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At Issue: The coming oil crash

Published (3/21/2008)
By Nick Busse
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David Hughes, a geologist with the Geological Survey of Canada, checks the overhead display while giving a Power-Point presentation on peak oil production and other energy sources during at a March 17 hearing of the House Energy Finance and Policy Division.

When the average price of gasoline reached a new all-time high of $3.23 a gallon last week, most Americans had little choice but to take it in stride. For the most part, the reality of expensive gas had become inevitable; like the weather, we can grumble about it, but we can’t change it.

But if the forecast for the price of gasoline looks cloudy now, it’s nothing compared to the storm that some experts say is gathering just over the horizon. Believe it or not, the price of gas is likely to rise even higher — a lot higher. And it’s not because of greedy oil company executives or volatile Middle Eastern politics.

Sometime within the next 30 years, global demand for oil is projected to finally exceed the human capacity to produce it. We will not run out of oil, per se, but our production capacity will peak, meaning that oil supplies will grow increasingly scarce and significantly more expensive. This phenomenon is known as “peak oil,” and those familiar with the issue claim that it rivals global warming in terms of the problem it poses to humanity.

“This will be the defining challenge of the 21st century,” said Matthew Simmons, chairman of the investment bank Simmons & Company International and author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”

Simmons, one of many scientists and oil industry experts who appeared before members of the House Energy Finance and Policy Division in a series of peak oil informational hearings that began in January, believes that the peak may have already occurred; others predict that production will peak between 2012 and 2015, while more optimistic estimates put it out to approximately 2040.

While the exact timing of peak oil remains in dispute, no one — not even the oil companies — denies that it’s going to happen. And while state and local governments can do little to stop peak oil from occurring, a push has begun to get them to prepare for some of its potential consequences, which could include temporary gas shortages, rising food costs, rapid price fluctuations, general economic instability and social unrest.

No good alternatives

Simmons and other experts say that one of the biggest problems with oil is its irreplaceability. Ethanol and biodiesel, gasoline’s chief competitors, are energy-intensive to produce, and there isn’t nearly enough feedstock available to make quantities that would be large enough to replace gasoline. Other technologies like solar, wind and nuclear power are geared toward generating electricity, and offer little hope of solving the transportation needs of a global economy.

Moreover, even if some new miracle technology were to emerge in the next few decades that could replace oil as a fuel source, it’s unlikely that it would. Consider the hundreds of millions of cars, trucks, ships and airplanes around the world that run on petroleum and that would have to be replaced in such a short time frame.

Given that investing in alternative fuels would likely put little more than a dent in the problem, any efforts to mitigate the effects of peak oil are likely to focus instead on conservation, and on softening the impacts of short-term problems like gas shortages and price spikes.

What that could mean for policymakers in the future is largely anyone’s guess; however, Simmons offered a few of his own ideas, such as growing more food locally, ending the “globalized” manufacturing of products and “liberating” the workforce by encouraging more people to work from home.

For the time being, Division Chairman Rep. Bill Hilty (DFL-Finlayson) intends to get the ball rolling with HF995, a resolution that would recognize the “unprecedented challenge” posed by peak oil and ask Gov. Tim Pawlenty to prepare a statewide response plan to deal with it.

It’s a small first step, but one that is intended to address what experts say is one of the biggest obstacles to dealing with the issue: the lack of public discussion about it.

“Awareness is the first step, and that resolution goes a long way in producing awareness,” said David Hughes, a geologist with the Geological Survey of Canada, at a March 17 division meeting. Hughes said global warming and peak oil represent the two preeminent issues of our time, but noted that the latter issue is relatively obscure.

Hilty’s resolution currently awaits action by the full House. A companion, SF1948, sponsored by Sen. Jim Carlson (DFL-Eagan), awaits action by the Senate Rules and Administration Committee.

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