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The Future of Fossil Fuels: New Discoveries, Technological Advancements, and Global Growth

Growing Demand for Fossil Fuels

Crude oil, coal, and natural gas are the main sources of fossil fuels that are extracted from below the Earth’s surface and converted into useable sources of energy. Moreover, non-renewable fossil fuels are the main resources for the world’s energy supply. According to recent projections from the U.S. Department of Energy, rapid economic growth in developing countries like China, India, Indonesia, and Brazil will cause global energy consumption to nearly double by 2040 (Cusick, 2016). As global energy consumption continues to rise, the U. S. Energy Information Administration expects that fossil fuels such as coal, oil, and gas will remain as the primary sources of global energy for the foreseeable future.

In 2008, Ron Oxburgh, the former chairman of Shell Oil Company, made headlines by saying, “It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil” (Freeland, 2012). Oxburgh’s exclamation initiated concerns for investors and some energy industry analysts that the Earth was on the verge of running out of fossil fuels. However, as a result of a series of new hydrocarbon discoveries and emerging drilling and hydraulic fracking technologies, Oxburgh’s claim that the era of cheap oil was over may have been prematurely stated.

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Source: Wikipedia

New Discoveries and Technological Advancements

From the tar sands of northwestern Canada, to the vast pockets of shale gas within America’s Permian Basin (reserves that will last 75 years at current consumption rates), to Brazil’s massive offshore oil reserves that aim to make the county the world’s fourth-largest oil producer by mid-2020, many new fossil fuel reserves are suddenly becoming available or accessible for extraction (Freeland, 2012). Furthermore, the new discoveries of fossil fuel reserves have been found among some of the world’s most developed democracies, which is a change of pace from the existing reserves located in the conflict-burdened Middle East and within many of the nations in Sub-Saharan Africa. The location of the new discoveries, along with rapidly improving technology for oil drilling and hydraulic fracking, will ensure that these reserves are accessible and dependable future sources of global energy.

Following the Great Recession of 2008, the resurgence of fossil fuel discoveries and new extraction technology have created a series of new global fossil fuel leaders. Canada’s tar sands, shale gas extraction in western Texas, and vast offshore exploration in Brazil have transformed these nations into some of the new global energy leaders. While the abundance and accessibility of these new fossil fuel reserves have helped to propel the world out of the global economic slowdown, energy analysts are concerned that the new fossil fuel discoveries may end up complicating domestic politics among countries that are already thriving democracies.

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Source: Wikipedia

The Threat of the Resource Curse

Economists and energy analysts often reference the “the curse of fossil fuels” when a new discovery of oil or natural gas is announced in the news. In countries that have abundant natural resources, they are often inflicted by dictatorships and conflicts that have been exacerbated by valuable fossil fuel discoveries. Venezuela is a among the most notable examples of a country that has been adversely impacted by the resource curse. According to 2016 estimates, Venezuela is home to oil reserves in excess of 300 billion barrels, which is known to be the largest in the world – bigger than Saudi Arabia’s reserves, although Venezuela’s oil is thicker and less desirable (Cohen, 2019). While Venezuela formerly had a thriving economy that was bolstered by its oil reserves, the country has experienced a dramatic economic collapse over the past decade that has wrecked its economy, government, and standing as a global energy superpower. The mismanagement of its oil reserves, a lack of economic diversity, and widespread political corruption has led the nation to fall victim to the resource curse.

In addition to concerns about existing democracies becoming the latest victims of the natural resource curse, Canada, the U.S., and Brazil also face a fierce battle with global leaders and environmentalists over climate change and the safety of fossil fuel extraction techniques. While the newly discovered fossil fuel reserves are massive in scale and could provide enough energy to power the world for decades into the future, the location of these hard-to-reach reserves involves a significant investment in technological advancements and comes with numerous environmental risks.

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Source: Wikipedia

New Challenges for Future Production

The fossil fuel industry of the 20th century can be characterized by abundant deposits and easy-to-drill reserves. The new discoveries in Canada, the U.S., and Brazil are hard to access without technology that allows for horizontal drilling, advanced hydraulic fracking, and deep-water oil extraction. Each of these technologies will have a rougher impact on the environment when compared to the easy-to-drill reserves of the 20th century. Moreover, as the news media focuses in on these new methods of extracting fossil fuels, the general public has started to become more involved in activism against the development of new oil, gas, and coal reserves and their associated infrastructure. The recent uproar over the development of the Keystone pipeline may be a sign of things to come with regards to the increased opposition to oil-related infrastructure.

While the fossil fuel industry continues to support high-paying jobs, economic growth, and the high-quality of life that most developed countries have demanded, activism against the fossil fuel industry continues to soar. Abundant lawsuits and frequent protests have hindered the development of the industry and have called into the question the future of the fossil fuel industry. As world leaders continue to pass resolutions such as the Kyoto Protocol and the Paris Agreement, the fossil fuel industry is expected to continue to come under increased scrutiny as greenhouse gas emissions become the target of global initiatives sponsored by organizations like the United Nations and the Intergovernmental Panel on Climate Change (IPCC). While leaders continue to identify opportunities to end global dependence on fossil fuels, it will be imperative for the fossil fuel industry to craft new global agreements and plans to increase investments in technology to reduce greenhouse gas emissions in an effort to combat climate change.

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Source: Energy Information Administration

U.S. Energy Information Administration Predictions

As outlined within the 2016 International Energy Outlook, the U.S. Energy Information Administration expects that a shifting global energy portfolio that relies less on coal for energy generation and more on renewable energy resources and natural gas will ensure that the associated rise in global greenhouse gas emissions will not keep pace with the world’s total energy consumption (Cusick, 2016). The U.S Energy Information Administration says that global greenhouse gas emissions are only expected to rise from 36 billion metric tons in 2012, to just over to 43 billion metric tons in 2040 (Cusick, 2016). Considering the total global energy consumption is also predicted to double in that timeframe, the efficiencies of the energy industry will vastly outweigh the increase in carbon emissions. While the world is expected to consume a record of 815 quadrillion British thermal units (Btu) of energy in 2040, the expected increase in greenhouse gas emissions from 2010 levels is projected to be around 34 percent (Cusick, 2016).

While the projections from the U.S. Energy Information Administration suggest that fossil fuel consumption will continue to increase through 2040, numerous critics have targeted the methodology used in these predictions. Some energy analysts highlight how the U.S. Energy Information Administration has failed to base their projections on major international policy initiatives from the United Nations and the Intergovernmental Panel on Climate Change (IPCC). Moreover, in 2015, nearly 190 of the United Nations member countries committed to make dramatic reductions in energy-sector carbon emissions as part of the Paris Agreement (Cusick, 2016).

Continued Investments in Fossil Fuel Technology

Some critics of the U.S. Energy Information Administration’s fossil fuel projections believe that world leaders will stand by their efforts to reduce emissions as part of the Paris Agreement. However, continued investments in new fossil fuel extraction-related technology challenges these assertions that the United Nations member countries will come together in an effort to abandon the use of fossil fuels.

In 2005, Japan invested in a $540 million deep-sea oil drilling vessel with a 30-story deck topped with a landing pad big enough to hold a 30-person helicopter. The floating barge known as the Chikyu, with its enormous six-mile long oil exploration drill is the largest and most sophisticated research vessel that has ever been constructed (Mann, 2013). Since it was launched in 2005, the Japanese government has been hopeful that that the Chikyu’s ability to delve deep beneath the ocean floor in earthquake generating zones would help Japan find enough oil to move towards energy independence. However, even with this massive investment, Japan has still failed to uncover a significant amount of oil. Today, the country is the world’s third-largest net importer of crude oil, the second-largest importer of coal, and the largest importer of liquefied natural gas (Mann, 2013). Despite this failed investment, Japan, like many other nations around the world, have still been moving forward with new fossil fuel exploration initiatives despite the agreement to reduce emissions as part of the Paris Agreement.

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Source: Wikipedia

Strong Demand and Increasing Uncertainty

During the beginning of 2008, the price of oil, natural gas, and coal all rose steeply, in part because demand was strong, and fear was spreading about a lack of supply. Ron Oxburgh’s infamous quote about the end of the cheap energy century convinced the world that supplies were limited and an increase in reserves was nowhere on the horizon. Moreover, during the same time, King Abdullah of Saudi Arabia announced that the country would be shrinking oil and gas production to ensure that future generations would have the energy resources needed to maintain a high quality of life (Oxburgh, 2008).

The fear of an unprecedented fossil fuel supply crisis sent the price of oil well above $100 per barrel. For example, in 2008, the price of oil soared to more than double the average price of oil in 2007 (Teslik, 2019). The extent to which oil producers would be able to meet demand for decades to come was called into question. At that time, there was a great deal of anxiety about the world’s remaining oil reserves. In fact, nobody really knew how much oil was left on the planet. The best estimates at the time were produced in a 2000 assessment of total world oil supplies by the U.S. Geological Survey (USGS). The USGS employed a systematic methodology based on existing oil reserves and modeling of future discoveries to come up with an estimate that the world held about three trillion barrels of recoverable oil, with roughly 710 billion barrels of oil already consumed by 1995 (Teslik, 2019).

While the USGS had acknowledged that its estimate of recoverable oil reserves could be higher or lower based on methodology tweaks, the results of the study were greatly disputed. While some analysts argued that technology would allow for a much higher estimate of recoverable reserves, others have predicted that at least half of the world’s supply of oil has already been consumed (Teslik, 2019). The uncertainty, coupled with grave predictions from high-profile figures like Ron Oxburgh, had painted a bleak future for fossil fuels.

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Source: Creative Commons

Falling Prices and New Energy Leaders

Today, as technological advancements continue to lead to new fossil fuel discoveries, oil prices have fallen dramatically since 2008. When new reserves were unveiled in countries like Canada, the U.S., and Brazil, the uncertainty about future production started to diminish. Moreover, as oil production pressures have begun to shift away from traditional petro-autocracies like Russia, Iran, Venezuela, Iraq, Kuwait, and Saudi Arabia, energy analysts have found comfort in knowing that the new and emerging Canadian, American, and Brazilian energy leaders will be less susceptible to the financial and political turmoil that was often experienced by the 20th century’s global oil leaders.

Sources

Cohen, A. (2019). “Russia Attempts to Take Over Venezuelan Oil, Creating A Challenge For The U.S.” Forbes.

Cusick, D. (2016). “Fossil Fuels May Not Dwindle Anytime Soon.” Scientific American.

Freeland, C. (2012). “Actually, Fossil Fuels Are Here to Stay.” The Atlantic.

Mann, C. (2013). “What If We Never Run Out of Oil?” The Atlantic.

Oxburgh, R. (2008). “Another inconvenient truth.” The Guardian.

Shafiee, S. (2009). “When will fossil fuel reserves be diminished?” Science Direct.

Teslik, L. (2019). “The Future of Fossil Fuel.” Encyclopedia Britannica.

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