January 14, 2011

Obfuscatory Data from the IEA and EIA

Gregor McDonald, in a post at The Oil Drum, complains of "channel stuffing" by the two main public energy data sources--the Paris-based International Energy Agency and the Washington-based Energy Information Administration.
In the case of Canada, the high-cost tar sands production has now been aggregated into that country’s measures of “crude oil.” While not as egregious as including ethanol into publicly released data measures of oil, the alchemy and energy inputs required to turn oily dirt into usable petroleum can hardly be deemed as conventional crude oil production. To this point, one of the core methods EIA Washington and IEA Paris have increasingly relied on in recent years–to obscure the very serious and now very real problem of oil depletion–is to include biofuels and natural gas liquids in the accounting of global oil production. The technique that both agencies use to conduct this obfuscation is a familiar one, in which the key information is aggregated (buried) into a much larger barrage of data and presentations. For a scholarly look at the methods governments use to work around their obligations to inform the public, do watch the one hour lecture that Jay Rosen gave to the World Bank earlier this year. Rosen’s deconstructions of the media have been very helpful to me, over the past two years. See his blog here: PressThink.org. Rosen describes the use of opacity as a kind of hiding in plain sight, or secrecy by complexity.

In order to rebut this Secrecy by Complexity it’s the obligation of responsible energy analysts to explain the falsehood of adding biofuels and natural gas liquids (NGL’s) to measures of oil production. The reason is simple: natural gas liquids are not oil. They are not oil in any sense and most important of all NGL’s contain only 65% of the BTU of oil. Worse, biofuels are barely an energy source themselves and are the product of a conversion process of other energy inputs. Accordingly, the world is not producing 84, or 85, or 86 million barrels of oil per day. The world is instead producing 73.436 million barrels of crude oil per day. The depletion of oil will not be solved by either by the production of biofuels and NGLs, nor their inclusion into oil data, as the world economy moves into the future.

When the EIA in Washington falsely composes such forecasts, aggregating future natural gas liquids and ethanol into a supply picture for “oil” as they do each year in their various projections, this disables the public’s ability to accurately understand the true outlook for global oil supply. While it’s still the case that EIA Washington produces data each month for Crude Oil production only, the predominant reporting and forecasting is now weighted towards “liquids”, the unhelpful aggregation of oil with NGLs and biofuels. But most unhelpful of all is that, in forecasts, the EIA has essentially dropped projections for global crude oil supply. For example, in the International Energy Outlook (IEO) 2010 public press conference this May the EIA released to the press the following slide-deck: International Energy Outlook 2010–With Projections to 2035. No accounting or forecast of oil is contained in the document. see: Slide 6: OPEC producers maintain an approximate 40% share of total liquids production in the Reference case.

Little information of any use is actually provided by the projection shown above for one simple reason: the chart does not tell us about the actual energy that will available to society. More egregious is that even in the main body of the IEO 2010 report, more false aggregation occurs with a yet another term of complexity: Conventional Liquids. Indeed, it’s not surprising that OECD governments use opacity and secrecy by complexity to handle this extremely important issue. OECD economies are now structurally short energy supply, having lost access to the cheap BTU in oil that built out their societies over the past 100 years. The loss of cheap energy, the loss of the cheap BTU that oil has provided to OECD nations for the past century, is a crucial factor in the dilemma the West now faces: a newly chronic economic restraint that refuses to go away.
McDonald's post provoked some interesting comments. In response to the idea that if it can run motors and be made into plastics, it ought to be counted as as a "liquid" equivalent to oil, RockyMtgGuy noted the following:
There is an argument for including condensates from gas wells and pentanes plus (C5+) from gas plants in the "liquid fuels" category, since these are liquids under atmospheric conditions and can be blended into the crude oil stream going into the refinery. In fact, many refineries would want to do this because it improves their yield of gasoline, which will be low if they are processing a lot of heavy oil. This is particularly helpful in the US where the demand for gasoline and asphalt is high, but less so in Europe which wants a higher cut of diesel than a condensate+heavy oil mix would provide.

But the lighter NGLs - ethane, propane, and butane - are gases under normal atmospheric conditions. They have different markets, such as petrochemicals, or heating/cooking fuels where natural gas is not available. You can't just indiscriminately blend them into gasoline because they will cause fuel systems to vapor lock under hot conditions. A refinery would prefer to sell them to a petrochemical plant, which is why they are often built side-by-side.

And biofuels, which mostly means fuel ethanol, is problematic because it really involves some double-counting of "oil" production. Refineries are producing diesel fuel, which farmers then burn in their equipment to produce corn for ethanol which the refineries blend into their gasoline. This is just an indirect and expensive way of converting diesel fuel into gasoline. It would be more efficient for the refineries to enhance their refining processes to produce less diesel fuel and more gasoline, but then the total volume of "oil" produced would be lower.

So, the EIA in Washington and the IEA in Paris are producing numbers which are highly misleading. They purport to show that oil production is remaining stable, when in reality it is starting to decline.
One commentator objected that RMG had obscured the nature of ethanol: "Ethanol is a Gas-to-Liquids process, with a (small) net energy gain, a huge economic gain, and a lot of dry distillers grains feeding livestock. The bulk of the energy used is natgas to make ammonia fertilizer, and natgas to run the distillation. The diesel used to run farm equipment is damn near in the noise. Trucking feedstocks and products around takes way more diesel than minimal-tillage corn farming does."

RMG replied by acknowledging that the "use of natural gas to create nitrogen fertilizer is the biggest energy input into creating fuel ethanol. Coal to generate electricity is another big input. The use of diesel fuel for farm equipment is a smaller input, but the diesel fuel to transport crops and run irrigation pumps is also significant."

But it's not really a gas-to-liquids process, it is a food-to-fuel process and has the secondary effective of driving up world food prices. This is not a minor effect - much of the world has become dependent on imports of cheap American corn, which is becoming less cheap as it is turned into automobile fuel.

I don't see the economic gain, because agricultural production and irrigation are heavily subsidized in the US. Turning corn into fuel ethanol just adds even more subsidies to get rid of the corn surpluses caused by the agricultural and irrigation subsidies. It's piling subsidies on subsidies.
At the end of it all, the whole fuel ethanol system is just a huge mass of subsidies that could be eliminated by forcing car companies to build and people to buy more fuel-efficient vehicles. Instead of putting 10% ethanol into gasoline, Americans could just use 10% less gasoline by buying smaller vehicles - which of course people in almost all other countries already do. The main losers would be industrial-scale corn farmers, oil companies, and automobile companies. However the latter groups have much better lobbying organizations than taxpayers do.

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