Growing up during the Lower Diluvian epoch, when my father got us out of bed to watch Sputnik blink across the sky as the world’s first satellite and we began to learn new math instead of arithmetic, gasoline for the family dinosaur cost about $0.33/gallon. Since then, inflation has raised the price of U.S. postage stamps from $0.04 to $0.44, the model airplanes I bought as a youth for $1.06 now cost about $15, and the cost of groceries has increased significantly.
By these subjective measurements, in the United States that $0.33 gallon of gasoline should now cost well over $3 just to account for inflation, with an additional price bump to cover the fact that oil and gas have become harder to find and produce. Believe it or not, gasoline and other hydrocarbon products are better bargains now than they were 50 years ago, and given the improved fuel economy of modern cars we probably spend a lower percentage of our income on gasoline than we did back then.
Even so, many complain about the price of hydrocarbons, unwilling to allow for the fact that the oil and gas industry is a business that depends on an economic return for the effort. We don’t explore for oil and gas just for the sake of proving theories about the presence/absence of an oil pool, even though that is the fun, scientific part of the job. And since an economic return is necessary, known fields containing millions of barrels of oil remain untapped because it would cost more to extract and transport the oil than could be recovered by its sale. Such dollar limits change with product prices, thus many such fields can and will be produced when prices for oil and gas increase.
However, there is a different and less flexible energy-budget limit involved in the production of fossil fuels. As long as oil is being recovered for use primarily as an energy source, no one can afford to expend the amount of energy found in a barrel of oil in order to drill for, pump out, and transport less than a barrel of oil.
Jeremy Boak is the new chair of the AAPG Energy Minerals Division Oil Shale Commodity Committee, and professor at the Colorado School of Mines. According to Boak, the ratio between 1) the energy expended in obtaining oil, and 2) the energy recovered by the process* was probably 1:100 or better for new wells in the era of easy oil, but the ratio has fallen to 1:20 or even 1:10 as that oil has been depleted. The ratio is even less for mature fields that require advanced oil recovery techniques, where Boak suggests that the ratio is below 1:10. So far, efficiency gains through better science and technology have kept the ratio from declining to the point where, as with corn-based ethanol, it’s debatable whether a net energy benefit exists.
Ultimately, even when over half the oil remains in the ground, industry makes the decision to abandon a field when it takes more money and energy to recover the oil than can be extracted from the recovered oil. And with many conventional fields reaching their production capacity limits we are again looking at extracting fossil energy from the immature kerogen in oil shale formations, where Boak says the energy-in/energy-out ratio is only between 1:3½ and 1:5. The renewed interest in this and other unconventional resources is an indirect indication both of industry’s internal forecasts for energy demands and of how close to the bone we are getting.
Rising oil prices will only go so far in promoting recovery of the world’s fossil energy resources. The laws of physics limit how much oil and gas can be recovered from small, deep, or remote fields as long as we don’t intend to put more energy into the ground than we extract from it. Once we develop reliable and inexpensive alternative energy sources we may use hydrocarbons primarily for purposes such as chemical feedstock instead of merely burning them, whereupon they could conceivably become more valuable than the energy they contain. In the meantime, our job as geologists is to use the best available geoscience when picking drilling locations and determining completion techniques. Every day, AAPG members are advancing the science and technology that help keep the energy ratio favorable.
* Described as the “EROI,” the energy return on investment, by Cleveland, C.J., 2005, “Net energy from the extraction of oil and gas in the United States,” Energy, v. 30, p. 769-782.