On August 6, I wrote a post called Making Sense of the US Oil Story, in which I looked at US oil. In this post, I would like to look at other sources of US energy. Of course, the energy source we hear most about is natural gas. We continue to be a net natural gas importer, even as our own production rises.
Figure 1. US natural gas production and consumption, based on EIA data.
US natural gas production leveled off in 2013, because of the low level of US natural gas prices. In 2013, there was growth in gas production in Pennsylvania in the Marcellus, but many other states, including Texas, saw decreases in production. In early 2014, natural gas prices have been higher, so natural gas production is rising again, roughly at a 4% annual rate.
The US-Canada-Mexican natural gas system is more or less a closed system (at least until LNG exports come online in the next few years) so whatever natural gas is produced, is used. Because of this, natural gas prices rise or fall so that demand matches supply. Natural gas producers have found this pricing situation objectionable because natural gas prices tend to settle at a low level, relative to the cost of production. This is the reason for the big push for natural gas exports. The hope, from producers’ point of view, is that exports will push US natural gas prices higher, making more natural gas production economic.
The Coal / Natural Gas Switch
If natural gas is cheap and plentiful, it tends to switch with coal for electricity production. We can see this in electricity consumption–natural gas was particularly cheap in 2012:
Figure 2. Selected Fuels Share of US Electricity Production – Coal, Natural Gas, and the sum of Coal plus Natural Gas, based on EIA data.
Coal use increased further in early 2014, because of the cold winter and higher natural gas prices. In Figure 2, there is a slight downward trend in the sum of coal and natural gas’s share of electricity, as renewables add their (rather small) effect. Continue reading →
World leaders seem to have their minds made up regarding what will fix world CO2 emissions problems. Their list includes taxes on gasoline consumption, more general carbon taxes, cap and trade programs, increased efficiency in automobiles, greater focus on renewables, and more natural gas usage.
Unfortunately, we live in a world economy with constrained oil supply. Because of this, the chosen approaches have a tendency to backfire if some countries adopt them, and others do not. But even if everyone adopts them, it is not at all clear that they will provide the promised benefits.
Figure 1. Actual world carbon dioxide emissions from fossil fuels, as shown in BP’s 2012 Statistical Review of World Energy. Fitted line is expected trend in emissions, based on actual trend in emissions from 1987-1997, equal to about 1.0% per year.
The Kyoto Protocol was adopted in 1997. If emissions had risen at the average rate that they did during the 1987 to 1997 period (about 1% per year), emissions in 2011 would be 18% lower than they actually were. While there were many other things going on at the same time, the much higher rise in emissions in recent years is not an encouraging sign.
The standard fixes don’t work for several reasons:
1. In an oil-supply constrained world, if a few countries reduce their oil consumption, the big impact is to leave more oil for the countries that don’t. Oil price may drop a tiny amount, but on a world-wide basis, pretty much the same amount of oil will be extracted, and nearly all of it will be consumed.
2. Unless there is a high tax on imported products made with fossil fuels, the big impact of a carbon tax is to send manufacturing to countries without a carbon tax, such as China and India. These countries are likely to use a far higher proportion of coal in their manufacturing than OECD countries would, and this change will tend to increase world CO2 emissions. Such a change will also tend to raise the standard of living of citizens in the countries adding manufacturing, further raising emissions. This change will also tend to reduce the number of jobs available in OECD countries.
3. The only time when increasing natural gas usage will actually reduce carbon dioxide emissions is if it replaces coal consumption. Otherwise it adds to carbon emissions, but at a lower rate than other fossil fuels, relative to the energy provided.
4. Substitutes for oil, including renewable fuels, are ways of increasing consumption of coal and natural gas over what they would be in the absence of renewable fuels, because they act as add-ons to world oil supply, rather than as true substitutes for oil. Even in cases where they are theoretically more efficient, they still tend to raise carbon emissions in absolute terms, by raising the production of coal and natural gas needed to produce them.
5. Even using more biomass as fuel does not appear to be a solution. Recent work by noted scientists suggests that ramping up the use of biomass runs the risk of pushing the world past a climate change tipping point.
It is really unfortunate that the standard fixes work the way they do, because many of the proposed fixes do have good points. For example, if oil supply is limited, available oil can be shared far more equitably if people drive small fuel-efficient vehicles. The balance sheet of an oil importing nation looks better if citizens of that nation conserve oil. But we are kidding ourselves if we think these fixes will actually do much to solve the world’s CO2 emissions problem.
If we really want to reduce world CO2 emissions, we need to look at reducing world population, reducing world trade, and making more “essential” goods and services locally. It is doubtful that many countries will volunteer to use these approaches, however. It seems likely that Nature will ultimately provide its own solution, perhaps working through high oil prices and weaknesses in the world financial system.
We keep hearing about the many benefits of natural gas–how burning it releases less CO2 than oil or coal, and how it burns with few impurities, so does not have the pollution problems of coal. We also hear about the possibilities of releasing huge amounts of new natural gas supplies, through the fracking of shale gas. Reported reserves for natural gas also seem to be quite high, especially in the Middle East and the Former Soviet Union.
But I think that people who are counting on natural gas to solve the world’s energy problems are “counting their chickens before they are hatched”. Natural gas is a fuel that requires a lot of infrastructure in order for anything to “happen”. As a result, it needs a lot of up-front investment, and several years time delay. It also needs changes on the consumption side (requiring further investment) that will allow this natural gas to be used. If the cost is higher than competing fuels, this becomes a problem as well.
In many ways, natural gas consumption is captive to other things that are happening in the economy: an economy that is industrializing rapidly will easily be able to consume more natural gas, but an economy in decline will find it hard to scrape together funds for new ways of doing what was done previously, now with natural gas. Increased use of renewables seems to call for additional use of natural gas for balancing, but even this is not certain, because in many parts of the world, natural gas is a high-priced imported fuel. Political instability, often linked to high oil and food prices, creates a poor atmosphere for new Liquefied Natural Gas (LNG) facilities, no matter how attractive the pricing may seem to be.
In the US, we have already “hit the wall” on how much natural gas can be absorbed into the system or used to offset imports. US natural gas production has been flat since November 2011, based on EIA data (Figure 1, below).
Figure 1. US Dry Natural Gas Production, based on data of the US Energy Information Administration.
Even with this level of production, and a large shift in electricity production from coal to natural gas, natural gas is still on the edge of “maxing out” its storage system before winter hits (Figure 2, below).
Figure 2. US natural gas in storage, compared to five-year average. Figure prepared by US Energy Information Administration, Weekly Natural Gas Storage Report as of October 5, 2012.
What does our world’s energy future look like? Does renewable energy feature as much in the energy production mix as many hope it will? Will natural gas and fracking help reduce our dependence upon oil and how will the world economy and trade fare as supplies of cheap oil continue to dwindle?
To help us take a look at this future scenario we had a chance to chat with Gail Tverberg – a well-known commentator on energy issues and author of the popular blog, Our Finite World
In the interview Gail talks about:
• Why natural gas is not the energy savior we were hoping for • Why renewable energy will not live up to the hype • Why we shouldn’t write off nuclear energy • Why oil prices could fall in the future • Why our energy future looks fairly bleak • Why the government should be investing less in renewable energy • Why constant economic growth is not a realistic goal
Gail Tverberg is an independent researcher who examines questions related to oil supply, substitutes, and their impact on the economy. Her background is as a casualty actuary, making financial projections within the insurance industry. She became interested in the question of oil shortages in 2005, and has written and spoken about the expected impact of limited oil supply since then to a variety of audiences: insurance, academic, “peak oil”, and more general audiences. Her work can be found on her website, Our Finite World.
We live in a world with very limited solutions to our sustainability problems. I often hear the view, “If we would just get off fossil fuels, then our society would be sustainable.” Or, “If the price of oil would just go high enough, then renewables would become economic, and our economy would be sustainable.”
Unfortunately, our problems with sustainability began a long time before fossil fuels came around, and the views above represent an incomplete understanding of our predicament. When fossil fuels became available, they were a solution to other sustainability problems–rapid deforestation and difficulty feeding the population at that time. Getting rid of fossil fuels would likely lead to very rapid deforestation and many people dying of lack of water or food. If getting rid of fossil fuels is a solution to our predicament, it is one with very bad side effects.
A couple of different events this week reminded me about how deeply embedded our sustainability problems are. For one, I had the opportunity to read a draft of a soon-to-be published paper by James H. Brown and a group of others from the University of New Mexico and the Sante Fe Institute called, “The Macroecology of Sustainability.” This paper points out that sustainability science has developed largely independently from and with little reference to key ecological principles that govern life on earth. Instead, sustainability science is often more of a social science, looking at slightly greener approaches which are almost as unsustainable as the approaches they replace.