Post Carbon Institute

By Richard Heinberg - Post Carbon Institute, September 28, 2017

News reports tell of the devastation left by a direct hit from Category 4 Hurricane Maria. Puerto Ricans already coping with damage from Hurricane Irma, which grazed the island just days before, were slammed with an even stronger storm on September 20, bringing more than a foot of rain and maximum sustained winds of at least 140 miles per hour. There is still no electricity—and likely won’t be for weeks or months—in this U.S. territory of 3.4 million people, many of whom also lack running water. Phone and internet service is likewise gone. Nearly all of Puerto Rico’s greenery has been blown away, including trees and food crops. A major dam is leaking and threatening to give way, endangering the lives of tens of thousands. This is a huge unfolding tragedy. But it’s also an opportunity to learn lessons, and to rebuild very differently.

Climate change no doubt played a role in the disaster, as warmer water generally feeds stronger storms. This season has seen a greater number of powerful, land-falling storms than the past few years combined. Four were Category 4 or 5, and three of them made landfall in the U.S.—a unique event in modern records. Puerto Rico is also vulnerable to rising seas: since 2010, average sea levels have increased at a rate of about 1 centimeter (0.4 inches) per year. And the process is accelerating, leading to erosion that’s devastating coastal communities.

Even before the storms, Puerto Rico’s economy was in a tailspin. It depends largely on manufacturing and the service industry, notably tourism, but the prospects for both are dismal. The island’s population is shrinking as more and more people seek opportunities in the continental U.S.. Puerto Rico depends entirely on imported energy sources—including bunker oil for some of its electricity production, plus natural gas and coal. The Puerto Rico Electric Power Authority (PREPA) is a law unto itself, a monopoly that appears mismanaged (long close to bankruptcy), autocratic, and opaque. Over 80 percent of food is imported and the rate of car ownership is among the highest in the world (almost a car for each islander!).

To top it off, Puerto Rico is also in the throes of a debt crisis. The Commonwealth owes more than $70 billion to creditors, with an additional $50 billion in pension obligations. Puerto Rico’s government has been forced to dramatically cut spending and increase taxes; yet, despite these drastic measures, the situation remains bleak. In June 2015, Governor Padilla announced the Commonwealth was in a “death spiral” and that “the debt is not payable.” On August 3 of the same year, Puerto Rico defaulted on a $58 million bond payment. The Commonwealth filed for bankruptcy in May of this year after failing to raise money in capital markets.

A shrinking economy, a government unable to make debt payments, and a land vulnerable to rising seas and extreme weather: for those who are paying attention, this sounds like a premonition of global events in coming years. World debt levels have soared over the past decade as central banks have struggled to recover from the 2008 global financial crisis. Climate change is quickly moving from abstract scenarios to grim reality. World economic growth is slowing (economists obtusely call this “secular stagnation”), and is likely set to go into reverse as we hit the limits to growth that were first discussed almost a half-century ago. Could Puerto Rico’s present presage our own future?

By J David Hughes - Post Carbon Institute, October 2014

In recent years Americans have been hearing that the United States is poised to regain its role as the world’s premier oil and natural gas producer, thanks to the widespread use of horizontal drilling and hydraulic fracturing (“fracking”). This “shale revolution,” we’re told, will fundamentally change the U.S. energy picture for decades to come—leading to energy independence, a rebirth of U.S. manufacturing, and a surplus supply of both oil and natural gas that can be exported to allies around the world. This promise of oil and natural gas abundance is influencing climate policy, foreign policy, and investments in alternative energy sources.

The primary source for these rosy expectations of future production is the U.S. Department of Energy (DOE). Each year the DOE’s Energy Information Administration (EIA) releases its Annual Energy Outlook (AEO), which provides a range of forecasts for energy production, consumption, and prices.

The 2014 AEO reference case projects U.S. crude oil production to rise to 9.6 million barrels of oil per day (MMbbl/d) in 2019 and slowly decline to 7.5 MMbbl/d by 2040, while natural gas production is projected to grow for at least the next 25 years and hit 37.5 trillion cubic feet per year in 2040. Tight oil (shale oil) and shale gas serve as the foundation for these optimistic forecasts.

This report provides an extensive analysis of actual production data from the top seven tight oil and seven shale gas plays in the U.S. (These plays account for 89% of current tight oil production and 88% of current shale gas production, and serve as the primary sources of future production in the EIA’s forecasts—82% of forecast tight oil and 88% of forecast shale gas production through 2040.) It concludes that the current boom in domestic oil and gas production is unsustainable at the rates projected by the EIA, and that the EIA’s tight oil and shale gas forecasts to 2040 are extremely optimistic. What this means is that the country's current energy policy—which is largely based on the expectation of domestic oil and natural gas abundance far into the future—is badly misguided and is setting the country up for a painful, costly, and unexpected shock when the boom ends.