Oil - some crystal ball gazing

What do increasing oil prices mean for us? We need to separate out extreme claims, the economy, environmental concerns and the impacts on society.

Energy itself cannot be substituted, but crude oil has alternatives. At an expensive extreme, we could grow canola or mallee oil and we have coal for hundreds of years. Sure, there will be a crunch eventually - but further down the track. Oil can be both a provider of energy and an input to industry and coal can substitute in both situations.

Putting it very fundamentally, our way of life comes down to fertiliser, concrete, metal and transport.

Fertilisers are made from phosphorus and ammonia. Phosphorus extraction involves sulphuric acid, which is extracted more readily from oil. But it can be extracted from coal. You need hydrogen to make ammonia. Hydrogen is more readily extracted from gas and oil, but you can also extract it from coal and with sufficient energy, you can extract it from water.

The raw materials for concrete are plentiful. Iron ore is abundant, along with the coal to process it.

An important alternative to fertiliser from fossil fuel is biosolids recovered from sewage. There are processing and transport costs, but it may well become the cheapest option. At present, there is a health issue - it needs to be sterilised - which collides with issues of cost and sustainability - not to mention the inertia around fertilisers as we know them. But that may change. Perhaps irradiation will be an efficient means of sterilisation.

The "Hubbert curve" has oil production peaking and then declining. However, as noted in other articles in this feature, it's the pumping capacity, not the size of reserve, which determines the output. Rather than a "peak" we might have a "cliff", but the crunch will then be further off.

There's the energy profit ratio (EPR) - the energy required to extract the energy contained in a barrel of oil. In times past you could obtain about twenty five barrels of oil for the energy in one, and now it's down to about seven. It reduces the "size" of the reserve - if you need one barrel of oil to extract two, the size of the reserve is halved - for a ratio of seven, its reduced to 86 per cent of the original - and so on.

However, extraction energy is only one cost. There's infrastructure cost, exploration cost, ongoing maintenance and labour, and so on. Fabricating an oil platform takes energy, but for this you'd get a lot of energy out of the ground. It's still worthwhile to talk about the "value" of the oil rig in dollar terms separately to its energy cost. The "energy profit ratio" is not as significant as it advocates suggest. Oil is an important part of the economy, but not the only one.

Two important alternatives to current oil reserves are shale oil and tar sands. These have been criticised for having low EPRs but regardless, the EPR is positive. It's not clear whether the low EPR is the result of a thermodynamic limit or current technology. There are also issues of its environmental impact, but it is nevertheless likely to be important.

Even for low EPRs it is possible to extract the oil for industry, with the energy provided by sources which do not have alterative industrial uses.

If we replace oil with coal, we still generate CO2; but nuclear, tidal, solar and biofuels (for example, biodiesel and alcohol) do not generate CO2. Biofuels take CO2 out of the atmosphere as the plants grow; we put the CO2 back when we consume the fuel. Biofuels are CO2 neutral, as long as the fertiliser and energy used in their production do not themselves generate CO2.