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Energy Mixes Shift But Fossils Remain King

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By Evan Lund

The world’s most valuable company is not Apple, Google, or Amazon. It’s an oil company, and it’s about to go public. Saudi Aramco, the Saudi Arabian state energy goliath, is preparing for an initial public offering in 2018. Depending on who you ask, its valuation will be somewhere between $250 billion and $2 trillion. The discrepancy in estimates stems, at least in part, from oil and predictions of its long-term future as the world’s foremost energy source.

How much oil does the world’s largest oil company produce? ExxonMobil, the largest U.S. oil company, pumps 2.5 million barrels per day. Saudi Aramco pumps over 10 million barrels per day, roughly equivalent to one of every eight barrels globally produced. Two of its biggest customers, China and the U.S., each purchase over one million barrels of Aramco oil per day. Even if they ceased production today, BP’s Statistical Review of World Energy report estimates the company has 267 billion barrels in reserve. All that oil stacks up – Saudi oil and gas accounts for 50 percent of the country’s GDP, and Aramco is its big kahuna. For Saudi Arabia, comes with offering public ownership of the company? Perhaps it’s the disadvantage they avoid. In the last two years, the price of oil has been slashed in half. It stands to reason that any country that heavily invested in oil should consider energy diversification.

Rest assured, fossil fuels remain the most precious commodity in the world. The advent of the automobile industry changed the way and the speed at which the world traveled, and along with it, the fuel source used to do it. Oil providers have owned the global energy market ever since. Today, $1.5 trillion worth of oil is exported every year. It fuels 93 percent of the world’s transport. When members of OPEC declared an oil embargo in 1973, it accounted for 46 percent of global energy supply. Since then, alternative technologies have been refined, but the top three sources of energy remain oil, coal, and natural gas, in that order. Collectively, they represent over 80 percent of the global energy market.

What about alternative energy? Although wind and solar face seemingly insurmountable global odds currently, the alternative sources have been making strides regionally. For the U.S., our outlook on energy changed immediately after the oil embargo of ’73. Dependency threatened the economy. Shortly after President Jimmy Carter created the Department of Energy, the world’s first solar powered village popped up in Arizona, and a couple years later, the world’s first wind farm opened in New Hampshire. California instituted the first state mandate for electric cars in 1990, long before Tesla.

Ever since these initial developments, the pursuit of clean, carbon-free energy has fueled a steadily growing industry that now perceives solar panels and wind turbines as the sources that will fulfill U.S. energy requirements in the near future. In 2015, the two did account for nearly 70 percent of all new electric generation capacity added to the U.S. energy grid, and marked the second straight year renewable investment outpaced fossil fuels. The U.S. Department of Energy reported a 25 percent increase in the solar workforce and 32 percent increase in the wind workforce in 2016, and almost 20 percent of motor vehicle component firms derive all their revenue from products designed to increase fuel economy.

The U.S. isn’t alone in advancing renewable energy, and in some cases, isn’t even leading the pack. Recently, Denmark set a world record when nearly 40 percent of its total electricity was produced by wind sources. China is the world’s largest emissions producer, but has also attained status in a different realm – world leader in solar energy production. By 2020, its investment in clean energy should reach $290 billion, which translates to an estimated 11-20 percent of total energy output coming from renewables. As previously mentioned, perhaps the most encouraging news is that the Middle East, perennial hotbed for oil and gas procurement, have invested in solar – leveraging their 300-plus sunny day geography.

With hundreds of billions invested worldwide and technological improvements driving costs down to near competitive levels with some fossil fuels, how close are we to a post-oil world? Not very. In 2014, renewables contributed to about 10 percent of global energy needs, which is a significant improvement from the negligible contribution just a decade before. However, wind and solar represented only a sliver (1.6 percent) of that small chunk of energy pie.

We’re heading toward a post-oil world, but when that will happen is up for debate. Renewable electrical capacity recently surpassed coal’s capacity, reaching 1,985 gigawatts (GW), a number equivalent to 31 percent of global power capacity. However, capacity indicates potential max output, and in terms of actual power generated, renewable production amounted to about half of that of coal. That question now is, when will energy-conversion efficiency standards for renewables yield higher energy production than fossil fuels?

It won’t be easy, and not just due to overcoming limitations of standard materials used in renewable energy sources. The renewable pioneers are chasing a moving target because what’s also increasing is the global demand for energy. As long as populations increase and economies develop, energy demand will not dip.

Another challenge is innovation from those keen on dismissing talk of ‘peak oil.’ Although exploration for new sources has decreased, oil and gas companies have invested heavily in additional techniques, like fracking, and hardware to extract as much material as they can from existing pools. The International Energy Agency (IEA) predicts the U.S. will pass Saudi Arabia as the world’s leading oil producer by 2020.

Environmentalists have protested fracking as a public health and environmental menace, and for good reason, but the technique is a boon for the petroleum industry, enabling oil and natural gas collection from new sources at torrential rates. Methane hydrate, a chemical compound and the world’s largest resource of natural gas, is buried in seabeds and the Arctic permafrost. Estimates of its abundance vary greatly, but are nonetheless eye-popping – twice as much as all fossil fuels combined. Natural gas is shopped as the cleaner fossil fuel and will at least help reduce emissions, but it’s not part of an energy policy with goals including a complete phase-out of carbon emissions.

The story goes that the creation of the Model T in the beginning of the 20th century resolved a serious public health issue by offering a fast, cheap, dung-less alternative to horse-driven buggies. The automobile industry was created, and oil replaced coal. Over a century later, the relentless pursuit of global progress continues to be fueled by oil. Carbon dioxide is piling up in our atmosphere. We’re now well aware of the potential for catastrophe that could result from a steadily warming planet. The threat of climate change has clearly impacted intergovernmental policy change through incentivized alternative energy use, but what remains to be seen is how much it will matter. Climate scientists cite speed and the accelerated rate of climate change as our existential problem. The renewable market faces a different problem – the fossil fuel industry’s inertia.

Evan Lund is a former scientific researcher based in Chicago. He started a research scientist interview series called B-sides and Research that you can visit here.

triplepundit.com



8 Comments on "Energy Mixes Shift But Fossils Remain King"

  1. bobinget on Fri, 7th Jul 2017 8:24 am 

    Venezuelan fishermen blocking oil exports.
    Check Google news foe up-dates.

    Looks like ‘the people’ are taking matters in hand.

    Below is another opinion around shale.

    “Canadas last major heavy oil project fort hills is scheduled to come on late this year. Nothing major is planned after. So aside from some light immaterial conventional oil associated with the Motney play and southeast Sask Bakken I don’t see Canada growing at all. Suncor been cutting back production another million barrels or so for the month of July…they can say for maintenance or upgrade or this or that…but bottom line they struggling to make money at these prices so why burn through your reserves….produce enough to stay afloat. This game doesn’t end well…everyone quick to point at the shale but in grand scheme they are very minor….those who created this will be the ones to finish this and it ain’t going end pretty.

    Oil stays at 40-45 for another 8 months you bet EOG or Pioneer going try something else to drop their breakevens another $5 per barrel…or increase EUR more. Drilling times, super laterals…these guys will innovate and survive. Slow cuts wont do it as shale can grow slowly…They need deep steep cuts…but see how much more bleeding they willing to do before………… “Pipewelder”

    Another:

    Oil is a world market. I don’t think it is possible to “target” Canada or shale or deepwater or anything else.

    Aah, but no one waits with baited fish breath each week for oil storage data coming out of Czechoslovakia. Or oil export data from South Africa. The world market is: US, China, and the EU. Honorable mention to India. That expands from there to the rest of the Americas, East Asia, and the rest of Europe. The point being it’s possible to “target” specific targets to get specific results.

    The US imported 7.742M bbls of oil last week. There was 2.8M by PADD 3, and 2.5M by PADD 2. PADD 2 is a mix of heavy&light refining. Unclear to me if they should be called medium, mixing US light with Canadian heavy(???). But they didn’t reverse the Seaway pipe from PADD 3 to PADD 2 for nothing. We know PADD 3 is overwhelmingly heavy oil refining. Canada exported 3.3M of heavy oil to the US last week.

    If you were the Saudis needing greater revenues/market share, the US heavy oil market is the one to go after. Canada is the competition. The oil sands need $60 for new expansion. The secondary competition Venezuela is falling apart. The problem for the Saudis is it will take time for the Canadian snake to be drained, with lower export capacity to the US. How to gain time? Try the IPO con.

    IMO … If the Saudis can make their initial IPO, and follow on offerings work, they will keep flooding the US till 2020. Create a Canadian production gap, allow prices to rise to the $50s (i.e. still keeping a lid on new Canadian investments), and reap huge revenue gains. If the Saudis fail in their IPO then they are in deep doo doo.

    In the meantime us retail guppies suffocate in the oil slick.

  2. Cloggie on Fri, 7th Jul 2017 8:44 am 

    Contracts Signed for 752 MW Offshore Wind of Dutch Coast

    https://deepresource.wordpress.com/2017/07/07/contracts-signed-for-752-mw-offshore-wind-of-dutch-coast/

  3. bobinget on Fri, 7th Jul 2017 8:46 am 

    Did you know thee are already 400,000 ethnic Chinese living in Venezuela?

    https://en.wikipedia.org/wiki/Chinese_Venezuelans

    When, no if, China, in effect, colonizes Venezuela,
    there will be plenty local Chinese speakers to act on China’s behalf for pay.

  4. Dave Thompson on Fri, 7th Jul 2017 10:20 am 

    “Energy Mixes Shift But Fossils Remain King” The title is missing the word “Will”

  5. Bob on Fri, 7th Jul 2017 11:10 am 

    This article assumes that energy use will increase because of population and economic growth. Both are quite debatable. There is only a loose connection between population and energy use; someone born in Africa just won’t use much energy. Economic growth looks to be slowing dramatically; it is equally suspect. Rising war, antibiotic resistance, famine, etc. will be chopping the population down do size, even without a disaster like a nuke war. In 25 years we will be in a very different world, one that is most likely use a lot less energy with a lot less people. Our other choice is a civilized de-growth path but that isn’t going to happen as it is against our nature. So we get to spin out of control into the abyss.

  6. Cloggie on Sat, 8th Jul 2017 6:12 am 

    Student of the Technical University of Eindhoven are proposing a new carbon neutral fuel and storage medium: formic acid. Later this year they will have bus running on it:

    https://deepresource.wordpress.com/2017/07/08/formic-acid-as-car-fuel/

    It is too early to tell if this is a solution, but it can be added to a long list of possible solutions.

    Advantage: storage medium. Hydrogen economy via the backdoor, because you can avoid potentially hazardous storage of high-pressured hydrogen gas or low temperatures and use liquids instead for unproblematic and safe storage.

    Furthermore you can fill the tank in a traditional way in a matter of minutes, rather than having to wait for a recharge, which is OK during the night, but not during long trips.

    Could not quickly find crucial data about round-trip cycle efficiency formic acid > hydrogen > electricity generation in hydrogen fuel cell.

  7. rockman on Sat, 8th Jul 2017 8:49 am 

    Bob – “Unclear to me if they should be called medium, mixing US light with Canadian heavy”. If that’s final blended oil the it can be called “medium” since it would be about 32° API. But it’s tricky: the Alberta oil sands are blended with light oil so it can be pipelines but dilbit is about 23° API. Once it reaches storage in the US it might sit in storage for a while as dilbit. But eventually it will reach the final blend weight (32° API) the refineries require.

    But heavy oil blended with light oil to produce 32° API can be indistinguishable from an 32° API oil produced as at the well head. The definition of “medium oil” is based solely on its gravity and not its origin.

  8. onlooker on Sun, 9th Jul 2017 11:55 am 

    This article assumes that energy use will increase because of population and economic growth. Both are quite debatable. — certainly
    http://www.zerohedge.com/news/2017-07-08/bofa-stunned-drop-gasoline-demand-where-driving-season?utm_source=dlvr.it&utm_medium=facebook
    BofA Stunned By Drop In Gasoline Demand: “Where Is Driving Season?”

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