As many people with even a casual interest in energy now know, natural gas supplies in the United States are very tight and will most likely become worse due to mature gas reservoirs no longer being able to meet demand. The National Petroleum Council (NPC), an industry organization established by the U.S. Interior Secretary in 1946, announced in a September 2003 report that U.S. and Canadian gas production has “plateaued” and that North America will no longer be self reliant in meeting its gas needs.1 There currently exists only one source of proposed salvation for meeting American gas demand, and that is importing Liquefied Natural Gas (LNG) from other countries such as Oman, Qatar, or Algeria. There is currently a large effort in this nation to rapidly increase LNG imports but safety and environmental concerns are greatly slowing down this effort. In addition, competition for LNG from Japan, Europe, India, and China may very well limit the amount we can ultimately obtain.
The oil situation may turn out to be just as bad, if not worse. Studies conducted by petroleum geologists such as Colin Campbell2 and L.F. Ivanhoe3 suggest that conventional oil production will peak sometime before 2010. While this claim was at first ignored by most mainstream media, it can’t be ignored any longer. Petroleum prices have reached record highs; oil production has peaked in individual countries including the U.S., Britain, and perhaps Oman; and it’s now commonly recognized that Saudi Arabia is the only country claiming excess production capacity. Ever-increasing numbers of former skeptics agree that oil production may peak during this decade.
We live in a world that was built and is sustained by inexpensive, readily available fossil fuels. Fossil energy powers our delivery vehicles and all of our farm machinery, it pumps water to our homes, it produces nearly all of the products that we call chemicals. In short, without fossil fuels our civilization cannot exist as we currently know it. Figure 1 shows the percentage of various energy sources used to run American civilization from 1920 to 2002. It can be easily seen that natural gas, petroleum, and coal make up the vast majority of American energy demand and that as petroleum and gas consumption have risen or fallen, coal has done the inverse. This is because coal is the only real alternative for gas and oil. Some might argue that there could be other sources of energy and they would be right but we are simply not ready for them.
Nuclear energy can be used to generate electricity and can even make motor fuels, but safety concerns, waste disposal issues, and needs for further technological development mean that nuclear energy will not be a majority energy source for several decades. Hydroelectric power has served the U.S. well but is now near its maximum potential because there are simply almost no rivers remaining to be dammed. In addition, water shortages have affected the reliability of hydroelectric power. Wind power has a moderately promising future but the unreliability of wind has limited its use throughout the world. Even countries such as Denmark that have made heroic efforts to develop wind power are connected to a larger electrical grid so that they can rely on more traditional sources of electricity when the wind is not blowing. There are also other energy sources such as solar power but they are very minor contributors and will remain so for reasons that are beyond the scope of this paper. In short, the only major energy sources for the next few decades will be oil, natural gas, and coal.
Another item to note about figure 1 is the peak in gas and oil production that occurred in the 1970s which led to the resurgence in the percentage growth of coal. If indeed we are nearing a point in which the U.S. will find more difficulty in obtaining oil and natural gas, then only coal will be called upon to fill the shortfall.
There is almost no doubt that coal production will rise in the future and the Department of Energy’s Energy Information Administration (EIA) predicts that coal consumption will greatly increase in the next two decades.4 Most would agree that this will not be a problem because in the U.S. we have hundreds of years of reserves remaining. Years of reserves remaining is easy enough to calculate: one only need determine how many tons of coal remain in the ground (available from the EIA) and divide by the production for that year. If we look at the year 2000, we can see that we have 255 years of coal remaining. However, if we look at other years, we see something strange: there were 300 years of coal reserves in 1988, 1000 years reserves in 1904, and 10,000 years reserves in 1868! As each year goes by, we use our coal more quickly and we see that the standard formulation of ‘years remaining’ is nearly meaningless.
Figure 2 shows U.S. coal production from 1800 to 2001. We can see a fairly good example of exponential growth with a change in that pattern from 1917 to 1961. This deviation from exponential growth teaches us an important lesson about projections. Any mathematical model that involves human decision such as whether to use coal or oil, or models that include the chaotic, human driven economy will deviate from mathematical perfection. Any model that we devise will only be a decent fit at best.
One model that has been fairly successful at predicting the production of oil and gas is the Hubbert curve. It is a bell shaped mathematical curve very similar to the normal distribution curve and is named after the now famous geophysicist M. King Hubbert who used it to predict that oil production in the 48 contiguous states would peak in the early 1970’s. Hubbert was proven to be right when production peaked in 1971. Figure 3 shows a Hubbert curve that has been fitted to coal production data for the United Kingdom. The U.K. was chosen as an example because it is a region that is well past its peak and will likely never be able to increase its production to British coal’s heyday in the early parts of the 20th century.
Britain has already shown us that a region’s coal fields can be depleted, but we must ask whether the Hubbert curve is a good depletion model.
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