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The Houston Chronicle: Oil crunch

U.S. Energy Department study concludes crude production will peak, requiring other energy forms

Last September, a Chronicle editorial warned that global oil production would peak in this decade or the next, and then inexorably decline. Given that likelihood, the United States would have to embark on a crash program to develop alternative energy sources or endure crippling increases in the price of energy.

Last week, a study performed for the U.S. Department of Energy concurred with the editorial’s conclusions.

The study, led by Robert Hirsch, warned that the world should be spending $1 trillion per year developing alternative energy sources — including tar sands, oil shale and gas liquefaction — to avoid having its economy crippled by oil shortages and the resulting chaos. The study recommends a 20-year lead time, so it might already be too late to prevent a crunch.

The report said the timing was uncertain. Hirsch predicted peak oil production could come in five years, almost certainly by 2020.

Actually, the world would not have to arrive at peak production in order to experience severe shortfalls in oil supplies. The aftermath of Hurricane Katrina showed what even a minor constriction in supply can do to drive prices skyward. Apart from natural disasters, wars, political unrest, government intervention, deteriorating equipment, accidents or any combination could interrupt the supply of oil.

Demand for gasoline in the United States is dropping with the end of the summer vacation season. Consequently, prices also are dropping. But this trend is extremely temporary.

Demand for oil in China, in India and throughout the developing world will continue to grow. Exxon Mobil CEO Rex Tillerson predicts that world demand for crude will increase 50 percent in a decade.

Bloomburg News reported that the Energy Department study found that conventional oil production reached “soft and sudden” peaks in Texas in 1972, North America in 1985, Great Britain in 1999 and Norway in 2001. These dates were predicted by formulas used by proponents of the peak oil theory to predict the crest of global oil production.

Perhaps the report’s most serious conclusion is that the free market and private industry alone will not prevent economic catastrophe from energy shortages. Government must have a policy for managing the transition from conventional crude oil to other energy forms.

Hirsch, a consultant and former government official overseeing research into solar and other renewable energy forms, said the conversion from oil could be compared to the race for the moon or the mobilization for World War II. Consumers, he said, could not rely on oil companies to get the huge job done.

If oil company managers disagree, they need to demonstrate where all the oil is going to come from to meet rising demand, or propose their own plans for developing alternative sources.

1 Comment on “The Houston Chronicle: Oil crunch”

  1. #1 Jim Pierobon
    on Sep 26th, 2006 at 03:48

    Shareholders of large oil companies need to ask their leaders: as it becomes more profitable to make energy “greener” and more burdensome to produce energy in conventional ways, why aren’t more of them investing in alternative technologies and at a significant level? Who thinks we have not reaching the tipping point?

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