Recently the Guardian newspaper in the UK launched into that much discussed topic of peak oil in response to a recent report Heads in the Sand issued by Global Witness. I will pass on the topic of peak oil, but look more at the energy use solutions that we should be thinking about to better manage demand for oil. The Guardian article concludes with a discussion about the need to “go hell for leather for renewable energy sources”. Whilst this may well be needed as part of the overall global need to meet growing energy demand, it won’t necessarily address the issue of oil demand.
In my view, the key to oil demand lies with transport, not really with overall energy demand. Over the past 35 years the percentage of the usable barrel of oil (oil less processing energy less bitumen/asphalt demand) going to transport has risen from 41% to 61% and continues to increase (see figure). Increasing amounts of the heavy end of the barrel are being upgraded to transport fuels even as heavier and more difficult crudes make up more of the overall oil supply available. The only real transport fuel that “leaks” out of the system and into the broader energy arena is gasoil. It’s use is split between residential, commercial and agricultural sectors for heating, small generators, construction equipment and so on. Some gasoil is also used for electricity generation but with pressure from the transport sector this will slowly be returned, although it only represents about 5% of global demand for gasoil in transport.
Source: IEA & BP Statistical Review of World Energy Use
Some 20 years ago when I first worked in Shell Trading and was involved in the trading of Far East crudes, I remember that quite a bit of heavy Indonesian crude went to Japan for burning in power generation. This type of activity just doesn’t happen today – it is predominantly used for transport.
Oil and transport are inextricably linked. To manage oil demand we have to get a grip on the transport system.
In the short term the answer must lie with energy efficiency in transport, particularly road transport. Although electrification will start to shift transport energy demand across into another sector, the rate at which this will happen is limited (see earlier posting). But efficiency, both in the vehicles we use and the way in which we use transport is available today. In addition, we can also supplement the transport fuel pool with biofuels and although this is happening faster than electrification, it will also have its short term limits as well, at least until some more advanced bio technologies arrive on the scene.
Right now there is a unique opportunity at hand to address energy efficiency in transport. Vehicle production has suffered dramatically as a result of the financial crisis so that could well mean a surge in demand over the coming few years as those who put off a car purchase catch up. If government policy encourages a more efficient choice of vehicle, we will all ultimately benefit.
I was interested to see the trend in the usage of oil products in transport. Our research at Verdantix on the electrification of corporate fleets and non-oil/petrol fueled cars supports your assertion that this is a 20 year transition away from oil. The really big question hanging over climate change related investments in transport is the price of oil. What other variables do you see impacting the speed of the transition to non-oil/petrol fueled vehicles? And how would you weight them in a market forecast?
As the technology becomes common place, there is huge potential to use economic tools such as road charging for time of use, congestion, environmental externalities and many other factor to encourage the behavioural and technology change necessary.
One issue that can be politically complex is setting the charges to be high enough to encourage the necessary behavioural and technology change, but not so high that people are priced out.
Little is said about human behaviour and energy consumption. As a one who remembers the space age, I was raised expecting that big, world-changing innovations were just over the horizon: talk in the 70s of nuclear fusion, speculation in the 80s about tapping vacuum fluctuations (perhaps through the Casimir effect), humanity colonizing and shaping the solar system propelled on Bussard ramjets….
From 1900-1975, the developed world went from horses and steamships to anywhere-in-a-day jet travel, a handful of perilous, but costly moon trips, and countless jaunts into low earth orbit. Perhaps to some it seemed reasonable that even bigger exploits would become commonplace in the next 75 years. Yet, those wonders seem to always recede into an ever-retreating horizon as we waste increasing amounts of conventional energy for frivolous, quotidian conveniences.
No amount of optimization of our cars and other transport devices can help if we continue to do absurd things with our precious energy: look in any walmart and you will see items that could have been produced locally, but were instead moved insane distances. I’m sure there is some “economically sound” explanation for why Florida Walmarts contain oranges from California and mangos from South America, when both are grown locally! Even more absurd is that almost everything not edible in the store was moved to the US from Asia. Short-term profit and long-term energy losses and environmental damage (which will require even more energy to clean up): we are squandering the future for mere convenience. Billions of intelligent humans will not do much better, in the long run, than mindless bacteria.