Several news stories caught my attention this week. They all relate to things I've covered at length in past blogs, and together they send conflicting signals about our energy future:
Item: In conjunction with the release of its annual statistical review for energy, BP has dismissed the prospect of an imminent peak in oil output due to production constraints. They see sufficient reserves to support another 40 years at current consumption levels. I'm not sure how that view maps into a variety of forecasts that show oil demand growing by 30-50% over the next 20 years. The difference between consuming 85 million barrels per day (MBD) for forty years versus growing to 120 MBD in twenty years and sustaining that level for another twenty is about 370 billion barrels, or roughly the current proved oil reserves of Saudi Arabia plus Iraq. (This corrects the math error in the earlier version of this posting; I don't believe it changes the point I was trying to make.)
Item: Chevron is reported to have deferred drilling on the giant Jack discovery in the Gulf of Mexico until next year, because there aren't enough deepwater rigs available. (Perhaps this is what Senator Kerry was referring to yesterday, when he said that the Congress didn't need to open up more of the Gulf for drilling, because oil companies weren't drilling the areas that were already open.) Jack made headlines last fall, because it pointed to the potential of up to 15 billion barrels of unexploited reserves in the deepwater Gulf, in the "lower Tertiary" layer. While Jack's reserves might still incrementally support the BP view that there's plenty of oil left, the question of practical importance is not how much oil is still in the ground, but whether and how quickly we can extract it. Turning reserves into production is not as simple as it used to be, with the necessary access, hardware, and personnel all in short supply.
Item: The Congress is debating increasing fuel economy standards either to 35 mpg for all light-duty vehicles or to 36 for passenger cars and 30 for SUVs, depending on which version of the legislation you're looking at. There are two main ways to achieve these higher averages, either by raising the fuel economy of most vehicles by 50%, or by concentrating on converting about 15% of the new car fleet to ultra-efficient technologies, such as 100 mpg plug-in hybrids (PHEVs.) (See below.)
Item: The timing of PHEVs was dealt a blow this week, when Toyota backed away from using lithium-ion batteries in its 2008 model Prius hybrid, apparently because of the "flaming laptop" problem. Li-ion batteries, which can be cycled many times without degrading and are much lighter than competing batteries, are widely regarded as essential to providing adequate range to make PHEVs practical at an acceptable penalty in bulk and weight. This is probably not insurmountable, but if PHEVs are delayed, then auto makers may be forced to start down the harder path of making all their new models much more efficient.
So while there may be plenty of oil left in the world, the pace of global economic growth and the nature of the accessible resources are stretching the industry's capacity to expand production fast enough to meet demand. And although the US is finally approaching consensus on the need to improve automobile efficiency, there is still no single off-the-shelf technology that will achieve it painlessly, without significant tradeoffs in vehicle cost, performance, and/or weight.
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