Electricity vs Oil
In light of the diesel crisis unfolding around the globe I thought it would be worthwhile to touch upon the topic of electrification. Will EV-s be our saving grace? Can we save the climate and our modern way of life by switching to electric vehicles? Has this transition begun in earnest at all? As someone with an engineering background and a direct involvement in the electrification of road transport, I long felt the need to dispel some of the myths around the topic, and to offer a bigger picture view than what is usually available from the media. So, without much further ado: here you go.
In what eerily resembles a PR campaign, we are under a constant bombardment of messages from the International Energy Agency, company CEOs, corporate media outlets and pundits how oil demand is peaking and how electric vehicles and ‘renewables’ are making oil less and less necessary. How all we need to do is to invest in smart grids, build more wind, more solar and how battery metals will serve as the basis of our clean green economic growth from this point on.
On the other hand, we see more and more news that a recession is looming, and as a result oil demand would fall as clear sign of economic turmoil. In order to prevent this, we see extorted efforts by our leadership class to lower prices at the pump. Begging the Saudis to pump more. Considering waiving sanctions. Maybe its just me, but the two simply doesn’t add up. Shouldn’t we be less dependent oil with all those electric cars zooming around in our cities? Why is everyone scrambling for cheap oil then?
Well, the problem is — suddenly realized by our wise elites — that in order to proceed with electrification and to build out a smart grid powered by ‘renewables’, we would need to extract more oil than ever — despite the fact that by doing so we would utterly screw up the climate… and much more.
Let me explain.
To understand what are we trying to replace with electric currents, first we have to take a look at the numbers. According to BP oil companies in 2021 have extracted 78 million barrels of crude oil a day, which they distilled into 23 million barrels of gasoline, 5 million barrels of jet fuel and 27 million barrels of diesel/heating oil (these two are almost the same thing). The remaining 23 million barrels a day were used up in chemicals production (going into pesticides, paint, shampoo, toothpaste and many other products) while roughly 2 million barrels have found their way into asphalt (tarmac / blacktop) production.
This paragraph above alone should put a wedge between our dreams of electrification and abandoning oil. First of all, electric cars displace gasoline use only, while remaining hopelessly dependent on the remaining oil products to operate. Lubricants for their gearboxes, made from oil. Synthetic rubber tires, made from oil (there is not enough natural rubber to cover the demand, sorry). Asphalt, to drive your vehicle on, also made from oil. Plastics — making up as much of 30% of a modern vehicle’s weight — all made from oil. Look at the numbers above, again: there are 23 million barrels of oil turned into these products every single day. There is no way on Earth you can replace this amount with hemp, wood, or corn derived wunder-plastics.
But this is just the fun stuff. You can leave all this behind and hop on bus instead, right? Well, not so fast. Buses run on diesel. As every other heavy duty truck, dumper, excavator, harvester, combine, tractor, ship, back-up generator etc. responsible for mining all the metal ores and carrying stuff needed to build more cars, solar panels, wind turbines, heavy duty trucks, dumpers, excavators, harvesters, combines, tractors, ships, back-up generators etc. Not to mention growing and transporting food keeping 8 billion of us alive.
It is no exaggeration to say that this modern, urban civilization is kept alive by diesel fuel.
Diesel is the prime reason behind the fact, that we still need oil — especially so, when we would like to electrify every moving vehicle, including the garbage truck and the kitchen sink. (Haven’t you heard about electric kitchen sinks yet? Just kidding.) Should world production of electric vehicles rise in any significant manner (above a few percents of global production today) we would immediately see a surge in diesel demand as new copper and lithium mines would ramp up extraction.
Should we then try to electrify the mining fleet, transport trucks, ships, diesel locomotives and the rest as well? The many, currently insurmountable technical difficulties aside, a transition on this massive scale (now including heavy machinery) would surely shot diesel demand and the resulting CO2 emissions through the roof in the process, and end us up with an enormous mountain of toxic waste (1) as a side-effect…
If it were possible… Only it isn’t.
The bad news is, that the global diesel shortage is already upon us and the boom in EV production is still yet to materialize. Other issues — environmental, resource, waste handling etc. — notwithstanding, this global fuel shortage alone would put a break on any serious attempt made at turning everything electric.
Biodiesel (whether soy, algal or bacterial in origin) is simply not available at scale today, not to mention the fact that all of these “solutions” require heavy machinery, pumping cubic miles of water, adding pesticides, herbicides, fertilizers etc. and would result in a ton of biological waste needed to be handled. At the end of the day we would spend roughly the same amount of fuel on producing biodiesel than what we would get out in the end. All our current efforts aimed at producing bio-fuels are nothing but a vast subsidy scheme for the agriculture industry seeking to send its excess production of corn and soy somewhere.
There is no replacement for diesel. Hydrogen is but a very expensive, energy wasting battery. Regular batteries are also very heavy, charge slowly (compared to pumping diesel into a cheap metal container), and are very uneconomic to use, leaving no room to payload. Refineries can’t do miracles either: the ratio of diesel they can make out of a barrel of oil is fixed by the laws of chemistry and physics… within a rather tight range of +/- 5%.
As a result price hikes and inventory drawdown have already started. If this much touted electric transition were really underway we would see diesel prices (already at a record high) rise further and inventories fall lower still. According to a recent article on Forbes:
Diesel inventories are at the lowest seasonal level ever, heading into winter. The Energy Information Administration (EIA) announced that U.S. distillate inventory (including heating oil and diesel fuel) had 106.2 million barrels in the week ending October 14, which is about 20% below the 5-year average and a 25-day supply. (2)
How do we know then that this is not simply due to a temporary lack of supply, or due to a war?
A tell-tale sign that this trouble was already long in the making is that while according to BP gasoline consumption could grow at an average 1% a year (not a sign of the growing share of electric vehicles for sure), diesel fuel could grow only at 0.4% annually over the last ten years (during the 2011–2021 period). Remember, there is a fixed percentage of any given barrel of oil which can be turned into diesel. And while refinery throughput in the US did fall over the past 2 years, it did not do so worldwide. In other words: if this were a US issue alone, the missing quantities could have been easily sourced from somewhere else. This is not a capacity issue — at least not on the side of refining.
The real problem is, that the United States produces lighter crude oil, and imports heavier crude oil. At the core of this issue (without going too much into technical details) is a difference in the composition of various types of oil. Light oil yields a lot of light distillates like gasoline or naphta (a feedstock for plastics), while diesel being a middle distillate, requires more heavier crude (more thicker, denser oil) to make. You can make some diesel out of shale oil for sure, but definitely not enough. The missing quantity has to be made from imported medium-heavy oil. (So much for US energy independence…)
On the other hand extra heavy oil, like what is “produced” in Canada or Venezuela is also a poor product to make diesel from. The sticky goo coming from these two countries has to be first broken down into some lighter stuff by adding hydrogen derived from natural gas and — you guessed — a lot of energy. In other words: making diesel out of extra heavy oil has an abysmal return on energy invested. As a result, extra heavy oil simply does not worth as much to the world economy, and consequently will not save our butts either.
The world’s problem at this point is, that as traditional medium-heavy crude oil sources continue to deplete and get replaced by fracked ultra-light shale oil and extra-heavy synthetic crude from places like Canada, there will be less and less of the right type of oil to make diesel from.
Add in political considerations, bans and embargoes (affecting exactly the “right type” of oil) and you’ve got a perfect storm on the horizon. As I keep saying on this blog: our leaders are too stupid to understand (let alone solve) our problems and predicaments, but clever enough to make them much worse — for example by creating import bans and the like:
This means the EU will need to replace 1 million bpd of crude and 1.1 million bpd of oil products, with diesel especially scarce and expensive with prices 70% higher than this time last year helping to fuel global inflation, the IEA said.
How smart is that…? Well, if the question was how do we make diesel — the lifeblood of every modern economy — more expensive for the Europeans, then they have found the perfect answer. That this would have a side effect of lowering demand in the EU, and thus ‘easing the pain at the pump’ everywhere else, must be a mere coincidence only. It also should not come as a surprise that the White House Considers Curbs On Fuel Exports Amid Diesel Squeeze.
I let you draw your on own conclusions.
In the meantime oil production is still expected to fall very fast from shale, as I keep reminding my Readers for over a year now. The US oil business will not keep the economy floated for very long… We are simply running out of the right kind of oil to make more diesel from, and the much touted shale revolution did not change that picture much. Now, that fracking is close to taper off for good, and with the rest of the world experiencing similar problems, the diesel crisis is here to stay for a very long time… and may very well turn into a chronic illness of this civilization.
At first this will mean higher inflation, affecting just about anything (as every product needs raw materials to be mined or at least to be carried on a ship or truck at some point). Fresh produce (fruits, vegetables) will be especially hard hit, just like metals like copper — making ‘renewables’ an even less appealing proposition. Then later on it will make many businesses go bankrupt or become nonviable due to ever increasing shipping costs, while people will have less and less money to spend on goods and services after paying the ever higher grocery bill…
This is going to be one hell of a long emergency.
All in all, diesel is a but a harbinger of things to come. It is going to be the first casualty of peak oil supply, but being the lifeblood of industrial civilization, its peak will also put a definitive end to economic growth and to all of our dreams of turning everything electric (yes, including the kitchen sink). The future will be less industrialized, less dependent on global supply chains and more local, small scale and decentralized as a result.
There is no other way. Building and buying more stuff — no matter how green we label them — will just continue to make our environmental and climate predicaments worse. The political class will of course do everything to prevent an inevitable decline in industrial activity to set in, but while they can trade away people’s freedom to an illusion of security, or conjure money from thin air, they will never be able to strike a better deal with Nature or cross the laws of physics.
Until next time,
B
Notes
(1) The inconvenient truth, no one willing to admit is, that a technological civilization at this scale is wholly incompatible with a finite planet maintaining a healthy climate and biosphere — with or without electrifying everything. And even if we were to succeed with this task, then we would realize all of a sudden, that we had run out of all of the economically viable copper, lithium and other critical resources. Only then would we see, that we had turned the one and only mineral wealth of our species into dead battery cells and radioactive, toxic tail-ponds — making forced electrification one of the unwisest move humanity has ever made.
(2) Of course this doesn’t mean that the US will run out of truck fuel in 25 days, as refineries and ships from other continents still keep delivering this vital liquid. This means however, that there is clearly not enough fuel on the market, and the missing quantities now have to be filled in from stocks.
Further reading:
Diesel is finite — a well researched topic from A.J. Friedman. Well worth the read if you still have quibbles with my observations above.
