Monday, January 02, 2006

Peak Oil—Nature’s Own WMD? Part II

Serendipity strikes again. Long time readers of this column are familiar with my use of that word to describe the frequency with which some unexpected and coincidental event relates to a subject contained herein. Well, here we go once more. In Part I of this series, I asked, “Have you heard one politician, one political leader of either party, one world figure express concern, or even mention the phrase ‘Peak Oil?’” I then elaborated, “Actually there is one member of Congress who has done so, and his efforts will be mentioned in Part II.” Here, I intended to mention Congressman Roscoe Bartlett’s (R-MD) attempts in the spring of 2005 to call Congress’s attention to the Peak Oil crisis. Little did I realize at the time that these early “efforts” would eventually evolve into the following headline: “Congress Acknowledges Peak Oil.”

That occurred on December 7th, 2005, when the first Congressional hearing on Peak Oil was held, just about two weeks after Part I of this Peak Oil series was submitted for publication. At a meeting of the House Energy and Commerce Sub-committee on Energy and Air Quality, after several witnesses testified, Congressman Roscoe Bartlett (R-MD) presented a resolution to the Committee. This resolution was backed by 14 additional congressmen who had formed the House Peak Oil caucus. Congressman Bartlett is a trained scientist, and one of only three representatives in congress who has earned a PhD.

As an indication of the critical importance this group placed on the subject, the resolution stated in part, “Expressing the sense of the House of Representatives, that the United Sates, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the ‘Man On the Moon’ project to address the inevitable challenge of Peak Oil.”

At the time I wrote so harshly about our legislative and executive branch leaders’ failure to address the potentially catastrophic consequences of Peak Oil, I was also unaware that on November 24, 2005, two days after Part I had been submitted, the Senate Committee on Foreign Relations chaired by Senator Richard Lugar (R-IN) held a hearing on Peak Oil. In attendance were Senators Chuck Hagel (R-NE), John Sununu (R-NH), and our own Bill Nelson (D-FL).

They heard testimony from former CIA Directors, James R. Schlesinger (also the first head of the Department of Energy, under Jimmy Carter), and James R Woolsey. The website www.craiglist.com described the hearing in part as follows: “Schlesinger’s testimony locked in on Peak Oil and never let go. He stated what those following the subject have long known: that high oil prices may lead to a world recession, and that economic shock and political unrest are likely on the horizon. He also added that Peak Oil could prevent our military from maintaining world dominance of the oil supplies needed to advance the war machine and that they could not be secured.”

Contradicting President Bush’s comments about the hopeful future of hydrogen fuel cells (a process that became an integral part of the Energy Bill recently passed by Congress), James Woolsey testified, “We should forget about 95 percent of our effort on hydrogen fuel cells for transportation. We found on the National Energy Commission that quote, ‘Hydrogen offers little to no potential to improve oil security and reduce climate change risks in the next twenty years.’” In a sense, Bush himself agreed with Woolsey’s evaluation in a speech as long ago as 2003. Although waxing poetic about the benefits of hydrogen fuel cells, he said, “If we develop hydrogen power to its full potential we can reduce our demand for oil by over 11 million barrels per day by the year 2040 [my emphasis].” If Peak Oil is imminent, 35 years from now is the equivalent of light years too late.

Here we have two congressional committees acknowledging that the concept of Peak Oil not only exists, it presents potentially, the most serious problem the world has ever faced. Particularly enlightening is the testimony of one of the witnesses at the House of Representatives hearing. Robert Hirsch is a senior energy program advisor at the private scientific and military company, Service Applications International Corporation (SAIC). This company works extensively on defense and geopolitical issues for clients including many for the U.S. Government. Hirsch has over 35 years experience in the U.S. energy field, including senior energy analyst at the famous Rand Corporation.

In March, 2005, Hirsch co-authored an official report requested by the U.S. Department of Energy (DOE) titled, “The Peaking of World Oil Production: Impacts, Mitigation, and Risk Management.” Much of his testimony to the House of Representatives committee hearing reiterated the findings contained in that report. Here are some of the truly frightening conclusions:

“World oil peaking is going to happen; only the timing is uncertain.” Regarding the impact on the U.S. economy, the report states, “The development of the U.S. economy and lifestyle has been fundamentally shaped by the availability of abundant low cost oil. Oil scarcity and several-fold oil price increases due to world oil production peaking could have dramatic impacts…the economic loss to the U.S. could be measured in the trillion dollar scale.”

If you believe the tenor of the article you are reading is exaggerated or mere hyperbole, in its conclusion, Hirsch’s report notes, “the world has never faced a problem like this. Without massive mitigation [dramatic action], more than a decade before the fact [which may at this point be too late], the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary.”

The SAIC report agrees that mitigation efforts undertaken too soon prior to the oil peak would exact a cost on society, yet acting too late would extract a loss that could be so massive as to be almost unimaginable. However, as stated in Part I, there are skeptics who believe if oil production peaks at all, it will not occur until the year 2020 or even 2030 (depending on the “expert”), at which time they claim other energy forms will take up the slack.

The leading proponent of this belief is Daniel Yergin the author of The Prize: The Epic Quest for Oil, Money, and Power, a history of oil that won the 1992 Pulitzer Prize. He is also the founder of a large and well-known consulting firm, Cambridge Energy Research Associates, also known a CERA. In July of this year, Yergin quoted from a June CERA report, writing, “There will be a large unprecedented build-up of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not production) could grow by 16 million barrels per day—from 85 million barrels per day to 101 million barrels per day—a 20 percent increase. Such growth over the next few years would relieve current pressure on supply and demand.”

Yergin admits however, that “At this point, even with greater efficiency, it looks as though the world could be using 50 percent more oil 25 years from now.” It is on that basis that he acknowledges, “The growing energy supply should not lead us to underestimate the longer-term challenge of providing energy for a growing world economy.” The larger questions that must be addressed are “What if Yergin is wrong? Can we gamble on his evaluation with a possible worldwide crisis hanging in the balance?”

In his official report to the DOE, Hirsch essentially contradicts Yergin’s assertions by arguing that despite agreements (by some, not all) major oil companies and producer nations (more on them later), new oil discoveries are not replacing annual oil consumption, and despite technological advances, oil reserves are becoming increasingly difficult to replace.

Writing in the October, 2005 bulletin of The Atlantic Council of the United States, Hirsch emphasizes the dilemma facing not only the United States, but also the world at large. He also destroys Yergin’s sanguine contentions because of the timing issues. Referring to the analysis produced for the DOE document and his subsequent hearing testimony, Hirsch writes, “A scenario analysis was performed, based on crash program implementation worldwide—the fastest humanly possible.” Hirsch explains that the timing of oil peaking was deliberately omitted “because of the considerable differences of opinions.” However, he then provides three implementation scenarios and the probable consequences of each:
  1. “Waiting until oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades. [Hirsch emphasizes that his report refers only to a liquid fuel crisis, not the more general energy crisis].
  2. Implementing a crash program 10 years before oil peaking helps considerably but still leaves a liquid fuel shortage shortfall roughly a decade after the time that oil would have peaked.
  3. Initiating a mitigation crash program 20 years before peaking offers the possibility of avoiding a world liquid fuel shortfall for the forecast period.”

Hirsch elaborates further, summing up with this statement: “The reason why such long lead times are required is that the worldwide scale of oil consumption is enormous—a fact often lost in a world where oil abundance has been taken for granted for so long. If mitigation is too little too late, world supply/demand balance will have to be achieved through massive demand destruction (shortages), which would translate to extreme economic hardship. On the other hand, with timely mitigation, economic damage can be managed.”

This gloomy appraisal of the Peak Oil crisis is what led the House committee to issue its resolution to initiate a worldwide crash program of the magnitude of “The Man On the Moon Program,” in order to discover and create solutions to a challenge of enormous proportions. It will be interesting (and perhaps frightening) to observe the reaction of our politicians to this once in a lifetime emergency situation, one that must now compete with the sometimes comic and often insubstantial issues that have engaged our legislators in the recent past. My guess is that unless there is recognition and effective action at the presidential level, the Peak Oil issue will attain the same mythical status as…well, The Man in the Moon.

Because this is probably the most serious and most important subject ever covered in this column, next month we will examine more closely claims by Saudi Arabia that there are more than adequate oil reserves. In addition, possible alternate energy sources will be discussed.