Snake Oil: How Fracking's False Promise of Plenty Imperils Our Future

by Richard Heinberg

  Still, there are real hurdles to overcome.

  The world’s largest current renewable source of energy is hydroelectric power. It can’t grow by very much, and building dams often creates enormous environmental problems.

  The main renewable energy sources that are capable of significant growth are solar and wind. Both are intermittent; this can create challenges for grid operators. Typically those challenges are addressed by building energy storage capacity and by managing the grid to take advantage of a diverse portfolio of wind and solar generators sited in different places with different weather conditions. Some recent studies suggest that clever electricity supply and demand management could enable renewables to provide most, or perhaps even all, of America’s power without serious difficulties.23 However, the grid operator in Germany—a country with extensive experience in solar and wind—reports that, with high grid penetration, intermittency leads to problems like blackouts and brownouts, which in turn can damage electronic devices.24

  For the world as a whole, growth in supply of renewable energy is not occurring at a sufficient rate to entirely displace fossil fuels any time soon. Some countries are seeing relatively quick adoption: Germany generated 23% of its electric power from renewables in 2012 (the proportion doubled in six years); Denmark achieved 41% renewable power; and Portugal, 45%. Here in the United States, Texas produced nearly 30% of its power from wind on some days last year. Yet the IEA notes that “worldwide renewable electricity generation since 1990 grew an average of 2.8% per year, which is less than the 3% growth seen for total electricity generation.”25 Moreover, there has recently been some slowing in the furious growth pace of solar installations in many countries because of reductions in government incentives, due in turn to the debt crisis in Europe and the squeeze on all older industrial economies from high oil prices.

  Renewable energy boosters hope that falling prices will make solar and wind cheaper than fossil fuels, so that incentives will no longer be needed, and the growth rate for renewables will soar. Prices for both solar and wind have dropped steadily in recent years, and in some cases are competitive with natural gas (especially given the cost to utilities of hedging against gas price volatility). However, for the solar industry, low prices are a mixed blessing. Many photovoltaic (PV) producers are losing money, and factories are closing. A massive consolidation of the solar industry is under way.26 Prices may have to rise in order for solar manufacturers to remain profitable. If that happens, the growth rate for solar penetration into electricity markets will be further constrained.

  Another hurdle is the fact that solar and wind produce electricity, while transport runs on oil. How can we make transport energy renewable? All routes to that goal are problematic.

  Electric vehicles offer a partial solution, but market penetration is not occurring nearly fast enough. And there are problems with high energy and materials costs for manufacturing batteries. There are no electric airliners on the drawing boards and probably never will be.

  Hydrogen-powered vehicles have been hailed as a vector for renewably energized transport, but these have been very slow to deploy because fuel cells are expensive, and hydrogen is hard to store.

  Advanced biofuels are another proposed solution. Companies are working to develop biofuels from city sewage, from contaminated grains and nuts, from cannery wastes and animal manures, and from forest wastes. Efforts are also under way to make liquid fuels from algae. Add up all these potential sources and they could nearly equal current transport energy; the remainder could be dealt with through better vehicle efficiency. But all biofuels have a low EROEI. Indeed, many of these potential fuel sources are likely to have a zero or negative net energy balance. Some make sense as ways of dealing with waste products, but as ways to economically produce energy—not so much. Alan Shaw, the chemist and former chief executive officer of Codexis, the first advanced biofuel technology company to trade on a US exchange, now says, “Cellulosic fuels and chemicals are not widely manufactured at commercial scale because their unit production economics have not yet been shown to be competitive with incumbent petroleum.”27

  EROEI is not the only criterion by which we should assess energy sources. We also need to take into account their environmental risks and their long-term viability. On these latter criteria, renewable energy sources score better than fossil fuels, though renewables do entail environmental costs (building solar panels and wind turbines requires extraction of depleting nonrenewable resources and generates pollution). However, without a high EROEI, renewable energy sources will never power the kind of growing, fast-paced consumer society that policy makers mistakenly believe to be the necessary goal of all economies.

  Mark Jacobson at Stanford University and Amory Lovins of Rocky Mountain Institute say we can power the world entirely with renewable energy sources in 20 to 40 years with no real economic sacrifice.28 Skeptics like Ted Trainer at the University of New South Wales say the transition will be expensive and littered with engineering nightmares.29 One can cherry-pick data to support either position.

  One thing we can say for sure: by the end of this century the world economy will be running mostly, if not entirely, on renewable energy sources, whether that economy is robust or withered, and whether or not we have made substantial investments in alternative energy. Fossil fuels simply won’t get us to that far shore. Even if we don’t know exactly what kind of ride they will give, renewables are the only boats we have that don’t leak.

  ENERGY SCENARIOS

  It is, of course, impossible to predict exactly what our energy future will be, but current trends suggest a few likely possibilities.

  Let’s start with prospects for oil. During the past couple of years, global prices have bounced around within a band ranging from $95 to $115. This results from an uneasy supply balance maintained by the ongoing depletion of conventional oil fields and the simultaneous appearance of more expensive oil from unconventional sources. This is an inherently unstable dynamic. One might think that higher oil prices would inevitably follow as drillers are forced to move to ever-more expensive prospects, but this is not necessarily the case. A renewed global recession would cut energy demand; in that case, oil prices could fall significantly. With a dramatic reduction in trade and higher unemployment, we would also see declining overall oil production.30 If the price of oil falls below $90 per barrel, new deepwater drilling will slow. At $80, new tar sands projects will be put on hold. At $70, nearly all drilling will be called off (except where required in order to maintain lease agreements). At $60, tar sands production from some existing projects will be throttled down.31

  With cheaper oil, the economy might rebound somewhat; but then demand for oil would likely pick up again and so would prices. Altogether, the picture is bleak for oil economics.

  The prospects for natural gas are not much better. Two trends are likely to drive gas prices higher. Currently, US drilling rates are down, so production will inevitably start to slide in the next couple of years as a result of the high per-well decline rates of shale plays and the drilling out of the core regions within each play. Also, if and when the United States begins exporting LNG, this will serve to push up domestic gas prices. These are not mutually exclusive developments, and if both happen, America could be facing both lower natural gas production rates and much higher prices.

  There is one scenario in which natural gas prices would fall, but it’s not a pretty one: it entails a serious economic recession that would destroy demand for the fuel through massive unemployment and a collapse of manufacturing.

  Higher natural gas prices would be welcomed by the US coal industry, which has been struggling for the last few years under the onslaught of (temporarily) cheap shale gas. American coal producers want to export their product to China, which has nearly maximized domestic mining capabilities. China’s options for new energy sources to fuel economic growth include imported oil, imported coal, imported LNG, nuclear, solar, wind, and shale gas; all are more expensive th
an the country’s own fast-depleting coal. If China begins importing coal from the United States at the same time as American domestic natural gas prices soar (which would entice utilities to burn more coal once again), the result could be a spike in domestic coal prices. Higher coal prices would be abated only by a serious recession or falling gas prices. Several recent studies conclude that world coal extraction rates have little headroom: despite the vastness of the resource base, most of the high-quality, easily accessible coal is already gone.32

  Altogether, fossil fuel prices appear to be on the verge of increased volatility: we will likely see more frequent and severe booms and busts within the oil, gas, and coal sectors. At the same time, accounting properly for energy costs in energy production, we will probably see less net energy delivered to society. And fossil energy will be generally less affordable. The overall EROI of society—the energy return on all investments in energy production, including financial as well as energy investments—will fall.

  We have not discussed nuclear power thus far, and readers who see nuclear as a major future energy source will have found this frustrating. However, I generally agree with the analysis of the Economist magazine, which recently published a special report calling nuclear power “The Dream that Failed.”33 Nuclear is just too expensive and risky. It was a technology that seemed to make sense in an earlier era of high fossil energy returns from minor investments, when enormous research, development, and construction costs for fission power could easily be shouldered. Today it is far more difficult to divert capital away from other energy projects. Even though nuclear electricity is inexpensive once power plants are built, the initial investments—several billion dollars per project, with inevitable cost overruns and the requirement for government loan guarantees and insurance subsidies—are now just too high a barrier. Currently, the industry is expanding in only a few nations, principally China—a country that gets most of its energy from cheap, high EROEI coal.

  The only regions relatively immune to the economic whipsaw of fossil fuel dependency will be those reliant on renewable energy. But new investments in renewables, as we saw in the previous section, have slowed due to the systemic anemia of the Western economies and the false expectation of cheap and abundant natural gas for decades to come. The trend to ease back on renewable energy incentives cannot be allowed to continue. The world may have a fairly brief window of time in which major investments in renewable energy are feasible. Beyond that point, the volatility of fossil fuel prices and declining overall societal EROI may drain the vitality of economies to the point that financing major new projects will become ever more difficult. This is perhaps the most important reason that the conventional wisdom of a new golden era of oil and gas abundance must be countered.

  In the worst case, societies may enter an ongoing maintenance crisis, seeking merely to keep basic services available as energy and capital contract in a self-reinforcing feedback loop.34 The better-case scenario would start with major immediate investments in renewable energy. How it would unfold from there requires considerable speculation. Society would almost certainly need to adapt to economic stasis or contraction as a result of declining mobility and EROEI. It would also need to rebuild transport and food systems to use less overall energy and different energy sources. In the best-case scenario, we will tomorrow discover a new, abundant, cheap, high-EROEI energy source with no carbon emissions.35 Betting on that highly unlikely event seems foolish; in all likelihood, we will have to settle for solar and wind. But we won’t have even those if we don’t start building panels and turbines at a ferocious pace.

  A MIRAGE DISTRACTS US FROM HYDROCARBON REHAB

  I have devoted a portion of this chapter to countering assertions in Charles Mann’s Atlantic article not because he deserves scorn. Mann is no fossil fuel industry shill; he is a respected historian and the author of several excellent books (including 1491: New Revelations of the Americas Before Columbus). He doesn’t exaggerate the world’s hydrocarbon prospects because he wants us to burn all that oil, gas, and methane hydrate. Quite the contrary; he is deeply concerned about climate change. The full subtitle to his article is “New technology and a little-known energy source suggest that fossil fuels may not be finite. This would be a miracle—and a nightmare.” I chose Mann as a foil because he epitomizes the general failure of America’s intellectual class to comprehend and communicate the complexity of our energy-economy-climate situation. It is an understandable failure, but it may be a fateful one.

  Perhaps the most concise way to convey this complexity is by way of two equally true statements:

  Hydrocarbons are so abundant that, if we burn a substantial portion of them, we risk a climate catastrophe beyond imagining.

  There aren’t enough economically accessible, high-quality hydrocarbons to maintain world economic growth for much longer.

  Here is a public relations nightmare: how to convey these seemingly contradictory messages to people without confusing the bejesus out of them. How can concepts like “energy return on energy invested” be explained to an audience that barely understands what energy is? How can millions of half-somnolent television addicts be guided in understanding “fugitive methane emissions,” “energy density,” and a dozen other essential terms and concepts? Where are the cover stories in chattering-class magazines, the hour-long NPR interviews, the TV newsmagazine in-depth investigative reports, and the congressional inquiries that explore the true intricacy and peril of our energy-economy-climate conundrum? Don’t hold your breath waiting for them. It all just takes too long to explain. A PR consultant might advise organizations discussing energy issues to stick with an easy message: “We are running out of oil,” or “We are not running out of oil.” Take your pick and make your case.

  Reality is more complicated.

  Fortunately, there is one element of simplicity in all this complexity, at least in terms of communication—and that is what we must do: as a global society, we must reduce our dependency on fossil fuels as quickly as possible. It is the only realistic answer both to climate change and our economic vulnerability to declining fossil fuel resource quality and EROEI. This is literally humanity’s project of the century, probably the most important in all of history. It is an enormous challenge, but it is not optional. Either we break the addiction, or we suffer the consequences—which would impact not only ourselves, but future generations as well.

  Yet, the mistaken notion that new technology can free up all the oil and gas we could ever possibly want stops us in our tracks. Suddenly we are faced with a (false) binary choice: jobs and economic growth on one hand, climate protection on the other.

  People need jobs and businesses need growth. If plentiful fossil fuels can provide jobs and growth (we tend to believe they can because they have a track record, and we already have the infrastructure to use those fuels), then can’t we somehow find a way to eat our cake, yet have it too? “Let’s think about this for a while longer before making any rash decisions,” the masses murmur in unison. In this context, “a while” could mean a decade or longer. By that time, it will be far too late to begin a successful energy transition.

  The choice is rigged. The promise of economic fossil energy abundance is a mirage. Like a thirsty desert castaway, we chase that mirage even though it lures us to our doom. Dazzled by the prospects of a hundred years of cheap natural gas or oil independence, we embrace an energy policy of “all of the above” that is hardly distinguishable from having no energy policy at all. With every passing year the fossil fuel industry consumes a larger portion of global GDP, reducing society’s ability to fund an energy transition. And every year the environmental costs of continued fossil fuel reliance compound.

  Everything depends upon our recognizing the mirage for what it is, and getting on with the project of the century.

  NOTES

  INTRODUCTION

  1. International Energy Agency, World Energy Outlook 2000, www.worldenergyoutlook.org/media/weowebsite/2008-1994/weo
2000.pdf.

  2. See, for example, my own book: Richard Heinberg, The Party’s Over: Oil, War and the Fate of Industrial Societies (Gabriola Island, BC: New Society Publishers, 2003).

  3. See, for example, Julian Darley, High Noon for Natural Gas: The New Energy Crisis (White River Junction, VT: Chelsea Green Publishing Company, 2004).

  4. George Monbiot, “We Were Wrong on Peak Oil. There’s Enough to Fry Us All,” Guardian, July 2, 2012, http://www.guardian.co.uk/commentisfree/2012/jul/02/peak-oil-we-we-wrong.

  5. Energy Information Administration, Annual Energy Outlook 2013 Early Release, Table 14, (December 5, 2012).

  CHAPTER 1

  1. Nick Owen, Oliver Inderwildi, and David King, “The Status of Conventional World Oil Reserves—Hype or Cause for Concern?” Energy Policy 38, no. 8 (August 2010): 4743–4749, doi: 10.1016/j.enpol.2010.02.026.

  2. International Energy Agency, World Energy Outlook 2008; see also http://www.postpeakliving.com/files/shared/Hook-GOF_decline _Article.pdf.

  3. Matt Mushalik, “Shrinking Crude Oil Exports a Tough Game for Oil Importers,” Crude Oil Peak (blog), February 4, 2013, http://crudeoilpeak.info/shrinking-crude-oil-exports-a-tough-game-for-oil-importers. Mushalik references JODI Oil World Database data up to November 2012.

  4. “Why Is US Oil Consumption Lower? Better Gas Mileage?” The Oil Drum (website), last modified February 6, 2013, http://www.theoildrum.com/node/9811.

  5. “Annual Vehicle-Miles Traveled in the United States and Year-over-Year Changes, 1971-2012,” The Geography of Transport Systems (website), http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/vehiclemilesusa.html.

  6. Jeffrey Brown, “The Export Capacity Index (ECI): A New Metric For Predicting Future Supplies of Global Net Oil Exports,” ASPO-USA (website), February 18, 2013, http://aspousa.org/2013/02/commentary-the-export-capacity-index/.