Oil peak; US News & World Report

You may have thought you were in the clear when the high gasoline prices of the summer eased in recent weeks. Think again, say a few well-known geologists. They believe the recent energy shortfall may have been a foretaste of a steadily worsening crisis that will set in as world oil production hits a peak this decade, then starts to fall, wreaking economic havoc.

Predictions of a permanent oil crisis are nothing new and are largely dismissed by government, industry, and most academics. But the debate is heating up with the approach of what the pessimists believe is an inexorable deadline, outlined in a book called Hubbert's Peak —The Impending World Oil Shortage, due next month from Princeton Press. At the same time, studies from the U.S. government and others have gotten rosier, saying we'll have plenty of oil for almost four decades —time to shift to alternative energies.

The debate is the legacy of a petroleum geologist name M. King Hubbert, who bucked industry dogma in the 1950s and correctly predicted that U.S. oil production would peak around 1970. Hubbert, who died in 1989, said oil discoveries and oil production follow similar trajectories, hitting a maximum and declining in bell-shaped curves. He noted that U.S. oil discoveries peaked in the 1930s; based on an estimate of total domestic reserves, he predicted that the production peak would follow about 40 years later. Sure enough, domestic oil production topped out in 1970 and has declined ever since, except for a couple of plateaus when prices spiked temporarily. U.S. wells now pump 40 percent less oil than they once did, and the country imports about two thirds of what it consumes.

World discoveries peaked in the 1960s. If world oil follows the same pattern as domestic oil did, production will max out about 2010, and maybe sooner. "The peak of production has to be a mirror image of the peak of discovery," says longtime petroleum geologist Colin Campbell, now living in Ireland, who is outspoken in his warnings. Since production growth barely keeps ahead of demands even today, supplies will quickly run short and prices will soar for everything from gasoline to plastics and synthetic fabrics. Fans concede that Hubbert's math was somewhat suspect, but because he was right about domestic oil, "it's scary to bet against him now," says Kenneth Deffeyes, a Princeton geologist and the author of Hubbert's Peak.

Different math is behind the buoyant view of the U.S. Geological Survey, which last year doubled its estimate of the world's remaining oil, to 2.3 trillion barrels. The world is consuming about 28 billion barrels a year, a figure that has grown an average of 2 percent annually over 30 years. But the USGS estimate leaves a comfortable cushion: the U.S. Department of Energy looked at the data and estimated that remaining reserves could meet demand until 2037. And the reserve estimate is conservative, says DOE petroleum analyst John Wood. "There are a lot of things USGS could do to get even higher numbers, but they didn't," he says.

The USGS started with roughly 900 billion barrels in "proved" reserves. Then it tried to estimate how much oil has yet to be discovered. Committees of geologists laid odds of finding oil in areas now being explored. The longer the odds, the less weight the scientists gave an area in their estimate of total undiscovered reserves: about 700 billion barrels. Much of the new oil would come from the Middle East, already home to most of the world's reserves, and from new prospects off the Atlantic shores of Africa and South America.

Every Drop. The USGS also included, for the first time, a phenomenon called reserve growth, in which the industry finds it can pump more oil than expected from a field because of new technology and methods. The USGS looked at the U.S. experience, where technologies such as horizontal drilling and digital seismic imaging retrieve 50 percent or more of a field's oil. In the rest of the world the average is about 30 percent. [This only looks like it makes sense. Unlike taking money out of a bank account, there is no way to know what percent of oil remains in a field, because you would have to take out every last molecule to truly know how much there was in the first place. You can only compare the original estimate of how many barrels would be recoverable to how much has been exhausted. An honest industry estimate would logically take into account known and anticipated technology, which should have a visible rate of slow increase, resulting in a total actually recovered higher as often as it would be lower. A quantum leap could happen, but it would be unwise to bet civilization on it. Honesty is not always the best thing for the price of a company's stock, neither is letting the cat out of the bag.] Exporting U.S. technology and know-how should raise the yields in other countries by about 700 billion barrels, says Thomas Ahlbrandt, the head of the USGS study.

Campbell is skeptical of both these wellsprings of new oil. He criticizes the USGS for including fields which a 1-in-29 chance of producing oil in its estimate of undiscovered reserves, saying those odds are too long to be given any weight. Only about 150 billion barrels remain to be discovered, in his view. He also dismisses reserve growth, saying U.S. laws forced companies here to understate reserves, resulting in what appears to be higher recovery rates than in the rest of the world.

Still, the USGS's upbeat estimate spun around the International Energy Agency, whose members include the major industrialized nations. The Paris-based agency predicted alarmingly in 1998 that oil would peak before 2020 but changed its mind after the USGS report. The U.S. view is also echoed by the IHS Energy Group, an international consulting firm that owns the best database on oil exploration and that once held a more pessimistic view. "Recent data suggests there is plenty of oil out there for the near term," says IHS spokesman Pete Stark.

Near term" —that's the consolation of his view. Sure, oil is finite. One day the world will need to shift from oil to other energy sources for transportation and heating, reserving what's left for uses where there is no substitute, such as in some chemical and plastics manufacturing. But four decades would give us a chance to prepare —providing it doesn't just deepen our petroleum addiction.[Four decades would be nice for those who don't want to worry now, however, a peak of two years ago now hidden by the plateau effect would be considerably more serious, to say the least. Remember, big business doesn't like the truth when it affects their profits.]

—"A Low-gas Warning"; U.S. News & World Report; Sept 17, 2001;

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