In this post, we will switch from a look at the shale gas outlook in the US to that globally. Again, the starting point is a forecast of total energy consumption out into the future, and then a discussion of what amount of gas would be needed to produce a true energy transformation. The latest set of forecasts we have are those from BP’s Energy Outlook 2012, just released this January. The report can be found here.
Interestingly, there is not that much difference between the aggregate energy numbers produced by the major organisations that predict energy supply and demand into the future (IEA, EIA, OPEC, BP and Exxon Mobile). I think that this is because they generally start with a GDP growth (and energy intensity) assumption and then work backwards to produce supply and demand forecasts. (The question of whether growth drives energy or energy drives growth is a topic for another post.)
In my last post, I noted how a whole host of reports have been trumpeting shale gas as the ultimate ‘get out of jail free’ card from any kind of energy constraint and, indeed, the need to invest in renewables to protect the planet from climate change. Here is Mortimer Zuckerman talking of a shale gas ‘revolution’ in the Wall Street Journal.
America’s soaring natural-gas production has already helped cut our share of oil consumption met by imports to 47% last year from 60% in 2005, according to the Energy Information Administration. The shale-gas revolution, with proper safety practices, can be expected to continue this trend while addressing three longstanding concerns of the energy business: energy scarcity, energy security, and environmental risks. In a word, we have a chance to remake our energy future.
Note that an awful lot is being asked of shale gas if it going to help solve scarcity, security and environmental risks all at once. We are in effect asking it to do three things: 1) allow total energy consumption from all energy sources to grow in order to solve the problem of scarcity, 2) enable us to switch away from coal in the generation of electricity in order to blunt (but not stop) CO2 emission growth and so ameliorate environmental risks, and 3) facilitate a transport revolution that allows us to stop importing oil from geopolitical hotspots. Continue reading
The idea that resource constraints pose a limit to growth (one version of which is Peak Oil thoery) is subject to constant attack, with economists of a neo-classical persuassion frequently leading the charge. As such, those who believe in resource cornucopia, or at least that resources pose no impediment to economic growth, deserve a close reading since the victors of this debate will define how our world evolves over the next 50 years.
As I mentioned in my last past, it adds nothing to the debate when many mainstream economists begin their analysis by misconstruing the arguments of their opponents. Take a careful note of three things that modern Peak Oil theorists are not suggesting: they emphatically are not stating that 1) price doesn’t matter, 2) there are no more reserves to be found and 3) technological advances are irrelevant. If you don’t believe this statement, then I urge you to actually read the landmark article by Campbell and Laherrere in Scientific America (here) that brought the topic of Peak Oil back into the public domain. Or, at the very least, read the excellent summation of Peak Oil thought that ends their article:
The world is not running out of oil—at least not yet. What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.
At the heart of economics is the idea of scarcity—or rather scarcity in the face of infinite wants. Yet scarcity is an issue that touches upon us all, and thus draws the interest of different scientific disciplines. So if we take the idea of scarce oil (let’s call it Peak Oil), we should not be surprised that chemists, physicists, engineers and geologists would want to take a view.
Nonetheless, many economists appear to believe that they have a unique and superior understanding of how scarcity evolves through time (using the tools of supply, demand and price); and they often also behave as if no non-economist could ever hope to gain such insights. As such, we may criticize them for being arrogant—but not as necessarily wrong (and at this point I have to declare that I am an economist by training). But wait a minute, if the arguments of mainstream economists are so evidently correct, why do many of them appear to have a pathological need to misconstrue the arguments of their opponents?
Probably the most enduring urban legend (or urban myth if you prefer the term) of them all in the study of resources is the common interpretation of The Limits to Growth report to the Club of Rome published in 1972. Surely, everyone knows that the report’s forecast of resource exhaustion by the year 2000 turned out to be nothing but a huge joke. And if we don’t know this directly ourselves (having not read through the report because frankly who has the time, and where would we find a copy anyway these days), we know because high profile journalists and media pundits have told us of the report’s spectacular failure on TV, in newspapers or over the internet (or someone in a pub or bar said that is what the report said). Continue reading