Energy: The Frantic Global Search for More

 |  Includes: GAZ, KOL, NLTX, OGEM, OIL, XLE
by: Elliott R. Morss


There has been much in the news about coal and oil mining problems. The BP spill is dumping more than 50,000 barrels per day into the Gulf. Will it be as serious as the 1979 IXTOC-1 blowout that resulted in 3.5 million barrels flowing into the Gulf before being capped 9 months later? Quite possibly.

And then there are the continuing coal mining disasters. In China, 2,631 lives were lost in 2009 (7 per day), down from 3,215 in 2008. Frank Warner estimates that the US compares favorably with China: only 2 deaths per 100 million tons of coal mined versus 85 deaths in China.

In oil and coal, most problems take place when the fuels are being mined. With nuclear, the problems occur when the fuel is being used to produce energy: conservative estimates put nuclear power deaths at 4,100 people. Tracking deaths from radiation is tricky - Greenpeace reports one study estimating nuclear fatalities as high as 182,156.

What do all these disasters have in common? They are all part of man’s desperate efforts to find energy fuels to supply the world’s ever-growing demands. In what follows, global energy supply and demand data are presented and discussed.

Today, there is very little slack between growing energy demands and production capacity. If anything goes wrong, e.g., a hurricane hits a strategic region or a worker strike anywhere in the energy supply chain, shortages will occur and other serious problems will arise. And the world is not searching for more fuels in a coordinated manner: each country is trying to insure its own supplies – a dangerous situation.

Energy Production

Since 1970, energy production has doubled. Table 1 indicates the primary global sources of energy to be oil, coal, and natural gas followed by combustible wastes/renewable and nuclear. The United States and China are the largest energy producers, larger than Saudi Arabia and Russia, the largest oil-producers. Since 2005[1], China has passed the United States to become the largest energy producer in the world.

The United States formerly had very large crude oil reserves. But since 1980, it has extracted 67 billion barrels of oil from its own lands to partially satisfy its growing oil demands. To supplement its domestic production of 300 MT, it had to import another 573 MT, far more than any other country.

Coal is second only to oil as a global energy source. Coal reserves, measured in MTOE terms, are greater than any other fossil fuel reserve. China produces more than twice as much coal as the United States and the latter produces twice as much as the next producer, India. The United States, Russia, and China have more than 100 years of coal reserves at current production rates.

Global reserves of natural gas are large. At current production rates, proven natural gas reserves will last 63 years. And proven reserves are increasing as new discoveries are being made. Russia and the United States are by far the leading natural gas producers. At current production rates and proven reserves, Russia can produce for 59 years while United States will run out in less than 10 years.

When it comes to nuclear, one thinks of France and Japan. However, the United States generates more energy from nuclear than any other country, almost twice as much as France, the second largest producer. This is because the United States needs so much energy overall. Nuclear production constitutes only 12% of US energy production while the percentages in France and Japan are 87% and 69% respectively.

Energy Consumption

The United States is the leading consumer, but China is closing the gap rapidly.

The following table provides tons of oil equivalent energy consumed by the OECD European countries and selected other countries.

Energy Consumption per Capita

Region/Country TOE/Capita
OECD - Europe 3.36
United States 7.75
Japan 4.02
China 1.48
India 0.53
Click to enlarge

IEA, op. cit.

Energy Imports

The United States imports 15% of all energy fuels traded internationally.

Energy demand is projected to grow rapidly in China, India and Indonesia. China car sales passed US sales several years back. In 2010, China sales are on track to break the US car sales record of 17.4 million set in 2000.


  1. Oil

From a global perspective, the primary energy problem is the rapidly growing demand for oil. Why is this? Globally, there is plenty of coal and natural gas. And more nuclear plants can be built. Why can’t these and other energy sources replace oil as the primary energy source? Certainly, with higher oil prices, some substitution will occur. But the real problem is in transport: there are not yet adequate substitutes for oil in this sector. As indicated in Table 1, 35% of the world’s energy comes from oil. And of that total, 63% is used in the transport sector.

It is relatively easy to find substitutes for oil where energy is produced in a fixed setting such as in an electrical plant: coal, natural gas, and nuclear power come to mind. However, it becomes more difficult to find reasonably inexpensive substitutes when the objects needing energy, move, like planes and cars.

50% of energy traded internationally is oil. And here is where the problems are likely to occur as the demands of China, India, and Indonesia increase. What will China and the US do to secure oil supplies?

  1. China

China gets about 60% of its oil from the Gulf Region. It is aggressively trying to diversify its sources of supply and has recently made “oil shopping trips” to Central Asia, West Africa and the Americas. China regularly offers military equipment for oil

contracts. China has oil deals with Iran and Sudan, and has repeatedly blocked Western efforts to impose Western sanctions on these countries.

  1. United States

In 2008, the leading suppliers of oil to the United States were Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and Iraq, in that order of importance. Chavez would love to stop selling oil to the US if he could find another reliable buyer, and Nigeria has regular disruptions because of in-country civil strife. Does anyone want to speculate on why the US went into Iraq? Was it really to bring democracy to the Gulf? Keep in mind that Iraq’s estimated oil reserves are second only to Saudi Arabia’s.

  1. Energy Alternatives

Considerable attention has gone into finding alternative energy sources to avoid global warming. The data on global warming is probably sound, and major global transformations will occur if significant steps are not taken in the next few years to avoid them. But despite the growing concerns and government subsidies, alternative energies are growing slowly. In 2007, geothermal, solar, wind, etc. amounted to less than 1% of total energy fuels.

An oil executive recently pointed out to me that the largest energy venture capital companies in the world are the oil companies. They have the cash and are involved in all alternative energy sectors. But like any business, they would prefer to sell off existing inventories before bringing new products to the market. By keeping oil prices just below breakeven for these alternative energies, they can work down their oil inventories gradually. Later, they can emerge as leaders in the new industries.

Perhaps as a consequence of this, most energy venture capital is now not going into the development of new energies. Instead, it is directed at energy saving technologies, like systems that minimize energy use in homes.


We have heard it before: we are running out of oil and other natural resources. Remember the Ehrlich – Simon wager? In 1980, Julian Simon bet Paul Ehrlich that the prices of any non-government controlled natural resource would be lower one year or more later. Ehrlich took the bet and chose chromium, copper, nickel, tin, and tungsten. He specified 1990 as the end date. Ehrlich lost the bet; the prices on all five commodities were lower in 1990 than they were in 1980.

Are we in a new world? I think so. Satisfying the energy demands of Western nations is the primary cause of global warming. But now, with the growing middle classes of Asia, Latin America, and Africa demanding the same energy intensive products as the West, things will become more problematic.

[1] Elliott R. Morss. "Global Energy: A Factual Framework for Future Research" New

Global Studies 2.1 (2008).

Disclosure: No positions