The Peak Oil Crisis: Congressional Hearings – Round #2

The first congressional hearings on peak oil were held in December 2005 when a subcommittee of the House Energy and Commerce Committee had a half-day session devoted to the topic. At the hearing several luminaries of the peak oil community testified that indeed the world was about to start running short of cheap, easy to find oil and that indeed there would be serious consequences for the industrialized world. This view was countered by the man from Cambridge Energy Research who testified that to the contrary, world oil production could continue to grow for decades, never really would “peak,” and this was a problem for future generations. Happy motoring everyone!

This apparently was just what the good Congressmen wanted to hear at the time, for after a few desultory comments about how “the oil wells back in my district are still pumping away,” the matter was forgotten.

What a difference a year makes. In the intervening 13 months, the world burned up an additional 31 billion barrels of cheap oil, gasoline flew way up and then way down, and more importantly the international scene with respect to the future of oil production grew far darker.

This time, the hearings were held by the Senate Committee on Energy and Natural Resources. They approached the subject from the perspective of the national security implications of our dependence on foreign oil supplies. By skipping over the arguments on the size of the world’s remaining oil reserves and focusing just on who owned these reserves and what they were going to do with them, the Committee was able to achieve a remarkable amount of bi-partisan agreement that the country is facing a very big problem.

In a remarkable display of just how far we have come recently, the Chief Economist of the International Energy Agency told the Committee that he expected non-OPEC produced oil to peak within ten years. Therefore, most of the projected growth in world oil production will have to come from the OPEC nations. He then went on to explain that while the IEA thinks the OPEC states will have enough reserves to increase production, OPEC does such a good job of hiding the true status of their reserves the IEA can’t be sure.

The heart of the hearings focused on the idea that 75 percent of the world’s oil reserves are now in the hands of national state-controlled oil companies and this percentage is expected to keep growing. High oil prices are making these oil exporting countries so rich, they really don’t need the international oil companies, their capital or their technical expertise anymore.

Moreover, these energy-exporters are now in a position to use the political leverage from their growing oil and natural gas monopoly against the political interests of the US and EU.

If this was not enough to worry the committee, one speaker raised the specter of a Sino-Russian “axis of oil” that, when coupled with the massive Iranian reserves of natural gas, could offset the US’s “superpower hegemony” in world affairs. This is getting scarier all the time.

The notion of “energy independence” was soundly rejected by several panelists. As one panelist said, “simply put, there is no economically plausible scenario for a strategically meaningful reduction in the dependence of the United States and its allies on imported hydrocarbons during the next quarter century.”

The speakers, all certified members of the US foreign policy establishment, made clear and convincing cases that alarming times are ahead. The solutions ranged from the usual, efficiency, biofuels, electric cars, to more innovative ones such as coming to a comprehensive, “grand settlement” with Iran and an energy/environmental pact with China.

Reactions from the senators were nearly all positive with several noting bold and dramatic changes in US policy are needed to deal with this geopolitical threat. Nearly all accepted the assertion of several panelists that “energy independence” was a myth that could never be achieved voluntarily as it would require unacceptable changes to the “American lifestyle.”

By forgoing any discussion that world oil production just might be peaking in the near future, the ambiance of the hearing lost a certain sense of urgency. One panelist did mention, however, that remedies such as biofuels, electric cars, and tax breaks for renewables would take decades to have any real effect, so hard times are ahead.

The hearings gave every indication of having made an impact on the committee. One member mentioned that additional hearings to explore all the issues that were raised in more detail would be helpful. Another outspokenly conservative member noted that while he was adamantly opposed to wasting the peoples’ money, now that he could see the growing national security aspect of the US energy situation, it was time for action.

Capitol Hill clearly is starting to move on energy issues. During the hearing, the chairman mentioned that the committee would be holding an all-day conference on biofuels on February 1. Chairmen of the House and Senate agriculture committees say the next farm package is going to be driven largely by energy issues for the first time, thanks to fears about energy security and greenhouse gases.

So far tough issues such as ordering Detroit to quit building SUVs, or lowering the speed limit back down to 55 mph, or enacting significant gas taxes, are not on the agenda. However, these can wait until inevitable crisis actually comes. Only in Washington can we make more progress on mitigating the effects of peak oil if we don’t actually mention what we are mitigating.