Not if, but when: Oil production peak will bring hard transition

By a happy coincidence, the day after The Wall Street Journal featured Colin Campbell on its front page with a headline characterizing him as a "doomsayer," one of Campbell's closest collaborators visited Eugene.

Jean Laherrère, like Campbell, is a petroleum geologist, and together they wrote an influential article in the March 1998 Scientific American magazine titled "The End of Cheap Oil." They believe world oil production will soon peak, ending an era of economic expansion fueled by ever-increasing supplies.

Laherrère was in Eugene last week to visit his friend and colleague Walter Youngquist. Youngquist, a former University of Oregon professor of geology, has warned for years - in his 1997 book "GeoDestinies" and other works - that consumption of petroleum and other resources can't continue to grow indefinitely. Laherrère and Youngquist are members of the Association for Study of the Peak Oil, founded by Campbell.

These men are not saying anything revolutionary. In 1956, a geologist named M. King Hubbert predicted that oil production in the continental United States would follow a bell-shaped curve, peaking in about 1969. Production peaked in 1970 and has been declining ever since. In their Scientific American article, Campbell and Laherrère argued that world oil production could be expected to follow the Hubbert curve.

In the continental United States, most oil fields had been found by 1930; discoveries peaked that year, and the peak in production came 40 years later. Worldwide, the peak in discoveries came in the early 1960s.

The last massive oil field to be found, one big enough to supply world demand for two years, was in the North Sea in 1968. The average barrel of oil pumped today was found before 1973. Campbell expects the peak of world oil production to arrive as early as next year.

Laherrère hesitates to predict a date, partly because he doesn't trust oil-producing nations' public statements about their reserves. In the near term, he expects to see not a peak, but a "bumpy plateau" in world oil production, followed by a gradual decline.

World demand for oil currently totals 82 million barrels per day, and is growing at a rate of just over 2 percent a year. The Paris-based International Energy Agency predicts that demand will reach 120 million barrels per day by 2030 - an increase that would fuel economic growth in the United States and the rest of the world for the next quarter of a century. Such an increase in demand can be satisfied only if the world's oil basins are capable of producing that much more than they're producing today. If Laherrère and Campbell are right, production capacity will soon bump up against its limit.

The notion that the oil production peak is near is still a minority view. The prevailing ideology among governments and the oil industry is that technology will permit ever-more-efficient oil extraction, so that reserves will grow even if no new massive oil fields are discovered. In addition, when demand exceeds supply, prices will rise, spurring further exploration and technological improvements. That's what happened after the oil shocks of the 1970s, when higher prices resulted in a surge of non-OPEC production.

Both prices and technology have important roles to play, Laherrère says - but the oil-supply picture is governed by geology, not economics. (Youngquist jokes that oil companies should fire their geologists and hire economists instead, since economists are so much better at finding oil.) Higher prices and technological innovations will both be required to extract harder-to-get oil reserves, but neither can magically bring new supplies into being.

Moreover, given finite supplies, the peak of oil production is a logical certainty - the only question is the date. The U.S. Department of Energy's Energy Information Administration analyzed U.S. Geological Survey data to estimate the date of the peak. Its analysis assumed that new discoveries and technological improvements would significantly increase recoverable world oil reserves. The administration's mid-range estimate shows that if oil consumption grows at a 2 percent rate, the peak in production will occur in 2037.

That's 33 years in the future, which sounds like a long time. Yet, the Arab oil embargo occurred 31 years ago, and little has been done since then to insulate the United States against the many costs of imported oil. Still less has been done to prepare the entire world's economies for an era of declining oil production - indeed, China and the developing world are giving oil-fueled growth an enthusiastic embrace.

The country and the world will have to adjust to declining oil supplies by switching to other energy sources and pursuing efficiency. The sooner that transition occurs, the less wrenching it will be. Instead, oil consumers are driving toward a cliff with their foot on the accelerator, with Americans in the lead.

Jean Laherrere is a member of the Scientific Committee of EFN - the Association of Environmentalists For Nuclear Energy