Book review
Burn Out:
The Endgame for Fossil Fuels.
DIETER
HELM.
Yale
University Press 2017
ISBN
9780300225624; xx + 281 pp; £16.59
Ironically,
given its theme, as published early in 2017, “Burn Out: The Endgame for Fossil
Fuels” shortly
preceded the announcement made by President Trump of the withdrawal by the
United States from the Paris Agreement on climate change, driven primarily by
an aim to support the US coal industry, which he maintains has been hampered by
environmental policies, and disadvantaged in comparison with other countries,
such as China. The book’s title offers a
punchy proclamation, that the age of fossil fuels is coming to an end: this is not as a result of any imminent
shortage of them - far from it - but an expectation that natural gas will be
employed as a cheap and plentiful bridging fuel, en route to a dominant electrification of the
energy sector, most likely powered by advanced solar technologies, and that
such innovations as the Internet of Things (IoT), 3D printing, and robotics will
confer a more efficient overall use of energy, hence reducing demand on oil,
gas and ultimately renewables.
The
author, Dieter Helm, is professor of energy policy at Oxford University, and an
outspoken commentator and critic on global energy strategies, including those intended
to ameliorate climate change. Thus, this book is in part a consolidation of some
views, framed from the viewpoint of an economist, espoused in his various writings
on the subject, and an extension of some of the themes covered in his previous
books. Helm remains thoroughly censorious of the peak oil concept, and bangs
the drum that “peak-oilers” have got it wrong. He stresses that there is no
shortage of “oil” (or indeed of the other fossil fuels), and in terms of the
large quantities of carbon-rich fossil materials that lie in the ground he is
quite correct. However, peak oil was never a reference to “running out of oil”,
but to an ultimate maximum in the rate of production and flow of this unique
source of energy into global civilization. This depends on geological factors, changes in technology and the oil price, and
indeed, the “hole” in supply that would have arisen following the peaking in global
production of conventional oil that occurred about a decade ago, has since been
filled by production from expensive and more energy intensive “unconventional”
sources, mainly from hydraulically fracturing (“fracking”) shale and processing
bitumen from oil sands, neither of which would have been entertained had the
oil price not approached and then exceeded $100 a barrel.
As
Helm has stressed, it was surging demand from China for oil that initially forced
the price up; however, the resulting escalation in unconventional production,
combined with a maintained strong output by OPEC (30% of this from Saudi
Arabia), led to an oversupply against demand and a price crash. Helm asserts
that the oil price will stay low (perhaps in the range $40-$60) from now on,
but the question remains of, how low can the price go and oil production still remain
a viable activity? There are varying
estimates of the breakeven price for oil from different plays, depending on
exactly what is being measured, and it is claimed that due to improved
technology, oil might be viable even at $30 a barrel. However, some analysts in
the oil industry have concluded that the relatively low apparent breakeven
prices currently being quoted for shale are partly an artefact of not including
all costs, and that service providers, e.g. fracking crews, are running on the
margins, accepting whatever cash flow they can get in order to remain in
business. Indeed, many small oil and gas companies have gone bankrupt in their
efforts to continue shale gas and oil production, while oil and gas prices
plummeted.
Whatever
may be quibbled over the cost/price of oil in $, an important measure of
production viability is Energy Returned on Energy Invested (EROEI) – sometimes
the equivalent term, Energy Returned on Investment (EROI) is used - since it
takes energy to produce energy, and ultimately it is primary input energy that
is the determining factor in the production rate of a resource (i.e. physics
trumps economics). In the limit, for an EROEI of 1, it takes as much energy to
produce the resource as will be delivered by burning it: clearly a pointless
exercise. Before 1930, the figure was around 100, as it still is in some plays
in Saudi Arabia, while the global average has fallen to below 20. An increasing reliance on unconventional oil
- i.e. “tight oil” produced by fracking shale, extra-heavy oil/bitumen from oil
sands, (ultra)deepwater drilling, etc. - means falling EROEI (perhaps 5 for
some shale and oil sands deposits), higher production costs, greater carbon emissions, and less available energy
for society from the total primary energy that is accessible, if more of that
energy is consumed overall by the various energy production processes. As noted,
it was only the very high oil price that prevailed prior to its crash in 2014,
which rendered alternative, unconventional sources economically viable. In the
present period of low oil prices, the high costs of producing oil from these
sources continue to push companies to the verge of bankruptcy, and investment
in new projects is stalling. On this
basis, it is not obvious how cheap oil prices will be maintained into the
future.
In
regard to the potential for producing the large quantities of natural gas that have
been estimated to exist in shale plays across
the world, echoing the notable success achieved in the United States, the experience of Poland1
might urge some caution. Originally reckoned in a US Department of
Energy study to be the European giant, with holdings of around 5,295 billion
cubic metres (bcm) of technically recoverable shale gas, the figure was revised
down initially to 346–768 bcm by the Polish Geological Institute, which
nose-dived further to perhaps 38 bcm, according to a study made by the US
Geological Survey, i.e. around one hundredth or so of the original estimate,
and with a huge range of uncertainty: anywhere between zero and 116 bcm. Of the
72 test wells that had been drilled in Poland by the end of 2015, 25 were
successfully fracked, but none of them yielded a sufficient gas production rate
to be commercially profitable. It may well prove that technical advances, such
as using supercritical CO2 as the fracking fluid, will improve the circumstances
in Poland and elsewhere with complex geologies, e.g. China (where,
reportedly, shale gas accounted for around 5% of total domestic natural gas production
in 2016), but unless the selling price of gas increases, or somehow production
costs can be substantially reduced, the prospects for a global shale gas
bonanza are open to question. In any case, while gas is clearly the better
option to coal, since it produces perhaps half of the latter’s carbon emissions
per unit of energy generated, unless the “bridge” that it is intended to build
is a relatively short one, it may not fulfil the carbon reductions outlined in
the Paris Agreement, and it is debatable that even these are sufficient to keep
the mean global temperature from rising in excess of the 2 oC limit,
beyond which catastrophic climate change is predicted to ensue.
Clearly,
we need low-carbon energy sources as soon as possible, and Helm is sceptical
about the prospects for both wind and nuclear energy, concluding that the
primary energy source in a largely electrified system will be “probably solar,
but not as we know it”, which implies a reliance on new and untried technology
whose date and scale of installation is as yet unknown. Indeed, to change to a
nearly “all electric” energy system would entail the installation of an
entirely new distribution network, of much greater capacity than we have
presently, and most likely of the smart grid kind, with the potential for
energy savings, both in terms of primary (input) and end-use energy, although
questions remain about how base-load power would be provided, which would
require storage (battery technology) if solar is to be a key driver in the
scheme.
Helm concludes that sustained low oil
prices will severely damage the economies of oil exporting nations. For
example, although Saudi Arabia can produce oil for $5-$10 a barrel, it needs a
selling price of nearer $100 to cover its national expenditure (fiscal
breakeven price). He opines that the strife in the Middle East will worsen, as
nations who earn most of their GDP from selling oil find themselves lacking the
funds to pay for social programmes which help to preserve societal order. Helm
predicts that the future for Russia, which previously benefitted from high oil
and gas prices, “looks bleak, since it has few competitive industries beyond
fossil fuels, other than its military complex”. While China is lambasted for
having attained prominence as the world’s worst “emitter”, its firm stance on
decarbonising its use of energy is applauded. Helm concludes that the US is
“The lucky country” in terms of its energy prospects, while in Europe, the
situation is “Not as bad as it seems”.
In
summary, this is a well written and thought provoking book, and is impressive
in its wide ranging coverage of those technical, economic and geopolitical
factors which are woven together in the Gordian knot of providing a sustainable
energy supply, while dealing with climate change. In truth, we are in uncharted
territory regarding our use of energy and other resources, but Burn Out offers considerable insight
into the complexity of the challenges that may lie ahead of us, and outlines
some courses of action that we might take in dealing with them. In Helm’s view,
“step one is to acknowledge the possibility of radical change and of
discontinuity.” The existing patterns of supply and demand for energy, upon
which the world’s geopolitics is based, may change profoundly, and it is a
mistake to assume that tomorrow will be “roughly like today”.
Reference.
(1)
Inman, M. (2016) Nature, 531, 22-24.
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