Fossil Fuels – Cheap, Available, Reliable & Convenient

Global energy consumption

For much of the last fifty years, the way energy has been generated and distributed has changed very little. Generally concentrated in giant deposits, fossil fuels have been abundant and cheap; there price has largely been set simply at some markup on the cost of getting them out of the ground and to the point of consumption. The world has therefore become accustomed to energy being amazingly cheap compared to any time prior in human history. Indeed, even today’s prices are likely to look very good value compared to what energy is likely going to cost in the future.

Over the last two hundred years or so, the vast reserves of coal, oil and gas the world suddenly discovered it possessed have meant that, until recently, there was always more energy available for consumption if there was demand was demand for it. Sometimes this meant price went up but generally even this was not the case. In short, society has become accustomed to having enough energy to do whatever it was that it wanted to do. In the future availability is likely to be far more constrained as existing reserves become depleted and production declines. Examples of this are becoming abundant with the UK’s North Sea oil and gas fields, Mexico’s giant Canterell oil field and Kuwait’s giant Barghan oil field being well known. Competition for fossil fuel inputs is almost certain to intensify; It is not unlikely that there will be occasions when oil, gas, coal or electricity will be rationed and therefore pretty much unavailable regardless of price.

As mentioned above, fossil fuel abundance since have allowed energy supply to keep pace with or outstrip with demand. Energy suppliers have therefore pretty much always had sufficient buffer stocks to avoid turning away customers regardless of their demands – even when demand spiked, supply could keep up. This ability meant that customers could choose not to care about the specifics of how their energy was supplied, its production could be safely outsourced by just about everyone to centralised energy suppliers. This model is already showing signs of stress visible to all – the first stage in the reorganisation of energy supply, price based rationing, is already well advanced. If demand continues to outstrip supply for any significant period, price based rationing will be supplemented by physical rationing. The recent events in India and South Africa suggest that electricity may be the first major form of energy that this applies to. Those users who need to maintain a reliable supply will be forced to take far more direct responsibility than has been the case in recent history.

Coal and oil are energy dense and stable making them incredibly convenient to transport to their point of use. Even natural gas can piped relatively easily or transported by LNG tanker albeit slightly less conveniently. Along with other historic factors, the result has been an energy industry wherein giant utility corporations extract the fuels and process them, in many cases even supplying the finished product to the end user. Electricity generation has largely been undertaken by centralised utilities using massive generator systems. Combined with the low costs of fossil fuel inputs these generation systems meant that users did not have to bother about where their energy came from; one could just fill up the car at the gas station or plug the toaster in to the socket and not have to think any more about the miracle that was required to facilitate it. This miracle of convenience to which nearly everyone in the developed world has become accustomed is likely to be less miraculous as fossil fuel depletion impacts on input availability for all forms of generation. One result is that distributed renewable energy supplies will become far more attractive. The downside is that these have been and still are far less convenient than their fossil fuel based alternatives.