The concept of peak oil argues that global oil production will peak relative to increasing demand such that supply will be insufficient for all needs, which would trigger massive price increases and perhaps rationing.
However, while oil prices increased during the early 2000s and widespread oil reservoir depletion suggested that the globe had passed the peak oil point, it is not yet clear if that is in fact the case.
Some argue that we have seen this all before: in 1975, MK Hubbert, a Shell geoscientist, successfully predicted a decline in US oil production and suggested that global supplies would peak in 1995, while in 1997 the petroleum geologist Colin Campbell estimated it would happen before 2010.
And now a report by Leonardo Maugeri published by the Harvard Kennedy School argues that a new oil boom is taking place. Maugeri’s thesis is that price rises in the early 2000s stimulated exploration in higher-cost, marginal oil fields and that a net additional capacity of over 17 million barrels of oil per day (mbd) to around 110 mbd will be added to global supplies by 2020. Average global production in 2015 was about 95.7 mbd, or about 102 per cent of 2015’s average demand of 93.4 mbd.
Daily production in 2011 was about 88 mbd.
Conventional oil production is continuing to grow throughout the world, although some areas of the world such as the United States, Canada and the North Sea are witnessing an apparently irreversible decline in conventional production. These areas, however, are enjoying a boom in unconventional oil production from tar sands and shale oil. It is estimated that the Bakken shale oil reservoir in the US state of North Dakota contains almost as much oil as Saudi Arabia, although much of this oil cannot be extracted. However, the application of shale oil extraction technologies, such as horizontal drilling and hydraulic fracturing, to conventional oilfields could further increase the world’s oil production.
Maugeri argues that a ‘revolution’ in environmental and emission- curbing technologies is required to sustain the development of most unconventional oils along with strong enforcement of existing rules.
Without such a revolution, a continuous clash between the oil industry and environmental groups will force governments to delay or constrain the development of new projects with the average price of oil hovering around US $45 per barrel in 2016.The Carbon Tracker Initiative foresaw in 2015 that any oil price slide would make many unconventional and
high-cost oil projects uneconomical. It identified US $1.1 trillion of potential capital expenditure for projects over the next 10 years that would require a market price of over US $95 per barrel to provide an acceptable rate of return and which may be deferred or cancelled. For example, Norway’s Statoil has relinquished three exploration licences off Greenland’s west coast, Chevron has put its Arctic drilling plans on hold, and in the Canadian oil sands oil companies have cancelled or deferred billions of dollars’ worth of projects (Hobley, 2016). In contrast, renewable energy has exhibited falling costs, zero price volatility, lower carbon emissions and superior security of supply as an indigenous energy source for many countries including the UK. Investment in clean energy through 2014 beat expectations despite the falling oil price.
Surges in investment in offshore wind in Europe and solar in China and the United States helped to increase global clean energy investment by 16 per cent to US $310 billion.
Some of the major geopolitical consequences of Maugeri’s report include Asia becoming the reference market for the bulk of Middle East oil with China becoming a new protagonist in the political affairs of the whole region. At the same time, the western hemisphere could return to a pre- World War II status of theoretical oil self-sufficiency and the United States could dramatically reduce its oil import needs. However, quasi-oil self- sufficiency will not insulate the United States from the rest of the global oil market and world oil prices. Further, Canada, Venezuela and Brazil may decide to export their oil and gas production to markets other than the United States for purely commercial reasons, making the notion of western hemisphere self-sufficiency irrelevant.
Thus, Maugeri concludes that oil is not in short supply from a purely physical point of view; there are huge volumes of conventional and unconventional oils still to be developed with no ‘peak oil’ in sight. He suggests instead that real problems concerning future oil production are ‘above the surface, not beneath it, and relate to political decisions and geopolitical instability’. While the age of ‘cheap oil’ is over, it is still uncertain what the future level of oil prices might be as technology may turn today’s expensive oil into tomorrow’s cheap oil.
However, George Monbiot worries that the automatic environmental correction mechanism – resource depletion destroying the machine that was driving it – is not going to happen. The problem of too much instead
Science of Sustainability 47
of too little oil generates a conflict between the planet’s natural systems and industrial and consumer capitalism as there are no obvious means or reasons to prevail upon governments and industry to leave oil in the ground to prevent climate breakdown, as evidenced by the collapse of multilateral discussions at the UN Conference on Sustainable Development (Rio +20) in June 2012. In summary, when will the earth run out of oil? And more importantly, how will that uncertainty affect environmental issues going forward?
SOuRCES Hobley (2016); Maugeri (2012); Monbiot (2012); US Energy Information Administration (2016).
Renewable sources include wood, plants, dung, falling or gravity-fed water for hydroelectric or mechanical energy, geothermal sources, solar, offshore and onshore wind, biomass or biofuels, and tidal and wave energy. The latter five sources are relatively new, with only about 20–30 years of oper- ational experience at the most, and are still higher-cost alternatives until economies of scale take effect.
Each source has its own economic, health and environmental costs, bene- fits and risk factors that interact strongly with other governmental and global priorities. Key factors for energy sustainability include sufficient growth of energy supplies to meet human and industrial needs, energy efficiency and conservation measures so that the waste of primary resources is minimized, public health by recognizing safety risks inherent in energy sources such as radiation from nuclear sources, and protection of the biosphere by preven- tion of pollution.
The growth of global primary energy demand in response to indus- trialization, urbanization, and societal affluence has led to a greater than 35 per cent increase in total consumption from all sources of just under 10,000 million tonnes of oil equivalent (Mtoe) in 2000 to about 13,500 Mtoe in 2015 (Enerdata, 2016). There is also an uneven distri- bution of energy consumption across the globe as shown in Tables 2.1 and 2.2. The highest energy-consuming countries by far in 2011 were China with 3,101 Mtoe and the United States with 2,196 Mtoe. The lowest-consuming countries were New Zealand with 21 Mtoe and Portugal with 22 Mtoe.
Table 2.1 Highest energy-consuming countries in 2015 Country Energy Consumption (Mtoe)
China 3,101
United States 2,196
India 882
Russia 718
Japan 435
Germany 305
Brazil 299
South Korea 280
Canada 251
France 246
SOuRCE Enerdata (2016).
Table 2.2 Lowest energy-consuming countries in 2015 Country Energy Consumption (Mtoe)
Sweden 47
Uzbekistan 45
Czech Republic 40
Kuwait 38
Chile 38
Colombia 34
Romania 33
Norway 32
Portugal 22
New Zealand 21
SOuRCE Enerdata (2016).
Halldórsson and Svanberg (2013) note that there are two purposes for energy. One is to power various operations processes such as storage (or
‘Stop’) and production and transportation of goods (or ‘Go’) for use and consumption. On the energy input side of logistics and SCM, trucks and vans use fuel-burning engines as their motive source. However, vehicle engines are becoming more efficient in terms of fuel use and emissions and there are ongoing efforts to consider alternative fuels such as biodiesel or bioethanol,
Science of Sustainability 49 hydrogen, natural gas or liquid petroleum gas, and electricity (McKinnon et al, 2015). Some of these developments are still in their infancy, just like newer sources of renewable energy, and also have their own environmental impacts. For example, growing crops for biofuels requires the use of arable land which displaces growing crops for food. A response to that situation might see farmers cultivating more forests and grasslands for food produc- tion, thus possibly negating the positive effects of greenhouse gas emissions reductions from using biofuels.
The second purpose (Halldórsson and Svanberg, 2013) is energy that is embedded in physical products, eg electricity through assembly such as energy consumption for vehicle assembly, or via their material content such as oil used in consumer products. These purposes also affect service provision. For example, energy includes mobility, eg transport, heating, eg households and warehouse facilities, and cooling, eg storing of drugs and food.
The World Business Council for Sustainable Development (2007b) notes that warehousing, as one aspect of the manufacturing and industrial sector, accounts for 40 per cent of worldwide energy use. Initiatives to increase the efficiency of building in using energy and reducing emissions have been developed by the Leadership in Energy and Environmental Design certifi- cation program (LEED) in the United States and the Building Research Establishment Environmental Assessment Method (BREEAM) in the UK (McKinnon et al, 2015). Such accreditations consider the following categories of building sustainability: the indoor environment quality including light- ing, the materials and resources used in construction, the energy source and building atmosphere including electricity use, sustainable building sites, and water use efficiency. The ultimate goal for a sustainable building is a net zero operation where a building uses little or no outside energy or resources at all, for example by generating its own electricity through solar power, recycling and reusing waste water. This topic will be further discussed in Chapter 4.