New UC Davis market-based sustainability forecasting approach concludes supplanting gasoline and diesel with renewable fuels could take 131 years
09 November 2010
At the current pace of research and development, replacing gasoline and diesel with renewable fuel alternatives could take some 131 years, according to a new University of California, Davis, study using a new sustainability forecasting approach based on market expectations. The forecast was published online 8 Nov. in the ACS journal Environmental Science & Technology.
In the paper, Nataliya Malyshkina and Deb Niemeier point out that the peak of oil production is estimated to occur approximately between 2010 and 2030, and note that all those dates are considerably earlier than their estimate of the time until renewable replacement technologies are viable in the market (around 2140). “Obviously, our results suggest that there is a potential danger that crude oil will be depleted before it can be replaced by viable substitutes.”
We acknowledge that some of the difference between the estimates for the time until oil replacement and the time until oil depletion could be reduced in response to changes over time. That is, as fossil fuel resources diminish, we would expect both market and individual behavior to change. We would expect that new reserves of conventional and unconventional oil may become available for exploration due to geological exploration and advances in oil extraction techniques or that extraction from less feasible oil fields becomes more economically attractive. We would also expect that oil consumption would decrease due to energy-saving measures and/or due to responsiveness of demand to higher oil prices. All of these factors would change our predicted outcome.
—Malyshkina and Niemeier
Malyshkina and Niemeier set out to create a new tool that would help policymakers set realistic targets for environmental sustainability and evaluate the progress made toward those goals. Their research establishes a probabilistic theoretical approach based on market expectations reflected in prices of publicly traded securities to estimate the time horizon until the appearance of new technologies related to replacement of nonrenewable resources, for example, crude oil and oil products.
Two key elements of the new theory are market capitalizations (based on stock share prices) and dividends of publicly owned oil companies and alternative-energy companies. Other analysts have previously used similar equations to predict events in finance, politics and sports.
Sophisticated investors tend to put considerable effort into collecting, processing and understanding information relevant to the future cash flows paid by securities. As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate.
—Nataliya Malyshkina, UC Davis postdoctoral researcher
To assess the time (T) when technological innovations are likely to appear, they apply advanced pricing equations, based on a stochastic discount factor to those traded securities whose future cash flows critically depend on appearance of such innovations. Applying a simple approximation of the proposed approach to replacement of crude oil and oil products, they found that T works out to approximately 131 years for replacement of gasoline and diesel.
Our estimate T≈131 years for the time until a replacement of gasoline and diesel (beginning at 2009) is about 2.6 times larger than the time until the development of alternative ways of meeting the needs that are served by resource consumption that was assumed by Graedel and Klee. Also our estimate is significantly longer than the 20 to 50 years previously suggested by several energy experts for the time horizon until a considerable fraction of oil is replaced.
There are a number of possible reasons for the large range. For example, there are often subtle but persistent price signals embedded in long-term investment decisions and stock price fluctuations. In 2008 the International Energy Agency (IEA) reported that investment in renewable generation fell proportionately more than that in other types of generating capacity. In fact, the IEA predicted that for 2009, renewable investment could drop by as much as one-fifth. There are also examples in the past in which experts and scientists were overly optimistic about the diffusion of new technologies. In particular, a controlled thermonuclear fusion for energy production was initially expected within few decades from the first successful test of an H-bomb in 1952. However, despite more than 50 years of extensive research, no commercial fusion reactor is expected until the second half of the 21st century. Finally, differences in estimates of T can emerge as a result of variations in values assigned to the factors underpinning such estimates (e.g., the extent to which new technologies are expected to penetrate the market).
—Malyshkina and Niemeier
Niemeier, UC Davis professor of civil and environmental engineering, said the new study’s findings are a warning that current renewable-fuel targets are not ambitious enough to prevent harm to society, economic development and natural ecosystems.
Our results suggest it will take a long time before renewable replacement fuels can be self-sustaining, at least from a market perspective. We need stronger policy impetus to push the development of these alternative replacement technologies along.
—Deb Niemeier
Resources
Nataliya Malyshkina and Deb Niemeier (2010) Future Sustainability Forecasting by Exchange Markets: Basic Theory and an Application. Environ. Sci. Technol., Article ASAP doi: 10.1021/es100730q
Total waste of a study
Assuming that people will be using gas for the next 131 years. At the rate of change of the world we might not even be humans in 131 years. Some form of computer cyborg. I think battery technology will improve enough in the next couple of decades to provide most of the needs
Posted by: ds | 09 November 2010 at 11:06 AM
This is the all or nothing at all analysis. The U.S. produces about 8 million of the 20 million barrels of oil it consumes each day. The other 12 million barrels are imported and half of that is from OPEC. (round numbers)
If we have 100 million true FFVs on the road in the U.S. by 2010, we have options. If we do not have those vehicles then we do not have those options. With 1 in 20 vehicles now able to run E85 and E85 pumps in less than 1% of the locations, we have fewer options.
The goals should be clear, my goal is to eliminate OPEC oil imports entirely from U.S. Other people may have other goals and that is a topic for discussion. Maybe some decade we will all be driving electric cars, but until that day we are vulnerable to supply disruptions and that is what concerns me.
Posted by: SJC | 09 November 2010 at 11:11 AM
events 1885
The first successful appendectomy is performed by Dr. William W. Grant on Mary Gartside
The first Japanese arrive in Hawaii.
Gottlieb Daimler was granted a German patent for his 1-cylinder water-cooled engine design
I think we can be sure that the odds a pretty good that gas wont be used in 131 years and probably not cars
Posted by: ds | 09 November 2010 at 11:18 AM
Their analysis is interesting even if making forecast 130 years ahead doesn't really make sense. Anyway even if we convert all the biomass we can grow for making biofuel, we could displace at best 30% of the oil today production, so fully replacing gazoline with biofuel won't happen anyway. I think they just want to show that the response of the technology is not necessarily as fast as we wish when we need to transition simply because we have exhausted the available resource that power the current technology. But they should do the same analysis for EV and try to see if the pace of development is fast enough to insure a smooth transition from ICE powered car to EV car,I am not convinced that it is indeed the case.
Posted by: Treehugger | 09 November 2010 at 11:36 AM
This is flat-out preposterous. Is there anyone in the world who still doesn't know that technology adaptation trends follow an exponential (and sometimes double-exponential) growth curve? So many of these forecasts also assume fossil fuel price/availability BAU and even *growth.* Today's IEA report is peddling the same nonsense. Total joke.
If we're not to at least 50% renewables by 2030, we'll have huge problems with lack of oil production capacity. Fortunately once they feel it's in their best interest to do so, energy companies will drive Moore's law type growth in alt fuels.
Posted by: Sean Prophet | 09 November 2010 at 12:11 PM
It's pretty clear that the cheap oil available has peaked, as in is over half gone. The present relatively stable half again the oil price of 2008 is just, as during the past, to crush any profitable alternative fuel operations taking hold.
Once there are no alternative transportation modes established and 'Green' options are bankrupted, the REAL OPEC price hikes will begin.
The $10 to $100/barrel oil hikes since 1973 will just be a 'market adjustment' compared to what's coming if there are no mass production alternatives to oil.
Posted by: kelly | 09 November 2010 at 12:14 PM
I see this study as less of a forecast for the future and more of statement of the present. What they are really saying is 'the market alone is not currently reacting to peak oil with the intensity or speed it needs to.'
If we leave things to market forces we will end up rushing to make the transition to post-oil energy at the last minute. We need somebody to think ahead and put money and effort into this before the market sees profits. And we need to do this with an overall plan that reduces waste through synergy and holistic efficiency.
Posted by: ai_vin | 09 November 2010 at 01:10 PM
Within 130 years everyone could be driving electric cars charged using fusion power. That is a long ways away but it is good to see the bounds of sustainable fuel for transportation.
If natural gas and biomass can reduce our imported oil, then I say go for it. If we can accelerate the adoption of electric vehicles, then do that too. Anything we can do to reduce OPEC oil imports gives us a more secure energy future.
Posted by: SJC | 09 November 2010 at 01:13 PM
When I see these I want to pound the table:
Treehugger: "we have exhausted the available resource that power the current technology"
Sean: "we'll have huge problems with lack of oil production capacity"
Kelly: "It's pretty clear that the cheap oil available has peaked, as in is over half gone"
Nothing could be further from the truth, oil is not scarce. Its price is kept artificially high by powerful players like Exxon and the Saudis. There will be a collapse in the price of oil near term, in 2 to 5 years, partly due to decrease in demand caused by BEV's, improved fuel efficiency, etc.
Posted by: nordic | 09 November 2010 at 01:57 PM
The world can do better (faster) than that but another 50 years or so before we wean ourself from oil and ICE may be a possible probability.
The tipping point could come shortly after 2030.
Isolated special groups could keep ICE going for a while longer, specially where liquid fuels are cheaper than electricity.
Posted by: HarveyD | 09 November 2010 at 02:11 PM
I think ai_vin has THE salient point:
'the market alone is not currently reacting to peak oil with the intensity or speed it needs to.'
There you have it folks, even the much regarded market system is not reacting fast enough. Not a surprise when most of the market system is big oil that benefits from the status quo.
Posted by: SJC | 09 November 2010 at 02:27 PM
There's no way to justify a prediction 130 years in the future with any model. However, I think that as EV transportation becomes widespread, this means competition for oil-powered ICEs. In that case demand for oil will drop, as will the price. But, free market expectations cannot be relied upon if global warming and ocean acidification require draconian legislation. Anything in the study about that?
Posted by: Zhukova | 09 November 2010 at 03:16 PM
Nordic, "Nothing could be further from the truth, oil is not scarce." - where are you? US oil production and new finds have fallen for 40 years. World oil reserves are now falling as well.
Drilling for oil miles below the ocean surface is NOT cheap nor because there's oil a plenty.
The 100's of millions of new Brick nation families reaching middle class and soon buying their first family car, tired of five to a motorcycle, could bid the remaining oil to hundreds a barrel this decade with ease if there's no mass affordable alternative to oil.
Posted by: kelly | 09 November 2010 at 04:31 PM
"Nothing could be further from the truth, oil is not scarce. Its price is kept artificially high by powerful players like Exxon and the Saudis."
Nordic, is this claim off some Alex Jones site or are you actually going to cite some evidence?
Posted by: Sean Prophet | 09 November 2010 at 04:33 PM
When the Deep Water Horizon Macondo project cost $50 million but can make $1 million per day for the next 10 years, I would say it is profitable. It takes about 1000 of those sized wells to supply the U.S. daily consumption and there is the problem.
We consume too much oil and we import too much oil. This has been the case for decades and it is getting worse. The data for biofuels is there, the data for EV penetration is there. Neither will solve the problem and together they will not, but they could lighten the blow of a world oil market bidding war.
Posted by: SJC | 09 November 2010 at 04:55 PM
I was going to rip Nordic a new one but I am pleased to see the job is already done. You'd think that a Nordic person would know that the North Sea is already past peak and what that means for the future.
The West needs to move to very efficient engines and PEVs (Plug-In Vehicles) very quickly, because India and China can get a lot more economic output per gallon of fuel in things like scooters and can afford to out-bid us. Either we get efficient and electric, or we have less transport and a smaller economy (read "depression").
Posted by: Engineer-Poet | 09 November 2010 at 05:29 PM
Right, I don't know where Nordic got his information maybe on another planet, oil demand in China and India is going to soar in the coming years even with oil at 100$ a barrel, we are on a plateau since mid 2004 and there is little slack in capacity production, 60 of 100 oil producing countries have passed their peak and are on the decline, last but not least oil discoveries have peaked in 1968 and we are only discovering 1 barrel for 3 or 4 than we burn. Big Oil like Exxon Shel BP and other only control 12% of the world reserves these days so contrary to what most american they don't control the price of oil.
Next year the price of oil will get back above 100$ and I see it as a good news
Posted by: Treehugger | 10 November 2010 at 08:59 AM
I have to agree with E-P that we cannot remain competitive with $100+/barrel oil and V-8 gas guzzlers as we did when oil was given away at $2/barrel. Sooner or latter we will have to pay for the $xxxxB for the imported oil price tag. We can't print $600+B new money every year to pay for it unless we want to lower the value of the USD.
A depreciated USD is appealing to give a short term competitive edge. The problem is the negative effects on the standard of living. A 50 cent/USD can reduce the standard of living by 30+% within 3 to 5 years. This may be an effective fix but many will cry very loudly. Feeding the gas guzzler may mean $100++/week. Walmart prices would doubled almost overnight.
Posted by: HarveyD | 10 November 2010 at 09:14 AM
If the demand for oil ever drops and the price falls (due to BEV's, flex-fuel-V's etc.), then tax oil imports to maintain a price floor (and balance the budget).
Posted by: danm | 10 November 2010 at 09:19 AM
Looks like T. Boone was right. We are going to have to convert to Natural Gas for transportation fuels, with a lot of help from Coal gasification.
Posted by: Lucas | 10 November 2010 at 10:08 AM
Adsorbed natural gas in a PHEV would suit me just fine. Any way we can reduce oil consumption and oil imports would be great. Getting rid of ALL OPEC oil imports would be even better. We had the chance in the '70s, but it is not too late until it is.
Posted by: SJC | 10 November 2010 at 08:38 PM
danm....your proposition makes sense but the majority don't want it and politicians will never touch it. Oil firms/producers are the only one who can multiply oil prices and we will readily accept it. It has nothing to do with the real cost of oil production. The same can be said with the price of Gold. The current $1400/oz has nothing to do with production cost. Commodities price fixing is a monopoly game, very remote for real cost. Normally, suppliers will raise the asking price as much as they can or until consumption starts to drop. Cartels do even better, because they fix prices regardless of consumption. That is called free enterprise and free trade? Very odd interpretation.
Posted by: HarveyD | 11 November 2010 at 09:18 AM
We could put an oil import fee on OPEC, they are a cartel and thus break market rules every day. WTO and others would never hear a complaint from them. A 10% import fee on every barrel of OPEC oil is a good place to start.
Posted by: SJC | 11 November 2010 at 10:34 AM
The Tea Party would NOT buy it.
Posted by: HarveyD | 11 November 2010 at 12:00 PM
The Tea party is funded by oil billionaires. Ever hear of the Koch brothers?
Posted by: ai_vin | 11 November 2010 at 05:11 PM