The petroleum world is at war with itself, and the stakes of the quarrel are high for all of us. The debate concerns the concept of peak oil — the term used to describe a global limit of oil production — its timing, and its implications.
Oil is the lifeblood of modern economies. Without it, the world as we know it would cease to exist. That is not journalistic hyperbole. Given our petroleum dependence, or in the more candid words of former President George W. Bush, our “addiction,” we would be foolish to ignore warnings about the future supply of this precious commodity.
Some respected analysts have forecasted such warnings. Businessman Warren Buffet — who recently made headlines for directing his company, Berkshire Hathaway, to acquire BNSF Railway — has declared that “it’s going to be difficult … to get [oil production] up much.” Just days ago at the Petroleum Geology Conference in London, after witnessing a debate on the issue, roughly two-thirds of the geologists present voted against a motion stating that “peak oil is no longer a concern.”
If the flow rates of conventional and unconventional oil sources are approaching — or, as the more pessimistic peak oil adherents argue, have already reached a plateau — we will soon be facing an unprecedented economic obstacle. As former British Prime Minister Tony Blair said in April of 2002, “The price of oil can be the difference between recession and recovery.” Some economists, such as James Hamilton of the University of California, San Diego, have suggested that high prices were partly responsible for the unfolding of the current financial crisis.
Most alarmingly, recent accusations reveal that instead of raising awareness about peak oil, governments have been suppressing the truth about its proximity. On Nov. 9, a day before releasing its annual report, the International Energy Agency was criticized by two whistleblowers for allegedly capitulating to U.S. pressure to downplay decline rates and overplay the chances of finding new reserves.
One of the sources, a senior official still active in the agency, stated that “many inside the organization believe that maintaining oil supplies at even 90 to 95 mbpd would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further.” The other source stated bluntly, “We have already entered the peak oil zone. I think that the situation is really bad.”
Just weeks ago, David Fridley, a scientist at Lawrence Berkeley National Laboratory who worked directly under Energy Secretary Steven Chu, further pushed the notion that the U.S. government is choosing to remain silent on oil supply woes, proclaiming that Chu “knows all about peak oil, but he can’t talk about it. If the government announced that peak oil was threatening our economy, Wall Street would crash. He just can’t say anything about it.”
Our present approach to energy may be seriously altered within the next decade, and not by climate legislation. The further development of new technologies is more important now than ever before, but it seems highly likely that sweet crude, with inherently high energy returned on energy invested, does not have an equal substitute.
In 2005, the U.S. Department of Energy sponsored the report “Peaking of World Oil Production: Impacts, Mitigation, and Risk Management.“ The findings were grave.
According to the report, even if a crash program were to be implemented a decade before the fact, a production peak would still severely disrupt the global economy. In an interview conducted this September, the report’s lead author, Robert L. Hirsch, said,
“Peak oil is a bigger issue than health care, than federal budget deficits. … There are no quick fixes.”
A culture of denial will prove to be disastrous for properly mitigating this problem. The answer lies in universities, human ingenuity and research and development, in students and faculty like us. Perhaps the U.S. government will wake up to this reality and start properly allocating capital in a responsible manner before it’s too late.
Sloan is a government senior.
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