Peak Oil in the Energy State

2007 Houston World Oil Conference focused on eventual point at which world oil production outpaces global demand

Houston’s morning rush-hour traffic isn’t for the faint of heart. I recently zoomed past seemingly limitless suburbs headed for downtown on the Sam Houston Tollway en route to the largest ever conference to address peak oil: the point at which world oil production taps out and is outpaced by rapidly increasing global demand.

In attendance at the 2007 Houston World Oil Conference were some 525 people from 18 countries and 36 states. Some say peak oil has already occurred; others predict it some time before the decade’s end. Outcomes range from minimal lifestyle disruptions as we transition to new technologies to a rapidly worsening second Great Depression, amid fierce if not violent global competition for available oil supplies. Many predictions by industry experts in attendance leaned toward the latter if preparations aren’t made soon. What is clear is that cities like Houston and Austin are now beholden to oil, and as prices reach historic, unprecedented highs, as many expect them to continue to do, the cost of commuting by car, as well as chicken and cabbage at the store, will rise uncomfortably.

Henry Groppe, a 50-year veteran oil-industry economist, called current projections by the U.S. Energy Information Administration and major oil companies that available oil supplies will increase “sheer fiction,” explaining that “trends in all elements of supply show plateau and gradual decline.” Billionaire T. Boone Pickens, perhaps the most famous living American oil and gas man, said the peak has already occurred. “Eighty-five million barrels per day [the approximate current output], you can’t get more than that out of the world.” If he’s correct, things are already amiss, as global oil demand for 2007’s fourth quarter is projected to be 88 million barrels per day. Robert Hirsch, who authored the first ever peak-oil report to the U.S. government in 2005, said mitigating the peak will take 20 years and that if we’re unprepared, “Shortages will occur at a more rapid rate than we can do anything about … causing deepening recession, jumps in unemployment, and high interest rates.”

The 1970 U.S. peak was accurately predicted in the 1950s by geophysicist M. King Hubbert, based in part on the decline of new, large oil-field discoveries. At the time he was discredited, but he was ultimately proved correct, and the U.S. hit its domestic peak unprepared, resulting in fuel shortages and recession. Energy experts have applied the same “Hubbert’s Peak” theory to global supply, noting fewer large oil-field discoveries, inherent difficulty in procuring oil from deep water and tar sands, and the often understated rates of decline in the world’s largest existing fields, like Cantarell in Mexico, Europe’s North Sea, and Ghawar in Saudi Arabia. What’s more, the idea of peak exports comes into play too, meaning oil-producing nations will export less to prolong domestic supplies and income.

Prominent oil broker Matthew Simmons, an energy advisor to both Bush presidents, has been a leading voice on peak oil, calling foul on the disparity between producers’ rosy reserve estimates and declining production. Characterizing his cautionary vocalizing on the issue as a public service, Simmons recalled gas-related shootings during the late-Seven­ties oil shortages and reminded that today, “There is nothing discretionary about energy use.” What’s more, with hundreds of millions of people in India and China headed toward car ownership and American-style auto lifestyles, he warned that a China-Venezuela oil deal, for example, could hobble the U.S. economy. After the peak, estimates of a supply decline range between 4% and 10% per year, with 1% equaling 800,000 barrels per day, according to online energy publication the Oil Drum.

Aggressive conservation topped all presenters’ solution recommendations. Houston Mayor Bill White is proposing a Flex in the City program, encouraging more telecommuting to cut fuel-wasting rush-hour congestion, as well as urging employers to base pay on productivity vs. time at the office. Increased auto efficiency standards, alternative fuels, hybrids, and electric cars were also noted, but rather than looking for one silver bullet, the common theme was that prosperity could be achieved by using many silver BBs. Less overall mobility (especially air travel), a shift away from globalization to more localized economies, and simpler lives overall will characterize post-peak-oil America, most agreed. Author Jim Kunstler perhaps best encapsulated a logical American response on his blog: “Quit putting all your mental energy into propping up car dependency and turn your attention to other tasks such as walkable communities and reviving passenger rail.”

For more, see the Association for the Study of Peak Oil & Gas website.

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KEYWORDS FOR THIS POST

Environment, Energy, peak oil, 2007 Houston World Oil Conference, Henry Groppe, T. Boone Pickens, Robert Hirsch, M. King Hubbert, Matthew Simmons, Bill White, Jim Kunstler

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