Welcome to the Age of Crappy Oil

UK's climate chief says we’re running out of cheap oil, but fossil fuels can still burn the planet.

It's been a while since we've heard about peak oil—the point at which we use up half the world's reserves and see production terminally decline—but it's happening. And yet, we still have enough oil left to burn our way to climate catastrophe.

In a paper released at the end of July, Sir David King, the British Foreign Office's Special Representative on Climate Change, and his co-author, Oliver Inderwildi of Oxford University's Smith School of Enterprise and the Environment, refute what they call "a common misperception about peak oil": that fossil fuels are growing scarce.

Rather, they argue, peak oil means it's getting more difficult and costly to get oil out of the ground—and there's less of the cheaper, easy oil available.

The age of easy oil is over

Plummeting oil prices in the wake of the US shale boom have led many to dismiss peak oil as little more than a doom-mongering myth.

In his study published in the peer-reviewed journal, Frontiers in Energy, King agrees with critics that the planet is swimming in oil. But he warns that peak oil proponents are still right to warn of oil's growing economic and environmental costs:

Haliburton fracturing operation. Image: Joshua Doubek/Wikipedia

"We are not running out of oil, but we have reached a plateau in easy, inexpensive conventional oil production, which will be followed by a fall in production…Novel unconventional oil reserves are abundant, but are more costly to produce, provide less net energy and cause more GHG [greenhouse gas] emissions."

Up until 2005, economic growth was enabled by exponentially rising production of cheap conventional oil. But since then, conventional production has stopped rising. To keep the economy chugging along we've started using more expensive forms of unconventional oil—which are worse for the environment, and require more energy just to get out the ground and become usable.

According to the new paper, conventional crude oil is "a limited resource and its production is currently plateauing, at about 64 million barrels per day (mbd)."

The gap between plateauing crude supply and burgeoning world demand is being increasingly filled by "unconventional resources… now at 93 mbd."

So as the cheaper, easier stuff is no longer growing, the world has to rely on more expensive unconventionals, like tar sands in Canada or shale gas in the US, which require costly fracking technology to extract, and more difficult processes to refine.

For King and Inderwildi both sides of the argument have a point: "There is indeed ample potential supply of fossil fuels, however, conventional oil, which is relatively cheap to recover, can no longer meet the demand."

Since 1980, they found, more conventional oil is consumed than found every year. The widening supply-demand gap is filled using unconventional reserves.

Welcome to the age of crappy oil

And that's where the bad news comes in. Business as usual means we will remain heavily dependent on unconventional oil and gas for the next three decades at least.

But the energy to mine and refine unconventional oil and gas, write King and Inderwildi, "is significantly higher than that of conventional resources and consequently, the greenhouse gas (GHG) emissions generated by combustion of these fuels is higher."

Operations in Mali. Image: Magharebia/Flickr

In other words, we are now more dependent on fundamentally crappier fossil fuels: oil and gas that is way harder and costlier to get out, and which is way worse for the health of our climate.

Yep: crappy oil.

King draws on the concept of Energy Return on Investment (EROI)—introduced by Professor Charles Hall of the State University of New York—to calculate how much energy is invested, compared to how much energy is extracted for different fuel sources.

For conventional oil produced from Saudi Arabia, the EROI can be as high as 100—"providing 100 times the energy invested."

Not so for unconventional resources. Shale oil has an EROI of as little as 5. EROI for tar sands is roughly 4.8—which is nearly half of the EROI value of oil imported to the US from, say, Venezuela.

"All this is roughly a factor of 20 lower than early conventional oil. Consequently, the energy benefits from these resources are significantly lower than the benefits from conventional oil. The benefits are diminishing."

And if more and more energy is invested simply in the process of producing fossil fuel energy, then that higher energy input entails higher greenhouse gas emissions: an increased carbon footprint.

The shift to unconventional fossil fuels is therefore putting us on a collision course with the climate, which will "increase global greenhouse gas emissions even more than anticipated and counteract other decarbonisation endeavours."

In the long-term, that means we're increasing the risk of dangerous global warming. In the short-term, there's a tangible impact right now: the economy. The more we rely on more expensive and lower quality energy to keep the economy moving, the slower the economy moves.

The shift to crappy oil is also a shift to sluggish, slower economic growth.

The light at the end of the tunnel

It's not all bad—the shift to shale gas has helped displace coal use, which has helped lower carbon emissions. But we're at risk of simply juggling our dependence from one unsustainable fuel to another.

Hydropower. Image: Chalisa Jirotchuk/Wikimedia Commons

King and his co-author urge that government intervention is needed to guide and incentivize societies to use unconventional resources "as a transitional and not a long-term fuel."

The real target must be kept in sight: restructuring our energy and transport systems, reducing our demand for oil, and shifting to "indigenous primary energy supplies, solar, wind, hydropower, geothermal, tidal, wave", along with new forms of "energy storage facility and smart grid development."

It's either that, or the planet burns in a sea of crappy oil.