DOE Report on Peak Oil

The Department of Energy has always been among the most optimistic in forecasting future oil production. They were among the last to accept that oil production would inevitably peak world-wide and then roll over into decline. Even when they accepted this, they estimated the date of peak oil to be 30 years in the future, much more optimistic than what others were predicting.

Now a report by Drs. R. L. Hirsch, R. H. Bezdek, and R. M. Wendling has been completed for the DOE on the mitigation of world oil peaking. Among other things the report states that "Optimistic oil production forecasts deserve to be viewed with considerable skepticism" and that "World oil peaking represents a problem like none other. The political, economic, and social stakes are enormous."

The report states that, "Waiting until world conventional oil production peaks before initiating crash program mitigation leaves the world with a significant liquid fuel deficit for two decades or longer."

However this is exactly what is happening, particularly in the United States. The effort that has been made to find alternatives to oil have been on a state wide level at best.

The overall picture is bleak.

1. The date of world oil peaking is not known with certainty, complicating the decision-making process. A fundamental problem in predicting oil peaking is uncertain and politically biased oil reserves claims from many oil producing countries.
2. As recently as 2001, authoritative forecasts of abundant future supplies of North American natural gas proved to be excessively optimistic as evidenced by the recent tripling of natural gas prices. Oil and natural gas geology is similar in many ways, suggesting that optimistic oil production forecasts deserve to be viewed with considerable skepticism.
3. In the developed nations, the economic problems associated with world oil peaking and the resultant oil shortages will be extremely serious. In the developing nations, economic problems will be much worse.
4. While greater end-use efficiency is essential in the long term, increased efficiency alone will be neither sufficient nor timely enough to solve the oil shortage problem in the short term. To preserve reasonable levels of economic prosperity and growth, production of large amounts of substitute liquid fuels will be required. While a number of substitute fuel production technologies are currently available for deployment, the massive construction effort required will be extremely expensive and very time-consuming, even on a crash program basis.
5. Government intervention will be essential, because the economic and social impacts of oil peaking will otherwise be chaotic, and crash program mitigation will need to be properly supported. How and when governments begin to seriously address these challenges is yet to be determined.

The report is correct that the date of peak oil cannot be known with certainty, but several recent developments suggest that it may be sooner rather than later. Indonesia, whose oil production has been in decline since 1991, is now considering dropping out of OPEC because they became a net importer of oil in 2004. The government of Mexico has just announced that its largest oilfield, Cantrell, which supplies about half of Mexico's total production, has peaked and will produce less oil than last year. North Sea production is now in its third year of decline. The spectacular increase in Russian oil production, which went a long way in carrying the world through the last two years, now appears to have leveled off; production has declined for three months in a row. On top of this is the concern by a growing number of experts that Saudi Arabia may have mismanaged it's fields by pushing production too hard and may be close to decline itself.

If peak oil happens this decade--and some believe it may already have happened--it will hit the world economy like a tsunami of enormous proportions. And the U.S., which consumes a quarter of the world's production, will be hit the hardest.