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.
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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.
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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.