Peak Oil Recongised at US DOE - Cat getting out

Dept of Energy Acknowledges Possibility of Peak Oil Production After 2011

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Posted by Zoe Macintosh on April 7, 2010 at 3:00 pm

As seen in this graph above, the DOE has for at least a year fully expected traditional oil supplies to drop off suddenly starting in 2012 (a small discrepancy from DOE secretary Sweetnam’s stated date of 2011). The graph is especially troubling in the absence of numerous newly identified oil production projects and widespread commercial production of non-petroleum fuels. (image: eia.doe.gov)

A week after President Obama announced plans to open restricted areas to offshore drilling, the French newspaper Le Monde reported that the US Department of Energy has for the first time expressed uncertainty about the sources of near-term oil supplies.
In contrast to its official stance on a global production peak, comments by DOE secretary Glen Sweetnam in an exclusive interview demonstrate that the department is considering whether a swift and unexpected decline of oil supplies is close at hand.
“A chance exists that we may experience a decline [of world liquid fuels production between 2011 and 2015] if the investment is not there,” Sweetnam told correspondent Matthieu Auzzaneau.
The Department of Energy’s new pessimism over the oil supply situation follows from figures in a study prepared for a meeting in April 2009.  Entitled “Meeting the Growing Demand for Liquid (fuels),” the report predicted that from 2011 through 2015, global oil production would drop from 87 million barrels per day (Mbpd) to 80 Mbpd while demand would rise to 90 Mbpd. Essentially, it warned of a coming time when the status quo of oil consumption will begin to surpass supply, requiring the world to prepare for a 10 Mbpd shortage—a volume just shy of top world producer Saudi Arabia’s output of 10.8 Mbpd.
Previously, the DOE has abided by the perspective shared by the peak oil-skeptical analysis firm Cambridge Energy Research Associates (CERA), which depicted any drop-off in oil supplies as a temporary dip in a cycle of small declines and recoveries that adds up to flatness over time. Deemed the “undulating plateau,” this image of supply levels has been roundly criticized by oil analysts for masking an irreconcilable supply gap. In April 2008, Sweetnam published a long-term international energy outlook that predicted that oil production would enter a plateau in 2030 that would last until 2090, only after which an irreversible decline would begin.
Regardless of whether one believes a decline in global oil production to be temporary or not, the Le Monde interview makes it clear that the DOE is considering whether the “undulating plateau” will begin as soon as next year. As as a statement from DOE World Oil Prices expert Lauren Mayne shows, the term itself functions as a euphemism for “production peak”:

Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline.

While Glen Sweetnam’s new uncertainty and the above graph from the DOE show that the Department takes seriously the possibility of peak oil, the lack of outright confirmation of the coming decline it predicts likely follows from the line of reasoning implicit in the phrase “undulating plateau.” The alternate theory explains that following maximum global production, future production will form a plateau, not slope, in global supply levels because new production techniques, made possible by better investment, act to reverse losses by developing previously inaccessible reserves. In order to compensate for a near-term supply shortage, the DOE report predicts that the US would have to boost liquid fuel production by 1.8 Mbpd by 2015 (with 2007 as the base year), the largest ramp-up of any other country studied.
According to Auzanneau, Sweetnam did not appear to be knowledgeable of any newly identified oil sources, and even if he had been, the DOE states that it takes seven years for any new projects to begin making meaningful contributions to global oil supplies. Therefore, the logical expectation is that huge increases in ethanol manufacturing will be required in order to compensate for a supply decline in the US.
Given the Department of Energy’s new openness to peak oil theory, it would appear that US energy policy stands at a crossroads. Accepting the possibility of peak production next year burdens the department with added responsibility, because the ability to minimize the damages of another period of skyrocketing oil prices and/ or shortages, rests with government, not businesses or consumers. Actions that the DOE may take if it wholeheartedly embraces the premise of a steep decline in oil supplies include boosted initiatives and subsidies for ethanol and biodiesel production, stepped-up biofuel content through federal fuel mandates, and even fuel rations. In order for consumers to make the switch from gasoline or diesel to biofuels, those fuels need to be more widely available at competitive prices. However, that the only reason the public knows about the department’s changed approach is because of good journalism, not a public address, does not bode well for future clarity or conviction. It appears that, as in the UK we will have to wait and watch closely to see how the US Department of Energy addresses these issues as it strives to prevent life-altering increases in the price of heating oil and other consumer petroleum products.

This article was posted on Wednesday, April 7, 2010 at 3:00 pm and is filed under Blog, energy policy, peak oil