The Peak Oil Crisis: Importing Energy
By Tom Whipple
Lurking just beyond public perception is the 800-pound gorilla of peak oil issues.
Who gets to import how much after worldwide depletion sets in?
Currently, distribution of the world's oil production is relatively simple. Whoever wants oil, and has the money to pay for it, can buy as much as they want. No questions. No limits. Historically there have been a few exceptions, such as during World War II or the Arab Oil embargo, but in general if you have the money, importing oil has not been a problem.
Last month, the gorilla began to stir in the form of a report prepared by the folks up at the University of Alberta in Canada . It seems 68 percent of the crude oil and 55 percent of the natural gas produced in Canada is being exported to the US . Under the fine print of North American Free Trade Agreement (NAFTA), the Canadians are obligated to continue shipping this portion of their oil and gas production to us even after they go into depletion and can no longer produce enough to satisfy their own needs.
Not unexpectedly, a number of Canadian writers have started to ask why on earth 32 million Canadians should be obligated to send over half of their oil and gas production to help meet the energy appetite of 300 million Americans. As Canada 's production of oil and gas starts to dwindle, there will obviously be pressure to reduce exports. Canada 's Prime Minister recently noted that unless the US is more forthcoming on Canadian complaints about US softwood restrictions, Washington just might be facing Canadian reluctance to keep exporting such prodigious amounts of oil and gas south of their border.
Although there does not seem to be any immediate danger of a reduction in the flow of Canadian oil and gas to the US, the report and media reaction raise a glimmer of what might happen to world energy movements after depletion sets in.
For some period after peak oil, the rich nations will simply outbid the poor ones for dwindling supplies of gas and oil. Indeed, this seems to be already happening after the recent price increases. What will become hardships for the rich will become life and death issues in poorer countries as the underpinnings of modern civilization simply melt away.
In the United States , however, it might be time to start making a distinction between imports of oil and imports of natural gas. There are many sources of imported oil, and stepping up oil imports can be rather easy as we have seen from the marked increases in our imports to compensate for the hurricane damage to production facilities in the Gulf of Mexico .
However, importing gas is another issue as most of it comes by pipeline from Canada and Mexico . Only 2 percent of current natural gas imports come as liquefied natural gas (LNG) from distant suppliers. Although there are a lot of calls these days to increase LNG imports to the United States by building more LNG import faculties, importing increased supplies of LNG requires the construction of large and expensive LNG production facilities in other countries and the special tankers to move it.
For the US, the bulk of our natural gas imports — some 18 percent of our total consumption — come by pipelines from countries that have their own needs and are starting to raise questions about the scale of their exports.
There is another issue with natural gas however; it is a very versatile fuel and raw material. Currently in the US about 22 percent of our annual consumption of natural gas goes for residential needs where it supplies heating for about 55 percent of the homes in the country. About 38 percent is used in industry to produce power and as the raw material to make multiple products and 25 percent goes to produce clean electricity.
Last month, the Canadian Chemical Producers Association released a statement pointing out that by far the most valuable use of natural gas was to make other materials such as vinyl and plastics. The Association contends that using natural gas to make materials is far more valuable to our civilization than burning it to keep warm or to make electricity that can be produced by other fuels. Until recently there was so much gas around nobody really looked very hard at what it should be used for. Anything that made economic sense was fair game.
It’s now starting to look as if natural gas may become scarce even before oil does. This is especially true in Britain where North Sea gas is running out, and in the US where hurricanes keep tearing up production facilities and at least one neighbor is starting to wonder about how long they really want to keep supplying us.
For the 55 percent of us who are currently cooking, drying, bathing and generally keeping comfortable courtesy of our natural gas supply, it just might be time to start thinking about alternatives.