Are We About to Have Another Wake Up Call???

With unrest in many areas of the world, especially in places where oil production facilities are located, should we be doing things to quickly reduce our dependence on oil, especially gasoline?   One country that is already acting to immediately reduce their dependence on oil is Spain.  Spain’s Deputy Prime Minister, Alfredo Pérez Rubalcaba, said that Spain will immediately allow for an increase in the minimum proportion of biofuel allowed in gasoline.  He also stated that Spain will lower rail fares to make it more attractive for people to leave their cars at home.  Spain has little or no oil reserves, so acting quickly is almost a necessity.  But what about the rest of us?

Closer to home, John B. Hess gave a talk at Cambridge Energy Research Associates’ annual energy conference in Houston on February 12.  He said, “It is not only a matter of demand. It is not only a matter of supply…. We need to take steps on both fronts, and we need to start today.”  He further stated that, “Given the long lead times of at least 5 - 10 years from discovery to production, an oil crisis is coming and sooner than most people think.  Unfortunately, we are behaving in ways that suggest we do not know there is a serious problem.”  Admittedly, this is a longer view than that taken by Spain, but then again, the U.S. does have a large oil reserve to get us over any short lived disruption.  But doesn’t what Mr. Hess say have a lot of truth in it?

Source: Energy Information Administration, Annual Energy Outlook 2004

I have had the privilege of working in the oil industry and have followed closely the statistic of proven oil reserves.  This is a very important statistic that tells us whether we are withdrawing more oil than we are finding or being better able to extract it due to technology, etc.  The latest statistics available tell us that energy companies around the world reported 8 % more oil put in to the proven reserves in 2009 than there was in 2007.  So, one might say: where is the problem?  Our extraction technology is getting better, and because of that we are going places that were not available to us before.   The question becomes: how much more can we do before these reserves start decreasing?

I think Mr. Hess is correct, and before we have to do what Spain is forced to do today, we want to focus our vast R&D prowess on finding displacements for certain uses of oil.  I know I am taking a long term view here, but there are certain plain facts that are in front of us, that, if we acknowledge them, might cause us to act a bit differently.  One example is plastics.  I am not reliving a scene from The Graduate here, but it is a fact that many of the plastic materials that enable us to do so many things today have no known substitute.  Should our focus on the use of this non-replenishable resource (oil) be centered around our ability to make critical materials like plastics for ourselves and future generations while working on developing other sources/methods of fueling our cars and power plants?

Are you and your companies grappling with this issue today? Are you taking any special measures/incorporating new directions into your strategic planning?  Please let us know.