Welcome to the age of diminishing returns

Saturday, July 21, 2012

Five times as much oil and coal and gas as climate scientists think is safe to burn

Burning everything that we can possibly burn is not unavoidable, it is a choice (the wrong one). Unfortunately, we seem to have made it. (Image: burning of oil shale from Wikipedia)


It is remarkable how much the Internet discussion has been affected by the recent report by Leonardo Maugeri on the availability of huge reserves of unconventional oil. Maugeri is off by a huge factor in his estimations, nevertheless he has hit the crucial spot in the debate.

There is nothing in the geology of a hydrocarbon containing formation that defines it as a "resource" in human terms. The definition is all in economic terms; and economy is all about choice. Extracting or not extracting from a certain formation is a choice we make. The point of Maugeri's report is that a choice has been made. That nebulous entity we call "the market" has decided that we'll try to extract as much as we possibly can from everything that contain hydrocarbons that can be crushed, squeezed, boiled, distilled, treated, or whatever else we can do to get even a few drop of those liquid fuels that we see as so precious. For that, the industry has poured in enormous investments to build the necessary technology and infrastructure. It was a choice we made. The wrong one.

It is certain that we'll never be able to approach Maugeri's numbers in terms of what we can actually extract from unconventional resources. But just the attempt of doing so may be more than sufficient to ensure our destruction as a civilization and perhaps also as a species.

It is no surprise, then, that the discussion has taken a dramatic tone. In a previous post, I commented on a piece by George Mombiot titled "Enough fossil fuels to fry us all". In the following, an excerpt from the recent Bill McKibben's piece "Global Warming Terrifying new Math" on "RollingStone"


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Global Warming Terrifying New Math
 Bill McKibben
July 19, 2012 9:35 AM ET

....

Scientists estimate that humans can pour roughly 565 more gigatons of carbon dioxide into the atmosphere by midcentury and still have some reasonable hope of staying below two degrees. ("Reasonable," in this case, means four chances in five, or somewhat worse odds than playing Russian roulette with a six-shooter.)

.....

We have five times as much oil and coal and gas on the books as climate scientists think is safe to burn. We’d have to keep 80 percent of those reserves locked away underground to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring some massive intervention, it seems certain. Yes, this coal and gas and oil is still technically in the soil. But it’s already economically aboveground – it’s figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value. It’s why they’ve worked so hard these past years to figure out how to unlock the oil in Canada’s tar sands, or how to drill miles beneath the sea, or how to frack the Appalachians.

If you told Exxon or Lukoil that, in order to avoid wrecking the climate, they couldn’t pump out their reserves, the value of their companies would plummet. John Fullerton, a former managing director at JP Morgan who now runs the Capital Institute, calculates that at today’s market value, those 2,795 gigatons of carbon emissions are worth about $27 trillion. Which is to say, if you paid attention to the scientists and kept 80 percent of it underground, you’d be writing off $20 trillion in assets. The numbers aren’t exact, of course, but that carbon bubble makes the housing bubble look small by comparison. It won’t necessarily burst – we might well burn all that carbon, in which case investors will do fine. But if we do, the planet will crater.

4 comments:

  1. Hi Ugo,

    The amount of fossil fuels mankind can dig out of the planet, and most importantly, the rate at which these fuels can be produced, is determined largely by net energy. IIASA, Monbiot, Maugeri and other cornucopians simple ignore this fact and adjust their forecast to their wishes. The reality is going to be quite different and the countries where these voices of galore come from won't have much influence on future atmospheric CO2 concentrations.

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    1. Well, Luis, a few years ago I would have agreed with you. Yes, peak oil could be our last chance, but now that I have seen what obstinacy we are putting in extracting liquid fuels at all costs, I am afraid that not even peak oil will be able to stop us from destroying our own planet.

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    2. It is funny how were are making a Faustian Bargain of forgoing capital expenditures on infrastructure that makes the system more efficient to pump more fossil fuels, while the EROI of those fossil fuels goes down. Meanwhile, whole countries are being priced out of the fossil fuel market by way of the bond market only to be resurrected the next day by central banks. And our only hope of keeping any of our current technologies going without burning up the planet is to trade high quality fossil fuels for low quality green technologies that can't keep those technologies around. We live in strange times.

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    3. Well,

      I would say in many places our planet is already destroyed...

      Alex

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)