Unlinkable, by NY Times editor Robert Semple Jr.

This topic created a really nasty comment war last year on this blog, when one commenter insisted any mention of the possibility of the world running out of oil was foolish, juvenile and ignorant. (Funny, that’s just what I thought of his comments.) It’s not going to happen tomorrow, but the crisis may not be that far off, either.

The End of Oil

When President Bush declared in his 2006 State of the Union address that America must cure its “addiction to oil,” he framed his case largely in terms of national security — the need to liberate the country from of its dependence on volatile and in some cases hostile nations for much of its energy. He failed to mention two other good reasons to sober up. Both are at least as pressing as national security.

One is global warming. This is not an issue Mr. Bush cares much about. Yet there is no longer any doubt among mainstream scientists that the earth is warming up, that increasing atmospheric temperatures have already damaged fragile ecosystems and that our only real defense against even graver consequences is to burn less fossil fuel — which means, among other things, using less oil.

The second reason is just as unsettling, and is only starting to get the attention it deserves. The Age of Oil — 100-plus years of astonishing economic growth made possible by cheap, abundant oil — could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia will run dry. But before that happens there will come a day when oil production “peaks,” when demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today’s $60-a-barrel oil look like chump change. Unless, of course, we begin to develop substitutes for oil. Or begin to live more abstemiously. Or both. The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look — largely because it is almost certainly correct.

I. Peak Oil

In oil-patch lingo, “peak oil” refers to the point at which a given oil reservoir reaches peak production, after which it yields steadily declining amounts, no matter how many new wells are drilled. As Robert L. Hirsch, an expert on energy issues told Congress last December, the life span of individual oil fields is measured in decades. Peak production typically occurs 10 years or so after discovery, or when the reservoir is about half full. An oil field may have large estimated reserves. But a well-managed field that has reached its peak (as most American fields have) has also reached a point of no return, no matter how much new technology is applied. And what’s happening in individual fields will be reflected on a global scale, because world production is by definition the sum of its individual parts.

When will oil peak? At least one maverick geologist says it already has. Others say 10 years from now. A few actually say never. The latest official projections from the Energy Information Administration put the peak at 2037, or 2047 — depending, of course, on how much of the stuff is out there and how fast we intend to use it up. But even that relatively late date does not give us much time to adjust to a world without cheap, abundant oil.

II. Hubbertians vs. Cornucopians

Let’s start with the true pessimists, proudly known as Hubbertians after the legendary Shell Oil Company geophysicist, M. King Hubbert. In the 1950’s, Mr. Hubbert collected a wealth of historical data on oil discoveries and production, developed some complex mathematical formulas, and produced a bell-shaped curve showing that the rate at which oil could be extracted from wells in the United States would peak around 1970 and then begin to decline. Though perhaps not the most popular guy at Shell headquarters, he turned out to be right. U.S. oil extraction peaked at about 9 million barrels a day in 1970, and is now below 6 million a day. His basic methodology has been used ever since. Various economists and geologists have applied the Hubbert technique to the world oil supply.

Among the more readable and entertaining of Mr. Hubbert’s disciples is another Shell alumnus, Kenneth S. Deffeyes, who is now a professor emeritus at Princeton. Mr. Deffeyes holds that nature’s original oil bequest amounted to about two trillion barrels, of which nearly half has already been consumed. Armed with Mr. Hubbert’s bell curve, and incorporating all sorts of up-to-date data, Mr. Deffeyes concludes with playful certainty that the apocalypse is not only upon us but has in fact occurred. “I nominate Thanksgiving Day, Nov. 24, 2005, as World Oil Peak Day,” he says at the outset of his latest Hubbert-related book, “Beyond Oil: The View From Hubbert’s Peak.” “There is a reason for selecting Thanksgiving. We can pause and give thanks for the years from 1901 to 2005 when abundant oil and natural gas fueled enormous changes in our society. At the same time, we have to face up to reality: World oil production is going to decline, at first slowly, and then more rapidly.”

Other prognosticators — Mr. Deffeyes dismisses them as “cornucopians” — paint a much cheerier picture. The most authoritative of these is not one person but 40 — the number of geologists and physicists the U.S. Geological Survey assigned to carry out the most comprehensive study ever conducted of the oil resources outside the United States. The study was done between 1995 and 2000. When combined with the results of an earlier survey of U.S. resources, it suggested that earth’s original oil endowment was 3 trillion barrels, not 2 trillion as supposed by Mr. Hubbert and his followers. It also suggested that the remaining inventory was more than twice Mr. Hubbert’s — 2. 3 trillion barrels, consisting (in very round figures) of 900 trillion in proven reserves, 700 trillion in “reserve growth” (additional barrels that can be retrieved through advanced technology) and 700 trillion in “undiscovered” reserves, meaning oil the USGS experts think we can find given what we know about geological formations. These figures, admittedly speculative, are undeniably more upbeat than anything the Hubbertians have to offer (Mr. Deffeyes, for instance, puts the “undiscovered reserves” figure at 100 million barrels, max). And, of course, these rosier official calculations yield a much later oil peak — 2037, assuming a steady annual increase of 2 percent in worldwide demand, and maybe later, if another mammoth oilfield kicks in somewhere on earth. No reason yet to abandon the family S.U.V.

III. Consequences

Or is there? Think about it: the year 2037 is a mere half-generation away. Despite their differences, neither Mr. Hubbert’s disciples nor the optimists showed the least interest in doing a straight-line calculation to figure out when earth will yield its last drop of oil (a calculation easily done, by the way — dividing USGS’s 2.3 trillion by today’s average annual consumption of 30-plus billion gives us about 80 years until the fat lady sings). But that’s not the important date. The important date is the point at which demand zips past supply.

In the past several years, the gap between demand and supply, once considerable, has steadily narrowed, and today is almost in balance. Oil at $60 a barrel oil may be one manifestation. Another is the worried looks on the faces of people who fret about national security. In early 2005, for instance, the National Commission on Energy Policy and another group called Securing America’s Future Energy (SAFE) convened a bunch of Washington heavyweights at a symposium called, alarmingly, Oil ShockWave, and asked them to imagine what it would take to drive oil prices into the stratosphere and send shockwaves reverberating through America and the rest of the western world.

It wouldn’t take much — a terrorist attack on Alaska’s Port of Valdez would reduce global oil supply by 900,000 barrels a day; unrest in Nigeria, 600,000 barrels; an attack on Saudi Arabia processing facilities at Haradh, 250,000. Throw in an unseasonable cold snap across the Northern Hemisphere, boosting demand by 800,000 barrels, and before long you’re staring at a net shortfall of 3 billion barrels, or about 4 per cent of normal daily supply. This, in turn, is enough to drive oil prices from about $60 to $161 a barrel. The cost of fuel at the pump — indeed, the cost of most petrochemical-based products — rises dramatically. The U.S. economy slides into recession. Millions are thrown out of work. More broadly, the quintessentially American lifestyle — two-car suburban families commuting endlessly to office, school and mall — suddenly becomes unsustainable. But what the peak oil experts are saying is that we don’t need terrorists to make this happen. Essentially the same scenario is unfolding now, right before our eyes, without benefit of bombings or cold snaps, simply through the normal laws of supply and demand.

The 2005 International Energy Outlook from the government’s Energy Information Administration is instructive on this point. Over the next two decades, global oil consumption is expected increase by more than half, from about 84 million barrels per day now to nearly 119 million barrels by 2025. U.S. consumption alone is expected to jump from 20 million to 30 millions barrels a day, one fourth the world’s total. But the thirstiest consumers of all will be the emerging giants of Asia, particularly China, which is expected to quadruple the number of cars on its roads in the next 20 years and whose oil needs are expected to grow by a minimum of 3.5 per cent every year, well above the worldwide norm. Can supply keep pace? Put differently: Can Saudi Arabia bail us out?

IV. The Mysterious Saudis

Conservative projections and simple arithmetic tell us that the world will need at least 35 million more barrels a day in 2025 than it needs now. The Energy Information Administration is cautiously optimistic that those barrels can be found. It foresees steady production increases in the old Soviet Union, Africa and the Caribbean. It hopes that Iraq’s oil industry will survive the war and return to its old self. It does not even mention the possibility of blackmail by Iran. And it sees no reason why Saudi Arabia — the elephant in the oil patch, the country whose 260-plus billion barrels in proven reserves is one-quarter of the world’s total, twice Iran’s and ten times the U.S.’s — shouldn’t be able to keep the oil flowing our way. Forecasters at the E.I.A. and elsewhere assume that the Saudis will be able to make a contribution commensurate with the overall 50 percent rise in production the world will need to produce those extra 35 million barrels, jacking up output from 10.5 million barrels a day now to 12.5 in 2009 to 15 million after that. But there are some people who seriously doubt whether Saudi Arabia can turn on the spigot as it’s always done before.

Matthew Simmons is one of them. Indeed, Mr. Simmons is not sure that Saudi Arabia can do much of anything. Mr. Simmons is a Texas businessman and oil expert who runs a consulting firm in Texas, making good money advising energy companies. Like Mr. Deffeyes, he is seen as a maverick. His other trademark is pessimism — a pessimism nourished, he told Peter Maass of the New York Times Sunday Magazine, by months of poking around in obscure data about Saudi oil fields that left him with deep doubts about Saudi Arabia’s ability to deliver the oil the world will ultimately need. His studies of Saudi Arabia’s huge Ghawar field, which has produced an astonishing 55 billion barrels in the last half-century, left him particularly wide-eyed. “Twilight at Ghawar is fast approaching, ” he says in a new book, “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.” “Saudi Arabia clearly seems to be nearing or at its peak output.” Or as he told Mr. Maass: “The odds of the Saudis sustaining [even] 12.5 million barrels a day is very low. The odds of them getting to 15 million for 50 years — there’s a better chance of me having Bill Gates’s net worth.”

Publicly, Saudi officials and many American experts scoff at Mr. Simmons the way official Washington scoffs at Mr. Deffeyes. Other industry consultants, including the much-admired author Daniel Yergin, believe that Mr. Simmons and Mr. Deffeyes and “peakists” in general are being much too gloomy. ” This is not the first time the world has run out of oil,” Mr. Yergin wrote last year. “It’s more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.” Privately, however, a few well-placed Saudis share Simmons’s doubts, and for one obvious reason: Hitting the Energy Information Administration’s targets will require the Saudis to extract increasing amounts of oil from fields that may already be past their prime.

V. What Now?

There are many economists who believe that a nasty oil-price shock might not be such a bad thing, just as a big fat increase in gas taxes might not be such a bad thing. Sharply higher price increases might force us to conserve in ways we never have before, and lead also to a public outcry for fuel-efficient cars that neither Detroit nor the Japanese have been willing to build on a large scale. Higher prices for conventional oil could also make other sources of energy more attractive, including unconventional forms of oil. These include the heavy oil lodged in the Canadian tar sands, where there are thought to be many billions of barrels and where companies like Exxon are poking around. There are also the billions of barrels of unconventional oil trapped in shale formations out West. In the 1970’s, during Jimmy Carter’s synthetic fuels craze, a lot of people lost their shirts on shale oil, which needs to be heated and basically boiled out of the rock. Getting at tar and shale oil require heavy, energy-intensive mining operations. And despite the serious bets being placed on the tar sands, unconventional oil won’t be available in large enough quantities to make a real difference until well down the road.

The same can be said of the hydrogen energy President Bush has been touting ever since he came to office; the National Academy of Sciences says we won’t see affordable hydrogen-powered cars in meaningful numbers for 30 years, if that. This does not mean that we shouldn’t keep trying — future generations will not forgive us if we don’t. What it does mean is that we need to look quickly for near and medium-term solutions that can help us cushion the shock when we hit the peak, assuming we haven’t hit it already.

There is no shortage of ideas about what to do to reduce the demand for oil. In the last two years, there have been three major reports remarkable for their clarity and for their convergence on near-term strategies — from the Energy Future Coalition, consisting of officials from the Clinton and first Bush administrations; from the Rocky Mountain Institute in Aspen, which concerns itself with energy efficiency; and from the above-mentioned National Commission on Energy Policy, a collection of experts from academia, business and labor. All three groups call for much stronger fuel economy standards, beginning very soon. All three call for major tax subsidies and loan guarantees to help the carmakers develop and market these more efficient cars on a massive scale without going bankrupt. And all three call for an aggressive program to develop gasoline substitutes from starch and sugars, known loosely as cellulosic fuels. These strategies would not only help reduce oil dependency but, in the bargain, greatly reduce greenhouse gas emissions, 40 percent of which come from vehicles. They would not threaten economic growth, especially if Washington stood ready to ease Detroit’s transition from the S.U.V.’s and light trucks they depend on for their profits (such as they are) to a new generation of cars and trucks. And they are not pie-in-the sky. Off-the-shelf technology can boost our average fuel economy from 26 to 45 miles an hour in a decade. Brazil already has its cars running on cellulosic fuels. What these groups are talking about — and what distinguishes them from the administration’s rather more passive approach — is not more research but getting good ideas into commercial production in a hurry. This is going to take serious investment. It will also take real leadership, which may be the biggest missing ingredient of all.

A couple of years ago, David Goodstein, vice provost of the California Institute of Technology, published a slim, intelligent, and spry little book called “Out of Gas: The End of the Age of Oil.” A Hubbertian at heart, he nevertheless thinks we have time to avoid the worst, but only if we stop deluding ourselves. He also knows, though, that human nature does not easily leap to a challenge that seems always to be receding, and for that reason he does not think that we will really act until the wave crashes down upon us. “Our present national and international leadership is reluctant even to acknowledge that there is a problem,” he writes. “The crisis will occur, and it will be painful. The best we can realistically hope for is that when it happens, it will serve as a wakeup call, and will not so badly undermine our strength that we are unable to take the giant steps that are needed.”