Exxon Mobil Corp. (NYSE: XOM) Has Succeeded ...

[ptheland]

I assume this is a “tongue in cheek” thread - folks just having fun.

For me, it’s a bit of both.

Yes, it’s a bit silly to contemplate how to power the world on animal fats. On the other hand, I don’t doubt that there are certain specialty applications where some form of animal fat is the preferred lubricant. I can’t name any, but it would not surprise me at all if they existed.

But there’s also a larger point. Just like whale oil, petroleum is a finite resource. What we have in the ground right now is all that we will have. Effectively, forever. Oil isn’t like whales. Stop hunting whales and their population will again increase, unless we’ve killed so many that it becomes too hard to find a mate and reproduce.

Measured over decades, there is only one direction for the price of petroleum. Up. It will become more scarce and more expensive to extract as time marches on.

Yes, there will be wiggles in the line. Gasoline prices in the US have retreated a little from their recent highs at $5-6. But we will see those prices again. Perhaps within a decade or less, we will consider those prices normal. In a couple of decades, those recent highs will be the good ol’ days of cheap gas.

We will reduce our usage of fossil fuels one way or another. For now, we get to choose the timing. But if we keep deferring the decisions into the future, the timing will eventually be forced upon us.

—Peter

[texirish]

Good post Peter. Thoughtful. You make three important points:

o Petroleum is a finite resource.

o It will become more expensive as its availability diminishes.

o We will reduce our usage of fossil fuels one way or another.

Over a very long time span, I believe you’re correct. Charlie Munger agrees with you. He states we should buy all our petroleum from others and save what we have in the USA for the future.

I started my work career in an Exxon R&D lab located in the Baton Rouge refinery in 1955. As I became more familiar with the many different molecules in petroleum I thought, even then, that it’s a damn shame to just burn such wonderful stuff.

And, over the decades, I consistently underestimated the ability of technology to enable us to find and produce it. The “peak oil” story. And, in fact, we did hit “peak oil” in a number of reservoirs. But we kept finding new sources. “Tight” oil from shale and very deep offshore are just two recent examples.

In ExxonMobil’s last update they expect liquid hydrocarbons (petroleum and natural gas condensates) world consumption to be only about 10-12% higher in 2050 than actual consumption in 2019. They also expect OCED consumption to be down 12% while non-OCED consumption to be up 31%. Growth in the middle classes in China, India, and Indonesia are major factors. This balances out to a 14% growth in energy demand over three decades. What most consider renewables - geothermal, wind, solar, and biofuels - make up 11% of total supply compared with 3% in 2019.

This is going to require finding a lot more petroleum due to the decline in production from existing fields. If this is unsuccessful, prices will climb even more and cause demand destruction. And slow down economic growth.

There are alternates. If one thinks of the range of fossil fuels from coal to natural gas, they’re all hydrocarbons. The difference is in the amounts of hydrogen they contain - low for coal, medium for petroleum, saturated for natural gas. The amounts of carbon are huge compared to petroleum. The technology exists to convert coal to petroleum - Germany did it during WWII and South Africa also when imports were cut off due to apartheid. There are better ways. Should very cheap hydrogen become available - say from further breakthroughs in solar or fusion - then this could be used to “manufacture” petroleum.

I guess the point of this dialogue is that humanity can have access to petroleum for a very long time - it’s going to be a matter of cost. High value end uses like lubricants and feedstocks for chemicals and other uses can be provided.

So I think it’s going to be a well into the distant future before it goes away from a supply standpoint.

The great debate is the trade-offs of combatting climate change and improving the lives of many non-OCED humans. My personal view is that capturing and sequestering the CO2 from using fossil fuels will turn out to be the logical way to pursue both. That’s already getting underway in many OCED countries. It remains a political hot potato - carbon taxes - in the USA.

Some may question the statistics above from Exxon. I can assure you it’s not a PR document. It is the data base used for long range investments of many billions of dollars as well as directing R&D among other uses. It is their reasoned judgment - others may see the future differently.