal world. I see nothing wrong with high energy use as such.(see an old post of mine about energy consumpsion vs. variation in solar input [Andy: can you add a link?] If fusion worked cheaply then, what the heck, let your mom fly continuously. It’s the uncertain source of the fuel, and the effects of burning it that causes us anguish today.

  20. Alan Penny says:

    John:

    I missed your last but one post when I wrote my reply to the one previous to that, so here are some comments. I certainly did not mean “us” to be the West, I meant “us” to be the world – for instance see the section in my post on “Future Oil Demand”. As it seems necessary I will repeat myself for the third time. Future oil supplies (known oil, new oil, oil shale and oil from coal) will meet oil needs for at least 50 years even if the whole world rises to EU 2008 levels in 2050. It will only be necessary to depend on a growing contribution from nuclear/renewables/efficiency if the whole world in 2050 is at EU 2050. But anyway nuclear/renewables/efficency will be developed to deal with global warming, so we (the whole world) will probably be OK at EU 2050 levels.

    If the drastic levels of 80-90% reduction from 1999 greenhouse gases by 2050 currently espoused by Brown and Obama is met for the whole world, then oil will last for much longer, and probably will only be used for such things as planes and some chemical industry needs where replacement is difficult. Oil will not limit the timescale for “the poor are no longer with us”. As the first paragraph of my post said “over the next 50 years there will be a smooth transition from an oil economy to one based on nuclear, coal and renewables”. I do not see that this discussion alters that.

    [It is in fact a mystery to me why the poor are still here. The EU, US and Japan have shown how to be rich. Come on guys, as the HHGTTG says, 'bang the rocks together'.]

    As to disagreement with MacKay’s figures, there is indeed disagreement between folks such as the ‘peak oil’ people and the organisations lke the OECD. I took and linked to the OECD figures. See also the news item that Andy linked to. There is a similar disagreement about how much nuclear fuel there is with the Greens saying ‘hardly any’ and the nuclear industry saying ‘tens of thousands of years’. Take your pick. I adopted a figure more to the latter, and this will indeed be necessary if nuclear is going to meet a substantial part of the energy needs for the whole world at EU 2050 levels.

    The world population is now 6.7 billion and is predicted to peak at 9.1 billion in about 2045. There seems to be disagreement as to whether it will then plateau or fall, and if fall, then how fast and how far. Some people say that large cities are good for people (lots of connectivity), and small provincial cities of half a million or so will lag further and further behind the zeitgiest, and will have to be bailed out from time to time by their more capable bigger brothers.

  21. Alan Penny says:

    PS:

    For a good discussion of world population beyond 2050 see the 254-page UN report.

    Perhaps I should comment that, as the second paragraph of my post said, I was merely concerned about whether there would be a smooth or a bumpy transition away from our present oil economy, and was prompted by Andy’s posts on the subject which seemed to me to err on the ‘bumpy’ side.

    BTW, oil at $49/bbl today. But as I said in my post I would expect the long term level over the next 50 years to be in the $50-$100 range.

  22. Martin E. says:

    Alan: The discussion had wandered away from your original point. (mea culpa a bit.)
    Your big point is that we should expect a smooth transition to non-oil energy sources. Well…. depends what you mean by ‘smooth’. Overall, will renewables grow in importance through 2050? Surely. Will that happen without major economic crises? Much less likely.
    Our physics training is positively misleading when it comes to economics*. Economics is all about dis-equilibrium (eg comparitive advantage). Marginal rates dominate: the spot price of oil, or anything else, is determined by how much the last bidder will pay. So if supply is getting too close to demand, prices can soar, as oil did a few months back. People react to the change by buying less, so the spot price plummets as demand drops off.
    The oil price volatility we see today is a sign of too tight a match of supply and demand. [Contrary to what you'd expect - surely if they are matched all is hunky dory?] Unfortunately, while economies need some uncertainty to generate opportunity, too much uncertainty stops anyone being able to make plans, and we can drop into a slump.
    So even if abundant oil supplies at $50-$100/barrel are known, it will take years to get them on-line so prices can stabilize. This is especially true as Asia increasing its demand quickly, so the new supplies have to be coming on-line quicker than that rate to calm prices down. I reckon we can expect volatile oil prices for 5-10 years before expensive-to-extract oil comes along in sufficient quantity. The economic impact of these fluctuations is unpredictable (counter arguments anyone?): It could be minor, or it could be a major Depression.
    Andy really should have been posting notes about the decline in oil prices, but with an ‘uh-oh’ attached. Roller coasters are fun. But this one can make us all feel rather sick before we get off.

    [*disclaimer: all I know about economics I get from reading the Economist for decades; probably not a really good training :) ]

  23. Alan Penny says:

    Well, this has been an interesting conversation, and I have learnt a lot. I can see a couple of points where I was wrong and a number where I should have been clearer. I hope to incorporate all the comments into “Version 2″ of the post on my own blog.

    I think we have exhausted this topic for the moment, and if it is OK with you all, lets bring it to a. (As Sellar and Yeatman said.)

  24. andyxl says:

    Woah there Robin. That you have to explain.

  25. John Peacock says:

    Alan: A topic like this could indeed run and run. But permit me one attempt at clarification for the sake of disinterested bystanders. You estimate 263 years of coal remaining at current consumption. This is identical to Mackay, who quotes 250 on the same basis. But this becomes 60 years allowing for the current growth in usage as China builds more coal plants etc. Therefore, I’m pretty confident of my figure of 13 years if all the world funded a UK-style energy appetite on coal. So there is no disagreement on the data: 263 and 13 are both correct figures. The question is how you interpret them.

  26. Alan Penny says:

    John,

    I’m not sure if you are disagreeing with my interpretation of the data, but I think you are, so for the fourth time:

    1) 263 years for coal is based on current reserves. There is sure to be more to be found and commercially viable if oil stays at $50-$100. So that adds more years. Of course the ‘Peak Oil’ folks would disagree with this.

    2) The non-US/EU world consumption will ramp up, but not match the increased US/EU levels until sometime in the next 50-100 years.

    3) During the next 50-100 years [nuclear/renewables/efficencies/perhaps fusion] will ramp up, reducing the demand for coal.

    3) There will thus be enough coal (present+new) supplies to last for 50-100 years. during which time the world will become less unequal.

    4) Sometime in that period (early in it if the global warming efforts are massive) [nuclear/renewables/efficencies/perhaps fusion] will supply nearly all the world’s energy needs, leaving a residual demand for coal for specialised uses. (The same applies to oil and gas.)

    Thus neither 263 nor 13 years for coal are useful figures in themselves when thinking about future world energy needs. You have to look at the totality of the situation. The question I was asking is will coal/oil/gas last out until the transformation to [nuclear/renewables/efficencies/perhaps fusion] is complete? My analysis says yes.

    There are a number of factors in my analysis which need fleshing out, for example exactly how rapid will the non-EU/US growth in energy demand be? Also the very valid point that Martin E rises about financial instabilities. For example, he roller-coaster in oil supplies over the last year seems to me unrelated to supply/demand figures as supply was always enough to meet demand, although Paul Krugman’s excellent NYTimes blog disagrees. As I said, I hope to put some more figures into the ‘version 2 post’ on my own Newsfromthecottage blog,

  27. Alan Penny says:

    Rats.

    That’s my Newsfromthecottage blog.

  28. John Peacock says:

    Alan:

    OK then. Yes I do think your interpretation is wrong. Using your numbered points:

    (1) Unless there is some hard proof (what?) that current coal stock estimates are a severe underestimate, we have to work with these figures.

    (2) Ramp-up of non-EU/US is included in MacKay’s estimate, which is why we are due to run out of coal in 60 years.

    (3) So 60 years is just consistent with your “will last for 50-100 years”, but note that this is only if we accept continuing massive inequality of energy use.

    (4) I don’t think fusion will be widely available in 50 years. MacKay’s analysis makes it look unlikely that fission/renewables/economies can come close to plugging the gap from fossil fuels running out on this timescale. Only something truly heroic like paving the sahara with solar cells would do it. So not impossible, but hardly to be relied on.

  29. Alan Penny says:

    John:

    Well, I think it is now clear where our differences are. Is this a suitable place to stop?

  30. seta says:

    Well John i think ur wrongggggggg hahahahahahaha

  31. freeroll says:

    freeroll…

    [...]Guest post : Oil in 2050 « The e-Astronomer[...]…

  32. curde1 says:

    Very Advance post on about crude oil !

  33. Alan Penny says:

    Four years later:

    George Monbiot comments in the Guardian ”There is enough to fry us all.”. As I said in 2008, with oil in the $70-100/bbl range, as it is now, new sources emerge.

    Actually, we are only definitely OK for the next 20 years or so. After then the increasing demand from the BRIC-type countries may become too large even for the new sources. However, the switch to nuclear and renewables and conservation may by then have rescued us.

    (On another, more important, aspect, this is bad. Plentiful oil harms the politics of dealing with global warming.)

  34. andyxl says:

    Alan – I read the Monbiot piece. Its a bit depressing, as you say in your last sentence – our one chance of scaring governments into doing something about global warming has gone….

  35. Anonymous says:

    I love to disseminate knowledge that will I’ve accumulated through the 12 months to help improve team efficiency.

  36. It’s in reality a great and useful piece of info. I’m satisfied that you simply shared this helpful ijfo wwith
    us. Please keep us up too date like this. Thanks for sharing.

  37. You can definitely see your enthusiasm in the work
    youwrite. The sector hopes for more passionate writers such as you who aren’t afraid
    to mention how they believe. All the time follow your heart.

  38. Kory says:

    When some one searches for his required thing, therefore
    he/she desires to be available that in detail, therefoore that thing
    is maintained over here.

  39. Filomena says:

    Greetings! Very useful advice within this post!
    It’s the little changes that produce the biggest changes.
    Many thanks for sharing!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 130 other followers

%d bloggers like this: