Sunday, April 14, 2013

What happened to Peak Oil? – The new energy revolution.

I am writing this stepping onto the bus using my new Surface Pro tablet computer while being connected to the cloud using my Windows phone as wireless network. Yes we’re living in truly revolutionary times. Not only are we experiencing a technology revolution, we’re also living in an energy revolution and that is the theme of this posting: What happened to Peak Oil?
As a geologist with over 30 years experience in the oil patch, I realize that although  economics rule the day in terms of where we putting our efforts, technology, social trends and many other factors determine the final direction of our collective lives.
Peak oil made the correct assumption that our resources are limited. Yes, we have run out of oil by now – that is oil to be found in, what today we consider, highly permeable reservoirs. Because, with the technologies of the 1970s it were only those reservoirs that allowed us to produce oil and gas economically.
How much has live changed in terms of hybrid cars, hydrogen driven cars or electric cars in the fight to conserve energy. The way we look at the environment and a sustainable economy has resulted in enormous shifts of thinking. But in the end, I think that economics will determine that we have vehicles powered somehow by natural gas and oil for some decades to come.
I would like to digress for a moment (don’t I always?). Although I feel that green activists, leftist journalism and for that matter, journalism on the right, all have their place in the ongoing discussion about the direction we as a society take. However, I do not like the ideological fanaticism that these activist groups espouse and their ‘adjustments’ of facts.
It is so ironic; with the 'green' opposition to new pipelines as an unintended consequence they have driven oil companies to much riskier rail transport. The same is true for the greens’ war on carbons and their push to alternative energy under the guise of fighting global warming or climate change in the most futile and hysterical way possible. Their audacious and arrogant views that humans can significantly affect and control climate is beyond believe.
As I have said in earlier posts, it is important to keep our earth clean and sustainable but not to the fanatical degree of anti-human behavior as displayed by those activists. Another irony in their opposition to hydrocarbon powered vehicles is the so-called hydrogen engine as developed with mixed success by companies such as Ballard and Plug. Imagine a world filled with hydrogen powered cars that spout… 'poisonous' water and water vapor; the latter being an even more powerful greenhouse gas than CO2! Well let’s go back to our original discussion.
So our conservation of energy has resulted in delaying 'Peak Oil'. But it is technology on the other side of the hydrocarbon equation that has really rendered the 'Peak Oil' concept obsolete. The new horizontal wells penetrating sometimes up to 4 miles of reservoir combined with multistage fracking has opened up a whole new type of reservoir - non-conventional low permeable reservoir.
First we applied these technologies in ‘tight gas reservoirs’ and we were thus successful that we created an oversupply of natural gas. Our pipelines and markets were filled to the rim and with North America not being well connected to the global natural gas infrastructure, gas prices collapsed to below the cost of production.
Many North American industries took advantage of the situation such as electric utilities and car manufacturers that build engines running on natural gas. Transportation is in the process of quickly converting a lot of trucks to natural gas-powered. With more natural gas than we can handle, we have actually started to export it. However, our current export facilities are so far behind in capacity that for the immediate future we’re drowning in our own gas. Finally, after five years, our gas production has stabilized and a local supply/demand equilibrium is starting to form. In response, gas prices have started to revert to a more normal level(close to the cost of production). It will take several years before we can export this gas and before we will have true global gas pricing.
The same is now true for oil as well. Pipeline constrictions have cost industry and society billions. But, in spite of reactionary green, left activism (and the Xenophobic Tea Party), export facilities will be build and antiquated oil and gas export policies in the U.S. will be defeated, allowing us to reduce our trade imbalances and government deficits. Nothing is as economically stimulating as affordable energy and in-spite of Obama’s dithering and damaging politics, his administration is likely to preside over the beginning of an extremely prosperous period in North American history.
Let China and other BRICS take care of themselves – I am sure they will do well upon reaching a critical mass of economic self-sufficiency. The new energy revolution has the potential to take care of the trade imbalances and debt levels that we all worry so much about (well... some more than others).
If there is one thing I have learned then it is humanity's unlimited potential. You just have to dare to lookout into the future far enough. There is no shortage of energy around us, whether hydrocarbon based, or solar, or geothermal. The real issue is to achieve the right balance of energy sources at reasonable prices. For that, our collective wisdom as expressed in the markets – the invisible hand – is ideal. It may be a bit slow and it may be indifferent to the ups and downs in the lives of individuals and that is where neighbor, community, province, country and possibly a global government have a role to play.
How much this role is to be, seems the perpetual topic of discussion between left, right and the center. But in all of this, we should never forget about individual accountability and the right of reward when we’re doing good.
I think, the term ‘Peak Oil’ will fade in history. It has proven to be very useful in making us aware of our resources and how to manage those resources in a responsible fashion. I also hope that we will never forget its lessons.


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