000, 2659(7). Yet the discovery of major oil fields peaked in 1964(8). Where has it come from?
It is true to say that oil reserves are not fixed. As technology improves or the price increases, oil that was formerly too expensive to extract becomes available. But the oil geologist Jean Laherrere points out that the survey’s estimate “implies a five-fold increase in discovery rate and reserve addition, for which no evidence is presented. Such an improvement in performance is in fact utterly implausible, given the great technological achievements of the industry over the past twenty years, the worldwide search, and the deliberate effort to find the largest remaining prospects.”(9)
The current high oil prices are the result of a shortage of refineries – exacerbated by the hurricanes in the Gulf of Mexico – rather than a global shortage of crude. But behind that problem lurks another. Last week Chris Vernon of the organisation PowerSwitch published figures showing that while total global oil production has risen since 2000, the production of light sweet crude – the kind that is easiest to refine into motor fuels – has fallen, by two million barrels a day(10). This grade, he claims, has already peaked. The refinery crisis results partly from this constraint: there aren’t enough plants capable of processing the heavier grades.
And next in the queue? Who knows? All I can say is that Bush himself does not appear to share the Geological Survey’s optimism. “In terms of world supply,” he said in March, “I think if you look at all the statistics, demand is outracing supply, and supplies are getting tight.”(11) What has he seen that we haven’t?
If the figures have been fudged, we’re stuffed. That might sound extreme, but it is not my conclusion. It is that of the consultants hired by the US Department of Energy. In February this year, the department released a report called “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management”.(12) I say “released”, for it was never properly published. For several months the only publicly available copy was lodged on the website of the Hilltop High School in Chula Vista, California.(13)
The department’s consultants, led by the energy analyst Robert L Hirsch, concluded that “without timely mitigation, the economic, social, and political costs will be unprecedented.” It is possible to reduce demand and to start developing alternatives, but this would take “10-20 years” and “trillions of dollars”. “Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades”, which would cause problems “unlike any yet faced by modern industrial society.”(14)
Of course, we have been here before. Oil analysts and environmentalists have warned of disappearing reserves ever since drilling began, and they have always been proved wrong. According to people like the Danish statistician Bjorn Lomborg, this is because the industry is self-regulating. “High real prices deter consumption and encourage the development of other sources of oil and non-oil energy supplies”, he says. “Since searching costs money, new searches will not be initiated too far in advance of production. Consequently, new oil fields will be continuously added as demand rises. … we will stop using oil when other energy technologies provide superior benefits.”(15)
It is beginning to look as if he is wrong on all counts. As the Economist magazine pointed out on September 10th, “demand for petrol is pretty inelastic in the short term”(16), because people still have to go to work, however much it costs. According to the analyst it cites, “it would take a doubling of petrol prices to reduce American petrol consumption by just 5%.”(17) Lomborg’s idea that companies can just go out and find new oil when demand rises suggests that he believes geology is as malleable as statistics. One day – or so we should hope – a superior technology will certainly emerge, but cheap alternatives to liquid fuels are currently decades away. Yes, the pessimists have been 