Oil Panic and the Global Crisis: Predictions and Myths Book

Preface ix

Acknowledgments x

About Units xi

Getting Started: What Do You Think? xiii

1 End of the Oil Era 1

Cause for Concern 1

Hubbert's Curve 4

The Appeal of Hubbert's Curve 10

Hubbert's Success 11

US Oil Dependence Since Peak Production 12

Chapters Ahead 13

Notes and References 13

2 The Global Oil Landscape 16

Introduction 16

Definitions 17

Petroleum Composition and Energy Density 18

Why a Barrel is a bbl 20

The Oil Business 20

OPEC 23

How Much Oil is There? The USGS Assessment 26

From the USGS Assessment to 2009 29

Reserves 31

Where is Oil Produced? 32

Where is Oil Consumed? 33

Oil Imports 35

After Oil is Produced 37

Oil Production Versus Consumption 38

Oil Quality 40

Oil Pricing by Quality 40

Gasoline 41

What Determines the Price of Gasoline at the Pump? 41

The Price of Gasoline 44

Gasoline Price Elasticity: What Happens When the Price Goes Up (or Down)? 45

Gasoline Price Variability 47

Points to Take Away 49

Notes and References 51

3 The Historical Resource Depletion Debate 58

The Malthusian Doctrine 58

The Limits to Growth 59

The Oil Panics of 1916 and 1918 62

Panic Revisited: The Oil Crisis of the 1970s 63

Arguments Supporting Global Oil Depletion 65

Declining Oil Production in Countries in Addition to That in the US 65

Production Exceeds Discoveries 66

Reserve and Endowment Estimates are Inflated 67

Industry Exaggeration of Reserves 69

Fewer Giant Fields Discovered and Production is Declining 70

Decline in Discovery and Oil Drilling Suggests Onset of Production Decline 72

Global Industrial Development and Oil Consumption 74

The Price of Oil is Increasing: Does ThisIndicate Scarcity? 77

Forecasts Support a Decline in Global Production Using Extensions to Hubbert's Approach 80

Summary 81

Notes and References 82

4 Counter-Arguments to Imminent Global Oil Depletion 87

Myth I Hubbert's Predicted Production Rates Were Accurate 87

US Oil Production 88

The Bell-Shaped Curve 93

US Natural Gas Production 95

Global Oil Production 95

Myth II A Decline in Production Necessarily Indicates Scarcity 98

Commodity Scarcity 98

Generalizing the Debate: Resource Economists versus Neo-Malthusians 103

Back to Oil 110

Scarcity Rent 116

Myth III Resource Assessments Provide Useful Endowment Estimates 118

The Missing Mass Balance 123

Counter-Argument to OPEC and Industry Exaggeration of Reserves 124

Myth IV After So Much Exploration, There Is Little Oil Left to Be Found 126

US Oil: Reserves 126

US Oil: Discoveries 128

Global Oil: Reserves 132

Global Oil: Discoveries 138

Russian and Global Arctic Oil 144

Myth V The World Cannot Afford Increases in Oil Use as Developing Nations Demand More Oil 146

Future Demand of Developing Nations 146

Oil Expenditures in the World Economy 153

Myth VI There Are No Substitutes for Oil 156

The Gold Resource Pyramid 156

The Oil Resource Pyramid 160

The US and Global Oil Resource Pyramids 161

Three Unconventional Oil Substitutes 165

US heavy oil 165

Global heavy oil 166

US oil sands 168

Global oil sands 168

US oil shale 170

Global oil shale 172

Fossil Fuel Conversion: The Role of Gas and Coal 173

The Importance of Diesel 175

Synthetic Fuel from Coal and Natural Gas 175

Natural Gas Resources 177

Coal Resources 180

Chapter Summary 181

Notes and References 183

5 Beyond Panic 195

The Non-Renewable Resource Model 195

Where is an Efficiency Gain Possible? 196

Will Increases in Efficiency Indeed Reduce Demand? 199

Two scenarios for developing nations 204

What Might Ultimately Substitute for Oil? 207

Consideration 1 Cost of dependence on imported oil 208

Consideration 2 Gasoline and atmospheric carbon dioxide emissions 209

Consideration 3 Alternatives 210

Ethanol 211

Biodiesel 212

Leapfrogging to an ultimate substitute 213

Effects of a US move to oil alternatives 215

The State of Oil Resources 219

Ending Thoughts 221

Notes and References 225

Index 231