Years ago, I looked into shale and found that the amount of “net energy” input to extract and convert shale deposits into oil was very high. The mantra for years has been that, as the price of oil/energy gets high enough, it will become economically feasible to make oil from U.S. (Bakken) shale. But the problem is EROEI – energy return on energy invested. Last I checked, it takes about 1 bbl of oil energy to extract 8 bbls of U.S. crude oil. It takes roughly 1 bbl to produce 4 bbls of Canadian tar sand oil. Shale is a far less efficient process than sand – perhaps approaching 1:3 EROEI. And this, in short, is the theory of peak oil. We’re getting desperate for cost-effective energy.
There will always be billions of bbls of oil out there, but the cost to extract it (relative to supply-demand) will continue to rise, until EROEI approaches 1:1, at which point there will be little use for oil. The “low hanging fruit” (relative to demand) we’ve enjoyed for 100 years is now gone. If regenerative / sustainable energy alternatives are not in place as we approach smaller EROEI fossil ratios, economics and commerce will slow considerably (and perhaps has already). The global economy as we know it relies on cheap energy, yet the cost of that energy is increasing far faster than average inflation (which is troubling since energy is a core % of many inflation indicators). This was / is a central peak oil theory prediction and it seems to be holding true.
There’s an equal if not greater problem – the environmental damage of shale extraction. Canadian tar sand extraction is a terribly dirty process. I’m told that shale extraction is worse.Â When we combine the cost of extraction with the environmental damages, I don’t see where Yergin and Goldman Sachs get their rosy predictions. In the WSJ article, I find at least two glaring misstatements by Yergin. Not surprising, given that he’s one of the oil industry’s highest paid PR gurus.
Anyway, the ever colorful James Kunstler penned a reply to Yergin and Goldman which I want to pass along. Enjoy.