If we want to maintain our current standard of living, we can’t do it without abundant energy, and the source doesn’t make any difference because the end result is to generate power for our economy.
In today’s energy market, fossil fuel produced energy is being joined by several other sources such as solar, bio, wind, geothermal, hydroelectric and water. However, although they all produce energy, there are huge differences in the sources.
Fossil fuels, which are oil, gas, coal and lignite, are finite, while the other sources, which produce renewable energy, are infinite. That means fossil fuels, which are used to produce around 85% of our current energy, deplete every time a barrel of oil is used to produce gasoline etc, while the renewable sources never diminish in supply. There is only so much oil and gas, and one day it will become so scarce that it will be too expensive to use as a fuel to produce energy.
Now let’s see how that scenario is playing out in today’s worldwide market for energy.
First, some relevant facts: before the pandemic rolled back the worldwide demand for oil, the world energy market used 90,000,000 bbls of oil per day to meet our energy demands and the price was around $70 per barrel. When the pandemic hit, the demand for oil dropped and the price plummeted to a minus (-) $34 per barrel. In theory, you would have had to pay someone $34 per barrel to take your oil.
Historically, the oil market goes from boom to bust, and that caused a bust in the market. The result: around 300 oil and gas companies went bankrupt, several hundred thousand oil and gas workers were laid off, hundreds of drilling rigs were stacked, and gasoline prices dropped down to under $2.00 a gallon. Now, since the pandemic is receding and the oil surplus is gone, gasoline is moving toward $3.00.
Well, where do we go from here? Let’s look short term and then let look out five, 10, and 20 years.
First, the next five years: when the demand for oil dropped, most oil and gas exploration companies drastically cut back drilling for new oil and gas. That simply means a lot of new oil and gas won’t be on the market next year or the next. New oil is critical to keep the oil market in balance, and keep the price of oil from going through the roof. The price of oil is the only item that makes the price of gasoline go up or down.
Pair that with a pent-up desire by virtually everyone to get back to normal after the pandemic is over, and not only back to normal, but we will probably see well above average activities for a couple of years. Of course, that will drive up the demand for oil and gas back up to pre-pandemic levels, and probably well above it for at least a year or so. Can oil producers quickly go back to 90,000,000 bbls a day, and then ratchet up to 100,000,000 or higher? That’s not just turning a valve.
The loss of a full year of drilling, while existing old wells deplete and produce less, means a tightening global oil market. Back a few years ago, a Saudi Oil Minister said $100 per bbl was a fair price for a barrel of oil, and I think the Saudis are going to shoot for that figure. That’s why I believe that within two years after the pandemic is over, oil will be over a $100 a barrel, and that equals $5.00 per gallon gasoline. It is simply supply and demand, and that will create a boom in the oil industry. Booms and busts have been a characteristic of the industry since its inception. It will take some time to get sufficient new oil on the market and that will determine the length of the boom.
Last year when I was in West Texas I saw a bumper sticker that said, “Lord, just give me one more boom, and I promise not to p* it off.”
I know you’re thinking, “But what about renewable energy?” Of course, renewable energy is cleaner and inexhaustible, and it should be highly desirable. It is. There is no question that one day we must use renewable energy for most of our energy needs. However, the problem is more than simply gearing up to harvest those energy sources.
Based on the several surveys I have seen, we are deriving around 15% to 20% of worldwide energy from renewables, and that is projected to reach somewhere between 30% and 45% in 20 years. The reason these figure are approximate is because these are varying estimates on how fast will we adopt renewables.
For example, China is still building coal-fired plants to generate electricity, and putting in infrastructure to produce electricity from renewable sources is expensive and time consuming.
Naturally, there are other significant parts of the energy equation, and global warming is certainly in the picture. Fossil fuels contribute a high amount of atmospheric pollution and are one, if not the major contributor to global warming.
As a concerted effort to reduce global warming becomes more active, the fuel used by combustion engines will decrease as the demand for electric vehicles increases. However, the infrastructure to handle the increasing demand for electric vehicles is huge, and will take years to become commonplace. During that time, worldwide demand for energy will continue to accelerate for at least a decade.
Consider the developing world and then look at the per-capita energy use by the citizens of those countries, and it is easy to see how as countries such as China, India and most of Africa and South America become more developed they will use more and more energy as they copy our lifestyle.
The answers to all the Energy Equations are too complicated for a short column, but I have come to several conclusions: Sometime in the next five years you will pay more than$5.00/gallon for gasoline, in the next 10 years you will probably own an electric vehicle, in the next 15 years the use of coal to generate electricity in Arkansas will completely cease, and worldwide oil and gas use will peak in 20 years. Then the steady decline in oil and gas use will accelerate, as it is replaced by renewable energy sources.
If we want our children, grandchildren, etc., to have a high quality of life, and this planet to be an inviting place to live, we should respond by reducing our energy use. The next couple of decades are a critical time in history of Earth. That time frame is the key to increasing the use of renewable energy and to solve global warming.
It’s not giving up using energy, it is to slowdown the massive wasting of energy. The United States wastes more energy than any other country. There is not enough fossil fuel energy available for the rest of the world to live in the wasteful way we do. We must recycle, conserve and use renewable energy sources. It’s that simple.
Richard Mason is a registered professional geologist, downtown developer, former chairman of the Department of Environmental Quality Board of Commissioners, past president of the Arkansas Wildlife Federation, and syndicated columnist. Email [email protected]