The Oil Crash: why this crisis will never end

1. The Oil Crash:why this crisis will never end Antonio Turiel Institut de Ciències del Mar (CSIC) & Oil Crash Observatory May 17, 2013 Oil Crash: Año 7

2. Summary • Energy and economy • Energy return on energy investment (EROEI) • Peak Oil • Status of energy sources • The end of growth • Conclusions

3. Energy and economy What is the energy Energy as the ability of doing work

4. How much energy is consumed nowadays in the world? Some 570 Exajoules (!) 10.000 That is equivalent to an average power of 18 Tw (!) That is, 2.500 w per person in the planet

5. The growth of GDP is linked with the growth of energy consumption

6. Energy Return on Energy Investment (EROEI) To obtain energy some energy needs to be invested EROEI = Produced energy/consumed energy If EROEI<1 we have not an energy source If 1<EROEI<10 the energy source may be not profitable Exemple: EROEI=2, lifespan: 30 years  return: 2,3% annual Historical societies have average EROEIs of about 10!! The EROEI governs production rate in oil fields

7. Peak oil Mineral resources cannot be extracted at a constant rate, but according to a production curve. ... But in fact it is rather like that. People tend to think that extracting oil is this...

8. Hubbert’s curve By the 50’s Marion King Hubbert modelled with good accuracy the production curve for the oil extracted in wells, fields, regions... • His model is based on two basic hypothesis: • The probability of new findings depends on the amount of resources still to find • Found resources are always exploited at maximum, constant efficiency

9. The result is a logistic curve: Reserves: Q(t)=Qmax /(1+aebt) Production: P(t)=-Q’(t) a: Probability ratio b: Extraction efficiency Example: Fitting Norwegian oil production (Source: Energy Bulletin)

10. The fatal consequences of the curve cannot be avoided (fast increase at the beginning, fast decline at the end) If efficiency is improved, both increase and decline accelerate If efficiency is lowered, a plateau may result but the production is also lower The derivation includes the resources yet to be discovered; a change in behaviour can only happen if different resources are included

11. Peak Oil (i.e, maximum extraction rate) is an observed fact, not a “theory” Oil

12. November 9, 2010:IEA recognises for the first time that Peak Crude Oil took place on 2006

14. Status of all non-renewable energy sources Peak Oil: 2005 (crude) 2015 (total) 33,1% PE Peak Coal: before 2020 30,3% PE Peak Gas: before 2020 23,7% PE Peak uranium: before 2020 4,9% PE Peak all non-renewable energy: 2018 Those sources represent 92% of all primary energy

15. Status of all renewable energy sources • Hydraulics: Widely exploited, scarce additional potential in Europe (6,4% PE) • Wind: Limited maximum potential (1Tw), dependence on oil (1% PE) • Photovoltaic: Low energy return (TRE2), low potential (4,5Tw), dependence on rare earths • Concentrated Solar Power: Good theoretical return, scarcely exploited • Others (geothermal, tidal power, wave power, biomass): very limited potential

16. The end of growth Spain is in an energy agony Total energy Oil energy Classical analysis states that consumption drop of energy is the result of the economic crisis

17. But since 2005 world crude oil production has become very inelastic (Murray & King, Nature 48, 433-435 (2012))

18. As oilproductionbecomesmore and morescarce, pricebecomesmore and morevolatile and sometimesitskyrockets Situación actual Pico histórico: Julio de 2008, 147$/barril Source: James D. Hamilton. Causes and Consequences of theOilShock of 2007-08. Brookings papersoneconomicactivity (2009))

19. Oil production plateau is already causing the Oil Crash in OECD (Source: Stuart Staninford, “US Economic Recovery in the Era of Inelastic Oil”. Early Warning, Nov. 23, 2009)

20. Novembre 16, 2012:IEA recognises that in fact crude oil production is already falling Gross energy Net energy Net energy (realistic scenario) The Oil Crash: El Ocaso del Pétróleo (http://crashoil.blogspot.com.es/2012/11/el-ocaso-del-petroleo.html)

21. As a matter of fact, everythingpeaks Peakgold: 2000 Peakcopper: 2018 Price evolution 1992-2012 (ref. 2005, source; FMI ) Copper, Aluminium, Iron, Tin, Níckel, Zinc, Lead and Uranium Cereals, Vegetal Oil Vegetables, Meat, Fish, Sugar, Bananas and Oranges Wood, Cotton, Wool, Rubber and Leather Oil (Crude), Natural Gas and Coal

22. The unavoidable decrease of our energy consumption push our econony into a forced, permanent decrease. The most serious problem is debt: without growth debt cannot be repayed All Western countries will fail to service their debts and default at some moment  historical crisis. The attempt to pay the debt may lead to a massive liquidation of assets without improving the debt-to-GDP ratio (catabolic collapse)

23. Conclusions • Oil production is stagnant since 2005. And that is just the herald of the peaks of natural gas, coal and uranium. • Even worse, our oil consumption already falls at a 3% annual rate due to the pressure by emerging economies. • The scarcity of prime matters and of oil makes sustained economic growth impossible. • With our economic system, no growth implies entering in an economic destruction spiral (catabolic collapse) • There is no alternative to fossil fuels and uranium; renewable sources are short of scale, materials, time and capital.

24. Conclusions • What can and shall we do about this situation? - To decrease our individual exposure - To reorientate, if required, our career or job, adquiring new skills - To help the closest people, warning them about the problem and settling mutual support communities - To influence the execution of sustainable policies - To educate citizenship, especially the youngest ones Thanksforyourattention http://oilcrash.net http://crashoil.blogspot.com