World oil supply debate between former Shell Oil president and Professor Patzek

This is a paraphrase of some of what was said.  Basically Hofmeister is drill baby drill, Patzek advises taking action in your own life to live more simply, because that’s how it will be in the future regardless — investing in things like solar hot water heaters now will pay off in comfort and energy bills later…

John Hofmeister. Former President, Shell Oil Company Author, Why We Hate the Oil Companies Member, US National Energy Security Council Founder, Citizens for Affordable Energy

Dr. Tadeusz Patzek Chair, Dept. of Petroleum & Geosystems Engineering, University of Texas at Austin Co-author, Drilling Down: The Gulf Oil Debacle and Our Energy Dilemma. Vice-President, Association for the Study of Peak Oil & Gas USA

Hofmeister: we have more oil than we will ever use. We have nothing else to substitute for oil. So why are we paying such high prices? I predict a more than 50% chance of $5 per gallon gas by this summer. We’re headed for $8 per gallon gasoline, because from Nixon to Obama, politicians would rather pay attention to special interests than the average American, and did nothing practical and systematic about addressing nation’s energy future in an organized way.  We’re as dependent as in 1973.  Our energy and environmental future is at risk

By 2015 there will be gas lines that we’ll pay any price for, due to India and China where economic development is the most important to them.  It’s fueled by petroleum. China knows oil will get scarcer, so they loan money to state owned petroleum countries so that they can continue to get oil. There’s not enough oil out there to meet India, China, and our demands.

We use 18 million barrels of oil per day but produce 7 million, so we’re too dependent on  foreign imports. With right technology, capital and people, we could increase production from 7 to 10 million barrels per day, convert Natural Gas (NG) into liquid fuels for autos. Also convert coal to fuel, and use biofuels. Make higher efficiency vehicles.  Now we are on the path to social disruption and political partisanship like we have never seen before.

Patzek:  What should I tell you in these 8 minutes that won’t frighten you too much but will move you to change your lifestyle?

World oil production is not up in the last 5-6 years but world demand is up, because we sold our lifestyle very successfully, so now you have more people vying for less oil.  Future oil will be different too:  more unconventional, such as deep offshore, arctic, and  tar sands.  NG liquids are propanes, ethanes, butanes, not gasoline, and need to be transformed to drive on.

USA is a grown up baby, very large, on a cold night wants to cover herself with a baby blanket, but no matter what she does, has a body part exposed to cold weather.  There are only 3 possible choices:

1) do nothing, default choice, what we’ve been doing.  We’ll continue consuming and listen to siren songs for status quo.  Those people, like Daniel Yergen, are loved by the media and public, who dDon’t listen to people like me

2) De-power.  We talk a lot about Energy, but really it’s the rate of use of Energy that matters.  We won’t run out, but we are reaching a point of lower rates of production.  In less than 20 years if China and India grow as now, they will consume ALL the exports of the world.  So we should learn to use less Energy per unit of time.  We need to use less power in our daily lives. Two-thirds of power us used to move around and live

3) Hofmeister’s choice:  we have plenty of oil, let’s produce as much as we can as quickly as we can to reduce our exposure to outside forces.  But this oil is in very difficult expensive places — deep water, the far North, or in mudstones (shales), that produce at a very low rate.  The cost of producing is very high.  So either way, the cost of oil is going up.

So we have to circle back to choice 1 do nothing, or 2, use less.  I don’t like choice 1.  In short, we have to behave like adults.  Clearly we should choose choice 2, use less.

We use 100 times more Energy than we need to survive biologically.  We should not kid ourselves that getting power at any cost is a safe choice.  China’s soil, water, and air is incredibly damaged, environmentally ruined.  China is therefore a weaker giant than people think.

Oil production is declining.  Of the 33 countries that export oil, many are not consuming much oil, but they’re consuming more and more every year. Saudis are the swing producer, but producing less and less, while meanwhile their domestic consumption is growing by leaps and bounds as their population grows.  Saudis used 18% of their oil production a few years ago, now they use 28%.  They will not be exporting in less than 20 years.

For the average citizen, the price of oil is going to go up.  Big bad oil companies will be blamed, but we are all in this game, all vying for a constantly shrinking resource. The battle will be harsher and harsher as we go on.

Hofmeister: lack of oil supply is due to failed political leadership, not a lack of oil.  8 presidents in a row produced less oil, and politics failed in Iran, Iraq, Mexico, Russia, Nigeria as well.  Failed political leadership, not a lack of oil supply and growth.  There is so much oil out there. More than 100 billion barrels in our outer continental shelf, yet 85% is off limits.  A trillion barrels in the Peonce (sp?) basin of Wyoming Utah and Colorado is untouchable. Exploration on federal lands is prohibited. Gulf of Mexico has many more years of possible production.

Patzek: arctic is being considered now as a place to drill. very freezing and remote, gulf stormy and deep.  it’s not easy.  we have vastly increased drilling but we’re bringing in less production per rig because it’s so expensive to get more oil.  yes, a failure of political leadership in world.  Only Norway is well run and doing good things for their people.

Hofmeister: we are facing impending shortages like in the 70s, when you waited in a block long line every other day. There were fist fights, gun fights.  “No gas” was a common sign.  With china coming on, it’s going to get worse. I’m in favor of alternative energy, but here and now there is no alternative but to turn on the taps, unless we want to see a true global depression.

Patzek: What John said is true, and then some.  Available exports to USA will decline by about 50% in the next 8 years.  I’m going to make a stronger statement, things will not be rosy for those on a fixed income.  Don’t wait to be told what to do. insulate yourself from these shocks.  Think about food, heating oil.  Oil is the blood of society, it permeates every nook and cranny of this economy.  Try to think about simple steps to insulate yourself from the coming shocks, they’re coming, such as solar water heaters – they’re low tech, used in most countries, even Sweden.

Hofmeister: you can’t take care of yourself, we are so linked in the economy that looking after yourself is only frustrating, because you’ll be alone.  We can not depower our society and watch China power up their society. We are a competitive and economically driven and not going to take a back seat to any other economy on earth. We are determined to lead good lives, and it’s a fixable problem, all we need is a political solution [to drill more for oil].  Think about how many live off grid — their kids are in a school on the grid, they shop at stores on the grid.

Patzek: I came here after solidarity in Poland, formed by a collective action of people and we removed communism. You’d be surprised by how much people acting alone, then getting friends, family, neighbors to do likewise.   The very smart people can’t be counted on, they’ve been proven not to be so very smart.  Oil runs all societies on this planet.  The oil industry has come up with the most expensive & complex machines ever invented to mine oil for all of us. We’ve succeeded rather well, and due to improvements in technology of many kinds [long list], we’ve produced many millions of barrels of oil that would have never been produced otherwise. But there’s a dark side, for every good thing it does, it causes a negative effect. And there’s the 2nd law of thermodynamics. Every time we drill closer to drinking water and sensitive environments we risk interfering with how people live, yet desperately we want more hydrocarbons.  An everlasting tension between the two.  In fact, we’re not speaking honestly because we want to think we’re environmental, but when inconvenienced want to go ahead with drilling no matter what the environmental costs.

Hofmeister: BP is looking at drilling 12,000 feet, now deepest well is 8,500 feet, and are thinking even 35,000 feet down.  People are excited.  Dark side is must manage risk, failed in BP disaster. alt fuels: sure, NG can be compressed into methanol, coal to methanol also. flex fuel engines.  NASCAR uses methanol.  We have a huge new liquid source.  Electrify vehicles.  Hydrogen fuel cells too.

Patzek: Have to warn you, getting liquids out of coal has been known for a while, in WWII Germany did this. Very expensive experiment.  South africa during apartheid also.  A very environmentally polluting technology.  Where easy coal exists is Wyoming, but there is no water, and you need tremendous amounts of water to convert coal to a fuel.  Biofuels are similar to that.  Hydrogen has many problems.  The only alternative is to use fuels more carefully, wisely, sparingly.

Hofmeister: OPEC should be illegal due to their uncompetitive behavior, they are a cartel, we’d throw them all in jail if they behaved that way here.  We’re the victims of what we’d define as criminal behavior because they conspire to maintain a price of oil to maintain their elites and buy peace with their people by giving their people social benefits. OPEC operates in its own self-interest.  I’m in a group that wants to break the back of OPEC.  Part of that is to produce NG and make methanol.  Environmental issues are solvable.  Then OPEC will be irrelevant.  We taxpayers are paying to keep the oil lines open, we’re all paying. if straits of Hormuz closed, for a day or week or month, for any reason, there is a fateful hostility in the making [nuclear war? WW III?] that could play out there.  It will affect tomorrow’s price at the pump, so we have to worry.

Patzek:  I’ve got really bad news for you. OPEC has just relaxed quota, did away with it, since they can’t produce that amount any more.  OPEC can’t even meet their own promises.  USA MAIN suppliers are not the Middle east but canada, ecuador, trinidad, tobago, etc.  In order for us to eliminate all imports from Saudi Arabia, just inflate your car tires properly.

Hofmeister: can’t continue on the path we’re on. disruption and cost to families.  there’s a 21st e sys to be born, but won’t without a plan.  we the people need to change the governance of energy.  our current system can’t do it.  [long talk about economic history, federal reserve, etc].  E future can only be assured by an independent federal energy board to maange E and env, like the federal reserve.  auth over short, med, long term plan over 50 years so industry can go produce it. oil, gas, coal, nuclear, biofuels, hydropower, hydrogen, wind, solar, geothermal.  focus on efficiency. get rid of combustion engine.  by 2060 we could be carbon free.  we can get there, but we won’t get there with the status quo. forget political left or right. do what works.  when the energy abyss comes and you’re waiting the the gas lines, talk to the person next to you and tell them we need an independent energy agency.  There’s no single solution, but a complex potpourri.

Patzek: I am an engineer and a scientist, and I’ve spent the last 30 years thinking about the confluence of energy and the laws of physics and nature.  We would be a sperm whale weighing 40 tons 6 stories high if the energy we used went into our bodies.  We could become orcas like western Europeans or dolphins like the Chinese.  I will end with a speech of Wendell Barry (paraphrased).  A hummingbird crossing gulf of Mexico does not exceed its physical and mental capacities using it’s own energy. how can we be more like the hummingbird?  don’t work or think on a heroic scale.  Heroes often risk the lives of people they’ve never met, and cause damage. Abandon hope that more industrialization will solve the damage from previous industrialization.  we must think more about where we are, the place we are.  Learn the sources of energy. we Drive 20 miles to get a gallon of milk.  Give up notion we are too special to do our own work.  Build local places. In the end, that’s what matters.  Only then will our leaders follow us.  I don’t have as high hopes for our gov’t as others, it’s paralyzed, exists to extort money to support their existence.  we must do something on own, not wait for others to tell us. My son is getting PhD in sustainable agriculture, and told me “you talk too much”. That taught me something important.  Talk less, do more.

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