Peaking Global Oil Production & the Environment
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Transcript of Peaking Global Oil Production & the Environment
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Peaking Global Oil Production
& the EnvironmentNational Center for
Environmental Economics(OPEI/NCEE)
John Davidson & Keith Sargent
(May 2005)
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Preview• Conventional oil production is expected to peak before 2050 & may peak in the next decade.– Oil sand / shale production will increase.– Synfuel production from coal will increase.– Biofuel production will likely increase.
• Oil prices will continue to rise (acting like a US energy tax) reducing GDP growth rates.– Transportation sector will be most affected.
• Environmental effects are difficult to predict– Oil shale and synfuel production have environmental effects but increased efficiency and slower economic growth (due to more costly oil) could limit pollution.
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Background
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Draining the Tank
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Two Views of World Oil Production Conventional & Unconventional Resources
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Big Picture Observations
(from ORNL 2003 Report)
• World conventional oil production slows substantially or declines after 2020.
• Non-Mideast conventional oil is likely to peak between 2010 and 2030.
• OPEC market dominance is robust under a wide range of scenarios.
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ORNL Observations (cont.)
• A major transition from conventional to unconventional oil is likely to begin before 2030 to meet increasing energy demand.
• Without dramatic efficiency improvements:– US oil imports are likely to increase until shale oil becomes an important source.
– US oil dependence appears to be a long-run problem without major changes in transportation technology and/or energy sources.
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Proved Oil Reserves in 2003
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When Will the Oil Peak Occur?
(Non-Mideast Oil Production)
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When Will the Oil Peak Occur?
(World Production)
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What happens after the peak?
• Will oil production fall so quickly that alternatives will be inadequate to meet demand?
• Will the price of backstop technologies be above or below the peak oil price?
• How will the market respond?
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The Transition to Alternatives
(from ORNL 2003 Report)• Transition to unconventional oil will be rapid if EIA growth rates of 1.7% in oil consumption continue thru 2020.– 7 to 9% annual growth rates in unconventional oil production appear necessary as peak in non-Mideast oil is approached.
– If the demand for oil consumption could be slowed, the transition would correspondingly be slowed
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The Transition (cont.) (from ORNL 2003 Report +
new info)• Unconventional oil first comes from Canadian oil sands [2004 Production: about 1Million B/Day] – Followed by Venezuelan and Russian unconventional resources
• US shale oil is likely to be developed at a rapid pace following peaking of non-Mideast oil– The US is likely to supply nearly all of the shale oil due to its enormous resources
– US DOD has earmarked funds starting in 2009 for shale oil and other unconventional domestic resources
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Alternatives• Increased Fuel Efficiency–Hybrid Vehicles
• Improved Oil Recovery• Heavy Oil & Oil Sands• Gas-to-Liquids• Coal Liquification• Oil Shale Production• Biomass / Biodiesel• Hydrogen & Electric Vehicles
(Source: “Peaking of World Oil Production.” R. Hirsch, et al.)
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US Oil Shale Resources
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Oil Sand & Oil Shale Depletion Curves
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Future World Oil Production
Oil Sands and Oil Shale
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U.S. Economic Effects• A global disruption of 1 million barrels per day results in a $3 - $5 increase per barrel of oil– Transportation sector will be hardest hit
• Higher energy prices will act like an energy tax– Each 10% increase in oil prices results in a 0.05 to 0.1 percent decline in the U.S. GDP growth rate
• A shift to oil shale production will allow oil revenue to be “recycled,” offsetting some of the fall in U.S. GDP growth rates
• Oil prices may become more volatile
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U.S. Environmental Effects
• Increased domestic oil drilling• Increased coal mining for synfuel production
• Mining of U.S. oil shale deposits– Open pit mining - Aquifer depletion– Water leaching - Increased CO2 emissions
• Political pressure to weaken pollution regulations
• Lower GDP growth may moderate pollution increases
• Alternatives will become more cost-competitive (fuel cells, hydrogen, natural gas & electric power)
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End of Presentation