Monthly Discussion



Natural Gas Replaces Oil


There is a discussion in Predictions on the substitution of primary energies. It is a competitive substitution process in which the various energy types are seen to compete for the favor of consumers in a Darwinian way (the best fit wins!) Contrary to what you may have expected the availability of an energy type does not significantly influence its popularity.

          Exhibit 3 below is a graph taken out of Predictions updated here with data of the last fifteen years. The S-curves are as originally determined. The graph demonstrates that we discover oil reserves ten years before we consume them, not earlier or later, thus destroying the myth of an imminent depletion of oil reserves on Earth. There is no relationship between the utilization and the reserves of a primary energy source. The market moves away from a certain

primary energy source long before it becomes exhausted, at least at the world level. And vice versa; despite the ominous predictions made in the 1950s that oil would dry up in twenty years, oil use continued growing unhindered and more oil was found as needed. Oil reserves will probably never be exhausted because of the timely introduction of other energy sources. Well-established substitution processes with long time constants are of a fundamental nature and cannot be reversed by "lesser" reasons such as depletion of reserves.


Exhibit 3.  This figure from Predictions has been updated here with data from the last fifteen years (open circles). The fits (smooth lines) are as originally published in 1992.


          The graph also demonstrates that the S-curve fits (and ensuing pessimistic forecasts for oil) made back in the late 1980s prove to be rather accurate. The rate of growth of oil production, see Exhibit 4 below, is indeed declining as anticipated fifteen years ago, at a time that no signs of decline were evident.



Exhibit 4.  This life cycle of oil production in the US is directly obtained from Exhibit 3 above. The confirmation of oil's forecasted decline is flagrant.


          However, energy needs are not declining at all, and a decline in oil implies growth in other energy type. The large-time-frame substitution process described in Predictions has wood yielding to coal yielding to oil yielding to natural gas in a natural way, i.e., each time via an S-shaped evolution of the respective market shares. If oil declines, natural gas must be increasing.

          Exhibit 5 shows that production of natural gas is indeed increasing at an accelerated rate. Natural gas has penetrated only 1/3 of its world market so far. Its heyday is still to come. According to Exhibit 6, production of natural gas will reach a zenith in the 2010s.

          As natural gas replaces oil in supplying a major fraction of the world's energy needs, more gas must be found. But one need not worry about it. Just as it happened with oil, important natural gas fields are likely to be found as needed. Gas is a more probable find than oil the deeper one goes underground, due to the thermal gradient of the earth's crust. But even if during the gas era the discovery of new gas fields does not keep up with demand, oil or coal may be artificially processed to produce the amount of gas lacking. Synthetic gaseous fuels such as methanol could easily be used in cars during the 21st century.


Exhibit 5.   Natural gas production on a worldwide level follows a natural-growth curve.




Exhibit 6.   The process of phasing in of natural gas is expected to reach its zenith in the 2010s.


The driving force in substitutions between primary energies is twofold. On one hand we have the economies of scale involved in the technology and distribution infrastructures of each energy source. On the other hand we have the fact that during the last 200 years, the fuel mix of the world's primary energy sources has evolved toward "lighter" forms, i.e., fuel forms richer in hydrogen. The hydrogen/carbon (H/C) ratio increased from wood (H/C =0.1) to coal (H/C=1) to oil (H/C=2) to natural gas (H/C=4). Furthermore, this increase followed an S-shaped curve, implying a natural process that should proceed to completion and eventually reach pure hydrogen. Such a fuel, clean and powerful as it may be, can only come from nuclear energy.*

          The gas-for-oil substitution is proceeding more slowly than predicted in Predictions. Nevertheless, the updated detail graph below shows that gas and oil will have equal market shares in the world energy market by 2010. But oil will be on the decline and gas on the rise.


Exhibit 7.   Natural gas and oil are expected to contribute equally (about 30% each) to world's energy needs by 2010.


          The above gas-for-oil substitution process sets the seen for substitutions in longer-term investments. Stocks of companies dealing directly with natural gas or natural-gas technologies and equipment should be progressively replacing those of oil along the trends of Exhibit 7.

* Cesare Marchetti, "Nuclear Plants and Nuclear Niches: On the Generation of Nuclear Energy During the last Twenty Years", Nuclear Science and Engineering 90, 521-526 (1985).