The Costs and Implications of Our Demand for Energy: A Comparative and Comprehensive Analysis of the Available Energy Resources and How Fossil Fuels Have Created an Energy Crisis - Exploring Our Alternatives The Future of Energy

Oil & Natural Gas / Conventional Oil & Gas Resources / Economics

In a report best qualified as that from a non-academic, non-scientist, "common educated American man" with a MBA, Fritz Dufour opines on the energy picture. That that follows is from his Background opening of his 223-page report:

Dufour begins ..."With the exception of remote and unchartered places, what we use now as sources of energy are a far cry from the one and only energy source humans have used for a very long time: wood. A major fuel, it was used to cook food and heat homes. Over time, they invented machines to do the work for them. Along came windmills and waterwheels used to provide the energy needed to grind grains. Animals were also used both to provide energy and transportation. The industrial revolution of the 18th century, which started in England and spread throughout Europe, the United States, and the rest of the world, was the driving force behind the switch from manual labor to machine-based manufacturing. The introduction of machines in the daily life will catapult the demand for energy as living comfortably and acquiring more commodities became the new normal. In the United States, although water power resurfaced in the 19th century with the discovery that water could be used to generate electricity, coal remained the primary source of energy, especially for generating electricity. In the 20th century, another fossil fuel, petroleum, was discovered and quickly became a prime source of energy. In the process, natural gas was also found to be useful for cooking, heating, and generating electricity. After World War II, by 1947, the use of petroleum surpassed that of coal. A new era was born. The production of cars and trucks in the US and worldwide increased the demand for oil, thus, created an unprecedented need to dig deeper underground. With the oil boom came wealth but also great challenges and uncertainties as fossil fuels are not forever and are subject to depletion. They also represent a constant threat to the environment.

Today, the world is experiencing the full brunt of an energy crisis. What energy crisis? You might ask. My home is heated. I can cook whenever I want. I can drive my cars, both the hybrid and the gasoline-powered one. The streets are well lit. I just came back from a cruise in the Caribbean. So, I don’t see where the crisis comes from. For the sake of this analysis, energy crisis is not meant in the sense of shortage. As a matter of fact, energy resources abound on our planet, which gives us a large repertoire of choices. Energy is free and virtually unlimited. The problem lies within its conversion and popularization. The world is facing an energy crisis because our energy resources
are a global challenge. From their discovery, their exploitation, and their storage to their distribution and their usage, they pose tremendous risks and threats both to our health and the environment. The challenge also stems from the facts that: technology does not create energy, transforming energy is expensive, and energy transitions – for example, switching from fossil fuels to, say solar energy – take time. Before I go on, I would like to note that the health and the environmental risks apply only to non-conventional resources, which include fossil fuels such as coal, petroleum, and natural gas and nuclear power. Coal, petroleum – commonly called oil – and natural gas are called fossil fuels because they derive from fossils of plants and living organisms which populated the Earth millions of years ago. Fossil fuels account for 80% of global energy usage. But fossil fuels will eventually run out, in a few centuries to be more precise. Like it or not, they will have to be excluded from the list of available energy resources. We already know what other sources of energy will still be around when that happens. They constitute a category of energy sources called renewable energy. Renewable because they cannot be depleted.

At any time, energy can be pushed to the forefront of both national and international attention as a result of several factors, including: increase of demand for energy, dependence on imports – of oil – from foreign sources, uncertainties created by political instability, climate change, instability of energy prices, and inadequate investments in energy infrastructure. What complicates the situation is the fact that these factors also depend on government policies on both national and international levels. And policies are not always easy to implement because they are affected by a mix of scientific, technical, economic, social, and political elements.

Can something be done now to avoid a possible crisis – this time in terms of shortage – in the future? It depends on who you ask. There are many viewpoints on the subject. An alternative would be to make our planet energy efficient, meaning retrofit it with homes, commercial buildings, transportation means, and appliances that use energy in an efficient manner. This is being done but on a very small scale and is accessible only to those who can afford it. So, right now energy efficiency looks more like a paradox. To pay less money – thus saving money – you must have money. It resembles this saying in finance: “to make money, you must have money”. This is to say that energy efficiency comes with a price tag and somewhere along the line someone will have to pay for it. But who? Policy makers or political actors should establish strict rules and take the initiative. The problem is politicians tend to think in the short term. Most of them do not want to take responsibility for Earth’s problems. The future global challenges that energy resources will pose must be dealt with now in a proactively manner. It is easier said than done because the issue is an ethical one. It is not a factual issue.

We tend to act following a major adverse event or an accident. For example, environmental disasters such as the Chernobyl nuclear power plant accident, the British Petroleum oil spill, or more recently the Fukushima nuclear power-plant accident caught briefly people’s attention and raised a short-lived awareness on the use of nonconventional energy resources. We must not let disasters or accidents determine how we should use energy. That can easily be achieved through debate, dialogue, and consensus. But to talk about energy and establish rules and guiding principles in terms of its use, both policy makers or political actors, leaders in the energy industry, technocrats or economic actors, and the general public or the consumers must be fully knowledgeable about energy, what it entails, and what are its implications, which is not an easily achievable goal because energy is a science in itself and draws on many other disciplines such as economics, politics, history, engineering, biology, chemistry,
physics, and geophysics (the physics of Earth).

Let’s consider a few factual and ethical assertions. Example: offshore drilling. An ethical assertion might be: offshore drilling is bad. Well, there is nothing to discuss here. A factual assertion might be: the British Petroleum oil spill of 2010 leaked 4.9 million barrels into the Gulf of Mexico. You  might think that this factual assertion is wrong. That could prompt you to study the fact and come up with a different number. We could debate it. Factual assertions are often quantified. We could always round off the 4.9 billion to 5 billion. But when we consider the costs to the fishing industry, tourism, the cost of the cleanup, the effects on the planktons and seagulls, there are many factual
assertions we can make about offshore drilling: it provides X amount of oil; it creates X number of jobs; it reduces the cost of gasoline at the pump by X cents per gallon; it reduces our dependence upon foreign oil by X barrels per day. Some of the assertions are easy to calculate; some of them aren’t. Think about buying a car. You want the car to be affordable, safe, energy-efficient, attractive, functional, reliable, long-lasting, easy to clean, and environmentally friendly. The problem is: you can’t have all these things. Say you go to a car dealer. You can get factual assessments on these facts for each car, but that won’t tell you which car to buy. You might have a family of seven. So, you’re looking at a minivan. You might use it for hauling large objects. So, you want a pickup truck. You might really like the color red. So, there is always going to be
tradeoffs. A safer car is always going to be heavier and less energy efficient, will cost more to run and less environmentally friendly. What you don’t want to do is not make a decision. And the decision will not encompass all your choices. It’s the same thing with the future of energy. We need to get all our facts about our energy sources, but it’s also tricky because these facts also change overtime. We’ll need to make conscious decisions. One thing to remember is that there is no single energy source that’s going to save humanity because every single source of energy has ts pluses and minuses. In the foreseeable future, we’ll need a diverse portfolio of energy sources geographically variable in order to meet all our needs. We’ll need cooperation and coordination.

All of us are already familiar with diverse types of energies in many intimate ways: you pay for electricity to light your house, you pay for natural gas to heat it, you pay at the pump for fuel to power your car or truck, you pay indirectly those fuel costs in all the food you eat and all the stuff you buy. Energy is big business. For instance, on the 2015 Fortune 500 companies, 4 of the top eight of these companies were energy companies: Exxon Mobil, Chevron, Phillips 66, and General Electric. So much of the global economy is energy and it affects our jobs, our incomes, and our personal economics. Politics is also important in the dynamics of energy development.

Internationally, government subsidies have helped the development of new technology for solar and wind power. For example, governments subsidize the oil and nuclear power industries. Politics plays a role in the coal industry which has survived and thrived in the US because of exemptions from federal pollution regulations. The same is true for hydrologic fracturing or fracking, which has survived in the US because of the 2005 Clean Water Act. The US government also subsidizes pipelines and support military actions in the Middle-East as part of ensuring a continuing supply of gasoline. Energy has also been a leading focus of most political tensions between countries. Oil in the Middle-East, OPEC, gas pipelines out of Russia, countries fighting for oil resources in the South China Sea. These tensions shape the decisions all countries make about their energy resources.

The story of energy is, at its core, the story of human civilization. Economy, energy, and environment are interrelated. Energy impacts the economy and the environment more than it is impacted by them. While the economy is driven primarily by supply and demand and the environment is driven by both spontaneous changes and Anthropocene – modification of the environment by human activities – energy, especially fossil fuel energy, is one of the most seminal indicators of wealth. It’s plentiful, diverse, and only a few nations have the ability to extract and distribute it.

What is our next source of energy? Chris Martenson thinks that it’s the most important question of our time and it remains unanswered. Oil is not the only critical resource that will be in shorter than-hoped-for supply in the future…This is not a story of “running out”; this is a story where resource extraction gets just a little more challenging and a little bit more expensive. Consequently, fewer and fewer more resources come up out of the ground to sustain the economy that we know and love. Will all economic activity cease with the depletion of a few key elements? No, of course not. But neither can our economy continue to operate in precisely the same way that it did when
demand alone dictated supply…We can no longer constrain our thinking to just one E, the economy; we must include the other two E’s, energy and the environment. For far too long, economists have been allowed to behave as if the economy was an independent system all on its own. It is not. It is a subset of the larger world. (Martenson, 2011)."