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What’s Plan B?

Posted by Jeff Rubin on June 16th, 2010 under SmallerWorldTags: , , , ,  • 12 Comments

America’s Plan A for the future of its oil supply was shaky to start with. Hurricanes, and the devastation they’ve brought to offshore oil platforms in the Gulf of Mexico, had already put the kibosh on earlier dreams of reversing the nearly 40-year decline in domestic oil production. Ironically, oil production in the Gulf had climbed back to pre-Katrina levels only months before the blowout at the deep-water Macondo well became America’s all-time worst environmental disaster.

President Obama won’t lift the moratorium on deep-water drilling until the Macondo gusher is, at minimum, fully capped. But whether he lifts it after that may not matter. BP has already lost over 40 per cent of its market capitalization. If Chapter 11 bankruptcy protection is the ultimate sanctuary from the staggering economic and environmental costs the firm will face, how eager will other oil companies be to follow in its deep-water footsteps?

As the days of rupture flow by, not only is the area no longer the answer to tomorrow’s oil demand, but before too long it may not even produce the 1.6 million barrels per day that it currently does. Without accessing even deeper fields, like BP’s Tiber field, almost six miles below the ocean, the rapid depletion rates of offshore wells on the much shallower continental shelf spell declining production for the Gulf region and for the United States as a whole.

Hopefully Canadian tar sands aren’t Plan B. If they are, someone should tell Governor Schwarzenegger and the growing list of other US politicians who claim that fuel is too dirty to burn. The real problem isn’t that it’s too dirty—at least not for the vast majority of American drivers, who would be happy to burn it—but rather that it’s too expensive. That’s why BP and the rest of the oil industry were drilling in deep water in the first place.

In the end, Plan B isn’t more tar sands production from Canada or Venezuela, or more deep-water production from Brazil or Africa. Whatever comes from those sources will barely cover depletion, and what’s left over will be gobbled up by the exploding oil appetites of the BRIC economies.

Plan B can only be less oil consumption. Whether Americans realize it or not, they are already on that path. The disaster in the Gulf is just putting that reality into sharper focus. Last year there were four million fewer vehicles on the road in the United States than there were the year before. In the next decade, there will be 40 to 50 million fewer cars than today. In the process, an economy that once consumed over 20 million barrels of oil per day will find a way to run on 15 million barrels or even less.

Peak supply defines peak demand. That, in a nutshell, is Plan B.

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  • Denny

    In his speech last night, President Obama cited wind turbines and solar as alternative energy sources that would reduce America's addiction to oil. However, neither of those will help fuel a fleet of cars. Mr. Obama also stated that the United States, not China, should be the world leader in producing alternative energy and the accompanying jobs. Not mentioned, was China's strangle hold on the essential metals necessary to make wind turbines, solar panels, and batteries for electric vehicles. While America meets with BP leaders to discuss the escrow fund to pay for damages, China is probably planning for its next major oil purchase in Nigeria, Venezuela, or some other corner of the world. I wish that I could share President Obama's excitement that Americans are driving more efficient cars, but as Jeff Rubin points out, that will only prolong, not end, our “addiction to oil.”

  • whatisayute

    well since only 19% of oil is converted to gasoline and most of is is used for energy/heating generation, and 10% is made into diesel for trucks, our economy is going to suffer severely and people are going to be freezing their rears off if this is Plan B. So driving cars a little less will be like spitting into the wind as our economy collapses. I hope you're not right and some entrepeneur comes through to save the day before then.

  • RTagain

    Hey whatisayute,

    This may be it – a company developing a way to power all vehicles, generate electricity and heat for less than current prices – from the sun (along with biomass, & geothermal, etc.) with a new very low cost bladeless turbine and other techs. They could ramp up production to gigawatts per year within a few years. They offer a “No Cost” deal to taxpayers to gain ownership in production facility under construction – saving all income taxes, info here & you can contact this site for info on the company: http://www.tnns.org/energy

  • http://www.unitedstatesofmichael.com USofMH

    Does anyone have any thoughts why we have this massive gusher in the Gulf, and prices at the pump are actually lower right now here in the States? I really don' get it – it seems that we should be paying more of a premium right now given everything…

  • marcovth
  • http://aardvarkcola.wordpress.com/ Aardvarkcola

    BP oil spill as a defining oops moment. Maybe a four-cylinder will do. And turn the thermostat down.

  • Denny

    December 2018 oil futures are trading at 95.06 indicating that there is a belief by investors that oil prices will be higher in the future. However, concerns about sovereign debt, high unemployment, and other economic difficulties are keeping near term oil prices subdued. It is also possible that China and sources connected to the United States government are shorting oil to prevent panic from spreading as the Gulf of Mexico dies. After government bail-outs of General Motors, Citigroup, etc., and the guarantee of banker bonuses who do you trust? Place your bet accordingly.

  • Sbross

    America suffers from a massive dose of ignorance and denial on so many fronts it is frightening to watch . I find it hard to see how they can manage themselves out of this mess with the current leadership.

    It won't be to long before millions of Americans will be scrambling like frightened birds in the gulf,soaked in their self made economic mess and no one to clean them up.

    good luck

  • Sbross

    America suffers from a massive dose of ignorance and denial on so many fronts it is frightening to watch . I find it hard to see how they can manage themselves out of this mess with the current leadership.

    It won't be to long before millions of Americans will be scrambling like frightened birds in the gulf,soaked in their self made economic mess and no one to clean them up.

    good luck

  • Jonatan Bravo

    Dear Jeff,

    Thank you for this interesting comment.

    It is relatively easy to understand, however it fails to take into account the overall effects of the rapidly declining net energy curve that some even describe as a cliff… As you know the average EROEI for all the current energy sources used by all the major geopolitical blocks is falling and falling relatively fast by historical standards. If that average EROEI falls below 20, any complex interdependent society will have to channel a disproportionate proportion of its energy to simply finding more energy and will therefore simply start to desingtegrate…

    Just to illustrate the extent of the problem, the EROEI of US domestic oil sources was of about 100 while the EROEI of today's Canadian tar sands is of about 1.5 and depends on the availability of large natural gas and water resources…

    I would be interested in your related views about the problems and solutions related to the net energy cliff issue.

    Best regards,

    JB

  • Jonatan Bravo

    Dear Jeff,

    Thank you for this interesting comment.

    It is relatively easy to understand, however it fails to take into account the overall effects of the rapidly declining net energy curve that some even describe as a cliff… As you know the average EROEI for all the current energy sources used by all the major geopolitical blocks is falling and falling relatively fast by historical standards. If that average EROEI falls below something like 20, any complex interdependent society will have to channel such a disproportionate proportion of its energy to simply finding more energy that it will likely start to desingtegrate…

    Just to illustrate the extent of the problem, the EROEI of US domestic oil sources was of about 100 in the 1930s while the EROEI of today's Canadian tar sands is of about 1.5 and depends on the availability of large natural gas and water resources… I do not know the average EROEI of deepwater wells but after the BP Macondo debacle and the additional costly security measures that will be mandated, it is likley to significantly be lower than it was… Because of the related potential liability, several deepwater projects are event likely to be cancelled altogether.

    I would be interested in your related views about the problems and solutions related to the net energy cliff issue.

    Best regards,

    JB

  • http://etcgreen.com Steve

    Jeff Rubin should consider hosting a TV Talk show where he attempts to educate the masses. The Daily Show for Energy.

    I find it disturbing that the rest of the planet has been taking steps for decades and the US seems to still be in denial. Clean diesel and high yield feedstock biodiesel can greatly mitigate the impact of the end of the oil age, but the US consumers are slow to change.

    Are you driving your last gasoline powered car? (http://etcgreen.com)

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