Fossil Fuels? What a Quaint Notion

Fossil fuels are responsible for the huge advances in living standards over the past several hundred years. Since the beginning of the industrial revolution, the economy has depended upon concentrated sources of energy which is converted into useful work. Coal was the first source of energy meeting this need. Once extracted, and moved to its point of use, a lump of coal when burned expanded man’s capabilities through the turning of turbines and through the production of steam, which could move large machinery.

Then we discovered liquid petroleum. That was an even better source, and quite literally, it seemed to jump out of the ground once we poked a straw into its hidey-hole. Now you could use liquid hydrocarbons to fuel the transportation revolution that unfolded in the 20th century. Humanity grew used to its availability and deemed it as a birthright to maintain access to inexpensive forms of liquid hydrocarbons.

But then the 1970’s happened, and the producers of liquid hydrocarbons realized they controlled the production of a substance the industrialized world was addicted to. Quite logically, they withheld their product, saw the reaction from the rest of the world as of an addict writhing in the agony of withdrawal, and then resumed selling, but at a higher price. Thus the US began a period where the foreign and military policy of this nation was directed to protect the producing nations and protecting the transportation lanes. The military cost for this was never factored into the price of oil, which stayed high but never reflected the full cost for the fuel.

Just when the US grew accustomed to the external costs associated with securing petroleum supplies, technology threw the US a lifeline. See, the true reserves of hydrocarbons greatly exceeded the stated volumes, but much of those extra reserves were locked up in sedimentary rock, instead of pooling in geologic formations. And those oil and gas bearing sedimentary rocks could be found in many areas of the country. Technology gave the tool to unlock these hydrocarbon reserves in the form of fracking.

So the great fracking revolution was unleashed. Since about 2007, fracking has resulted in significant increases in production. So much so, that for several years, we’ve been able to forego much of the imported petroleum we once depended upon. The new solution of fracking was going to replace our old sources of energy, and we could rely upon a new generation of American wildcatters going out and perpetuating the stereotype of macho men dealing with steel and oil.

There is just one problem with fracking, though. The input costs to get the energy out are a more significant portion of the energy produced when compared to standard oil wells. See, in energy production there is the little matter of energy return on investment (EROI). Similar to a financial ROI calculation, this ratio shows the energy return for any form of technology. And fracking has a lot of inputs that a standard drilling rig doesn’t have. The inputs for fracking are sand, water, and chemicals, and a large amount of excess water produced from fracking has to be disposed of. Anyone who has lived in or visited an area with active fracking can attest to the volume of trucks going to and fro dealing with the water from the wells. Plus, another secret with fracking is that the amount of oil and gas produced declines much faster with a fracked well as compared to a standard well. Declines of as much as 60% from year to year are noted in fracked wells, whereas a standard well may decline only at a 5% per year rate. Thus to maintain or improve production requires ever more drilling, and this vicious cycle perpetuates through the lifespan of the producing field.

The chart below shows expected EROI for various forms of energy. Note the steep drop off once you get below an EROI of about 10. In particular note the figure attributed to biofuels. Since corn-generated ethanol is the main source of biofuels, it is evident that it takes about as much energy to produce it as it releases. The original reason for the corn conversion to ethanol  was to reduce US dependence on foreign oil. But when all of the inputs are considered, it is obvious that ethanol from corn is strictly a political beast that has developed a constituency far beyond its original intent. That is a subject for a separate post.

Looking at this chart, one would think that fracked oil and gas offers a significant increase in the available hydrocarbon supply. It does, but not as much as standard reservoir wells. And the steep depletion rates for these wells masks another issue with fracking. The cost of hydrocarbons needed to produce a positive ROI is higher than the current price. In other words, fracking does not make economic sense while the cost of oil is near $50/barrel. At $80/barrel, you can show a positive cash flow, but not at the price we’ve seen for many years. So we now are in the situation where the technology we’ve used to reduce our dependence on foreign oil, is shown to be an endless dollar pit.

So now, as almost all problems go, this has become a political issue. One party in the US wants the fossil fuel party to continue, noting that our lifestyle is dependent upon an ever-increasing supply of hydrocarbons. And one side has looked into the future, seeing that the only way to keep the fossil fuel party going is to increase the cost of that fuel beyond the ability of the population to handle. So we should deliberately speed up conversion of the economy towards renewable sources of energy, in order to avoid falling off of the energy cliff.

You might bring in concerns about global warming into this discussion, but in my opinion, that is icing on the cake. It is a straight-forward economic calculation that will dictate our migration away from fossil fuels. By the way, one final thought on the EROI charts – if you are using a fossil fuel to convert it into electricity, you run into thermodynamic losses. Even in an extremely modern power plant, 40% of the fuel goes into waste heat, which greatly reduces the EROI of the fuel source. So wind and solar, even though they show up as lower on the chart than fracking, they have the advantage of having converted input energy directly to electricity, thus avoiding the thermodynamic losses.

We in the US are at the mercy of our political class understanding these issues and making decisions that are better in the long run. Given the track records of the parties, skepticism is warranted.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s