Crude:

The Story of Oil

By Sonia Shah

November

18-20, 2006

Foraminifera fossils commonly found in crude oil

Crude is the product of the

decayed remains of billions of sea

creatures.

Oil seeping to surface, Iraq

Spontaneous combustion of natural gas seep in Iraq: the “everlasting fire” of Biblical times

U.S.’s first oil well,1859Titusville, PA

Crude is uniquely energy intense

Energy in 1 gallon of oil equal to

= 5 kilograms of the best coal

=more than 10 kg of wood

=more than 50 days of full-time human labor

=100 times more energy than its extraction requires

First market for crude = kerosene lighting

“Give the poor man his cheap light” John D. Rockefeller, Standard Oil

Octane was waste

Kerosene market crumbled after Edison invented light bulb in 1879;

but Standard Oil was swimming in oil

A forest of oil derricks, California

The first “horseless carriages”

Automobile races held to entice skeptical public

Per person per mile

Cars require three times more energy than trains

Cars require 30 times more energy than bicycles

The paving of the United States 1907: less than

200,000 miles of U.S. roads had any kind of surfacing

Today, nearly 4 million miles of paved highway alone

1955: 50 million cars owned by Americans

1975: 100 million cars

1990: one car owned per licensed driver

Today, a new car is bought in the US every 3 seconds

We consume crude 100,000 times faster than it can accumulate underground

M. King Hubbert delivering his speech to the American Petroleum Institute, 1956

Minutes beforehand, employer Shell urged him to tone down his findings

The first oil shock

1960: Organization of Petroleum Exporting Countries formed

OPEC countries govern access to over half of the world’s conventional oil

1971: US oil production peaks 1973: OPEC embargoes oil to US and Netherlands Price of oil rises from $3/barrel to $12/barrel in six

months Between 1970-1980 consumer prices double

Lining up for access to the pump

“Any means necessary”

The Carter Doctrine: the US will defend access to Persian Gulf oil using any means necessary

Oil is lifeblood of US economy 70 percent of weight of US army = fuel

Into the cold and the deep

A new generation of technology

North Sea oil peaks in mid-1980s

Alaskan oil peaks in 1988 $10 billion needed to

rehabilitate North Slope 300 million gallons of

toxic sludge in North Sea

North Sea and Alaskan oil decline

New oil: an heroic effort

Hibernia

Over 2,000 icebergs 15,000 ton rig sank in

1982 New rig built with

400,000 tons of concrete and 69,000 tons of steel

Submerged with 400,000 tons of iron

Total production = 0.5 billion barrels

A method of mining the last of the world’s crude: FPSO

Association for the Study of Peak Oil & Gas

Declining discoveries of new oil

Since 1960, the size of new oil finds has declined

Since 1980, the rate of discovery of new oil finds has declined

Last year, one new barrel of oil found for every 6 consumed, despite industry spend of $238 billion on oil exploration

Flow of oil from known oilfields declines 3 to 5 percent a year

Fuelling petro-demand

Increasing oil demand in China and India is “crucial to the long-term growth of oil markets,” according to the DOE

World Bank spends 15 times more on fossil fuel projects than renewable energy

World Trade Organization accepted China’s membership contingent on slashing tariffs on car imports

Bicycles banned

in Shanghai 40,000 new miles

of highway planned in India

Developing countries led by China and India expected to consume 90 percent as much oil as industrialized countries by 2020

Asian Brown Cloud

A 2-mile thick cloud of toxic pollution permanently hanging above Asia

“Dutch Disease”: The curse of crude

Oil production in Algeria, Angola, Congo, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Peru, Qatar, and Trinidad Tobago coincided with a decline in the standard of living

Per capita income in Saudi Arabia dropped from $28,000 in 1981 to ~$10,000 in 2004

War in Angola, Colombia and elsewhere paid in petro-dollars

The end of cheap oil: a new era?

Challenges for oil industry

Public disapproval of high prices and profits in industry

Declining discoveries of new, conventional oil

Declining production of old oil

Record profits from high oil prices

$10 trillion invested in current oil and gas infrastructure

Minimal investments in renewables

Increasing investment in natural gas

Increasing investment in unconventional oil resources

Tar sands: Open-pit mining, Alberta

•300 billion potentially recoverable barrels of oil

•Globally, 2.5 trillion barrels oil locked in tar sands

•Cost of extraction in 1980: $30/barrel (compared to Saudi oil at $2/barrel)

•Cost of extraction today: $5-7/barrel

Turning tar sands into oil

Burns up to a fifth of Canada’s natural gas supply

Emits 6 times more C02 than producing a barrel of conventional oil

Requires 6 barrels of freshwater for each barrel

Threatens Alberta’s forests with acid rain

Crude’s royal successor: natural gas

Exxon invested $7 billion in new project to turn natural gas into diesel

Half of BP’s $8 billion investment in alternative and renewable energy is in natural gas

Natural gas: an “environmentally friendly” fossil fuel? Burning natural gas emits less carbon dioxide

than burning oil Unburned natural gas (methane) absorbs 23

times more heat than carbon dioxide With 3 percent leakage, using natural gas has

same climate-warming effect as burning oil With 6 percent leakage, using natural gas has

worse effect on atmosphere than burning coal Most recent data suggests present leakage of

at least 2.3 percent

Keeping old oilfields alive beyond planned obsolescence

“Our biggest problem is not the end of our resources.

That will be gradual. Our biggest problem is a

cultural problem. We don’t know how to cope with it.”

—M. King Hubbert

Toward a sustainable energy future

Appropriate price signals Energy literacy Challenging power of oil industry Modelling a post-oil society

Based on Crude: The Story of Oil

By Sonia Shah

November 18-20, 2006