A credible U.S. position on the uncertainty about our future oil supply

April 6, 2007 | By | Reply More

The Government Accountability Office (GAO) recently released a detailed yet accessible report addressing future energy supplies in the U.S.   The title of the report is Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production.
Here are some of the report’s conclusions:

Most studies estimate that oil production will peak sometime between now and 2040.

In the United States, alternative fuels and transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear. For example, although corn ethanol production is technically feasible, it is more expensive to produce than gasoline and will require costly investments in infrastructure, such as pipelines and storage tanks, before it can become widely available as a primary fuel. Key alternative technologies currently supply the equivalent of only about 1 percent of U.S. consumption of petroleum products, and the Department of Energy (DOE) projects that even by 2015, they could displace only the equivalent of 4 percent of projected U.S. annual consumption. In such circumstances, an imminent peak and sharp decline in oil production could cause a worldwide recession.

The report also contains a section on Peak Oil:  Oil Production Has Peaked in the United States and Most Other Countries Outside the Middle East.  Here is an excerpt:

According to IEA, most countries outside the Middle East have reached their peak in conventional oil production, or will do so in the near future. The United States is a case in point. Even though the United States is currently the third-largest, oil-producing nation. U.S. oil production peaked around 1970 and has been on a declining trend ever since.

Looking toward the future, EIA projects that U.S. deepwater oil production will slightly boost total U.S. production in the near term. However, this increase will end about 2016, and then U.S. production will continue to decline.

As indicated above, the report indicates that worldwide peak oil will occur “between now and 2040.” 

What can be made of this report?  Consider the well-recommended posts from Robert Rapier of R-Squared, a thoughtful blogger who is a chemical engineer who works in the energy field.  Here is Rapier’s take on some aspects of the GAO report:

[Peak oil] is a very serious challenge and something that needs to be addressed immediately. If oil production peaks in the next few years, and is followed by a 4-8% annual production decline, things could get very bad indeed. The U.S. is simply not prepared to have its oil supply disrupted.

While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable.

Now, here is why you should care about this situation, even if you tend toward the viewpoint that oil production won’t peak for 30 years: 

Other important sources of uncertainty about future oil production are potentially unfavorable political and investment conditions in countries where oil is located. For example, more than 60 percent of world oil reserves, on the basis of Oil and Gas Journal estimates, are in countries where relatively unstable political conditions could constrain oil exploration and production.

Most of the remaining oil happens to be in places like Iran – not on the friendliest terms with the U.S., Nigeria – where the promise of oil wealth has led to much violence (ala Blood Diamond), and Saudi Arabia – generally on “friendly” terms with the U.S., but in a historically unstable part of the world. This is where the oil dollars are flowing. If you think ExxonMobil is making big profits, you would probably be stunned at the amount of money Saudi Aramco is pulling in – with a significant portion resulting from U.S. demand. Some of that money ends up in the pockets of people like Osama bin Laden, who then uses it to fund attacks against the U.S.

So, is that situation desirable for the next 30 years (for those with a 2040 peak view)? I doubt too many people will say yes. Yet the same mitigation efforts for peak oil will also mitigate our dependence on foreign oil. Why don’t we address this? Politics. There is no free lunch. Mitigation will cost money. How many people would be willing to get off of foreign oil if the end result is gasoline prices of $7.00 a gallon? I guarantee you that there is a price point that would enable us to get off of foreign oil. But what percentage would accept such a solution? 5%?

The problem is that people are being promised pie-in-the-sky solutions.

Speaking of pie in the sky, Rapier is not hot on the prospects of ethanol, as you can see here.  Just follow the numbers he presents for verification.

What’s most amazing is that this information is readily available to American politicians who refuse to craft any coherent energy policy.  Pie-in-the-sky is simply much cheaper, at least today, and maybe tomorrow.

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About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

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