Increased Oil Production Won’t Solve the Energy Crisis

Many of the problems we confront today come from 100 years of fixed capital investment in getting our fuel mostly from one source: petroleum. Where we live and work and how we get between the two places is all based on internal combustion engines burning petrol refined from crude oil.

Yet there are many other uses for oil-plastics for example. If we try to solve the energy problem with increased oil production, we’ll just buy ourselves some more time. But eventually, demand will exceed supply, or prices will rise so high that an economy based on cheap energy will perish from the earth.

There is no single easy alternative to getting fuel from crude oil. We reckon the world needs to spread its bets in a portfolio of energy experiments that not only produce fuel from different sources, but also take advantage of an entirely different energy architecture.

By that we mean a system which produces energy that’s different from the centralised generation and distribution model we use know. For example, if you’re going to run cars on electricity, there are many ways of generating electricity at the household level and not relying on more coal-fired plants. Or maybe you don’t have a system that uses cars. Maybe people live closer to work and drive less.

We won’t go into the gory details. Suffice it to say that sussing out the world’s next energy architecture-and the technologies and companies that will make it work-is what we do more or less full time at the Australian Small Cap Investigator. We think trillions of dollars in new capital investment will be thrown at the energy problem. Much of it won’t produce any new energy, or any returns for investors. But some of it will.

And don’t forget, all hydrocarbons are a form of stored solar power, or solar income as the saying goes. Oil and coal are decayed plant life. Plants get their energy from the sun. The sun shines down on us (or somewhere) all the time. The great energy challenge is to increase our ability to turn sunlight into energy without having to wait millions of years for plant life to turn into black goo.

The efforts to turn Canada’s tar sands and Colorado’s oil shale into energy are really just efforts to speed up what would happen naturally over time. But we don’t have time. So we throw excess energy at the problem, trying to cook shale in situ or use huge quantities of natural gas to increase oil production via the tar sands. We don’t have much excess energy, either.

Both processes use tremendous amounts of energy for a small net energy yield (energy returned on energy invested, or EROEI). Yet free solar income rains down on the planet each day. The sun is eight minute energy! We simply don’t have an industrial system built to run off the modest amounts of energy we can convert from sunlight. We need a new system or a way to convert a higher percentage of sunlight into usable energy.

It’s not the sort of thing you design on your kitchen table. It’s the sort of thing that evolves out of necessity and experimentation. Its evolution obeys the same basic laws that govern the evolution of species…variation, mutation, adaptation. Australia has a wide variety of clever and well managed companies working on different aspects of the problem.

But in the big picture, we think human beings are pretty good at adapting when they have to. The alternative is non-survival, which also goes by the name of death. True, civilisations seem to through a life cycle of their own. And perhaps this oil-based one is past its prime. People are quarrelsome and stupid. We may not adapt our way out of this problem before it overwhelms us. But it would be unnatural not to try.

Dan Denning
Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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5 Comments on "Increased Oil Production Won’t Solve the Energy Crisis"

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I thought we already have a “portfolio” of sources from which to derive energy for productive usage – crude oil, LPG, Natural Gas, Coal etc. There’s also plenty of research going on to (1) reduce emissions and (2) increase efficiency. The problem is scale – any means developed thus far to enhance efficacy is fraught with economic dubiety, cost delinquency and a host of physical impracticalities which nullify feasible implementation. Misconceived biofuels, which reduce the food component of agricultural output, and the ponderous speculation about finding a subterranean domicile for CO2 deposits are exemplary of the fantasies which hang on… Read more »
Very good questions Dan. From my reading of the internet the past 10 years on this issue, there are answers – but time is short to do the big shift. “Who Killed The Electric Car?” is a doco that shows vested interests and inertia in the public and political imagination are our biggest threats. The Australian CSIRO solar research dept has said since the mid 1990s that Australia could power its grid with 50km x 50km of solar-thermal power stations in the desert. The latest technology seems to have reduced the area needed to 30km x 30km even with increased… Read more »

sorry should’ve mentioned geothermal as another backup to a solar world.

Thorium at least is cleaner than Uranium nuclear power.

Some estimates (? accuracy) are that if the world did truly try and run on Uranium based Nuclear power – there’d be Peak Uranium within a decade. But others may know better on that. Still obvious downside risks of the stuff as Iran showing at present.

Hello So what came first greed or power, power greed? I know man, man if e stat ion For each of us, the universe is different. A homeless man may view the universe as unfair, hard and tough. A rich man may view the universe as a lovely place full of luxury and pleasure. Both of them are viewing the same universe, it is just different because of their perceptions of it and their life experiences. This is a fundamental key to understanding, to know that how you perceive the universe is how it is to you. If you feel… Read more »

..running the future on cloned muscle tissue sounds unethical…however , scientists might clone the hind quarters of the tauranosaurus rex and fit them to bicycle-like devices to which an electrical generator might be attached…sort of a “living fossil fuel” and if they break down…they’re edible too….

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