Happy Days are Here Again?

The Economics of Exploitation. Since one exercise in 1998, the USGS has not tried to estimate how much of the resources may be economically recoverable. It may turn out to be rather small.

At some point, there is a wall when the energy return on energy invested (EROEI) approaches 1:1, whatever the price. (Already, it is said to be down to something like 1.5:1 for heavy oils and tar sands.)  Well before that happens, drilling will not be worth the investment. Coal will follow oil and gas, and we will be at the end of the fossil fuel era even though some fossil fuels will remain in the ground and may be tapped for high-value (mostly non-fuel) uses. But there is nothing in sight that changes the basic arithmetic of exhaustion.  Fossil energy resources are finite, and we are approaching their end.

Population growth is a much more fundamental source of our energy problems than that single calculation about imports (above) suggests.   It has been the fundamental driver of the decline in natural resource availability that has been becoming increasingly evident, and future population growth will accelerate the decline.


What are the lessons from this brief exercise?  The euphoria is momentary.  The U.S. has more recoverable energy than it did before fracking — for better or perhaps worse, because it will cause more environmental damage and global warming. We don’t really know just how much more energy. For crude oil, the USGS does not see much of an energy bonus from fracking, and EIA’s estimates suggest that the bonus will begin to decline in eight years. We will continue to need large imports, and dependence becomes more and more dangerous in an increasingly fragile and energy hungry world. For natural gas, a temporary glut has happened in the United States, but it is a result of investment generated by the current euphoria and may be very temporary, judging by the official estimates of recoverable resources. The market price is now below the cost of production, and the three principal natural gas producers in North America have already begun to adjust to the glut by cutting production and diverting their emphasis to liquid fuels.

The Dilemma.  The reality remains: fossil energy is not forever.  We are in the transition from fossil energy, and the momentary euphoria should not obscure the shortness of the reprieve offered by fracking. Daydreams of a permanent surplus of oil and gas are just daydreams.

… or perhaps nightmares would be a better word. The press and the politicians seem to have forgotten about anthropogenic climate change.  We face a dilemma of truly awesome dimensions.   The more fossil fuels we consume, the more rapid and terrifying will be their impact on climate change.  If in fact the supply is more limited than the present euphoria would have us believe, the less time we will have to bring our population and our consumption patterns down to levels that can survive the painful transition to renewable sources.

The Hansen Proposal.  James Hansen is a leading student of climate change.  He has just written an OpEd detailing the immediate and long-term impacts of climate change.8 He starts with the sentence: “Global warming isn’t a prediction. It is happening.” He cites the recent droughts and heat waves as evidence, and goes on to describe a future with higher sea levels and intolerable temperatures. “Civilization would be at risk…If this sounds apocalyptic, it is.”

Hansen writes that the Canadian tar sands contain more oil than the world has consumed in its history, and U.S. “tar shales” (oil shales) contain even more.  If these are burned, they will make catastrophic global warming a certainty.  (On this point, I would demur.  The EROEI calculation I described above puts limits on exploiting all those bitumens.  Their presence has long been known, as have the limits. The World Energy Council years ago cited an even higher figure for Canadian and Venezuelan tar sands and heavy oils, but it estimated that only 1.3% of the total are proven, economically recoverable reserves, with another 5.4% “probable”.9 Nevertheless, Hansen’s argument stands, even if those particular statements may be questionable.)

As to what to do about it, Hansen offers a policy with which I thoroughly agree. “We should impose a gradually rising carbon fee, collected from fossil fuel companies, then distribute 100 percent of the collections to all Americans on a per-capita basis every month.” That distribution, he says, would more than compensate most people for the increased cost of energy.  I am not so sure of that, but I strongly believe that a carbon tax – and perhaps not so gradual – should be a central feature of any serious effort to address the problems we face.   It would reshape America and, indeed, the world.  It would begin to address the climate issue, seriously, for the first time. It would be painful, but it would work, whatever one’s beliefs as to the amount of oil and gas we have left.

The Ticking Clock.  Time is running out.  We must deal with both sides of the dilemma.  Present policies are leading us into a climate crisis.  They will lead us into an energy crisis if we run through our fossil energy resources before we have reduced our numbers and changed our lifestyle to survive in a leaner world with a diminished flow of energy.  We cannot count on imports, because most of the world faces just as desperate a future, and even sooner than we do.  (The USGS conventional oil and gas survey cited above [Note 4] also produced estimates for the rest of the world.  It came up with a decline of 8% from the 2000 estimate for oil, and an increase of only 29% for gas.)

The refusal of the press and politicians to admit those facts and change their policies on development, economic growth, population growth – and on the mass immigration that has been driving population growth — guarantees that the transition will be more abrupt and more brutal.


Lindsey Grant

Lindsey Grant is a retired Foreign Service Officer; he was a China specialist and served as Director of the Office of Asian Communist Affairs, National Security Council staff member, and Department of State policy Planning staff member. As Deputy Secretary of State for Environmental and Population Affairs, he was Department of State coordinator for the Global 2000 Report to the President, Chairman of the interagency committee on Int'l Environmental Committee and US member of the UN ECE Committee of Experts on the Environment. His books include: Too Many People, Juggernaut, The Horseman and the Bureaucrat, Elephants in Volkswagen, How Many Americans?

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