The heft and feel of a well-worn handle,
The sight of shavings that curl from a blade;
The logs in the wood pile, the sentiment of huge beams in an old-fashioned house;
The smell of fresh cut timber and the pungent fragrance of burning leaves;
The crackle of kindling and the hiss of burning logs.
Abundant to all the needs of man, how poor the world would be
Without wood.

Everard Hinrichs, quoted by Eric Sloane in A Reverence for Wood


Friday, June 29, 2012

Oil: The Next Revolution

We ended the last post with an admission by the government of Denmark that their plan for the elimination of fossil fuels in their country by 2050 may not be perfect because of the fact that there are many "unknowns". We could fill shelves of books with all the unknowns that could make their energy strategy sub-optimal by the year 2050, but let's just touch on one current event that is being ignored with all the other big political stories in the news recently.

We are on the brink of a revolution in the oil of a tremendous increase in oil production in the next decade that could last for a century, or more. The title of this post is taken from a report of the same name authored and released this month by Mr. Leonardo Maugeri, an Italian oil executive and fellow at the Harvard Kennedy School Belfer Center for Science and International Affairs. The report, as its implications are slowly grasped by the governments of the world, will hopefully result in a sea change in the way that global energy policy is currently formulated. Here is a short video with Mr. Maugeri explaining the bottom line on his findings.

Among his conclusions...

  • Oil is not in short supply. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no “peak-oil” in sight.
  • The age of “cheap oil” is probably behind us, but it is still uncertain what the future level of oil prices might be. Technology may turn today’s expensive oil into tomorrow’s cheap oil.
  • The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades.
  • At the same time, the Western Hemisphere could return to a pre-World war II status of oil self-sufficiency, and the United States could dramatically reduce its oil import needs.

His findings will come as a surprise to most people who have heard for decades now that we were approaching, or have passed, "peak oil"; that is, sooner than later the world's oil production would begin to decrease and in the face of increasing demand, the cost of that oil will skyrocket. Instead, as was explained in a previous post by the late Dr. Jude Wanniski, we are discovering that the earth is, in fact, a ball of energy that we are just beginning to learn to harvest. True to Dr. Wanniski's prescience, higher energy prices are driving innovation in fossil fuel exploration and recovery, and the results are staggering.
"Forget ‘peak oil.’ Or so they say. It has fracked its way to energy self-sufficiency… there are roughly 20 major shale oil plays in the US. The largest five of these new reservoirs have more than 20 billion barrels of recoverable oil… meaning that each of these new fields is not only the largest in US history (by a wide margin), but that each of them, individually, would more than double the proven reserves of domestic oil… That is why America is on track to be the world’s leading producer of oil within the next five or six years… and why the most knowledgeable oil analysts are predicting a new all-time high of American oil production by 2017. In fact, we’ve already become a net energy exporter for the first time since 1949. 
-Bill Bonner, The Daily Reckoning: A Valley in Peaks...and the Biggest Fraud in Economics 
So, regardless of government policies to drive up the price of fossil fuels so that "green" fuels could be more competitive, more oil than ever before is being found and will soon be making its way to global markets. In fact, the higher prices that were meant to benefit the development of renewable energy resulted in record profits for oil companies, and to technical breakthroughs that in fact, are about to make oil more abundant than ever.

The bright side of the story is that advances in renewable technologies have in fact taken place. Less competitive technologies (think Solyndra) are being driven from the marketplace, and the most competitive renewable energies have been improved and are finding their market niches, such as biomass energy in the thermal heat sector. So I found the report of Mr. Maugeri exciting and a breath of fresh air for the struggling global economy. More abundant energy, in all its forms, will get a lot of things moving and will restore folks' confidence in our ability to survive another few centuries.

So, even if the Danes and other small countries like them continue in their desire to be free of fossil fuels, that's fine. They'll presumably be happy with their expensive wind power; Canadians, Scandinavians, and Northeasterners will be happy with our wood heat; Spaniards and Californians will be happy with their solar power; and everybody will be happy with abundant oil, coal, and natural gas.

One big happy family. At least, that's the plan.

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