How soon will world's oil supplies peak?

The question provokes hot debate among experts, as concerns rise that America isn't prepared for a dropoff.

If world crude-oil production hits its peak and then falls within the next five to 10 years, would America be ready? The answer is, almost certainly not.

A debate unlike anything seen since the oil embargoes of the 1970s has erupted over the future of world petroleum supplies. A chorus of experts claims that the peak in production may be approaching, and that the impact of a peak and subsequent dropoff would be devastating to the world's economies. Others insist that moment is still distant.

Some nations, including China, already appear to be taking steps to lock in future oil supplies from the Middle East, Africa, Central Asia, Canada, and South America.

The risks of future oil shortages are huge. As if to illustrate that point, the temporary ripple in supplies after hurricane Katrina sent gasoline prices in the US to record levels.

Experts' views on future oil supplies are divided into two major groups - the optimists and the pessimists, David Greene of Oak Ridge National Laboratory said at a recent oil-supply workshop sponsored by the National Academies. On this topic, he said, "the only unbiased opinion is an uninformed opinion."

Pessimists predict the world's output of conventional oil will top out within the next few years at about 100 million barrels a day (m.b.d.) and then decline - perhaps by as much as 8 percent a year.

Optimists contend that there is plenty of oil, particularly in the Middle East, and output will meet worldwide demand through at least 2030.

All sides agree that oil is a finite resource, and that it is vital to know which side is right. But the lack of public data makes that assessment difficult.

At the meeting here, dozens of energy analysts from federal agencies, big and small oil companies, universities, and the Organization of Petroleum Exporting Countries (OPEC) debated salient points concerning the world oil outlook:

• The exact time of a worldwide oil peak is unpredictable, but could happen soon. Once production peaks and begins to fall, it could precipitate a global depression, widespread starvation, high unemployment, and even war.

• If nations are not prepared, prices for crude oil after a peak could rise to hundreds of dollars a barrel, and gasoline could climb to $10 or more a gallon.

• Mitigating the effects of an oil peak would take decades, even for advanced societies like the United States, Japan, and the European Union. Standards of living could plunge.

• Undeveloped nations could be devastated as heating oil, fertilizer, gasoline, and other petroleum products became unaffordable. More than 1 billion people could be put at risk.

Participants emphasized that repercussions from a downturn in production would last decades.

One point of general agreement is that oil output in non-OPEC countries is likely to peak soon after 2010. If this occurs, OPEC's control over supply and price would rise.

Ultimately, other liquid fuels to replace oil could be produced from unconventional sources, such as coal, natural gas, shale oil, tar sands, extra heavy oil, and biomass (corn, soybeans, sugar cane). But making the multibillion-dollar investments in alternative-fuel facilities - such as those needed to convert coal to gasoline - could take 20 to 30 years, said David Gray, director of energy systems analysis at Mitretek Systems, a nonprofit scientific-research corporation headquartered in Falls Church, Va.

Nor can conservation efforts - such as gas-electric hybrid cars - save the day, said John Heywood, director of Sloan Automotive Laboratory at the Massachusetts Institute of Technology. Autos and trucks last an average of 15 years, so it would take more than a decade to bring down fuel consumption on a large scale with new technology.

A representative of ExxonMobil, the world's largest petroleum company, countered these cautionary reports. ExxonMobil contends that its proprietary studies show that oil output will continue to grow to well over 100 m.b.d. worldwide at least through 2030. At ExxonMobil, they are "believers in technology" to boost oil production over time, said Scott Nauman, manager of energy and economics at the firm's corporate planning department. ExxonMobil also sees ways to ultimately control demand through technology such as hybrid autos.

Similar assurances came from Adnan Shihab-Eldin, acting secretary-general of OPEC. Dr. Shihab sees 12 m.b.d. of new crude-oil capacity coming on line in the next five years - more than enough to meet the 7 m.b.d. rise in world demand that OPEC forecasts over that period. More than 100 new projects are under way worldwide to add supply, he said.

Yet these assurances leave some analysts unsatisfied. Both ExxonMobil and OPEC rely on Middle Eastern geological data that are private, and so not independently verified. No one outside OPEC, for instance, has seen the latest information on Saudi Arabia's oil reserves.

"By their nature, the people who explore for oil [like ExxonMobil] are optimists. They have to be," said Robert Hirsch, senior energy program adviser at SAIC, a research and engineering firm with headquarters in San Diego. "But we are betting our [American] civilization on the assumption that they are right."

Another critical factor is that OPEC's role will become far more important than it is now after about 2010 because overall oil output in non-OPEC countries - such as the US, Mexico, Norway, and Nigeria - is expected (even by ExxonMobil) to peak about that time. After that, OPEC, with 78 percent of the world's proven oil reserves, will hold greater sway over prices and supplies.

Trying to pinpoint the date when oil production peaks has become something of a guessing game of late. There have been at least seven predictions that the peak could come within five years. A US Department of Energy analysis in 2000 studied 12 scenarios for peaking, with the mean peak coming in 2016. If true, that gives the US 10 years to prepare - too little time to avoid dislocations.

Several experts say it is time for Congress and the president to pay closer attention to the peaking issue, and to take steps soon enough to protect America's energy future.

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