In attendance at the 2007 Houston World Oil Conference, Oct. 17-20, were some 525 people from 18 countries and 36 states for the largest ever conference to address “peak oil“: the historical moment at which world oil production reaches maximum output and begins to decline, to be outpaced by rapidly increasing global demand. Some say peak oil has already occurred; others predict it some time before the end of the decade. Consequences could range from minimal lifestyle disruptions cushioned by new technologies, to a rapidly worsening second Great Depression amid fierce global competition for available oil supplies. What is certain is that as prices reach unprecedented highs, the costs of commuting and commodities will steadily rise.
Veteran industry economist Henry Groppe called U.S. Energy Information Administration and major oil companies‘ projections that available oil supplies will increase “sheer fiction,” explaining that “trends in all elements of supply show plateau and gradual decline.” Oil billionaire T. Boone Pickens 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.” Yet global oil demand for 2007’s fourth quarter is projected to be 88 million barrels per day. Robert Hirsch, who wrote the first 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. When it came, 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.
Matthew Simmons, an energy advisor to both Bush presidents and a leading voice on peak oil, recalled gas-related shootings during the late-Seventies oil shortages and noted that today, “There is nothing discretionary about energy use.” With hundreds of millions of people in India and China headed toward car ownership and related energy use, he warned that a China-Venezuela oil deal 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.
Aggressive conservation topped the recommendations. Houston Mayor Bill White is proposing a Flex in the City program, encouraging more telecommuting as well as urging employers to base pay on productivity rather than 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 many silver BBs. Less overall mobility (especially air travel), a shift away from globalization to more localized economies, and simpler lives overall will likely characterize post-peak-oil America. Author Jim Kunstler 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 at www.aspo-usa.com.
This article appears in November 9 • 2007.