A more careful look at the production of energy, the bloodstream of industrial society, gives a different picture. In the early 1970s, known oil reserves were around 600 billion barrels. Just 40 years later, the amount of oil used had reached 760 billion barrels, while global reserves were estimated at 1.2 trillion barrels. As the demand for oil grew, so too the availability of the resource.
How has this paradox come to be? Through technological advances in discovery, a more effective exploitation of oil fields, the uncovering of new reserves, the exploitation of previously unreachable areas (deep sea, arctic), and the use of unconventional reserves (tar sands). With rising prices, even recovery in remote areas and with demanding techniques is profitable. This is clearly bad news from an ecological standpoint. As we turn further towards unconventional reserves, we increase the energy needed for and emissions produced in extraction, amplifying the destructive effects on sensitive ecosystems. At the same time, higher fuel prices lead us to focus on efficiency improvements, ultimately reducing the oil dependency of our economies. This can be observed clearly in highly developed industrial states: since 2005, we see the uncoupling of economic growth from oil demand.
The energy policy realities of the United States and Europe are drifting apart. The US, decades-long oil junkie, is now a rising petroleum powerhouse. Despite the devastating 2010 Gulf of Mexico oil spill, the administration continues to distribute new licenses for exploration. Simultaneously, the US finds itself in the middle of a natural gas boom. Reserves of shale gas are especially enormous. With the development of fracking technology, exploitation of these fields is finally economically viable.
According to a study from the Harvard Business School, oil production in the US will rise from 8 million barrels per day at present to 11.6 million in the year 2020. If they are right, the US will usurp Russia's second-place position in the ranking of oil producing countries; only Saudi Arabia will surpass US production. As a result, the US will become less dependent upon imports. In 2005, the country imported 60 percent of its oil demand – in 2012, just 42 percent, and falling rapidly.
The Dark Side of the Revolution
Environmentalists are highly critical of fracking; they fear seepage of the chemicals used in extraction, including cancer-causing chemicals such as benzene, into the groundwater supply. Further, given its energy-intensive process and the potential release of methane into the atmosphere, shale gas is hardly a climate change-friendly resource. This is not to mention the massive amounts of water needed for fracking. These concerns could dampen the euphoria over this new gas boom. Water shortages in the Midwest and South are already an acute problem, as last summer's drought clearly illustrated.
In contrast to the overwhelmingly critical public opinion in Europe against fracking, US protests have been local and largely ineffective. The promise of a new oil and gas boom is simply too alluring. The US now produces more natural gas than Russia. The price of gas today is half of what it was in 2004. Currently, large industrial users in the US pay two-thirds less than in Germany; electricity savings are at 40 percent. This increases the attractiveness of the US as an industrial location, especially for energy-intensive branches such as chemical or aluminum production.
In a few years, the US will become a net exporter of natural gas. Once the Panama Canal expansion is complete, the route for LNG tankers to Japan and China is open. Adding Canada to the equation, which appears resolved to exploit its tar sands despite all ecological objections, yields a North America that can provide for its own oil use. That is a geopolitical revolution. Some are calling it a new era of oil abundance, and foresee a loss of power for OPEC.
The other side of this new petro-boom is an increase in costs and risks. The years of cheap oil have passed. Easy and inexpensive reserves are being depleted, and at the same time it becomes more and more expensive to develop new fields. In this way, in contrast to the US, Europe's energy future is less secure. Half of Germany's oil demand is met by North Sea reserves. There, production continues to decrease. Its high point was around 6 million barrels per day in 1999. The prognosis is that this source will sink to only 2 million barrels per day by 2020. Europe will in the future be more dependent upon crisis-ridden oil producing states. No one can predict how stable the Persian Gulf region may be in ten years. But even without a fear of acute energy shortages, there are still plenty of ecological, economic, and political reasons to promote the transition from fossil fuels to renewable energy sources.
Drill, Baby, Drill!
When crude oil becomes more expensive, alternative fuels become more competitive. Here we must include natural gas. Despite an increase in demand of nearly 31 percent over the past decade, the current known reserves lie 60 percent higher than estimates in 1991 – and new gas fields continue to be discovered. In the production of electricity, natural gas has the advantage of expelling just half the carbon dioxide of coal. Gas-fired power plants can be easily combined with renewable energy sources, as their operation can be flexibly controlled. Finally, natural gas can be used as an element of production in the chemical industry or as fuel for vehicles.
The new gas boom does, however, have a dangerous side. The US more than any other country risks falling into a natural gas trap. The current price in the US is so low that efficiency upgrades and renewables threaten to fall entirely by the wayside. The erratic government promotion of renewables only further encourages this debacle. Instead of focusing on efficiency improvements and transitioning to renewables, there is building pressure to simply increase production from gas and oil reserves – perhaps best encapsulated in the Republican Party's 2008 slogan, “Drill, Baby, drill!”
One can only hope that President Obama follows through on his initiatives and in the future promotes ambitious energy and climate policies. Otherwise, the prospects for a global climate treaty are dim. And once again, the US will have missed the chance to put itself at the forefront of the energy revolution, despite possessing all the necessary requirements: hi-tech, venture capital, entrepreneurial spirit, and an abundance of sunshine and wind.
Even as the exhaustion of our oil resources remains out of sight, the end of petroleum's dominance of the worldwide energy supply is already visible. Renewables and gas will increase in importance. In transportation, oil-powered vehicles will be replaced over time by electric-, natural gas-, and second-generation biofuel-powered ones. It will disappear entirely from heating and electricity production. Its use should be reduced to those areas in which the highest value is added and a transition to another fuel source requires a longer timeframe. This is especially necessary for the chemical and pharmaceutical industries.
Much as the end of the Stone Age had little to do with a shortage of stones, the end of the Oil Age will not be precipitated by every oil well running dry. The same has been true of coal, which is still available in large quantities. We'll stop using fossil fuels because in the future we'll have access to environmentally friendlier and cheaper alternatives.
The same goes for other lubricants of the industrial system, even for the so-called rare earth elements that aren't actually rare at all: global reserves are estimated at up to 99 million tons – an abundant supply at a current yearly demand of around 140,000 tons, or even if demand increases. Supply shortages of some of these minerals has nothing to do with their physical abundance, but rather with restrictive Chinese export policies. Beijing controls 95 percent of the current market for rare earth elements, but only owns around one-fourth of all known reserves.
Growing demand and climbing prices will lead to the reactivation of older and the founding of new reclamation industries. At the same time, recycling will increase, as it has with other metals, allowing us to stretch the limits of natural stores. Rather than massive operations shipping European electronic waste to Africa, where it is cannibalized without regard to human or environmental costs, we must find a way to recycle these valuable materials here.
In conclusion, in the immediate future, the critical limits to growth do not lie in the exhaustion of nonrenewable resources, they lie in the burden placed on our central ecosystems: our atmosphere, landmasses, oceans, and freshwater sources. Given the negative effects of climate change on all other essential ecosystems, the most immediate issue is the accumulation of greenhouse gases in the atmosphere.
Accounting for the needs of a growing world population, an exit from our ecological dilemma will not lie in a reduction of production or consumption. Rather than focusing on the growth of the world economy, we must realize the central question of the coming decades is how quickly we can succeed at reducing our carbon outputs. This will require no less than the giant leap from a fossil to a solar civilization, and is based on two central developments. First, we must achieve a systematic increase in our resource efficiency: greater prosperity from fewer inputs, less energy, and decreased space. Second, we must replace coal, oil, and gas with renewables. For this reason, Germany's Energiewende is a pilot project with a worldwide signaling effect. It is damned to succeed – and offers us the opportunity to be at the center of a new industrial revolution.
This article was published on 23.05.2013 in the new edition of the "IP Journal", Journal of the Deutsche Gesellschaft für Auswärtige Politik e.V. (DGAP) / German Council on Foreign Relations.
The article is based on a chapter of Ralf Fücks book, “Intelligent wachsen. Die grüne Revolution,“ recently published by Hanser.