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Elliott Morss | October 20, 2014

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Energy: The Frantic Global Search for More

 

Energy: The Frantic Global Search for More

by Elliott R. Morss, Ph.D.

Introduction

 There has been much in the news about coal and oil mining problems. The BP spill is dumping more than 50,000 barrels per day into the Gulf. Will it be as serious as the 1979 IXTOC-1 blowout that resulted in 3.5 million barrels flowing into the Gulf before being capped 9 months later? Quite possibly.

 And then there are the continuing coal mining disasters. In China, 2,631 lives were lost in 2009 (7 per day), down from 3,215 in 2008. Frank Warner estimates that the US compares favorably with China: only 2 deaths per 100 million tons of coal mined versus 85 deaths in China.

In oil and coal, most problems take place when the fuels are being mined. With nuclear, the problems occur when the fuel is being used to produce energy: conservative estimates put nuclear power deaths at 4,100 people. Tracking deaths from radiation is tricky – Greenpeace reports one study estimating nuclear fatalities as high as 182,156.

What do all these disasters have in common? They are all part of man’s desperate efforts to find energy fuels to supply the world’s ever-growing demands. In what follows, global energy supply and demand data are presented and discussed.  

 Today, there is very little slack between growing energy demands and production capacity. If anything goes wrong, e.g., a hurricane hits a strategic region or a worker strike anywhere in the energy supply chain, shortages will occur and other serious problems will arise. And the world is not searching for more fuels in a coordinated manner: each country is trying to insure its own supplies – a dangerous situation.

 Energy Production

Since 1970, energy production has doubled. Table 1 indicates the primary global sources of energy to be oil, coal, and natural gas followed by combustible wastes/renewable and nuclear.

Table 1. – Global Energy, 2007

Energy Source Percent of Total
Oil 34.0%
Coal 26.5%
Natural Gas 20.9%
Nuclear 5.9%
Hydro 2.2%
Other 10.5%

International Energy Agency, Key World Energy Statistics, 2009

Table 2 provides aggregate data on the ten largest energy producers. The United States and China are the largest energy producers, larger than Saudi Arabia and Russia, the largest oil-producers. Since 2005[1], China has passed the United States to become the largest energy producer in the world.

Table 2. – Global Energy Production, 2007

Country MTOE[2] Percent
China 1,973 16.40%
United States 1,665 13.80%
Russia 1,022 8.50%
Saudi Arabia 551 4.60%
India 451 3.70%
Canada 413 3.40%
Indonesia 331 2.75%
Iran 323 2.70%
Australia 289 2.40%
Mexico 251 2.10%
World Total  12,029 100.00%

International Energy Agency, Key World Energy Statistics, 2009

 The largest producers of each of the primary fuels are presented in the following paragraphs.

 Crude Oil

 Four of the top ten oil producers are from the Middle East. Proven reserves grow with new technologies and investment. However, the data on production as a percent of proven reserves suggest that the United States, China, and Mexico are depleting their reserves at a very rapid rate. Hence the push for offshore drilling in the US.

 The United States formerly had very large crude oil reserves. But since 1980, it has extracted 67 billion barrels of oil from its own lands to partially satisfy its growing oil demands. Its proven reserves are now 21 billion barrels which ranks it behind Saudi Arabia (264 billion barrels) and 10 other countries. To supplement its domestic production of 300 MT, it had to import another 573 MT, far more than any other country.

Table 3. – Leading Oil Producers, 2008

Country Million Tons (MT) %  of World Total Production as % of Proven Reserves
Saudi Arabia 509 12.9% 1.31%
Russia 485 12.3% 4.20%
United States 300 7.6% 9.64%
Iran 214 5.4% 1.07%
China 190 4.8% 8.37%
Mexico 159 4.0% 10.37%
Canada 155 3.9% 0.60%
Kuwait 145 3.7% 0.98%
Venezuela 137 3.5% 0.94%
U.A.E. 136 3.5% 0.95%
World Total 3,941 100.0% 1.97%

IEA, op. cit. and CIA, The World Factbook

 Venezuela’s production has declined recently due to inefficiencies and a lack of investment in the oil sector. But like the U.A.E., Kuwait, and Canada, it has more than 100 years of reserves at current production rates. Note that for the world overall, we have 50 years of proven reserves at current production rates. The world will not run out of oil soon.

  Coal

 Coal is second only to oil as a global energy source. Coal reserves, measured in MTOE terms, are greater than any other fossil fuel reserve. China produces more than twice as much coal as the United States and the latter produces twice as much as the next producer, India. The United States, Russia, and China have more than 100 years of coal reserves at current production rates.

Table 4. – Leading Coal Producers, 2007

Country MTOE % of World Total Production as % of Proven Reserves
China 1,295 40.6% 2.4%
US 505 15.8% 0.5%
India 244 7.7% 0.9%
Australia 186 5.8% 0.5%
Russia 152 4.8% 0.1%
South Africa 111 3.5% 0.8%
Kazakhstan 49 1.5% 0.3%
Poland 39 1.2% 1.1%
Colombia 37 1.2% 1.2%
World Total 3,188 100.0% 0.8%

IEA, op. cit. and BP, Statistical Review of World Energy, 2009.

 Transporting coal is a major task, done primarily by rail cars. To supply the world’s needs, 225,687 coal railroad cars must leave the mines every day!

Natural Gas

 Global reserves of natural gas are large. At current production rates, proven natural gas reserves will last 63 years. And proven reserves are increasing as new discoveries are being made.

 Table 5 indicates that Russia and the United States are by far the leading natural gas producers. At current production rates and proven reserves, Russia can produce for 59 years while United States will run out in less than 10 years. Iran’s desire for nuclear energy appears strange in light of its natural gas reserves. Canada, the Netherlands, Norway, and China are drawing down their reserves quite rapidly.

 Table 5. – Leading Natural Gas Producers, 2007

Country MTOE % of World Total Proven Reserves Production as % of Proven Reserves
Russia 657 20.9% 148,681 1.7%
United States 583 18.5% 21,063 10.6%
Canada 175 5.6% 5,113 13.0%
Iran 121 3.8% 87,792 0.5%
Norway 103 3.3% 7,230 5.4%
Netherlands 85 2.7% 4,425 7.3%
Algeria 82 2.6% 14,072 2.2%
Qatar 79 2.5% 78,942 0.4%
Indonesia 77 2.4% 9,381 3.1%
China 76 2.4% 7,080 4.1%
World 3149 100.0% 553,482 2.2%

IEA, op. cit.

 The problem with natural gas as a global energy source is its portability: it can be moved by pipe, but this requires large investments. In addition, it can be liquefied by cooling it to minus 260 Fahrenheit and then transporting it in tanks designed to maintain that temperature. Needless to say, this is also quite costly.  

Nuclear

 When it comes to nuclear, one thinks of France and Japan. However, the United States generates more energy from nuclear than any other country, almost twice as much as France, the second largest producer. This is because the United States needs so much energy overall. Nuclear production constitutes only 12% of US energy production while the percentages in France and Japan are 87% and 69% respectively.

Table 7. – Leading Nuclear Producers, 2007

Country MTOE % Total
United States 218.5 30.8%
France 114.8 16.2%
Japan 68.9 9.7%
Russia 41.8 5.9%
South Korea 37.3 5.3%
Germany 36.8 5.2%
Canada 24.3 3.4%
Ukraine 24.3 3.4%
Sweden 17.5 2.5%
United Kingdom 16.4 2.3%
World 709.7 100.0%

IEA, op. cit.

 Virtually all nuclear energy is used to produce electricity. Its attraction is that unlike fossil fuels, it does not contribute to global warming. Its shortcomings include danger in use and its radioactive wastes. Until recently, the costs of using nuclear energy to produce electricity were high, but they are now more reasonable. At a cost of $29 per barrel of oil equivalent, nuclear energy is a breakeven; energy prices in the last year have approached $100 for a barrel of oil. China now has 10 nuclear plants and has plans to build another 18. Uranium is needed to fuel these plants and with the anticipated buildup, uranium will be in short supply. 

Consumption

 Table 8 provides data on the 10 countries using the most energy. The United States is the leading consumer, but China is closing the gap rapidly.

Table 8. – Energy Consumption, 2007

Country MTOE Percent
United States 2,340 28.2%
China 1,970 23.8%
Russia 1019 12.3%
Japan 514 6.2%
India 595 7.2%
Germany 331 4.0%
Canada 269 3.2%
France 264 3.2%
United Kingdom 211 2.5%
Brazil 236 2.8%
World Total 8,286 100.0%

IEA, op. cit.

 Table 9 provides tons of oil equivalent energy consumed by the OECD European countries and selected countries.

Table 9. – Energy Consumption Per Capita

Region/Country TOE/Capita
OECD – Europe 3.36
United States 7.75
Japan 4.02
China 1.48
India 0.53
Indonesia 0.84

IEA, op. cit.

 In my earlier paper referenced above, I found that winter severity, gas prices, and per capita income all had significant effects on energy demands.

 Energy Imports

 It is reasonable to assume that foreign policies of countries most dependent on energy imports will be most influenced by these needs. The countries with the largest absolute net imports are listed in the middle column in Table 10, along with imports as a percent of their total energy consumption. The United States imports 15% of all energy fuels traded internationally.

 Table 10. – Largest Energy Importers, 2007 

Country Net Imports
Imports (MTOE) % of Use
United States 714 31%
Japan 435 85%
Germany 202 61%
South Korea 190 86%
Italy 158 89%
France 136 52%
Spain 144 51%
India 150 25%
Taiwan 102 92%
China 167 9%
World 4,729 39%

IEA, op. cit.

 Data on China, India and Indonesia are included because energy demand is projected to grow rapidly in these large countries over the next few years. China car sales passed US sales several years back. In 2010, China sales are on track to break the US car sales record of 17.4 million set in 2000

Analytics

  1. Oil

From a global perspective, the primary energy problem is the rapidly growing demand for oil. Why is this? Globally, there is plenty of coal and natural gas. And more nuclear plants can be built. Why can’t these and other energy sources replace oil as the primary energy source? Certainly, with higher oil prices, some substitution will occur. But the real problem is in transport: there are not yet adequate substitutes for oil in this sector. As indicated in Table 1, 35% of the world’s energy comes from oil. And of that total, 63% is used in the transport sector.

It is relatively easy to find substitutes for oil where energy is produced in a fixed setting such as in an electrical plant: coal, natural gas, and nuclear power come to mind. However, it becomes more difficult to find reasonably inexpensive substitutes when the objects needing energy, move, like planes and cars.

 50% of energy traded internationally is oil. And here is where the problems are likely to occur as the demands of China, India, and Indonesia increase. What will China and the US do to secure oil supplies?

a. China

 China gets about 60% of its oil from the Gulf Region. It is aggressively trying to diversify its sources of supply and has recently made “oil shopping trips” to Central Asia, West Africa and the Americas. China regularly offers military equipment for oil contracts. China has oil deals with Iran and Sudan, and has repeatedly blocked Western efforts to impose Western sanctions on these countries.

b. United States

 In 2008, the leading suppliers of oil to the United States were Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and Iraq, in that order of importance. Chavez would love to stop selling oil to the US if he could find another reliable buyer, and Nigeria has regular disruptions because of in-country civil strife. Does anyone want to speculate on why the US went into Iraq? Was it really to bring democracy to the Gulf? Keep in mind that Iraq’s estimated oil reserves are second only to Saudi Arabia’s.

2. Energy Alternatives

 Considerable attention has gone into finding alternative energy sources to avoid global warming. The data on global warming is probably sound, and major global transformations will occur if significant steps are not taken in the next few years to avoid them. But despite the growing concerns and government subsidies, alternative energies are growing slowly. In 2007, geothermal, solar, wind, etc. amounted to less than 1% of total energy fuels.

 An oil executive recently pointed out to me that the largest energy venture capital companies in the world are the oil companies. They have the cash and are involved in all alternative energy sectors. But like any business, they would prefer to sell off existing inventories before bringing new products to the market. By keeping oil prices just below breakeven for these alternative energies, they can work down their oil inventories gradually. Later, they can emerge as leaders in the new industries. Perhaps as a consequence of this, most energy venture capital is now not going into the development of new energies. Instead, it is directed at energy saving technologies, like systems that minimize energy use in homes.

 Conclusion

 We have heard it before: we are running out of oil and other natural resources. Remember the Ehrlich – Simon wager? In 1980, Julian Simon bet Paul Ehrlich that the prices of any non-government controlled natural resource would be lower one year or more later. Ehrlich took the bet and chose chromium, copper, nickel, tin, and tungsten. He specified 1990 as the end date. Ehrlich lost the bet; the prices on all five commodities were lower in 1990 than they were in 1980.

 Are we in a new world? I think so. Satisfying the energy demands of Western nations is the primary cause of global warming. But now, with the growing middle classes of Asia, Latin America, and Africa demanding the same energy intensive products as the West, things will become more problematic.


[1] Elliott R. Morss. “Global Energy: A Factual Framework for Future Research” New

Global Studies 2.1 (2008).

[2] Throughout this paper, million tons of oil equivalent (MTOE), a standardizing measure for energy from all sources, is used. One million tons of oil equivalent is the energy generated by burning 1,000,000 metric tons of crude oil.

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