What happens when oil runs out?
The answer: It may not run out as soon as everyone expects; and, by then, the world may need more oil anyhow.
The reason is jet engines cannot fly on coal, and hydrogen-powered aircraft are still years away.
“People are talking about oil prices pushing $100 a barrel, double the current prices,” Stephen J. Reilly, an official with an oil-spill control company based in Connecticut, said.
“It takes only $3 or $4 per barrel to pump the oil from the ground or under the sea in this part of the world.”
Reilly was one of the visitors at the recent Offshore Arabia conference in Dubai.
Prices, he said, depend on supply and demand as well as geopolitics.
While alternative energy sources, such as solar power or hydrogen, have proved their worth, their use is not as pervasive as greens would have it.
He said the shift to alternative energy sources requires a different mindset.
“More Americans are still buying gas guzzling 4x4s. The soccer moms go around in their big suburbans. Detroit is still churning out millions of SUVs.
“According to some industry projections, by the year 2020, the global demand for oil could triple.
“I was in Shanghai a few weeks ago, and cars have replaced bicycles, which were still popular during my last visit two years ago. There’s a similar trend in India,” he said.
Former US President Bill Clinton, in a recent visit to Dubai, said diversifying sources of income in the region “is a special task at a time when the world is switching to alternative sources of energy”.
Marc Faber, an economist who predicted the US stock market crash in 2000, thinks oil prices could hit $100.
Oil prices reached more than $130 in 1936, $80 in the early 1980s, but stayed mostly in the $30 a barrel range at the end of the 1990s.
While science has sought other ways of running engines, hydrogen-powered cars or aircraft are much too expensive compared to their petrol-powered siblings.
More than 200,000 hybrid electric-petrol cars, which run for 60 kilometres a gallon, are sold each year, and 100,000 of these are sold in the United States.
That, however, is a small number considering that Toyota and GM, the world’s top carmakers, roll out more than 2.5 million cars a year.
The Scramjet, which uses hydrogen to propel an object to four or five times the speed of sound, has been proven theoretically possible in recent experiments. To propel a Scramjet to that speed, however, it has to piggy-back on a reconfigured B52 that runs on petroleum.
“There’s no viable substitute for oil right now. The hydrogen fuel economy remains an expensive pipe dream,” Reilly said.
To highlight the importance of oil — or shielding their countries from its shocks — India, China and even Russia — are trying to follow America’s lead.
The United States keeps 700 million barrels of strategic petroleum reserves at any given time — 17 million were used in the 1991 Gulf War and 30 million in 2000.
It is refilled from oil produced in the United States or sourced directly from producers and stored in three heavily guarded underground reservoirs buried in salt shafts. Even that reserve would only last 35 days because the United States consumes 20 million barrels of oil a day, a quarter of the world’s daily consumption.
Reilly said higher oil prices could stunt world economic growth and accelerate the viability of alternative sources of renewable energy, such as solar, wind and hydrogen.
Factors affecting oil prices:
– China and India need more oil in the short and long term. Demand for petroleum is expected to triple by 2020.
- Liquid Natural Gas, an alternative fuel, is cleaner than petroleum and cheaper to recover, but costlier to process.
– If Venezuela sorts itself out, the oil price will go down. Political instability in Iraq is also a factor.
- Russia holds significant oil and gas reserves and big oil companies are investing heavily in its oil sector, but it will take a while for this to have a major impact.
– Prices for the Prius with a 1.5-litre hybrid engine running for more than 25 kilometres per litre (60 miles per gallon) on both electricity and petrol still hovers at about the $22,000 mark, while a hybrid Honda Accord retails for about $30,000.
- Statistics by the Kuwait-based Organisation of Arab Petroleum Exporting Countries (Oapec) showed the Arab region’s recoverable crude oil deposits have increased by 23.5 billion barrels to 654.87 billion barrels at the end of 2003, from 631.3 billion barrels at the end of 1999.
– The revised estimates of oil reserves came even though Arab states have pumped in excess of 36.5 billion barrels during that period, according to the 11-nation Oapec.