SNAKE OIL: Chapter 6 – Energy Reality

October 30, 2013

This article is the final excerpt from Richard Heinberg’s new book SNAKE OIL: How Fracking’s False Promise of Plenty Imperils Our Future. Given the urgency and importance of the issues we are serializing the book here at
During the past year, article after article in the mainstream press has gushed over the prospects for American oil independence and natural gas exports, while ignoring the context—an ever-increasing requirement for the investment of capital and energy in the extraction of fast-depleting and often poorer quality fuels.
The media’s euphoria was perhaps epitomized by Charles C. Mann’s lead article in the May 2013 issue of Atlantic titled “What If We Never Run Out of Oil?” The magazine’s cover proclaimed, in tall capital letters, “WE WILL NEVER RUN OUT OF OIL”—which of course is true: the Earth’s crust will always contain immense amounts of crude. It’s just that we won’t be able to afford to extract most of it because doing so would take either too much money, too much energy, or both. Continuing the theme, the article’s subtitle asked a startling question—“What if fossil fuels are not finite?”—which implies uncertainty as to whether the Earth is a bounded sphere or a plain extending endlessly in four directions. Title, subtitle, and headline were presumably intended as attention-grabbers: the article itself was serious and thoughtful—though, as I hope to show, profoundly misleading.
In this chapter, we will first address a few of Charles Mann’s claims in the Atlantic article and then proceed to the much more important discussion of our real energy prospects.


As a warm-up for touting America’s shale gas and tight oil prospects, Mann spent the opening pages of his article introducing readers to the truly gargantuan potential of methane hydrates—a frozen hydrocarbon resource locked in seabeds and Arctic tundra. “Estimates of the global supply of methane hydrates,” wrote Mann, “range from the equivalent of 100 times more than America’s current annual energy consumption to 3 million times more.” Numbers that big numb the brain.
This should have been the appropriate point in the article to explain the resource pyramid, and to inform readers that nearly all (if not all) of the world’s methane hydrate resources rest at the bottom of the pyramid, where they are economically inaccessible and likely to remain so. Japan has conducted the world’s most extensive research on commercial extraction of this resource, and, as Chris Nelder noted in a rebuttal to Mann’s piece, “Japan’s experiment so far has taken 10 years and $700 million to produce four million cubic feet of gas, which is worth . . . about $50,000 at today’s prices for imported LNG in Japan.”1 Mann, in a reply to Nelder’s rebuttal, countered that technology R&D costs should not be taken into account in assessing the commercial viability of a resource.2 That’s arguable. However, using the word supply to describe these resources, as Mann does (“estimates of the global supply of methane hydrates”), is clearly misleading, because virtually no hydrates are actually being supplied.
Whatever the size of the resource base, economic reserves of methane hydrates are currently roughly zero. We simply do not know if the extraction of these resources can ever be accomplished at an energy or economic profit. Most of the geologists I’ve spoken with on the subject are highly skeptical. The EROEI (energy return on energy invested) for commercial methane hydrate extraction is unknown, but preliminary indications are not encouraging. A study of the EROEI for electrical heating of methane hydrate deposits located at depths between 1000 and 1500 meters yielded ratios from less than 2:1 up to 5:1, depending on the source of electricity. The authors of the study emphasize that this is only one of the energy inputs that must be taken into account.3
Other authors mimic Mann’s hydrocarbon hyper-enthusiasm when discussing “oil shale” (more properly termed kerogen), which is extraordinarily abundant in Colorado and Utah. The United States has the largest deposits of this resource in the world, amounting to nearly 4.3 trillion barrels of oil equivalent. Novice commentators often take that number, divide it by America’s annual oil consumption (roughly 7 billion barrels), and arrive at the mind-melting conclusion that the nation is sitting on six hundred years’ worth of oil.
But kerogen is not oil. It is better thought of as an oil precursor that was insufficiently cooked by geological processes. If we want to turn it into oil, we have to finish the process that nature started; that involves heating the kerogen to a high temperature for a long time. And that in turn takes energy—lots of it, whether supplied by hydroelectricity, nuclear power plants, natural gas, or the kerogen itself. Therefore, the EROEI in extracting and processing oil shale is bound to be pitifully low. According to the best study to date, by Cutler Cleveland and Peter O’Connor, the EROEI for oil shale production would be about 2:1.4 That tells us that oil from kerogen will be far more expensive than regular crude oil—right up until the time when regular crude oil itself becomes uneconomic to produce.
In “Drill, Baby, Drill,” after carefully analyzing US shale gas and tight oil prospects, David Hughes proceeds to assess global unconventional oil resources; in the pages devoted to oil shale he points out:

[W]ith oil shale, as with all hydrocarbon accumulations, there are variations in quality between basins and there are sweet spots within basins. For this reason, the relatively high quality oil shale resources within the Piceance Basin have received the most attention in recent years with pilot projects conducted by the oil majors Shell, Chevron, and ExxonMobil, as well as a number of smaller companies. None of these pilots has resulted in commercial scale production and Chevron has recently abandoned its operations. [p. 123]

Again: the resources are immense, yet economic reserves are minuscule to nonexistent. Sometimes this can be hard to explain to the layperson. I recall all too many instances where I have carefully described to a lecture audience how it takes energy to get energy, pointing out that the energy profit from the production of kerogen resources is abysmal—only to hear an audience member insist that there must be some dark conspiracy preventing America from exploiting these unfathomable energy riches.
Other unconventional hydrocarbons are viable, but still problematic and often overestimated. Canada’s tar sands (better termed bitumen) are clearly an economic source of fuel, and again the resource is immense—1.84 trillion barrels, or about 60 years of global oil consumption at current rates. But only about a tenth of that resource is currently counted as reserves. The EROEI for tar sands production is poor, between 3:1 and 6:1 by most estimates. “Syncrude”—synthetic crude oil made from bitumen—is profitable to produce only because oil prices are high and natural gas prices are low. (Heat from gas is often used to liquefy the tar.)5 Bitumen, like all nonrenewable resources, is subject to the low-hanging fruit extraction principle: the very best resources are being mined first—which means that, as time goes on, the requirement for financial and energy investment per barrel of finished syncrude will tend to increase.
Like tar sands, Arctic and deepwater sources of oil are currently economic—at least in some instances. For the United States, the Gulf of Mexico is the site of nearly all current deepwater production. The Gulf boasts a total of almost 70 billion barrels of reserves plus estimated “undiscovered technically recoverable resources.” Shell is currently developing some of the deepest wells ever drilled, in nearly two miles of ocean water two hundred miles south of New Orleans.6 Deepwater petroleum resources also exist off America’s Pacific and Atlantic coasts, and the North Slope of Alaska. In all instances, deepwater drilling entails high environmental risks (recall the Deepwater Horizon disaster in the Gulf of Mexico in 2010), but especially so in ice-choked Arctic waters. The realistic prospect is for a combined production rate no greater than 1.7 million barrels per day from all US deepwater projects through 2035 (which equates to about 2% of world crude oil consumption), after which production will decline.7 Deepwater projects typically suffer from high production costs: a single well may require the investment of $100 million or more. Drilling costs are highest in the Arctic, as Shell recently discov-ered: in January 2013, a Shell drilling rig called the Kulluk broke free from a tow ship in stormy seas and ran aground near the island of Kodiak. The immediate loss was assessed at $90 million, and there were no oil production revenues from the project to offset it.8 Deepwater exploration and production are only profitable when oil prices are high.
Our problem is not that there aren’t enough hydrocarbon molecules in the ground. (Charles Mann is right on that point.) There are certainly plenty to fry the planet many times over, if we were to burn them all. Instead, our most pressing energy conundrum—from a purely economic standpoint—is declining EROEI. We built industrial societies on high-EROEI fuels that enabled a small amount of investment, and relatively few workers, to supply enough cheap, concentrated energy so that the great majority of citizens could use ever-increasing amounts of energy and thereby become more productive. Millions of farmers (who are traditional societies’ primary energy producers) were freed up to become factory workers, salespeople, computer technicians, perhaps even hedge fund managers or journalists. During this time, labor productivity soared—not because people were working longer and harder, but because they were using more energy at their jobs (by way of machinery) to generate more wealth. Urbanization, globalization, specialization, rapid economic growth—none of these would have been possible without increasing flows of energy that was spectacularly cheap in both monetary and energy terms.
Lower the overall EROEI of the energy system of a modern industrial society and the predictable result is a requirement for more investment in the energy sector and for more workers there as well. Economic growth slows, stalls, or reverses; jobs in non-energy sectors disappear; globalization falters. Meanwhile, more expensive energy translates to a stagnation or even decline in worker productivity.
This is exactly what we are beginning to see.


A key point of Charles Mann’s article in Atlantic was that technology changes the game. It was new technology (hydrofracturing and horizontal drilling) that made a torrent of new shale gas and tight oil production possible. Technology is driving expanded extraction of Canada’s tar sands. Technology could make methane hydrates accessible and could make Arctic oil easier to reach. We simply don’t know how much of the world’s currently inaccessible, vast, unconventional hydrocarbon resource base can be turned into economic reserves through further advances in technology. Therefore (so goes the argument), to discount the likelihood of a future of cheap, plentiful fossil fuels simply because we’re depleting reserves of conventional fuels is foolish.
A discussion about the unknown capabilities of future technology could easily descend into the trading of empty claims based on contrasting prejudices. We can avoid that wasted effort by clarifying the essence of the dispute and then examining the evidence. The question we really need to answer is this: Can technology improve the overall EROEI of fossil fuel extraction enough to overcome declines in resource quality resulting from the depletion of conventional fuels? Now, let’s look at the relevant facts.
Technology can certainly improve the EROEI of oil, gas, and coal production. Examples of energy-saving innovations include clustered pad drilling for shale gas, cogeneration in tar sands production, longwall coal mining, and closer well spacing in tight oil plays.9 The industry is always looking for ways to save money, and efficiency measures undertaken in order to reduce investment requirements usually end up saving energy as well.
Technology or geology: Which horse will win? In the end, geology is destined to triumph. Energy efficiency moves us in the direction of solving the EROEI dilemma, but it is always subject to the law of diminishing returns: the first 5% increase in energy efficiency typically costs less than the next 5%, and so on. Meanwhile, the effects of depletion compound: fossil fuels are finite, regardless of any attention-grabbing headline to the contrary, and the extraction costs for fossil fuels tend to rise exponentially as resource quality declines below certain thresholds. Efficiency improvements will eventually be overcome by the sheer physical burden of har-vesting hydrocarbons that are increasingly deep and dispersed.
However, “in the end” and “eventually” are too vague to be helpful. What we really need to know about is the short term—say, the next 20 years. During the next two decades, society will still be largely dependent on fossil fuels even if it makes a substantial effort to reduce that dependency in order to avert catastrophic climate change. In fact, fossil fuels will be doing double duty: they will be keeping major sectors of our current economy going (most essentially, our transport and food systems), while also providing energy for the manufacture of millions of solar panels and wind turbines (it’s only just this year that the world’s solar power plants installed to date have produced as much energy as was required to build them).10 Whatever fossil fuels we continue to use will have to be highly productive—especially since most renewables have energy profit ratios lower than those of fossil fuels (as we will see in the next section). To focus the relevant question even further: Can improvements in extraction technology enable fossil fuels to keep modern, complex societies economically viable during this crucial transition period?
The signs are not favorable. Currently, the overall EROEI for fossil-dominated global energy is declining. That’s the conclusion of a boatload of ongoing research by a growing number of scientists.11 Charles Hall is the father of EROI research. (He prefers the term EROI, or energy return on investment, because it considers capital and environmental investments as well as energy investments in energy production; EROEI refers only to the investment of energy in energy production.) He writes that “the world’s most important fuels, oil and gas, have declining EROI values. As oil and gas provide roughly 60 to 65% of the world’s energy, this will likely have enormous economic consequences for many national economies.”12 Hall’s finding is based on numerous recent studies: “This pattern of declining EROI,” he writes, “was found for US oil and gas (Guilford et al.), Norwegian oil and gas (Grandell et al.), Chinese oil (Yan et al.), California oil (Brandt), Gulf of Mexico oil and gas (Day and Moerschbaecher), Pennsylvania gas (Sell et al.), and Canadian gas (Freese).”13
A few energy financial analysts have explored the implications of EROEI, often without observing Hall’s methodological rigor and without properly citing his original work in this field. Andrew Lees of UBS, writing in The Gathering Storm, has argued that global EROEI is currently about 20:1, deriving this figure from energy’s 4 to 5% share of world GDP. Given recent trends, Lees calculated that the ratio might fall to 5:1 over the next decade, which would translate to a massive disruption of the world economy.14 Discussing Lees’s conclusions, the Economist magazine mused that “the direction of change seems clear. If the world were a giant company, its return on capital would be falling.”15
Tim Morgan, of the London-based brokerage Tullett Prebon (whose customers consist primarily of investment banks), discussed the averaged EROEI of global energy sources in a recent Strategy Insights report, noting:

[O]ur calculated EROEIs both for 1990 (40:1) and 2010 (17:1) are reasonably close to the numbers cited for those years by Andrew Lees. For 2020, our projected EROEI (of 11.5:1) is not as catastrophic as 5:1, but would nevertheless mean that the share of GDP absorbed by energy costs would have escalated to about 9.6% from around 6.7% today. Our projections further suggest that energy costs could absorb almost 15% of GDP (at an EROEI of 7.7:1) by 2030. Though our forecasts and those of Mr. Lees may differ in detail, the essential conclusion is the same. It is that the economy, as we have known it for more than two centuries, will cease to be viable at some point within the next ten or so years unless, of course, some way is found to reverse the trend.16

In two of three primary fossil fuel energy sectors, extraction costs are rising. Technology may be winning a battle here or there, but the evidence shows that, as of now, it’s losing the war.
Charles Mann discusses EROEI briefly in his Atlantic article, pointing out one apparently bright spot in the landscape: shale gas. He reports that the EROEI of shale gas is a shining 87:1. He doesn’t provide a source for this figure, but it apparently comes from a study by Bryan Sell, David Murphy, and Charles Hall.17 In it, the authors analyzed “tight gas” production in Indiana County, Pennsylvania, using drilling and production data from before 2003. In other words, the data do not reflect the energy costs associated with the new and more complex and costly technology associated with horizontal drilling and hydrofracturing. The authors did not attempt to account for transmission and processing energy costs (which might lower the result by up to half). They were also very conservative in accounting for other energy costs. Crucially, they note that “highly complex-drilling environments, such as some shale gas reservoirs, could ultimately show relatively low EROI values.” No evidence suggests that the technology of fracking has actually raised the EROEI for natural gas production. (It temporarily lowered prices, but only by glutting the market.) Moreover, in their concluding remarks, Sell, Murphy, and Hall discuss the spectacularly high decline rates of shale gas wells and note, “catastrophic drops in gas supply can be expected if shale gas is relied upon as a replacement [for] conventional gas.”
There is good reason to think that the EROEI of shale gas is probably higher in the Marcellus (where operators are still drilling in “sweet spots”) than in older plays like the Barnett, Haynesville, and Fayetteville. As core areas are drilled out and rapidly deplete so that drillers are forced to move to areas with lower productivity, the overall energy return for shale gas drilling and production is probably declining rapidly. Indeed, David Hughes, in “Drill, Baby, Drill,” speculates that if all energy inputs are properly accounted for, the EROEI of shale gas in the older plays may be 5:1 or less on average.18
Technology can trump geology for a while, at least in certain instances.19 But we have entered a new era in which geology is negotiating harder all the time, and the costs of new technology often outweigh the economic benefit promised. Some fossil fuels (coal and gas) still have a relatively high EROEI, but oil is crucial to the global energy mix since it fuels virtually all transport, and oil’s energy profit ratio is plummeting.20 The economy is not likely to respond in steady increments to declines in energy profitability. This is how Tim Morgan at Tullett Prebon puts the matter: “[T]he critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.”21 Failing to notice this historic shift, while celebrating a temporary breakout in oil and gas production numbers in Texas, Pennsylvania, and North Dakota, seriously hampers our ability to adapt to dramatically and quickly changing circumstances.


We need much more renewable energy, and we need it fast. We must replace fossil fuels in order to prevent a climate catastrophe. And we must leave oil, gas, and coal behind because they are depleting, nonrenewable fuels that will inevitably become more expensive and dirtier the longer we rely on them.
The EROEI for most renewables is lower than the historic energy profit ratios for fossil fuels (see Figure 13 in Chapter 1). But the EROEI of oil and gas is declining, while the EROEI of wind and solar photovoltaics is improving.22 As we’ve just seen, the efficiency improvements in the production of fossil fuels are temporary, because they are quickly overcome by declining resource quality. But with renewable energy sources, technological improvements do not face the same headwinds. This is a crucial trend in our favor, and we should make the most of it.
Still, there are real hurdles to overcome.
The world’s largest current renewable source of energy is hydroelectric power. It can’t grow by very much, and building dams often creates enormous environmental problems.
The main renewable energy sources that are capable of significant growth are solar and wind. Both are intermittent; this can create challenges for grid operators. Typically those challenges are addressed by building energy storage capacity and by managing the grid to take advantage of a diverse portfolio of wind and solar generators sited in different places with different weather conditions. Some recent studies suggest that clever electricity supply and demand management could enable renewables to provide most, or perhaps even all, of America’s power without serious difficulties.23 However, the grid operator in Germany—a country with extensive experience in solar and wind—reports that, with high grid penetration, intermittency leads to problems like blackouts and brownouts, which in turn can damage electronic devices.24
For the world as a whole, growth in supply of renewable energy is not occurring at a sufficient rate to entirely displace fossil fuels any time soon. Some countries are seeing relatively quick adoption: Germany generated 23% of its electric power from renewables in 2012 (the proportion doubled in six years); Denmark achieved 41% renewable power; and Portugal, 45%. Here in the United States, Texas produced nearly 30% of its power from wind on some days last year. Yet the IEA notes that “worldwide renewable electricity generation since 1990 grew an average of 2.8% per year, which is less than the 3% growth seen for total electricity generation.”25 Moreover, there has recently been some slowing in the furious growth pace of solar installations in many countries because of reductions in government incentives, due in turn to the debt crisis in Europe and the squeeze on all older industrial economies from high oil prices.
Renewable energy boosters hope that falling prices will make solar and wind cheaper than fossil fuels, so that incentives will no longer be needed, and the growth rate for renewables will soar. Prices for both solar and wind have dropped steadily in recent years, and in some cases are competitive with natural gas (especially given the cost to utilities of hedging against gas price volatility). However, for the solar industry, low prices are a mixed blessing. Many photovoltaic (PV) producers are losing money, and factories are closing. A massive consolidation of the solar industry is under way.26 Prices may have to rise in order for solar manufacturers to remain profitable. If that happens, the growth rate for solar penetration into electricity markets will be further constrained.
Another hurdle is the fact that solar and wind produce electricity, while transport runs on oil. How can we make transport energy renewable? All routes to that goal are problematic.
Electric vehicles offer a partial solution, but market penetration is not occurring nearly fast enough. And there are problems with high energy and materials costs for manufacturing batteries. There are no electric airliners on the drawing boards and probably never will be. Hydrogen-powered vehicles have been hailed as a vector for renewably energized transport, but these have been very slow to deploy because fuel cells are expensive, and hydrogen is hard to store.
Advanced biofuels are another proposed solution. Companies are working to develop biofuels from city sewage, from contaminated grains and nuts, from cannery wastes and animal manures, and from forest wastes. Efforts are also under way to make liquid fuels from algae. Add up all these potential sources and they could nearly equal current transport energy; the remainder could be dealt with through better vehicle efficiency. But all biofuels have a low EROEI. Indeed, many of these potential fuel sources are likely to have a zero or negative net energy balance. Some make sense as ways of dealing with waste products, but as ways to economically produce energy—not so much. Alan Shaw, the chemist and former chief executive officer of Codexis, the first advanced biofuel technology company to trade on a US exchange, now says, “Cellulosic fuels and chemicals are not widely manufactured at commercial scale because their unit production economics have not yet been shown to be competitive with incumbent petroleum.”27
EROEI is not the only criterion by which we should assess energy sources. We also need to take into account their environmental risks and their long-term viability. On these latter criteria, renewable energy sources score better than fossil fuels, though renewables do entail environmental costs (building solar panels and wind turbines requires extraction of depleting nonrenewable resources and generates pollution). However, without a high EROEI, renewable energy sources will never power the kind of growing, fast-paced consumer society that policy makers mistakenly believe to be the necessary goal of all economies.
Mark Jacobson at Stanford University and Amory Lovins of Rocky Mountain Institute say we can power the world entirely with renewable energy sources in 20 to 40 years with no real economic sacrifice.28 Skeptics like Ted Trainer at the University of New South Wales say the transition will be expensive and littered with engineering nightmares.29 One can cherry-pick data to support either position.
One thing we can say for sure: by the end of this century the world economy will be running mostly, if not entirely, on renewable energy sources, whether that economy is robust or withered, and whether or not we have made substantial investments in alternative energy. Fossil fuels simply won’t get us to that far shore. Even if we don’t know exactly what kind of ride they will give, renewables are the only boats we have that don’t leak.


It is, of course, impossible to predict exactly what our energy future will be, but current trends suggest a few likely possibilities.
Let’s start with prospects for oil. During the past couple of years, global prices have bounced around within a band ranging from $95 to $115. This results from an uneasy supply balance maintained by the ongoing depletion of conventional oil fields and the simultaneous appearance of more expensive oil from unconventional sources. This is an inherently unstable dynamic. One might think that higher oil prices would inevitably follow as drillers are forced to move to ever-more expensive prospects, but this is not necessarily the case. A renewed global recession would cut energy demand; in that case, oil prices could fall significantly. With a dramatic reduction in trade and higher unemployment, we would also see declining overall oil production.30 If the price of oil falls below $90 per barrel, new deepwater drilling will slow. At $80, new tar sands projects will be put on hold. At $70, nearly all drilling will be called off (except where required in order to maintain lease agreements). At $60, tar sands production from some existing projects will be throttled down.31
With cheaper oil, the economy might rebound somewhat; but then demand for oil would likely pick up again and so would prices. Altogether, the picture is bleak for oil economics.
The prospects for natural gas are not much better. Two trends are likely to drive gas prices higher. Currently, US drilling rates are down, so production will inevitably start to slide in the next couple of years as a result of the high per-well decline rates of shale plays and the drilling out of the core regions within each play. Also, if and when the United States begins exporting LNG, this will serve to push up domestic gas prices. These are not mutually exclusive developments, and if both happen, America could be facing both lower natural gas production rates and much higher prices.
There is one scenario in which natural gas prices would fall, but it’s not a pretty one: it entails a serious economic recession that would destroy demand for the fuel through massive unemployment and a collapse of manufacturing.
Higher natural gas prices would be welcomed by the US coal industry, which has been struggling for the last few years under the onslaught of (temporarily) cheap shale gas. American coal producers want to export their product to China, which has nearly maximized domestic mining capabilities. China’s options for new energy sources to fuel economic growth include imported oil, imported coal, imported LNG, nuclear, solar, wind, and shale gas; all are more expensive than the country’s own fast-depleting coal. If China begins importing coal from the United States at the same time as American domestic natural gas prices soar (which would entice util-ities to burn more coal once again), the result could be a spike in domestic coal prices. Higher coal prices would be abated only by a serious recession or falling gas prices. Several recent studies conclude that world coal extraction rates have little headroom: despite the vastness of the resource base, most of the high-quality, easily accessible coal is already gone.32
Altogether, fossil fuel prices appear to be on the verge of increased volatility: we will likely see more frequent and severe booms and busts within the oil, gas, and coal sectors. At the same time, accounting properly for energy costs in energy production, we will probably see less net energy delivered to society. And fossil energy will be generally less affordable. The overall EROI of society—the energy return on all investments in energy production, including financial as well as energy investments—will fall.
We have not discussed nuclear power thus far, and readers who see nuclear as a major future energy source will have found this frustrating. However, I generally agree with the analysis of the Economist magazine, which recently published a special report calling nuclear power “The Dream that Failed.”33 Nuclear is just too expensive and risky. It was a technology that seemed to make sense in an earlier era of high fossil energy returns from minor investments, when enormous research, development, and construction costs for fission power could easily be shouldered. Today it is far more difficult to divert capital away from other energy projects. Even though nuclear electricity is inexpensive once power plants are built, the initial investments—several billion dollars per project, with inevitable cost overruns and the requirement for government loan guarantees and insurance subsidies—are now just too high a barrier. Currently, the industry is expanding in only a few nations, principally China—a country that gets most of its energy from cheap, high EROEI coal.
The only regions relatively immune to the economic whipsaw of fossil fuel dependency will be those reliant on renewable energy. But new investments in renewables, as we saw in the previous section, have slowed due to the systemic anemia of the Western economies and the false expectation of cheap and abundant natural gas for decades to come. The trend to ease back on renewable energy incentives cannot be allowed to continue. The world may have a fairly brief window of time in which major investments in renewable energy are feasible. Beyond that point, the volatility of fossil fuel prices and declining overall societal EROI may drain the vitality of economies to the point that financing major new projects will become ever more difficult. This is perhaps the most important reason that the conventional wisdom of a new golden era of oil and gas abundance must be countered.
In the worst case, societies may enter an ongoing maintenance crisis, seeking merely to keep basic services available as energy and capital contract in a self-reinforcing feedback loop.34 The better-case scenario would start with major immediate investments in renewable energy. How it would unfold from there requires considerable speculation. Society would almost certainly need to adapt to economic stasis or contraction as a result of declining mobility and EROEI. It would also need to rebuild transport and food systems to use less overall energy and different energy sources. In the best-case scenario, we will tomorrow discover a new, abundant, cheap, high-EROEI energy source with no carbon emissions.35 Betting on that highly unlikely event seems foolish; in all likelihood, we will have to settle for solar and wind. But we won’t have even those if we don’t start building panels and turbines at a ferocious pace.


I have devoted a portion of this chapter to countering assertions in Charles Mann’s Atlantic article not because he deserves scorn. Mann is no fossil fuel industry shill; he is a respected historian and the author of several excellent books (including 1491: New Revelations of the Americas Before Columbus). He doesn’t exaggerate the world’s hydrocarbon prospects because he wants us to burn all that oil, gas, and methane hydrate. Quite the contrary; he is deeply concerned about climate change. The full subtitle to his article is “New technology and a little-known energy source suggest that fossil fuels may not be finite. This would be a miracle—and a nightmare.” I chose Mann as a foil because he epitomizes the general failure of America’s intellectual class to comprehend and communicate the complexity of our energy-economy-climate situation. It is an understand-able failure, but it may be a fateful one.
Perhaps the most concise way to convey this complexity is by way of two equally true statements:
        Hydrocarbons are so abundant that, if we burn a substantial portion of them, we risk a climate catastrophe beyond imagining.
        There aren’t enough economically accessible, high-quality hydrocarbons to maintain world economic growth for much longer.
Here is a public relations nightmare: how to convey these seemingly contradictory messages to people without confusing the bejesus out of them. How can concepts like “energy return on energy invested” be explained to an audience that barely understands what energy is? How can millions of half-somnolent television addicts be guided in understanding “fugitive methane emissions,” “energy density,” and a dozen other essential terms and concepts? Where are the cover stories in chattering-class magazines, the hour-long NPR interviews, the TV newsmagazine in-depth investigative reports, and the congressional inquiries that explore the true intricacy and peril of our energy-economy-climate conundrum? Don’t hold your breath waiting for them. It all just takes too long to explain. A PR consultant might advise organizations discussing energy issues to stick with an easy message: “We are running out of oil,” or “We are not running out of oil.” Take your pick and make your case.
Reality is more complicated.
Fortunately, there is one element of simplicity in all this complexity, at least in terms of communication—and that is what we must do: as a global society, we must reduce our dependency on fossil fuels as quickly as possible. It is the only realistic answer both to climate change and our economic vulnerability to declining fossil fuel resource quality and EROEI. This is literally humanity’s project of the century, probably the most important in all of history. It is an enormous challenge, but it is not optional. Either we break the addiction, or we suffer the consequences—which would impact not only ourselves, but future generations as well.
Yet, the mistaken notion that new technology can free up all the oil and gas we could ever possibly want stops us in our tracks. Suddenly we are faced with a (false) binary choice: jobs and economic growth on one hand, climate protection on the other.
People need jobs and businesses need growth. If plentiful fossil fuels can provide jobs and growth (we tend to believe they can because they have a track record, and we already have the infrastructure to use those fuels), then can’t we somehow find a way to eat our cake, yet have it too? “Let’s think about this for a while longer before making any rash decisions,” the masses murmur in unison. In this context, “a while” could mean a decade or longer. By that time, it will be far too late to begin a successful energy transition.
The choice is rigged. The promise of economic fossil energy abundance is a mirage. Like a thirsty desert castaway, we chase that mirage even though it lures us to our doom. Dazzled by the prospects of a hundred years of cheap natural gas or oil independence, we embrace an energy policy of “all of the above” that is hardly distinguishable from having no energy policy at all. With every passing year the fossil fuel industry con-sumes a larger portion of global GDP, reducing society’s ability to fund an energy transition. And every year the environmental costs of continued fossil fuel reliance compound.
Everything depends upon our recognizing the mirage for what it is, and getting on with the project of the century.

1. Chris Nelder, “Are Methane Hydrates Really Going to Change Geopolitics?” Atlantic, May 2, 2013.
2. Charles C. Mann, “Yes, Unconventional Fossil Fuels Are That Big of a Deal,” Atlantic, May 7, 2013.
3. Roberto Cesare Callarotti, “Energy Return on Energy Invested (EROI) for the Electrical Heating of Methane Hydrate Reservoirs,” Sustainability 3, no. 11, (November 7, 2011): 2105–2114. doi: 10.3390/su3112105.
4. Cutler J. Cleveland and Peter A. O’Connor, “Energy Return on Investment (EROI) of Oil Shale,” Sustainability 3, no. 11 (November 22, 2011): 2307–2322, doi: 10.3390/su3112307.
5. Charles Hall, “Unconventional Oil: Tar Sands and Shale Oil—EROI on the Web, Part 3 of 6,” The Oil Drum (blog), posted by Nate Hagens, April 15, 2008.
6. Jacob Chamberlain, “Deeper Than Deepwater: Shell Plans World’s Riskiest Offshore Well,” Common Dreams (website), May 9, 2013,
7. Hughes, “Drill, Baby, Drill,” 129.
8. Bryan Walsh, “A Rig Accident Off Alaska Shows the Dangers of Extreme Energy,” Time, January 2, 2013. Stephanie Joyce, “Shell Tallies Cost of Kulluk Grounding,” Alaska Public Media (website), February 1, 2013.
9. See, for example, “Improving Efficiency in Upstream Oil Sands Production,” ExxonMobil. John Kemp, “Column—Bakken Output May Be Boosted by Closer Oil Wells: Kemp,” Reuters, May 8, 2013.
10. Francie Diep, “Solar Panels Now Make More Electricity Than They Use,” Popular Science, April 3, 2013.
11. Doug Hansen and Charles Hall, eds. “New Studies in EROI (Energy Return on Investment),” special issue, Sustainability (2011).
12. Jessica Lambert et al., “EROI of Global Energy Resources,” (State University of New York, College of Environmental Science and Forestry, November 2012), .
13. Charles A. S. Hall, “Editorial: Synthesis to Special Issue on New Studies in EROI (Energy Return on Investment),” Sustainability 3, no. 12 (December 14, 2011): 2496–2499, doi:10.3390/su3122496. Andrew McKay has proposed a new unit he calls “Petroleum Production per Unit of Effort,” or PPUE, which reflects drilling rates, drilling depths, and cost of production. World PPUE improved between 1980 and 2000 but has declined dramatically since 2000.
14. Andrew Lees, “In Search of Energy,” in The Gathering Storm, ed. Patrick Young (Derivatives Vision Publishing, 2010).
15. “Engine Trouble: A Rise in Energy Costs Will Hit Productivity,” Economist, October 21, 2010.
16. Tim Morgan, “Perfect Storm: Energy, Finance, and the End of Growth,” Tullett Prebon (blog), January 2013, 77.
17. Bryan Sell, David Murphy, and Charles A. S. Hall, “Energy Return on Energy Invested for Tight Gas Wells in the Appalachian Basin, United States of America,” Sustainability 3, no. 10 (October 20, 2011), doi: 10.3390/su3101986. Caveats are from private communications with one of the study’s authors.
18. Hughes, “Drill, Baby, Drill,” 75.
19. For further discussion of this point, citing failures to improve efficiency in tar sands operations, see Andrew Nikiforuk, “Difficult Truths about ‘Difficult Oil.’”.
20. The EROEI for tight oil production in the Bakken play is under investigation; a report by Egan Waggoner on the subject is in preparation.
21. Morgan, “Perfect Storm,” 3.
22. Improvement in EROEI can be inferred from falling prices for new solar and wind installed capacity (private communication with Charles Hall). However, some renewable energy technologies achieve higher EROEI by relying on materials such as rare earth minerals that have an increasing energy cost over time due to depletion of the more accessible deposits. Also, as the best locations for wind turbines, tidal, and geothermal power are utilized, further expansion requires the use of less favorable locations, resulting in lower EROEI.
23. “Renewable Electricity Futures Study,” National Renewable Energy Laboratory, last updated May 13, 2013, . One early reader of this chapter commented: “You don’t necessarily need the same amount of energy to achieve the same functionality post-fossil fuels. For example, in our plug-in vehicles we drive on about one-fifth of the energy used by a typical gas car to achieve the same result of moving people down the road. Plus we make that renewable energy by PV on our own rooftop for one-eighth the cost of gasoline. So you could say we only have one-fifth the energy available to us and paint a negative picture of having 80% less energy available, but we’re achieving the same motive result as a fossil fuel powered tool.”
24. Benedikt Römer et al., “The Role of Smart Metering and Decentralized Electricity Storage for Smart Grids: The Importance of Positive Externalities,” Energy Policy 50 (November 2012): 486–495, . Janvon Appen, “Time in the Sun: The Challenge of High PV Penetration in the German Electric Grid,” IEEE Power and Energy 11, no. 2 (March 2013): 55–64, doi: 10.1109/MPE.2012.2234407. For a more optimistic perspective on the potential of microgrids to enable higher levels of renewable energy, see Chris Nelder, “Microgrids: A Utility’s Best Friend or Worst Enemy?”.
26. David Manners, “Massive Consolidation in Solar,” Electronics Weekly, January 14, 2013.
27. Andrew Herndon, “Biofuel Pioneer Forsakes Renewables to Make Gas-Fed Fuels,”, May 1, 2013.
28. Louis Bergeron, “The World Can Be Powered by Alternative Energy, Using Today’s Technology, in 20–40 Years, Says Stanford Researcher Mark Z. Jacobson,” Stanford Report, January 26, 2011, . Amory Lovins, “A 40-year Plan for Energy,” TED talk (March 2012).
29. Ted Trainer, “Renewable Energy Cannot Sustain a Consumer Society,” (Dordrecht, The Netherlands: Springer, 2010). For a moderate and realistic take on the capabilities and limits of renewable energy, see David McKay, Sustainable Energy—Without the Hot Air (blog).
30. Prices could fall absent a full-fledged global recession, if energy efficiency in transport vehicles increases significantly (we are already seeing modest gains) and vehicle miles traveled decrease significantly in regions experiencing very low economic growth. 31. Gail Tverberg, “Low Oil Prices Lead to Economic Peak Oil,” Our Finite World (blog), April 21, 2013.
32. Richard Heinberg, Blackout: Coal, Climate and the Last Energy Crisis (British Columbia, Canada: New Society Publishers, 2009). Tadeusz Patzek and Gregory Croft, “A Global Coal Production Forecast with Multi-Hubbert Cycle Analysis,” Energy 35, no. 8 (August, 2010): 3109–3122.
33. “The Dream that Failed,” Economist, March 10, 2012.
34. Gail Tverberg, “How Resource Limits Lead to Financial Collapse,” Our Finite World (blog), March 29, 2013.
35. This, by the way, would not solve serious ecological problems such as resource depletion, topsoil loss, species extinctions, and water scarcity. I’m focusing here only on our energy-economic-climate conundrum.

Richard Heinberg

Richard is Senior Fellow of Post Carbon Institute, and is regarded as one of the world’s foremost advocates for a shift away from our current reliance on fossil fuels. He is the author of fourteen books, including some of the seminal works on society’s current energy and environmental sustainability crisis. He has authored hundreds of essays and articles that have appeared in such journals as Nature and The Wall Street Journal; delivered hundreds of lectures on energy and climate issues to audiences on six continents; and has been quoted and interviewed countless times for print, television, and radio. His monthly MuseLetter has been in publication since 1992. Full bio at

Tags: EROI, Oil, oil shale, Renewables, Snake Oil