Profit from the peak

PROFIT FROM THE PEAK The End of Oil and the Greatest Investment Event of the Century BRIAN HICKS CHRIS NELDER John Wiley & Sons, Inc ffirs.indd iii 3/20/08 1:51:34 PM ffirs.indd ii 3/20/08 1:51:34 PM PROFIT FROM THE PEAK ffirs.indd i 3/20/08 1:51:33 PM ffirs.indd ii 3/20/08 1:51:34 PM PROFIT FROM THE PEAK The End of Oil and the Greatest Investment Event of the Century BRIAN HICKS CHRIS NELDER John Wiley & Sons, Inc ffirs.indd iii 3/20/08 1:51:34 PM Copyright © 2008 by Angel Publishing, LLC All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic formats For more information about Wiley products, visit our Web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Hicks, Brian, 1968– Profit from the peak: the end of oil and the greatest investment event of the century / by Brian Hicks and Chris Nelder p cm Includes index ISBN 978-0-470-12736-0 (cloth) Petroleum industry and trade Energy industries Commodity futures I Nelder, Chris, 1964– II Title HD9560.5.H47 2008 333.8'23—dc22 2007047638 Printed in the United States of America 10 ffirs.indd iv 3/20/08 1:51:34 PM CONTENTS List of Figures ix List of Tables xii Acknowledgments Introduction xiii xv PART I THE CRISIS IN A BARREL CHAPTER 1: DECEMBER 2005: THE MONTH THE DEVIL WEPT HIS TRILLIONTH TEAR CHAPTER 2: WHAT IS PEAK OIL? What Is Oil? Hubbert’s Peak Types of Oil Refining Oil Prices Reserves Revisions Importance of Giant Oil Fields When Is the Peak? Exports Reserve Replacement and Deepwater Drilling Differing Projections Drilling Like Never Before Infrastructure Issues The Bottom Line on Peak Oil The Hard Truth 7 10 12 15 16 16 22 25 31 35 36 42 44 46 51 v ftoc.indd v 3/20/08 2:55:16 PM vi Contents CHAPTER 3: WANTED: FIVE NEW SAUDI ARABIAS Global Demand and Population China and India Making up for Depletion U.S Dependence Investment Opportunities 53 54 58 62 63 67 CHAPTER 4: $480 A BARREL: THE TRUE VALUE OF OIL Cheaper than Water Draining the National Coffers The True Cost of Oil Government Subsidies Environmental Costs Climate Change Cost Natural Capital Costs 71 71 72 73 74 75 76 76 CHAPTER 5: THE PENTAGON PREPARES FOR PEAK OIL Reduce Dependence on Oil Reduce CO2 Emissions Staunch the Bleeding Invest Heavily in Renewables Policy Recommendations Solar for China? 79 80 85 88 89 90 91 PART II MAKING MONEY FROM THE FOSSIL FUELS THAT ARE LEFT CHAPTER 6: TWILIGHT FOR FOSSIL FUELS Natural Gas Coal Diminishing Returns and Receding Horizons Energy Return on Investment Global Warming ftoc.indd vi 95 96 111 119 122 123 3/20/08 2:55:16 PM Contents CHAPTER 7: TAR SANDS: THE OIL JUNKIE’S LAST FIX Tar Sands Oil Shale vii 125 125 131 PART III ENERGY AFTER OIL ftoc.indd vii CHAPTER 8: THE RENEWABLE REVOLUTION Oil and Gas Executives Want Renewables World Bank Financing Biofuels 137 139 140 141 CHAPTER 9: ENDLESS ENERGY: HERE COMES THE SUN A Short History of Solar Technologies The Sky’s the Limit Photovoltaics Takes Center Stage Grassroots Momentum Investment Opportunities 153 154 155 156 160 161 CHAPTER 10: PRESSURE COOKER: TAPPING THE EARTH’S HEAT What Is Geothermal Power? Benefits of Geothermal Power Explosive Growth Investment Opportunities 165 166 169 169 171 CHAPTER 11: NUCLEAR’S SECOND ACT Nuclear Potential China and Nuclear Power Limits to Nuclear Power Investment Opportunities 175 176 177 178 183 CHAPTER 12: WHAT’S NEEDED: A MANHATTAN PROJECT FOR ENERGY The Importance of Timely Response Apollo Alliance 187 188 192 3/20/08 2:55:17 PM 272 Notes 22 U.S Geothermal, “Consolidated Financial Statements,” March 31, 2007, www.usgeothermal com/FinancialReports/YE03312007.pdf Chapter 11 Nuclear’s Second Act Australia Uranium Association, “What is Uranium?” http://www.uic.com.au/uran.htm World Nuclear Association, “Advanced Nuclear Power Reactors,” February 2008, http://www world-nuclear.org/info/inf08.html Thomas B Cochran, Christopher E Paine, Geoffrey Fettus, Robert S Norris, and Matthew G McKinzie, “Position Paper: Commercial Nuclear Power,” Natural Resources Defense Council, www.nrdc.org/nuclear/power/power.pdf Australian Uranium Association, “Nuclear Power Reactors,” May 2007, www.uic.com.au/nip64 htm Australian Uranium Association, “Nuclear Power in the World Today,” www.uic.com.au/nip07 htm Ibid Energy Information Administration, “U.S Nuclear Generation of Electricity,” www.eia.doe.gov/ cneaf/nuclear/page/nuc_generation/gensum.html Data source: EIA, 2006, www.eia.doe.gov/oiaf/aeo/excel/aeotab_1.xls Greg Walker, “Peak Oil Requires New Thinking for a New Age,” PR-inside, May 28, 2007, www.pr-inside.com/peak-oil-requires-new-thinking-for-r136542.htm 10 Energy Information Administration, “International Energy Outlook 2007,” 2007, www.eia.doe gov/oiaf/ieo/pdf/electricity.pdf 11 Ariana Eunjung Cha, “China Embraces Nuclear Future,” Washington Post, May 29, 2007, www washingtonpost.com/wp-dyn/content/article/2007/05/28/AR2007052801051_pf.html 12 Council on Foreign Relations, “Prepared Statement before the Select Committee on Energy Independence and Global Warming U.S House of Representatives,” April 18, 2007, www.cfr.org/ publication/13128/ 13 Ibid 14 John Vidal, “Nuclear Expansion Is a Pipe Dream, Says Report,” Guardian Unlimited, July 4, 2007, http://business.guardian.co.uk/story/0,,2117711,00.html 15 Star Phoenix, “Nuclear Demand Will Outstrip Supply: CEO,” June 30, 2007, www.canada.com/ saskatoonstarphoenix/news/business/story.html?id=a96783d2-7976-43f4-9879-c3ae3262677c 16 Jan Willem Storm van Leeuwen and Philip Smith, “Can Nuclear Power Provide Energy for the Future; Would It Solve the CO2-Emission Problem?” Great Change, June 16, 2002, http:// greatchange.org/bb-thermochemical-nuclear_sustainability_rev.html 17 Jan Willem Storm van Leeuwen, “Energy Security and Uranium Reserves,” Oxford Research Group, July 2006, www.oxfordresearchgroup.org.uk/publications/briefing_papers/energyfact sheet4.php 18 Ibid 19 John Vidal, “Nuclear Expansion Is a Pipe Dream, Says Report,” Guardian Unlimited, July 4, 2007, http://business.guardian.co.uk/story/0,,2117711,00.html 20 Energy Watch Group, “Uranium Resources and Nuclear Energy,” December 2006, www.lbst.de/ publications/studies_e/2006/EWG-paper_1-06_Uranium-Resources-Nuclear-Energy_ 03DEC2006.pdf 21 Ibid bnotes.indd 272 3/20/08 2:54:26 PM Notes 273 22 23 24 25 26 Ibid Ibid van Leeuwen, “Energy Security.” Vidal, “Nuclear Expansion.” Keith Kohl, “Uranium in 2008: $255/lb Is Just the Beginning,” Energy and Capital, June 19, 2007, www.energyandcapital.com/articles/uranium-investing-nuclear+power/453 27 “USEC Inc USU (NYSE),” Reuters, http://stocks.us.reuters.com/stocks/fullDescription asp?rpc=66&symbol=USU Chapter 12 What’s Needed: A Manhattan Project for Energy European Commission, “European Smart Grids Technology Platform,” www.smartgrids.eu/ documents/vision.pdf Council on Foreign Relations, “Prepared Statement before the Select Committee on Energy Independence and Global Warming, U.S House of Representatives,” www.cfr.org/publication/ 13128/ Robert Hirsch and Roger Bezdek, “Peaking of World Oil Production Impacts, Mitigation, & Risk Management,” February 2005, www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL pdf The Oil Drum, “Updated World Oil Forecasts, Including Saudi Arabia,” August 5, 2007, www theoildrum.com/node/2716#more Apollo Alliance, “The Apollo Alliance for Good Jobs and Clean Energy,” Copyright 2003, www apolloalliance.org/about_the_alliance/ Apollo Alliance, “The Ten-Point Plan for Good Jobs and Energy Independence,” Copyright 2003, www.apolloalliance.org/strategy_center/ten_point_plan.cfm Western Climate Initiative Scope Subcommittee, “Summary of Major Design Options Under Consideration,” March 3, 2008, http://www.westernclimateinitiative.org/ewebeditpro/items/ O104F15977.PDF A Denny Ellerman and Barbara K Buchner, “The European Union Emissions Trading Scheme: Origins, Allocation, and Early Results,” Oxford Journals, Oxford University Press, Review of Environmental Economics and Policy 2007 1(1):66–87; doi:10.1093/reep/ rem003, http://reep.oxfordjournals.org/cgi/content/abstract/1/1/66 “Australia to launch carbon trading scheme by 2012,” Reuters, June 3, 2007, http://www.reuters.com/article/environmentNews/ idUSSYD 26700820070603 Carbon Tax Center, “Tax vs Cap-and-Trade,” September 20, 2007, www.carbontax.org/issues/ carbon-taxes-vs-cap-and-trade/ “Hubbard Argues for a Carbon Tax,” Wall Street Journal, June 28, 2007, http://blogs.wsj.com/ energy/2007/06/28/hubbard-argues-for-a-carbon-tax/ 10 Peerless Mfr Co corporate profile, http://phx.corporate-ir.net/phoenix.zhtml?c=117637&p=irolhomeProfile 11 James Kanter, “In London’s Financial World, Carbon Trading Is the New Big Thing,” New York Times, July 6, 2007, http://select.nytimes.com/gst/abstract.html?res=F20E1EF6395A0C758CDD AE0894DF404482 12 Bill Prindle, Maggie Eldridge, Mike Eckhardt, and Alyssa Frederick, “The Twin Pillars of Sustainable Energy: Synergies Between Energy Efficiency and Renewable Energy Technology and Policy,” American Council for an Energy-Efficient Economy, May 2007, http://aceee.org/pubs/ e074.htm bnotes.indd 273 3/20/08 2:54:26 PM 274 Notes 13 EnerNOC, Inc., “Customer Solutions,” www.enernoc.com/solutions.html 14 Lester R Brown, “Ban the Bulb: Worldwide Shift from Incandescents to Compact Fluorescents Could Close 270 Coal-Fired Plants,” Earth Policy Institute, May 9, 2007, www.earth-policy.org/ Updates/2007/Update66.htm 15 Richard Heinberg, The Oil Depletion Protocol (n.p.: New Society Publishers, 2006), 78 16 Richard Heinberg, Powerdown, (n.p.: New Society Publishers, 2004), jacket copy 17 Transportation Energy Data Book: Edition 26—2007, http://cta.ornl.gov/data/tedb26/Edition26_ Chapter02.pdf 18 Copulos, “Averting Disaster of Our Own Design.” 19 Consortium for Electric Reliability Technology Solutions, “Integration of Distributed Energy Resources: The CERTS MicroGrid Concept,” April 2002, www.localenergy.org/pdfs/Document% 20Library/Microgrids.pdf 20 International Energy Agency District Heating and Cooling, “A Comparison of distributed CHP/ DH with large-scale CHP/DH,” www.iea-dhc.org/010601.html 21 Ibid 22 U.S.-Canada Power System Outage Task Force, “Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations,” April 2004, https://reports energy.gov/B-F-Web-Part1.pdf Parks, Bill, 2003, “Transforming the Grid to Revolutionize Electric Power in North America,” U.S Department of Energy, Edison Electric Institute’s Fall 2003 Transmission, Distribution and Metering Conference, October 13, 2003 23 U.S Climate Change Technology Program—Technology Options for the Near and Long Term, “1.3.2 Transmission and Distribution Technologies,” November 2003, http://climatetechnology gov/library/2003/tech-options/tech-options-1-3-2.pdf 24 North American Windpower, “A Study of Wind Power Storage in Ireland,” June 2007 25 GE 2006 Ecomagination Report, “Delivering on ecomagination,” http://ge.ecomagination.com/ site/downloads/news/2006ecoreport.pdf 26 Dave Rutledge, “Hubbert’s Peak, the Coal Question, and Climate Change,” www.its.caltech edu/~rutledge/Hubbert’s%20Peak,%20The%20Question%20of%20Coal,%20and%20Climate% 20Change.ppt 27 Ibid 28 AWEA Third Quarter Market Report, November 2007, American Wind Energy Association, http://www.awea.org/Projects/PDF/3Q_Market_Report_Nov2007.pdf 29 U.S Department of Energy, “U.S Continues to Lead the World in Wind Power Growth,” May 31, 2007, www.energy.gov/news/5091.htm 30 AWEA 2007 Market Report, January 2008, American Wind Energy Association http://www awea.org/projects/pdf/Market_Report_Jan08.pdf 31 “Wind Power Beat Nuclear, Says AD,” Dutch News, July 12, 2007, www.dutchnews.nl/news/ archives/2007/07/wind_power_beats_nuclear_says.php 32 GE Energy press release, “U.S Wind Industry Milestone: GE Ships 1,000th-Megawatt Wind Turbine for FPL Energy,” June 4, 2007, www.gepower.com/about/press/en/2007_press/060407.htm 33 Keith Johnson, “Turbine Shortage Knocks Wind out of Projects,” Post and Courier Charleston, from the Wall Street Journal, July 15, 2007, www.charleston.net/news/2007/jul/15/turbine_ shortage_knocks_wind_out_projects/ 34 Ibid bnotes.indd 274 3/20/08 2:54:27 PM Notes 275 35 Zoltek 2007 Annual Report, http://ir.zoltek.com/common/download/download.cfm?companyid= ZOLT&fileid=154939&filekey=2874687A-D883-448A-BE9C-8778C35CEEA9&filename=Zolt ek-AR-2007_Final.pdf 36 Reuters, “Zoltek reports new expanded carbon fiber supply agreement with Vestas Wind Systems,” May 22, 2007, http://www.reuters.com/article/inPlayBriefing/idUSIN20070522163346 ZOLT20070522 37 Vestas Annual Report 2007, http://www.vestas.com/Admin/Public/DWSDownload.aspx?File= Files%2fFiler%2fEN%2fInvestor%2fFinancial_reports%2f2007%2f2007-AR-UK.pdf 38 Acciona press release, www.acciona-energia.com/cambioIdioma.asp 39 Mitsubishi Heavy Industries, Ltd News,“MHI Receives Massive Wind Turbine Orders from U.S., Almost Equal to Japan’s Domestic Wind Power Generation Capacity,” May 30, 2007, www mhi-ir.jp/english/new/sec1/200705301176.html 40 Suzlon press release, “Suzlon Secures Single-Largest Order,” May 2, 2007, www.suzlon.com/ images/you/Suzlon%20PPM%20400MW%20Order%20Release%20R2.pdf 41 U.S Department of Energy press release, “DOE Releases First Annual Report on U.S Wind Power Market,” May 31, 2007, http://www1.eere.energy.gov/femp/newsevents/release.cfm? news_id=11003 42 Eric Scigliano, “Wave Energy,” Discover, December 2, 2005, www.discover.com/issues/dec-05/ features/ocean-energy/ 43 Scigliano, “Wave Energy.” 44 Wayt W Gibbs, “Plan B for Energy.” Scientific American 295, no (2006), 112 45 U.S Department of Energy, EERE Network News, “FERC Aims to Simplify Licensing for Wave and Tidal Pilot Projects,” July 25, 2007, http://www.eere.energy.gov/news/news_detail.cfm/ news_id=11125 46 Adam Hochberg, “Power Turbines Will Rely on Tidal Forces,” NPR, October 19, 2006, www npr.org/templates/story/story.php?storyId=6344642 Heather Timmons, “Energy from the Restless Sea,” New York Times, August 3, 2006, www.nytimes.com/2006/08/03/business/ worldbusiness/03tides.html?ex=1312257600&en=a0172afbc7c00d14&ei=5088&partner=rssnyt &emc=rss 47 Phillip Matier and Andrew Ross, “Mayor ’s Current Idea: Catch a Wave to Make Power,” San Francisco Chronicle, June 25, 2006, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/06/25/ BAGATJK5D51.DTL 48 U.S Department of Energy, EERE Network News, “FERC Aims to Simplify Licensing for Wave and Tidal Pilot Projects,” July 25, 2007, http://www.eere.energy.gov/news/news_detail.cfm/ news_id=11125 49 Peak Energy blog, “Tapping The Source: The Power Of The Oceans,” February 25, 2008, http:// peakenergy.blogspot.com/2008/02/tapping-source-power-of-oceans.html 50 “The new wave: Energy from the ocean,” International Herald Tribune, August 2, 2006 http:// www.iht.com/articles/2006/08/02/business/tides.php 51 “Energy from the Restless Sea,” New York Times, August 3, 2006, http://www.nytimes com/2006/08/03/business/worldbusiness/03tides.html?ei=5088&en=a0172afbc7c00d14&ex= 1312257600 52 Gibbs, “Plan B,” 112 53 Ibid 54 Power Projects Limited, “Wave Energy Technology the WET-NZ Programme,” June 2006, www wavenergy.co.nz/wetnz-2006-06.pdf bnotes.indd 275 3/20/08 2:54:27 PM 276 Notes 55 Scottish Government, “Progress on Wave Power Development,” August 30, 2006, www.scotland gov.uk/News/Releases/2006/08/30103302 56 E.ON UK press release, “E.ON UK and Ocean Prospect Look to Plug in to One of the World’s First Large-Scale Wave Energy Farms,” September 13, 2006, www.oceanpd.com/docs/ Eon%20PR.pdf 57 “Scotland Vows Support for Wave Power,” Environmental Data Interactive Exchange (EDIE), August 30, 2006, www.edie.net/news/news_story.asp?id=11937&channel=0 58 WELL’s Guidance Documents are available here: www.willitseconomiclocalization.org/ GuidanceDocs 59 This data is a typical calculation, taken from this essay: PR-inside,“Peak Oil Requires New Thinking for a New Age,” May 28, 2007, www.pr-inside.com/peak-oil-requires-new-thinkingfor-r136542.htm Other calculations based on other assumptions have produced losses as low as 10% and as high as 90% 60 Ibid 61 Matt Savinar interview in the documentary film, A Crude Awakening Chapter 13 A Future Electric Robert Rapier, “The Future Is Solar,” The Oil Drum, July 27, 2007, www.theoildrum.com/ node/2812 Angela Greiling Keane, “Union Pacific, Icahn Win as Soaring Oil Lifts Rails,” Bloomberg, June 21, 2007, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=af4K2vSsWVNk Lupe C Valdez, “SCAG’s Goods Movement Task Force,” March 15, 2006, www.scag.ca.gov/ goodsmove/pdf/gmtf031506_UnionPacificPresentation.pdf Alan S Drake, “Electrification of Transportation as a Response to Peaking of World Oil Production,” Light Rail Now, December 2005, www.lightrailnow.org/features/f_lrt_2005-02.htm Robert Malone, “Railroads Can Move Forward,” Forbes, May 5, 2006, www.forbes com/2006/05/04/railroads-intermodal-shipping-cx_rm_0505rail.html “The World’s Billionaires, #2 Warren Buffett,” Forbes, March 8, 2007, www.forbes.com/lists/ 2007/10/07billionaires_Warren-Buffett_C0R3.html “Warren Buffett Bought Two Other Rail Companies,” Guru Focus, April 9, 2007, www.gurufocus com/news.php?id=5263 “The World’s Richest People,” Forbes, www.forbes.com/lists/2006/10/Name_13.html Angela Greiling Keane, “Union Pacific, Icahn Win as Soaring Oil Lifts Rails,” Bloomberg, June 21, 2007, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=af4K2vSsWVNk 10 “The Two Other Rail Companies Warren Buffett Bought: Norfolk Southern Corp (NSC) and Union Pacific Corp (UNP),” Guru Focus, March 15, 2007, www.gurufocus.com/news php?id=5851 11 Alan S Drake, “Electrification of Transportation as a Response to Peaking of World Oil Production,” Light Rail Now, December 2005, www.lightrailnow.org/features/f_lrt_2005-02.htm 12 PR-inside,“Peak Oil Requires New Thinking for a New Age,” May 28, 2007, www.pr-inside com/peak-oil-requires-new-thinking-for-r136542.htm 13 Comment from Alan Drake on The Oil Drum, www.theoildrum.com/node/3152#comment255805 14 CityData.com, “Top 100 Biggest Cities,” www.city-data.com/top1.html bnotes.indd 276 3/20/08 2:54:27 PM Notes 277 15 Dylan Rivera, “Adams Sees Web of Streetcars,” The Oregonian, July 21, 2007, www.oregonlive com/business/oregonian/index.ssf?/base/business/118498652393360.xml&coll=7 www.pr-inside com/peak-oil-requires-new-thinking-for-r136542.htm 16 PR-inside, “Peak Oil.” 17 A123 Systems, “Plug-In PHEV Benefits,” Copyright 2007, www.a123systems.com/newsite/ index.php#/applications/phev/pchart6/ 18 David Roberts, “New Study Finds That Plug-In Hybrids Rule All Possible Futures,” Gristmill, July 20, 2007, http://gristmill.grist.org/story/2007/7/20/111715/427 19 Technically, it should be possible to use electricity to derive hydrogen from water, and reform it into syngas and then into a liquid hydrocarbon fuel But the EROI would be atrocious Epilogue Why We’re Energy Optimists Carl Mortished, “Energy Crisis Cannot be Solved by Renewables, Oil Chiefs Say,” Times Online, June 25, 2007, http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/ article1980407.ece Council on Foreign Relations, “National Security Consequences of U.S Oil Dependency,” www cfr.org/publication/11683/ “Jevons Paradox,” Encyclopedia of Earth, Horace Herring, ed by Cutler Cleveland, October 8, 2006 www.eoearth.org/article/Jevons_paradox bnotes.indd 277 3/20/08 2:54:28 PM bnotes.indd 278 3/20/08 2:54:28 PM INDEX Abiotic oil, 10 Abu Dhabi, 18 Acciona Windpower, 213 Africa, 35–36 Air pollution, 60–61, 232 Akeena Solar, Inc., 162 Alaska, 102, 105, 110 Alcohol, 144 Aleklett, Kjell, 127, 128–129 Algae, 142–143 Alga Technologies, 142–143 Allegro Biodiesel Corp., 143 Alternative energy, 135 American Council for an Energy-Efficient Economy (ACEEE), 198 American Council on Renewable Energy (ACORE), 198 American Petroleum Institute (API) Scale, 14 American Wind Energy Association, 211 Amtech Systems, 161 Andersons, The, 151 Angola, 27, 40 AOSP See Athabasca Oil Sands Project (AOSP) Apollo Alliance, 192–193 Appliances, energy-efficient, 192 Applied Materials, 158 Arch Coal, 118 Archer Daniels Midland Company, 151 Arctic, 102 Arise Technologies, 159–160 Association for the Study of Peak Oil and Gas (ASPO), 4, 201 Athabasca Oil Sands Project (AOSP), 128, 130 Australia, 200 Automobile industry, 61, 90, 192, 220, 231–232 Aventine Renewable Energy, 151 Baker Hughes Inc., 69 Bakhtiari, Ali Samsam, 29–30 Ballard Power Systems Inc., 222–223 Bartlett, Albert, 56–57 Battery technology, 91, 204, 231 Beacon Technologies, 207–208 Best-of-breed technologies, 192 Bezdek, Roger, 50, 188 Binary plants, 167, 168 Biodiesel, 141–144, 149–150 Biofuels, 91, 134, 138, 141–151, 236 future of, 225–226 investment opportunities, 150–151 limits to, 148–150 Biomass, 137 Biophysical economics, 77 Birol, Fatih, 149 Bitumen, 14, 126 Blackout, 204 BP Capital, 41 Bradford, Jason, 217 Breeder reactors, 176, 183 Britain, 216 Brown, Jeffrey, 33 Brown, Lester, 145, 200 Building integrated photovoltaics (BIPV), 160, 162 Burgan oil field, 43 Burlington Northern, 228, 230 California, 157, 160–161, 200, 211 Cambridge Energy Research Associates (CERA), 37 Cameco Corporation, 184–185 Campbell, Colin, 10, 21, 22, 51, 55, 57, 201 Canada, 63, 99, 101–102, 200 Canadian National Railway, 228, 230 Cantarell oil field, 43, 49, 65 Cap-and-trade systems, 194–195 Carbon capture and storage (CSS) technology, 114–115, 116 Carbon credits, 194 Carbon dioxide, 142 Carbon emissions, 61, 85–88, 114–115, 123, 220–221 Carbon taxes, 193–194, 195 279 bindex.indd 279 3/20/08 1:56:41 PM 280 Index Carbon trading, 196–197 Carmichael, Gil, 226 Cars See Automobile industry Caspian Sea, 35–36 Caterpillar, 222 Cellulosic ethanol, 91, 134, 145–147, 150 Chesapeake Energy Corporation, 111 Chevron Canada, 130 ChevronTexaco, 35 Chicago Climate Exchange, 196, 197 China: carbon emissions, 1985–2003, 88 coal consumption, 59–61, 113 energy consumption, 58–61 and global warming, 86–88 and nuclear power, 177–178 and oil imports, 59 oil usage compared with U.S., 60 and solar power, 91–92, 156 Citrus Energy LLC, 147 Clean coal technology, 114 Cleveland, Cutler, 122 Climate change, 76, 85–88 Clipper Windpower, Inc., 213 Coal, 9, 111–119 and China, 59–61 and electricity, 113 global reserves, 112–113 and global warming, 117 investment opportunities, 117–119 and pollution, 60–61 production and CSS, 116 worldwide possible production, 114 Coal to liquids (CTL) technology, 115–117, 119 Cohen, Dave, 34–35 Combined heat and power (CHP) systems, 203 Committee on the Present Danger, 84–85 Comverge Inc., 208 Concentrating solar power (CSP) systems, 154 ConocoPhillips, 38 Copper indium gallium selenide (CIGS), 159 Copulos, Milton, 58, 73–74 Corn ethanol, 122, 145, 147–148, 149 Council on Foreign Relations, 80–81, 188, 236 Crude oil, 14, 16, 30, 88 CSS technology See Carbon capture and storage (CSS) technology CSX, 228 Cummins, Inc., 222 bindex.indd 280 Daqing oil field, 43 Deepwater drilling, 35–36, 42–44, 68–69 Demand response strategy, 207 Department of Defense, U.S., 82–84 Depletion See Oil depletion Deutch, John, 81 Developing world, 86–87 Devil’s tears, Diamond Offshore Drilling, Inc., 68 Direct FuelCell (DFC) power plants, 222 Distillation, 15 Distributed energy grids See Smart grids Distributed Energy Systems Corporation, 207 Dollar, devaluation, 89 Drake, Alan, 228–229 Drilling, 35–36, 42–44, 68–69 Dubai, 18, 38 Eagles, Lawrence, 41 Echelon, 209 Ecology & Environment Inc., 197 Electricity: and coal consumption, 60, 113 cost of, 72 demand by 2030, 54 future of, 225–233 and future of energy, 203–209 generation, 134 infrastructure, 192 and renewable energy, 109 and steam, 167, 176 storage, 204 world generation by fuel, 178 Electric Power Research Institute, 214, 232 Emissions trading, 194, 196–197 EnCana Corporation, 111 Energy: after oil, 133–135 consumption, 59, 202–203, 254 depletion, 237 and foreign policy, 81 generation and use, U.S., 199 inequity, 140 military costs, 73 peak, 237 policy development, 90–91, 187–223 and population, 57 production, 193, 254 R&D for new technologies, 91 and receding horizons, 119–121 3/20/08 1:56:41 PM Index renewable, 84 and transportation, 226–231 units, 241–243 U.S sources of, 138 world supply, 139 Energy Conversion Devices, 161, 219, 223 Energy Farms, 218 Energy Future Coalition, 84 Energy Information Administration (EIA), 28, 37, 47 Energy Policy Act of 2005, 170, 211, 215 Energy Research Centre, 211 Energy returned on energy invested (EROEI), 122 Energy return on investment (EROI), 122, 130, 145, 219–220 Energy Watch Group, 112, 181–183 EnerNOC, Inc., 198, 208 Enhanced oil recovery (EOR) technology, 4, 42–43, 50 Environment, 57, 75–76, 129–130 Eriksen, Tony, 28–29 Estimated ultimately recoverable (EUR) production, 17, 27 Ethanol, 144–148, 149–150 Ethanol, corn See Corn ethanol Europe, 209, 229 Exponential function, 56–57 Exports, oil, 31–35 ExxonMobil, 35, 36, 49, 67 Factories, efficient, 192 Federal Energy Regulatory Commission (FERC), 215 Ferguson, Charles D., 178–179 First Solar, Inc., 161–162 Fischer, Franz, 115 Fischer-Tropsche (F-T) process, 96, 115–117 Flash plants, 168 Flex-fuel vehicles, 134, 144, 145 Food supply, 4–5, 55, 147–148, 150 Foreign policy, U.S., 81 Fort Hills Project, 130–131 Fossil fuels, 10, 88 China’s use of, 61 costs to the environment, 75–76 dwindling supplies, 96–123 and food production, 4–5 and global warming, 123 natural capital costs, 76–77 Foucher, Samuel, 25, 30 bindex.indd 281 281 FPL Energy LLC, 147, 210 France, 176, 177, 229, 230 Freight transport, 134, 226, 227 FuelCell Energy, Inc., 222 Fuel cells, 219, 223 Fuel economy, 90 Fuel sources heat values, 241–242 Gaffney, Frank, 89 Gamesa SA, 212 Gasoline taxes, 197–198 Gas to liquids (GTL), 110–111 Gas window, Gawell, Karl, 170 Gay, Charles, 158 General Electric, 208, 212, 222, 231 Generators, tidal energy, 214–215 Geothermal energy, 135, 138, 154, 166–173 Germany, 157, 210 Ghawar oil field, 43–44, 65 Gilbert, Jeremy, 115 GlobalSantaFe, 36 Global warming, 80, 85–88, 117, 123, 193–195 Gold, Thomas, 10 Government, U.S.: prepares for peak oil, 79–94 Grandey, Gerald, 179–180 Grasses, 146 Grease, waste, 141 Greater Burgan Field, 20 Green buildings, 192 Green hawks, 80, 90 Greenhouse gases, 86, 117, 118, 196, 232 GreenShift Corporation, 143 Green tags, 194 Gulliford, Andrew, 132 Hall, Charles, 77, 122 Halliburton, 69 Hamilton, James D., 119 Hansen, James E., 123 Hart, Phil, 21 Hawken, Paul, 77, 208 Hayward, Tony, 50 Heating, 134–135 Heat values, 241–242 Heinberg, Richard, 5, 62, 133–134, 201–202 Hidden costs, 73–75 Hirsch, Robert, 148, 188–192 3/20/08 1:56:42 PM 282 Index Homes, energy-efficient, 135, 192 Horse Hollow Wind Energy Center, 210 Hubbard, Glenn, 195 Hubbert’s Peak, 10–12, 13 Hughes, J David, 101, 107 Hybrid cars, 90, 134 Hydrocarbons, 9, 15, 96 Hydrogen, 85 Hydrogen economy, 193, 218–223 Hydropower, 137, 154, 214, 236 Hypercars, 90 Iberdrola, 212–213 Immelt, Jeffrey, 208 Imports: natural gas, 104, 105, 106 oil, 5, 31, 59, 65–66, 89 India, 61, 86–88, 113 Indonesia, 40 Industrialization, 54, 59, 86–87 Infrastructure Action Plan, 140 Ingersoll-Rand Company, 222 International Emissions Trading Association, 196 International Energy Agency (IEA), 38–41, 53, 187 International Energy Outlook, 178 International Monetary Fund, 149–150 Investment opportunities: biodiesel, 143–144 biofuels, 150–151 coal, 117–119 emissions trading, 196–197 geothermal power, 171–173 hydrogen economy, 222–223 natural gas, 111 nuclear power, 183–185 oil, 67–69 oil shale, 132 railroads, 230–231 smart grids and microgrids, 207–209 solar energy, 161–163 tar sands, 130–131 wind power, 212–213 Iran, 18, 40 Iraq, 18, 40 Itron, 208–209 Japan, 157, 229 Jevons Paradox, 237 bindex.indd 282 Kashagan oil fields, 120 Kawasaki, 222 Kerogen, 8, 9, 131 Klare, Michael, 72 Kohl, Keith, 104, 183–184 Koppelaar, Rembrandt, 32–33, 115 Kunstler, James Howard, Kuwait, 18–20 Kyoto Protocol, 216 Laherrère, Jean, 21 Law of receding horizons, 119–121 Lawrence Berkeley National Laboratory, 159 Libya, 33 Lightbulbs, 200 Light water nuclear reactors, 176 Liquefied natural gas (LNG), 103–109 Liquid fuels, 115 Lithuania, 177 LMI, 82–84 LNG See Liquefied natural gas (LNG) London ICE exchange, 16 Lopez, T Joseph, 86 Low-carbon technologies, 138 Mackenzie Gas Project, 110–111 Marine Current Turbines, 215 Mascoma Corporation, 146 Mayer, Roel, 119 McFarlane, Robert, 84 Mearns, Euan, 43 MEMC Electronic Materials, 161 Methane hydrates, 110 Mexico, 65 MGP Ingredients, 151 Microgrids, 205–206, 207–209 Middle East, 17, 22, 48–49 Military, U.S., 5, 72–73, 82–84, 89–90 Million Solar Roof campaign, 160 Mitigation strategies, 188–192 Mitsubishi Heavy Industries, 213 MOX fuel, 183 Mulva, James, 49 Nansolar, 160 National Commission on Energy Policy, 84 National Iranian Oil Co (NIOC), 29 National oil companies (NOCs), 48–49 Natural capital costs, 76–77 3/20/08 1:56:42 PM Index Natural gas, 9, 220–221 cost, 72, 104 demand for, 54, 55, 99 depletion, 11 dwindling supply, 96–111 imports, 104, 105, 106 investment opportunities, 111 North American supply, 84 production, 99, 100, 105 recovery, 103 reserves, 96–97 storage and reserve capacity, 103 supply forecast, 107, 108 top producers, 98 Natural Resources Defense Council, 232 Negawatts, 198–201 New York Mercantile Exchange, 16 Nigeria, 33, 40, 66 NIMBYism, 179, 230 Norfolk Southern Corporation, 228, 230 North America, 99, 102 North Sea Brent Crude oil, 16 Nuclear energy, 154, 175–185 and China, 177–178 compared with wind energy, 211–212 global capacity, 179 investment opportunities, 183–185 limits to, 178–183 peak, 235 potential, 176–177 Ocean energy, 213–217 O’Connor, Terry, 132 Oil: China and U.S usage comparison, 60 and climate change, 76 conventional, 28–30 cost of security, costs stifling projects, 121 discovery, 50 distribution, 48–49 economic cost of dependence on imported oil, energy return on investment, 122 exports, 31–35 flow rate, 10 formation process, heavy sour, 15, 16, 68 hidden costs, 73–75 imports, 5, 31, 59, 65–66, 89 bindex.indd 283 283 investment opportunities, 67–69 light sweet, 14, 15, 16, 68, 119 military costs of, 72–73 non-OPEC crude quality, 14 prices, 16 recovery from shale, 120 refining, 15–16 retail price of, 71–72 and transportation infrastructure, 85 true value of, 71–77 types of, 12–14 unconventional, 50, 51 what it is, 7–10 world reserves estimates, 21–22 Oil consumption, 3–5, 33, 88, 226, 229 Oil demand, 41, 53, 54–57, 61, 62, 63–67 Oil dependency, 63–67, 80–85 Oil depletion, 4–5, 11, 35, 39 average world depletion rate, 49 calculating rate of, 201 global rate, 62 rates, 43–44 Oil Depletion Protocol, 201–202 Oil Drum, The, 25 Oil fields: age of largest, 23 discovery in Kazakhstan, 120 giant, 22–24, 26, 27, 43–44 infrastructure problems, 44–46 predicting production of oil, 16–22 recovery stages, 42 Oil production, 3, 42 age of oil fields, cost of, 16 and demand, 33 and enhanced recovery technology, 50 forecasts, 28, 31, 36–41 in giant oil fields, 26 global peak, 16, 51 increasing, 35 nations by share of total, 253 need for Saudi Arabia to increase, 47–48 and OPEC, 33 rate of, 10 risk management, 190 top producers, 245–251 U.S 1900–2050, 11 when it peaks, 191 world, 29 Oil pyramid, 25 3/20/08 1:56:43 PM 284 Index Oil shales, 50–51, 119–120, 122, 131–132, 236 Oil window, 8–9 OPEC: exports, 34 need to increase oil production, 47 and oil production, 33 oil reserves, 18, 21 opinions about world oil supply, 48 production forecasts, 40 Open Energy Corporation, 160, 162 Ormat Technologies, 171 Ovshinsky, Stanford, 219 Oxford Research Group, 183 Pacific Ethanol, 151 Patzek, Tad, 149 Peabody Energy Corporation, 117–118 Peak coal, 112–114, 235 Peak gas, 235 Peak natural gas, 97–103 Peak oil, 235, 245–251 mitigation strategies, 188 overview, 51–52 Pentagon prepares for, 79–94 timing, 46–48 what it is, 7–52 what to expect from supply, 46–51 when it occurs, 25–31 Peak uranium, 179–183 Peerless Mfg Co., 196 Pelamis wave energy converters, 216 Petrie, Tom, 48–49 Petro-Canada, 131 Petroleum industries, 75, 134 Philips Electronics, 200 Photovoltaic (PV) cells, 138, 154, 155, 156–160 Pickens, T Boone, 41, 96 PIRA Energy Group, 27 Plug-in hybrid electric vehicles (PHEVs), 91, 134, 172, 231–232 Plug Power Inc., 222 Plutonium, 176, 180 Political reserves, 17–22 Pollan, Michael, 147 Pollution, 60–61, 87, 232 Population, 54–57 Portland, Oregon, 230 Portugal, 216 Power generation, 137 Power storage, 204 bindex.indd 284 Prudhoe Bay, 44, 46 Qatar, 109 Railroads, 134, 226–231 See also Transportation Range Fuels, Inc., 146 Rapier, Robert, 225–226 Raser Technologies, 171–173 Receding horizons, 119–121 Regenerative braking, 229 Regulatory protections, 193 Relocalization, 217–218 Renewable energy, 84, 137–151, 236 in China, 92 and electricity supply, 109 expanding development, 192 global investments in, 138 ocean energy, 215 U.S commitment to, 89–90 wind power, 209 World Bank financing, 140–141 Renewable energy certificates, 194 Renewable Fuel Standards, 151 Renewable portfolio standards, 138 Rentech, Inc., 119 Reserve replacement, 35–36 Reserves: coal, 112–113 natural gas, 96–97 political, 17–22 revisions, 16–22 Return on investment, 122 Risk management, 190 Robelius, Fredrik, 23 Rumsfeld, Donald, 83 Sasol Limited, 119 Saudi Arabia, 34, 40 oil depletion rate, 49 oil production, 44, 45, 47–48 oil reserves, 18 remaining oil, 16 as source of U.S oil, 65 spare oil capacity, 33 Schindler, David, 128, 129 Schlesinger, James, 81 Schlumberger Limited, 69 Schultz, George, 84–85, 89, 90–91 Scotland, 216–217 Security, national, 5, 80, 85–88, 89, 183 3/20/08 1:56:43 PM Index Sedimentary rock, 8–9 Sequestration, 114–115 ShellCanada Limited, 130 Shell Exploration and Production Co., 131–132 Shields, David, 65 Siemens Westinghouse, 222 Silicon, 155, 158–159 Simmons, Matthew, 4, 23–25, 30, 44, 51, 65 Skrebowski, Chris, 21, 62 Smart grids, 203–209 Smart meters, 206–207 Smith, Philip, 180 Smith, Russel E., 211 Solar cells See Photovoltaic (PV) cells Solar energy, 89, 138, 153–163 and China, 91–92, 156 growth of industry, 155–156 history of technology development, 154–155 hot water systems, 154–155 incentive programs, 160–161 investment opportunities, 161–163 Solar roofing tiles, 160, 162 Solar thermal technologies, 154–155 Southwestern Energy Company, 111 Soviet Union, 17–18 Soybeans, 141, 149 Splinter, Mike, 158 Staniford, Stuart, 44 Steam, 167, 176 Stephen, Nicol, 216–217 Storage systems, hydrogen, 222 Strip mining, 126 Subsidies, government, 74–75, 151 Sullivan, Gordon, 86 Sulphco, Inc., 69 Sum-of-energies model of population, 55 Sun See Solar energy Suncor Energy Inc., 130 SunOpta, 151 SunPower Corporation, 162 Sustainability, 56–57, 166, 218 Suzlon Energy Ltd., 213 Sweet oil See Oil Tainter, Joseph, 121 Tar sands, 50–51, 122, 125–132, 236 Taxes: carbon, 193–194, 195 credit for wind power, 211 gasoline, 197–198 bindex.indd 285 285 Teck Cominco Limited, 131 Terrorism, 36, 66, 84–85 Tesla Motors, 231 Tesoro Corporation, 48, 68 Texas, 210 Texas Renewable Industries Association, 211 Thermal depolymerization, Thermal values, 243 Thin-film solar material, 159–160, 162 Tidal energy, 213–217 Time Banks, 218 Transesterification, 141 Transocean Inc., 36, 68 Transportation, 134 See also Railroads electrified cars, 231–232 and energy consumption, 202–203 improving energy efficiency, 193 infrastructure and oil, 85 and oil consumption, 226, 229 passenger modes, 227, 231 Tropsch, Hans, 115 Trucking industry, 134, 226 Truly, Richard, 86 Turbines, 167, 212, 215 Ultimate recoverable resource (URR) See Estimated ultimately recoverable (EUR) production Union Pacific Corporation, 228, 230 United Arab Emirates, 40 United States: carbon emissions, 88 coal consumption, 113 coal reserves, 111 commitment to renewable energy, 89–90 consumption of crude oil, 88 debt, 89 dependence on oil, 63–67 energy consumption by source, 254 energy generation and use, 199 energy policy recommendations, 90–91 energy sources, 138 geothermal power, 169–170 imports, 31, 63–66 natural gas, 99, 100, 101, 104, 105 and nuclear power, 177 oil discovery and production, 42–44 oil usage compared with China, 60 and wind energy, 210 3/20/08 1:56:43 PM 286 Index United States Geological Society (USGS), 20–21, 37 United States government See Government, U.S United Technologies Corporation, 172, 173 Uranez Energy Corp., 185 Uranium, 175–176, 178, 179–183, 183–184 Urban growth, smart, 193 U.S Geothermal Inc., 173 USEC Inc., 185 UTS Energy Corporation, 131 Valcent Products, Inc., 143–144 Valero Energy Corporation, 48, 68 van der Veer, Jeroen, 236 van Leeuwen, Jan Willem Storm, 180 Venezuela, 16, 18, 40, 63–64 VeraSun Energy, 151 Verenium Corporation, 147 Vestas Wind Systems, 213 Viscosity, 14 Viteri, Xavier, 210 Vulcan Power Co., 170 bindex.indd 286 War costs, 72–73 See also Military, U.S Waste power, 137, 141, 172, 198, 203 Wave energy, 213–217 Weber, Christopher L., 87 Wendling, Robert, 188 Western Oil Sands, Inc., 130 West Texas Intermediate oil, 16 WestWave, 216 Willits Economic LocaLization, 217–218 Wind energy, 138, 154, 209–213 Woodward, David, 21 Woolsey, James, 84–85, 89, 90–91 World Bank, 140–141 Xantrex Technologies, 163 Yergin, Daniel, 37 Zabel, Graham, 55 Zinni, Anthony C., 86 Zoltek Companies, 213 3/20/08 1:56:43 PM ... 3/20/08 1:51:34 PM PROFIT FROM THE PEAK ffirs.indd i 3/20/08 1:51:33 PM ffirs.indd ii 3/20/08 1:51:34 PM PROFIT FROM THE PEAK The End of Oil and the Greatest Investment Event of the Century BRIAN... this theory as supposed proof that peak oil is a hoax The vast majority of geologists discount the theory, however, and we give it no further consideration here HUBBERT’S PEAK Peak oil is a theory... explore the potential (and the limitations) of each of the major energy alternatives, and the carefully considered investing angles on each one Although this is a study in how to profit from the peak,