FYI: ASPO #52

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FYI

http://www.peakoil.net/Newsletter/NL51/newsletter51.pdf
http://www.peakoil.net/USDOE.html

504. The US Department of Energy addresses Peak Oil

Hirsch, R.L: My colleagues and I are working the peaking
problem from the public policy point of view. We just
completed a study for the U.S. DOE on the mitigation of
world oil peaking. In the thought that it might be of
interest to you and your colleagues, I've attached a brief
summary of the work in a form that might fit your newsletter
format.

The Mitigation of the Peaking of World Oil Production
Summary of an Analysis, February 8, 2005

A recently completed study for the U.S. Department of Energy
analyzed viable technologies to mitigate oil shortages
associated with the upcoming peaking of world oil
production. Commercial or near-commercial options include
improved vehicle fuel efficiency, enhanced conventional oil
recovery, and the production of substitute fuels. While
research and development on other options could be
important, their commercial success is by no means assured,
and none offer near-term solutions. Improved fuel efficiency
in the world’s transportation sector will be a critical
element in the long-term reduction of liquid fuel
consumption, however, the scale of effort required will
inherently take time and be very expensive. For example, the
U.S. has a fleet of over 200 million automobiles, vans,
pick-ups, and SUVs. Replacement of just half with higher
efficiency models will require at least 15 years at a cost
of over two trillion dollars for the U.S. alone. Similar
conclusions generally apply worldwide. Commercial and
near-commercial options for mitigating the decline of
conventional oil production include:

1) Enhanced Oil Recovery (EOR), which can help moderate oil
production declines from older conventional oil fields;
2) Heavy oil/oil sands, a large resource of lower grade
oils, now produced primarily in Canada and Venezuela;
3) Coal liquefaction, an established technique for producing
clean substitute fuels from the world’s abundant coal
reserves; and
4) Clean substitute fuels produced from remote natural gas.
For the foreseeable future, electricity-producing
technologies, e.g., nuclear and solar energy, cannot
substitute for liquid fuels in most transportation
applications. Someday, electric cars may be practical, but
decades will be required before they achieve significant
market penetration and impact world oil consumption. And no
one has yet defined viable options for powering heavy trucks
or airplanes with electricity. To explore how these
technologies might contribute, three alternative mitigation
scenarios were analyzed: One where action is initiated when
peaking occurs, a second where action is assumed to start 10
years before peaking, and a third where action is assumed to
start 20 years before peaking. Estimates of the possible
contributions of each mitigation option were developed,
based on crash program implementation. *Crash* programs
represent the fastest possible implementation – the best
case. In practical terms, real-world action is certain to be
slower. Analysis of the simultaneous implementation of all
of the options showed that an impact of roughly 25 million
barrels per day might be possible 15 years after initiation.
Because conventional oil production decline will start at
the time of peaking, crash program mitigation inherently
cannot avert massive shortages unless it is initiated well
in advance of peaking. Specifically,

• Waiting until world conventional oil production peaks
before initiating crash program mitigation leaves the world
with a significant liquid fuel deficit for two decades or
longer.

• Initiating a crash program 10 years before world oil
peaking would help considerably but would still result in a
worldwide liquid fuels shortfall, starting roughly a decade
after the time that oil would have otherwise peaked.

• Initiating crash program mitigation 20 years before
peaking offers the possibility of avoiding a world liquid
fuels shortfall for the forecast period. Without timely
mitigation, world supply/demand balance will be achieved
through massive demand destruction (shortages), accompanied
by huge oil price increases, both of which would create a
long period of significant economic hardship worldwide.

Other important observations revealed by the analysis
included the following:

1. The date of world oil peaking is not known with
certainty, complicating the decision-making process. A
fundamental problem in predicting oil peaking is uncertain
and politically biased oil reserves claims from many oil
producing countries.

2. As recently as 2001, authoritative forecasts of abundant
future supplies of North American natural gas proved to be
excessively optimistic as evidenced by the recent tripling
of natural gas prices. Oil and natural gas geology is
similar in many ways, suggesting that optimistic oil
production forecasts deserve to be viewed with considerable
skepticism.

3. In the developed nations, the economic problems
associated with world oil peaking and the resultant oil
shortages will be extremely serious. In the developing
nations, economic problems will be much worse.

4. While greater end-use efficiency is essential in the long
term, increased efficiency alone will be neither sufficient
nor timely enough to solve the oil shortage problem in the
short term. To preserve reasonable levels ofeconomic
prosperity and growth, production of large amounts of
substitute liquid fuels will be required. While a number of
substitute fuel production technologies are currently
available for deployment, the massive construction effort
required will be extremely expensive and very
time-consuming, even on a crash program basis.

5. Government intervention will be essential, because the
economic and social impacts of oil peaking will otherwise be
chaotic, and crash program mitigation will need to be
properly supported. How and when governments begin to
seriously address these challenges is yet to be determined.
Oil peaking discussions should focus primarily on prudent
risk management, and secondarily on forecasting the timing
of oil peaking, which will always be inexact. Mitigation
initiated earlier than required might turn out to be
premature, if peaking is slow in coming. If peaking is
imminent, failure to act aggressively will be extremely
damaging worldwide.

World oil peaking represents a problem like *none* other.
The political, economic, and social stakes are enormous.
Prudent risk management demands urgent attention and early
action.

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