Jörg Schindler and Werner Zittel
For how much longer will the cheap oil last?
1. Introduction
The problem of the limitation of fossil energy reserves is of no interest to the public at the moment. Politics, the industry, the press and environmental groups are amazingly agreed, that although there is principally a resource problem it actually represents no real problem for the next decade and possibly also for generations to come. Although the Club of Rome had made the public aware of this subject at the beginning of the 70’s, and the world then experienced two oil crises, that were able to be overcome within a few years however, there is almost everywhere the feeling today that the problem is not high up in the agenda and deserves very little attention.
Society has a very short-term association with long-term developments. The conclusion that the problem of reserves really deserves no attention because no catastrophe has occurred in the last 25 years, is senseless however. It compares with the opinion of a person who, after having recovered from a severe sickness and then survived for many years, now comes to the conclusion that his own death will never occur.
Taking care of resources - avoiding the use of limited natural reserves - and avoiding the results of unrestrained use of resources - represent the two principal components for a sustainable way of life and and a sustainable economic development. Both arguments are to be heeded within the strive for sustainability. At least the second aspect finds respectful attention in the political energy debates these days. The results of unrestrained energy use are the objects of international conferences and are already visible today for everyone who wants to see. On the other hand the scarcity of the resources occurs insidiously and invisibly. Because of this the call for sustainable economic development is substantiated almost exclusively by the emissions affecting global climate.
In fact the long-term supply situation, especially with mineral oil, has become dramatically precarious, largely unnoticed by the public at large. We maintain the thesis here that the question of resources will dominate the energy discussion again within a few years, or will at least have an equal influence as the issues of global warming.
With this discourse we want to shake the impression that everything is "in order" as far as oil supplies are concerned. Even in the next ten years there could also very well be chaotic upheavals. We certainly do not know how the future will be, but there are good reasons to believe that the most unlikely scenario is that which assumes that the next 20 years will be the same as the last 20 years.
We want to show that there is a large discrepancy between the basic facts and the actual actions of the important actors on the one hand, and the public awareness on the other hand.
There are frequently isolated reports in the press about "facts" such as new oil discoveries, rising world oil reserves etc., that are not put in any interpretable context. We want to sharpen the eyes for the "game" that, in our opinion, is really being played, and for the players and their interests. Then the patterns in the long-term development will be more clearly visible.
With an almost 40% share, mineral oil is today the most important form of energy. The annually published reserves to production ratios (a number that shows how many years the remaining oil would still last at today’s level of consumption), and also low prices suggest oil supplies for the coming decades without any problems. A critical analysis of these publications however, allows a very different interpretation hinting at fundamental changes in the oil markets in the near future.
If we speak about the role of oil in our energy supply, we must also speak about other aspects than just the technical and economical dimensions, especially about distribution (who in the world uses oil today and what for?) and about the distribution of the right to consume between the generations. These questions naturally not only concern the finite resource of oil, but also gas, uranium and coal.
More intensive attention to the finiteness of the fossil energy resources will also make the call for a basic alteration in our use of energy more urgent. We are of the opinion that exactly because the beginning of the drying up of mineral oil wells will soon be visible, there is a glimmer of hope. This awareness will exercise a healthy influence on our thinking about energy and, eventually, on our behaviour. To the same extent that a fundamental change in the oil supply situation evolves, will the system move economically in a new direction. Then for the first time the markets will also begin to reflect the long-term shortage. It will then be just as promising, for economical reasons, to engage in the new business of sustainable energy supply and use, as to exploit the remaining mineral oil reserves.
2. Mineral oil reserves: Available information and public awareness
For a long time man has not seriously considered the question of how large the total worldwide mineral oil reserves are, and how long these will last. At the beginning of the 1950’s there were only a few persons who occupied themselves with this question a little closer. The first substantiated estimates originate from an American geologist, M. King Hubbert [1]. He was also the first who pointed out the fact that the exploitation over time of each oil well follows the shape of a bell curve. The production rises over the years, reaches its maximum when about half the oil has been extracted, and then drops continuously again. The most important work of Hubbert was that he turned attention to the question of when the productuion in a certain oil producing area , or even worldwide, would reach its maximum - this question is just as interesting as the question for how many years the remaining oil will last. He also predicted in 1956 that the American oil output would reach its maximum at the beginning of the 70’s. He was laughed at a great deal at that time for this forecast, but in fact he was quite right. With this he had, in fact, given the very first correct long-term forecast regarding the availability of oil. The oil later discovered in Alaska could not delay the date of peak production, but only slow down the decline of production. In 1974 Hubbert predicted that the worldwide oil production would reach its maximum in 1995, based on his estimate of the amount of ultimately recoverable oil to be about 2000 billion barrels. These views were hardly discussed in public however.
The first broad public discussion about the limitation of energy resources started in 1972, with the publishing of the report "Limits of Growth" by the Club of Rome [2]. This report however treated the question of the availability of mineral oil only in a peripheral way. Alongside many other raw materials, data on mineral oil were shown in some tables. In the study the mineral oil reserves still recoverable were stated as being 456 billion barrels, and the reserves to production ratio was given as 31 years. With the increase in world consumption at that time, of almost 4% per year, there would have been an actual reserves to production ratio of 20 years. These numbers were certainly incorrect and perhaps give a reason why this subject is not readily taken up by ecological groups. After it was seen that this forecast did not materialize, everyone was pacified again. The value of the report, and also the intention of the authors however, lay less in an exact forecast of future time horizons than much more in showing systematic connections. For the first time the euphoric global growth philosophies were questioned and the limits of natural systems were pointed at.
An investigation with the title "Global 2000" was presented by American experts in 1980, that had been ordered by American President Carter [3]. This report still represents today, the only large-scale and substantiated investigation that has become known to a wider public, on the question of the availability of fossil energy. In this report it was already found that the percentage of success in finding new oil fields is decreasing, and that the mineral oil production is assumed to reach its peak at the end of the millennium. The study came to the conclusion that a total of 2,100 billion barrels of ultimately recoverable oil is available on Earth, a statement that, in the light of present knowledge, lies at the upper limit. The faulty estimates of this study, just as with the forecasts of Hubbert in 1974, lie primarily in overestimating future consumption rates - neither the reduction in consumption after the oil crises, nor the restructuring of countries in the former eastern block, are taken into account - and not in gravely faulty estimates of available reserves and resources.
The public awareness of the problems since 1980 is mainly influenced by press reports, that are based on soothing reports of the oil industry. Objective information is seldom given.
Then after a long period only the study "World Oil Supply 1920-2050" appearing in 1995, provided a substantiated independent analysis of the problem of oil reserves [4][5]. This work was based on the largest independent data base with data on more than 10,000 oil fields - that of Petroconsultants in Geneva - as well as on the decades of experience of the authors in analyzing oil fields. The study arrives at the conclusion that the earlier estimates of Hubbert, and the assessment of the "Global 2000" report, were surprisingly exact. In contrast to these earlier studies forecasts today can be supported by considerably better statistical data.
Three years have passed since the publication, but nevertheless little has changed in public awareness. This is the more astounding because the important information on the reserve situation and development of exploration can be read also in the publications of the German Federal Agency for Geosciences and Raw Materials. In contrast to this lots of comforting reports about annually growing reserves are published by the mineral oil industry. These reports are then uncritically accepted and believed by the public and politicians alike.
3. What is the origin of this false picture in the public?
This distorted picture in the public awareness is to be attributed to several reasons. One of which is certainly that the drying up of oil wells was already forecast several times before in the past, and that these forecasts were always seen to have shortcomings. But the basis of these forecasts was mostly the concept of the static reserves to production ratio. This parameter however characterizes the supply situation completely inadequately and superficially and we will later discuss the reasons why this is so. Also the development of oil prices in recent years that were rather falling, or remaining constant, seemed to confirm the fact that no problem exists. After all this feeling was encouraged by press reports about continually new and larger discoveries of oil, and about ever growing reserves. Even the otherwise critical environmentalists in Germany and Europe have not questioned this view - in contrast to some groups in America.
To interpret the low price of oil as a reserve information signalling safe supplies in the long term is a much too short-sighted view of things. The oil market simply reflects no long-term scarcities, but only short-term imbalances between supply and demand. That small variations in supply (e.g. whether oil from Irak is available or not) can nevertheless lead to big, or even erratic price movements, shows how nervous and tense this market already reacts, a market where worldwide production rates in the past, and today, are still well in front of worldwide demand. Only when the output rates permanently start to fall below the demand, will long-term shortages also be reflected in the oil market.
When one reads the superficial publications in the press, one has the impression that more oil is found annually than is actually consumed. But if one sets the size of each newly found oil field and the sum of these new discoveries in relation to the annual worldwide oil consumption, it will be clearly seen that the new dicoveries can only make a marginal impact. Just one example from a daily newspaper: "Oil concern Elf discovers enormous oil field on the coast off Angola"; the "Süddeutsche Zeitung" reported about the discovery of a new field on December 10, 1997. The size of the field is given as 730 million barrels - at the same time the find is described as one of the largest in recent years. But one must find 35 new "Angolan fields" each year, for example, to merely cover the current oil consumption for one year (but that was not written in the newspaper).
Moreover the reserve situation of individual oil companies must be kept apart from the worldwide reserves. Just because reports from individual companies are very frequent, according to which their reserves in the past year have increased by so and so much, this can be interpreted more as an indication of a tense reserve situation than as a hint at a relaxed situation. Otherwise it would be almost trivial to mention the reserve situation of individual companies at all. The mixing of these company related concepts with the global supply situation by the press effectively suggests to the public a relaxation of the basic problem, that in no way corresponds with reality.
In addition doubts are appropriate as to whether statistics about the global oil reserves, handed out and publicized annually, really correspond with reality. It must be visualized here how these statistics are made up. The basis for these statistics is not original information provided in a scientific manner subject to objective analysis and verification but rather each oil producing country in the world transmits his own oil reserve data annually to the "Oil and Gas Journal". This journal publishes the information without comment and without checking. All other publicly accessible statistics, such as the "BP Statistical Review of World Energy", statistics published by Shell, Esso etc., also use these same data without comment. The impression is thus given that these are all independent analyses, which is not the case. The information from the German Federal Agency for Geoscience and Raw Materials, or the statistics issued by the German Federal Ministry for Economic Affairs, are also based on these same publications. Apart from Petroconsultants nobody has access to original and proprietary data the scope of which considerably exceeds the area of experience of the own country or the individual oil company.
The reserve reports of many countries are to be observed with great scepticism. It is astonishing that quite a few countries report unchanged reserves over more than a decade, without being substantiated by reports about new oil discoveries. That would really mean that just as much oil was newly found as produced each year, and this for many years in succession. Is it not more probable that the same numbers are simply reproduced every year?
Another item of criticism is the following practise of many OPEC States: for many years almost constant reserves were reported, then suddenly from one year to the next the figures describing reserves were doubled, or even trebled, by reassessing the oil fields. Even if this information were to be accepted at face value, it would not mean that the reserves had been added in the year of reassessment, but that the increase in reserves must be back-dated to the year of discovery of the oil field. But that in turn would mean that the year with the largest new finds would have been even earlier. There are however reasons for doubt whether these new assessments are justified and some experts therefore speak of "political reserves". OPEC production quotas for each memeber state are fixed annually at a joint meeting. One criteria for fixing the production quotas is the size of reserves in relation to the number of inhabitants of each country. In other words: those countries who can report the largest reserves are also entitled to produce more oil accordingly. Under this hypothesis it is understandable that, after the first OPEC country used this practise of revising reserve information, other OPEC countries followed. Another reason may be that the availability of international credits for a country is dependent on the securities of the country. These securities include, above all, the mineral resources. This whole situation is roughly comparable to that of a houseowner who in dealing with his bank would be able to determine the value of his property in his own right.
What are presumably the reasons why environmentalists hardly discuss the problem of a threatening shortage of oil? The most simple reason could be that they, just as the rest of the public, know much too little about the problems. They are probably still worried about getting onto thin ice, after the rather superficial treatment of oil reserves by the Club of Rome and the following over-interpretation of its findings. Even when people take the subject of sustainable development very seriously, they cannot really envisage that just with oil the limitations could soon be felt. And anyway other environmental aspects such as local emissions and the problem of global warming are regarded to be more convincing arguments, because their effects are already manifesting themselves.
In general the public has difficulties with paying attention to long-term developments that show a very low rate of change over time. A slowly changing annual oil production of any country that decreases each year by 3 percent or less, for example, is not a subject for much public attention. Yet exactly such slow but steady movements change the structures. Instead of this the big movements in prices are more readily observed, although they indicate absolutely nothing about the basic problems.
4. The oil system
The deposits of oil in the world and its formation in the history of Earth have been intensively investigated for many decades now under the most various aspects. The fundamental relationships are meanwhile understood very well. Large surprises that could upset the basic picture we now have are more than improbable. For our purpose we give a brief overview of the most important basic data and relationships
The geologists can now explain very exactly, under which conditions and in what regions mineral oil has originated in the history of the Earth. The areas of concentration are in principle distributed along two belts: one goes through North America; the other goes right through Central Asia and bends westwards in the Middle East to Africa. In these two regions lie more than 80% of all oil deposits. More than 40,000 oil fields are known today, but in less than one percent of these oil fields there are three quarters of all deposits. The two largest fields of the world alone, with more than 50 billion barrels inside, contain about 5 percent of the worldwide oil reserves.
Looking at the time pattern in the discovery of oil reserves is also revealing. All really large deposits were already discovered decades ago: 80% of the oil produced today originates from wells that are known for 30 years or more. The maximum of new oil discoveries was reached in the 1960’s. Despite intensive exploration efforts after the two oil crises, new finds are becoming less and less. This is also in no way surprising, because the geological factors and relationships that have led to the formation of oil in the history of the Earth are now well established and well understood. We therefore know where to look for oil, and we know where there is nothing to be found. It is therefore obvious that the larger deposits have already been found early with simple methods and that later in time the ever smaller ones were found. The sum curve of all reserves discovered so far is asymptotically approaching a limit.
So what is briefly our knowledge so far? The most reliable numbers in our opinion originate from Petroconsultants, as of 1996 [5]:
Production to date 784 billion barrels
Known reserves 836 billion barrels
Probably yet to find 180 billion barrels
Total amount of ultimately recoverable oil in the world 1800 billion barrels
These numbers show that we have produced almost half the mineral oil of the world already. In the years around the turn of this millennium the so-called "mid-depletion point" will be reached, i.e. the point in time at which half of the extractable oil will be actually extracted. Sometime in the next few years the annual oil production, which reached about 23 billion barrels in 1996, will begin to decline.
At this point there should perhaps be a few remarks made about the oil deposits in the North Sea. Many people believe that, because of the first oil price shock at the beginning of the 70’s, work was started on finding alternatives to the oil deposits in the Near East countries. Oil then was promptly found in the North Sea and one was able to reduce the pressure. If the supply situation becomes tight again at another point, this will be repeated and the "next North Sea" will be sought, for example in Kasachstan or off the coast of Angola. But what is overlooked is that the deposits in the North Sea were already discovered before the oil crisis, and that it was only an economical problem to actually exploit these fields that are more difficult to develop. With the advent of the next oil crisis there will be no more "deposits not yet exploited". Most of the oil has already been found.
For some areas of the world the annual production rates are already well known over a long term. Prominent examples are the USA, but especially also Germany. In Germany the maximum production was reached in 1968. At that time it was at 8.2 million tonnes per year. Today there are only less than 3 million tonnes produced each year, in other words less than 40% of the maximum production. For the North Sea it is expected that the peak production will be reached in the next 2 to 3 years. So the European oil reserves are visibly and foreseeably ending. Oil produced in Europe can only cover almost 40% of European consumption. In the USA the first production maximum was reached in 1971, and a second, smaller peak resulting from the new finds in Alaska, was reached in 1985. The import quota of the USA has increased in the last ten years from 30% to now over 50%.
At this point it is time to discuss in more detail the concept of the (static) "reserves to production ratio" ("for how many years will the still available oil last at today’s consumption rates"). This parameter was already used by the Club of Rome. It is the most prominent figure of all statistical publications and finds more and more attention. The handling of this parameter in public debates is, to a certain extent, remarkable. Various lines of argument that are quite contrasting stand next to each other.
One time it is said that the "reserves to production ratio" has remained at 30 or 40 years for the last 4o years - that is to say enough new deposits were obviously continuously found to make up for current consumption. The finiteness of oil is therefore obviously not a practical problem. The faulty estimates of the past of the "reserves to production ratio" simply show that the real reserves are much larger than stated by this figure. Only if this would not be the case anymore however one would have to be worried.
Lately, one hears on the other hand, that we need have no fears about the availability of mineral oil, because supply is secured after all for the next 40 years. One time therefore, 40 years are much too short a time, and another time a comfortingly long time.
The concept of the "reserves to production ratio" as such is rather misleading for a number of reasons. For one, and that we have already tried to explain, the production does not stay at a constant level over time, and then suddenly comes to an end when the last drop has been extracted. But production rather follows a bell shaped curve. Secondly a constant consumption of oil over time is assumed in the concept of the "reserves to production ratio". The world’s consumption of oil is growing however. In so far the "reserves to production ratio" overestimates the time oil will be available.
Another aspect is that after passing the "mid-depletion point" of a production area, the "reserves to production ratio" becomes increasingly misleading. This can be easily demonstrated using the example of the oil production in Germany. After all we had a "reserves to production ratio" of 11 years at the time of peak production in 1968. Today, with a production level of only 40% of peak production and much less remaining reserves, the "reserves to production ratio" has increased to 18 years [6].
It is also frequently suggested that one can defer the problem of finiteness by applying advanced technologies. That is obviously correct in principle, but is significantly overestimated in its effect. By using advanced technologies oil fields can be exploited to a - probably not all that much - greater extent for example, but this only at considerable financial and technical expense. The principal effect is that the existing deposits are being exhausted even faster. Here again the example of Germany: the use of all the modern pumping technology has hardly altered the overall shape of the production curve over time. And generally one has to be aware of the fact that the size of reserves cannot be increased by however potent technologies. Technology and reserves have nothing to do with each other after all.
The extension of exploration activities into ever greater depths of the sea and into polar regions is the expression of a "Go-West" mentality, that is still widespread in parts of the oil industry. Perhaps it is no accident that the protagonists of an alternative energy policy in the US are coming from California - the final stage of the historic "Go-West" movement. From a geological viewpoint as far as oil is concerned there is nowhere in the world a new "West" to be discovered where man can go to next. But mankind cannot accustom itself to this idea yet.
Another difficulty is that various institutions use various terms for what is meant by "oil", or mean different things when they use the term "oil". The figures and relationships that we have so far described refer to the only vaguely definable term of "conventional oil". "Conventional oil" is oil that can be extracted as a liquid by drilling wells. In addition there are heavy oils that require other extraction methods and, following this, other processing techniques. And there is also oil that occurs in nature in the form of oil sand or oil shale. These deposits are also termed as "non-conventional oil" and are in fact very large. Many considerations regarding the future availability of mineral oil do not differentiate very exactly between "conventional" and "non-conventional" oil. This is based on the assumption that there is only a technological difference in the production methods, and that in case of appropriate economical preconditions and given appropriate price levels, there can be a smooth transition from the production and supply of "conventional oil" to the production and supply of "non-conventional oil".
It is less than probable that this will be so. Whilst with conventional oil the oilfield has only to be "pierced" and the whole extractable content can be produced with a few stationary pumping installations, with non-conventional oil the whole tar sand, oil shale etc., has to be moved, washed, pressed out or whatever. This process is rather more comparable with the extraction of lignite - digging up the ground in large areas - than with pumping conventional oil. It is quite clear that there will be a collision with the demands of environmental and countryside protection here. In addition there is more energy necessary in the production process thus considerably reducing the producable net energy.
Let us sum up: Most oil States outside OPEC, with only a few unimportant exceptions, will reach their peak production within a few years. Oil imports
of these countries, which include all of the presently industrialised countries, will therefore in future be dramatically dependent upon very few suppliers. And even within the OPEC the production peak will presumably be reached in the course of the next decade.
5. What are the alternatives to oil?
When oil production passes its maximum there will be a growing gap between energy supply and demand. What are the probable alternatives to oil?
In the first place a switch to the next most favorable energy source appears to be the obvious thing. This is what is already happening in the last few years, with the increased use of natural gas worldwide. But such a transition can only provide a breathing space at best, it will not bring us any closer to a sustainable energy supply situation. The now observable development of entering natural gas, a relatively clean and easy to handle energy carrier, into as many applications as possible, will certainly continue for some time. But it can be clearly seen that the more we try to replace oil with gas, the sooner this will turn out to come to a limit. The supply of natural gas and mineral oil will then end at about the same time.
Can nuclear power be an alternative? Apart from all other problems of nuclear power we here also have a limited availability of the natural resource of uranium. Present figures indicate that all the nuclear power stations in the world today can be operated with the known uranium reserves for another 80 years. Nuclear power today has a share of far below 10% of primary energy consumption in the world. If we wanted to increase this share to about 20% - which would still not be enough to replace the missing mineral oil - the reserves to yearly production ratio of uranium would be shortened to 20 years - not a very convincing perspective.
Nuclear power offers no feasible escape from the dilemma. It is therefore an illusion to think that we might be able to continue our style of life in the industrial countries through the use of nuclear energy. The remaining 20 years in our example are not even sufficient to ensure the economic viability of the nuclear reactors that would then have to be built. Nuclear energy is not viable - neither in terms of resources, nor ecologically, nor economically. We think that the visionaries of nuclear power saw the problem of resources in just the same way some decades ago and therefore regarded the breeder technology as a precondition for an important and long-term role of nuclear power. But today nobody believes in the fast breeder technology any longer. This argument alone decides the issue - but let us add the remark that it requires quite some impudence to leave to our descendants the nuclear waste for thousands of years in order to close the energy gap for a few decades only.
Does the future of fossil energy lie with coal then? Coal was the first fossil energy used by human beings. In spite of this fact the coal deposits are nevertheless still larger than all other forms of fossil energy and, with present-day consumption, will in fact last for another 200 to 300 years. As the deposits near the surface can be extracted relatively cheaply, coal mining in the next 50 years is certainly determined more by environmental aspects than by the limitation of resources. Yet past experience has shown that with an increased use of coal the local emission problems increase enormously.
The history of the use of fossil energy shows that coal, the oldest fossil resource used in large quantities, was able to initiate and accelerate the process of industrialization for several centuries. Then mineral oil supported this development for almost a century now. Considering the high level of energy consumption now reached, any newly introduced finite energy source appears to be increasingly ludicrous in its long-term prospects. Natural gas will just about achieve an important share in the world energy supply for half a century. Nuclear energy will never be able to achieve an important share not even reaching double-digit percentage. Therefore the higher the level of our energy consumption rises, the more clearly visible it will be that fossil and nuclear energy constitute a dead-end.
6. It is high time to fundamentally reconsider our usage of energy
Our considerations so far have only been concerned with the availability of mineral oil. Even so this point of view is important it has nonetheless to be extended. This leads to more basic considerations: What moral questions does the use of finite energy pose? And what do we think can be the constituting elements of a sustainable usage of energy?
The use of finite energy sources such as mineral oil, natural gas, coal and uranium, is principally different to the use of renewable energies that are fed from the continuous energy flow provided by the sun. The use of non-renewable energy is not sustainable simply because it cannot be maintained permanently. That sounds trivial - which it actually is - and somehow everyone does realize the difference - but the conclusions resulting from these simple facts are very fundamental and very far-reaching and this is probably the reason why people avoid to face them.
Just distribution
The use of a finite resource poses the question of its just distribution with especially high urgency: just distribution with regard to the people living now, as well as with regard to future generations.
We know that the distribution of oil is very unjust: today about 20% of the people (namely the populations of the industrialized countries) use 80% of the oil consumed. We like to soothe ourselves with the thought that, even though this may be regretful, it still is unavoidable at the moment and only temporary anyway. With increasing economic development of the Third World and of emerging countries (a development that we of course consider to be desirable as well as possible) the imbalances will then be reduced more and more in future. But alas: this will definitely not be the case! As a matter of fact it is just too bad that almost half of the mineral oil available has already been consumed. If we would want to correct past imbalances starting tomorrow (leaving aside for the argument’s sake the unresolved technicalities of a suitable economic distribution mechanism), to every one of the previous have-nots there could at most be attributed only a quarter of the amount the rich people did consume in the past - because this is simply all that is left. There is principally no way ever to correct this imbalanced and unjust distribution. Where is the moral justification for this?
The consequence of all this is that our model for the development of Third World countries is seen to be a farce: It is not possible to transfer the lifestyle of the industrial countries to the whole world. As we have shown with oil as an example, such a development is simply not possible and apart from that would lead to ecological collapse within a few years. The belief that non-industrialized countries only need to copy our behaviour and become as "industrious" like us, and then everything would move in the right direction and past imbalances can be corrected, has no basis at all. Only when we are prepared to realize that our pleasant way of life is based on the "sacrifice" of the people in the less developed countries, will we be able to accept that here there is a problem.
Perhaps even more drastic is the discrimination of future generations. Now a few generations are consuming the fossil resources that were accumulated during millions of years. What gives us the right to exploit the non-renewable deposits of the Earth in our time? The justification can certainly not be made by economic reasoning and invoking the laws of the "market". Markets do not reflect long-term shortages, simply because future generations cannot bid on the market for oil - perhaps they would be prepared to pay more than we do... As things stand future generations will only be able to draw little benefits from fossil energy but they nevertheless will have to bear the consequences of our lifestyle. In fact we are today experiencing the problems of just distribution with mineral oil, yet we have a similar situation with regard to coal and nuclear fuels where only the time horizons differ a little.
Sustainable use of energy
In a finite world nothing can grow infinitely. That applies to raw materials just as to the production of material goods. A sustainable exchange with nature can only take place when there is a balance between consumption and production. In the long run we cannot cover our energy needs by using the stored energy reserves, i.e. fossil deposits, instead we can only use the permanent energy flow of the sun.
The meaning of this is best illustrated by looking at and comparing two significant evolutionary steps - the one in the evolution of the biosphere on Earth and the other a cultural change in the historic development of mankind.
Far back in the history of Earth some 2 billion years ago the discovery of photosynthesis through plants was the precondition for the further evolution of life on Earth: only the evolutionary shift from the then prevalent methanogenesis - i.e. energy production of microorganisms by the way of transforming hydrogen and carbon dioxide into methane and water - to the much more efficient photosynthesis - i.e. energy production of microorganisms by way of using the light of the sun - allowed in a relatively short time the development of such a myriad of various species until recently. Let us just mention here that now we have to observe a drastic decimation of this variety within a few decades.
With this evolutionary step forward the cyclical principle of a sustainable economy was "introduced" into nature: the starting products and the end products of the photosynthetic process are continually transformed into each other, whereby the one half of the cyclical transformations is effected by the energy from the sun. This constitutes the key for the acceleration of the evolution. In contrast to this principle the autophytes whose life dependet on methanogenesis used up the reservoir of available hydrogen. Their ability to develop was thus limited by the supply of hydrogen that was almost exclusively supplied by volcanic activities.
Now let us look at the rather different turn the cultural development of mankind took in the recent past: until about 200 years ago almost all the energy used by man was supplied by the sun:
- the direct radiation of the sun served to produce low temperature heat, e.g. for drying the washing or heating houses,
- biomass was used to make fires and to generate processing heat,
- wind and water was used for powering machines, and
- finally an important part of all work was carried out by human beings and by animals just using muscular power.
Only by making use of highly concentrated energy in the form of coal, oil and gas, was the process of industrialization possible to the experienced extent - with an up to then unknown rate of change that led to such new developments as the rapid growth of population, mechanically driven vehicles, waste of natural resources and damages of the environment.
The use of the unlimited flow of energy from the sun, which is characterized by its low energy level and its low energy density, was given up in favour of the use of the stored fossil energy resources. But in so doing the conditions for a long-term economic growth are no longer given. The result is an unhealthy growth allowing high energy consumption over a short period of time that cannot be sustained in the long run. As it were we are spending more than we earn. As long as it seemed inconceivable that pollution could be a limiting factor for the ecological system of the Earth, the question after the conditions for survival of a system was never posed. It was assumed a priori that the system that is successful in the short-term will also be successful in the long-term. It is inevitable that, after having depleted the fossil energy resources within a few generations, we have to move towards sustainability again.
One can wonder what course the technical and economic development would have taken in which - for whatever reasons - mankind would not have used this transient peak of fossil energy resources and instead had continually adjusted its energy requirements to the energy supplied by the sun according to the possibilities of increasingly more efficient techniques. Without doubt such a development would have been considerably slower. But presumably there would have been much more time to recognize and correct mistakes and avoid dead-ends already at a local level without thereby producing global effects. It is indisputable that our present standard of living can also be achieved with an energy system based purely on solar energy.
Bearing capacity (What is the level of energy turnover the Earth can bear?)
The ecological system of the Earth cannot bear any level of energy turnover caused by human beings. This fact gets little attention, but it constitutes another limiting factor for human activities that is summarized under the term "sufficiency". Sustainability also implies limiting the energy turnover. This may at first seem confusing, because we are much more concerned with achieving the highest possible energy density. But with fundamental considerations it can be shown that an economy that allows to every human being a permanent energy turnover of more than about 1 - 2 kW, is not sustainable. And whoever associates the term "sufficiency" with describing a restricted, ascetical or bleak way of life, should remember that exactly this level of energy consumption was the basis for the prosperity of Switzerland at the end of the 60’s (this assumes that we today can make use of technologies which are twice as energy-efficient than those used at that time). Does this really constitute an unacceptable restriction when one demands such a level of prosperity for the whole world?
In our context we only want to touch on this aspect and refer to the writings of other authors [7].
7. How do politicians treat this subject?
It is amazing that politicians do not give priority to this subject, that is so central for our national economies. In our opinion the only serious attempt made so far was undertaken in the USA in 1980, with the comprehensive report "Global 2000". Other countries either accepted the findings of that report - or perhaps lacking proprietary sources of information they just lost interest in the subject.
In Germany there is an authority whose task it is to analyze the problems of energy resources and to observe developments for the Federal government. This is the Federal Agency for Geosciences and Resources in Hannover, an authority that is subordinated to the Federal Ministry of Economic Affairs. Their last comprehensive report was published in 1995 [8]. In addition there are some recent publications in journals. In these publications the expected problems are pointed out with increasing clarity - in one of these reports we read the warning "....there is certainly trouble ahead..." [6]. It is therefore all the more astonishing that these publications find no response from the government and also not from the public. The assessments of that agency of all, that is equipped with the greatest authority and the greatest competence, are ignored. This really tempts one to conclude that politicians rather prefer to follow their prejudices or listen to the insinuations of lobbyists.
Germany is an example of a country that is practically completely dependent upon oil imports, and is also a country where the possibilities of obtaining original information about the oil deposits of the world are certainly restricted. But how do the large producing countries who must at least have a good knowledge about their own situation, assess the supply situation? Let us look at three examples namely Texas, Norway and the Near East.
For some years now Texas imports more mineral oil than it produces - before that this State has been supplying oil to the world for decades. This is a cultural shock for Texas, for a Federal State whose oil once enabled the landing of the allied troops in Normandy in the second world war. There are clear indications that an increasing number of people in Texas are now seriously working on the possibilities of renewable energies: Now that the oil is seen to be ending, the new motto is "infinite power". The endangering of the "American way of life" is increasingly felt in Texas.
Norway, the oil eldorado of Europe, may serve as the second example: The production is expected to peak within the coming 2 to 3 years. The development of new oil fields will not be able to change this situation very much. As a consequence there has started a discussion in Parliament about how to best proceed in this matter. Large oil companies would like to develop new fields as fast as possible to suit their own interests, the government on the other hand would like to delay the new developments. For the first time the government argues that this is necessary in order to stretch reserves.
In the Near East the debate has, for perhaps obvious reasons, not reached a stage comparable to Norway. But quite obviously the OPEC States are at the moment acting against their own economic interests, when they recently increased the production quotas. This increase led to a drop in prices that in total gave the OPEC States a lower income than before. It is obvious that in contrast to this a reduced production would lead to big price increases and thus to more income for the oil States. It can only be a question of time until the OPEC States use their market position of increased power in this direction. Really it can only be explained politically why the OPEC, who now plays a greater role in the supply of oil in the world than before the oil crises, makes so little use of its strength. An obvious political explanation is the fact that many oil potentates depend on foreign protectors and thus have to respect the interests of their protectors. But perhaps the oil States in the Near East just have different time horizons and more patience, perhaps they think that it is only a question of a few more years until their market power will rise to a decisive level, and this time not temporarily but permanently.
8. How does the oil industry treat these questions?
For decades the oil industry has managed to speak about these questions with one voice. For the first time last year one could observe clear differences of opinion in the statements of individual companies about their future strategy. We regard this as a strong hint that the oil industry is changing and looking for new orientation: we have forerunners and protagonists of new business fields separating themselves from the defendants of the "status quo" and of vested interests.
Whilst Exxon must be seen as the exponent of the old course, companies such as ENRON, BP, Shell or even Elf Aquitane, are departing from the unison choir.
But none of those companies following new lines argued that the reorientation is caused by a tense reserve situation. In contrast, the soberly published statistics suggest an unchanged situation that does not give cause for worries. Whilst Exxon treats the public with a (des)information campaign through their German subsidiary Esso ("our great grandchildren will also drive cars", "the world oil reserves are today as high as never before"), Shell and BP are remarkably guarded and do not engage in more substantial interpretations.
Instead the new thinking can be seen in other fields: in the political discussions on measures to tackle the problem of global warming, ENRON is in the front ranks of the protagonists proposing a carbon dioxide tax. The company also played an essential part in founding a new political lobby for supporting a strict protocol for climate protection ("European Business Council for a Sustainable Energy Future"). Some years ago ENRON took over the largest American wind energy producer, ZOND, and recently is building up a worldwide network of companies in order to market renewable energies. ENRON together with AMOCO founded the subsidiary company ENRON Renewables, which then took over the photovoltaic production company SOLAREX. In Germany a wind power company, Tacke, was recently taken over and is to become the center of the European activities.
BP surprised the public in the Summer of 1997 with a noteworthy speech by the Chairman of the Board, John Browne. In the preparations for the climate conference in Kioto for the first time an oil company declared that the worries about the greenhouse effect will have to be taken seriously, and that BP shares these worries. Even though the causes of global warming were still not proven, the principle of precaution requires that action is taken. Shortly before this speech the company left the Global Climate Coalition - a lobby of the American oil and automobile industry to prevent political measures for the protection of the climate - and argued that their interests were no longer adequately represented. Both of these actions were followed with great interest by observers. For the first time dissenting views within the oil industry were discussed in public.
BP still makes a lot of money in the oil business, at the same time new business opportunities in other fields are being developed. BP now is one of the largest producers of solar cells in the world and is following an offensive marketing strategy. Early in 1998 in California the worldwide first large production plant of thin-film solar cells went into operation and BP says this plant will reduce the previous manufacturing costs to a third.
The Brent-Spar affair drove Shell into the defensive on environmental issues and is perhaps the reason why Shell is also changing its tune. On the other hand as early as 1994 Shell was getting much attention for publishing an energy scenario up to the middle of the next century. This scenario - although still carefully worded - finds it to be possible that by the year of 2050 half the world’s energy requirements could be supplied by renewable energies. Such a scenario had until then only been considered by environmentalists.
Following the "new" politics of BP, Shell also declared that global warming is to be taken seriously. There is an astonishing similarity in the wording of Shell in justifying their worries, to that of BP. Then shortly before the climate conference in Kioto came another offensive: Shell announced the founding of a fifth business division - concerned exclusively with the production and marketing of renewable energy - with equal status as the already existing ones. The declared aim is to achieve a market share of 10% by the year 2010 in the photovoltaic market. Into this new division large funds will be invested. Apart from this Shell is the biggest private owner worldwide of forests and is engaged in the use of biomass for energy and chemical purposes. At the beginning of this year the board even declared an environmental tax on mineral oil to be acceptable.
The "defectors" from oil industry’s former united front which we tried to illustrate here, are still a minority. Most oil companies still maintain their old policies.
The drastic changes of policy by large companies like BP, Shell and ENRON at first glance lack credibility, but can appear plausible even for outsiders if they are seen before the background we tried to illustrate of a shrinking oil market in the medium and long-term. Not that the oil market will break down within the next few years - but the economic framework will change in such a way that there certainly will be new business opportunities in the field of renewable energy techniques. It will be increasingly more lucrative to invest in the building up of renewable energy techniques than in the development of new oil fields which tend to be ever smaller and smaller and more difficult to access. It is this new business where some companies want to be in the front line.
9. Outlook
The next few years, until the worldwide peak of oil production is reached, will probably see a series of violent upheavals of oil prices, both upward and downward. Only when the production peak has been passed will the instability of the oil prices come to an end. The market will then reflect the long-term shortages. The oil price level will be significantly higher than it is today. This will provide a signal of long-term significance for consumers and investors alike and everybody will then attempt systematically to replace oil by other forms of energy. How fast these adjustment processes will be, and what effect they will have on the price level cannot be predicted in detail.
We also believe that the potentials for saving energy are much greater than is commonly thought. E.g. we only have to think of automobiles. It is "just" a question of social habits and social values as to whether a large car can be replaced by a smaller one. The primary benefits of car use are to a great extent independent of the size of the car.
In the long-term oil as a carrier of energy will be less and less important. The question for how many more years the oil will last, will have no practical relevance anymore. Presumably the production of oil in large quantities will one day be stopped, just as the mining of coal in Germany is about to being stopped, although there is still quite enough coal left under the ground.
It is very important that the finiteness of oil is understood as a present problem, and not as one that can wait to be tackled seriously in a few decades. Only then will people believe that we have to start now with a fundamental restructuring of our energy economy, that we have to act fast, and that there is no alternative to all this.
To us the interrelations in the oil and energy economy we tried to illustrate, adequately explain, as to why, e.g., such a large and powerful company like Shell does not invest in nuclear energy, but does invest increasingly in renewable energies. We can observe right now how some of the large oil and gas companies are about to set the course for a renewable energy future. These companies cannot be blamed for not pointing out to the public the fact that in the near future a new game will be on. But parallel to all this the oil industry naturally wants to rely heavily on natural gas in the time ahead - until renewable forms of energy can take over a large part of the energy supply while at the same time the ending of the availability of oil will already become clear. The necessary investments for natural gas can be written off fast, that is why this is good business for the companies even if it lasts only for a relatively short period of time.
Society has to carry out the great task of finding and developing workable alternatives for a sustainable energy future - this needs the efforts of everyone. We need as many options as possible for the use of renewable energy. We know that this course is unavoidable, but on the other hand market signals give us the illusion that this is not so. It is therefore the task of the politicians to accelerate the necessary changes in the energy economy and to prevent further investments in dead-ends, especially by taxing fossil energies. But the large environmental movements also have an important task here of preparing the ground for the necessary policies.
Translation by
Beyer Consulting GmbH and Jörg Schindler,
Januar 1999
Version 6
The original
article "Wie lange reicht das billige Öl" was
published in:
Scheidewege, Jahresschrift für skeptisches Denken, 28, 1998/99
Baiersbronn 1998
[1] Hubbert, M. King: Nuclear energy and the fossil fuels. Am. Petro.. Inst., Drilling and Production Practice, 1956
[2] Meadows Dennis L.: The Limits of Growth, New York 1972
[3] Council on Environmental Quality [Hrsg.]: The Global 2000 Report to the President, Washington 1980 German issue: Global 2000, Frankfurt/Main 1980
[4] Petroconsultants [Hrsg.], Campbell, C.J. and Laherrere J.H.: The Word/9s Oil Supply 1930 – 2050, Geneva 1995
[5] Petroconsultants [Hrsg.], Campbell C.J.: The Coming Oil Crisis, Brentwood (1997)
[6] Hiller, K: Future World Oil Supplies – Possibilities and Constraints, in: Mineral Oil Natural Gas Coal, 113th annual, Issue 9, September 1997
[7] Dürr, H.-P.: The 1,5-KW – Society, Global Challenges Network e.V. Munich October 1994
[8] Bundesanstalt for Geo Science and Raw Material (BGR): Reserves, Resources and Availability of Energy Raw Materials 1995, Stuttgart 1995