Crude Awakening (Page 2)

If not already aware of all this, readers of The Nation should be on notice that both the imminence and the timing of peak oil matters--big time. Because petroleum supplies 40 percent of the world's energy--far more than any other source--and because oil powers most of the world's cars, trucks, buses, trains, planes and ships, a permanent decline in global output will have a powerful and lasting impact on the US and world economy. Unless affordable substitutes are developed, a decline in global oil output will produce rising transportation costs, diminished economic activity, high inflation and the onset of a deep and prolonged worldwide depression. Furthermore, because modern, mechanized agriculture is wholly dependent on cheap oil--for herbicides and pesticides, as well as truck and tractor fuel--a contraction of petroleum supplies will result in reduced food production and, in all likelihood, mass human starvation.

The timing of peak oil matters because it bears on the crucial issue of how much time remains to us for the development of hydrogen fuel and other petroleum substitutes. All informed energy experts agree that peak oil production will occur at some point in this century, but the optimists among them believe that it will occur later, rather than sooner--thus affording us many years in which to develop the necessary alternatives. This, in essence, is the conclusion of the Bush Administration's energy strategy, as articulated in the National Energy Policy (May 17, 2001). Go ahead and consume more oil, the report seems to argue, reassuring us that America's scientists will devise a new energy system for our kids and grandchildren when that far-off moment of oil depletion arrives. The fact that the large oil companies that financed Bush's 2000 campaign will profit enormously from this advice is not, of course, something that is acknowledged in the report.

But what if peak oil arrives sooner rather than later, as predicted by Hubbert's followers? If this is the case, we are in for extreme trauma and difficulty. While it is conceivable that hydrogen will prove the fuel of choice in the second half of this century, it is unlikely that the required infrastructure--estimated to cost several trillion dollars--will be in place by 2015 or 2020, when global oil production may begin its irreversible descent. In that eventuality, we will have to undergo several decades of punishing scarcity until a new energy regime has been put in place. Worldwide economic activity will contract during this period, billions of people will starve or suffer, and the major industrial powers will engage in ceaseless "resource wars" over any remaining pools of petroleum.

If this scenario is even somewhat credible, American and international leaders should drop whatever else they are doing and devote their full attention to preparing the world for post-peak petroleum. This means, for example, imposing tough new restrictions on the minimum fuel economy of all new cars and SUVs (say 40 mpg, an entirely achievable standard), ceasing new highway construction, building high-speed rail lines and investing hundreds of billions of dollars in the development of renewable energy supplies and other alternatives to petroleum.

This also means, of course, discarding the Bush Administration's favored energy plan and adopting an entirely new strategy based on hydrogen and renewables. As well, it means forcing the big oil companies to invest in petroleum alternatives and persuading the big auto-makers to redesign their major production lines--costly steps that neither industry is eager to take. Hence, their evident reluctance to embrace the predictions of imminent peak production; rather, they have endorsed the more optimistic assessments of the DOE and other industry-friendly bodies indicating that the onset of peak oil is still many decades in the future.

It is against this backdrop that Shell's January 2004 announcement of overstated reserves and the subsequent indications of declining production in Saudi Arabia must be seen. Do these events signal that predictions of an imminent peak are accurate? No one can say for sure, but they do suggest that Hubbert's followers may be closer to the truth than the industry-backed optimists.

But this, needless to say, is contested territory, and is likely to remain so for some time. As evidence of the seriousness and significance of this struggle, the DOE hastily inserted a sidebar into its 2004 International Energy Outlook addressing the Shell and Saudi disclosures. Claiming that global reserves are substantial and will continue to grow as new technologies permit the exploitation of hitherto unaffordable or inaccessible supplies, the DOE blithely avowed that peak oil output will occur "closer to the middle than to the beginning of the 21st century."

The DOE projection, and those proffered by other industry-friendly agencies, rest on two critical assumptions: first, that immense reservoirs of as-yet-undiscovered oil lie beneath such insufficiently explored areas as the deep Atlantic, northern Siberia and Iraq's western deserts; and second, that higher energy prices will permit the profitable development of tar sands, shale oil and other unconventional sources. Although much of this remains speculative, the DOE sees no reason to hedge on its prediction that global oil production will rise from its present level of about 80 mbd (of which the United States consumes one-fourth) to an estimated 126 mbd in 2025. In other words, there is simply nothing to worry about.

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