Last week we and other representatives of the Association for the Study of Peak Oil & Gas USA (ASPO-USA) stood on the steps of the U.S. Department of Energy (DOE) to call for “Truth in Energy” concerning one of the most serious threats to our economy, national security, and environment: the prospect of an impending decline in world oil supply. The consequences of this milestone are far-reaching and potentially catastrophic. After a news conference at DOE, we delivered a letter to Energy Secretary Steven Chu summarizing our concerns and requesting answers to specific questions about DOE’s response to this monumental challenge.
The Energy Information Administration (EIA), a branch of DOE, has been providing to the public wildly optimistic projections that world oil supply will keep pace with rising global demand and prices will rise only moderately over the next two decades. This view of the future is misleading and fosters a dangerous complacency about the nation's energy challenges. Such rosy forecasts are to be expected from industry sources; however, EIA is a public, taxpayer-funded body that, according to its mission statement, is supposed to be an “independent and unbiased source of information.”
Sadly, we believe EIA has failed to fulfill that mission in analyzing the future outlook for oil. EIA's own data show that world oil production has not increased for the past seven years, despite rising demand and a dramatic jump in oil prices. How does DOE and EIA explain such an unprecedented trend, and does this trend signal a turning point in our long history with oil?
Potential constraints on world oil supply are downplayed in public information disseminated by DOE and EIA, in contrast to other prominent sources. The International Energy Agency (IEA), of which the United States is a cooperating member, indicates that global production from conventional oilfields has reached maximum levels and is entering a period of steady decline. A 2010 report by the Department of Defense's Joint Forces Command identified a potential fall-off in world oil supply as a critical challenge for future military readiness. The Government Accountability Office conducted a study in 2007 that warned of oil supply constraints and recommended concrete actions for DOE to take. There is little evidence to date that DOE has responded to these recommendations.
Tad Patzek, professor and chair of the Department of Petroleum and Geosystems Engineering at the University of Texas, and a member of ASPO-USA's advisory board, notes that EIA has been a preeminent source of historic energy information, but their future projections are not meeting the same standard. EIA predicts that natural gas liquids and unconventional sources of oil, such as Canadian tar sands, will offset declining supply from conventional oilfields. According to Patzek, however, this is like “comparing apples and oranges” given the great uncertainty about the rate and costs at which these unconventional sources can be developed on a global scale.
EIA forecasts for U.S. natural gas supply also fail to examine physical and economic factors that may limit future production, despite the current exuberance about shale gas development. EIA’s 2011 Annual Energy Outlook projects a continuation of low and stable prices for natural gas through 2035. Reports by the New York Times, however, suggest there is considerable uncertainty within EIA regarding the medium and long term potential for shale gas. Contractors with clients in the natural gas industry apparently helped develop the agency's natural gas projections which raises additional doubts.
ASPO-USA is calling for DOE and EIA to openly and directly address the possibility of an impending oil supply crisis and persistent oil shortages. EIA also needs to provide much greater transparency regarding how its projections are developed. ASPO-USA is further calling for DOE to lead the development of a National Oil Emergency Response Plan, which would assess the consequences of declining world oil supplies and plan prudent responses. A National Plan would help Americans prepare for and adapt to an uncertain and rapidly-changing energy and economic future. DOE and EIA have a critical role to play in understanding and confronting this national challenge. They can start by providing reliable information.
Jim Baldauf is president and co-founder of ASPO-USA. Jan Lars Mueller is ASPO-USA’s executive director. ASPO-USA will be holding its 7th annual Peak Oil Conference in Washington DC, November 2-5, at the Capitol Hill Hyatt.