By Drs. Robert & Sonia Vogl
President and Vice President,
Illinois Renewable Energy Association
Saudi and Russian oil ministers recently announced that they will maintain oil production at current high levels for the next few months which suggests prices could go lower. Increased production from Iran will add to the glut, as will the United States’ storage facilities reaching capacity.
While Saudi production is a leading factor in the oil surplus, contributions have come from fracking in the United States and tar sands production in Canada. But the latter two sources are cutting production in response to low oil prices. According to a New York Times article 60 oil and gas companies have filed for bankruptcy over the last 16 months. If energy prices stay low another couple of months the number of bankruptcies could double and lead to a major consolidation in the industry.
Low energy prices, looming bankruptcies, major cuts in capital investments to fund costly drilling efforts in deep offshore, formidable Arctic sites and fracking operations could lead to a dramatic reduction in the supply of oil and gas. If so prices could rise once again.
With the historic dramatic swings in the prices of fossil fuel energy, it would seem wise to reduce our dependence on these resources. If carbon reductions are anywhere near the levels called for to avoid dramatic climate changes, many of the sources of fossil fuels may never be consumed.
With all the innovations in energy production and storage and continuing gains in energy efficiency and renewable energy, the stage is set for escaping the volatility of oil and gas prices. With increased transportation options such as Uber and similar services and the promise of high speed rail the path away from fossil fuel is being developed. Increasing consideration is being giving to restoring light rail service connecting communities and within communities, which would further reduce carbon emissions while cleaning the air.
As fossil fuel interests fight to protect their market Amory Lovins sees market competition from efficiency and renewable energy as bigger threats to them. The demand for gasoline has fallen for nearly a decade both in Europe and the United States from technological improvements, increased variety in transportation options and changing citizen values.
As capital intensive operations oil companies take nearly a decade before they realize a return on their investments in new oil wells and face increasing risks by seeking oil in Arctic areas and deep ocean drilling.
Lovins reminds us that a dramatic change in oil supplies could come via military actions or cyber attacks on concentrated Saudi oil production facilities. A major successful attack could render their 10 million barrel production per day inoperable for years. While the existing surplus of oil would offset the sudden loss of production capacity for a short period of time the world would be forced to turn to alternatives to keep the economy going. We could move more quickly to fill the gap by installing energy efficiency, renewable energy sources and changing our behavior to reduce our oil consumption.
We have recently heard from several area citizens committed to building energy efficient homes which are off-grid and supplied with renewable energy sources. As the price of solar cells and battery storage systems continue to fall and the cost of grid electricity continues to rise, we can expect more citizen interest in alternative energy options.