Peak Oil is You
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Page added on September 22, 2013
What Will Power America’s Future? The Case for Oil
Deep down, we all fear the world will become a scene from the film Mad Max. Global oil supplies dry up and cause a complete breakdown in law and order as we desperately search for the trace amounts of oil left. While we find the chances of this actually happening to us as extremely slim, there is a reason that these dystopian films work. Somewhere, that chance exists, and it terrifies us.
But what energy source will keep us from tumbling into this pit of chaos? For years oil has been the primary fuel choice, but does it have the legs to keep us going? Let’s take at the pros and cons of oil and its place in America’s energy landscape.
Pro: There’s still lots of it
Remember all that talk about peak oil a few years ago? It’s not a new argument. Our first fear of peak oil production actually came back in the 1880’s when many thought that oil would never be found outside of Pennsylvania. Today, proven reserves in the US are at 25 year highs thanks to our ability to access deeper, more complex reservoirs in the Gulf of Mexico and the formidable one-two punch of using horizontal drilling and hydraulic fracturing for extracting oil from shale.
Also, there is still lots of oil out there we have yet to consider as proven reserves. BothExxonmobil (NYSE: XOM ) and Russian oil company Rosneft are in the process of exploring a region of the Arctic that could hold as much as 90 billion barrels of oil off the shores of Alaska and Russia. Even more significant is the work being done by Chevron(NYSE: CVX ) and Royal Dutch Shell (NYSE: RDS-A ) to extract oil from kerogen deposits. This experimental form of oil could more than double the worlds current proved reserves, and could make the United States the largest oil source in the world.
Pro: We’re getting better at extracting it
One of the biggest reasons that peak oil theories have fallen flat so far have been because its assumption is based on the current technology in the industry. Problem is, we have continually developed ways to extract oil from more remote places and deeper, more complex reservoirs, which have pushed back the pending doomsday of peak oil.
Even now, the next generation of oil technology is being put into place: enhanced oil recovery, or EOR. Using the current methods of extraction, we can only get about 30% of all oil from a reservoir. But through new EOR techniques such as flooding the reservoir with CO2 gas, we are able to boost our reservoir recovery rates to around 60%. Occidental Petroleum (NYSE: OXY ) , one of the leading EOR companies today, estimates that it will be able to extract another 340 million tons of oil from just the Permian Basin in Texas using EOR.
Con: It’s getting more expensive to extract it
All this new technology may give oil a much longer runway than many of us originally anticipated, but it comes at a price. The cost to develop these new oil fields is skyrocketing. Chevron estimates that the costs for drilling and exploration in the Gulf of Mexico are 20-25% higher following the Deepwater Horizon spill. Also, the break-even price for oil for most of the shale oil plays in the US are in the $55-$80 range. Granted, oil companies have been been bringing operational costs down as they become more familiar with new technology, but the simple fact that these processes are becoming more complex will inevitably mean operational costs will remain high.
Con: Increasing Environmental Concerns
This is pretty much true for every hydrocarbon source, but its becoming harder and harder for oil companies to ignore the sentiment toward reducing carbon emissions through either reduced consumption of hydrocarbons or to implement greater carbon capture methods to prevent emissions. Some oil companies are getting wise to the idea. Total (NYSE: TOT ) currently owns over 60% of SunPower, the 2nd largest solar panel maker in the US. While the profits from SunPower may not move the needle much for Total right now, it goes to show that some companies are taking carbon emission concerns more seriously than others.
What a Fool Believes
Oil will be around for a very long time. To remain the premier energy source for the world, though, it will need to keep prices in line with the other emerging energy sources. As prices for oil climb, more and more consumers are going to look at alternatives like natural gas and electric vehicles despite the infrastructure shortfalls these two options have today. Luckily for us, these alternatives should keep us from living in that Mad Max type of world, but then again a massive shortage of oil didn’t stop them from driving all over the place.
10 Comments on "What Will Power America’s Future? The Case for Oil"
rollin on Sun, 22nd Sep 2013 12:42 pm
Do these writers get paid to produce this kind of trash?
mo on Sun, 22nd Sep 2013 1:49 pm
If you go back to the 90s and read their crap you can see Theve been wrong forever yet they seem to get the airplay
actioncjackson on Sun, 22nd Sep 2013 2:42 pm
“…but then again a massive shortage of oil didn’t stop them from driving all over the place.”
It was a movie, and a decent one at that; You know, fictional.
shortonoil on Sun, 22nd Sep 2013 3:12 pm
Just another pile of prose written by an author that doesn’t the difference between a barrel, and a BTU. When you get articles written by majors in journalism on science and engineering subjects you wonder into “Alice in Wonderland”, and the “Three Bears”. Cute little stories to keep the kids entertained.
DC on Sun, 22nd Sep 2013 4:42 pm
Q/What a Fool Believes
Too funny…
If the Mad Max series had mentioned explicitly that there was still lots of oil left in the ground even after the events depicted in the film, but it was too expensive, flowed too slowly, and did too much damage to adequately power the drive-shop-consume global economy, would that have made much of a difference in the film’s message and commercial success?
Here is my take on it-amerika is going to get AND help create the Mad Max world. Its is going to do it by insisting the world is the amerikan ‘consumers and militaries’ fuel pump. To be tapped when and how it feels like. You can already see the beginning of this attitude when amerika constantly implies and refers to ‘Canadian and Mexican’ energy supplies as virtually amerikan.
bobinget on Sun, 22nd Sep 2013 6:52 pm
I see four rather cute put-downs of this article but no facts that would convince anyone in the school yard.
One look at the world’s industrial and military complex
and we see only token attention to renewables.
The ‘word’ perpetrated by outfits like ‘Barons’
or ‘Forbes’ is that renewables are some kind of plot
thought up by AGW “profiteers”. (These scientists, ya can’t trust em they are only in it for the money, say those defending oil company tax breaks)
Take one great American Corporation: GE
Last year they canceled building what was to be the world’s largest PV production line. This year, forward thinking GE, dumped their entire solar tech (on FSLR)
and are pursuing oil, gas and mining support. Why?
Because that’s where the money will be for the next 100 years as oil and gas become ever more difficult
(expensive) to locate and lift.
Stop kidding yourselves gang. In no time we will be wringing diesel from natural dry gas and NGL’s.
Both Shell and Sasoil are busy building such refineries as we read. A new acronym ‘GTL’, will be common..
Post Fukushima we got nuttin that comes close replacing nuclear. That one single on going disaster has more far reaching effects then poisoned air and sea water. At this time, reasonable people must concede, all we have available NOW, for base loads
is stikin coal and natural gas. POTUS finally issued
some serious impediments to new coal burners, so that’s out.
BTW, The biggest sellers in the auto industry are still SUVs and pick-ups. To whom will the public listen,
Steve Forbes or DC?
CAM on Sun, 22nd Sep 2013 6:54 pm
The aptly named “motley fool” strikes again. Need any more be said?!
actioncjackson on Sun, 22nd Sep 2013 8:45 pm
Bob,
The world has a 32 billion barrel a year habit to keep things the way they are. The price of oil is crippling economies globally. Once the price of oil spikes high enough, the next generation wells are not going to matter because there will be no economy to sell it to. Sure demand will back down lowering prices but then immediately it will spike back up again as demand picks up. That is peak oil and that is game over buddy. This party isn’t going to last ten decades if we’re experiencing the effects already, namely economy crushingly high oil prices.
These companies are staying in oil because that’s the only thing keeping this boat afloat, they’re in it until the collapse because nothing can replace oil and they know this. Doesn’t mean they expect it to last 100 years.
BillT on Mon, 23rd Sep 2013 12:36 am
Action, you are correct. Bobinget is wrong. THe oil companies fdon’t dare whisper that theyr end is approaching or the investors would bail out like rats from a sinking ship and that would finish them.
There are NO renewables’ without oil. None. Those who survive will have to live on the annual sun energy and little else.
mike on Mon, 23rd Sep 2013 6:12 am
Best get investing in fracking plays then Bobinget, just like the WSJ and most other MSM outlets keep telling you. Anything less and I will presume your post was satirical.