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World oil shortages would center on liquid fuels, forum told

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Oct. 8 -- The world could face more of a liquid fuels than crude oil shortage as national economies recover, experts agreed at an Oct. 7 Capitol Hill forum. Global liquid fuels production hit a plateau in mid-2004 where it has generally stayed despite the strongest economic recession in decades, said Robert L. Hirsch, a senior advisor at Management Information Services Inc.

Several nations’ gross domestic products could plunge as a result, he warned at the event cohosted by the Environmental & Energy Study Institute and the Association for the Study of Peak Oil & Gas. “The countries that would be hurt the most would be the ones relying most heavily on imports,” said Hirsch, who wrote a report on possible peak oil impacts for the US Department of Energy.

“It’s a liquid fuels problem, not energy. Anyone who tells you that windmills will help is early in his or her understanding of the issue,” he maintained.

“There are huge challenges for meeting rapidly growing demand for liquid fuels,” noted Franklin Rusco, the US Government Accountability Office’s natural resources and environment director. “All commodities’ prices are going to be affected. Before the recession, their prices were high. They can be expected to resume their growth as national economies recover.”

Countries can prepare by aggressively moving rail and other major transportation systems to electricity from diesel fuel, suggested Tad Patzek, chairman of the University of Texas at Austin’s petroleum and geosciences engineering program. “We need modes of transportation that rely less on liquid fuel. This will need to involve coal and nuclear as well as natural gas,” he said.

Production realities
There are plenty of fossil fuel resources worldwide, but few policymakers recognize that such estimates do not reflect what can actually be produced economically and without major environmental impacts, he continued. “When fields are run very efficiently, 50-60% of their oil can be recovered. That’s not always possible,” he said. “The entire Bakken shale is producing at a rate comparable to one not-so-good well in the Gulf of Mexico. It requires significantly more wells, with all their casing and cement, with production that declines quickly.”

Peak oil is as much an issue of cost as supplies, according to Arthur E. Berman, director of Labyrinth Consulting Services Inc. in Sugar Land, Tex. “In order to get wedges of additional supply, oil will need to cost more,” he said. “More wells will need to be drilled at increasingly higher costs to recover steadily smaller amounts.”

Countries also should carefully examine potential environmental consequences before they allow aggressive shale gas development, he added.

Policymakers have to balance growing environmental concerns with security and economic pressures as they consider energy issues, observed Neil Brown, a senior minority staff member of the US Senate Foreign Relations Committee. He said that while US politics have traditionally emphasized domestic issues, global concerns have begun to emerge. “As the economy recovers, demand is going to skyrocket. The question is whether there will be enough supplies,” he said.

Guy F. Caruso, a former US Energy Information Administration administrator who now is a senior advisor at the Center for Strategic and International Studies, said an effect energy policy will need to be sustainable, adaptive, and use the current system as much as practicable in the interim while it promotes and provides incentives for new technologies and fuels.

“The problem needs to be attacked from both sides: supply and demand,” he recommended. Countries in the Organization for Economic Cooperation and Development “are well on their way with major efficiency programs,” Caruso continued. “It’s the developing countries, where most of the growth is expected, that pose the major challenge.”

Contact Nick Snow at nicks@pennwell.com.


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