The price of peak fuel
Our need for fossil fuels is insatiable, but coal, oil, gas and uranium reserves are finite and some may even be in decline. How long will our energy resources last?
By Stephen Pincock
It's among the great ironies of modern life. In order to fuel our twenty-first century global society, we rely profoundly on fossil fuels that are millions of years old.
Most scientists believe that the oil, coal and gas we use to generate electricity, run our cars and transport food began their existence as ancient plants and algae. Buried under heavy layers of sediment, they transformed chemically under immense heat and pressure into rich sources of fuel.
These forms of energy have revolutionised human society over the past century and more, but they are irreplaceable resources, and reserves are inevitably dwindling. Many scientists and other experts warn that we are approaching the time when production of these fuels will reach its peak, and start to decline.
The concept of peak oil — and by extension, peak coal, gas and other fuels — was born in 1956, when American geophysicist M. King Hubbert calculated that the rate of production of fossil fuels would peak in the United States in about 1970 and then start declining. At first his calculations were dismissed, but ultimately he was proven correct.
"The peak that matters is a peak in production," says Dr Mark Diesendorf, a senior lecturer at the Institute of Environmental Studies at the University of New South Wales. "And the peak wouldn't matter so much if the demand for these fuels wasn't increasing so much. But demand keeps going up and up and up. In that scenario only one thing can give, and that's price."
As fossil fuels become increasingly rare, the cost of extracting them from the earth will inevitably grow, he says. And the impacts on the global economy could be dramatic. These fuels are used for more than just running the family car; they are vital to powering homes and offices, transporting foods and much more.
In the most dramatic scenario, declining availability of fossil fuels could trigger violent upheaval, as a group of German experts called the Energy Watch Group warned in October last year.
"The world is at the beginning of a structural change of its economic system," they said. "This change will be triggered by a sharp decline of fossil fuel supplies and will influence almost all aspects of daily life. Anticipated supply shortages could easily lead to disturbing scenes of mass unrest."
Crude oil, otherwise known as petroleum, is a vital energy source. Made up of a mix of different molecules, it is the starting point for production of the petrol we buy to power our cars, diesel, bunker fuel used in ships, kerosene and liquefied petroleum gas, among many other things.
"Everyone knows that our transport system is highly dependent on petroleum products," says Dr Hugh Saddler, managing director of the company Energy Strategies. "The mining industry in Western Australia is also dependent on petroleum products. There's an enormous amount of diesel fuel used there."
Given the world's reliance on oil for transport, heating and to a lesser extent electricity generation, not to mention the manufacturing of plastics and other products, there's intense interest in trying to figure out how much oil is left. But calculating this figure is no easy task, partly because many countries keep their data secret.
According to estimates published by the US Energy Information Administration in early 2007, the world has around 1,200 billion barrels of oil in "proved reserves", which are estimated quantities of oil that can be recovered based on geologic and engineering data.
On the other hand, Energy Watch Group said in October last year that a more accurate estimate, based on the amount of oil that is being produced, would be 854 billion barrels. According to their analysis, world production of oil passed its peak in 2006, and is now already in steep decline.
The International Energy Agency (IEA), on the other hand, disagrees. In a 2005 report, the agency's executive director, Claude Mandil, argued that "There is no shortage of oil and gas in the ground, but quenching the world's thirst for them will call for major investment in modern technologies."
Still, the IEA estimated that unless the world implemented new energy policies, oil demand would grow by more than 50 per cent between 2002 and 2030.
Searching for the reality among these different estimates is a futile exercise, says Saddler. "I've had the view for a long time that when you're talking about energy policy that it gets a bit fruitless arguing about peak oil. It gets a bit speculative."
His view is that we simply need to begin finding ways to use less oil and search for alternatives. "It's the precautionary principle we should apply, just as we do with greenhouse-gas emissions."
This seems like particularly sensible advice given the impact that rising oil prices are already having at the pumps and elsewhere. Oil prices have doubled in a year to around $130 a barrel as increased consumption has hit, hurting industry and contributing to food price rises that have resulted in protests and riots in places like Haiti, Egypt and Somalia.
"The reality is that the supply of oil has got to the point where the reserves of easily obtained oil are definitely starting to dwindle," says Dr Graeme Pearman, former chief of CSIRO Atmospheric Research and now honorary senior research fellow at Monash University.
"How hard and how fast the prices rise depends on a lot of factors, including the politics of how the oil suppliers respond to the situation."
Coal generates 40 per cent of the world's electricity. It is also the largest worldwide source of carbon dioxide emissions. (Source: iStockphoto)
If oil is largely used for transport, most of the coal mined around the world is used in power stations, where it is burned to turn water into steam and turn turbines that generate electricity.
According to the World Coal Institute, which represents industry, coal provides a quarter of global primary energy needs and generates 40 per cent of the world's electricity. It is also the largest worldwide source of carbon dioxide emissions, contributing more greenhouse gas than oil and gas to generate the same amount of electricity.
There is little disagreement that coal is currently an abundant resource, with the US Energy Information Agency estimating that there are world coal reserves of 997 billion short tons. At current production levels, the World Coal Institute says, proven coal reserves are estimated to last 147 years.
The coal story is very different to the situation with oil, notes Pearman. "There are reserves of coal that are still obtainable at relatively low cost."
There are concerns, however. Some organisations predict that global coal production could peak as early as 2020, and the massive growth in China and elsewhere looks likely to keep demand for coal growing.
Plus, the rate at which we use up coal reserves could escalate if it is converted into liquid and gas fuels, a scenario that could become more attractive if the cost of oil continues to spiral.
"In that case, the coal will go very quickly," says Diesendorf. "Probably within the century."
Ultimately, the major concern about coal is the amount of greenhouse gas it emits when being used to generate energy. In the short term, the search for ways to capture and store the carbon dioxide (CO2) from coal could create a temporary peak in its use, suggests Pearman.
As US scientist James Hansen wrote in an open letter to Prime Minister Kevin Rudd this year: "Coal caused fully half of the fossil fuel increase of CO2 in the air today, and on the long run coal has the potential to be an even greater source of CO2. Due to the dominant role of coal, solution to global warming must include phase-out of coal except for uses where the CO2 is captured and sequestered."
Natural gas is actually a mixture of different gasses, sometimes found in isolation and sometimes along with oil and coal. It is used to generate electricity, as an automobile fuel and for heating and cooking at home.
According to the US government, current global reserves are estimated at 178 trillion cubic metres. Australia is home to a sizeable amount of that resource — two trillion cubic metres according to the government's Australian Bureau of Agricultural and Resource Economics, most of it located off the West and North West coasts.
But gas is easy to extract, and is used up quickly, a process that Saddler suspects will soon become even more important as oil prices keep rising. "The world's going to gas because it can be readily substituted for petrol in non-transport uses and it is lower in greenhouse gas emissions," he says.
The inevitable result will be rising prices for gas, he says, and Mark Diesendorf agrees. "The demand for gas is going to go up dramatically. We'd probably be optimistic to think there's going to be much gas left in Australia by 2050."
Fossil fuels such as oil and coal are not the only finite fuel resource. Uranium, used to power the nuclear power stations some hope will offer a power source with fewer greenhouse emissions, could also reach a peak as soon as 2040.
Over the past 50 years, the average grade of the uranium extracted from mines around the world has gradually declined, says Dr Gavin Mudd from Melbourne's Monash University, and he argues it's a trend that is likely to continue.
That means mining companies will have to use more energy, and more water, to extract the ore and process it ready for use in a power station.
Advocates for the technology say nuclear power plants could help mitigate greenhouse gas emissions, and therefore could be an important weapon in the fight against climate change. But Mudd says there has been a lack of real facts and figures around how much uranium there is, and how easy it will be to extract.
A spokesperson for the Australian Uranium Association questions Mudd's figures.
"The assumption appears to be that we are currently mining all the known resources of uranium, beginning with the most easily recoverable ore and working through to the ore that is more difficult," he says.
Time to act
Exactly how and when each of these fuels is likely to reach their production peaks is still a matter of intense disagreement among scientists, politicians and representatives of the fossil fuel industry.
One thing seems certain, however. Eventually they will.
"All of these things have their limits," says Pearman. "There are constraints in the real physical world."
The big question is how quickly we will be able to change our economies and societies and begin weaning ourselves from our reliance on these limited resources.
"We seem to be very slow to respond to these things," Pearman says. "I'm optimistic we can do it, but there are things that could happen overnight that could change our view."