National Commentary

The Peak Oil Crisis: A Message from Houston

We gathered at a hotel near the Convention Center, some 525 of us from 18 countries and 36 states attending the Association for the Study of Peak Oil-USA’s 3rd annual conference. The PowerPoints flashed by at mind-blowing speed as speaker after distinguished speaker shared the latest thoughts and insights into the peaking of world oil production.

For those of us acquainted with the field, there was nothing startling. World oil production has either peaked already or is certain to do so within the next few years if the world’s petroleum industry manages to eek out a little more production. But the good times are clearly over.

Peak production of conventional oil came 30 months ago and although new production projects will come on stream in the next few years, they will have a hard time balancing the depletion from existing fields which various speakers placed at 4-5 percent a year and probably increasing. As a greater share of world production shifts to undersea production, which is expensive and is usually water flooded to get the oil out as quickly as possible, some believe the annual world depletion rate could increase to six percent or more.

The most ominous development for countries such as the U.S., which must import most of its oil, is the emerging concept of “peak exports” which was discussed by several speakers. Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible.

This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful.

For me, the most interesting insight of the conference had nothing to do with oil production but rather was an insight I gained into the psyche of the American people. A keen observer of the American scene pointed out that most literate Americans are aware that we have some sort of energy problem. If for no other reason than unprecedented gasoline prices and the TV ads featuring yellow corn-fueled cars, most have at least an uneasy feeling that some sort of transformation is coming.

The problem is that most have no concept as to how soon the transformation will start and how much their lives are going to change. The President, his government, the Congress, the oil companies, and indeed the media have left us with the impression that we have the transformation to an alternative fuel future well in hand. Bills mandating and increasing the supply of ethanol have been passed or are in the hopper. The President makes periodic references to hydrogen-powered cars. The oil companies allege there is no problem and the media takes it all in and remains mute.

The peak oil problem is not that most of us don’t recognize a transition is coming – if for no other reason than reducing our dependence on “foreign oil” – it is that we don’t recognize that the transition will come soon and will inflict more economic pain and social dislocation on the American people than we have experienced since the Civil War or perhaps ever.

Thus the message from Houston was “it will be soon and it will be bad, very bad,” much sooner and much worse than 99 percent of the American people realize.

Earlier this week, a European Organization called Energy Watch released a paper concluding as many others have done that world oil production peaked last year and will decline steeply over the next 22 years so that by 2030 production will be in the vicinity of 40 million barrels per day which is less than half of current production. In ten years production will be down on the order of 20 million barrels per day.

What we in America have not yet begun to grasp is that numbers like this imply the near total demise of the private internal combustion powered automobile. Your local gasoline station is at the end of the distribution pipeline and is the most likely to be cut off. If gasoline available for distribution in the U.S. were to fall from 9 million barrels a day to the order of 5 million through a combination of declining production and declining exports, it is not hard to figure out what would happen when the government gets around to prioritizing uses.

Food production and distribution would come first, then public health (clean water, sewage, sanitation, medical services), then public safety including the armed forces, and finally some level of economic activity that uses petroleum products.

Thirty seconds of pondering this situation should leave you with the idea that there will be very little gasoline available for your gas station to sell to you. For sure, there will be a lot fewer gas stations around ten years from now and you are not going to like the prices. 


 Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.