BIKE: Living in a fool's paradise

[Jeb Boyt]

----Original Message Follows----
From: Roger Baker <rcbaker>
Date: Thu, 3 Mar 2005 13:08:47 -0600

The Mitigation of the Peaking of World Oil Production

. . .

Improved fuel efficiency in the world's transportation sector will
be a critical element in the long-term reduction of liquid fuel
consumption, however, the scale of effort required will inherently
take time and be very expensive. For example, the U.S. has a fleet
of over 200 million automobiles, vans, pick-ups, and SUVs.
Replacement of just half with higher efficiency models will require
at least 15 years at a cost of over two trillion dollars for the
U.S. alone.
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How's that?  I do not see at all how this figure of 15 years and $2 trillion 
relates to the projected replacement rate of vehicles.  They appear to 
assume that half the cars on the road now will still be on the road in 15 
years or, more likely, that it will take 15 years before more than half the 
cars on the road are more efficient than today.  The market response and 
move to more fuel efficient vehicles as a result of the oil price increases 
of the 1970s occurred without anything close to that level of trauma.  Just 
count the number of pickups and SUVs that you see on the way to work in the 
morning, and you will see that there is a large opportunity for increasing 
the vehicle fuel efficiency.

They also appear to assume that all 200 million vehicles will be replaced as 
opposed to retired without replacement.  This summary of fuel efficiency in 
transportation does not appear to take into account the impact public 
transportation, let alone cycling and walking.  Households with 
transportation alternatives may only need one car.

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Similar conclusions generally apply worldwide.
Commercial and near-commercial options for mitigating the decline of
conventional oil production include:  1) Enhanced Oil Recovery
(EOR), which can help moderate oil production declines from older
conventional oil fields; 2) Heavy oil/oil sands, a large resource of
lower grade oils, now produced primarily in Canada and Venezuela; 3)
Coal liquefaction, an established technique for producing clean
substitute fuels from the world's abundant coal reserves; and 4)
Clean substitute fuels produced from remote natural gas.
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As the price of oil increases, the cost of production from marginal fields 
and wells (e.g. stripper wells that produce less than 10 bbl a month) and 
from marginal technologies (e.g. oil sands, alt fuels, etc.) becomes more 
cost effective.

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Someday, electric cars may be practical, but decades will be required before 
they achieve
significant market penetration and impact world oil consumption.
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<sarcasm>Yeah, the increasing numbers of hybrid electric vehicles you see on 
the roads are a sign of limited market penetration potential.</sarcasm>

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To explore how these technologies might contribute, three
alternative mitigation scenarios were analyzed:  One where action is
initiated when peaking occurs, a second where action is assumed to
start 10 years before peaking, and a third where action is assumed
to start 20 years before peaking.
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And, why do they think that we have 10 years, let alone 20, left before 
peaking?

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Without timely mitigation, world supply/demand balance will be
achieved through massive demand destruction (shortages), accompanied
by huge oil price increases, both of which would create a long
period of significant economic hardship worldwide.
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Forgive my weakness on the economic-speak, but under the classic supply and 
demand paradigm, as price increases, demand falls.  It is not the shortage 
that "destroys" demand, it is the price increase resulting from the 
shortage.

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Oil peaking discussions should focus primarily on prudent risk
management, and secondarily on forecasting the timing of oil
peaking, which will always be inexact.   Mitigation initiated
earlier than required might turn out to be premature, if peaking is
slow in coming. If peaking is imminent, failure to act aggressively
will be extremely damaging worldwide.
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Wouldn't prudent risk management involve minimizing the potential future 
liabilities associated with drastic supply shortages and dramatic price 
increases?  Even if mitigation today would be premature, wouldn't the return 
in additional years before peak and lessened economic impacts and 
disruptions following peak be worth it?

Jeb