Johns Hopkins Bloomberg School of Public Health Overview Peak Oil and Health Conference • Energy, Economy, Development, and Health • Oil – our master resource Energy, the World Economy, • Peak oil is imminent and Peak Oil • Peak Oil’s challenges • Options for response March 12, 2009 • Two Big Problems Stuart Chaitkin • Suggested Next Steps: New Energy Regime Senior Associate, JHSPH 1 2

Energy and Economy Energy, Economy, Development, & Health HDI vs. Energy use per capita, 1999/2000 • Energy use “drives” world economic activity. In modern industrial societies • Economic development generally • Energy is the world’s largest business. requires abundant, inexpensive energy. • But, beyond a certain level, additional energy use per capita tends not to raise • Economies can use energy wisely or poorly. the HDI. – Industrial societies would be wise – U.S.: Energy used per $ of economic activity has to: • conserve energy resources dropped ~ 40% since 1970. Two main reasons: HDI: composite indicator • improve energy efficiency developed by UNDP to • use renewable resources • Shifted from manufacturing to service economy show countries’ relative – Exported manufacturing to places like China, India, Japan For less-developed societies well-being in social as well as economic terms. – “Exported” a lot of energy use • > 1 billion people suffer from energy poverty and the poor health often • Increased end-use energy efficiency of buildings, appliances, associated with that condition. A long and healthy life even cars Access to knowledge • Anticipated economic development is A decent standard of living critically threatened without: – But U.S. energy use (especially of oil) remains quite – available and affordable energy inefficient. resources (particularly oil) 3 HDI = Human Development Index 4 Source: World Energy Assessment, 2004 Update, Part II

Oil = World’s Largest Energy Source Energy and Environment World’s Total Use of • Energy exploration, acquisition, and use is Primary Energy 2006 USA China responsible for the largest portion of Energy Source % Quads environmental insults on the world’s Oil 36.4 % 171.7 40.0 % 18.7 % ecosystems. Fossil Coal 86.3% 27.0 % 127.5 22.5 % 70.5 % • Impacts on all our key resource systems: Natural gas 22.9 % 108.0 22.2 % 2.8 % – Land Hydro 6.3 % – Water Nuclear 5.9 % – Air Renewables 1.6 % – Global climate – And our people TOTAL 100 % 472.3 Q 99.9 Q 73.8 Q Quad : 1 quadrillion Btus

5 Source: EIA, International Energy Statistics 6

1 How does the world use its oil? World Oil Use, by sector, 2006 Oil is a Unique Energy Source Share of Sector World Oil • Energy dense Use Transport 60.5% • Storable Industry 9.5% Non-energy use 16.5% • Transportable Other sectors 13.5% Other sectors includes agriculture, commercial, and residential • Versatile From 1973 to 2006, world oil use grew by 55%. Transport sector use of oil grew by 106%.

Source: IEA, 2008 Key World Energy Statistics 7 8

Oil is Our Master Resource Oil and the World Economy DIRECT USE • Nearly all economic activity depends directly or indirectly on the • dominant fuel of the USE as a FEEDSTOCK availability of oil . to create hundreds of products: – Imagine reverting back to pre-oil energy sources for: transport sector • Manufacturing – gasoline Petrochemicals • Agriculture - plastics • Transportation – diesel - synthetic fibers – Imagine a world without oil-derived plastics, rubber, etc. – jet fuel - synthetic rubbers • July 2008: world oil production set record high: > 86 million barrels a day • space heating - detergents - chemical fertilizers • Oil prices also hit a record high that month: ~ $147/barrel • power factories, Also: • The world probably spent > $330 billion on oil just in that month. industrial processes - lubricants, pesticides, waxes Annual World Payments for Oil - food additives, pharmaceuticals Price of Oil (per barrel) INDIRECT USE - boat resins, ink dyes, perfumes World Oil Use @ $35 @ $50 @ $100 @ $150 to generate electricity - ethylene (film, garbage bags) 85 mbd $ 1.09 trillion $ 1.55 T $ 3.10 T $ 4.65 T Oil is truly fundamental to the world’s economy. [Cheney, 1999] 9 mbd = million barrels per day World GDP ~ $ 55 trillion 10

U.S. Energy Consumption, in quads U.S. Petroleum Consumption by source & sector, 2007 historically, by sector, mbd

Source: Notice the huge growth in oil use in the transport sector. EIA, AER But, what happened in 2008 when oil & gasoline prices spiked and 2007 the financial crisis sent the U.S. economy into a deep recession? Source: EIA, AER 2007 1 quad is a quadrillion (10 15 ) Btus 11 Petroleum demand in the U.S. dropped 6% in 2008 , per API. 12

2 Transport Sector Dominates How Dependent on Oil are the Other U.S. Oil Use Sectors of the U.S. economy? • Oil is also the largest source of energy for the But the 30% of oil used elsewhere is still U.S.’s industrial sector. a large portion of the nation’s energy – Largest oil-consuming industries include: % of U.S. • chemical Oil Use • lumber and wood, paper products • petroleum industry itself Autos 25% Light trucks 18% – Functions for oil in industry include heat, process Transport heat, power, feedstock, and lubrication. 70% sector Heavy trucks 16% Airplanes 6% – Shortages of oil would put pressure on the other fuels that power our industrial sector. Other Transport 5% Everything 30% • Another sector deeply affected: Agriculture else 13 14

Peak Oil is Imminent IEA’s View • World faces continually declining availability of Declining Oil Availability of conventional oil not far in the future. • Average annual observed decline rate worldwide is • International Energy Agency (IEA) warned last currently 6.7% for fields that have passed their November that: production peak. “The world’s energy system is at a crossroads. Current • IEA expects that decline rate to increase to 8.4% global trends in energy supply and consumption are per year in 2030. patently unsustainable – environmentally, economically, socially.” • AEO 2008 Executive Summary ends by saying: – “… it is becoming increasingly apparent that the era “What is need is nothing short of an energy revolution .” of cheap oil is over “ “...the sources of oil to meet rising demand, the cost of – “It is within the power of all governments … to steer producing it and the prices that consumers will need to the world towards a cleaner, cleverer and more pay for it are extremely uncertain , perhaps more than competitive energy system .” ever.” – “… the time to act is now ." Source: IEA Annual Energy Outlook 2008, Executive Summary, p.3, emphasis added 15 Source: IEA AEO 2008 16

The Challenges of Peak Oil So, what are we to do to? Declining Availability Oil shortages Option A. Reduce demand for oil’s services to the economy.

Price increases Option B. Substitute other energy sources for Liquid fuels for oil and its conventional oil. shortages potential substitutes But, are substitutes actually available …

Demand – In a timely manner ? Destruction – At large enough scale ? – At “acceptable” economic cost and environmental harm ?

Economic, Social … to avoid severe economic and societal disruption ? Hardship 17 18

3 Option A. Reduce Demand Option B. Use Substitutes for for Oil’s Services to the Economy Conventional Oil 1) Reduce use of the services that oil provides to the economy • We would need substitutes for each of oil’s versatile uses: – DIRECT USE, INDIRECT USE, FEEDSTOCK USE Direct use – Examples: • transport fuel – huge problem in the U.S. – no quick fix • Drive fewer miles; take fewer flights – gasoline (autos) • Use fewer feedstock products (e.g., plastics, fertilizers, pharmaceuticals) – diesel (trucks) – jet fuel (airplanes) 2) Become more oil-efficient • space heating – relatively small problem in the U.S. – switch to – Use vehicles (cars, planes) that are more fuel-efficient natural gas or electric heating (fueled by?) – Modify industrial processes to be more oil-efficient • powering factories – switch to natural gas or coal ? Not good. But, can we change quickly enough? NOT LIKELY Indirect use – Inertial forces are strong • to generate electricity – not really an issue in the U.S. – Long lead times are needed to replace equipment As a feedstock – Major expenditures and investments are needed • for hundreds of products – what are those substitutes? The current destruction of demand for oil around the world Note – due largely to the intense financial and credit crisis – is not • Easy, cost-effective substitutions have already been made. a healthy model for how we ought to adjust to the expected • Electricity can’t replace oil for all of its uses. reductions in oil availability that peak oil will bring upon us. 19 20

Which Resources Won’t (Easily, Quickly, Cleanly, or Cheaply) The End of Cheap Oil Replace Conventional Oil? “… it is pretty clear that there is not much chance of finding any significant quantity of new cheap oil .” As a LIQUID fuel As non-liquid ENERGY • Coal Unconventional Oil is Not Cheap • Unconventional oil – tar sands (oil sands) • Natural gas “Any new or unconventional oil is going to be expensive .” – oil shale • Nuclear Lord Ron Oxburgh, Former Chairman, Shell • Coal-to-oil • Renewables • Natural gas-to-oil

Source: Forward to “The Oil Crunch, Securing the UK’s Energy Future” • Biofuels First report of the UK Industry Taskforce on Peak Oil & Energy Security, 2008. 21 22

Criteria for Sustainable Difficulties with Oil Substitutes Substitute Energy Fuels FIVE CRITERIA FOR SUSTAINABLE ENERGY SOURCES Possible Oil renewable scalable high transportable, storable, ecologically • renewable Substitutes EROEI energy-dense sane • transportable, storable, energy-dense Tar/oil sands, No At great No Yes No oil shale expense • high energy returned on energy invested Coal No No medium Yes No (EROEI) I’m re-defining and expanding Coal-to- No Maybe, No Yes No liquids at great • scalable the characteristics of energy that expense Aric McBay, in “Peak Oil Survival,” Natural gas No No medium Yes Not quite • ecologically sane had described as being necessary Gas-to-liquids No No No Yes No – SO , NO , CO , water, land to “maintain industrial society.” 2 x 2 Biofuels Some Not yet medium Yes Maybe Other Possible Criteria Nuclear Maybe At great medium Makes electricity; not Not really • Reasonably affordable expense easily storable Renewables Yes Not yet No Make electricity, not Yes • Minimal security risks easily storable • Investor-friendly 23 There are “no silver bullets” that can substitute for oil. 24

4 We Have Two Big Problems Worldwide Economic Effects As oil shortages develop, we would want to: of Peak Oil • Use substitutes for oil to replace the energy services that the world economy has been getting from the oil it depends on so much. The Hirsch report prepared for the U.S. • Replace the energy services that those substitutes for oil were Department of Energy in 2005 concluded: providing before they were used to replace the energy services that the world has been getting from the oil it depends on so much. “The long-run impact of sustained, significantly increased oil prices associated with oil peaking will be severe . Virtually certain are World Energy Use increases in inflation and unemployment, declines in the output of goods and services, and a degradation of living standards. Unconventional Oil, “New” oil and/or energy Other Fossil Fuels, Without timely mitigation , the long-run impact on the developed replacements Nuclear, Renewables economies will almost certainly be extremely damaging , while many Some Existing developing nations will likely be even worse off .” Potential Oil Replacements Oil we depend on Peaking of World Oil Production: Impacts, Mitigation, & Risk Management, 25 Robert L. Hirsch, SAIC, p.30. [Emphasis added.] 26

Suggested Next Steps: Energy Revolution • End denial Big as our current economic problems are, – acknowledge that peak oil is coming peak oil means a very high probability of – and is likely to impose severe impacts on the world’s economic activity. worse problems to come . • Borrowing from Heinberg, we should: – Begin a massive (not a modest) shift to a new renewable energy-based regime “The Oil Crunch, Securing the UK’s Energy Future” – Retrofit fundamental elements of our economic system to First report of the UK Industry Taskforce match that new energy regime: on Peak Oil & Energy Security, p.5. 2008 (Emphasis added) • Transport system ● Agriculture/food system

• Electricity system ● Buildings • In the meantime: – Start planning seriously for oil shortages – Establish protocols (other than price) for rationing oil to critical sectors. 27 • Is our future: ENERGY REVOLUTION or CHAOS ? 28

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