In his new column on energy, The best hope for energy security, Martin Wolf, the senior economics editor of the Financial Times, after his earlier column that noted the expected growth in world energy demand, takes a look at how supply can provide for such demand. He makes the explicit hypothesis in this article that he will not worry about global warming (promising to come back to the issue specifically in a future column), and looks at the availability of energy sources.
The conclusion is pretty explicit:
Remember that this argument ignores the question of climate change. It asks whether the Malthusians who argue that the world will soon run out of fossil fuels allow the Malthusians who worry about the damage to the atmosphere to cheer up. The answer is an unambiguous no. It will be perfectly possible to run a fossil fuel economy for many decades at prices that are likely to be substantially lower than those of recent times.
...most analysts argue that reserves tell one little about available supplies, that higher prices and innovation generate greater extraction from existing fields, that discovery of new (if smaller) fields is continuing and, most important, that unconventional oil resources are still to be exploited (see chart). So even if production of conventional oil were to peak, the oil era would not be over. The question is rather one of price. The potential at a price of $70 a barrel seems huge. Many argue that the price needed to bring forward additional supply is much lower.
Nor does the end of oil mean the end of fossil fuels. Gas and, above all, coal are even more plentiful. Some would counter that petroleum is a unique source of high quality energy for transportation (which itself accounts for one-fifth of commercial energy use). But it is possible to convert coal and natural gas into "syngas" (synthesis gas) and then into liquid fuels. The question is one of cost. The answer is that this would be more expensive than conventional oil, but not prohibitively so.
He provides the following graph:
According to this, long term $40 oil will be enough to provide us with plentiful new sources of oil, like oil sands, ultra deep offshore, and improved recovery from existing fields. There are a number of reasons why this argument is suspect:
In a diary back last September, I noted that estimates of oil production costs were going up significantly, both for the average cost and the marginal cost (the most expensive barrel needed to fulfill demand, and the one ultimately driving minimum oil prices):
The article contains the usual casual dismissal of renewable energy, which, as it cannot provide the whole solution, is immediately discounted as useless. Nuclear is put in the same sorry bag.
What role then might be played by nuclear and renewables in such a "business as usual" scenario? "Marginal" seems to be the answer. The big points are that renewable energy is expensive, nuclear energy is controversial and overall demand is set to grow substantially.
There are a number of depressing things to read here:
So this story perpetuates all the feelgood stories that maintain the pretense that there is enough oil for the foreseable future, not to mention even more gas and coal, and that alternatives energies are unrealistic and unneeded - and thus that we do not need to do anything - and in particular we don't need to think about conservation and about demand.
I'll wait for his article on global warming to make too rash a conclusion, but this article is not reassuring, to say the least, that we're ever goping to get our elites to take energy issues seriously.