Abstract of Peak Oil and Energy Policy – for Tulane Law School Environmental Law Summit April 2, 2011, by Roger E. Sowell, Esq.
Update: Link here for full speech with slides (end update)
Update: Link here for full speech with slides (end update)
The simple, but absolute truth is this: every atom of carbon on the Earth stays on the Earth. Oil is made of carbon plus hydrogen and trace elements. The carbon is still here; all of it.
There are but three solutions to oil depletion: 1) Use less, 2) Find more, and 3) Find alternatives. Presently, we as a civilization are doing all three with oil. Until very recently, recycling transportation fuel was not an option.
Peak Oil predictions, while made sincerely and repeatedly since the 1950s, have never come true. This is a sure sign that the basis for Peak Oil prediction is false. It is also said that oil is a non-renewable resource, that it will someday be exhausted. New technology, however, has made that false. Just as we know how to recycle rusted iron into new iron and steel, algae-to-oil technology recycles CO2 from the atmosphere back into oil. Oil combustion is one of the sources of CO2. The only limitations to recycling CO2 to oil are energy input, adequate land, and costs. The energy is from sunshine and therefore is free.
Technology improvements in oil discovery and production provide more oil each year, even at relatively low oil prices. Higher oil prices will result in much more oil discovery. Technology improvements in automotive and truck technologies allow societies to consume smaller amounts of oil as time passes.
The most important aspect of a National Energy Policy is not to be short-sighted, but instead focus on the long view. It is far better to import oil from countries with ample supplies, than to deplete our domestic reserves. We will need those domestic reserves when our imports are cut off, and we face a prolonged military conflict such as World War II. Restrictions on domestic oil drilling are, therefore, very much in the nation’s best long-term interest.
The US has many laws related to a national energy policy, both federal and state. Recently, the Energy Policy Act of 2005 mandated large amounts of domestically-produced ethanol as a gasoline substitute. It also mandated Federal fleets use alternative fuels. In a different federal law, the CAFÉ standard was increased from 25 to 35 miles per gallon.
OPEC sets the price of oil to maximize revenue but discourage development of oil alternatives. OPEC set the price at $32 in 1980 and has generally maintained that price, adjusted for inflation and excepting short-term departures. This price was chosen to discourage coal –to-- liquids plants by oil-consuming nations. Canada’s oil sands were developed even though incurring a loss initially. Other technologies for alternatives are also being developed, such as gas-to-liquids.
U.S. Energy Policy should focus on the critical, long-term issues, and let the market sort out short-term winners and losers through competition and innovation. The Energy Policy must ensure the US maintains a viable domestic oil industry, capable of quickly increasing production if need be. It is critical that we attract and retain qualified personnel with the requisite oil industry know-how. Another critical, long-term issue is feedstock for petrochemicals, lubricants, asphalts, and specialty oil products.
If we must use an Energy Policy to manipulate oil consumption and resources, there are many, many alternatives. Speed limits, gasoline taxes, and CAFÉ standards have great impact on consumption. It is crucial that we not encourage diesel fuel for vehicles. We have technology to achieve 100 mpg or greater, but the cost per vehicle is high. If reduced oil importing is a critical goal, government also should subsidize after-market hybrid drive systems on newer vehicles.
4 comments:
I broadly agree with what you've said.
"The most important aspect of a National Energy Policy is not to be short-sighted, but instead focus on the long view. It is far better to import oil from countries with ample supplies, than to deplete our domestic reserves. We will need those domestic reserves when our imports are cut off, and we face a prolonged military conflict such as World War II. Restrictions on domestic oil drilling are, therefore, very much in the nation’s best long-term interest."
Wise words. Keep the oil and it can be used at home with increased efficiency in the future.
I am puzzled about one statement:
"It is crucial that we not encourage diesel fuel for vehicles."
It is not obvious to me why that should be and I would appreciate if you could elaborate a little. Do you mean simply diesel as alternative to gasoline, because of the increased mpg but more expensive verhicles?
Might that not conflict with the potential of GTL production of DME? My understanding is that DME is a relatively direct diesel substitute.
One last question - would you care to comment on the contribution of shale gas to your title? (The word verification for this comment was "frackbr" - how appropriate!)
@ Verity Jones, thank you for the kind words. We will very much, perhaps desperately, need our domestic oil someday.
The post is an abstract of a fairly long speech, and each paragraph could be expanded to provide more details. Regarding not using diesel fuel in the US, that is not obvious so here is my thinking.
US refineries are constructed and configured to yield, on average, 30 percent diesel by volume for each barrel of crude oil as feedstock. Thus, if diesel demand in the US increases 1 million barrels per day, our refineries must increase crude oil consumption by 3.3 million barrels per day.
There is also the possibility of importing the excess diesel fuel, that is, weigh the make-or-buy decision and choose the most economic option.
In contrast, gasoline represents about 60 percent of the refineries' output. Therefore, 1 million barrels per day increased gasoline demand requires only 1.6 million barrels per day of crude oil.
From an energy policy viewpoint, and to reduce importing of foreign oil, we therefore should do all we can to minimize diesel fuel consumption. We should encourage diesel hybrid drive systems on stop-and-go truck fleets. We should discourage automobiles that use diesel.
The EPA did discourage diesel-powered automobiles for years, perhaps unwittingly. (The EPA's wit-content is yet to be proven, in my opinion.) By refusing to allow diesel engines in cars because they did not meet EPA's very stringent emissions requirements, diesel demand in the USA has been lower than it would have been otherwise.
Now, however, diesel engine manufacturers produce engines that meet EPA's requirements. The only thing holding back increased vehicle sales is the high price of diesel cars.
Diesel substitutes, such as DME from GTL you mention, are another option to be considered. Where such homegrown substitutes are economic, they represent an attractive investment opportunity.
Finally, shale gas certainly impacts a national energy policy. Natural gas is used widely in local fleets such as buses and delivery vehicles. Such vehicles formerly ran on diesel, thus CNG contributes to reducing oil imports at a 3.3 to 1 ratio. NG can also be used as GTL feedstock.
Thank you. That is very clear. I was indeed missing the knowledge of refinery configuration.
I believe diesel consumption in Europe is proportionally higher than in the USA. That leads me to wonder if refineries there are configured differently.
@ Verity Jones, yes, European refineries in general produce less gasoline and more diesel compared to US refineries. The reason is the US has much more "Cat Cracking" capacity, more formally known as Fluidized Catalytic Cracking process. Europe has more Hydrocracking capacity, which is used to produce diesel fuel instead of gasoline.
In fact, Europe has an excess of gasoline production and exports gasoline to the USA, primarily into the New York market.
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