Chemical engineers long ago figured out how to convert natural gas into liquid fuel (see “Miles of Methane,” page 86), but the process was never cost-effective. “The Nazis did it in the final days of World War II because they had to,” says Anderson. The South Africans followed suit during the international boycott through the apartheid years. “No one would sell them any oil,” he notes. “They had to figure out how to make it themselves.” There was one significant drawback, however: the exorbitant cost. Twenty years ago, a natural gas plant that produced 100,000 barrels of liquid fuel per day would have cost about $100 billion to build, says Anderson. But now that companies are doing it on a large scale and with better technology, the cost of building a natural gas plant has come way, way down. Today a natural gas plant can be constructed for as little as $10 billion, bringing the total expense of producing a barrel of fuel from natural gas down to under $20.
“That will effectively put a ceiling on the price that anyone can charge for a barrel of oil—which is something that has never existed in history,” says Anderson. “The moment anyone tries to charge above that amount, people will switch to fuels derived from natural gas.”
By most estimates, there’s enough natural gas to produce about 1.6 trillion barrels of oil. Most of that gas probably will not be converted to oil. Still, the figure offers a hint at the extent of the world’s reserves: more than all the petroleum ever consumed—roughly 830 billion barrels—and enough to fuel the world for some 60 years at current rates of consumption. And there may be far more. John Edwards, a former Shell geologist and now an adjunct geology professor at the University of Colorado, believes that underwater deposits of another form of natural gas could raise the total to 5 trillion barrels.
In many parts of the world, the seafloor contains natural gas trapped inside ice crystals called hydrates. The hydrates can be extracted by lowering a pipe into the ground and drawing up a core of mud and crystals. The problem is that unless the core is properly contained, the change in pressure and temperature at the surface can cause it to explode, says Edwards. But that isn’t stopping the Japanese, who plan to drill and see if it is feasible to extract the fuel. The payoff could be huge. “There’s at least again as much natural gas trapped in hydrates as has already been discovered, and probably more,” he says.
When and if supplies of natural gas begin to run out, the oil companies will focus on squeezing usable fuels out of even more difficult prospects. Already, the Canadians are starting to mine the tar sands of Alberta, where an estimated 300 billion barrels of oil are trapped. And Venezuelans are beginning to excavate the solid tarry deposits of the Oronoco sludge belt, which contains as much as 1 trillion barrels of oil. If those supplies run out, there’s always coal—the most abundant and environmentally damaging of all fuels. Ninety percent of the world’s fossil fuels are contained in these remnants of swamps. Tapping it and converting it to liquid fuels (a process nobody has fully mastered yet) could yield a supply lasting a millennium.
This parade of unending innovation makes any worries about impending oil shortages sound unduly pessimistic. Still, not everyone is buying the idea. Among the doubters is oil geologist Colin Campbell, a consultant with Geneva-based Petroconsultant and the author of The Coming Oil Crisis. Sure, we can figure out new ways to extract oil and other fuels, argues Campbell, but the payoff for such technology is a long way off. As he sees it, the age of oil abundance may soon come to a close.
“I’ve traveled the world over in my career to study oil fields, and it’s the limits that strike you wherever you go,” he says. “At each oil field it’s the same story again and again. The oil runs out.” Oil wells churn out black gold according to a rough bell curve, with production rising during the first half of the well’s 30-year life span, then sliding back to zero during the second half. Already, the massive oil discoveries of the 1970s—from Alaska to the North Sea—are nearing their crest of production. Worse still, he argues, the number of oil finds peaked in the 1960s. Today, one new barrel of oil is found for every four produced. “By now, the whole world has been thoroughly explored so it has become clear that no new provinces comparable with the North Sea and Alaska await discovery,” he says, except the Caspian Sea. Within four years, he believes, the world’s entire oil production will peak and then decline, resulting in local shortages.
At that point, boosting production among the countries in the Middle East can fill the gap—leaving the world vulnerable once more to an oil embargo. This spring, Saudi Arabia, Iran, Mexico, Algeria, and Norway banded together to shore up prices by slight cuts in oil production. Campbell argues that these countries could eventually gain a greater control of the market and impose whatever price they please. “I picture an oil price shock within a couple of years,” says Campbell. “It seems a strange thing to say when today’s oil prices have never been lower. But they could easily double.”
Campbell’s predictions may be gloomier than most, but even those who believe that oil will remain abundant foresee a different doomsday. An oil-devouring economy has not been good for the planet. The so-called greenhouse gases—mainly water vapor and carbon dioxide—make the planet warm and habitable by trapping solar heat as it radiates back off the Earth. When humans burn hydrocarbons, or fossil fuels, the carbon reacts with oxygen. The result: more heat-trapping carbon dioxide in the air. Since the beginning of industrialization around 1850, the levels of carbon dioxide have increased from 280 parts per million to about 365 today, says Pieter Tans, of the National Oceanic and Atmospheric Administration. No one can precisely predict the effects of this addition to the atmosphere, but global warming, rising sea levels and changing climates are among the troubling possibilities. As more fuels are burned, the problem may become more obvious. And if all our oil, natural gas, and coal resources are burned, “that could raise CO2 levels by a factor of ten,” says Tans. “We sure wouldn’t be arguing about subtleties at that point.”
Environmentalists once hoped for oil shortages to cut carbon dioxide emissions, but that no longer seems likely. Only voluntary restrictions or, more likely, taxes on fossil-fuel consumption and incentives for developing alternative fuels will reduce emissions. The 1997 Kyoto Conference—a world meeting on fossil-fuel use—produced an agreement by a handful of highly industrialized countries to reduce carbon emissions to 1990 levels by 2010. What it did not produce was how exactly this was to be achieved. Of course, some see encouraging growth in renewable energy sources such as solar, wind, and even geothermal power. And if oil prices start to rise, these alternatives could eventually become competitive with conventional energy sources. But with the price of oil dropping—by an average of 2 percent a year since the peak in 1980— “that could push off the date for economic feasibility by as much as 25 years,” says Lynch.
Indeed, the perfect solution already exists: a carbon-free fuel cell that strips combustible hydrogen from a molecule like water or alcohol and yields only water when it is burned. But the cost of the technology remains prohibitive. And in a world swimming in oil, few companies and governments bother to spend big on alternative fuel technologies. Even if they did, the addiction to cheap oil would most likely persist.
“We could make the switch in fuels quite easily, but the switch in infrastructure would be far more difficult,” says Edwards. The world is wired for oil. “We’ve got hundreds of thousands of petrol stations around the world. The switch, when it comes, is going to be slow. And it’s sure not going to be voluntary.” With fossil-fuel consumption projected to grow, and grow, and grow, the question isn’t when are we going to run out of oil, says Arthur T. Andersen, a former director of the division of energy and international analysis at the U.S. Department of Energy. “It’s what are we going to do about the greenhouse effect?”
In light of this, the gravest prediction yet regarding the future of oil may not be its impending shortfall but its unimaginable bounty.