For most of the two decades after 1980, the scientific debate on ethanol and other biofuels revolved around the issue of production cost relative to those of conven­tional gasoline and diesel. As late as 1999, a lead author of the NRC report was still focusing on the question: is there any real hope that biobased products can compete economically with petroleum-derived products?108

Less than a decade on, a radically different perspective on biofuels has been enforced by the dramatic increase in oil prices that have rendered quite irrelevant the doubts expressed in the 1980s and 1990s on the feasibility of ever producing biofuels at an economic cost competitive to that of conventional gasoline. This watershed was evident in a comment made in an article in the August 29, 2006, issue of the International Herald Tribune: “As long as crude oil is above $50 a barrel, there is a momentum to biofuels that is unstoppable.”109 Analyses made in the 1980s and 1990s (and earlier) were all individually correct in that they reflected the prevailing economic realities of world oil prices; whatever the production route, bioethanol and other biofuels were only likely to be palatable as mass transportation fuels if heavily subsidized and/or as a result of enthusiastic, deliberate, and sustained governmental action (as in Brazil). In late 2007, the future of biofuels seems even rosier as world oil prices have topped first $80 a barrel, then $90 a barrel, and are predicted by industry analysts (never adverse to risking the “ridicule and resentment” noted at the begin­ning of this chapter) to even reach $120 a barrel during 2008.

Conversely, it is straightforward to identify the conditions under which the per­ceived “momentum” in favor of biofuels would falter:

• A severe (or sustained) global economic recession, or

• An unexpected announcement of the discovery of several major untapped oil deposits in politically stable regions of the world and that could be exploited at costs no more than marginally above those presently accepted by the oil industry

Both of these events would act to reduce crude oil prices again toward (if not to) those “enjoyed” for most of the twentieth century (figure 1.3). The outcome would be, however, no more than a postponement of an “event horizon” of far greater historical significance than the year-on-year fluctuations of oil and gasoline retail prices.

The concept of ultimate cumulative production, now usually referred to as estimated ultimate recovery, of global oil was introduced in 1956.110 Given a finite quantity of oil in the Earth’s crust, production could only reach that fixed amount, the oil extraction rate being mathematically fitted by a curve function with a dis­tinct maximum, that is, the “peak oil” theory. By 1956, historical oil production rate maxima were well known: for the Ohio oil field before 1900 and for the Illinois oil field in 1940; projecting forward, the U. S. peak production rate was predicted to occur between 1970 and 1975 and a world peak production rate around the year 2000 — in contrast, world coal production would have a much delayed peak rate (approximately 2150), and total fossil fuel “family” (oil, coal, and natural gas) might last until 2400-2500.[56]

Although U. S. oil production did, in the event, peak a little before 1975, the global picture has remained unclear, and “oil prophets” (who are equally as capable of producing reactions of deep skepticism and dread as are economists) now predict, in reports and publications appearing between 1997 and 2007, peak oil rates to occur at any date between 2010 and 2120, with a mean value of 2040.111 The great variabil­ity in these rival estimates derives from multiple uncertainties, including those of the extent of future discoverable oil reserves and their timing. The onset of irreversible decline could also be influenced by developments in oil-producing regions, in par­ticular increasing domestic oil consumption might eliminate over time the ability of some countries to export oil to net consumers, reducing the number of net exporters from 35 to between 12 and 28 (another large uncertainty) by 2030 — there is even the “inverse” oil security scenario where Middle Eastern oil exporters attempt to withhold or restrict oil extraction if faced by a concerted attempt on the part of the OECD to reduce dependence on Middle Eastern oil.112

To return to a question posed in the preface, when will the oil run out? A dif­ferent perspective is provided by calculating the quotient of the known oil reserves and the actual consumption rate, accepting that “proven” oil reserves may be over­estimated or underestimated and putting to one side any possible (but unproven) reserves to be substantiated in the future (figure 5.13). For the past 18 years, this estimate has changed little, after increasing markedly between 1979 and 1998 as new discoveries were made; the average time until exhaustion of the supply has been

41.5 years (with a standard deviation of ±1.0 year) since 1998. The dilemma lies in interpreting the detailed trend line: is the mean “life expectancy” of oil reserves now decreasing? After reaching parity in the late 1980s, the rate of discovery has been overtaken by the consumption rate since 2003; if that relative imbalance per­sists, the original Hubbert prediction will prove to have been accurate (figure 5.14). There certainly is no sign of the time to eventual exhaustion having increased during the past 20 years, individual years of optimism being followed by a succession of years that fit better with a static or decreasing trend (figure 5.13). The Energy Watch Group, a German organization “of independent scientists and experts who investi­gate sustainable concepts for global energy supply,” concluded in October 2007 that

so many major production fields were past their peak output that oil supply would decrease rapidly from 81 million barrels/day in 2006 to 58 million barrels/day by 2020 to 39 million barrels/day by 2030, with all regions (apart from Africa) showing reduced production rates by 2020, that is, “peak oil is now.”113 Table 5.21 collects the Energy Watch Group’s analysis of the historical sequence of individual nations’ peaks of production since 1955 and compares these dates with the dwindling rate of new oil field discoveries after the 1960s. As collateral, the evidence was presented in the German report that big international oil companies, taken in aggregate, have been unable to increase their production in the last decade despite the marked rise in world oil prices. Coincidentally, in October 2007, oil prices exceeded $90/barrel, highlighting the persistence of the new era of high energy prices that bodes ill if diminishing oil supplies seriously exert their inevitable economic effect.

With natural gas supplies, the horizon of exhaustion remains further away, that is, with a mean value of more than 66 years for estimates made after 1988 (figure 5.15). Integrated over the past 19 years, however, the outlook does not offer promise of natural gas supplies having an increased longevity. If anything, the prospect appears

to be one now of rapidly dwindling stocks if the trends from 2001 onward prove to be consistent (figure 5.15). As with oil, therefore, the era of discovery of large and accessible reserves may be over.

Unless fuel economy is radically boosted by technological changes and popular take-up of those choices, price pressures on oil products caused by a dwindling or static supply (and an expected increase in demand from expanding Asian economies) will act to maintain high oil and gasoline prices. Modeled scenarios envisaged by the DOE and European energy forums include those with persisting high oil prices[57]

can bear, and calling upon a wider range of socioeconomic factors to develop a full accounting of “externality costs.”115 A clearly positive case can, however, now be made without the recourse to such arguments.

Although there are nonbiological routes to substitutes for petroleum products, capable of extending liquid hydrocarbon fuel usage by a factor of up to tenfold, their estimated production costs lie between two — and sevenfold that of conven­tional gasoline and oil products (figure 5.16).116 Unavoidably, their production from oil shale, tar sands, natural gas, and coal deposits would add massively to total greenhouse gas emissions. Although it is also possible that technological innova­tions will enable oil to be extracted with high efficiency from such nonconventional sources as oil shale and tar sands and push the limits of geographical and geologi­cal possibilities for neglected or undiscovered deep-ocean oil deposits, these too will be costly.[58]

Perhaps, the crucial debate in coming decades will be that of allocating public funds in the forms of tax incentives to offset exploration costs (on the one hand, to the oil industry) or R&D costs to a maturing biofuels industry, that is, the crucial policy decisions for investments in new technologies that may be substan­tially unproven when those choices must be made. The oil industry has, in fact, been highly successful in attracting such subsidies. The last (numerical) word can be left with the U. S. General Accountability Office, whose assistant director for Energy Issues, Natural Resources, and the Environment made a presentation to the “Biomass to Chemicals and Fuels: Science, Technology, and Public Policy” conference at Rice University, Houston, Texas, in September 2006.117 Tax incen­tives to the ethanol industry between 1981 and 2005 amounted to only 12% of those for the oil and gas industry between 1968 and 2005 (figure 5.17). These figures underestimate the full sums expended in incentives to the oil and gas industry because they date only from when full records were kept by the U. S. Treasury of revenue losses, not when an incentive was implemented (the Tariff Act of 1913, in the case of the oil and gas industry). Although the magnitudes of some subsidies for conventional fuels are much reduced presently as compared with the situation in the 1970s and 1980s, they still outweigh the sums laid out to support biofuels. An “incentives culture” has, therefore, a long history in shaping and managing energy provision.

The competition is not between fuel ethanol, on the one hand, and substitutes for conventional oil products, on the other, but that between rival technologies for liquid fuels (most of which are biobased) and — a highly strategic issue — using plant biomass as either a source of biofuels or predominantly a source of carbon to replace petrochemical feedstocks in the later twenty-first century. Is the future one of a hydrogen economy for transportation and a cellulose-based supply of

“green” chemicals? Will nuclear power be the key to providing hydrogen as an energy carrier and will biological processes provide liquid fuels as minor, niche market energy carriers for automobiles? Or is the future bioeconomy (as discussed in chapter 6) a mosaic of different technologies competing to augment nuclear, solar, and other renewable energy sources while gradually replacing dwindling and ever more expensive hydrocarbon deposits as a renewable and (possibly) sus­tainable bedrock for the chemical industry beyond the twenty-first century?