The Incalculable Cost of Oil and Gas Production

The oil and gas industry is currently synonymous with controversy over carbon emissions and fuel prices. During the past few months, the public have witnessed the going rate of petrol and diesel yo-yo its way in and out of affordability due to the price of a barrel of oil. Fuel prices from major gas suppliers have also undergone an almost intangible hike, with some companies announcing increases of up to 40 per cent. It may seem an unusual statement to make but even at a high price, the potential value of energy supplied by oil and gas is practically priceless and the highest prices paid this year for a barrel of oil could be considered a bargain.

What has become apparent during these times of economic uncertainty is the true value of a barrel of oil. Each barrel of crude is capable of releasing 6 billion joules of energy. To put this in to some sort of perspective, back in the days before the industrial revolution it would take five men a whole year working continuous twelve hour days doing hard labour to produce the same amount of energy. So even when the price of a barrel soared to 200 USD earlier this year, it can be argued that the true value is near enough incalculable.

The monetary value of producing the 6 billion joules manually at today’s minimum wage is in excess of 185,000 USD. The value of time saving through powering machinery to do the work is of course a much more challenging calculation. As a global community we are currently capable of producing 74 million barrels of oil a day, but demand has risen to 88 million barrels; the difference is made up with natural gas. It is little surprise therefore that the world’s economy is very much dependent on the cost of black gold and the endless search for further reserves.

Economics aside, the environmental impact of using oil and gas a as a fuel for ever increasing energy demands has more implications than the highly publicised issues of carbon emissions, offset and trading. The potential effect on climate change through continuing exploration is just as hot a topic as the arguably hyperbolic issues of carbon economics. The latest proposals include drilling for oil in the Amazon Rainforest, and drilling for oil and gas in the Arctic, both of which have controversial political and moral consequences. There have already been major objections to these projects on the basis that not only will they cause damage to otherwise industrially virgin territories, but the evidence of climate change due to the burning of fossil fuels is mounting; thus prompting the moralistic question: why find more oil and gas to burn?

The reality of the situation is that while we are making the move towards using sustainable and renewable fuels, industry is still reliant on gas and oil as fuel for commercial and domestic use. In this situation, and whilst there are reserves available, production will continue. What needs to be done is to ensure that this production is carried out with respect for the environment and regard for localised social and economic impact.

Dominic Donaldson is an expert in the engineering and energy industry.
Find out more about oil and gas production and supply at URS Corp.
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