by jboullion | May 16, 2008 | Uncategorized
From a new Fossil Fuel Watch by Michael Vickerman:
Could there be more convincing proof of America’s debilitating addiction to oil than the recent calls to institute a gasoline tax holiday issued by two of the three presidential aspirants still in the race?
Imagine what would happen if a candidate for public office endorsed a repeal of cigarette taxes. Articulating such a position would instantly disqualify that candidate from serious consideration by rank and file voters. Indeed, it would stop a candidacy faster than you can say “macaca.”
Yet, while Sens. John McCain or Hillary Clinton, both advocates of suspending the 18.4 cents/gallon gasoline tax, have been excoriated in editorials for espousing such patent flim-flam, they don’t seem to have lost any ground with the voting public.
While the McCain-Clinton gas tax suspension proposal may have a set a new low in the public discussion of energy, it can’t be dismissed as mere election-year pandering. Instead, this proposal reveals a dark truth about ourselves: we Amnericans are psychologically unprepared to accept the energy reality we now inhabit, which is that oil is neither cheap nor plentiful (relative to demand). The same holds true for natural gas.
The factors converging to create global energy insecurity—diminishing output from supergiant fields, rapid demand growth in the world’s most populous nations, civil unrest in oil-exporting nations, etc.—cannot be held at bay with political stunts.
Whether its citizens like it or not, the United States will, going forward, consume a smaller portion of the Earth’s remaining petroleum than at any time before during the Automobile Age.
by jboullion | Apr 4, 2008 | Uncategorized
A presentation by Michael Vickerman at the Green Vehicles Workshop sponsored by the Milwaukee Area Technical College.
Vickerman poses the question, “[C]an we change our current habits and attitudes to transition into a less mobile but more sustainable future relying on renewable energy flows and low-EROEI energy stores?”
Complete presentation here.
by jboullion | Nov 2, 2006 | Uncategorized
Petroleum and Natural Gas Watch, Vol. 5, Number 8
by Michael Vickerman, RENEW Wisconsin
November 2, 2006
Sating America’s prodigious energy appetite depends on the continued availability of Canadian energy sources. About 25% of the crude oil and 80% of the natural gas imported into the United States come from our very accommodating neighbor to the north. More than half of the fuel pumped out of Canadian wells heads south to keep us Yankees warm and happily tooling about on our highways.
Even though the Canadian economy is no less dependent on hydrocarbon energy than ours, Canada has been drilling as many wells as necessary to keep the high-maintenance American economy humming. If this pedal-to-the-metal production policy were applied to a non-strategic product like, say, maple syrup, few people would care about the consequences. But there is nothing on the horizon to replace the nonrenewable high-density energy sources that Canada so generously sends our way.
This begs the question: how long can Canada go on behaving like America’s most compliant energy colony?
Not very long, according to David Hughes, a petroleum geologist with the Geological Survey of Canada. Speaking before the World Peak Oil Conference held in Boston last week, Hughes painted a remarkably pessimistic picture of Canada’s energy future, especially regarding natural gas.
Despite record drilling activity, natural gas extraction volumes have slipped from the peak set in 2002, and output per well is now declining at an annual rate of 28%. Put another way, just to keep the output from declining this decade, producers must complete nearly one-third more wells in 2007 than in this year, and then repeat that achievement in 2008, 2009 and 2010.
That would be a daunting challenge even if there were rigs and drilling crews standing by. As it now stands, there is no spare capacity of this sort anywhere in North America.
With only eight years of proven reserves left in Canada, Hughes suspects that natural gas output is about to fall off a cliff. Barring a miracle or two, Canada will soon experience challenges in providing for its own citizens, let alone producing surplus volumes bound for American furnaces.
A potentially wrenching resource conflict is now brewing on our continent, thanks to the North American Free Trade Agreement (NAFTA), under which Canada effectively gave up sovereignty over its fossil energy inheritance. As a signatory, Canada is prohibited from cutting back energy exports, even in the event of a domestic supply crunch. But how long would Canada honor its obligations under NAFTA if doing so resulted in its citizens freezing to death? American policymakers would be wise to explore how that scenario might play out.
If that weren’t enough, natural gas is also the key to expanding the production of oil from the tar sands of northern Alberta, the only oil-producing region left in North America that can increase output. It is the only available fuel for producing the pressurized steam needed to separate bitumen, a low-grade oil, from sand. Shrinking natural gas supplies would quickly reduce the flow of bitumen into the U.S., further complicating Canada’s energy dilemma.
The irony of sacrificing a premium energy source to make more low-grade fuel for export was not lost on Hughes, who closed with a quote from a Canadian energy executive. “Using natural gas to produce oil from tar sands is akin to turning gold into lead.”
Vickerman is executive director of RENEW Wisconsin, a nonprofit organization promoting conservation and renewable energy sources.
Sources:
Energy Information Agency, October 2006 Monthly Energy Review http://www.eia.doe.gov/emeu/mer/contents.html.com.
Hughes, David: “North American Natural Gas Production Trend and Implications for Canadian Tar Sands Production,” 2006 Boston World Oil Conference, Boston University, October 2006. http://www.aspousa.org
Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the
supply demand equation for these fossil fuels, and analyzing its effects on prices,
consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit “The End of Cheap Oil” section in RENEW Wisconsin’s web site: www.renewwisconsin.org.
by jboullion | Sep 21, 2005 | Uncategorized
by Michael Vickerman, RENEW Wisconsin
Petroleum and Natural Gas Watch, Vol. 4, Number 1
September 21, 2005
On its way toward the Gulf Coast states of Louisiana and Mississippi, Hurricane Katrina cut a swath through a hydrocarbon-rich zone of the Gulf of Mexico, the largest domestic source of petroleum and natural gas. When fully operational, this offshore oil and natural gas complex accounts for about 30% of domestic oil supplies and 20% of domestic natural gas supplies.
Fueled by exceptionally warm waters, this Category 4 storm KO’ed nearly 50 production platforms and four drilling rigs. Extensive damage was reported at 20 platforms and nine drillings rigs. The force of the winds and the waves tore six rigs loose from their moorings and sent them adrift; one rig in Plaquemines Parish was found beached on Alabama’s Dauphin Island. At the storm’s peak, on August 29, more than 90% of the Gulf’s oil extraction capacity and nearly 90% of its natural gas extraction capacity was off-line.
The storm’s devastation extended beyond structures protruding above the water’s surface. Parts of the underwater piping network that collect the raw fuel and carry it to onshore processing facilities need to be rebuilt. Mobilizing all the boats, helicopters, divers, and steel needed to repair this infrastructure will be a monumental undertaking. However, until these pipelines become operational again, many of the undamaged wells will remain idle, with no place to pump the oil to.
Onshore facilities like shipyards and refineries were also hit hard. The Mineral Management Service, which issues daily bulletins tracking Katrina’s impact on the Gulf of Mexico’s hydrocarbon complex, estimates that “35% of shut-in oil is due to onshore infrastructure problems.” The rebuilding effort is bound to be slow and costly, but absolutely necessary as this region is one of the few remaining centers of (real) wealth-production in the nation.
Three weeks have now passed since Katrina landed her roundhouse blows to our energy underbelly, and more than 55% of the region’s oil capacity and about one-third of the natural gas capacity still remain off-line. So far, the reduction in output amounts to about 1.5% of expected U.S. crude oil production this year. Also off-line are four refineries with a combined daily capacity of nearly one million barrels, about 4% of total U.S. refining capacity. Expectations are that these facilities, especially the 400,000 barrel per day Pascagoula unit, are three to six months away from being restarted. In an industry where production volumes lately have averaged between 90 and 95 per cent of capacity, making up a 4% loss shapes up to be an impossible challenge. This is very bad news indeed to a country that was, before Hurricane Katrina, not producing enough gasoline to keep pace with this summer’s driving demands.
In an effort to calm panicky oil markets, the Bush Administration has pledged to tap the Strategic Petroleum Reserve for as much as 30 million barrels of crude oil, an amount the Unites States consumes in 36 hours. Though gasoline prices have fallen 10% from the Labor Day weekend, releasing reserve oil is nothing more than a symbolic gesture when there is no spare capacity available to crack the crude into jet fuel, gasoline and diesel fuel. The nation has no choice but to import greater volumes of gasoline for the duration of this year. Even so, the supply-demand equation looks precarious. Only a nationwide slowdown in driving will keep fuel prices from heading higher. Nothing short of that will suffice.
Katrina’s path took it through the oil-heavy eastern half of the Gulf’s hydrocarbon complex. The natural gas production platforms that populate the western half were spared the flattening winds and 20-foot storm surges visited upon Bay St. Louis and Biloxi. Even so, the accumulated reduction in output so far represents 0.7% of U.S. extraction volumes expected this year. This deceptively puny number spells real trouble for Americans residing in colder climates, for unlike crude oil and its refined products, natural gas cannot be easily shipped across oceans. There are only four operating terminals in the United States where specialized tankers bearing liquefied natural gas (LNG) can offload their contents, and they are operating pretty much at full capacity right now.
Unless natural gas output from the Gulf of Mexico can be revved up to pre-Katrina levels in the next week or two, the likelihood that the United States can scramble its way out of a slow-motion supply squeeze this winter is poor. Earlier this year, several investment banking services that track energy supply-demand trends projected lower output from domestic sources this year. If the monthly production results reported by the Texas Railroad Commission are reliable guides, extraction volumes are already tailing off, compared with previous years’ results. The injection rate of gas into storage for winter use has slowed as well.
When one stops to consider all the factors at play here—a still booming housing sector, more gas-fired power stations on-line (including four new ones in Wisconsin this year), a declining resource base in North America (including Canada and Mexico), and insufficient infrastructure for importing more than 5% of domestic consumption through 2008—it’s not difficult to imagine natural gas prices, now at $12/MMBtu, ratcheting up towards the $20/MMBtu level this winter. And to think that only six months ago one could have bought a January 2006 gas contract for under $7/MMBtu.
The prospects for a rapid recovery became dimmer when a storm named Rita crossed the Florida Keys heading west toward Texas. The abnormally warm waters on which Katrina fed can easily transform Rita into a tempest of similar intensity. For the moment the very best outcome one can expect from Rita’s menacing presence in the gulf is a production interruption that lasts five to seven days followed by a full resumption of extraction activity. But if it strengthens as Katrina did, it is likely to cause even greater damage than Katrina wrought, due to its more westerly track. Texas and its coastal waters, it should be remembered, account for fully one-third of domestic natural gas output. Another hit to Gulf of Mexico hydrocarbon complex and natural gas futures will warp out of orbit.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Even more amazing than the destructive capacity of these hurricanes is the degree to which we as a nation are totally unprepared for dealing with their aftermath. The default assumption among policymakers is that the U.S. economy will grow in an uninterrupted fashion, and that high quality energy sources will magically appear in time to sustain this expansion. But how can this outcome be guaranteed when the U.S. government cannot control either the actions of foreign countries or the weather? In fact, the country does not appear able to exercise even the slightest hint of discipline or restraint over its own appetite for energy. As the nation’s energy infrastructure contracted relative to the domestic economy, the federal government’s ability to shape our energy future atrophied along with it. All of the planning functions that a healthy government is typically responsible for have been ceded to the marketplace. And the marketplace has one very powerful mechanism for allocating scarce but essential resources to a society’s constituents. It’s called price.
Author’s note: Given Hurricane Rita’s potential to add to the devastation caused by Katrina, I plan to update this article in one to two weeks.
Sources:
Center for Energy Efficiency and Resource Efficiency (CEERT), Risky Diet 2005: Global Energy Resource Adequacy. http://www.ceert.org
Minerals Management Service (U.S. Department of the Interior)
http://www.mms.gov/ooc/press/2005/press0916a.htm. See MMS web site also for daily shut-in statistics reports.
Simmons and Company: Outlook for Natural Gas: 2005 and Beyond
http://www.simmonsco-intl.com/research.aspx?Type=researchreports)
“Texas Monthly Oil and Gas Production by Year,” Texas Railroad Commission
http://www.rrc.state.tx.us/divisions/og/information-data/stats/ogismcon.html),
The Oil Drum: A Community Discussion About Peak Oil. Numerous postings on the web site from August 29 – September 21, 2005.. http://www.theoildrum.com/
Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the
supply demand equation for these fossil fuels, and analyzing its effects on prices,
consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit “The End of Cheap Oil” section in RENEW Wisconsin’s web site: www.renewwisconsin.org
