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PEAKING OF WORLD OIL PRODUCTION:
IMPACTS, MITIGATION, & RISK MANAGEMENT
The Hirsch report, the commonly referred to name for the report Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, was created by request for the US Department of Energy and published in February 2005. It examined the likelihood of the occurrence of peak oil, the necessary mitigating actions, and the likely impacts based on the timeliness of those actions.
XI. SUMMARY AND CONCLUDING REMARKS
Our analysis leads to the following conclusions and final thoughts.
1. World Oil Peaking is
Going to Happen
World production of conventional oil will reach a maximum and decline
thereafter. That maximum is called the peak.
A number of competent
forecasters project peaking within a decade; others contend it will occur
later. Prediction of the peaking is extremely difficult because of geological
complexities, measurement problems, pricing variations, demand elasticity,
and political influences. Peaking will happen, but the timing is uncertain.
2. Oil Peaking Could Cost the U.S. Economy Dearly
Over the past century the development of the U.S. economy and lifestyle
has been fundamentally shaped by the availability of abundant, low-cost oil.
Oil scarcity and several-fold oil price increases due to world oil production
peaking could have dramatic impacts. The decade after the onset of world
oil peaking may resemble the period after the 1973-74 oil embargo, and the
economic loss to the United States could be measured on a trillion-dollar
scale. Aggressive, appropriately timed fuel efficiency and substitute fuel
production could provide substantial mitigation.
3. Oil Peaking Presents a Unique Challenge
The world has never faced a problem like this. Without massive mitigation
more than a decade before the fact, the problem will be pervasive and will
not be temporary.
Previous energy transitions (wood to coal and coal to oil)
were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
4. The Problem is Liquid Fuels
Under business-as-usual conditions, world oil demand will continue
to grow, increasing approximately two percent per year for the next few
decades. This growth will be driven primarily by the transportation sector.
The economic and physical lifetimes of existing transportation equipment
are measured on decade time-scales. Since turnover rates are low, rapid
changeover in transportation end-use equipment is inherently impossible.
Oil peaking represents a liquid fuels problem, not an “energy crisis” in the
sense that term has been used. Motor vehicles, aircraft, trains, and ships
simply have no ready alternative to liquid fuels. Non-hydrocarbon-based
energy sources, such as solar, wind, photovoltaics, nuclear power,
geothermal, fusion, etc. produce electricity, not liquid fuels, so their
widespread use in transportation is at best decades away. Accordingly,
mitigation of declining world oil production must be narrowly focused.
5. Mitigation Efforts Will Require Substantial Time
Mitigation will require an intense effort over decades. This inescapable
conclusion is based on the time required to replace vast numbers of liquid
fuel consuming vehicles and the time required to build a substantial number
of substitute fuel production facilities. Our scenarios analysis shows:
• Waiting until world oil production peaks before taking crash program
action would leave the world with a significant liquid fuel deficit for more
than two decades.
• Initiating a mitigation crash program 10 years before world oil peaking
helps considerably but still leaves a liquid fuels shortfall roughly a decade
after the time that oil would have peaked.
• Initiating a mitigation crash program 20 years before peaking appears to
offer the possibility of avoiding a world liquid fuels shortfall for the forecast
period.
The obvious conclusion from this analysis is that with adequate, timely
mitigation, the economic costs to the world can be minimized. If mitigation
were to be too little, too late, world supply/demand balance will be achieved
through massive demand destruction (shortages), which would translate to
significant economic hardship.
There will be no quick fixes. Even crash programs will require more than a
decade to yield substantial relief.
