Asking Richard Heinberg: Is the world running out of oil?

Oil depletion is a serious problem. How can the peak oil theory help us understand this situation? Richard Heinberg, one of our time's foremost advocates for energy sustainability, explains.

FLORIDA, October 22, 2012 — When it comes to generating electricity, nuclear energy is often mentioned as a preferable alternative to fossil fuels. While it seems great on paper, how does it stand up in practice? Or do fossil fuels retain the edge in cost and efficiency?

The “Peak Oil” theory is a controversial element of our nation’s discussion over energy policy, and a widely misunderstood one. How might “peak oil” be explained? Are useful oil reserves being depleted, and if so, when should we expect production to decline?

In this second part of our discussion, Richard Heinberg, one of today’s foremost advocates for energy sustainability, shares his views regarding these subjects. He also describes his life and career.       

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Joseph F. Cotto: Should America continue to invest in nuclear energy? Or, are the drawbacks of nuclear power too great?

Richard Heinberg: Back in March 2012 The Economist magazine published an extensive special report on the future of nuclear energy, which it titled “The Dream that Failed.” The authors concluded that while nuclear generation capacity is likely to grow in China and a few other nations, elsewhere (including Europe, Japan, and the U.S.) it is declining and nuclear’s role is likely to “never be more than marginal.” I thought that was a good, objective assessment. The investment requirement for nuclear is enormous, and in an economy where credit and investment capital are scarce and the government is looking for programs to cut, there’s just no realistic pathway to grow the industry. 

Of course there are other problems with this energy source, as the Japanese have painfully discovered. New technologies—such as thorium reactors—might theoretically reduce some of the risks, but we’re decades away from widespread implementation even if pilot plants turn out to work as hoped.

Cotto: Many claim that America should continue using fossil fuels due to cost efficiency. In the long run, are fossil fuels really cost efficient?

Heinberg: Coal is still cheap—if you consider only the direct cost of the fuel and ignore all environmental and health “externalities.” Once you factor in the indirect costs to society, coal turns out to be quite expensive! I co-authored a “full lifecycle analysis” last year (“Mining Coal, Mounting Costs: The Life Cycle Consequences of Coal”). If costs from lung disease, climate change, land disturbance, etc., are all factored in, the cost of electricity from coal per kilowatt-hour rises dramatically, easily exceeding that of wind.

But those are dollar costs. There is also an energy cost to energy production, and that is crucial in many instances. It takes energy to mine tar sands, frack shale, or drill a deepwater oil well. In the early days of the oil and gas industry—when geologists were chasing large, shallow, onshore deposits—the energy returned on energy invested in exploration and production was astronomical, better than 100 to 1 in many cases. Today that ratio is declining rapidly—it’s less than 5:1 for many unconventional oil and gas plays. Long before we get to a 1:1 ratio, the costs of production will mount and companies will start trying to make ends meet by selling off drilling leases, arbitrage, and creative accounting. In fact, we’re already seeing that kind of behavior. This evidence suggests that fossil fuels are losing their “cost efficiency” quite rapidly.  

Cotto: Today, understanding about peak oil is tremendously important. Generally speaking, how would you describe the “peak oil” theory?

Heinberg: “Peak Oil” is just an extrapolated observation. Production from every oil well and oil field starts low, ramps up, reaches a maximum, and then declines over time. U.S. oil production peaked in 1970, and since then many other nations have gone into decline; many former exporters have become oil importers as a result. Inevitably total world oil production will peak and start to decline. In that sense, just about everybody who knows anything about the petroleum business is a Peak Oil believer. The only dispute is whether the peak will happen sooner (the next couple of years) or later (in 20 years or more). 

In my view, the evidence stacks in favor of a near-term peak. While the industry is bringing more production on line, it’s barely able to make up for declines in existing fields. And the newer production is from marginal sources that require more investment of capital and energy. Yes, there’s a lot more oil in the Earth’s crust, but since the beginning of the industry we’ve gone about extracting petroleum using the low-hanging fruit principle. What’s left in many cases will take more energy to extract than it will yield when burned. In short, I believe we’re seeing the near-term Peak Oil scenario unfold right before our eyes.

Cotto: Is oil depletion a problem that we are likely to face in the foreseeable future?

Heinberg: We’re facing it right now! The high oil prices of the past few years are not primarily due to speculation, but to depletion of the cheap-to-produce oil that fueled economic growth in the 20th century. Today the industry needs high prices—in the range of $90 to $100 per barrel—to justify developing new production capacity in deepwater, tar sands, and tight (fracked) reservoirs. Meanwhile we’ve learned over the past few decades that when prices stray into the $100 region for very long, the economy stalls or contracts.

Now, I’m not suggesting that oil prices will never fall. They will if demand crashes because of weakness in the broader economy. What we won’t see again are low oil prices in the context of a growing economy and growing demand. That means that, effectively, oil prices have become a governor on economic growth. And with each passing year, as the low-hanging fruit of conventional oil resources are burned, the dial clicks one more notch in the direction of zero growth.

A lot of people will say, “What’s the problem? Technology can work wonders. Just look at the increasing production from the Bakken shales in North Dakota!” But fracking / horizontal drilling technology has been around for decades; the only reason it’s being used in the Bakken is that high oil prices can justify it. These are unconventional resources that the oil industry wouldn’t bother with if it had any decent plays to pursue. Per-well decline rates are very high and the Montana portion of the Bakken is already seeing falling production; the North Dakota portion will likely follow shortly.

Depletion is relentless and it leads to the problem of declining resource quality, for which technology is only a partial solution.

Cotto: How did you become an advocate for sustainable energy policy? Tell us a bit about your life and career.

Heinberg: I’m just a writer who long ago realized that our society’s rates of growth in population and consumption are patently unsustainable. The historical reasons for this are obvious: our ability to extract and use fossil fuels gave us the Industrial Revolution and all that went with it. In pursuing a better understanding of energy, I got to know quite a few petroleum geologists, coal-mining engineers, solar researchers, and other energy scientists and economists. These folks have a story to tell, one that’s often quite different from the PR line delivered by the front office of the company they work for. I realized that our energy future is fraught with challenges that are being ignored or actively denied by policy makers.

Also during this time, I got to know quite a few environmental scientists who are genuinely frightened about the impacts they’re seeing on climate and ecosystems resulting from society’s use of fossil fuels. Many of these people are losing funding for their research projects, or receiving death threats from confused individuals who’ve been driven to a frenzy by the steady drumbeat of climate-change denialist propaganda churned out by industry-backed fake grass-roots organizations.

I’m not a petroleum geologist; I’m a generalist and a critical researcher. I merely attempt to translate the work of genuine energy and environmental experts into terms that, hopefully, the average person can understand, so that we can all make better sense of this extraordinary moment of history. 

 


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Joseph Cotto

Joseph F. Cotto is a social journalist by trade and student of history by lifestyle choice. He hails from central Florida, writing about political, economic, and social issues of the day. In the past, he was a contributor to Blogcritics Magazine, among other publications. He is currently at work on a book about American society.

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