Hurricanes Katrina and Rita highlighted the vulnerability of the world’s oil supply to disruptions and the resulting price shocks.
Matthew Simmons, author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, writes in the Time Magazine Bonus Section October 2005 on Global Business about “The Real Oil Shock.”
Simmons concludes: “The bottom line: the global oil supply has probably peaked. While the world expects to consume 120 million [barrels of oil] a day two decades from now, actual supply may be half that rate. This conclusion aptly portrays the potential magnitude of the energy ditch we are now in. It is impossible to calculate the odds of this supply-demand imbalance happening, but prudent planning argues that the world should assume the bleaker scenario. Then it follows that a global plan to use oil more rationally must be urgently developed and implemented.”
Simmons recommends: “Because 70% of the world’s oil is used as transportation fuel, that would be the place to start. We need to create new forms of transportation fuels as well as reduce the quantity of goods and people moved by cars and large trucks. If a high percentage of products now transported by large trucks were shifted to the global rail system, an efficiency savings of three- to tenfold could be realized. If those goods could be shipped over water rather than rail, even greater efficiencies would be realized. While such changes will take time, they have to succeed.”
Simmons also recommends: “A second change would come through embracing ‘distributed work.’ Most commercial businesses still operate on a concept that all employees need to work in the same office building to communicate. That was a necessity 20 to 40 years ago, but now faxes, e-mail, telephones and video conferencing allow people to work where they live, eliminating several hours of daily commuting time. And we need to manufacture more products and grow more food close to markets where they will be consumed.”
In closing Simmons says: “If a master plan is quickly adopted on a global scale, the world can safely cope with a peak in oil production and create a more sustainable and enjoyable economy at the same time. If we ignore these changes and peak oil does occur, the unforeseen consequences could create a far darker world.”
But other oil experts question Simmons’ dire predictions.
Daniel Yergin, author of the Pulitzer-prize winning book Prize: The Epic Quest for Oil, Money & Power, recently wrote in The Washington Post an article titled “It’s Not the End Of the Oil Age:
Technology and Higher Prices Drive a Supply Buildup.”
Yergin asserts: “We’re not running out of oil. Not yet.”
Nonetheless, Yergin concludes: “The growing supply of energy should not lead us to underestimate the longer-term challenge of providing energy for a growing world economy. At this point, even with greater efficiency, it looks as though the world could be using 50 percent more oil 25 years from now. That is a very big challenge. But at least for the next several years, the growing production capacity will take the air out of the fear of imminent shortage. And that in turn will provide us the breathing space to address the investment needs and the full panoply of technologies and approaches — from development to conservation — that will be required to fuel a growing world economy, ensure energy security and meet the needs of what is becoming the global middle class.”
The Energy Information Administration of the U.S. Department of Energy features a year-old article titled “Long-Term World Oil Supply Scenarios: The Future Is Neither as Bleak or Rosy as Some Assert.”
The authors John H. Wood, Gary R. Long and David F. Morehouse conclude: “Will the world ever physically run out of crude oil? No, but only because it will eventually become very expensive in absence of lower-cost alternatives. When will worldwide production of conventionally reservoired crude oil peak? That will in part depend on the rate of demand growth, which is subject to reduction via both technological advancements in petroleum product usage such as hybrid-powered automobiles and the substitution of new energy source technologies such as hydrogen-fed fuel cells where the hydrogen is obtained, for example, from natural gas, other hydrogen-rich organic compounds, or electrolysis of water. It will also depend in part on the rate at which technological advancement, operating in concert with world oil market economics, accelerates large-scale development of unconventional sources of crude such as tar sands and very heavy oils. Production from some of the Canadian tar sands and Venezuelan heavy oil deposits is already economic and growing. In any event, the world production peak for conventionally reservoired crude is unlikely to be ‘right around the corner’ as so many other estimators have been predicting. Our analysis shows that it will be closer to the middle of the 21st century than to its beginning.”
While Wood, Long and Morehouse doubt Peak Oil is just around the corner, they nevertheless call for action sooner rather than later: “Given the long lead times required for significant mass-market penetration of new energy technologies, this result in no way justifies complacency about both supply-side and demand-side research and development.”
Thinking globally and acting locally, key questions are: What can the Portland metropolitan area do to plan prudently for a potential worldwide shortage of oil? Are current efforts to promote transit and bicycling sufficient, or should more be done?
Looking to the state, are the efforts proposed in the draft update to the Oregon Transportation Plan enough? Are the measures called for in the plan likely to be implemented?
- Rex Burkholder recently posted an entry here about “Population Growth and Regional Traffic.”
- James Mayer recently wrote in The Oregonian about “Think the commute’s bad now? More jobs may mean more jams.”
- Rob Zako previously posted an entry here on “The Breaking Point for the Supply of Oil?”
- Matthew Simmons is featured in a recent New York Times story on “The Breaking Point.”