Does the Administration Know About Peak Oil?

The New York Times knows about Peak Oil, but does the president? On this point the evidence is conclusive.

First of all, agencies within the government clearly understand the problem, and therefore relevant information must be readily available to the chief executive if he wishes to have it.

Explicit warnings of Peak Oil have started to turn up in official U.S. government literature. For example, a paper prepared for the U.S. Army Corps of Engineers titled “Energy Trends and Implications for U.S. Army Installations” (Sept., 2005) includes the following tidbit:

The supply of oil will remain fairly stable in the very near term, but oil prices will steadily increase as world production approaches its peak. The doubling of oil prices in the past couple of years is not an anomaly, but a picture of the future. Peak oil is at hand. . . .13

Then there is the following from the U.S. Department of Energy, Office of Deputy Assistant Secretary for Petroleum Reserves, Office of Naval Petroleum and Oil Shale Reserves, dated March 2004:

The disparity between increasing production and declining reserves can have only one outcome: a practical supply limit will be reached and future supply to meet conventional oil demand will not be available. The question is when peak production will occur and what will be its ramifications. Whether the peak occurs sooner or later is a matter of relative urgency. . . . In spite of projections for growth of non-OPEC supply, it appears that non-OPEC and non-Former Soviet Union countries have peaked and are currently declining. The production cycle of countries . . . and the cumulative quantities produced reasonably follow Hubbert’s model. . . . The Nation must start now to respond to peaking global oil production to offset adverse economic and national security impacts.14

And then there is the 2005 Report, “Peaking of World Oil Production: Impacts, Mitigation and Risk Management,” commissioned by the U.S. Department of Energy, about which we will have more to say below.15

If none of this is specific enough (in fairness, we cannot expect George W. Bush to spend his evenings poring over obscure Army Corps of Engineers studies), we have the fact that Representative Roscoe Bartlett, Republican from Maryland’s sixth district—who has made many speeches about Peak Oil on the floor of Congress—has spent thirty minutes in private conversation with the president explaining the science of Peak Oil and seeking to convey the enormity of the problem.16

But what if Bush wasn’t able to understand what Bartlett was telling him? After all, Bartlett has a Ph.D. in physics; perhaps he was using words that were too big, or concepts too abstruse for our president to grasp.

Even if that were the case, we have evidence that Bush’s second-in-command, vice president Cheney, understands Peak Oil; given time, Cheney could surely make the concept comprehensible to his superior. In a speech in 1999 (while he was still CEO of Halliburton Corporation, the giant oil services company) to the Petroleum Institute in London, Cheney pointed out that

By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day.17

This is a fair statement of the depletion dilemma: 50 million barrels per day is almost five times the current output of Saudi Arabia.

Finally there is the fact that is that Bush and Cheney are themselves former oilmen: their inside knowledge of the industry should give them enhanced insight into the problem of Peak Oil. Some would say that these officials’ former ties to the petroleum industry imply a conflict of interest (they have been accused of giving perks to oil companies, even to Halliburton—perish the thought!). However, some of the most outspoken authorities on Peak Oil are retired petroleum geologists or engineers who have spent decades working for oil companies. Having former industry insiders in public office today could be good, if they used their technical knowledge to benefit the country by warning of the consequences of continued oil dependency. But, as we will see below, there is no evidence that the particular former oilmen currently occupying the highest offices in the land are doing any such thing—at least not genuinely or effectively.

In sum, while it is impossible to say whether Mr. Bush understands Peak Oil, no one could credibly argue that that he simply hasn’t heard about it.

How Serious Is the Threat?

Addressing this question requires some speculation: the peaking of global oil production is an event that has never occurred before. However, we need not speculate baselessly; for guidance we have a U.S. government-funded study that could hardly be more relevant—“The Peaking of World Oil Production: Impacts, Mitigation and Risk Management,” prepared by Science Applications International (SAIC) for the U.S. Department of Energy, released in February 2005. The project leader for the study was Robert L. Hirsch, who has had a distinguished career in formulating energy policy. The report on the study will hereinafter be referred to as “The Hirsch Report.”

The first paragraph of the Hirsch Report’s Executive Summary states:

The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.18

As the Hirsch Report explains in detail, due to our systemic dependence on oil for transportation, agriculture, and the production of plastics and chemicals, every sector of society will be impacted.

The Hirsch Report effectively undermines the standard free-market argument that oil depletion poses no serious problem, now or later, because as oil becomes scarcer the price will rise until demand is reduced commensurate with supply; meanwhile, higher prices will stimulate more exploration, the development of alternative fuels, and the more efficient use of remaining quantities. While it is true that rising prices will do all of these things, we have no assurance that the effects will be sufficient to avert severe, protracted economic, social, and political disruptions.

First, price increases may or may not stimulate more exploration, or do so sufficiently or productively. During the early 20th century, more exploration resulted in more oil being discovered. However, in recent decades, expanded exploration efforts have turned up fewer and fewer finds. It is difficult to avoid the obvious conclusion that there simply isn’t much oil left to discover.

Higher prices for oil will also no doubt spur new investment in alternative fuels. But the time required to produce substantial quantities of alternative fuels will be considerable, given the volume of our national transportation fuel consumption. Moreover the amount of investment required will be immense. And it would be unrealistic to expect most alternatives to fully or even substantially replace oil at any level of investment, and even with decades of effort, given practical, physical constraints to their development.

Higher prices will also no doubt spur efficiency measures, but the most productive of these will likewise require time and investment. For example, raising the fuel efficiency of the U.S. auto fleet would require years for industry retooling and more years for consumers to trade in their current vehicles for more-efficient replacements.

James Schlesinger, who served as CIA director in the Nixon administration, defense secretary in the Nixon and Ford administrations, and energy secretary in the Carter administration, in November, 2005 testimony before the Senate Foreign Relations Committee urged lawmakers to begin preparing for declining oil supplies and increasing prices in the coming decades. “We are faced with the possibility of a major economic shock and the political unrest that would ensue,” he said.19

Schlesinger was far from overstating the threat. In fact, it would be no exaggeration to view Peak Oil as potentially representing the economic, social, and political impact of a hundred Katrinas. And that impact will not subside in a few days’ or years’ time: once global oil production has peaked, the energy shortfalls for transportation and agriculture will be ongoing, relentless, and cumulative.