e 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 crying wolf for almost a century. But better that, perhaps, than crying “sheep” when the wolves appear.
The Hirsch report has no truck with those who believe in the magic of the markets. “High prices do not a priori lead to greater production. Geology is ultimately the limiting factor”.(18) There are plenty of oil shales, tar sands and coal seams available for turning into liquid fuels, but it would take years and a massive investment before enough came online. Hirsch compares the projections of the oil optimists to those of the gas optimists in the late 1990s, who promised “growing supply at reasonable prices for the foreseeable future” in the US and Canada. Today the same people are bemoaning the deficit. “The North American natural gas market is set for the longest period of sustained high prices in its history, even adjusting for inflation … Gas production in the United States (excluding Alaska) now appears to be in permanent decline”.(19)
“The bottom line,” Hirsch says, “is that no one knows with certainty when world oil production will reach a peak, but geologists have no doubt that it will happen.” Our hopes of a soft landing rest on just two propositions: that the oil producers’ figures are correct, and that governments act before they have to. I hope that reassures you.
1. Energy Intelligence, 2005. High Oil Prices: causes and consequences.
2. From Matthew Simmons, 2005. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Wiley. Quoted by Peter Maass, 21st August 2005. The Breaking Point. New York Times.
3. Adam Porter, 15th July 2005. How much oil do we really have? http://news.bbc.co.uk/1/hi/business/4681935.stm
4. Jean Laherrere, 2nd May 2000. Is USGS 2000 Assessment Reliable? http://energyresource2000.com
5. Adam Porter, ibid.
6. J.W. Schmoker and T.S. Dyman, 2000. Chapter RV, U.S. Geological Survey, World Petroleum Assessment 2000. http://energy.cr.usgs.gov/WEcont/chaps/RV.pdf
7. U.S. Geological Survey, 2000. World Petroleum Assessment 2000. Executive Summary. http://pubs.usgs.