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Transportation Energy: Supply, Demand and the Future http://www.uwm.edu/Dept/CUTS//2050/energy05.pdf

Edward BeimbornCenter for Urban Transportation StudiesUniversity of Wisconsin-MilwaukeePresentation to the District IV ConferenceInstitute of Transportation EngineersJune, 2005, updated September, 2007, June 2008

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The problemTransportation in nearly 100% dependant on petroleum as a source of energy.Global supply and demand trends will have a profound impact on the ability to use our transportation system and on economic activity.Alternatives are slow in development and implementation. Short term impacts are likely to be extreme and massively disruptiveThe ability to finance future transportation programs will be severely impacted.Related issues – Global climate change, air quality

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DemandWorldwide demand for petroleum is growing, particularly as related to economic trends in China, India, Eastern Europe and other developing areas.

China oil demand +104% by 2030, India +91%, Africa +105%, Central and South America +98 to 112%, US, Europe +22 to 34% (Exxon)

Transportation energy demand in the U.S. has increased because of the greater use of less fuel efficient vehicles. – a transportation finance bonus

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Fuel Economy by Model Year

1970 1975 1980 1985 1990 1995 2000 2005

Model Year

10

15

20

25

30Average MPG

Trucks

CarsBoth

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SupplyDifferent predictions of the total global supply of petroleum and related products.Some believe we may have reached the global peak of production. (peak oil)Rates of discovery have slowed, there may be few places left to find petroleum.As easy sources are used up, the cost, risk and energy required to extract the resource will increase. Major oil companies have reduced estimates of reserves and reduced investment in finding new sources

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Basic NumbersWorld demand – 30 Billion barrels/yrU.S. demand – 7.5 Billion barrels/yr., about 5 Billion barrels/yr. imported US. Reserves – about 21 billion barrels from all sources – off shore, AWNR (4 Bbl), etc.Remaining sources require greater energy to extract.Demand increases in the future?http://tonto.eia.doe.gov/dnav/pet/pet_crd_gom_s1_a.htm

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U.S. DOE, source: http://tonto.eia.doe.gov/FTPROOT/features/longterm.pdf#search='oil%20supply'

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World Conventional Oil Production & Discoveries

OIL DEPLETION -THE HEART OF THE MATTER, C.J.Campbell, The Association for the Study of Peak Oil and Gas

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Campbell’s prediction “the end of cheap oil”

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DefinitionsSustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs. (UN World Commission on Economic Development, 1987)A system is sustainable if resources renew themselves at the same rate or faster than they are used.Example: sustainable forest: Supplies fuel, lumber and food are used at a rate less than the rate of growth , forever.For more definitions, see TDM encyclopedia http://www.vtpi.org/tdm/tdm67.htm

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What sustainability really means

A system that is not sustainable will eventually collapseCollapse occurs quickly with increasing demand and a declining supplyThe higher it rises, the greater the fall.the only questions are

When will the collapse occur?How will it occur?What happens during collapse?What needs to be done to cushion the collapse?

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When petroleum demand exceeds supply, collapse occurs …

-10.00

0.00

10.00

20.00

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40.00

50.00

60.00

1940 1960 1980 2000 2020 2040 2060

Supply dem and

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U.S. DOE viewpoint,source:http://tonto.eia.doe.gov/FTPROOT/features/longterm.pdf#search='oil%20supply'

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Collapse - worst caseCollapse of petroleum system could have sever consequences

Global economic recession/depressionSevere inflation Investor speculation leading to wide price swings Removal of environmental controls over remaining resourcesTransfer of wealth to countries with remaining resourcesRise of autocratic governmentsIncreasing poverty in third world countriesPolitical/military conflict over remaining resources

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Increasing supply paradox

If additional supply is found or developed, it can result in a delay of the collapse, but the magnitude of the collapse will be greater.Efforts to deal with the collapse are generally good things to do, even if the collapse never occurs.

Alternate fuelsConservationDemand reduction

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Sources of supplyRemaining sources require more energy input and are more difficult to process than in the pastMany producing countries have moved past their peak production and are in a period of decline and are becoming net importers. (Oman, Indonesia, China, UK, Iran?) Exceptions are in the middle east (Saudi Arabia, Iraq, Kuwait, Abu Daubi) No matter when we reach the peak, most of the world, including the U.S. will be highly dependant on sources from a few mostly unfriendly, hostile foreign locations.

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Date of peak, source http://www.hubbertpeak.com/campbell/

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

LibyaVenezuela

USAKuwait

CanadaIran

RussiaUK

NorwayMexicoNigeria

ChinaAlgeria

Saudi ArabiaAbu Dhabi

Iraq

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Time to Depletion Midpointyr 2000, source: http://www.hubbertpeak.com/summary.htm

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Canada-oil shale/net energy??Estimated Reserves, Source http://www.hubbertpeak.com/campbell/

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

UK

Indonesia

Norway

Azerba

ijan

Algeria

Mexico USA

China

NigeriaLibya

Venezu

ela

Kazakh

stan

Abu Dhabi

KuwaitIra

qIra

n

Russia

Saudi A

rabia

Rem

aini

ng re

serv

es a

nd p

oten

tial n

ew fi

nds,

(B

illio

ns o

f Bar

rels

)

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Where does the Money go?(Emirates Palace Hotel and Conference Center, Abu Daubi)

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Some Quotes"Simply put, the era of easy access to energy is over. In part, this is because we are experiencing the convergence of geological difficulty with geopolitical instability... [W]eare seeing the beginnings of a bidding war for Mideastsupplies between East and West.“ David J. O'Reilly Chairman and CEO, ChevronTexaco“The supply side is limited, We are reaching the limits of the planet very soon” Dr. Ali Samsam Bakhtiari, Senior Planner, National Iranian Oil Company“By some estimates, there will be an average of two-percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional 50 million barrels a day.” Vice President Cheney

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The Future??

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PricesWe are operating on a very thin, thin edge to balance supply and demand. Minor events can significantly affect prices.The current system is not sustainable The result will be a series of major oil price shocks with rapidly increasing prices with a high potential for conflict over remaining resources. Short term effects are likely to be very severe with few options. “over a barrel”Highly visible pricesPrices will rise and fall, but are likely to generally continue upwards.Speculators lead to wide price swings

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Crude Oil Price Trends: Source: http://www.eia.doe.gov/emeu/cabs/chron.html

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Recent World Oil Priceshttp://tonto.eia.doe.gov/dnav/pet/hist/wtotworldw.htm

0

20

40

60

80

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140

Janu

ary-89

Janu

ary-90

Janu

ary-91

Janu

ary-92

Janu

ary-93

Janu

ary-94

Janu

ary-95

Janu

ary-96

Janu

ary-97

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ary-98

Janu

ary-99

Janu

ary-00

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ary-01

Janu

ary-02

Janu

ary-03

Janu

ary-04

Janu

ary-05

Janu

ary-06

Janu

ary-07

Janu

ary-08

Date

Dol

lars

per

bar

rel

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The Future

No easy long term solution, a combination of thousands of actions

Price increasesConservationAlternative FuelsIncreased efficiencyNew sourcesEconomic impacts

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Can Conservation Solve the Problem?

More efficient vehicles, price pressures and general conservation can delay the problem, but are not enough.“You can only turn off the lights once”Price increases will force more conservationMore conservation of fuels means less revenue for transportation purposes.

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The FutureCan Technology and Alternative Fuels solve the problems?

Possibly, in the long run, but some will take a long lead time to happen

Technology development - 6-15 yearsInfrastructure deployment -10-15 yearsMarket penetration occurs along with aboveFleet turnover – 12 yearsTotal 20-40 years for full effect to be felt

Fuels that use existing infrastructure can somewhat shorter lead time.

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Alternative Fuels

An ideal fuel has high energy content per unit of volume –(vehicle range), is easily converted to useful transport energy, is easily transported, doesn’t take more energy to produce than it returns as a useful fuel (positive EROEI), has low emissions and has an existing infrastructure

(Gasoline or Diesel fuel)

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Alternative fuelsMost require substantial energy to produce, what is the net gain?

Ethanol converts diesel fuel and natural gas into diesel fuel and a gasoline substitute, a small gainHydrogen from natural gas or electricityMethanol, ethanol need fuel, fertilizer and heat from fossil fuels Electricity as a source to convert fuels, generally uses coal, natural gas or nuclear fuelsNew petroleum sources are more difficult to extract and require substantial energy input

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Contingency Planning for the near term

Conservation is not enough and there is not adequate time to develop and deploy alternatives“If it could happen, it will happen” So, what strategies should be used when it does happen?Prepare for the worst, hope for the best, Similar to preparation of a disaster planMust plan for the crisis in advance because there is no time to plan for it when it does actually happen.Goal: To increase the ability to respond to an energy shortfall through an adjustment of demand without causing severe problems for households, or the economy.

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Question of Allocation & Conservation

Who gets the scarce resources and how is that decision made?

Who is vulnerable to price swings and availability issues?What essentials do these groups need?At what stage are these essentials provided?Prioritize policies based on effectiveness (work trips, short trips, long trips, etc.)Implement contingency plan

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Transportation Implications

Major financial shortfalls because of increased costs, flat revenues and needs to pay off bondingSubstantial price increases will affect demand somewhat, but there needs to be reasonable alternatives available.Travel growth will slow for multiple reasons, most trends that led to fast growth in the past have moderated or reached a saturation point.

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ConclusionsThe current system is not sustainableEnergy issues will dominate the future of transportation and the economyFailure to act early will lead to more severe consequencesContingency planning is essentialTransportation finance will be radically affected by future energy factorsTo do project planning or development without a thorough knowledge of future energy situations is a waste of timeBecome knowledgeable about the issue

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Web sitesMillions of web sites on Google or Yahoohttp://www.hubbertpeak.com/index.aspwww.eia.doe.govhttp://www.eia.doe.gov/oiaf/ieo/index.htmlhttp://www.eere.energy.gov/afdc/http://www.oilanalytics.org/netentop.htmlhttp://tonto.eia.doe.gov/FTPROOT/features/longterm.pdf#search='oil%20supply’i/http://www.drydipstick.com/