- State Roundup: Governor signs budget fix bills
- Rauner, Democratic leaders shake hands and make law
- State roundup: National guardsman and cousin arrested in terror plot
- Lawmaker says license plate readers a privacy threat
- Bryant not the first to feel impact of free agency rules
- State Roundup: Parents’ group calls for standardized test opt-out bill
- Hononegah Mack: ‘The best woman in the county’
- The tip of the iceberg: Human trafficking in America
- State Roundup: House passes proposal to fill current fiscal year budget gap
- ‘Hogs streak hits 4 as race tightens
Peak oil disputes
By Drs. Robert & Sonia Vogl
President and Vice President, Illinois Renewable Energy Association
Following the release of a study from British Petroleum “predicting oil production will increase substantially,” Bob Dudley, the firm’s chief executive, was quoted as saying that “peak oil theories are increasingly groundless.” The firm expects that by 2030, the U.S. will be self-sufficient in energy with much of it coming from shale oil.
A 2012 report by the International Energy Agency predicted the United States will be the world’s biggest oil producer before 2020, exceeding production from Saudi Arabia.
Chris Martensen casts doubt on such energy optimism. He acknowledges that the 3 million barrels per day of shale oil predicted to be in production in the U.S. by 2020 is impressive, but small in comparison to 60 million barrels per day shortfall in the world’s liquid fuel supplies by 2030 derived from a 2009 estimate by the U.S. Energy Information Agency.
A working research paper from a team at the International Monetary Fund, “The Future of Oil: Geology vs. Technology,” creates a predictive model that incorporates both the geological concerns of reduced oil outputs and the contradictory notion that rising prices will increase oil supplies. Their conclusion is that smaller increases in world oil production are likely to produce a permanent near doubling of the price of oil over the coming decade. Perhaps the more appropriate term to describe our oil future is that of the end of cheap oil.
Shale oil, tar sands and biofuels require substantial amounts of energy and water to secure and process into commercial products. With increased use of fossil fuels, carbon emissions will rise dramatically.
Even if oil supplies prove adequate, oil prices are high, and increased demand from China should increase the cost. In the past, increases in the price of oil have produced recessions. Although natural gas prices and electric prices have been low, neither natural gas nor electric-powered vehicle production and infrastructure can expand quickly enough to displace oil in transportation over the near term.
Erik Townsend, an investment adviser, published an article, “Commentary: Why peak oil threatens the International Monetary System,” in Resilience. In it, he explains the less obvious, but extremely important, economic impacts of peak oil. He presents a scenario of the international implications of the United States achieving energy independence. He suggests countries now pricing their oil in dollars and maintaining large dollar reserves for oil transactions might make their sales in other currencies. If they price their oil in other currencies, they will have an incentive to sell their U.S. Treasury bonds. Large oil importers such as China and Japan might stop paying for oil in dollars and cut their holdings of dollar reserves. Selling their reserves would push up U.S. interest rates, causing our borrowing costs to rise dramatically.
The artificial demand for dollars for oil transactions has enabled the United States to finance its federal budget deficit. Without the dollar demand, rising interest rates would have major adverse impacts on our economy.
Assuming our oil supplies fail to support energy independence, Townsend reminds us that U.S. military and nuclear dominance would be influential in negotiations for low-cost oil supplies.
Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. E-mail email@example.com.
From the Feb. 6-12, 2013, issue