Fausse-ill fuels

Another little writing exercise for my energy and environment class

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 ARE WE RUNNING OUT OF FOSSIL FUELS


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The phrasing of this question points to an important aspect of fossil fuels. The simple fact that we can “run out” of them means that there is an issue in the renewability of this resource. In the case of fossil fuels, the scarcity of the resource is an economic balance between supply and demand and the feasibility of extraction with current market prices.

It is important to understand what the nature of the resource we are discussing is, in order to properly understand the idea of its depletion. Fossil fuels are carbon rich life forms that existed hundreds of millions of years ago that have, through geological action, been pressurized and transformed over several eras into coal, petroleum, natural gas, oil shale, bitumen and heavy oils (Britannica 2012). In terms of human time span, this resource is considered non-renewable, as we are consuming it at a faster rate than it can replenish itself and therefore production will eventually fail to balance with demand (Owen et al 2010).

The fossil fuel era is widely acknowledged to be bringing about a rise in atmospheric CO₂ concentrations, causing climate change (Andres et al 1999). Fossil fuels have been used since 1751 for various purposes, such as heating, cooling, electricity production and transportation (Andres et al 1999). Today, our societies are so reliant on fossil fuels that we use them to the detriment of current and future generations as their extraction and consumption carries with it the very real risk of large scale pollution of soil, water and air.

Debate has surrounded the question of scarcity of fossil fuels for decades and though fears are that supplies are running out, the consumption of this resource has steadily increased for the past 150 years and carbon dioxide emissions from production has multiplied by 500 times since the mid 18^th century (Andres et al 1999, Brecha 2012). As the price for oil increases, it becomes economically viable to pursue reserves that previously may not have been considered due to difficulty of access, lack of infrastructure, complexity of technology needed for extraction and cost of exploration (Brecha 2012). This is an argument against the concept of “peak oil”, which is the idea that oil production would reach an upper limit of production and then decrease dramatically (Smith 2012). Unaccounted for in this original hypothesis of resource scarcity, is that fossil fuels are highly tied to market processes and some argue that the effect of peaking is not indicative of the scarcity of a resource (Smith 2012). In reality, there is no reliable indicator for the scarcity of exhaustible resources, such as fossil fuels when they are market dependent (Smith 2012). 

As the easily accessible resources run out, the market adjusts based on supply and demand and the price that people are willing to pay for fossil fuels increases (Smith 2012). As conventional oil prices increase, there are more incentives for substitutes to these costly scarce sources, such as tar sands, shale oil and natural gas (Brecha 2012). Over time, as all these reserves are drained, the price will increase causing a shift in behaviour in the market. This is contrary to the concept of peak oil, because prices are what determine accessibility of the reserves, and in this case accessibility is what determines scarcity (Brecha 2012). Fossil fuels are limited in resource due to the nature of access. By this, I mean that at lower prices of oil on the market, producers aren’t willing to invest in more costly to harness reserves such as tar sands, which require massive amounts of investment and are profitable only if the price reaches a certain level.   As of 2011, the U.S. Crude Oil First Purchase Price was nearly $96 per barrel, and the tipping point for major tar sands production in Canada was in 2000 when prices started to climb above $30 per barrel (Government of Alberta 2011, EIA 2012).

In general, crude oil prices are relatively stable, other than the 2007 to 2008 jump, when oil doubled in cost in a twelve month span and then dropped down to half of its starting point (Kaufman 2011). Speculation in the market also affects the price of this commodity and therefore its production (Kaufman 2011).

Knowing the size of the secondary, non-conventional resource is important in order to transition from crude oil to tar sands for example. Extraction and production of non-conventional oil reserves is important to begin early enough to buffer the decrease in main reserves and prevent a huge fluctuation in the market (Brecha 2012). This is tricky, because until prices are high enough, there is no financial incentive to encourage this kind of exploration.

Conventional oil production is estimated to be going in decline and there is a general agreement that changes in supply, stronger environmental regulations and increasing prices will force the market away from crude oil (Owen et al 2010).

Whether or not we are running out of fossil fuels, I believe society should be investing in switching to renewable forms of energy. On the one hand, running out of traditional forms of fossil fuels means that we are constantly exploring harder to access reserves, which pollute more in the course of their lifecycle (Kaufmann 2011). In that sense it is not a viable long-term investment, as externalities such as environmental health and human health are not accounted for.  When these externalities are included in the overall assessment of energy forms, the cost-effectiveness of non-renewable sources like fossil fuels is greatly reduced and becomes on par with renewable energy (Valero et al 2012). In this sense, increasing prices of fossil fuels and scarce resources are driving innovation into alternate forms of energy production, including renewables that have a smaller environmental footprint in terms of water, air and soil (Stoglehner 2003).

Community ownership and decentralization of energy production

There is no clear answer as to whether depletion of fossil fuel reserves is a positive or negative scenario. What is imminently clear is that society will need massive structural changes to incorporate different kinds of energy into the grid. This new energy future will require both top-down and bottom-up approaches in how our energy consumption is viewed.

The sky is the limit for those willing to try

Systematic infrastructure changes will be needed to implement renewable energies that require storage for peak hours: smart grids, large scale batteries, more efficient transmission lines are but a few things that will need to be thought of. From the consumer’s perspective, it will require a vast reduction in consumption and a new way of thinking about oneself in the context of an energivore society. Consumers may have to stagger certain activities to reduce peak hour pressure on the grid, be willing and open to alter behaviour and expect price variations that reflect the new economy. These shifting prices and energy standards may also bring about a decentralization of energy production, encouraging consumers to become their own producers and take charge of their own supply and demand on a local level. 

References 

Andres, R. J., Fielding, D.J., Marland, G., Boden, T.A., Kumar, N., Kearney, A.T. (1999). Cardon dioxide emissions from fossil-fuel use, 1751-1950. Tellus. 51(B). pp. 759-765. 

Brecha, R.J. (2012). Logistic curves, extraction costs and effective peak oil. Energy Policy. 51. Pp.586-597 Accessed October 31st from http://www.sciencedirect.com/science/article/pii/S0301421512007744

EIA (U.S. Energy Information Administration). (2012). Petroleum & Other Liquids. Independent Statistics and Analysis. Accessed November 1st from 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=f000000__3&f=a

Fossil fuel 2012. Encyclopædia Britannica Online. Retrieved 01 November, 2012, from http://www.britannica.com/EBchecked/topic/214545/fossil-fuel

Government of Alberta. (2011, September). Understanding the oil sands: Oil sands. Accessed November 1st from

Kaufmann, R.K. (2011). The role of market fundamentals and speculation in recent price changes for crude oil. Energy Policy. 39(1). Pp. 105-115. Accessed November 1st from

http://www.sciencedirect.com/science/article/pii/S0301421510007044

Lutz, C., Lehr, U., Wiebe, K.S. (2012). Economic effects of peak oiL. Energy Policy. 48 Pages 829-834. Accessed December 31st from 

http://www.sciencedirect.com/science/article/pii/S0301421512004296

Miller, M. H. and Upton, C. W. (1985), The Pricing of Oil and Gas: Some Further Results. The Journal of Finance, 40: 1009–1018. Accessed December 31st from 

http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.1985.tb05030.x/abstract

Owen, N.A., Inderwildi, O.R., King, D.A. (2010). The status of conventional world oil reserves—Hype or cause for concern?, Energy Policy. 38(8). Pp. 4743-4749. Accessed December 31st from http://www.sciencedirect.com/science/article/pii/S0301421510001072

Smith, J.L. (2012). On the portents of peak oil (and other indicators of resource scarcity). Energy Policy. 44. PP. 68-78. Accessed November 1st from http://www.sciencedirect.com/science/article/pii/S0301421512000171

Stöglehner, G. (2003). Ecological footprint — a tool for assessing sustainable energy supplies. Journal of Cleaner Production. 11(3). Pp. 267-277. Accessed Nov. 1st from  http://www.sciencedirect.com/science/article/pii/S095965260200046X

Valero, A., Valero, A. (2012). What are the clean reserves of fossil fuels? Resources, Conservation and Recycling. 68. PP 126-131 http://www.sciencedirect.com/science/article/pii/S0921344912001425