STATEMENTS FOR NEWS CONFERENCE AND RELEASE REGARDING “TRUTH IN ENERGY”
October 26, 2011
We founded ASPO-USA in 2005 with the purpose of monitoring alarming oil and gas trends that we were
seeing in the data. We became especially concerned that commonly-relied-upon sources of information
were ignoring and dismissing these trends. It’s one thing for industry to put out rosy projections about oil
and gas—it’s good for stock prices and Wall Street investors. But EIA is a taxpayer-funded public agency
that is supposed to be independent; they're supposed to dig for the truth.
No one can predict the future, but if these glowing predictions turn out to be wrong, the consequences
are potentially catastrophic. We can't bet our economy and national security on such overly-optimistic
projections; it's a risk that we can't afford. We can't bet our future on another bubble, an oil patch
version of the housing bubble and subprime crisis, the stock market bubble and financial bailout, Lehman
Brothers, AIG, and Enron.
We are not running out of oil. But we appear to be running out of oil that we can afford. Drilling for oil in
extreme deep water, strip mining for oil in the Canadian tar sands, squeezing oil from shale source rock—
we are essentially scraping the bottom of the barrel. And despite exuberance from the natural gas
industry, there are plenty of reasons to be skeptical that natural gas is going to solve our oil and energy
The Department of Energy’s optimistic forecasts for future supply are dangerously unrealistic. The
risk/benefit ratio is out of balance. If these exuberant predictions are wrong, the consequences could be
catastrophic. We need to be conservative in planning for the future. We can’t bet America’s economy and
national security on Pollyanna predictions. Exuberance about cheap energy may serve the short-term
interests of Wall Street, but it threatens the future of our country.
Increased development of North American resources is held up by some to be a path to energy
independence. U.S. oil production has increased about 625,000 barrels per day since 2008 but is still
below levels before 2002, and is slightly more than half of peak levels in 1970. While this is a positive
development, the increase represents 3.5% of U.S. daily consumption.
Increased oil production is mostly from the Bakken, Eagle Ford and other shale plays and is only
commercial at oil prices above $80/barrel, and much of it is not commercial at all because of high drilling
and completion costs. Reserves and future oil supply from these plays is unknown because there is
insufficient production history to estimate decline rates.
Medium- and long-term natural gas reserves and supply have similar uncertainty because of limited
production history. The math of industry claims of 100-year natural gas supply because of shale gas do
not compute based on estimates by the Potential Gas Committee. The U.S. has abundant natural gas
resources but it is unlikely that we have even 25 years of natural gas supply.
(Not present at news conference)
The trend that America needs to watch is the decline in global net exports. Global net oil exports are
simply defined as domestic production of total petroleum liquids in oil exporting countries less domestic
consumption. Global net exports have shown about a three million barrel per day decline from 2005 to
2010, with 21 of the top 33 net oil exporters showing lower net oil exports in 2010 versus 2005.
Another key metric is available net exports, which we define as global net exports less the combined net
oil imports of China and India. Available net exports have fallen at an average rate of about one million
barrels per day (mbpd) per year from 2005 to 2010, from about 40 mbpd in 2005 to about 35 mbpd in
2010. If we simply extrapolate current trends, available net exports would be down to about 21 mbpd in
2020 versus 40 mbpd in 2005.
At the current rate of increase in the ratio of China and India’s net imports to global net exports, the two
countries would consume 100 percent of global net exports in about 20 years. Contrary to many
optimistic predictions, what the data show is that developed countries like the United States are currently
being outbid by developing countries for access to a declining supply of global net exports.
(Not present at news conference)
The heart of our request is the formation of a national oil emergency response plan. We are not
demanding that the Department of Energy enact any specific policy change at this time, but rather set up
a properly funded and sufficiently empowered commission to study the full range of potential
consequences to the United States if we were to experience a near-term imbalance between global
supply and demand of liquid fuels. This is an eminently reasonable request, given the potentially severe
consequences that would afflict our country if we were caught flat-footed by this threat.
Despite rising demand and a large increase in oil prices, world oil supply has been on a plateau; it has
stayed relatively constant since 2005. Simultaneously, production from existing world oil fields is declining
at a high rate. Both of these developments are unprecedented, yet DOE and EIA have dismissed them as
not being of major concern. Many oil production analysts believe that in a relatively few years, total world
oil production will go into decline. Our 2005 study for the DOE examined the serious problems that will
cause and how little time we have to effectively react. This is because of the huge amount of oil
consumed worldwide and the fact that a even a few percent decline in oil production will be difficult,
expensive and time-consuming to make up.
Many oil production professionals and various organizations worldwide have warned that we are on the
threshold of a major world oil supply problem, yet no red flags have been registered by DOE or EIA.
Contrast that with the International Energy Agency which says that world conventional oil production has
peaked and will undergo a steady decline in the future.
The Department of Defense's Joint Operating Command in their biennial report has forecast a shortfall in
world oil supply as a serious challenge to military readiness. They have said that as soon as 2012 total
world oil production will begin to decline and that there could be 10 million barrel per day shortage by
2015. Even a report from the oil-industry-dominated National Petroleum Council, appropriately titled Hard
Truths About Energy, describes major challenges facing world oil supply in the near future.
EIA, along with some industry optimists, tell us that unconventional oil sources and improved efficiency
will make up for the decline in world conventional oil and will keep pace with a steady climb in world
demand. There is very strong evidence to the contrary.
Why the great concern? It’s because oil products drive more than 90 percent of world transportation, so
escalating oil prices and growing oil shortages will drive economies into ever deepening recession and
hurt untold billions of people. The optimism of the EIA against the realism of the Department of Defense
is not serving the United States’ public interest. The risks of EIA being incorrect are enormous. The U.S.
government needs to speak with one voice. We believe that Department of Defense is correct and that
the EIA is wrong. America deserves a single point of view from its government.
The Association for the Study of Peak Oil & Gas - USA (ASPO-USA) is a non-profit education organization
dedicated to advancing “Truth in Energy.” We believe that reliable information and a clear understanding
of the true nature of America's energy challenges and opportunities are essential for our nation to chart a
wise course for the future.
“Truth in Energy” is why we are here today. The Department of Energy and the Energy Information
Administration have a critical role to play in helping Americans uncover and understand “truth in energy.”
Indeed, EIA states that its mission is to be a source of “independent and unbiased information.”
Unfortunately, EIA has been hindered from fulfilling that mission. Specifically, EIA has failed to critically
examine and focus attention on the growing risks of a world oil supply crisis and persistent oil shortages.
It also has failed to critically examine factors that may constrain future natural gas supply, despite the
current exuberance about shale gas development.
We have documented and specified our concerns in a letter to Secretary Chu which we hand delivered to
his office today. The letter includes seven key questions which we believe are critical for DOE and EIA to
answer regarding their projections for future oil and gas supply. It also calls for DOE to lead the
development of a national oil emergency response plan which would involve multiple federal and state
agencies, industry, and the public in an effort to understand and confront the prospect of an impending
decline in world oil production.
ASPO-USA is a diverse organization of concerned citizens and critical energy observers. Our members and
advisers include a long list of distinguished experts from academia, industry, as represented by the group
here today, and the many signatories on this letter that we are presenting to Secretary Chu.
Americans rely on DOE and EIA to provide complete and reliable information to guide their decisions and
plans for the future. However, we believe Americans are not getting the whole truth about the challenges
facing future oil and gas supply, and so are unprepared for these growing threats and risks.
To understand and confront the growing possibility of an oil supply crisis and persistent oil shortages,
ASPO-USA is calling for the development of a national oil emergency response plan. Such a plan would
engage government, outside experts, diverse stakeholders, and the concerned public to assess the
impacts of increasing scarcity and rising oil prices on the economy and national security, and evaluate
potential responses. We believe DOE should have a lead role in initiating and developing such a plan.
Other federal and state agencies should also be involved in understanding how a near-term oil supply
crisis and long-term oil shortages will affect the different sectors of the economy—such as transportation,
food and agriculture, housing, finance, etc.
America needs DOE and EIA to examine and help us confront the reality of our energy challenges openly
and directly, especially concerning the future about oil and gas. We are ready to meet with the secretary
and his staff at their earliest convenience to discuss our concerns and the details of a national plan.
During a career working at the Central Intelligence Agency I came to appreciate the many diverse threats
to the national security and well-being of our country. These threats not only come from foreign countries
and terrorist groups, but also from changing economic and environmental factors. Ten years ago I
became from concerned about the threat to our well-being from depleting reserves of oil which is vital to
the functioning of our society.
For the last six years I have been the publications editor for the Association for the Study of Peak Oil and
in this capacity have become familiar with nearly every piece of information and analysis bearing on the
issue of peaking global oil production. There are literally dozens of reports and analyses appearing every
week around the world pointing to the fact that the world is facing major challenges in maintaining, much
less growing, the global supply of oil in next few years.
Our concern here today is the growing disconnect between the solid evidence of serious troubles ahead
and the Department of Energy’s benign projections concerning the availability of fossil fuels in the next 30
years. As a longtime federal employee, I know there are many good, smart analysts and modelers
working for the Department of Energy who fully understand the nature of what will happen to us when
the energy from fossil fuels comes into such short supply that it is no longer affordable.
I also understand the nature of life inside an organization as large as the U.S. government and even the
Department of Energy where one is subject to numerous political pressures from the incumbent
administration and the Congress. By their very nature large and venerable organizations become subject
to bureaucratic inertia, wherein there is great reluctance to change long-standing assumptions and
projections – especially when these changes will inevitably lead to controversy.
We are therefore calling on the leadership of the Department of Energy and the Energy Information
Administration to unleash the analytical resources and expertise of their organizations to understand and
address the increasingly uncertain future of our oil and gas supplies.