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Gruppo Consumo Critico Milano presents The
Coming Oil Crisis A survey about the present
energy supply and demand, and their implications
on war, peace and our future
links and references www.inventati.org/consumocri
tico/crisienergetica
e-mail crisienergetica_at_inventati.
org
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What are fossil fuels?
Fossil fuels are high-energy content materials,
which directly or indirectly originate from
living matter. For instance, coal originates
from dead wood, oil from marine organisms
bodies, natural gas from subsequent changes of
other hydrocarbons.
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Why do we need fossil fuels? Fossil fuels are
hugely important for industrial societies. Italy
satisfies 90 of its energy demand with fossil
fuels. The same do United States for 86 of its
one. Fossil fuels enhanced the working potential
of humankind at a level never seen before. For a
human the energy daily demand achieved by eating
is 2500 Kcal, but it can be as much as 5-6000
Kcal very hard jobs, e.g. traditional woodcutter
or miner. Thanks to fossil fuels an Italian
burns as much as 100000 kcal per day on
average (enough for the work of 40 men), and a
Northern American as much as 200000 kcal per day
(the energy demand of 80 men!)
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Renewable and non-renewable resources An energy
source is said renewable, when its exploitation
doesnt affect its availability in the
future. For instance, hydropower is a renewable
energy, since generating electricity with a dam
doesnt influence the rain in the future. In
other words, an hydropower plant generating one
million Kcal today, will still generate it
tomorrow and, with proper management,
forever. On the contrary, when we pump oil from
a reservoir there will be less to pump in the
future. Every time we use fossil fuels, there
are less remaining on the Earth for our
descendants. Fossil fuels are a non-renewable
energy source.
5
Are the various types of fossil fuels equally
important for economics? No, they are not!
Although similar in energetic content, coal, oil
and gas are very different on the
physical-chemical side, and then have different
properties. Coal is solid. It cannot be
transported through pipelines. This makes coal
transportation expensive. Moreover, coal can not
fuel car and truck engines. Gas is transportable
in pipelines and can fuel car engines. But its
difficult to transport it onto ships. This makes
difficult to transport gas at very long
distances. Moreover, it is more difficult to
produce from gas the panoply of plastics that our
modern economy needs so much. Oil is the
paramount fossil fuel. Because of its
transportability it is the fuel of globalisation.
Because of its chemical complexity, it is
indispensable for high technologies. There is no
doubt oil is the most important fuel for
industrial civilisation.
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Economic relevance of oil
Coal 6 Gas 38 Oil 46
Coal 23 Gas 23 Oil 40
Italy (energy needs)
USA (energy needs)
Oil is the most required fuel, as this figure
shows. Even USA, that have the largest coal
reserves in the world relies mainly on oil for
its energy demand. USA is the largest oil
importer in the world. This is a hint of at what
extent oil is irreplaceable with other fuels.
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Economic relevance of oil Do politicians and
economists know at what extent energy is relevant
for our economy? Look at this public document of
a Northern American think-tank , written during
the Clinton administration.
from Strategic Energy Policy Challenges for the
21st Century
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How much fuel is still in the world, and how fast
are we depleting it?
reserves ca. one trillion tons
reference ENI
coal
0,5 per year Reserves for 200 years
consumption ca. 5 billion tons per year
reserves ca. 169 trillion cubic meters
gas
1,5 per year Reserves for 65 years
consumption ca. 2.5 trillion cubic meters per year
reserves ca. one trillion barrels
oil
2,5 per year Reserves for 40 years
consumption ca. 25 billion barrels per year
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Further details Actually, the estimate of
latter slide (40 years) is useless for any
practical purpose. That figure aimed to show a
fact that maybe is not clear to everyone oil is
a limited resource, and at the present
consumption rate it is possible to completely
deplete it within a human life time. If we wish
to estimate more accurately in how much time we
are going to face serious supply shortages, we
have to account for at least three more factors
the growth of consumption, the discovery of new
reserves, and the peak production.
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The growth of consumption
Oil shock less consumption
25
Billion barrels per year
Present growth 2 per year
12.5
Economic boom 7 per year
1925
1950
1975
2000
year
Look at the historical figure of oil consumption.
Consumption heavily grew during XX century, and
is still growing at a 2 yearly rate.
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Discovery of new reserves
40
Billion barrels discovered per year
20
1975
1985
1995
year
Oil discoveries in new reservoirs declines at a
4 yearly rate
12
Overlap the curves...
discoveries
40
burned
Billion barrels per year
20
1975
1985
1995
year
and notice that since the early eighties, we are
depleting more than we are discovering!
13
The oil peak production
3,5
Oil production in USA lower 48
Billion barrels per year
2,5
1945
1970
2000
Look at oil production time series in USA it
reaches a maximum in 1970, then declines. 1970 is
the year of oil peak production in USA. Until
1970 production follows the demand, that is, it
is pumped out so much oil as it is possible to
sell. Then, it is sold so much oil as it was
possible to pump out.
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What does peak production mean? Peak production
is achieved when oil demand is over the capacity
of the reservoirs to match it. Economic
consequences of a world oil peak would be
devastating. Before the peak, the price of fuels
is determined by the cost of production (work,
machinery, transportation). After the peak, it
will be regulated by the demand and offer law in
other words, the fuel, more and more rare, will
be caught by who offers more. The history
since second world war (i.e., since when we rely
on oil for our energy supply) showed us that when
oil prices rise, western economies recede. It
couldnt but be so transportation, dresses,
food there is no industrial process that doesnt
need the power of the tens of virtual slaves
that fossil fuels provide us.
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Why a peak? The following question is if there
still is so much oil, why should we slow
pumping, instead of having growing consumption
until complete depletion? The answer is
because a reservoir is not like a tank, from
which the content can be drained at every
desired rate. A reservoir is rather like a
repository, full of both useful and useless
stuff. Imagine you are entering in such a
repository, full of little balls and other stuff,
and you need to get the balls. First you can
easily manage to collect as many balls as you
can carry, because you get the most visible, the
most grouped, the most reachable. Then, even if
there is still most of the balls into the
repository, you must slow collecting, as you
start to get them one by one, to shift other
objects to get some balls, and so on. Getting oil
is like collecting such balls. Let us get back
to the figure of the USA production time series.
Note that the curve has approximately the same
slope, before and after the peak. To get back to
our repository, USA slowed their ball collecting,
when there was still one half to get.
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When will oil production peak? May we estimate
it with data we rely on? First of all, get back
to the consumption time series. The curve signs
yearly consumption, the area below the curve is
the cumulative consumption. The same holds for
the discoveries time series. The area below the
curve is the cumulative discovery. This helps us
to estimate the year of peak.
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• The model
• starting from todays figure, consumption will
  rise with an yearly rate c
• and will go on growing until the year of peak
  pp...
• then consumption will decline with an yearly
  rate m
• and finally, the area below the curve will be a
  quantity R, that is the sum
• of known and unknown reserves.

c
Billion barrels extracted per year
m
25
R
pp
2003
year
18
The model if we know c, m e R, we can calculate
pp. The formula to calculate pp, given c and m
are time invariant, is reported. So we need to
estimate c, m and R The consumption growth rate,
c c, the growth rate of consumption and economy,
was 2 during last years. So 2 will be our c
estimate for following years.
19
An estimate of global reserves, R R is the
amount of known oil reserves plus the still
undiscovered ones. Known reserves total one
trillion barrel (see page 7). What about
undiscovered reserves? To estimate the amount
of such reserves, extrapolate the discovery time
series to the right... ...and the area below the
curve (S) is an estimate of the oil still in the
ground... ...R is obviously 1000 billion barrels
S.
S?400 ? R ?1400
S
2000
2025
20
The yearly rate of decline, m The variable m is
affected by different factors. m is a measure of
the technological quality of the pumping
industry, the amount of capital invested in it,
the peace and the stability of the region around
the reservoir. m is higher (i.e., decline is
steeper) if the reservoir was exploited
efficiently, and if the peak was delayed. Let us
try to show with a graph how this can happen.
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The yearly rate of decline, m if I have best
technologies, as much money as I need and
political stability, I delay the peak at
pp... but I cant increase the amount of world
oil (that is, the area below the curve)... and
then the declining curve m must cross the m
curve...
?
Note these areas must be equal
m
m
pp
pp
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The yearly rate of decline, m Factors like
obsolescent technologies, shortage of money,
political instability are negatively affecting
m. On the ground of theoretical considerations,
some scholars of oil hypothesise decline rates as
high as 10. But in reality, even USA, in the
best attainable conditions for capital
availability, technology and stability, didnt
succeed in pushing m above 3.
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The year of oil peak production now we can
estimate the year of peak production. Fix c at
2 as we told before. Give m all possible values
between 2 (easily attainable even in developing
countries) and 3 (see page 21). Finally, give R
all possible values between 1400 (see page 18)
and 2000 (theoretical maximum for some
scholars). Look at the results in the next slide.
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The year of global oil peak production
R (billion barrels)
2
2,5
3
m
25
Few considerations
luck
utopia
R (billion barrels)
pax imperialis
present situation
2
2,5
3
m
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Intermezzo are our politicians so crazy? I
think these conclusions are absolutely
incredible! If a new, unprecedented energy
crisis is so close, why are the governments of
western countries that will be hardly hit the by
such a crisis doing nothing about it? There are
different explanations, on economic, political
and geostrategic grounds. Lets see them
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Intermezzo economy the leaders of the Earth are
used to seek advice from economists. No problem,
of course. But economy, like every science, has
its dogmas and its ideology. One such dogma is
that a growth in demand generates a rise in
offer. Economists think that a rise in the oil
price will enhance investment in the oil sector
and finally will make the production to rise. The
bare fact that world oil is a finite quantity
finds no place in their equations. A clever
geologist defined them flat Earth economists.
Unfortunately, the leaders of the Earth are not
used to seek advice from geologists or
physicists. Another common tale from economists
is that the rise in the price of oil will make
other renewable energies profitable. Right! But
if we wait for the rise in oil prices, we will
have to build the new infrastructures in a
landscape of crisis, energy shortage, mass
unemployment, maybe famine. Should not be better
to do it now?
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Intermezzo politics Few politicians seem to
have realized the risks we are facing for our
wealth and even our culture, and are trying to
cope with the problem. German and Icelandic
governments are two such examples. Unfortunately,
even clever and long-sighting politicians cannot
be completely honest about energy
supply. Imagine to go to the polls, campaigning
upon consume reduction and improvement of public
transport while taxing private mobility, and upon
general tax raising to build the sustainable
energy infrastructure. Do you think you could be
elected? So many politicians who recognized the
problem but are too fearful to claim it are
waiting that everyone gets convinced. But, of
course, at that time it will be much harder to
cope with the crisis.
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Intermezzo geopolitics Until now we looked at
oil scarcity from a global point of view. In
other words, we looked at the supply shortage
for all humankind. But someone as usually could
think to gain economic and geostrategic
influence thanks to the crisis. Because of this,
it is much more difficult to find the less
harmful solution for everyone. Lets try to
understand who gains and who loses, in the global
energy shortage game.
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Oil Reserves
Areas that are darker in the bottom map than in
the top one will face oil shortages sooner than
the others Identify them
Oil Consumption
North America
Europe
Eastern Asia
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Fossil fuels geopolitics Therefore, it looks
that all the world powers, maybe except Russia,
share the same problems. They are all going to
face an oil shortage soon. The emerging China
is not different. Lets give a look at natural
gas, now.
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Natural gas reserves, production, consumption
100
50
0
reserves
consumption
production

• Remarks
• Look at the two continental blocks (Ancient and
  New World). Production and
• consumption are roughly equivalent.
• This is due to difficulties in sea shipping for
  natural gas.
• Notice the huge discrepancy between reserves and
  production for North-America and,
• with inverted direction, for Middle East.

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Natural gas reserves/production ratio
Here is a more friendly way to evaluate what is
shown in the last slide. The R/P ratio is
correlated with the future lasting of
production. Look at the average tonality of
Eurasia and Americas. It is a hint for who is
going to face the first an energy shortage.
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• Summarising
• our civilisation and our wealth were born on the
  ground of a dilapidation of
• fossil fuels
• the coal, once of paramount importance, is now
  secondary. Oil is now the star
• of energy supply, but natural gas is also
  very important. The location of the
• reservoir is much more important for gas than
  for oil, because oil is easy
• and cheap to transport both on the ground and
  the sea. Natural gas is very
• expensive to transport overseas
• cheap oil is going to find its place on history
  books. Maybe natural gas is going
• to last a little more, since reserves are still
  growing and production decline
• does not seem imminent
• but for gas there is not only a global issue to
  consider North America could be very
• close to a gas production decline, while for the
  Ancient World decline is
• everyway sure, but farther in time.

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• Fossil fuels geopolitics (2)
• Looking at world politics, with an eye on energy
  supply, many things turn clear, e.g.
• USA aggression to Iraq with no choice to find
  new energy sources, and more
• and more addicted to oil imports, USA stole by
  force the second world oil
• reserves. Its goal is to delay the world peak
  production, by privatising
• Iraqi reserves (raising m) and finding new
  reservoirs that could be in Iraq
• European opposition to the war Europe has no
  such urgent energy need like
• the United States. The huge gas reserves of
  Russia and Iran, make
• Europe less dependent on oil than USA.

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• Fossil fuel geopolitics (3)
• International disagreements onto the Kyoto
  Protocol Europe signed the protocol
• soon, accusing USA of environmental
  indifference. But Europe will be able
• to reduce emission by using natural gas, that is
  everyway its short term energy
• future while USA in oil shortage will have to
  rely on coal aggravating
• CO2 emissions.
• The International Penal Court Europe backed
  supranational rules aimed at
• limiting expansionism and aggressiveness from
  single countries, because
• European wealth do not rely, on the short term,
  on its imperial capability, the
• opposite of USA situation.
• 5) The US menace of aggression against Iran
  fourth oil reserves in the world, next
• global star of natural gas, soon a paramount
  energy supplier for Europe.

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Conclusions The end of cheap fossil fuels, in
probably not more than twenty years, is to
mark the end of western civilisation, at least
the way many think of it. The future is foggy a
war between powers blinded by the will to get the
last oil drops could throw us in something very
similar to a new Middle Age. On the opposite,
from comprehension of other countries
necessities, from responsibility for us and our
descendants, a new age could be born, an age that
will be surely poorer, but maybe more equitable
and liveable, and, I think, even happier. As
individuals, it is to us to look in our daily
lives for the path to emancipate from fossil
fuels and their derivatives. As political
subjects, our role is to promote a new common
sense, the sense of limited resources, giving a
new point of view to those that want to
solve black-outs by building new plants or to
those that want to stabilize the world by getting
Europe more and more armed. And these are only
two of the most foolish ideas recently
heard. The crossroad which brings to a new
Middle Age or to Peace and Dignity is now
in front of us.
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sources
slides 2 e 5 Department Of Energy (USA) slide
6 Strategic Energy Policy Challenges for the
21st Century slide 7, 30-33 ENI pagina 13
http//www.oilcrisis.com/
More information and contact us www.inventati.org/
consumocritico/crisienergetica