On Wednesday November 14, 2012, I attended a presentation on energy sponsored by the Yale Club of New Haven entitled, “Physics, petroleum and pricing: The Science underlying our current and future energy crises,” presented by Martin Cobern, ’74 PhD. His talk was particularly timely given record breaking prices for gas and heating oil.
Mr. Cobern began his discussion by explaining the difference between oil reserves (stocks) and production (flows), something that is often not fully appreciated by the general public. He noted that reserves are useless until they’ve been extracted from their resting place. And extracting these fuels is largely contingent on one parameter:
“Pressure is paramount,” he explained, because the four stages of extraction from primary (i.e. gushers) to quaternary (i.e. fracking) are pressure-dependent. With an inverse relationship, each of these phases are investment-dependent. As production moves through the four stages, pressure of reserves decreases and cost of extraction increases.
In other words, primary extraction is possible due to high pressure and allows for small investments for relatively high value. As extraction stages progress through secondary, tertiary and quaternary stages, pressure is less and investments increase for relatively less value.
Based on historical data, there is a serious concern beyond this inverse relationship. Not only do costs increase, but extraction rates decline. In other words, for any particular site – as we move through the four stages – we get less and less fuel over time, even with improved technology.
This led to a critical point in the presentation. What is peak oil? Oftentimes, peak oil is thought to be a measurement of our reserves (stocks). But that’s not the definition of peak oil.
Peak oil is not related to the total reserves of Earth’s fossil fuels. Rather, peak oil is related to the rate of extraction of Earth’s fossil fuels. This means that despite conventional wisdom peak oil is not a measurement of stock. It’s actually a measurement of flow and we are not in danger of running out of fossil fuels in the near future. They will continue to be available, but will probably cost more to extract and therefore, more expensive for the consumer.
Mr. Cobern continued by offering his views on the policy, politics and economics of energy production.
He concluded by saying there are no “magic bullets” to address our energy issues, but there are solutions. Through energy efficiency improvements and conservation, as well as diversification of our energy portfolio, America and the world will be able to fulfill our energy needs.
Martin Cobern, Ph.D. ’74, is an Associate Fellow at Trumbull College and a Former Governor of the Association of Yale Alumni.