Much higher oil prices seen in U.S. future

Peak oil expert says coping will be hard

Roger Fillion, Rocky Mountain News

Published November 7, 2007 at midnight

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Steve Andrews is betting the jump in oil prices is far from over.

He's convinced oil prices are headed much higher because global oil output is at or near its maximum peak, if it hasn't already peaked.

As co-founder and acting executive director of the Denver-based Association for the Study of Peak Oil-USA, Andrews is winning converts.

His group is the U.S. branch of a global organization. Peak oil proponents include geologists, physicists, oil industry consultants and environmental activists.

Demand for transportation fuels such as gasoline and jet fuel, as well as other fuels, will keep growing, according to the peak oil view, pushing oil prices higher as oil output heads lower over time.

Prominent dissenters from this view include Exxon Mobil and the U.S. Energy Information Agency.

Andrews spoke with the Rocky about these issues:

Do you think world oil output has peaked?

It's possible. I would put the odds at 30 percent or so that we've already hit our peak. There's a good chance that within the next five years we could produce a bit more. Right now the world is producing 85 million barrels of oil a day.

How will we know if output has peaked?

Back in 1970 U.S. oil production peaked. For two full years after that, the oil industry's main trade publication assumed production would increase - when in fact production fell slightly. It will only be clear in the rear-view mirror.

What does it mean for oil prices?

Last week, Sadad Al-Husseini - a former executive at Saudi Arabia's national oil company, Aramco - said at a conference in London that world oil production was flat and was likely to remain so for a long time. He said that currently the technical floor for oil prices is around $70, and that floor was likely to increase by $12 a year for the foreseeable future. ASPO-USA believes that's a likely type of scenario for us. There will still be volatility going forward, with no cap on the high side but a steadily rising floor on the low side.

What are the implications of peak oil for U.S. consumers and business?

We've been blessed with relatively low oil prices for decades and virtually always have had plentiful supplies. Both of those situations are likely to change for the worst. We've already seen some spot shortages, including in North Dakota and back East. And this was without a hurricane or anything like that.

Spot shortages are likely to become more frequent in about five years. The only way to make up the gap between shortages and strong demand is higher prices.

How can people prepare?

At the individual level it's going to really make sense to live closer to work so you have more travel options, such as carpooling. Bicycling will fit in. Some people will likely switch to motorcycles and motorbikes. That will probably be in about five or 10 years. And people will rely more on mass transit such as buses and light rail. People will be creative.

Can nuclear or renewable energy fix matters?

Our transportation problem is a liquid fuels problem, not an energy problem per se. Increasing electricity supply from any source - renewable or nonrenewable energy such as nuclear - is not going to help us diversify away from oil. In the U.S., 70 percent of our oil goes to transportation. Very little of our transportation system is run on electricity. In Denver, only light rail runs on electricity

Is Europe better prepared than the U.S.?

Europe is much better prepared for a shortage in transportation fuels. Their availability of mass transit is much higher. Their population density means it's much easier to get from point A to point B using mass transit or even biking and walking.

Is there any solution to the peak oil scenario?

We don't use the word solution because it implies a silver bullet that's not out there. The transition to come is likely to be protracted and rather painful. We use the phrase silver BBs instead of silver bullets because there will be lots of intelligent responses that people, businesses and cities can make.

How have you adapted to peak oil?

My wife and I have our primary residence in Westcliffe, about an hour west of Pueblo in the Wet Mountains. We built an off-grid house, not really for peak oil but because of where we live. We built a house that uses very little energy and we get most of our energy from the sun and wind. We drive a Prius.

Is there anything positive you can say?

We can be creative in our responses. But it will take individual and community responses to a degree we've not seen in this country since World War II.

fillionr@RockyMountainNews.com or 303-954-2467

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