Bakhtiari addresses Peak Oil before the Australian Senate Committee in 2006

[Australia has done a great deal to educate their public and leaders about the issue of Peak Oil, far more than the United States (2040 hits on peak oil in their parliamentary system). Whether that will make a difference given the lack of alternative energy resources to replace oil, and the likelihood China will invade Australia for resources when the U.S. military is immobilized from lack of fuel, remains to be seen.  Alice Friedemann, ]

July 26, 2006. Bakhtiari on Australia’s future oil supply and alternative transport fuels. Parliament of Australia.

I’ve only snipped out what I found of interest from the above file, so if at times the speakers seem disjointed, it’s my fault.

Dr Bakhtiari has recently retired as a senior advisor for the National Iranian Oil Company in Tehran and has written several books and more than 65 papers on the Iranian and international oil and gas industry.

Dr Samsam Bakhtiari—I will begin with a short opening statement for you to consider. Crude oil is a commodity unlike any other. It is simultaneously a strategic raw material, a unique industrial feedstock and the most essential of fuels. It is also the most conveniently and widely traded form of energy and therefore the swing element in the world’s energy mix. It is no wonder that the price of crude oil is the most important figure quoted daily worldwide. Its relevance could well rise significantly in the near future as the impact of peak oil or, in other words, the peaking of global crude oil production, becomes evident to all and sundry.

At present, worldwide crude oil output is stagnant at around 81 million barrels a day, give or take one million barrels. OPEC’s 11 member countries are now limited to a maximum of 31 million barrels per day, having produced only 29.35 million barrels in May 2006, and the so-called non-OPEC countries, which represent the rest of the world, are capped at 50 million barrels per day. Thus the world now produces and consumes some 30 billion barrels in each single year.

Most of the world’s major producers are struggling to keep oil production on an even keel, especially both the OPEC and non-OPEC champions—that is, Saudi Arabia and Russia—which are both producing some nine million barrels a day at present while facing almost insurmountable problems to avoid declines in the near future. Moreover, most of the world’s super giant oilfields are now getting old and some of them have entered terminal decline. Suffice it to mention the three largest ones: Saudi Arabia’s Ghawar, Mexico’s Cantarell and Kuwait’s Greater Burgan oilfields, which are surely but steadily going downhill. The last super giant to be discovered was the Kashagan oilfield in the north Caspian Sea offshore from Kazakhstan back in 1999, and it is now scheduled to begin initial production in 2008-09.


Not only have discoveries of super giants dwindled to nil in the 21st century but yearly oil finds have plummeted to between four and six billion barrels a year. There is little hope that this trend will be reversed in the near future because most of the planet’s petroleum provinces have now been explored for petroleum and there is only one last frontier area remaining—that of Antarctica, with its pristine wilderness and its population of some 20 million penguins.

The decline of global oil production seems now irreversible. It is bound to occur over a number of transitions, the first of which I have called transition 1, which has just begun in 2006. Transition 1 has a very benign gradient of decline, and it will take months before one notices it at all. But transition 2 will be far steeper, and each successive transition will show more pronounced declining gradients. My WOCAP model has predicted that over the next 14 years present global production of 81 million barrels per day will decrease by roughly 32 per cent, down to around 55 million barrels per day by the year 2020.

Thus in the face of peak oil and its multiple consequences, which are bound to impact upon almost all aspects of our human standards of life, it seems imperative to get prepared to face all the inevitable shockwaves resulting from that. Preparation should be carried out on individual, familial, societal and national levels as soon as possible. Every preparative step taken today will prove far cheaper than any step taken tomorrow. I thank you for your attention during my opening statement, and I am ready now to try, to the best of my abilities, to reply to any questions that you have.

CHAIR—In the first set of questions, can we concentrate on the issue of peak oil itself and defining that, and then we will move on to the other issues.

Senator JOYCE—Thank you very much, Mr Samsam Bakhtiari. I have been a follower of you for a while; I have been one of your quiet fans. With regard to Hubbard’s peak, within the Ghawar oilfields and the Cantarell oilfields, can you explain to us some of the signs that these oilfields are running out of oil? I am talking about gaseous inertia or water inertia. What do you believe are the key indicators that these oilfields are past peak production?

Dr Samsam Bakhtiari—The super giant oilfields are all very great oilfields. Today you have 40 per cent of world production in these super giants. Managing a super giant is a very difficult procedure. The larger the super giant, the more difficult it is. I will firstly state the case of Ghawar. Why? Because it is the largest oilfield in the world by far. At the beginning, it was estimated that it had in 1952—that is when it came on stream, which is some 54 years ago— some 70 billion barrels of recoverable oil. That was 54 years ago. In the meantime, much of that has been already recovered. The situation for Ghawar today is that you have two major problems. It is still producing, we think, between four and 4½ million barrels every single day, but in order to produce that much oil much needs to be done. I will show you two points, if you allow me.


What is happening today is that they are injecting eight million barrels of sea water every single day. What do they get out? This is very schematic. They get 12.5 million barrels of liquid out of the field and they split that into eight million barrels of water and 4.5 million barrels of oil. The water that they are injecting is increasing constantly.

The last information I have is that it has grown now to nine million barrels, but I did not have time to check. These figures are very approximate, because we do not know exactly what is going on. But it is roughly of that magnitude. So when they say that Ghawar crude is cheap, it is certainly not cheap any more, because you have to do all this enormous processing. You have these huge pipelines which come from the sea and an enormous compressor re-injecting that water under the oil column and pushing the column up. That is one point. There are problems. If you did not have problems you would not need to do all that.

They have done something else. Usually in all these supergiants you drill vertical wells and you take out the oil from the vertical wells by the pressure either of the gas or the water. That is how it is mostly in the four supergiants in Iran. But in the 1990s there was a new technology called horizontal wells. In Ghawar they thought that instead of relying on the vertical wells they would drill horizontal wells. Horizontal wells are both a blessing and a curse. Why?

Let me show you roughly how this works. You have a cap here. Here you have the oil. On top you have the gas and below you have the water. Naturally this is very schematic. A vertical well comes here in the middle of the oil column and you get your oil by either the pressure of the water beneath or the pressure of the gas from the top. With the gas here you say that this field is gas driven. Most of the Iranian fields are gas driven. Ghawar is water driven. It is either/or, but sometimes, very rarely, both.

The horizontal well is different. It comes down like this and then it goes horizontally for a few kilometers. The horizontal well is a blessing because you can get to the exact middle of the oil structure and so take out your oil more easily. But there is a very great danger with horizontal wells. They tell us that in Ghawar today there are 220, roughly, horizontal wells. The great danger of the horizontal well is that when the water reaches the well it is dead. So one day in the future at Ghawar, the water level will eventually reach the horizontal well.

It is happening but not on a large scale. When it happens on a large scale then Ghawar is going to collapse and you will have a cliff in the production of Ghawar. When you have a cliff there, the whole Saudi production system is going to fall apart. If that happens, we will start hearing bells ringing all over the place, and the price of oil is going to go through the roof.

Senator JOYCE—I have heard you say before that China are prepared to pay any price for oil. Therefore, if they are prepared to pay any price for oil, they are prepared to go anywhere to get it. I got myself into a lot of trouble by suggesting that countries would exploit the Antarctica. If China were prepared to pay any price for oil, which means they would be prepared to go anywhere to get it, and if there were areas of territorial dispute, is there the possibility that oil would be found in the Antarctic continent?

Dr Samsam Bakhtiari—I have studied oil reserves for the past 40 years, from when it was a very new science. In the beginning, there were a few specialists who were not very good, and then came the greatest specialist of oil reserves. He began working for a petrol consultant in the 1990s and, in 1995-96, established what is in my opinion the best set of oil reserves in the world.

These are the oil reserves of Dr Colin Campbell. I think these reserves are the best. I have been able to prove not only that these reserves adapted very well to my model but also that they correlate the production of the 11 OPEC countries in a satisfactory way. So I have adopted them.

Dr Campbell is of the opinion that the total endowment for conventional oil of the planet is around 1,900 billion barrels. I think this is the best number that we have at present. I have been working with that number for the past seven or eight years. Out of that number of 1,900 billion barrels, Dr Campbell is of the opinion that for the two polar sectors, the Arctic and Antarctica, you should have roughly 52 billion barrels. I think that Dr Campbell splits that number roughly half and half between the two poles.


As you know, exploration in the Arctic began in 1995-96—and this exploration is now growing faster and faster. They have given to a research team of the USGS and the Geological Survey of Denmark a joint research project to explore the tectonics and oil sources of the Arctic. Their report should be out next year, 2007, which is the International Polar Year. Antarctica is today the last frontier for the petroleum oil industry. Whether the oil industry is going to go there, I certainly do not know. I know from the very early studies I have made that it is going to be very difficult—firstly, because of the conditions in Antarctica. For seven months of the year it is dark—and you are more aware of the temperatures than I am. Senator Joyce, I believe you have lately been down there on a four-week trip and have seen things first-hand. So it is certainly not something for tomorrow, because conditions are not ready yet. As you know, it is very difficult to drill in ice—and there is an icecap of at least 2,000 metres that you have to drill through before you get to the lower tectonics. But maybe one day, when the price of oil goes up to $200 or $300 a barrel, some oil companies will decide to try their hand there. That could be a possibility. I hope it will not happen. But some governments will have their backs to the wall and in suburbia there will be unrest over petrol. Many things could happen—among them, drilling in the Southern Ocean or Antarctica.

Senator JOYCE—I said it would be in the next 10 to 30 years. Do you think that is the time frame for the price of oil to go up to $200 or $300 a barrel? I note you have stated that you believe the production of oil will start to fall off to around 55 million barrels a day.

Dr Samsam Bakhtiari—Yes—in 2020.

Senator JOYCE—So that is within a time frame of 10 to 30 years. When will people start exploring new areas?

Dr Samsam Bakhtiari—It is extremely difficult to forecast precisely the price of oil in the future. I can see a range of $100 to $150 not very far into the future.

Senator JOYCE—That is $100 to $150 a barrel?

Dr Samsam Bakhtiari—Yes, this we are certainly going to get to. In my opinion, we could get there very easily. We are a couple of hurricanes or some geopolitical problems or a war away from having a worse problem than we have today. There you could go very easily, but after that where can this price go? I am studying that right now, and I have not reached a conclusion yet. There must be some outer limit, and I am beginning to think that maybe the outer limit could be $300 per barrel. I am not so sure yet, because we are entering a brand new era in human history, an era we have not been prepared for at all. For the past six generations, we have been used to having cheap oil always available whenever we wanted it, more or less. Today, in 2006, all of this is beginning to change. We are entering an era in which we know nothing much, where we have a brand new set of rules. I am trying to find out what these new rules are. I have already reached two or three new rules. One of the new rules, in my opinion, is that there will be in the very near future nothing like business as usual. In my opinion, nothing is usual from now on for any of the countries involved. And the lower you are in the pile, the worse it is going to get.

Senator JOYCE—You also made the statement that steps made today are cheaper than steps made tomorrow. With regard to mitigating or alleviating the crisis that would be caused by an oil shortage or a price of oil that is completely prohibitive to the development of industry and the fundamental freedom of people to drive around, what steps do you envisage would be worthwhile taking today? And without loading your answer, can you refer to issues such as the production of a biorenewable fuel industry, the development of ethanol as a fuel alternative and biodiesels, and alternative forms of combustible material that can be used in internal combustion engines.

Dr Samsam Bakhtiari—Allow me to take your questions one by one. I said that steps needed to be taken, because now I am thinking that the price is going to go up. There is no other way. Now let me open a parenthesis: the price might go down tomorrow to $55, but it will come back up again. So you will have in this period a high level of volatility, but eventually it will go to very great heights—maybe to $200, maybe to $300. As long as you have price driven oil, I think it is a very good thing whatever this price is, because one day you will have a question of availability. You will be ready to pay any price, but there will not be any oil.

I remind you that oil is a very special commodity, which is something that is very difficult to realize today. For example, you have no free market in oil. Naturally, you can go to the NYMEX stock exchange and buy as many barrels as you want at the price of $74 now, but these are paper barrels. If you try to buy 10,000 barrels a day of real oil, of genuine barrels, you will have enormous problems getting that much oil on a regular and sustainable basis. So that is one of the problems that we will encounter in the medium term.

Any step you take today is to your advantage. I will give you one example. The city of Perth in Western Australia has free buses. I have been on these free buses. It is a fantastic service. Maybe today it is still too early. It might not be very economical but it is a marvelous step for the future, because one day it will pay enormous dividends, in my opinion. Also, they have a very light rail service going around 140 kilometers of their coast, and this links all of the suburbs. One day this light rail service will save all these suburbs. I was asked about this yesterday. I think that Western Australia is at the forefront of the world in terms of steps being taken. And Australia is at the forefront today of the other countries, because the other countries do not know anything at all and are not willing to prepare. So the faster these new decisions are put in place, I think it will be of benefit to any society, especially societies with suburbs.

Senator JOYCE—You said it is not really a perfect market. Yes, you can go to the New York Stock Exchange and buy oil, but it is paper oil; you are not buying the actual product. You have also talked about how the price of oil will possibly go to a horizon of about $300 a barrel. Of course, that would mean we would be paying about $6 a liter or something like that for fuel for our car, which obviously means we could not afford to fill up. Do you feel the major oil companies have the intention to exploit an arrangement which has the world paying $200 to $300 a barrel for oil? Obviously it would be in their financial interests to get to that position, because it is maximizing the returns on their stock on hand. Their stock on hand is the oil in the ground, and obviously there is a great financial windfall for them to keep the predominant means of internal combustion a mineral based oil product. The question I am asking is: will the oil companies drive the intention for people to continually use oil and be quite prepared to profit from a market of $200 to $300 a barrel? Will they ride us out to the very end? Will their intentions be to ride this cash flow window to its completion?

Dr Samsam Bakhtiari—I do not think it is in the interests of the oil companies for the price to go very high. I think they are very well satisfied with the present price, but I think it will not be in their hands. It will not be in the hands of the companies, it will not be in the hands of the oil producers. I can see Saudi Arabia and others being very worried by prices that are too high, but I do not think any one of these players can do anything about it.

When there is not enough oil, first you will have to raise its price and then you will have the problem of its availability. There may be some kind of worldwide rationing—I do not know. I am trying to look at the future but the future I am talking about, as you mentioned, might be beyond 2020. Maybe beyond 2020 we will have some reasonable idea. What will happen after that is very difficult to predict. I do not think the oil companies would like such a scenario at all. They will be forced—

Senator JOYCE—Who can afford oil at $200 a barrel? Who would be using it?

Dr Samsam Bakhtiari—I think the Chinese are ready to pay anything for oil. I agree with you that it will be very difficult.

Senator MILNE—Recently we had the head of BP in Australia talking about their statistical review. They take at face value the claims, particularly of Middle Eastern countries, about the extent of their reserves. We are aware that a few years ago these countries readjusted their reserves, yet there were no new discoveries that would have justified that. This is a really critical question to ask because it goes to the heart of the argument. Could you give us your frank appraisal of the Saudi reserves, in particular, and the Middle Eastern reserves, generally, and the extent to which they have been inflated for political and economic purposes et cetera and do not reflect what is actually there?

Dr Samsam Bakhtiari—Most reviews of the reserves of the major Middle Eastern countries today, especially the BP Statistical Review of World Energy, mention reserves amounting to between 600 billion to 700 billion barrels. These are official reserve figures—in other words, the countries involved say that they have so much oil reserves available. The Oil and Gas Journal and BP take these reserves at face value. As you mentioned, in the 1980s these reserves were revised upwards. For example, in 1988 Saudi Arabia, which had reserves of 160 billion barrels, suddenly took these up to 260 billion barrels. Since 1989, it has kept this number of 260 billion barrels; there has been no change to it up to this day. So, for 17 years, it as if they have not produced anything.

In Dr Campbell’s opinion—and it is also my personal opinion—the reserves of the Middle East are roughly one half of what is officially said and presented. In other words, there should only be between 300 billion and 350 billion barrels of oil. This is the best figure I have come up with. I and Dr Campbell, as a rule of thumb, divide the official reserves by two to get a number that we believe is the actual amount of the reserves in these countries. Does that answer your question?

Senator MILNE—It certainly does. Can you go on to tell us what your view is of the US Geological Survey and its accuracy in terms of the reserves?

Dr Samsam Bakhtiari—Every institution gives its own numbers, and we can only compare theirs to ours. You can see that the reserves given by the USGS, which is an endowment for the world of over 3,200 million reserves, is much, much higher than the numbers we are using, of only 1,900 million. Of course, we can not accept such reserves as realistic, as we cannot accept the projections of certain institutions like the International Energy Agency in Paris, which predicts that the world will be consuming 118 million barrels per day in the year 2030 as realistic, because I cannot see how the world can get over 81 or, say, 82 per day right now, let alone in the future. I believe we are in decline. So you have an enormous discrepancy between what these institutions publish and what we believe in, whether it is in reserves or whether it is in production of crude oil per day.

Senator MILNE—Given what you have said about the fact that the Middle Eastern reserves are probably half of what they say they are, and given what you have just said about the US survey, how are we going to tell? Given that the Saudis and the other Middle Eastern countries keep on saying that their reserves are the same—and they have been saying they are the same for all these years whilst production has kept on going—how are we going to know? What indications are there going to be so that we can revise the estimates to be more accurate? If they are half of what they say they are, then the shock in the share markets et cetera everywhere around the world will be huge. You mentioned before that they may not be able to manipulate it forever because of the horizontal wells and the step change that will occur. Is that the main indication—when one of the wells goes kaput? Or what will happen, in your view?

Dr Samsam Bakhtiari—From an outsider’s point of view, you have two ways of following what will happen. One is the price. The second is the production. If the production for the next couple of years remains stagnant, then it will mean the institutions that are predicting production of over 100 or 110 are wrong. By the way, the future is always predicted wrongly. So that is one basis. The other way of following this is by the price. If you see the price returning to $50 and staying there, it will mean that we were wrong. But, if you see the price continuing to increase, it will prove that we have been right.

So these are the two ways you can follow the story, but I will return to the French philosopher Pascal. He said the best way may be to take a bet and bet that we are right, because the ones who bet that way have not much to lose. If we are wrong, everything is going to be fine. But, if we are right, I think the ones who took precautions will be very much rewarded in the future.

Senator MILNE—What do you regard as the most authoritative estimate of world reserves? You have spoken about Colin Campbell. Is there anything that you would refer to or would you argue that that is the most accurate assessment?

Dr Samsam Bakhtiari—No, I certainly believe it is the most accurate. I have studied almost all, not all, of the reserve sets that I have been given or that I have come by. I can assure you that my personal archive is a very complete one. I have met almost everybody in this industry—and especially those at the world petroleum congresses, which were the Olympics of oil and were held every four years; before the internet age, at least—and I really think that the 1,900 billion barrels in Dr Campbell’s set of data are the very best that you could find in the world today. I cannot imagine that we will have any better set in the future, especially given that Dr Campbell with Mr Jean Laherrere, a petrol consultant, have done very impressive research on almost all the oil provinces on the planet.

Joyce—Is that 1,900 billion barrels of recoverable oil from now to the end?

Dr Samsam Bakhtiari—1,900 billion barrels total is the estimate of convention oil. You have the non-conventional, which include, among others—

Senator JOYCE—Shale oil.

Dr Samsam Bakhtiari—the tar sands, the shale oil and the heavy oil of Venezuela and Orinoco and all these kinds of oils, which are classified by Dr Campbell as non-conventional.

Senator WEBBER—I want to continue to explore the impact of price. Obviously the higher the price, the greater the impact on consumer behavior. In my home state of Western Australia, the higher price is making fields that were seen to be unprofitable worth developing. For example, we have all known that the Browse field has been there for a long time and now Woodside are looking at developing it. Could you give us an understanding of how an increase in price may bring other oilfields onto the market?

Dr Samsam Bakhtiari—I am sorry, I did not understand your question.

Senator WEBBER—I am asking about the relationship between the increase in the price and the increase in the development of fields that were previously seen as unprofitable. Does the increased price mean that there will be an increase in exploration with the result that new fields may come on stream?

Dr Samsam Bakhtiari—Yes, I understand now. Many people are of the idea that with the price increasing you will have new fields that before were not very profitable. Now, we will certainly see some of these factors coming into play. For example, you have exactly what you mentioned in the North Sea: small fields with reserves of 50 million to 100 million barrels of recoverable reserve were left by the wayside in the 1980s and 1990s, when it was not at all profitable to go and develop these fields with prices of $9 or $10 per barrel. These fields might very well be developed now at prices above $70. This will certainly happen not only in the North Sea but maybe also in America, where there are very small fields that now are going to be profitable and will be developed.

In my opinion, however all these are developed in the future, it will have very little impact on either peak oil or world production. It might make a change of, say, half a million barrels in total, not more, and half a million barrels will have very little impact. It will just shift the production curve upwards a bit but it will have very little impact. The reason is this: if you look at the US curve of decline, which was correctly predicted by Dr King Hubbert in 1956 and which peaked in 1970, it has been steadily coming down—but for the addition of Alaska. Alaska just shifted it a bit but it made no difference on the peak. It has been declining continuously since, notwithstanding the developments in exploration, exploitation and all the new technologies and the new investment that were possible at prices of $36 in the early 1980s. So I think that neither investment nor new technology will have any significant impact on the process of transition that we have entered.

Senator STERLE—Can you explain the claimed inadequacies of optimistic official agency predictions of oil production? We have had submissions from oil agencies that have told us that it is very rosy out there because they are spending lots of shareholders’ money—that is how rosy it is. Your report and your figures and Dr Campbell’s figures are at completely the opposite end of the spectrum. Can you explain how the oil agencies could be so far removed from your studies and be so different?

Dr Samsam Bakhtiari—Maybe one explanation could be that they are interested parties and we are disinterested parties. If you hear some people saying today that the price of oil is going to drop to $25 in the near future, and I think it is almost impossible for such a thing to happen unless there is a major catastrophe on a global scale. Maybe they are saying this because they want to grow and buy smaller oil companies. They might say that they will buy at $30 because the price is going to fall to $25, so $30 is a very good price and would be a very good price to pay a small company. And there are other problems. Nobody likes the idea of peak oil. Firstly, you have the politicians. Naturally, a politician will never say that there is such a thing as peak oil. It is suicide to give bad news so a politician will never do that. He will always say, ‘The IEA says that we will be having 118 million barrels in 2030 so why worry?’

Secondly, you have the media. The media does not like peak oil. Why? There is no sponsorship for peak oil. The oil companies do not like peak oil because you should not say that your soup is cold; you should always say that it is very hot and very tasty, yes? So nobody wants to hear of this phenomenon of peak oil. I believe that some of the institutions—I will not name them; they are here and maybe you can guess which ones they are—are saying these things to act as a protection for some politicians who can say: ‘Because these institutions are saying these things, then we follow them. We do not follow Campbell and others.’

Senator JOYCE—It could also inhibit the development of a biorenewable fuel industry too. If they say there is a lot of alternative product around, then they do not need a biorenewable fuel industry.

Dr Samsam Bakhtiari—I do not believe that there are alternatives around. In my opinion there is no alternative to crude oil. There is nothing that can replace it, and this is the problem the world is facing today. There are no alternatives and I will try to explain very briefly why.

In general economics we are taught a very basic rule. When the price goes up, demand comes down, and you have the marvelous figure of Professor Sam Wilson to explain exactly how this works. For crude oil this does not work at all. We were always taught that when the price doubles demand will come down by something. In the past two years the price has tripled and demand has not come down by anything. How far can we go? Nobody knows. I think that it will take three digits—at least over $110 or $120—for us to start seeing demand maybe coming down.

Why? Firstly, you have no way of preserving oil products easily—no way at all. We are all used to the car and we want to drive that car as far as we can possibly pay for it. Even at prices of $1.40 per liter for petrol you are beginning to have problems in the population economically, so what will it be like when the prices are much higher than that? $1.40 per liter is one of the cheapest prices in the Western world. It is just a little above fuel prices in California today so it is very cheap.

Not only do you not have preservation, you do not have any means of substitution, and I will come back to your previous question on alternatives. There is no alternative to crude oil. For the ones who believe that GTL is going to be an alternative, I am sorry to say that this is not a fact.

Today you have only 85,000 barrels per day of GTL capacity in the world. I do not think you will ever have much more than that, and 85,000 is nothing. It is a drop of water in an ocean. The latest GTL plant has just been started in Qatar and I do not know how it is going to fare. It makes 34,000 barrels. It is an enormous plant. I think it cost one and a half billion dollars at least. It has two enormous reactors. If anything goes wrong with these reactors—my God, I do not know what is going to happen! So that is for GTL.

You have coal to liquid. The only coal to liquid plant today in the world is in Secunda in South Africa. It makes 150,000 barrels per day of liquids. I can tell you that because I have visited it, half by helicopter and half by walking around the facilities. It is a very messy affair and it is very inefficient energy wise. Now the Chinese are trying to make CTL—coal to liquid—of one million barrels per day capacity. I think it is going to cost them $10 billion at least. I cannot imagine how this site is going to be. I am waiting for them to finish, but it will probably take them quite a long time to get that one million barrels per day off the ground.

You mentioned ethanol, biodiesel and all that. This is not the future. This is not sustainable because in the future, if our predictions are correct, the No. 1 priority will not be transport and all that. The No. 1 priority is going to be food. And for food you will have to have top priority for fertilizer and insecticides and whatever you need to produce food only. So ethanol is a very, very wasteful system.

And again, however much you want to make some ethanol, it will still be a drop of water in the ocean. Just let me tell you that for every liter of ethanol you will need between three and four liters of water to produce it. The best way to go for these types of fuel, and certainly the most efficient way, is sugarcane. That is what the Brazilians are doing today. With sugarcane you need one square kilometre of sugarcane to produce 3,800 barrels of ethanol per year. It is not very easy and it is very inefficient.

So I cannot see any of these alternatives coming up in the future in a big way. Now, certainly solar power will have a small role to play. Today it is still very expensive at between roughly $US 7,000 and $US 10,000 per megawatt. But it could certainly play a role, especially in Australia where you have quite a lot of sun and quite a lot of land to develop that. Wind also, in windy countries, could play a small role. But these roles will amount to two to three, or maybe four, per cent of oil consumption over the next 15 or 20 years, and not more. The orders of magnitude are not at all the same. You will make a small dent with each one of these but not much more than a dent. Replacing crude oil is not that easy.

CHAIR—I would like to follow up on this issue of price. The Australian Bureau of Agricultural and Resource Economics—ABARE—in their submission to us have done predictions based on future oil costs of $US 30 per barrel. How realistic do you think that is?

Dr Samsam Bakhtiari—I believe you will never, ever see $US30 per barrel again unless you have a bird flu epidemic that wipes out at least millions of people or, as Senator Joyce said, something hits the planet and disrupts all calculations.

Senator JOYCE—That takes out Europe.

Dr Samsam Bakhtiari—If oil falls below even $US50 per barrel, that in my opinion would be very bad news, because if it goes back to, say, $US50 per barrel for some reason and for a short period of time, people will think: ‘Ah! So $US75 was just a spike and now we are back to the good old days and we can begin consuming again. Let’s go and buy that big SUV that we were looking at.’ You then lose two or three years at least.

CHAIR—My next question relates to the industry. BP when they made a presentation to the committee said that the prices now are basically the same proportionally as the spike in the 1970s. What is your opinion of those comments?

Dr Samsam Bakhtiari—If you take into account inflation, it is the roughly same—it was $US 75 to $US 80 in those days. But those were spikes. Today it is a totally different problem.

Today it is a transition into the unknown; then it was known. I am now personally of the opinion that if they had continued with the spikes we would have been much better off today. But they did not. After the two oil price shocks of 1973 and 1979 you had two price counter shocks in 1987 and 1998, when it dropped below $US10 per barrel. That was very bad news, because then demand started going up again. If all these reserves had been better controlled, maybe the transition would have been much easier. Just to remind you, in 1950, which is not that long ago, global consumption was only 10 million barrels per day. That was very easily controllable with the reserves we had. What is not easily controllable is the 81 million barrels per day that we have today.

CHAIR—I want to go back to the price per barrel. What is your understanding of what IEA is saying is the standard price per barrel?

Dr Samsam Bakhtiari—In the world or in the Middle East?

CHAIR—In the world.

Dr Samsam Bakhtiari—It is very difficult to reply to that question because you have many costs per barrel, depending on whether they are onshore or offshore and whether those offshore are in shallow waters, deep waters or ultra deep waters. To make an average over all that is very difficult. I could not answer you. I can tell you that it is not $75 per barrel; it is certainly lower than that.

Senator MILNE—In your opening presentation, you said that you thought that in 2006 we had begun transition 1, and that it would be a relatively gentle stage, and then we would go to extreme discomfort, presumably in transition 2. Can you outline to me the time frames you see for each of the transition stages, and how they will proceed? What will trigger moving from transition 1 to transition 2? When do you expect the real crisis to hit in that transitional phase?

Dr Samsam Bakhtiari—Certainly. From now on, from 2006 to 2020, making predictions is an extremely difficult process, because we do not know exactly what to expect of these transition periods. But I have decided for the time being to split the next 14 years into four transition periods, which I call transition 1, 2, 3 and 4. Every transition period has a steeper gradient and I do not know exactly how long each of these will take, because it depends on many factors.

Nevertheless, I envisage now that transition 1 should take between three, four or five years, but I would have to revise this every three to four months.

Now I will try to explain to you when I predict will be the end of transition 1 by drawing you a model on the whiteboard. We are here in 2006, which is, according to my model, the first year of transition 1. And we want to go all the way to the end of transition 1. Here, in the world of oil, we have the following: today, we have a demand for oil which comes from all of the countries and the regions on earth. The demand is about 81 million barrels per day. What happens to this demand is that it does trigger a supply. This supply comes from two entities. The first entity is non-OPEC and the second entity is the 11 OPEC countries. The OPEC countries are the marginal producer—that is, whatever non-OPEC produces is subtracted from the demand, and it leaves what is required from the OPEC countries to produce to make up the rest of the demand.

This is the system today. It is a very simple system. It has been in place since 1960, when they created OPEC. In my opinion, the international oil industry created the entity of OPEC for this very simple reason: to have a marginal producer. So far it has worked very well. But today OPEC is not playing its role, because it is producing oil out, which is not a good thing.

I will open a parenthesis here about the oil industry and the oilfields. There is nothing worse for an oilfield than to be pushed. I believe that is what is happening to oilfields like Ghawar and Cantarell. They have been pushed. A better example is the Samotlor oilfield of Russia, which was a marvelous oilfield that the Soviets in the 1980s, when they badly needed money to have a system that would be a rival to the American Star Wars, destroyed, in my opinion. It was an extraordinary oilfield which could produce three million barrels a day. Today it is only producing 300,000 barrels a day. If they had managed that oilfield better, I think they would have had a much higher return. Pushing an oilfield is not very good for it. Letting an oilfield rest is the best thing you can do for it. The Iraqis’ oilfields had a marvelous time during the 1990s because they rested for a long time. I would be glad if such a thing could happen to the Iranian supergiants—if they could rest for some time. I think it would not be bad.

Coming back after this parenthesis to this system, between the beginning and the end of T1, you will have the two major scales tilting. At the end of T1 you will have a supply, and this supply is going to dictate the demand. Here you will have entities which will have the marginal demand. So it will be a totally different system form what we had at the beginning. It is this tilting of the scale that will in my opinion determine the end of T1. We have just begun shifting from one to the other.

In the time frame of T1, you might have some volatility in that it will start shifting to one side and then shifting back again to the demand side and going back and forth. So one has to be very careful. But in the end it will be the total shift that will in my opinion make the end of T1 clearer. About T2, T3 and T4, it is still very early. I am working on the next transition, but first we have to get this transition right.

One thing I might add about T1 is that I see not only that business as usual is not in the new rules but also that mega projects are not to be begun, because mega projects are long-term projects that take 10, 20, maybe 25 years. Because we do not know exactly where we are going at this stage, it is very dangerous to begin mega projects. But people are still doing this.

The Europeans have begun a freight train line from Barcelona to Kiev, which is roughly 2,600 kilometers. The idea of having freight trains is a very good idea, but it is a bit late now. If you have rails you might make the service a bit better, but you should not construct it from scratch because it will take 20 years and will never be finished because the high oil prices will trigger rises in prices for all other commodities.

You already see that steel is way above the usual prices. Copper has hit between $7,000 and $8,000, and it will go much higher than that. Nickel is $22,000. I think $22,000 is very cheap today; it will go much higher. All these commodities and all these metals will go very much higher, because it is the crude oil price which dictates the prices. Sugar is going up, orange juice is going up—everything is going up—because the price of crude oil is going up. It is the price of crude oil which more or less dictates all the other price hikes. In my opinion, you will have a correlation between all the price hikes in the future, and you can already see the first signs now.

Senator HUTCHINS—What do you see in transition phases 2, 3 and 4? Do you see any specific dates?

Dr Samsam Bakhtiari—No, not now, not yet. The gradients will get steeper, so the effects and the impacts will be greater. T1 is very benign; the gradient is very slow and you almost do not notice it. We will go from, maybe, 81 to 79.5 over the next few years; it is not difficult. But T2 will be much more difficult—it is already—because it will start dropping considerably; then you will notice the drops every year, probably, and then it will get worse and worse. It is a process, fortunately, where the introduction is easier than the following phases. But it is still very early to start predicting what T2 will do. Firstly, we have to see what T1 is going to do, because already, in many aspects, T1 is difficult to predict, with all the events that could take place in the next three to four years.

Senator HUTCHINS—What should governments do if you say that supply will determine demand?

Dr Samsam Bakhtiari—I think that every society, every city and every government should do a certain number of things—many things; 1,001 things. There are not one or two solutions.

There is no panacea. There is no silver bullet that you can just shoot to get rid of this. You have to start as early as possible and think about this type of future. I do not think the Europeans are ever going to make it.

I do not think that Airbus A380 is a valuable airplane. It is a marvelous airplane, but it is arriving at the wrong time. They should have built it 20 years ago—and it would have been marvelous—when we were in the ascending curve of petroleum, not in the descending one, and not now that we have entered T1. I told them five years ago but naturally they did not want to listen at all, so they carried on. Now they have the problems and they are paying the penalties to all these companies already. It is still not commercial. I do not know why it will be commercial. I do not see a very bright future for that.

There is not too much innovation now; there is certainly a returning to commodities and exploration. I know of a company in Australia that invested very heavily and has just found a brand new copper mine. That is fabulous, because the copper they are going to extract in a few years is going to make enormous profits. If you put money into oil exploration—whether onshore or offshore—almost whatever you find is going to make money. These are types of investment. Or you could invest in agriculture but not ethanol or biodiesel.

Senator HUTCHINS—Yes, I was going to ask you about that—and I do not know if that is the point we are at, Madam Chair. You seem to be dismissive of alternative fuels.

Dr Samsam Bakhtiari—Yes. I do not think it is a very good idea. You can always try it on a small scale, but I think that energy wise it does not make much sense. Now we are in transition 1, I try to look at things from an energy point of view, not from an economic point of view. We do not know these days exactly what economics are. You have to think energetically and about the things you really need. For example, Western Australia—sorry, I am always coming back—

Really, I think Western Australia is doing all the right things. They were kind enough to have been the very first to invite me, and I am very happy for them. Western Australia does not have enough water and the water table is falling. It is a very big problem. They are putting in two desalination plants. They are obliged to put in two desalination plants. The desalination plant will need fuel—it will need gas—to run. In my opinion, they have no alternative so they are obliged to do this. When you are forced then you have to do it. I see that one problem in the future in Australia, much more important than the oil problem, is going to be water.

Your precipitation is going lower and lower. I heard that in June you had an average of only 14 millimeters of rain instead of the normal 108 millimeters. When I crossed from Perth to Sydney in the plane, over 3½ hours, what I saw was very dry. I think one of the problems is water. When you consider that every liter of ethanol or biodiesel will take between three and four liters of water then you start having a problem on the water side and on the energy side. I think you have to reconsider the economics of all of that in the near future.

Senator WEBBER—On that optimistic note—being a Western Australian—what do you consider the prospects for the future of gas as an alternative?

Dr Samsam Bakhtiari—Gas is the big issue, because we are not only having peak oil but, according to my prediction, in 2008 or 2009 we are also going to have global peak gas. Peak gas and peak oil are two totally different things because oil is a very special commodity. Gas is not the same because you cannot just put it in a ship. You either have to consume it locally, pipe it to some other country or put it in a LNG tanker. You have only those three alternatives.

Fortunately, Australia has an enormous amount of gas, and I believe this is going to become very handy because the peak for gas will be between 100 and 105 TCF global production in 2008-09.

Because of this peak in gas, you will have enormous problems all over the world but firstly in the US. The price of gas is going to go sky high. Today, it is incredibly cheap. Gas in the US has a threshold price today of between $7 and $8 per million BTU. This is going to go much higher. Every year you will have to add $2 to $3 to that price. The US price is going to affect all the other prices, and it has already begun in South-East Asia. All that will be linked through the LNG price that you will have, and the price of LNG is going to go very high.

I think that Russia does not have much gas anymore, although it is the largest producer in the world. I am very worried for the Europeans, and probably this winter you will see that the Europeans are going to have an enormous number of problems. If it is a harsh winter in Europe, you might have thousands of people dying. You had hundreds last year, but that was only the beginning. If this winter is harsh, you will have thousands dying because the Russians simply do not have enough gas to provide to Europe.

The Americans do not have enough gas. The Americans had the incredible chance to have the mildest winter last year in 100 years. If that had not happened, I do not know where the price of gas would be today. That was very lucky, and they now have enough reserves for the coming winter because all the storage depots are almost full.

That is a positive point, but the Europeans do not have that kind of chance, so you will have lots of problems. The price of LNG is going to go sky high because everybody will want LNG—in America, Mexico and Canada, which are in full decline; in all the South-East Asian countries and especially in China; and even in Europe. If the Europeans cannot get the Russian gas, their only solution will be to get LNG from wherever they can.

I can tell you that, with gas prices in the US being around $6 per barrel, you have LNG spot sales today of $12 per barrel—and we are in a normal situation. So, wait for the panic and you will have prices of $25 or $30 per barrel, and maybe much more than that. For one week in March this year the British did not have enough gas and the price of gas shot up to $258 per barrel oil equivalent. At first I thought I had made a mistake of one decimal place, but then I realized it was not $25.8—it was $258. For one week they were paying that price for their gas.

And we are in a very normal situation now; we are not at peak yet. So you can imagine how it is going to be when it is at peak, with the panic in all those countries because of the winter months. Just wait and see how it develops this winter in Europe.

Senator WEBBER—That is pretty dark.

Senator JOYCE—Going back to the biorenewable fuels issue, ethanol is being used in Brazil, and the terminal gate price of ethanol in Australia is around 80c a liter, so the reason that it is not being utilized is that the oil companies refuse to take it up. I have heard of a lot of what is going wrong but what we are really looking for is the solution; we are looking for the way out. Or is the world as we know it going to come to an end and this is just a prologue to the end? We need to find the solution.

I do not say ethanol is a panacea but it is certainly a mitigating circumstance. We need to take it up. It could run conjointly with a whole range of issues. I have two questions. Firstly, if ethanol is not the answer, can you explain why it is being used so prolifically in places like Brazil, and why the United States, Europe and Asia are all taking it on board as a component of trying to deal with the impending oil crisis—or the oil crisis that is already here, apparently? Secondly, what is your solution? What is the noble horizon we need to head towards in order to maintain our current standards of living and economies?

Dr Samsam Bakhtiari—Allow me to take those questions one by one. First I will address the alternatives. Brazil can use ethanol as a fuel because of its enormous amount of sugarcane. There is also the idea of self-sufficiency. People like the Brazilians and the South Africans always have a complex about self-sufficiency. If the South Africans have gone after GTL and have pursued coal to liquids, it is because they want to be self-sufficient. It was not an economic decision; it was a political decision. I think the Brazilians are in somewhat the same situation. For them, because of the enormous amount of sugarcane they have, it does make some sense, but I really doubt that it makes a lot of sense in terms of energy. And I believe that, come the day there is conflict between producing ethanol or biodiesel and producing food, food is going to win because, first of all, you have to eat.

There is another danger in Brazil. They are destroying the Amazon rainforest at the rate of some 20,000 square kilometers per year and on that land they are planting food crops—in enormous amounts. I think that this will also be part of the future: when the other countries do not have enough food, they will go back to the Brazilians. Brazil has become one of the largest exporters of food in the world, whether it be soy beans, sugar, coffee or beef. It is almost anything. They have the surpluses. The Americans are also trying to get the ethanol. It makes a small dent for the time being, but not a very big one. I think that it is only a question of a few million gallons. I do not know what percentage you have, but it is not very much.

All of the others are trying. I heard there are a few million in Australia, but it will not make a very big difference, so I am not very keen on these types of bio alternatives. As for your second question about what should be done, there are many things.

Everyone should study their own situation and see what can be done with the possibilities at hand, and not one thing, not two, but 10, 20 or 50. In my opinion, the first thing is to develop free public transportation, and that applies to everybody. Make it free from now. Even if it does not make very much economic sense now, it will in the future. Certainly, there is absolutely no doubt, as you go into transition 1, that free public transportation has to make sense. That is one of the things.

There are many other things that you can do. Plan; get new ideas from the grassroots. That is what Perth has been trying to do, to congregate 1,200 people from different walks of life in teams of eight, give them each a computer and have all of these ideas go back to the top for the selection of the ones they think are viable and useful. Have teams of elders. You have a fantastic man out there, Mr Brian Fleay. He predicted peak oil in 1995. It is extraordinary what he did. He was maybe the second person, after Dr Campbell, to have done that. And he did it almost from scratch. So people like this could have predicted that in 1995—in 1995 he wrote his book, so he must have predicted it in 1993 or 1994.

Senator JOYCE—Sorry, I have missed something. What is this team of elders?

CHAIR—What he is talking about is dialogue with the city.

Dr Samsam Bakhtiari—Yes, to have these people present their ideas and solutions, and then to build on that through a committee of elders. Or create steering committees through such people, and then get younger people to come in, very bright people, to start setting the priorities, because one day you will have to set priorities for the use of petrol. Have these in place soon, maybe in the next year or two. You will not need them in the next year or two, but have them in place already so that you are prepared. Get prepared for any eventuality. Have a special committee for that now. That is what I can see. I can advise that such things should be done this year or next year so that when or if the crisis really hits, then you have something to fall back on; you have a team that is already prepared and who has thought these problems through.

Thinking about these problems is very important, but there is something else. It is going to be very, very difficult to change the minds, to have the minds set on the new realities. For six generations we have been thinking one way—that is, that petrol is always there, petrol is not too expensive, oil products are not too expensive. We do not think about it. We do not think about fertilizers. We do not think about insecticides. Why? They are not that expensive, so it does not come into the day-to-day consideration. Petrol was always $1, not that much of a problem. We are used to that. The problem is going to be when it becomes $3 or $4 or $5. Then people will notice. Already at $1.40, some people are beginning to think about it, so when it becomes higher they have to change their minds, their way of thinking and their way of planning.

Senator JOYCE—But changing the way people think is a very hard task. That is not really a solution; it is nirvana. I want to go back to shale oil. They say there are three trillion barrels of shale oil equivalent in China and two trillion barrels in the United States, and I think we have 440 billion barrels of equivalent shale oil between Proserpine and Gladstone. Surely if the price of oil keeps heading north, this potential oil will begin to be exploited. Can you give me your impressions? You have gone through gas to liquid and coal to liquid. Do you have any opinions on the shale oil issue?

Dr Samsam Bakhtiari—Yes. There is a lot of shale—many thousands. There is an enormous amount of oil in there, but it is a very messy and difficult industry. In Canada, you have about 1.1 million barrels per day of synthetic crude oil produced, which is being exported mostly to the US, and which makes economic sense, especially at the prices of $74 to $75 per barrel. I think it costs them around $30 to $40 per barrel, so they are making some money. But I think it is limited, and I think the limits to that industry are, according to my prediction, roughly three million barrels per day. I cannot see Canada or the US together making more than three million barrels per day at the 2020 or 2025 horizon, investing enormous amounts of money. The shale oil industry is like the oil industry. You go to the best places first, naturally. And then, as you go along, it gets more difficult, it gets more expensive and it gets messier. I think you need roughly 2,000 ton of shale oil to make one barrel of synthetic crude oil. You can imagine, on an enormous scale, what that involves for the land and for everywhere else.

Already, at the level of 1.1 million barrels a day, the Canadian rivers are becoming so polluted as to have triggered alarm bells over Canada; the fish are dying and it will soon be impossible to clean up all the rivers. There are side problems for that as well. If one day we reach three million barrels per day I do not know what the situation will be there, but I do not think we can go further than three million; that is it.

There is also the heavy oil in Venezuela. Today there are 600,000 barrels of capacity. I do not think the Venezuelans can go beyond twice that amount, and with the government they have now they are stuck with their 600,000. I do not think anybody will be willing to invest in such expensive and difficult processes of exploitation. But even if the conditions were right I think they can go to 1.2. I really cannot see them going much further than that. So, yes, there is the potential but you have to transform the potential into production.

I forgot to tell you about the tar sands and the shale oil. All the heat you need for that comes from natural gas. You are spending 1.5 million BTUs for every barrel you are going to produce; that makes a lot of gas. What the Americans are beginning to tell the Canadians is, ‘We’d rather have this gas than anything else.’ So you have other problems that arise in this exploitation—at most, three million for tar sands and shale and one million for the Orinoco heavy oil. That makes a total of four million over the next 20 or 25 years. It will not change a thing for people—it is a drop of water—in the 81 we are facing now.

Senator JOYCE—Everyone knows about the price of fuel in Venezuela—I think you can buy a liter of petrol for 6c or 7c or something; it is still cheap—and we know what the price of petrol is on the streets in Australia. The organizations that control basically from the wellhead to the bowser are predominantly the same four major oil companies. We know that the price of Chevron has gone through the roof and that the price of Caltex domestically has gone through the roof, so they are making a far greater return on their asset. Can you say what you believe is their interest in the future—where oil prices are going? Can you also give some sort of indication about what sort of control the major oil companies have through the whole process of oil production as it stands today, from the oilwell to the bowsers? What form of control do they have over the total production of that product? What sorts of profits do you think they would intend to make in the future?

Dr Samsam Bakhtiari—I think that oil companies are like all corporations: they want to make profits, and they want to make the highest return for their shareholders. In 2005, they set new records in every country for profits. I think that in 2006 they will have far higher returns and record profits of, maybe, $50 billion for Exxon or something like that. It will be roughly the same, maybe $40 billion, for BP and a bit less, maybe, for Shell. Their shares will be reevaluated all the time as the price of oil goes up—and, as I told you, it can only go up.

But they control part of the system. You have many players. You have the national oil companies now, like Saudi Aramco, the National Iranian Oil Company and the national oil companies of Kuwait or Qatar. The oil companies control part of the system and it seems that their share of oil production is beginning to decline as well. It is still quite substantial, but it is also beginning to decline. Naturally, I think they are in it for the profits, and they control wherever they are from the wellhead all the way down to the retail. I think they get profit centres all along the way, and they are making enormous profits.

Senator JOYCE—The issue I am getting at is a transfer pricing issue. By the time the fuel gets to Australia, the same organization controlled entity has made its profit offshore. It is only the final stage. The purpose of Australia is just to move the product, not to make the profit. That would be a fair statement, wouldn’t it? Everyone talks about the terminal gate price of fuel as if that is the true price. It is a transfer pricing issue. By the time the fuel arrives in Australia, the same controlled entity has made the profit overseas. The purpose of Australia is to move the final product of petrol—not to make profit but to move product—because the profit has been made before the product actually arrives in Australia. The purpose of the Australian retail market is to move product, not to make profit. Therefore, it would be the intent of the oil industry to keep exclusively their product out there in the market and not encourage an alternative market apart from their product, which is oil.

Dr Samsam Bakhtiari—Yes. Certainly that is one of the goals of any corporation which makes a product: not to have rivals in the field and to try somehow to destroy or not let them in. Certainly you have this factor. I do not think that any oil company would be very happy to see an enormous boom in biodiesels, unless they could control it, which they cannot. So it will be certainly in their interest to see alternatives. Some oil companies want to get into solar and into other types of alternatives, but I do not think it is their job or their way of doing things. Somebody is going to do it much better than that.

Senator STERLE—I have two questions. If we were to take all the alternatives around the world—solar, hydro, gas, CTL, GTL and all those—how far off subsidizing our thirst for oil would that be? Could we supply the world’s demands? Nowhere near it?

Dr Samsam Bakhtiari—Very, very little. In any scenario and in any field for the next, say, 20 years: very, very little. It is a drop of water. If you make the calculation of increasing even by 100 per cent every single year, it is still a drop of water in solar, in biodiesel, in anything.

Senator STERLE—So there really is no alternative at this stage?

Dr Samsam Bakhtiari—No.

Senator STERLE—You spoke about Western Australia and the free public transport. I think it is going to send some ripples, but we really are faced in the world today—and I can only talk of Australia and my home state in particular—with some very hard decisions to be made.

Dr Samsam Bakhtiari—Yes.

Senator STERLE—It will bring in a lot of side issues of employment and revenue for governments—all sorts of things will pop up. If we are not fair dinkum in what we are leaving for the next generation—for our environment, our economies, our communities and our world— we really are in serious trouble. I pick up on that earlier comment you made about public transport and integrating public transport in trains and buses and whatever else there might be. It is not nirvana; it is a reality that we really are confronted with and we have to face.

Dr Samsam Bakhtiari—Yes. Provided that our models and our predictions are correct, this is exactly what you are going to face very soon. I do not want to be more negative, but I have started looking into T2, T3 and T4, and, my God, there are some things I started seeing down there that really send shudders up my spine. But I will spare you that today. Maybe that is for another time.

But I entirely agree with your statement. It should be done if only to get prepared so that if things go the wrong way you have something to fall back on—that you have some organization which you have already set up. As the crisis develops you develop this organization and make it ever bigger and more powerful to take care of the crisis.

There are companies which are employing 300,000 people in 140 countries who do not know a thing about peak oil. I do not know how they are going to react tomorrow.

The Europeans do not want to believe this reality. Next year they are going to start—they have already started—dying from the cold. According to my statistics, at least 900 people in eastern European countries froze to death last year. This year it is going to be double or triple that amount. This is the reality already. When there is a real crisis, how are they going to react?

The most important point is that governments do not to cause people to panic. The worst reaction to this type of crisis will be panic. If governments are not prepared there will be panic.

The more prepared governments and institutions are, the less panic you will have. Panics are very costly. I entirely agree with what you just said. There is still time to get prepared. We are not that much down the T1 slope. It will be a very slow development, so there is time.

Senator STERLE—Apart from what you saw in Perth with the free public transport around the CBD, are any other countries taking that lead?

Dr Samsam Bakhtiari—No, nobody. There might be a city or two, but I have not heard of any that have taken this drastic step already, and I have not seen such things at all. I can tell you that the future is to rails because rails are the most fuel efficient system. Would you like to see some figures on that? I can illustrate this for you on the whiteboard. This will give you an order of magnitude. At ton kilometers per liter of fuel, airplanes are between two and three, cars are between 10 and 22, trucks are between 65 and 85 and trains are around 320. So on these very simple figures, I think you can see that the future is to trains, but not trains that you build now; trains that you already have and that you are going to spend money on. I have heard that Sydney in 2006 is planning to spend half its budget on roads and other infrastructures and half on public transportation—it seems to be roughly fifty-fifty. I think that as soon as you change this percentage towards rail and public, fuel efficiency might begin to make some sense. I think you can see the future here.

CHAIR—It is not planes.

Dr Samsam Bakhtiari—Aeroplanes will be the first casualty in the system. They are already making losses. I do not know how they can carry on because the jet fuel is directly proportional to the increases in crude oil. It is not like petrol. Petrol is very much cheaper because you have hidden subsidies and you have the taxes naturally.

Senator MILNE—I have a strategic question about Iran’s contribution to global oil supply as well as to gas. What percentage of global reserves does Iran hold? If Iran were to stop supplying overnight for a geopolitical reason, what impact would that have on 81 million barrels used per day? In other words, T1 is assuming everything goes along smoothly. Let us assume there is a geopolitical crisis and Iran decides to stop supplying into that 81 million barrels a day. What impact would that have?

Dr Samsam Bakhtiari—At present I think that Iran is supplying roughly two million barrels of oil for exports. In the case of some geopolitical problem, you would have to take the two million out of the 81 million. That in itself would not be very harsh. Why? Because major consuming countries have their strategic petroleum reserves. They could start taking it out of their reserves. The latest data on the US SPR is that they have 688 million barrels in their reserves. I believe that the Japanese must have something around 120 million barrels. The Europeans, all together, have roughly the same amount as the Japanese. The Chinese are trying to build up a strategic reserve of roughly 40 million barrels, but they have not started yet. Maybe they hope for the price of crude oil to come a bit lower before they start. They could do that. What would be impacting heavily on the price is the psychological impact of any geopolitical happening, whether in the Persian Gulf or in South-East Asia. Because the leeway in T1 is extremely small—as I have tried to mention to you—the slightest impact geopolitically will have enormous consequences. If you had in Saudi Arabia, for example, or anywhere else, some two million to three million barrels of spare capacity—that you usually had before—then people would not be so worried about this geopolitical impact. But you do not have spare capacity anymore. I do not believe the Saudis have any spare capacity today, although they say they have a million or 1½ million barrels. They have no spare capacity. Nobody, in my opinion—neither OPEC, nor non-OPEC, nor the Russians, nor the Saudis—has any spare capacity. It would have an enormous impact. The price could go anywhere.

I will give you just one example of what we in NOIC did in 1975 after the first price shock, when the price went from roughly $2 per barrel to $11 per barrel. To find out what the real price was NOIC set up an auction, saying, ‘We have a few barrels and we are going to auction these barrels, so whoever is interested should give us a bid.’ Through the bids, we found out what the real price was. Some bids were up to $41. There were people who were willing, at $11 per barrel, to pay $41.

Then you have the problem that the national oil companies today in the Middle East and in OPEC are not what they were in the past. That is another problem. If there is a disruption, as long as the system is working, you have little problem. It just goes on and on. You see that in cases of earthquake or catastrophe. Once there is a catastrophe, it is very difficult to put it back to the way it was before. You see it taking 10, 12 or 15 years to bring it back. If you have geopolitical problems in the Middle East, it will be very difficult after the crisis has been fortunately somehow solved to put the system back to where it was before. For all these reasons—and because of the herd instinct and the panic that might follow—you could easily have prices doubling overnight. If somebody were smart enough to have an auction, you would see prices that even I could not imagine today.

Senator MILNE—You have just talked about the strategic ramifications of even two million barrels being taken out. Australia, as you know, has just signed up to long-term gas exports to China at a fixed price. Given what you have just said, that looks like an increasingly bad deal.

Dr Samsam Bakhtiari—At a fixed price?

Senator MILNE—That is what I said. Yes, I can see that you are not impressed by the brilliance of that and neither are we, but nevertheless the Prime Minister and Premier Wen both opened the terminal in China recently, celebrating Australia selling bulk gas at a fixed price—to the horror of much of our country. But there are some people who are saying that given what we are having with peak oil and approaching peak gas and given Australia’s wealth in gas and the importance of gas as a transition fuel Australia ought not be exporting gas, that we should be keeping gas as a transition fuel as transition 1, if you like, goes to the more difficult transitions 2, 3 and 4. What is your view about that?

Dr Samsam Bakhtiari—I cannot comment on political decision-taking by national politicians but I believe that gas is a very strategic commodity today and the more you have the better it will be. You will certainly see in the next few years, even during transition 1, cases of what they call in international law ‘force majeure’ and when you are confronted with force majeure then there are many decisions that you can take.

Natural gas is certainly a strategic commodity today and commodities are becoming very strategic. Commodities like coal and copper, which do not seem to be very strategic, are very strategic. Uranium, for example, is already costing $47 or $48, which is still very cheap. Uranium was $10 not so long ago when nobody was thinking about it, but I can see uranium going way over $100 a pound. All other commodities are important, but natural gas is a very strong commodity. You can always use it domestically in the long term and I can see that happening easily for gas.

CHAIR—What would you recommend that we invest in? As a committee we need to make recommendations against our terms of reference, so what would you suggest we recommend should be the focus of government to deal with this issue?

Dr Samsam Bakhtiari—It is a very difficult question but I would have one major recommendation, and Senator Siewert touched upon it: to create some kind of national steering committee of experts in the field, dependent upon this committee maybe, to study as fast as possible all these questions, then under the aegis of this steering committee maybe create a very small executive committee to study all that and the priorities so that you have something that is working. That is the only thing that I could recommend now—to study.

CHAIR—Where do ships fit in your chart? You have airplanes, cars, truck and trains. Where does sea transport fit in?

Dr Samsam Bakhtiari—Ships are way down. Shipping is marvelous, in terms of energy efficiency, whether it be cargo or container ships. That is marvelous. Shipping is very good.

CHAIR—One of the scenarios into the future is likely to be that there will be less air travel and more ship transport and cargo.

Dr Samsam Bakhtiari—Yes, certainly. Airplanes in transition 1 are at risk. They are already at risk today and they are going to be much more at risk than that. Air travel will have to be more and more reduced in the future and it is going to be more and more expensive. Shipping will come back because the factor of time is not going to be as important as the factor of energy efficiency.

CHAIR—If I understand you correctly, you are saying that we should be investing now as a matter of priority in public transport.

Dr Samsam Bakhtiari—Certainly, yes. Right now. As soon as possible. Start tomorrow on public transport. It is better than starting the day after tomorrow. You also have the problem that, at some stage, you will not be able to invest that easily. The further we go down the line, investment gets more difficult. People who think they will undertake projects in 10 years time do not realize the problems of making these projects. I will give you two examples. The Europeans have woken up to this lately. They now want to bring gas from the Persian Gulf to Europe, but that is a 20-year project and it will cost at least $25 billion. It is not feasible today. They are dreaming. And even if they think of putting a gas pipeline from Iran to Pakistan to India, they are also dreaming. You cannot do that today. It is too late. You could have done that as long as you were on the curve, but when you are on the top the projects have to be smaller and smaller and you have to start them as soon as possible, and not get caught up by the events. It is a different way to do things.


Byron King, who writes the “Whiskey & Gunpowder” column, wrote Bakhtiari to ask him to further explain his thinking on T! through T4. Here’s what he said:

“The four Transition periods (T1, T2, T3, and T4) will roughly span the 2006-2020 era. Each Transition [will] cover, on average, three to four years.

The major palpable difference between the four Ts is their respective gradient of oil output decline – very small for T1, perceptible for T2, remarkable in T3, and rather steep for T4. In fact, this gradation in decline is a genuine blessing for those having to cope and adapt.

It should be borne in mind that these four Ts are only an overall theoretical structure for future global oil output. The structure is thus so orderly because [it is] predicted with ‘Pre-Peak’ methods, ‘Pre-Peak’ assumptions, and [a] ‘Pre-Peak’ set of rules.

The problem is that we now are in ‘Post-Peak’ mode, and that none of [the] above applies anymore.

The fact of being in ‘Post-Peak’ will bring about explosive disruptions we know little about, and which are extremely difficult to foresee. And the shock waves from these explosions rippling throughout the financial and industrial infrastructure could have myriad unintended consequences for which we have no precedent and little experience.

So the only Transition we can see rather clearly (or rather, we hope to be able to comprehend) is T1. It is clear that T1 will witness the tilting of the ‘Oil Demand’ and ‘Oil Supply’ scales — with the former dominant at the onset and the latter commanding toward the close (say, by 2009 or 2010).

But even during that rather benign T1, the unexpected might become the rule and the orderly ‘Pre-Peak’ rapidly give way to some chaotic ‘Post-Peak.

In any instance, the overall structure of the ‘Four Transitions’ is a general guideline for the next 14 years or so — as far as global oil output is concerned. In practice, reality might prove to be worse than these theoretical Transitions; but certainly not better.

I also agree that at the junction of two Ts, there should be some kind of a milestone. For example, at the close of T1, Supply should totally dominate Demand…I am toying with [the] idea, very preliminary, that close of T2 could be OPEC [oil production] surpassing non-OPEC [oil production], although OPEC died in 2004”.

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Why U.S. Is Running Out of Gas (Time magazine 2003)

Donald L. Barlett & James B. Steele. July 21, 2003.  Why U.S. Is Running Out of Gas. Time Magazine.

Inflated oil prices and natural gas shortages are wiping out jobs and savings, thanks to three decades of bungled energy policy. Get ready for more bungling.

If all goes according to plan, the U.S. Senate in the next few weeks will follow the House and approve the latest in a long line of national energy policies. This one incorporates a favorite initiative of President George W. Bush’s—the hydrogen-powered car. In his State of the Union address in January, the President proposed “$1.2 billion in research funding so that America can lead the world in developing clean, hydrogen-powered automobiles.” As the President explained, his goal was “to promote energy independence … in ways that generations before us could not have imagined.”

Democrats joined euphoric Republicans in signing on to the proposal. “The supply of hydrogen is inexhaustible,” Senator Byron Dorgan, North Dakota Democrat, told his colleagues. “Hydrogen is in water. You can take the energy from the wind and use the electricity in the process of electrolysis, separate the hydrogen from the oxygen and store the hydrogen and use it in vehicles. The fact is, hydrogen is ubiquitous. It is everywhere.”

Was this a rare instance of the two parties working together in Washington for the good of the country? Far from it. They’ve been doing this energy dance off and on for 30 years.

At the time of the first energy crisis, in 1974, President Richard M. Nixon put forth Project Independence to end American reliance on foreign oil through a series of energy programs, among them “hydrogen-fueled vehicles” that could be developed “to enable a shift away from oil.” Takeoff date for the new technology: 1990. Members of Congress were enthusiastic about the hydrogen car then too. “Hydrogen offers us great potential as a fuel for the future,” said Representative Charles Vanik, Ohio Democrat. Representative Robert Wilson, a California Republican, was equally excited: “We can now look forward to running our automobiles on water.”

But hydrogen power went nowhere then, just as it went nowhere when it was trumpeted nearly a century ago. It will probably go nowhere today, for many reasons, most notably a chronic case of short attention span among American politicians when it comes to energy policy. With great fanfare, lawmakers and Presidents—both Democrats and Republicans—announce sweeping plans to end or ease American dependence on foreign oil and find other stable sources of energy. When the headlines and television sound bites fade away, however, they scrap the programs, which then are often reintroduced to an unsuspecting public as new in later years by another generation of lawmakers and Presidents. But changing anything as deep-seated as America’s habits of energy use calls for consistency and follow through, so the failure of Washington to stick with hardly any of its plans has wound up making the U.S. more dependent than ever on foreign sources.

Now Congress is about to enact yet another doomed energy policy that promises more of the same. Take hydrogen. Ideally, the gas would be extracted from water using fusion technology. But that won’t be available for decades. In the interim, a substitute energy source would be used—natural gas. Yes, the same natural gas already in short supply.

Then there’s coal. The Senate bill would authorize spending $200 million a year to study and develop “clean coal” technologies. But that’s a substantial comedown from the billions spent in the 1970s and 1980s to encourage development of an industry that would turn coal into oil and synthetic gas, enabling the U.S. to dramatically curb imports. It never came about.

The Senate bill also contains an assortment of goodies. It would hand out $3.5 billion to revive America’s moribund nuclear power industry—even though the last order for a plant that actually went online was placed in 1973. It would parcel out nearly $10 billion in tax breaks and subsidies to oil and gas companies that will not erase falling production but instead enrich oilmen and investors. At the same time, the President’s proposed budget slashes spending on wind research by 5.5%, zero-energy buildings by 50% and biomass by 19%. To add to the insult, the Administration took the money to print its 170-page 2001 National Energy Policy out of the budget for renewable fuels.

This comes at a time when Americans are heading into their first big energy squeeze since the 1970s: a shortage of natural gas, the invisible resource used to heat homes, fuel kitchen appliances, generate electricity and manufacture many of the chemicals we use. The shortage has triggered a sharp rise in prices that is likely to exact a heavy toll on low- and middle-income Americans, especially those living on fixed incomes. Home heating bills last winter more than doubled in some areas, and they are expected to go up at least another 20% this winter. Electric bills also will spike because generating plants are increasingly gas-fueled. And in places like Louisiana, where the petrochemical industry makes up a big part of the local economy, the shortage is causing a loss of jobs, with at least 2,000 layoffs so far. The entire industry may be forced to move offshore over the next few years if there is no relief.

Beth Wilson, a stay-at-home mom in Hobart, Ind., 35 miles southeast of Chicago, is still seething over last winter’s bills from Northern Indiana Public Service Co., known as NIPSCO. In March 2002, Wilson paid the utility 33(cent) a heating unit for the family’s two-bedroom home. By March of this year, the price had shot up to 86(cent), an increase of 161%. If the price of new cars had risen at the same pace, a midrange Ford Taurus would sell for $54,000 today. Says Wilson: “I never turn my heat up past 68. I didn’t want to turn my ceiling fan on.” (NIPSCO also furnishes her electricity.) “How can other people on fixed incomes pay if I can’t?”

For consumers, the second part of this one-two punch is exaggerated oil prices. While the world is swimming in crude oil, it already trades at an inflated price of $30 a bbl., a level essentially dictated by Saudi Arabia with the approval of the U.S. government. This translates into swollen prices for gasoline, home heating oil and other petroleum products. What’s worse is that because of Congress’s three decades of fumbled energy legislation, Americans have become more vulnerable than ever to an interruption in foreign supply that would truly send prices into orbit and cripple the U.S. economy. More than 53% of America’s daily consumption of oil and petroleum products comes from foreign sources, compared with 35% in 1973.

Why are Congress and the White House responsible? As part of a long-standing ritual involving Democrats and Republicans, lawmakers and Presidents have devised energy plans that add up to no plan at all—not deliberately but by default. In pursuit of different agendas, competing interests tend to cancel one another out over time, leaving the nation with no coherent direction on energy. Lawmakers launch programs to develop alternative- energy supplies but later quietly cut or eliminate the funding so there are no realistic alternative sources.

They enact legislation offering incentives to stimulate crude-oil production in the U.S., when the politicians know—or should know—that the programs will not do so in any significant way. They encourage utilities, businesses and industries to shift to natural gas, then fail to ensure sufficient supplies of the fuel. The lawmakers refuse to make the tough choices on energy supplies and consumption, while they cater to the demands of campaign contributors and special interests. Worst of all, when politicians craft a conservation program that actually works, they abandon it. As a result, after three decades and dozens of energy bills, Congress has helped position Americans so they may be closer to an energy crisis than at any time since the oil shocks of the 1970s. And this time, the U.S. is finally beginning to run out of domestic oil and easily recoverable natural gas. Here is how it happened:

NATURAL GAS: THE CONGRESSIONAL FLIP-FLOP. A quarter-century ago, Congress enacted the Powerplant and Industrial Fuel Use Act, which banned after 1990 the burning of natural gas by power plants to generate electricity. The reasoning: because that fuel was in short supply and was most widely used to heat homes—it goes to half of all residences—it should be preserved for that purpose. Pete Domenici, the Republican Senator from New Mexico, told his colleagues that year, “Almost since we found natural gas we have been busy finding ways to abuse it, waste it, literally throw it away on uses that we are now finding are absolutely the wrong thing to do, and basic among those that are wasteful are … the use of natural gas to generate electricity.”

As the years slipped by, Congress reversed course. Prodded by the Reagan Administration, lawmakers repealed the ban in 1987 and opened the door to construction of natural gas-guzzling power plants. Three years later, they amended the environmental rules to discourage the burning of coal—America’s most plentiful fuel—to produce electricity. Predictably, the generation of electricity with natural gas, which had fallen 17% from 1979 to 1987, has shot up 151% since then, reaching a record 686 billion kWh last year. Nearly a fifth of all U.S. electricity is now generated with natural gas, and 88% of all new generating plants built in the past decade use the fuel. Meanwhile, U.S. production of natural gas has remained stagnant at 19 trillion cu. ft. a year, about the same as a decade ago. But the U.S. consumed 22 trillion cu. ft., up 8% during that time. Because natural gas moves more efficiently by pipeline than tanker (for which it needs to be liquefied), the difference comes mostly from Canada. Now the Canadians are running low, and exports to the U.S. are expected to be flat, or possibly even decline.

During these same years, Congress prohibited drilling for natural gas offshore for environmental reasons.

Earlier, in the 1970s, it had studied and then rejected building a natural-gas pipeline from the Arctic, where there are substantial gas reserves, south through Canada to serve the U.S. The worry was that Canada would hold the U.S. economic hostage.

This time around, the energy bill calls for taxpayer subsidies to build a needlessly longer and far more costly pipeline that follows a roundabout path. Called the Southern Route, it starts at the North Slope and heads south along the Alaskan highway before turning east into Canada. A far more direct path, called the Northern Route, would have cut across the north coast of Alaska and hooked up in Canada with the recently announced Mackenzie Valley pipeline. Both lines ultimately would feed into trunk lines in Alberta and serve the U.S. market.

Why the meandering route? In 2001 the Alaska state legislature enacted a law blocking the cheaper northern pipeline. Lawmakers wanted a pork-barrel project to keep construction and supplier jobs in the state. State representative Jim Whitaker, a Fairbanks Republican who sponsored the measure, summed up the state’s attitude: “The legislature has a responsibility to ensure that Alaska gas goes to market in a manner that is in the maximum best interest of the people of the state of Alaska.” Congress has agreed. In the years that it will take North Slope gas to reach the lower 48 states, natural-gas prices will keep moving up. In the short run, high temperatures this summer could produce spikes in prices and regional brownouts. In June natural gas sold for an average of $5.83 per 1 million btus, up 169% from the same week in 1998. Higher prices already are taking their toll on energy-dependent industries, like those that produce ammonia, the key ingredient in fertilizer. In June 1998 the Louisiana Ammonia Producers trade association had nine corporate members with 3,500 employees. Today it has one, CF Industries. “We’ve lost 2,000 employees,” says Jim Harris, a spokesman for the producers, who accounted for 40% of America’s ammonia output. “It’s been devastating. The high natural-gas costs have been the overwhelming reason plants have closed. It’s completely depressed the whole area.”

Other businesses have sounded the alarm, among them a consortium of nearly two dozen companies, including pharmaceutical makers (Abbott Laboratories), brewers (Coors), chemical companies (Dow) and makers of building materials (Owens Corning). They have urged President Bush “to declare war on high natural-gas prices.” Heading a list of recommendations: “Maximize use of other energy sources for power generation.”

At the same time that Louisiana factories are laying off workers because of gas prices, the U.S. is shipping gas to Mexico to generate electricity there. While the volume is still comparatively small, exports nonetheless have swelled 674% over the past seven years, to 263 billion cu. ft. last year. El Paso Energy, for one, pipes gas directly to the new Samalayuca II power plant, about 25 miles south of Ciudad Juarez. It serves 1 million people and some 300 factories south of the border. The potentially chronic natural-gas shortage and its impact on the economy and employment have even Alan Greenspan worried. Talking about the many industries dependent on natural gas, the Federal Reserve chairman told the Senate Energy Committee last week that “we do see the obvious loss of jobs … because it has made us largely uncompetitive in a number of industries in which gas is a critical input.” He also saw little hope that prices would fall. “We are not apt to return to earlier periods of relative abundance and low prices anytime soon,” he said.

LIQUEFIED NATURAL GAS: BACK TO THE FUTURE. To meet the surging demand for natural gas in the short term, Greenspan does see a solution: liquefied natural gas (lng). He has told Congress that “given notable cost reductions for both liquefaction and transportation of lng, significant global trade is developing. And high gas prices projected in the American distant futures market have made us a potential very large importer.”

Translation: Because natural-gas prices are going up—and are going to stay up—it’s now time to bring in more expensive lng from the Caribbean, the Middle East, Africa and possibly Russia. To import natural gas, it must be chilled to minus 260(degree)F, which converts it to a liquid and reduces its volume. An amount that would normally fill a beach ball can fit inside a Ping-Pong ball. When the liquid arrives at terminals in the U.S., it is slowly warmed up, returned to a vapor form and sent through pipelines.

The U.S. tried to build an lng supply line once before but, in typical fashion, abandoned it. During the last natural-gas shortage in the 1970s, when lawmakers voted to ban its burning to generate electricity, they also encouraged the establishment of the lng industry with taxpayer- guaranteed loans and grants. Special tankers, the most expensive ships in the world at the time, were built along with four terminals and re-gasification facilities at Cove Point, Md., near Baltimore, as well as in Georgia, Louisiana and Massachusetts. The first lng shipments arrived in 1978. In April 1980, Morris Udall, the Democratic Representative from Arizona, told the House that a Congressional Office of Technology Assessment report concluded that lng imports, “if encouraged, could double by 1990 and meet as much as 7% to 13% of U.S. natural-gas needs.” It was not to be. A series of events conspired to derail the policy. The Algerians, who shipped the lng, jacked up the price. The Carter Administration and the natural-gas and pipeline companies balked at paying more. After months of fruitless negotiations, the deal unraveled. The ships went elsewhere. Cove Point and two other plants closed. It was the end of the lng experiment. But the shortage has triggered a scramble to reverse course. Today Cove Point is being expanded and will reopen soon. The plants in the three other states are already open, and plans are on the drawing board for two dozen more.

OIL PRODUCTION AND IMPORTS: PROMISES, PROMISES. In 1973, with the country importing 6 million bbl. of crude oil and petroleum products daily, President Nixon pledged that by virtue of his Project Independence “in the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”

He advanced a catalog of energy proposals that covered everything from drilling on the outer continental shelf to building more nuclear power plants, from expanding the use of coal to conducting research on potential new sources. In the end it didn’t work, and the U. S. failed to come close to his goal of energy independence. While the yearly numbers rose and fell, by 1980 net oil imports had increased 400,000 bbl. a day over 1973.

After the second oil shock hit America in 1979, Washington’s wandering attention was focused again on energy. Following Nixon’s lead, President Carter pushed development of synthetic fuels as part of his strategy to slash imports. When he signed the Energy Security Act into law in June 1980, Carter said it would “encourage production of 2 million bbl. a day of synthetic fuels by the year 1992.” That didn’t work either: synthetic-fuel production ended up slightly in excess of zero, and oil imports totaled 6.9 million bbl. a day that year.

Throughout the years, in one energy debate after another, lawmakers and Presidents insisted that if they handed out enough incentives, U.S. oil production would rise, and there would be less need for imports. In each instance, legislation was accompanied by extravagant forecasts not only by lawmakers but by energy-company officials as well. In 1974 policymakers predicted that U.S. oil production “could increase to more than 17 million barrels a day, which is more than sufficient to be at zero imports by 1985.” The Reagan White House shared the optimism. A spokesman said that “the ranges that any reasonable person is considering include zero (imports) by 2000.” By that year, however, imports were at their highest level ever, and domestic production had declined to levels not seen since 1950. Now President Bush has his own plan to jump-start oil production.

He wants to begin drilling in a portion of the 1.5 million-acre arctic coastal-plain area of the Alaska National Wildlife Refuge (anwr), which covers a total of 19 million acres. According to the White House, the President “believes that opening this small area to environmentally responsible exploration would provide the resources necessary to reduce our dependence on foreign sources of oil and provide for greater energy security.”

The reduction would be modest. Even if the ANWR would yield 1 million bbl. daily of crude oil, as suggested by the President, by the time pipelines are built and production gets under way, the oil would displace less than 10% of U.S. imports. And there are no guarantees for the 1 million bbl. In the early days of the North Slope project, politicians predicted that consumers would get 3.8 million bbl. of crude oil daily out of Alaska “by the end of the century.” Instead production hit a high of 2 million bbl. in 1988—the only year at that level— and then began to trail off, dropping to 984,000 bbl. last year.

To make matters worse, the U.S. is confronted with a refinery gap—just as it was in the 1973-74 oil crisis. The U. S. consumed 19.8 million bbl. a day of petroleum products last year, but its refineries could process only 16. 6 million bbl. of crude oil. The 3.2 million barrel difference was made up through imports of finished products like gasoline and jet fuel, which are even more susceptible to supply disruptions than crude oil.

Following the energy debacles of the 1970s, the industry began adding refinery capacity. By 1980, it could process all the crude oil required to meet demand, but that lasted only until 1985. The gap has been widening ever since.

CONSERVATION—BUT NOT FOR REAL MEN. After the 1973-74 energy crisis, when gas stations closed on Sundays and motorists waited in lines for hours to fill up, Congress enacted a series of tough conservation measures. The Energy Policy and Conservation Act of 1975 imposed stringent mileage requirements on automakers—an average of 27. 5 m.p.g. on passenger cars by model year 1985—to curb gasoline consumption. It worked.

In the decade before the act’s passage, gasoline consumption had risen 48%, to 6.5 million bbl. a day in 1974. In years to follow, even with millions more cars on the highways, consumption remained largely unchanged.

Beginning at 7 million bbl. a day in 1976, demand went up and down in a narrow range and by 1991 was at just 7. 2 million.

During the 1980s, as it became clear gasoline conservation was working, aided by a nasty recession, one energy forecast after another anticipated ever better mileage. The American Petroleum Institute, swept up by auto-industry fervor, announced in September 1981 that “forecasts of fuel efficiency for new cars now exceed those mandates (27.5 m.p.g.), suggesting an industry-fleet average of 30 m.p.g. by 1985.”

Not exactly: this year the average is still 27.5 m.p.g. for vehicles officially labeled as passenger cars, but for the entire fleet of vehicles, including suvs and trucks, it is much worse. The best overall fuel economy of 22.1 m.p.g. (for U.S.- made vehicles) was achieved in 1987-88. Aside from an occasional upward tick, that figure has inched steadily downward, to 20.4 m.p.g. last year.

That’s because Congress lost interest in conservation and failed to keep the pressure on the car companies. Lawmakers refused to set new mileage goals. Worse, they excluded from the existing requirements light trucks and suvs, the fastest-selling vehicles and the ones that use the most gasoline. Contributing even more to the trend, they extended an extraordinary tax benefit to the gas guzzlers, so drivers who used a vehicle for work could write off the cost on their tax returns—even as much as $38,200 toward a new Hummer H2 that gets only 10 m. p.g. As might be expected, consumption rose 1.5 million bbl. a day over the past decade, to 8.8 million last year. But for owners of pricey vehicles like the Hummer, it keeps getting better. The tax-cutting bill signed into law in May expanded the write-off to $100,000.

For its part, the Bush Administration is dismissive of serious conservation. Vice President Cheney, who headed an Administration task force to devise an energy strategy—a group whose work was carried out in secret and whose papers remain secret—expressed the attitude two years ago in a now infamous way: “Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy.”

Representative Raymond Green, a Texas Democrat, was more blunt when the House earlier this year beat back an attempt to raise mileage standards. While allowing that he was for “better gas mileage,” said Green: “We come from a big state that wants big trucks and big cars.”

ALTERNATIVE ENERGY: HERE COMES THE SUN, AND THERE IT GOES AGAIN. No alternative-energy source has captured the imagination of lawmakers and Presidents like the sun. For three decades, solar energy’s champions on Capitol Hill have insisted that the harnessing of this free and unlimited supply of energy was just around the corner. Representative Charles Mosher, Ohio Republican, was among the ardent supporters in 1974. “Much of the technology needed to utilize this nonpolluting source of power is nearly at hand,” Mosher said in a speech on the House floor. “In fact, the consensus is that there are no major technical barriers to the widespread application of solar energy to meet U.S. energy needs.”

With that notion in mind, President Carter in 1980 pushed legislation that he said would help “us to reach our goal of deriving 20% of all the energy we use by the end of this century directly from the sun.” The forecast proved breathtakingly overreaching. Last year solar energy accounted for about seven one-hundredths of 1% of all U.S. energy consumption. The Bush energy package includes a $2,000 tax credit for individuals who buy and install photovoltaic or solar water-heating equipment in their residences.

Nothing new here: the government has been selling solar for years with generous tax incentives. Most of the public, though, isn’t buying. And people who do often have memorable experiences. A quarter-century ago, the owners of a 13-story, 64-unit co-op at 924 West End Avenue on New York City’s Upper West Side erected a steel framework on the rooftop, welded it to the building’s steel beams and attached 117 solar-collector panels.

Water heated by the sun flowed through pipes into a 5,000-gallon storage tank in the building’s old coal bin and from there into the building’s hot-water system. The project was funded in part with a $112,000 federal grant. Today the solar experiment is long gone. A building workman told Time that the collectors behaved like sails, swaying back and forth so much that water leaked into apartments below. It cost several million dollars to repair the roof, he said.

But solar is hardly the only alternative energy source that has failed to live up to the promises of its congressional supporters. Just as both parties have embraced President Bush’s hydrogen initiative, they have also signed on to another of his long-shot proposals, one he says will provide “clean, safe, renewable and commercially available fusion energy by the middle of this century.”

Unlike nuclear fission, the splitting of uranium atoms that powers nuclear reactors, fusion joins hydrogen atoms to unleash far more energy. The trick is to control the fusion reaction to generate electricity. It has been an elusive goal for half a century and probably will be for many decades to come. Even so, according to the President, “commercialization of fusion has the potential to dramatically improve America’s energy security while significantly reducing air pollution and emissions of greenhouse gases.”

That’s about what President Carter envisioned more than 20 years ago—albeit with a different timetable—when he signed into law the Magnetic Fusion Engineering Act in 1980. Said Carter: “Fusion power offers the potential for a limitless energy source with manageable environmental effects.” The law established as a national goal the successful operation of a magnetic fusion-demonstration plant in the U.S. by 2000.

The cost was put at $20 billion. As Congress is given to do after announcing grand projects, it slimmed down appropriations to less than $10 billion. U.S. researchers eventually teamed up with colleagues in several countries, but in 1998 Congress pulled the plug on the consortium, contending that it was too expensive.

President Bush, however, reversed that decision. The White House announced last January that the U.S. “will join … an ambitious international research project to harness the promise of fusion energy, the same form of energy that powers the sun. America will join negotiations with Canada, Europe, Japan, Russia and China to create the International Thermonuclear Experimental Reactor (iter). This will be the largest and most technologically sophisticated fusion experiment in the world.” Actually, it’s the same consortium to which the

U. S. had been party in the 1990s and from which it then bailed out.

So it is that the U.S. is likely to be faced with recurring oil and natural-gas crises for some years to come. Their duration and severity remain to be seen. But volatile prices—as with gasoline during the Iraqi war, natural gas last winter and electricity in 2000—are all but guaranteed. The result is a hidden tax of tens of billions of dollars on American consumers. Just how many billions depends on a catalog of variables ranging from the harshness of the weather to unfolding events in the Middle East. More important, it depends on whether Congress and the White House, Democrats and Republicans, come up with a thoughtful energy policy that imposes tough conservation and efficiency measures, promotes research to develop one or two realistic alternative energy forms in commercial quantities and encourages production from a mix of existing energy sources. But none of this will be worth the effort unless the U.S. sticks with a plan long enough for it to pay off.

—With reporting by Laura Karmatz/New York and Eric Roston/Washington, with research by Joan Levinstein/New York

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House Representative Stewart Udall (Arizona) 2005 Time to discard 50 years of energy myths

Stewart Udall and Matthew R. Simmons. Nov 20, 2005. Time to discard fifty years of energy myths. Arizona Daily Star.

Stewart Udall was elected to Congress more than 50 years ago, and served as secretary of the Interior during a vast expansion of the nation’s wilderness areas. For the last 35 years, Matt Simmons has been one of the world’s leading energy investment bankers, while writing widely on energy trends. One of us is a Democrat, one a Republican, but both of us believe that the nation can no longer afford fanciful, indulgent, “Alice in Wonderland” energy policies that place our economic prosperity and national security at risk. Stewart Udall, a former Arizona congressman, served as secretary of Interior in the Kennedy and Johnson administrations. Matthew R. Simmons is chairman of Simmons & Co. International, an energy investment banking firm. His recent book, “Twilight in the Desert,” is an investigation of Saudi Arabia’s oil industry.

This summer’s hurricanes have triggered the most serious energy emergency in the nation’s history. With gasoline, natural gas and heating oil at near-record highs, many families face the chilly prospect of much higher energy bills in the future. The entire economy is at risk, but airlines, tourism, farmers, small business, seniors and the poor are particularly threatened.

Katrina and Rita ravaged the Gulf of Mexico’s petroleum infrastructure, but a larger, more daunting crisis was already on the horizon.

To craft an intelligent response, we must begin by discarding 50 years of energy myths.

Because our continent had huge reserves of oil, coal and natural gas, Americans have nurtured a set of energy illusions that have now come home, in biblical fashion, to haunt us.

The most dangerous myth is that cheap energy is our birthright, that the well will never run dry.

This illusion was born in the early 1950s, when U.S. oil fields provided two-thirds of the planet’s petroleum. Oil was so abundant that domestic producers were required to curtail production to prevent a price collapse. For lack of a market, large plumes of natural gas, now our most precious heating fuel, were flared into the sky.

And atomic energy, the new kid on the block, promised an infinite supply of almost-free electricity. In this euphoric moment, our nation began to fashion a new way of living unlike anything ever seen on the planet.

For a half century, we designed skyscrapers, autos, cities and houses on the assumption that energy would remain inexpensive. In the ’50s, we invented the suburb, the shopping center and the Interstate Highway System. In the ’60s we bought Mustangs. In the ’70s we visited the moon, and in the ’80s we built the world’s most powerful military. Between 1950 and 2005, the country’s population doubled and the economy grew sixfold.

Although advanced technology, superb engineering and Yankee ingenuity played vital roles, it was cheap energy that invented U.S. prosperity. Even at today’s prices, a dime buys enough electricity to lift a pickup truck 500 feet in the air. A gallon of gasoline contains as much energy as that expended riding a bicycle across the United States or hiking 300 miles across Arizona.

Because energy was affordable and abundant, we learned to consume enormous quantities. In recent decades our “burn rate” has been the equivalent of 100 pounds of coal per person-day. Americans now consume their body weight in petroleum products each week.

Energy may be a sliver of gross domestic product – but try running the rest of the economy without it. Energy, not money, is the original currency, the source of all wealth. We share this view even though we come from vastly different backgrounds.

The coming months will pose an enormous challenge, with the highest heating bills in U.S. history and the prospect of natural gas rationing. It is a time for bold, courageous leadership, but to date the political response can be summarized as “pray for a mild winter.” Although the near-term challenges are dwarfed by those of the coming decade, our leaders continue sleepwalking.

Katrina showed us what happens when you unplug modern energy: Civilization unravels. Because energy is the prerequisite for economic prosperity, social stability and environmental well-being, we must discard the dangerous myths of the past and embrace the momentous challenges of the future.

U.S. oil production peaked 35 years ago and no amount of drilling can turn back the clock.

  • Depletion rates in natural gas wells have reached alarming levels.
  • The nation’s energy workforce and infrastructure are aging.
  • No new refineries have been built in 30 years.
  • Our population is increasing by 30 million each decade.
  • Chinese oil demand is surging.
  • Finally, the cornucopian assumption that the Middle East holds unlimited amounts of oil is false.
  • Approximately three dozen aging fields produce most of that region’s supply. The thesis that the Saudis could open the tap as wide as necessary is appealing but fictitious. As a result, world oil production is likely to peak within the next decade, if not sooner.

In short, the era of cheap energy is over. Where to from here?

More drilling? Of course we will need to do more drilling, if only to stay where we are. But research shows that more than half the energy used in this country is lost in inefficient power plants, buildings and cars.

Efficiency must be the rallying call. Conservation is, well, conservative, the single most patriotic thing we can do. Longer term, we’ve got to acquire more accurate information about the true state of the world’s aging oil fields, reorganize our work patterns, modernize our shipping and transportation systems, refurbish our aging energy infrastructure, weatherize tens of millions of buildings, and exponentially expand the production of domestic biofuels, wind and solar power, while replacing 225 million automobiles and light trucks with far more efficient vehicles. This scope of work is not optional: It is an urgent matter of national preservation.

If we ignore the current crisis or misread its message, the world as we know it is likely to become a far darker place for our children.

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James Howard Kunstler posts

[ As I re-read Kunstler posts I will add more excerpts and/or links.  I encourage you to read these brilliant posts in their entirety at for their wonderful humor, language, and the full logical chain of discourse, which excerpts disrupt. Alice Friedemann]

Excerpts from posts by James Howard Kunstler

November 16, 2015. There are no Safe Spaces.

I’m not persuaded that world opinion will ever “make sense” of the Paris attacks. The non-linear rules the day. So-called Fourth Generation Warfare works because there are so many small arms loose in the world and any band of maniacs with a few machine guns and a pound of Semtex plastic explosive can create the equivalent of a war zone in a given locality…..None of this is good, either, for a global economy constructed around long, hyper-complex, and fragile chains of obligation, the most critical being global finance and global energy lines. You think the Paris attacks were bad? Just wait until a few maniacs lob some explosives at the giant Ras Tanura oil refinery and shipping terminal on Saudi Arabia’s Persian Gulf coast. Imagine if that happens in the middle of winter, when Europe is freezing. Do you suppose the Big Brains in the Pentagon think about that? The West itself, including America, is a circus of soft targets. The softest ones are between our ears.

November 9, 2015. The Leviathan.

The economic picture manufactured by the national consensus trance has never been more out of touch with reality in my lifetime. And so the questions as to what anyone might do can hardly be addressed. How can I protect my savings? Who do I vote for? How do I think about where my country is going? Incoherence reigns…The Federal Reserve has morphed from being a faceless background institution of the most limited purpose to a claque of necromancers and astrologasters, led by one grand vizier, in full public view pretending to steer a gigantic economic vessel that has, in fact, lost its rudder and is drifting into a maelstrom.The Fed now finds itself in a trap of its own making. Having so interminably yapped about the interest rate hike, the central bank will have to put up or shut up in December… The truth is, this phony baloney economy can’t withstand even a measly quarter-point benchmark interest rate hike [which] would blow up the operating models of Fannie Mae and Freddie Mac, the buyers of home mortgages who are keeping the construction industry on life support, as well as the parallel rackets in securitized auto and student loans. Imagine all the derivatives bets that would go south. In reality, the Fed knows that it will have to shovel more ZIRP money into the debt-saturated maw of a dying financial leviathan… and the leviathan will be a little closer to heaving up dead on the beach.

October 12, 2015. Bang You’re Dead.

October 5, 2015. Syriasly.

Senior administration officials say the new offensive holds promise and may change the dynamics on the ground. — The New York Times

Whew…. That’s reassuring. Finally, a Middle East policy you can believe in….based on a joint Kurdish-Arab army that our side (the USA) is pretending to assemble around the ISIS stronghold of Raqqa. We’re informed also that American military officials have screened the leaders of the Arab groups to ensure that they meet standards set by Congress when it approved $500 million last year for the Defense Department to train and equip moderate Syrian rebels.  Is it safe to say that the table is now set for World War Three? King Salman of Saudi Arabia is itching to mix it up. Of course, the moment he sends official KSA ground troops in there, he will be eligible to have his oil terminal at Ras Tanura in the Persian Gulf blown up. Imagine what that would do to the S & P index. The Turks, too, are none too happy with their currency imploding and their economy falling apart, and perhaps view a widened war as politically refreshing. And let’s not forget Iran — having concluded the long, torturous negotiations to make America feel better about their nuke program, Iran is eager to put an end to this barbaric (Sunni-flavored) ISIS nonsense. Oh, did I leave out Israel. Probably a good idea since so many people just want to hate on it if the subject even comes up. But suffice it to say they are in the mix, too, with the ability to turn their adversaries into ashtrays, should it come to that.

As the old song goes: someone left the cake out in the rain.

You had to at least admire the forthrightness of Mr. Putin. His economy of motion is breathtaking. He goes to the UN and says: “The situation in Syria is intolerable and we’re going to do something about it,” and a few days later they did. Russia commenced bombing groups that the US had labeled “the moderate opposition” to Bashar al-Assad. The quandary for the US, of course, as Mr. Putin pointed out at the UN, is that we keep on arming and training “moderate oppositions” to this regime and that regime and abracadabra (to use an old Middle Eastern term-of-art) they break bad on us. They use the Humvee’s we give them to control the landscape and they blow stuff up with the ordnance we give them, and cut off the heads of Americans on video in the rudest and cruelest manner imaginable. So, might we ask ourselves: is there anything to the US’s complaint that Russia is not bombing the right ISIS?

September 28, 2015. Tick Tick Tick.

September 21, 2015. Fed Cred Dead.

The economy is a two-headed monster. One head is the trade in real goods and real services. The other head is the financialized traffic in swindles and frauds that surrounds banking…Most of the remaining on-the-ground economy consists of people merely driving their cars absurd distances, burning gasoline, between exquisitely-tuned giant warehouse store operations that were designed to destroy local Main Street trade — and accomplished that, by the way, to the applause of the local citizens whose towns were destroyed (“We want bargain shopping!”). Now, of course, even WalMart is looking over its shoulder at the collapse of the complex arrangements that allowed it to metastasize across North America like some cancerous fungus. Globalism is winding down as the gargantuan matrix of Ponzi schemes based on owed money dissolves debt by debt….A few decades ago, the suburban arrangement of daily life seemed like a good idea. You buy cheap land 27 miles outside what used to be a functioning (now obsolete) city. Build lots and lots of houses out of cheap, shitty materials such as strand-board and vinyl, pave a lot of new roads, line many of them with even shittier strip-mall buildings and Big Box “power centers,” and there you have a wonderful basis for an economy. That was more or less the Ronald Reagan Utopia. Now it’s all aging badly, fraying, too costly to fix and, increasingly, not worth scraping off the land and replacing with a new cheap, shitty building…The Federal Reserve itself is the victim du jour of its own grandiose fatuous fecklessness, in particular the idea that it could play a national economy like a three-button flugelhorn. What seemed like a good idea at the time when Alan Greenspan and then Ben Bernanke stepped into the pilot house now just looks like the fraud of frauds: enabling corporations to borrow ever more money from the future to pretend that their balance sheets are sound. That scam has nowhere left to go, except into the black hole that has been waiting for it.  Meanwhile, what remains on the other head of this two-headed economy besides driving to-and-from the Walmart? Pornography? The tattoo industry? Meth and narcotics? Prostitution? Professional sports on the flat screen? Kim and Kanye? Grand theft auto? Do you really think Donald Trump can fix this?

September 14, 2015. The Parties Crawl Off to Die.

I‘ve alluded to being a registered Democrat now and again, a disclosure that makes some readers go feral with wrath. For years I could only justify it as formal opposition to the cretinous brand of Republicanism that washed over the country like a septic wave with the reign of that sainted pompadour-in-search-of-a-brain, Ronald Reagan, whose “morning in America” bromide was among the biggest whoppers of my lifetime. With Reagan, we got the officially-sanctioned marriage of right wing politics and the most moronic strains of Southland evangelical religiosity. (Ronnie stated more than once his belief that Biblical “end times” were close at hand, which should have raised the question of his actual concern for the nation’s future — did he think it had one? — but nobody ever asked him about it.) George H. W. Bush expressed a similar view, perhaps merely pandering to the dolts of Dixie.  Who in his right mind could have subscribed to that load of bullshit? …More than once I’ve referred to the earlier period in US history, the 1850s, when the political compass points shook loose and parties died. The Whigs disappeared altogether (and fast!) and the Democrats became a rump party of southern slavers. Well, the two major parties of our time are now perfectly poised to enter the Temple Grandin cattle chute of death. But history doesn’t repeat, of course, it only rhymes, and this time there are no other political parties standing by to take their place, no credible institutions, certainly no one like Lincoln. There are only Bernie Sanders and the execrable Trump.
Sanders functions nicely as a foil to the flying reptile. But the self-labeled socialist has a big problem. The public may be simmering with grievance, but my guess is that they are not especially hot for more redistribution of the national wealth — that is, whatever little remains in the hands of a sore beset former middle class. The absence of any other reputible figure on the Democratic “bench” belies a party now more hollow than a supermarket Easter egg. What we see gathering is a political storm as perfect as the typhoon that has formed in banking. Surely the financial storm will strike first and it will leave the public stupefied with loss. I would not even bet against the possibility of the 2016 selection being canceled in some manner. Imagine, for instance, what the Pentagon brass thinks of Trump. And what they are planning for him. Just sayin’.

September 6, 2015. There Goes Europe.

The desperate wish in what is loosely called the West to at least appear morally correct is unfortunately over-matched by the desperation of people fleeing unstable, overpopulated places outside the West, and it is a fiasco beyond even the events of the moment. The refugee / immigrant crisis around the Mediterranean is a preview of a horror show to which there is no end in sight, and is certain to escalate. So anyone who indulges in fantasies about organizing an orderly, rational distribution of displaced persons for the current wave, is badly missing the point. Wave beyond wave awaits after the this one.  Yes, the tragic intrusions of the US military in Iraq, Libya, Somalia, Syria, and elsewhere have been reckless and stupid. But that is not the whole story. The desert nations of the Middle East and North Africa (MENA) have populations abnormally swollen by a century of oil-and-gas-based agriculture, really by the benefits of Modernity in general. Now that the oil age is chugging to an unruly crack-up, and Modernity with it, and the earth’s climate is doing wonky things, and the rich nations to the north have faked their finances to the point of bankruptcy, well, circumstances have changed.

In the years ahead, populations will be fleeing and shifting from many more unfavorable corners of the world. The pressures are mounting all over. Alas, the richer nations in which the fleeing poor aspire to gain a foothold, will also be contending with the disabling effects of a universal economic contraction — the winding down of the techno-industrial system and the global economy with it. That process has the potential to shatter political unions, overthrow established social orders, and provoke wars between the demoralized countries who still possess dangerous military hardware. At the least, it will produce economic conditions in Europe and North America probably worse than the Great Depression of the 1930s.

So, the idea that the nations currently bethinking themselves “rich” can take in, shelter, and employ the masses fleeing MENA (and elsewhere) is absurd. Somehow the people in charge, plus the intellectual classes who shape opinion and consensus, are going to have to arrive at some clear notion of limits and boundaries. It is actually happening in parts of Europe right now, extempore, where the immediate crisis is worst, for the moment in Italy, Greece, and Hungary — which first interned the refugees and then let them loose on the road to Vienna, probably only a way-station to Germany. Soon all nations across Europe will be agonizing, shucking, jiving, or improvising some sort of desperate response.

Among other confusions of policy and intention, the public “debate” so far does not make any distinction between true political refugees fleeing for their lives or economic migrants seeking to improve their prospects elsewhere. It is surely easy to empathize with both categories of persons, but that doesn’t mean you give up the control of your borders just to make yourself feel better. That is pretty much what has happened in the USA, where the Left, for political expediency, has deemed it indecent to call “illegal” immigrants what they are, and the Right has just been pusillanimous and hypocritical about it. H

Likewise, the rise of Marine LePen in France, Geert Wilders in Holland, and other parties seeking limits to immigration, perhaps even deportations. Personally, I reject the idea that it’s “racist” to want to preserve one’s national culture and character (especially in language), or to favor bona fide citizens for gainful employment. Europe has the additional obvious problem of an immigrant Islamic population overtly hostile to European culture and tradition. Why is it morally imperative for Europeans to countenance what amounts to low-grade warfare?

The situation that smoldered for decades is now exploding. Don’t expect to see any end to desperation and instability in MENA, but do expect new demographic crises out of other regions: Indonesia, Ukraine, Pakistan, West Africa, and Brazil, with its cratering economy. It’s not inconceivable that China might bust apart politically, with centrifugal consequences. The global economy is contracting. We have indeed attained the limits to growth. Cheap oil is bygone and the capital infrastructure we have won’t run on expensive oil — including the oil industry itself. New technology or further central bank legerdemain is not going to fix that. We’re in population overshoot and a scramble is underway to bail on the places that just can’t support the people who live there. National boundaries will be defended. Sentimentalists will have to step aside. History is not a bedtime story about bunnies and kittens.

August 31, 2015. Say Goodbye to Normal.

The tremors rattling markets are not exactly what they seem to be. A meme prevails that these movements represent a kind of financial peristalsis — regular wavelike workings of eternal progress toward an epic more of everything, especially profits! You can forget the supposedly “normal” cycles of the techno-industrial arrangement, which means, in particular, the business cycle of the standard economics textbooks. Those cycles are dying.

They’re dying because there really are Limits to Growth and we are now solidly in grips of those limits. Only we can’t recognize the way it is expressing itself, especially in political terms. What’s afoot is a not “recession” but a permanent contraction of what has been normal for a little over two hundred years. There is not going to be more of everything, especially profits, and the stock buyback orgy that has animated the corporate executive suites will be recognized shortly for what it is: an asset-stripping operation.

What’s happening now is a permanent contraction. Well, of course, nothing lasts forever, and the contraction is one phase of a greater transition. The cornucopians and techno-narcissists would like to think that we are transitioning into an even more lavish era of techno-wonderama — life in a padded recliner tapping on a tablet for everything! I don’t think so. Rather, we’re going medieval, and we’re doing it the hard way because there’s just not enough to go around and the swollen populations of the world are going to be fighting over what’s left.

Actually, we’ll be lucky if we can go medieval, because there’s no guarantee that the contraction has to stop there, especially if we behave really badly about it — and based on the way we’re acting now, it’s hard to be optimistic about our behavior improving. Going medieval would imply living within the solar energy income of the planet, and by that I don’t mean photo-voltaic panels, but rather what the planet might provide in the way of plant and animal “income” for a substantially smaller population of humans. That plus a long-term resource salvage operation.

All the grand movements of stock indexes and central banks are just a diverting sort of stagecraft within the larger pageant of this contraction. The governors of the Federal Reserve play the role of viziers in this comic melodrama. That is, they are exalted figures robed in magical Brooks Brothers summer poplin pretending to have supernatural power to control events. You can tell from their recent assembly out west — “A-holes at the J-hole” — that they are very much in doubt that their “powers” will continue to be taken seriously. This endless hand-wringing over a measly quarter-point interest rate hike is like some quarrel among alchemists as to whether a quarter-degree rise in temperature might render a lump of clay into a gold nugget.

What they do doesn’t matter anymore. What matters is that a great deal of the notional “wealth” they conjured up over the past decade or so is about to vanish —poof! Perhaps that will look like a black magic act. That wealth seemed so real! The bulging portfolios with their exquisite allocations! The clever options! The cunning shorts. Especially the canny bets in dark derivative pools! All up in a vapor. The sad truth being it was never there in the first place. It was just an hallucination induced by the manipulation of markets and the criminal misrepresentation of statistics, especially the employment numbers.

I have to say it again: prepare to get smaller and more local. Things on the grand level are not going to work out. Get your shit together locally, and do it in a place that has some prospect for keeping on: a small town somewhere food can be grown and especially places near the inland waterways where some kind of commercial exchange might continue in the absence of the trucking industry.

August 24, 2015. Worse Than Hitler.

Immigration is a practical problem, with visible effects on-the-ground, easy to understand. I’m enjoying the Trump-provoked debate mostly because it is a push back against the disgusting dishonesty of political correctness that has bogged down the educated classes in a swamp of sentimentality…But for me, everything else about Trump is frankly sickening, from his sneering manner of speech, to the worldview he reveals day by day, to the incoherence of his rhetoric, to the wolverine that lives on top of his head…Did any of you catch Trump’s performance last week at the so-called “town meeting” event in New Hampshire? Trump told the audience he was “very smart” 23 times… This is a man whose lifework has been putting up giant buildings that resemble bowling trophies, some of them in the service of one of the worst activities of our time, legalized gambling, which is based on the socially pernicious idea that it’s possible to get something for nothing…
Trump’s verbal incoherence is really something to behold. He’s incapable of expressing a complete thought without venturing down a dendritic maze of digressions, often leading to an assertion of how much he is loved…When he attacked Jeb’s statement that we have to show Iraqi leaders that “we have skin in the game,” Trump invoked the “wounded warriors,” saying “I love them. They’re everywhere. They love me.” In the immortal words of Tina Turner, “what’s love got to do with it?

Trump’s notion that he can push around world leaders such as Vladimir Putin by treating them as though they were president of the Cement Workers’ Union ought to give thoughtful people the vapors. It doesn’t seem to occur to Trump that other countries could easily get pugnacious towards us. He would have us in a world war before the inaugural parade was over.

The trouble is that it’s not inconceivable Trump could get elected. Farfetched, perhaps, but not out of the question. The USA is heading for a very rough patch of history… The country stands an excellent chance of waking up some morning soon to discover it is broke and broken. When that happens, all the anxiety and animus will be focused on looking for scapegoats, and they are likely to be the wrong ones. World leaders considered Hitler a clown in the early going, too, you know. But the Germans were wild about him. He pushed a lot of the right buttons under the circumstances. Trump is worse than Hitler. And the American people, alas, are now surely a worse lot of ignorant, raging, tattooed slobs than the German people were in 1933. Be very afraid.

August 17, 2005. True Believers.

July 27, 2015. Potemkin Party.

There is no Democratic Party anymore. There …is no will to oppose the lumbering parasitic corporatocracy that is doing little more than cluttering up this moment in history while it sucks the last dregs of value from our society. I say this as a lifelong registered Democrat but a completely disaffected one — who regards the Republican opposition as the mere errand boy of the above-named lumbering parasitic corporatocracy. Readers are surely chafing to insert that there is Bernie Sanders, disdaining Wall Street money, denouncing the current disposition of things with the old union hall surliness we’ve grown to know and love. I’m grateful that Bernie is in the race, I just don’t happen to think that Bernie gets what the country — indeed what all of techno-industrial society — is really up against, namely a long emergency of economic contraction and collapse.
These circumstances require a very different agenda than just an I Dreamed I Saw Joe Hill redistributionist scheme. Lively as Bernie is, I don’t think he offers much beyond that, as if cadging a little more tax money out of WalMart, General Mills, and Exxon-Mobil will fix what is ailing this sad-ass polity. The heart of the matter is that our way of life has shot its wad and now we have to live very differently. Almost nobody wants to even try to think about this.

The “to do” list for rearranging the basic systems of daily life in America is long and loaded with opportunity. Every system that is retooled contains jobs and social roles for people who have been shut out of the economy for two generations. If we do everything we can to promote smaller-scaled local farming, there will be plenty of work for lesser-skilled people to do and get paid for. Saying goodbye to the tyranny of Big Box commerce would open up vast vocational opportunities in reconstructed local and regional networks of commerce, especially for young people interested in running their own business. We need to prepare for localized clinic-style medicine…..

Oh, by the way, notice that the lead editorial in Monday’s New York Times is a plea for transgender bathrooms in schools. What could be more important?

July 20, 2015. Trump Hits a Bump.

Was it Donald Trump or the wolverine that lives on top of his head who made the dumb crack over the weekend about Senator John McCain not being a war hero? After all, that ambiguous patch of ginger-colored fur has taken on a life of its own. If I were Trump, I’d simply disown the remark and say that the hair-thing blurted it out, ventriloquist-style, because he (Donald) forgot to feed it that morning….It’s obvious that much of the developed world is now sore beset by past immigration policy choices and by the current inrush of desperate souls fleeing the evermore general breakdown of societies across the Middle East and North Africa (MENA). European pols are at least willing to have the debate, unappetizing as it might be. This dreaded political dance is now occurring against the background of a probable financial breakdown across Europe. When the utopian project of the European Union fails, as seems likely now due to the sovereign debt fiasco, I suspect that we will see a renewed effort to defend national cultures — French, German, and all the rest — in a manner that has a great potential for turning ugly. Financial failure means the death of the current banking system and the disappearance of massive notional wealth, and if that isn’t a recipe for extreme nationalism (plus xenophobia) than we are truly blind to the lessons of history…. Europe is in a whole heap of trouble in the event that the Euroland project falls on its face. This is perhaps beyond the question of merely preserving national identities. I think we will live to see an era of mass expulsions, fair or not.

Were I a pol, I would propose a “time-out” from immigration of all kinds. The USA did it before, in the 1920s, after a half-century of prodigious immigration when new states needed to be settled, and new industries needed to be manned, and new cities needed to be built. We are not in the same circumstances anymore. The empty places have been filled (and then some). The factories were banished to China and elsewhere. Some of America’s farming regions aren’t working out so well a hundred years later — Nebraska has been depopulating and God knows what the fate will be of California’s Central Valley as the epochal drought creeps forward.

Meanwhile, notice today’s headline from the fabled “newspaper of record” (The New York Times): Women Who Dye Their (Armpit) Hair

Yes, these are the mighty issues that concern us most.

July 6, 2015. Welcome to Blackswansville.

The Greeks may not recognize this, but they are in the vanguard of a movement that is wrenching the techno-industrial nations back to much older, more local, and simpler living arrangements. The Euro, by contrast, represents the trend that is over: centralization and bigness. The big questions are whether the latter still has enough mojo left to drag out the transition process, and for how long, and how painfully.

World affairs suffer from the disease of terminal excessive complexity. To make matters worse, much of the late-phase complexity operates in the service of accounting fraud of one kind or another. The world’s banking system is mired in the unreality of so many unmeetable obligations, cooked books, three-card-monte swap gimmicks, interest rate euchres, secret arbitrages, market manipulation monkeyshines, and countless other cons, swindles, and hornswoggles that all the auditors ever born could not produce a coherent record of what has been wreaked in the life of this universe (or several parallel universes). Remember Long Term Capital Management? That’s what the world has become.

What happens in the case of untenable complexity is that it tends to unravel fast and furiously. That’s exactly why avalanches and earthquakes happen all at once, not stretched out over a six week period. The global financial scene not so different. It’s just another matrix of linked mutually-supporting relationships that can implode if a few members weaken.

One question worth reflecting on is whether the implosion is actually well underway on-the-ground in real economies, with just the scrim of illusion to make the surface appear intact. That surely seems to be the case in the USA, where the so-called economy has already avalanched into a rubble heap of part-time scut jobs, defaulted college loans, underwater mortgages, and groaning pension funds — with an overlay of pointless and endless motoring.

Over in Euroland, the Greek “no” also implies that every other sovereign nation wallowing in deep financial shit will demand a haircut (and a disinfectant shower). Italy, Spain, Portugal, Ireland, and even France cannot possibly meet their debt obligations. Their citizens are being taunted with currency controls, too, and they have every bit as much potential to go ape-y as the Greeks. Notice you haven’t heard much from their leaders and financial ministers in recent weeks. They are all standing on the sidelines watching the Greeks go through the wringer — but you can be sure they are all making plans of their own.

The failure of the European experiment will be extremely demoralizing to the hopeful citizens of that continent, who emerged from the bloodbath of the early 20th century to become the world’s premier peaceful tourist theme park. I don’t know that they necessarily have to go back to fighting each other on battlefields with things that blow up and destroy human flesh, but they surely have to decentralize and re-fashion some kind of simpler, local way-of-life if they expect to remain civilized.

It’ll happen everywhere. The Japanese are next, of course, and they may be the most fortunate, since they retain more than a few shreds of memory for exactly that mode of life: the Tokugawa shogunate (the Edo period, 1600 – 1853), a manner of high pre-industrial economy and culture that might have persisted indefinitely had not Commodore Perry come knocking on their door.

Ukraine is about halfway back to being medieval with excellent potential to overshoot even that. The Euroland PIIG(F) nations don’t have the energy resources to extend Modernity, even if the banking system wasn’t terminally ill, and then on top of that they have the ethno-demographic quandary of creeping Muslimization — plus the additional flotillas of desperate boat people arriving daily.

America, count your blessings. Tattoos, obesity, drug use, and shiftlessness are all basically behavioral choices. You don’t need a finance minister or a central banker to overcome those problems.

June 29, 2015.  System Turmoil, Structural Reform.

All this trouble with money comes from one meta problem: aggregate industrial growth has ended. It has stopped more in some parts of the world than others, while in the USA it has actually been contracting. The cause is simple: the end of cheap energy, oil in particular.  The bottom line is that the world can no longer count on getting more stuff, except waste, garbage, political unrest, and the other various effects of entropy. From now on, there is only less of everything for a global population that has not stopped growing.

This dynamic was plain to see a decade ago, but the people who run finance and governments thought it would be a good idea to maintain the appearance of growth via the usufruct mechanisms of central banking: ZIRP, QE, market intervention, and universal accounting fraud. It’s not working so well. Debt was generated in place of the missing growth, and now there is too much of it that can’t be repaid on a coherent schedule. Many nations, parties, and entities are in trouble with debt and the prospective defaults are starting to pile up like SUVs on a fog-bound highway. Greece is just the first one fishtailing into a guard-rail.

The magic moment will come when it becomes obvious that these systemic quandaries have no solution. The system itself is programmed for implosion, in particular and most immediately the banking sector, where most of the untruth and illusion is lodged these days. As it stands exposed, the people are compelled to shake off their faith in what it represents: order, authority, trust. Institutions fail and each failure acts as a black hole, sucking air, light, and even time out of the system.

In the natural course of things, structural reform can occur, but that natural course entails some degree of disorder and loss. If Deutsche Bank or Goldman Sachs founders a lot of people will be living in their cars — a first stop perhaps to not living at all. Sooner or later, though, the survivors will all have to live differently. Structural reform means, for instance, that you can no longer count on getting food the way you were used to getting it. No more 3000-mile Caesar salads and take-out tubs of Kung Po Chicken. That will be very traumatic in the early going. Eventually in the places where it is possible to grow food on a smaller scale, it will be done.

Americans think that WalMart and its brethren are here to stay. They’re mistaken. Structural reform means reorganizing many layers of commerce around town centers — Main Streets — while the disintegrating strip malls await the salvage crews. Are we ready for that? Rebuilding local economies would put a lot of people back to work doing real things. All the blabber about “job creation” for the moment is only about increasing the share price of predatory corporations and the bonuses of their mendacious executives. Will the world miss them?

Do you fear the end of mass motoring and the suburban infrastructure that it operates in? Maybe your children and their children will be happier in walkable neighborhoods — outlandish as that sounds. There is a hell of lot of rebuilding to do. It may not involve materials like strand-board and vinyl siding, but the newer and smaller buildings will probably last a whole lot longer and look better. And a lot of hands will be needed to do the work.

June 1, 2015. Twenty-Three Geniuses.

June 18, 2007.  Both Ways.

It seems to me you can call the situation in Iraq a lot of things, but it’s not a war. Not at this point, anyway. Call it an unsuccessful nation-building project, a failed occupation, a botched policing job, a monkey-in-the-middle clusterfuck. All the US political factions, from left to right, do the public a disservice by calling it a war, because it misrepresents what we’re doing there.

We’re involved in Iraq because we don’t want to begin thinking about modifying our behavior at home. We are desperate to preserve our access to Middle East oil because that is the only way we can keep running our society the way we’re used to running it.

Mostly, we don’t want to face the tragic misinvestments we’ve made in the infrastructure of happy motoring, and we don’t want to face the inconvenient truth that there really isn’t any combination of alternative fuels that will permit us to keep running all the cars the way we like to run them. Either we keep getting the oil or say goodbye to the American Dream Version 2.K.

The public has now decided that this nation’s primary mission is to find some magic way to keep the cars running on a fuel other than gasoline. Everyone from the greenest greenies to the most medieval-minded Kansas Republican senator has joined in this collective wish. They are certain to be disappointed. All the Priuses in the world will not avail to save the Drive-In Utopia. The public will learn painfully what Iraq is all about.

Every time somebody blames the politicians for this predicament, I’m reminded that the politicians are actually doing a fine job of representing what their constituents want. What they want is to not change their behavior. Not even the science and technology folks want to think about changing our behavior. They just want to find new ways to continue the old behavior. They’re invested in the triumphal effort to come up with a happy motoring rescue remedy. Their techno-cred is on the line. They all want to be the first kid in their housing subdivision to run a car on dark matter.

So, we’ve gone to Iraq on the quixotic mission to stabilize-and-pacify this key territory in the greater region of the Middle East, so we can keep getting oil imports out of there in a reliable and orderly way, so we can keep on driving all our cars. And the whole thing has turned out rather badly.

Now there is another consensus forming. Across the political spectrum, from the far left to the far right, elected officials are now clamoring to “stop the war in Iraq.” By this they mean get US troops out. What cracks me up is their juvenile belief that being there is somehow optional for us, that we can keep on running WalMart and Walt Disney World without paying any price for it in the costs of policing the Middle East.

If we don’t maintain a military presence in Iraq, it is perfectly plain what will happen: Iran will instantly gain control of the southern Iraq oil fields. Iraq doesn’t have an army anymore. It is incapable of preventing Iran from acquiring control of its territory. From that vantage, Iran would also effectively threaten the sovereign existence of Kuwait. Then there is the question of how much instability Iran could generate next door in the Shia-dominated Persian Gulf shoreline region of Saudi Arabia, where most of that nation’s oil lies. (Meanwhile, there will be plenty more Iran-inspired mayhem in Lebanon and the Palestinian territories.)

It seems to me the answer to all this is clear: the first thing the US has to do is reach a different consensus about our behavior here at home, starting with the proposition that the happy motoring era must end. If we’re not willing to do that, we’re eventually going to lose both at home and in our struggles abroad. You can be sure that coming disturbances in the oil markets will make suburban life untenable while exhaustion and bankruptcy breaks our military.

The air waves and internet sites are full of blather now about ending the “war” and bringing the troops home. The presidential candidates are agonizing over their various positions on the Iraq adventure. I’d like to hear one of them tell me how Atlanta is going to function without Middle Eastern oil, or how WalMart will move its merchandise from San Pedro to Lansing without a “warehouse on wheels,” or how the thousands of yellow school bus fleets will carry on next September.

Actually, instead, I’d like to hear talk about drastically reforming our zoning laws to discourage any more suburban development or a pitch to allow some of our tax money to fund a US passenger rail revival. I’d like to see a candidate refuse to attend a Nascar race on the grounds that it’s an unconscionably stupid @#%$ waste of energy resources.

I’m waiting for one of these birds to tell the American people the truth: you can’t have it both ways. you can’t get our military out of the Middle East without changing the way we live.

Posted in Crash Coming Soon, Debt, Derivatives, Energy Markets, Foreclosures, Interest Rates, James Howard Kunstler | Tagged , , , , | Leave a comment

House of Representatives Roscoe Bartlett 2005

[ Former Congressman Roscoe Bartlett has discussed peak oil many times in the congressional record. Here are some of his earliest remarks for those of you interested in peak oil history.  He educated the other house members and formed a peak oil caucus consisting of the following House representatives: Mr. Udall of New Mexico, Mr. Goode, Mr. Grijalva, Mr. Jones of North Carolina, Mr. Tancredo, Mr. Gingrey, Mr. Kuhl of New York, Mr. Israel, Mr. Butterfield, Mr. UDALL of Colorado, Mr. Van Hollen, Mr. Gilchrest, and Mr. Wynn). Peak oil activists have and are doing everything they can to alert leaders of the coming crisis so that proper preparations are made, but for reasons listed in “Why do political, economic, and scientific leaders deny Peak Oil and Climate Change?” it is unlikely that government will do anything about energy descent (except perhaps at local levels) Alice Friedemann,]

March 14, 2005    US Congressional Record [H1409]

Peak Oil Presentation in the US Congress By Roscoe Bartlett

OIL DEMANDS —  House of Representatives

The SPEAKER pro tempore (Mr. Daniel E. Lungren of California). Under the Speaker’s announced policy of January 4, 2005, the gentleman from Maryland (Mr. Bartlett) is recognized for 60 minutes as  the designee of the majority leader.

Mr. BARTLETT of Maryland. Mr. Speaker, in this first chart we have some headlines from The Washington Post just a month or so ago. These are headlines from just one day in The Washington Post. The Dow drops 174 points driven, the article says, by economic damage from rising oil prices, the plunging dollar, and growing worries about consumer spending. It goes on to say that a recent oil price rise of 20 percent is continuing to crunch the profits of struggling airlines and is believed to be a factor in disappointing retail sales. Another headline: “Dollar Slides Against the Euro and the Yen.” And another headline: “Consumer Confidence Slips in February.”

Now, should we have had any indication that these were going to be the kinds of headlines that we have been reading in our paper recently? We need to go back a few years, as indicated on this next chart. Let us go back to the 1940s and the 1950s when a scientist by the name of M. King Hubbert, a geologist, was working for the Shell Oil Company. He was watching the discovery and the exploitation and final exhaustion of individual oil fields. He noticed that every oil field followed a very typical pattern. It was a little slow getting the oil out at first, and then it came very quickly and reached a maximum, and then it tailed off as it became more difficult to get the oil out of the ground.

This followed a bell curve. Here is one of those bell curves. Now, bell curves are very familiar in science, and in life, for that matter. If we look at people and how tall they are, we will have a few people down around 4 1/2 or 5 feet and some up to 7 1/2 feet; but the big mass fall in the middle, clustered around 5 1/2 to 6 feet.

Looking at a yield of corn, a few farmers may get 50 bushels per acre, some may get 300, but the big mass today it is somewhere around 200 bushels per acre for corn.

Hubbert noticed when the bell curve reached its peak, about half of the oil had been exhausted from the field. Being a scientist, he theorized if you added up a lot of little bell curves, you would get one big bell curve, and if he could know the amount of reserves of oil in the United States, and he was doing this in the 1940s and early 1950s, and could project how much more might be found, he could then predict when the United States would peak in its oil production.

Doing this analysis, he concluded that we would peak in our oil production in 1970. This curve is what is known as Hubbert’s Curve. The peak of the curve is what is known as Hubbert’s Peak. Sometimes this is called the “great rollover” because when you get to the top, you roll over and start down the other side. It is frequently called “peak oil.” So peak oil for the United States occurred in 1970, and it is true that every year since then we have pumped less oil and found less oil. The big blue squares here are the actual and Members see they deviated a little from the theoretical as M. King Hubbert predicted, but not all that much.

At the bottom, see the difference the big field in Alaska made, and see what that made in the down slope, that never increased production in our country. It just meant that we were not going down quite as fast. You can see that here on the curve. Notice that the Alaska oil production was not the typical bell curve. It should have been, but a couple of things meant it could not be. One was it could not flow at all until we had a 4-foot pipeline. So the fields were developed and they were waiting; then we got the pipeline on board, and it was filled with oil and oil started to flow, and Members see the rapid increase here. It could not flow any faster than through that 4-foot pipe, and so it levels off at the top. We have pumped probably three-fourths of the oil in Prudhoe Bay.

Many people would like to open up ANWR. ANWR has considerably less oil than Prudhoe Bay, so the contribution will be significantly less. I want to note on this chart we also have the red curve, which is the theoretical curve for the former Soviet Union. It is a nice bell curve, peaking a little higher, they have more reserves than we do, and later because we entered the industrial age with vigor before the Soviet Union was quite there. Notice what happened when they came apart; notice how precipitously it fell here. After they got things organized, the fall stopped and now they are producing more oil. As a matter of fact, we might see a little upsurge in this; but the general trend is still going to be down.

On the next chart, and we have here the same Hubbert Curve, but the abscissa is a little too long and the ordinate a little too compressed, so it is not the sharp peak that we saw before. That is the curve we saw before. It shows the Texas component, and it shows the rest of the United States; and it also shows some natural gas liquids. We learned how to extract those a little later. So if you were plotting that as a bell curve, it would peak about here. It is little and then it is much, and then it tails off.

This is the contribution of Alaska, and you can see this not going to be our salvation to pump ANWR because ANWR contains probably not even half as much as Prudhoe Bay. And notice the small contribution that Alaska made. And that is not a bell curve for the reason I mentioned before because we had to develop the fields and they waited for the pipeline, and then it would surge through the pipeline when it was developed. So you do not see the tail getting greater and tailing off.

This is gulf oil. Remember the hullabaloo about the big finds of gulf oil that were going to solve our problem? That is what it did. There never was a moment in time between the big Alaska oil find and all of the pumping discovery and pumping in the gulf, there never was a moment in time when it decreased the fall in our country. The peak occurred, as you see here, about 1970.

Now, the next chart shows what is happening worldwide.

The red curve here shows the actual discovery of oil. Notice that that peaked. There was a big find here that distorted the curve a little but if you rounded that off, you would have the typical bell curve. It started somewhere back here off the chart, then it peaks, and then it is downhill and it tails off. These are the discoveries. The last find there is simply an extrapolation. We have no idea where it is going. We are, by the way, very good at finding oil now. We use 3D seismic detection techniques. The world has drilled, I think, about 5 million oil wells and I think we have drilled about 3 million of them in this country, so we have a pretty good idea of where oil is.

A couple of Congresses ago, I was privileged to chair the Energy Subcommittee on Science. One of the first things I wanted to do was to determine the dimensions of the problem. We held a couple of hearings and had the world experts in. Surprisingly from the most pessimistic to the most optimistic, there was not much deviation in what the estimate is as to what the known reserves are out there. It is about 1,000 gigabarrels. That sounds like an awful lot of oil. But when you divide into that the amount of oil which we use, about 20 million barrels a day, and the amount of oil the rest of the world uses, about 60 million barrels a day, as a matter of fact, the total now is a bit over the 80 million that those two add up to. About 83 1/2 , I think. If you divide that into the 1,000 gigabarrels, you come out at about 40 years of oil remaining in the world. That is pretty good. Because up until the Carter years, during the Carter years, in every decade we used as much oil as had been used in all of previous history. Let me repeat that, because that is startling. In every decade, we used as much oil as had been used in all of previous history. The reason for that, of course, was that we were on the upward side of this bell curve. The bell curve for usage, only part of it is shown on this chart. That is the green one down here, the bell curve for usage. Notice that we are out here now about 2005. Where is it going? The Energy Information Agency says that we are going to keep on using more oil. This green line just going up and up and up is a projection of the Energy Information Agency. But that cannot be true. That cannot be true for a couple of reasons. We peaked in our discovery of oil way back here in the late sixties, about 1970. In our country it peaked much earlier than that, by the way. But the world is following several years behind us. And the area under this red curve must be the same as the area under the green curve. You cannot pump any more oil than you have found, quite obviously. If you have not found it, you cannot pump it. If you were to extend this on out where they have extended their green line, even if it turned down right there at the end of that green line, the area under the green curve is going to be very much larger than the area under the red curve. That just cannot be. We will see in some subsequent charts that we probably have reached peak oil.

Let me mention that M. King Hubbert looked at the world situation. He was joined by another scientist, Colin Campbell, who is still alive, an American citizen who lives in Scotland. Using M. King Hubbert’s predictive techniques, oil was predicted to reach a maximum in about 1995, without perturbations. But there were some perturbations. One of the perturbations was 1973, the Arab oil embargo. Other perturbations were the oil price shocks and a worldwide recession that reduced the demand for oil. And so the peak that might have occurred in 1995 will occur later. How much later? That is what we are looking at this evening. There is a lot of evidence that suggests that if not now, then very quickly we should see world production of oil peak.

What are the consequences? What are the consequences of this depletion? The remaining oil is harder to get. It requires greater energy investment, resulting in a lower return on energy invested. That is the energy- profit ratio, which is decreasing. When we started out, you put in one unit of energy and you could get 30 out. Then that fell off, and then we found a few more fields and we got really good at extracting oil with better techniques. It looked for a little while like it was going up, but look what happened. It falls off to where it would have come anyhow if this curve had simply gone down. This is an inevitable consequence of pumping a field.

Lower profits are not the only concern. When more energy is required to extract it than is contained in the recovered oil, that is, when this ratio is less than 1, notice, we are over there at about 1984, we have got to get now another 20 years, I am not quite sure where we are now when you plot that day. We are getting very close to the unit it takes as much energy to get the oil out as you get out of the oil. It may still seem profitable from a monetary perspective, but when you are using more energy to get oil out of the ground than you are getting out of the oil, then clearly you need to leave it there when we reach that point. I mentioned the bump there was caused by a few more discoveries and particularly by increased efficiency in pumping the oil.

What is the current U.S. status? We have only 2 percent, between 2 and 3 percent, not really known for certain, but approximately 2 percent of the known reserves of oil. We use 25 percent of the world’s oil. By the way, we have about 8 percent of the world production. What that means is if we have only 2 percent of the reserves and 8 percent of the production, that means we are real good at pumping oil, does it not? That means we are pumping our reserves at roughly four times faster than the rest of the world. That means that this 2 percent will not stay 2 percent by and by because we are so good at pumping oil, we are going to be down to 1 percent of the known reserves in the world and we will still be using about 25 percent of the world’s oil. We are now importing about two-thirds of that. At the Arab oil embargo we imported about one-third of that. So we are now importing, relatively, two times more oil, actual quantity much more than that, but relatively about two times more oil.

Chart 6 shows us that more drilling just will not solve the problem. This is a very interesting chart. This shows the difference between the amount of oil that you are finding and the amount of oil that you are pumping. Notice from 1960 on until about 1980, declining for sure, but every year except for one we found more oil than we pumped. The yellow line up here is drilling. You remember the Reagan administration and all the emphasis on drilling because we knew that we were approaching this flipover point where we were going to be pumping more oil than we found and so there was a rationale that if you just give them a profit motive and you have the right incentives, tax and regulatory incentives and so forth, they will go out and they will dig more wells and they will find more oil. Sure as heck they went out and dug more wells. But did they find any more oil? As a matter of fact, in 1982, more oil was used in looking for oil than the oil they found in 1982. Pretty consistently for every year after 1982, we have used more oil than we found.

Today worldwide we are pumping at least six barrels of oil for every barrel that we find.

Chart 7 shows that worldwide discoveries are repeating the U.S. pattern. This is a rough bell curve. You find a big find of oil and it is going to make a spike. This is average for 5 years. If you look at it on a year for year, it is really up and down as you find big reservoirs of oil. But generally it starts low and it goes up and it comes down. It follows roughly a bell curve. I would not pay too much attention to the figures on the ordinate here, because the area under this curve must equal just a little bit over 2,000 gigabarrels of oil. If I visually sum the area under this curve, it is going to equal something more, not frightfully more but something more than 2,000 gigabarrels of oil which from other sources we know ought to be the total amount of oil under the sun. Notice that we are tailing off to something very low. It is unlikely that we are going to find big additional finds in the future. Again, we are very good at that. We have dug about 5 million wells worldwide. We have done a whole lot more than that explorations with detonations and seismic and 3D and computers and we are very good at looking at the kind of geology where you might find oil. There is just no real expectation that there are going to be big additional fields of oil found out there. This dropoff in discovery is really in spite of very improved technology for finding oil.

Chart 8. This is a very interesting chart. It has nothing to do with time, because on the abscissa here, we have the number of wells that are drilled, the cumulative oil caps, and on the ordinate, we have the amount of oil that was found. For any relatively big field, here we are talking about 50 gigabarrels. Remember, there are about 2,000 gigabarrels worldwide, so this is a meaningful part of the world reserves of oil. We see that that goes up and up and then it tails off. You cannot find what is not there. No matter how many more wells you drill, you are not going to find oil that is not there. The same pattern should be apparent on a world scale. Chart 9. This is a very interesting chart. It is a little too busy, but let me try to explain what is there. The oil companies for reasons of pricing and regulations and so forth have had the habit through the years of underreporting initially how much oil they found. Then later when it was appropriate to their license to produce more oil, they would report additional oil. They never found any additional oil, they simply reported oil they had found previously. By the way, you may have noted that three times in the last roughly 3 weeks, oil companies have admitted that their estimates of the reserves were exaggerated and have downscaled the reserves that they said were there. If you took the original reporting of the reserves, you might be able to construct a curve, a straight line curve which said we are just getting more and more. But if you backdated that to the actual discoveries, then you get this curve. This curve is asymtoting at a bit over 2,000 gigabarrels, which is about what the world’s experts say had been there. We have now pumped about half of that. We have about 1,000 gigabarrels remaining.

What now? Where do we go now? One observer, Matt Savinar, who has thoroughly researched the options, and this is not the most optimistic assessment, by the way, but may be somewhat realistic, he starts out by saying, Dear Readers, civilization as we know it is coming to an end soon. I hope not. This is not the wacky poclamation of a doomsday cult, apocalypse Bible sect or conspiracy theory society. Rather, it is a scientific conclusion of the best-paid, most widely respected geologists, physicists and investment bankers in the world.

These are rational, professional, conservative individuals who are absolutely terrified by the phenomenon known as global peak oil.

Why should they be terrified? Why should they be terrified just because we have reached the peak of oil production? Last year, China used about 30 percent more oil. India now is demanding more oil. As a matter of fact, China now is the second largest importer of oil in the world. They have passed Japan. When you look at how important oil is to our economy, you can understand the big concern if, in fact, we cannot produce oil any faster than we are producing it now and there are increasing demands, as there will be, for oil. In our country, for instance, we have a debt that we must service. It will be essentially impossible to service that debt if our economy does not continue to grow. So there are enormous potential consequences, which is why he says that these people are absolutely terrified by the phenomenon known as peak oil.

What can we do to avert the kind of a catastrophe that he hints at with those words? We must not squander an opportunity. One is always reminded of Malthus. I am sure you have heard of him. He was looking at the increase in world population and he looked at our ability to produce food and he says, gosh, those two curves are going to cross because the world population was increasing faster than our ability to produce food and we are going to have mass starvation. That did not happen. The reason that did not happen was because Malthus could not have anticipated the green revolution, which, by the way, was made possible almost entirely, well, the plant science had a lot to do with it but better plants and better genes without the fertilizer to make them grow is not going to do you much good, so the green revolution was very largely the result of our intensive use of oil. Most people do not know it, but all of our nitrogen fertilizer is made from natural gas. You may have observed that when you have a thunderstorm in the summertime, your lawn is greener than when you have watered it.

That is because of what is known as poor man’s fertilizer. The lightning combines some of the nitrogen so they can be carried down by the water and one’s lawn is, in fact, greener after a thunderstorm than it is when they water it. We have kind of learned how to mimic lightning, and we now know how to make nitrogen fertilizer from gas. By the way, before we knew how to do that, the only sources of nitrogen fertilizer were barnyard manurers. If one is on the Eastern Shore with a lot of chickens, one could go a long way with that now in agriculture, could one not? But barnyard manurers would fertilize only a tiny percentage of the nitrogen needs of our plants.

And other than that it was guano. My colleagues know what guano is. Guano is the droppings of bats or of birds on a tropical island, their droppings accumulating for thousands of years, and there was a major industry insending ships around the world to tropical islands and getting the guano.

We must not squander the opportunity that we have. Jevons Paradox becomes applicable here. Just a word about what Jevons Paradox is because I am going to mention it a time or two again. But Jevons Paradox says that frequently when one works to solve a problem, they really make the situation worse.

Let me give one little example. Suppose there is a small businessman who owns a store. He is really concerned about peak oil, and he is concerned about energy, and he wants to do something. His little store is using $1,000 worth of electricity a month, and he decides that he can really cut that use. So he does several things. He gets a storm door. He puts on storm windows. He insulates more. He turns down the thermostat, and he asks his workers to wear sweaters. And he is successful because he reduces his electric bill from $1,000 to $500. Almost no matter what he does with that $500, he has just made the situation worse by doing that.

Let me explain. One of the things that he may do, and it is a natural thing for a small businessperson to do, he may decide, I could hire more people and have a bigger business if I expanded. And so now he will expand, and he will still be using as much energy. Or if he decides to invest his money, if he invests his money in the bank, the bank will lend his money out five or six times, and at least some of those loans will be to small business people. And what the small business people will do is to create jobs and use energy. So the store owner is concerned about energy and the environment and being a responsible citizen, cutting his use of electricity, because everybody did not do it, because only he did it and nobody took advantage of the opportunity that was presented because he used less energy, he really contributed to the problem.

Because after he expanded his business, he would be using still more energy. Or if the money was lent out by the bank and small businesses created more jobs and they used more energy, the situation would have just gotten worse.

All that the “green revolution” did was temporarily extend the carryng capacity of the world. If we think about that, ultimately if we cannot do something about it to stabilize it, the green revolution just made matters worse. In the meantime we have all eaten very well in spite of the fact that about a fifth of the world will go to bed hungry tonight; but on the average, we are eating very well, and because of the average American, we are eating maybe too well.

But what we have done with the green revolution is to permit the population of the world to double and double again. So if we cannot now make sure that we stabilize population and bring it to the point where it can be supported by a technology where there is not what was ordinarily perceived as an inexhaustible supply of oil, there will simply be more people out there to be hungry and starved if we cannot meet their needs. So we have got to make sure that whatever we do to solve this problem that Jevons Paradox does not contribute.

Chart 10, this shows that this growth cannot be sustained forever. The greatest power in the universe, Albert Einstein was asked this question: Dr. Einstein, you have now discovered the ability to release energy from the atom. We get just incredible amounts of energy from the atom. A relatively small amount of fuel in one of our big submarines will fuel it for 33 years now. Enormous energy density. And they asked him, Dr. Einstein, wat is the most energy-intensive thing in the world? He said, “It is compound interest.”

That is what we have here in this exponential curve. And by the way, we, and when I say “we,” I mean the world, have been using oil as if our economy could just continue to grow on this unlimited exponential curve.

Whether it is 2 percent a year or 5 percent a year or near 10 percent, which is what China has been growing in the last few years, we are still on an exponential curve.

Not quite so steep if we are on a lower growth rate. It goes up and up forever and ever.

Obviously, there is not an inexhaustible amount of oil in the world; so we have the exhaustible resource, which is this lower curve. It reaches a peak,which, if not now, shortly. Oil, as the Members may have noticed, is $54 or $55 a barrel. I saw the other day one future had sold for $100 a barrel, and the experts are saying we are probably going to see $60 before we see $50. We will wait and see.

The third curve here is the renewable resource curve. Do not be confused by the size of these curves. They are simply placed here so that lines would not cross other lines. But in actual practice, the renewable resource curve is likely to be nowhere near the peak of the exhaustible resource curve, energy.

Let me give a little example of what the problem is and why this is almost certainly true. One barrel of oil, 42 gallons of oil, equals the productivity of 25,000 manhours. That is the equivalent of having 60 dedicated servants that do nothing but work for someone. We can get a little better real-life example of this. A gallon of gas will drive a 3-ton SUV, and some of those are better than others, and let us say it takes it 20 minutes, which some will but most will not. Most are around 10. But let us say one gallon of gas will take a 3 -ton SUV 20 miles at 60 miles an hour down the road. That is just one little gallon of gas, which, by the way, is still cheaper than water. We pay more for water in the grocery store than we pay for gas at $2 a gallon at the pump, added up.

How long would it take one to push their 3-ton SUV the equivalent of 60 miles an hour, 20 miles down the road? To get some idea of the energy density in these fossil fuels, there is just nothing out there in the alternatives that have anything like this energy density. There are some potentials, nuclear, and we will talk about those in a little bit. But of the general renewables, there is nothing out there with that kind of density. So this curve is likely to be much lower than this curve; and notice that if it is, in fact, going to be renewable, it cannot go to an unrealistic height. There is only so much wood to cut. Easter Island had that experience. When they cut the last tree, they totally changed the ecology.

The Bible talks about the large clusters of grapes and the honey and so forth that they found when the spies went out. That now is a desert. The Cedars of Lebanon, the grand Cedars of Lebanon that built the temple, that is now largely a desert. Why is it a desert? Because they cut the trees, they changed the environment, they changed the climate. So obviously this line has to be a reasonable sustainable level. It just cannot go on forever.

The challenge, then, is to reduce consumption ultimately to a level that cannot be sustained indefinitely without succumbing to Jevons Paradox.

How do we buy time, the time that we will need to make the transition to sustainability? Obviously, there are only two things that we can do to buy time. One is to conserve, and the other is to be more efficient. And the gentleman from Maryland (Mr. Gilchrest) mentioned our increasing efficiency. We have done a great job. Our refrigerators today are probably twice as efficient as they were 20 or 30 years ago. But instead of a little refrigerator, we have a big one. Instead of one, we may have two. So I will bet we are using as much electricity in our refrigeration as we ever used.

Conservation, we can do that. Remember several years ago when there were brownouts, blackouts in California and we were predicting, boy, the next year is really going to be rough? Do the Members know why it was not and we did not see any headlines about blackouts in California? Because knowing that there was a problem, the Californians, without anybody telling them they had to, voluntarily reduced their electricity consumption by 11 percent. That is pretty significant. And that avoided the rolling blackouts or brownouts.

And, finally, we must commit to major investments in alternatives, especially as efficiencies improve. This must ultimately lead to the ability to do everything within the capability of renewable resources. If we have got a solar breeder, and this shows a picture of a solar breeder. That, by the way, is about 5 miles from my home. It was built by Solarex, and it is a sign of the times. Mr. Speaker, this is now owned by BP. They know that oil is not forever. They are now the world’s second largest producer of solar panels.

A few years ago, the largest buyer of solar panels in the world, and I do not know if that is true today, but a few years ago it was Saudi Arabia. Why would Saudi Arabia, with the most oil in the world, be the biggest purchaser of solar panels in the world? The reasons are very simple. These are not dumb people, and they figured out that solar panels were better for them in producing electricity than oil because they had widely distributed communities that were very small. Electrons in a wire are very different than oil in a pipeline.

Put a gallon of oil in a pipeline up at Prudhoe Bay, and a gallon will come out where it goes on the ship. If we put electrons in a line which is long enough, nothing will come out in the other end. It is called line loss.

And they knew that in their small communities, widely distributed, with the enormous line losses they had from big plants, that they would be better off with distributed production.

By the way, just a hint to our people who are concerned with homeland security, the more distributed production we have, the less vulnerable we are going to be to terrorist attacks on our power infrastructure.

Transition to sustainability will not happen if left applying market forces alone. Everyone must be part of the effort or Jevons Paradox will prevail. If only our country tries to do it and nobody else helps, we will just put off the day when we must make the transition, and it will be even more difficult. The market will, indeed, signal the arrival of peak oil. To wait until it does, however, is like waiting until we see a tsunami:
by then it may be too late to do anything.

We now are doing a lot of talking here in the Congress and fortunately across the country about Social Security, and it is a big problem. But I tell the Members if the problem of Social Security is equivalent to the tidal wave produced by the hurricane, then this peak oil problem is equivalent to the tsunami. The impact and the consequences are going to be enormously greater than the impact and the consequences of Social Security or Medicare or those two put together.

It will take a sustained, conscious, coordinated national and even international, effort. If everybody is not working together and buying time by conserving and being efficient and using wisely that time we bought, then all we do is put off the inevitable.

The hydroelectric and nuclear power industries did not arise spontaneously from market forces alone. They were the product of a purposeful partnership of public and private entities focused on the public good. This is what we have to do relative to alternatives.

As I mentioned, California solved their energy crisis by voluntarily reducing their demand for electricity. Time, capital and energy resources are all finite. We have only so much time until it would be too late to avoid a real problem. Capital is limited and energy resources are certainly limited.

This time it will not be like the seventies. The big difference between now and the seventies is that in the seventies, we were just going up this curve, we were nowhere near the top of the curve, so there was always the ability to expand, to surge. If, in fact, we are now at peak oil, there is no such ability remaining.

Is there any reason to remain optimistic or hopeful? Let me go back to Matt Savinar, that not-too-optimistic journalist. “If what you mean is there any way technology or the market or brilliant scientists or comprehensive government programs are going to hold things together or solve this for me or allow for business to continue as usual, the answer is no. On the other hand, if what you really mean is is there any way that I still can have a happy, fulfilling life, in spite of some clearly grim facts, the answer is yes. But it is going to require a lot of work, a lot of adjustments, and probably a bit of good fortune on your part.”

What now? Well, what we need to do now clearly is to buy time, and we buy that, as I mentioned, with efficiency and conservation. This will keep energy prices affordable. If demand continues to increase and output cannot increase, energy prices are going through the ceiling.

So we have got to reduce demand so that prices do not get so high that it is impossible to invest the capital necessary to develop the alternatives, using existing conventional technologies to make the transition as new technologies are developed.

We must use it wisely. If we do not use it wisely, and I have talked about Jevons Paradox several times, we have got to make investments in efficient, sustainable technologies, further reduce requirements for energy in any form, making smaller systems feasible which reduce both initial and operating costs.

The benefits are enormous. Additional benefits include business opportunities, lots of business opportunities we do not even dream of. Look at the business opportunities created by putting a man on the moon.

I have 200-some companies in Maryland alone which are there only because of technology breakthroughs in putting aman on the moon.

That same thing could happen if we had a Manhattan type project focusing on renewables, potential worldwide markets, if we are the leader, and we have every reason to be the leader because we have the biggest problem.

We can develop worldwide markets, domestic job creation and environmentally benign technologies with potential to reduce and or eliminate pollution. We could be a real role model.

We are, as I mentioned, less than 5 percent of the world’s population, and we use 25 percent of the world’s energy. I was in Europe a month or so ago, and their comment was somewhere between anger and disdain. “You are still only paying $2 a gallon for gasoline in your country.” It is $5.50 or $6.00 a gallon there. And they are not unmindful that this one person in 22 in the world is using 25 percent of the world’s energy. We have a real opportunity to be a role model.

Let me put up the last chart. This is potential alternative solutions. For what time we have remaining, let me ask my colleague, the gentleman from Maryland (Mr. Gilchrest) to join us as we talk about this.

I have only have some of the potential solutions here. I just want to go down this list and look at these. There may be some others. The gentleman mentioned hydrogen from the ocean. That is certainly one.

There are some finite resources here, ones we have not maximally exploited here, and some renewable resources here, and we want to spend another whole hour talking about this, because there are a lot of things to talk about in these resources. But almost none of these have the density of energy that we find in fossil fuels.

There are tar sands in Canada, there is oil shale in this country, but it takes an awful lot of energy to get energy out of those. You may not have much more than a one-and-a-half to one. I have heard it takes six barrels of oil to get one net barrel of oil out of these tar sands and oil shale. There is an awful lot there, but there are considerable environmental costs and enormous economic costs to develop it.

Mr. GILCHREST. If the gentleman will yield, another analogy I heard recently about the efforts to bring out ever-increasing and diminishing oil reserves and how that simply is not going to work for sustaining our energy needs, this particular physicist gave an analogy that compared the oil to a lion in Africa taking the energy of catching two gazelles to catch one gazelle. How long would that lion last? It takes the energy of catching two gazelles to only catch one, but he needs it to sustain himself, and that simply is not going to work.

I want to compliment the gentleman from Maryland, and I would like to be a part of the extra hour that we will do maybe this week to show what the alternatives are, simply because our energy requirements are increasing, they are not decreasing, and they will continue to increase.

Political parties are not going to let the grid go cold, but what do we do when we rely on oil and natural gas as the predominant energy source for this country? We have to simply find alternatives.

If I could just say briefly, there are two problems with our dependence on oil, and the gentleman has laid those out exceptionally well tonight. Part of the first problem is trade deficits and national security because of our oil dependence. When the price goes up, because we do not have most of the reserves, when oil peaks, we have no control over that. There will never be a decrease in demand. There will always be an increase in demand, no matter what happens, and our energy hunger is gargantuan.

The other problem with our oil dependence is that we are burning fossil fuel. We are returning to the atmosphere carbon that has not been there in this amount for millions of years, and what we are burning in decades it took the natural processes millions of years to lock away.

One other comment about letting the market forces deal with this fairly eminent problem. The global marketplace deals with the CEOs that are rightly so in the business to make a quick profit. The international marketplace is when nations get together, discuss an issue and they find mutual benefit to these vast problems.

Vast solutions are available through what the gentleman has described so well tonight.

Mr. BARTLETT. Mr. Speaker, reclaiming my time, of course the real challenge is to have everybody agree on what the facts are. I suspect a big percentage of the people that might read or listen to what we say this evening had not even heard of peak oil.

We really had about 30 years warning that this was going to happen. When M. King Hubbert predicted oil would peak in this country in 1970 and it did, and 5 years later, certainly by 10 years later we knew absolutely he was right, because we were well down on the curve 10 years later, we should have had some hint that he probably was right, he and Colin Campbell were probably right about world production? We paid no attention to that.

As a matter of fact, the people that were talking about this until very recently have been quickly relegated to the lunatic fringe. If I had been up here 3 or 4 years ago talking about this, someone may want to relegate the two of us this evening to the lunatic fringe.

But I think the evidence is out there. I think the evidence is out there, and the marketplace is saying that it is out there, because oil is now at $54 or $55 a barrel, they are saying we are going to see $60 before we see $50. I saw one future that was $100 a barrel.

By the way, at $100 or $200 a barrel, tar sands and oil shale become somewhat competitive, but with enormous costs. They will be positive, we will get a little more out than we put in, but not the kind of energy we are now using.

Coal, we have a lot of coal. China has a lot of coal. We now use coal primarily in this country for producing electricity. It is very dirty. Our environmental requirements now, there has not been a new coal plant in a long while, it is all natural gas. It is a real pity. Oil and natural gas are, in a very real sense, too good to burn. They are the feedstock for an enormous petrochemical industry. I mentioned only the fertilizer that grows our crops and the pesticides we make from oil. We live in a plastic world, and all of that plastic is made from oil.

Now, it is true that you can also use biomass and so forth to do some of that, but let us remember that we are just on the verge of not being able to feed the world. Tonight about one-fifth of the world will go to bed hungry. We we are not going to bed hungry in this country, not by a long shot, and we are living very high on the food chain. The time will come when you will not be able to eat the pig that ate the corn, because there is at least 10 times as much energy in the corn that the pig ate as you are going to get out of the pig by eating him. So we can certainly do a lot of by living lower on the food chain.

Mr. GILCHREST. If the gentleman would yield for a second, first of all, I want to compliment the gentleman on this fascinating factual presentation which leads me to what I want to say.

The gentleman said something earlier about finding solutions to the problem is going to be similar to the Manhattan Project or similar to placing a man on the moon within a decade when President Kennedy made that statement, and it is that kind of leadership from this Congress, from the administration, to incentivize, to create the kind of inspiration from the general public, to put these forces together to make it all work.

Mr. BARTLETT. Mr. Speaker, reclaiming my time, but now we must do it on a global basis, because of Jevons Paradox, if all the world does not cooperate, we will not get there. Had we paid attention to M. King Hubbert and not relegated him to the lunatic fringe, and he was right as evidence indicates on his prediction from 1970, had we paid attention to him we would have had at least 20 years headstart, and then we could have done it alone in this country because we are so big and use so much of the world’s energy.

Before we leave coal, we are going to come back to this and spend another hour with a lot of detail on this, but someone said there are 500 years of coal, that is not true there is maybe 250, at present use rates. But as oil becomes harder and harder to find, we are going to turn more and more to coal, and that 70 years with enormous environmental penalty will shortly become a relatively few years. That is not forever. But we will be leaning on coal more than in the past nuclear.

Three ways we can get nuclear energy. For one of them we are home free, and that is fusion. We send a little less than $300 million a year on that. I would like to spend more if there was the infrastructure out there to support it, because if we get there, we are home free.

But I kind of think that hoping to solve our energy problems with fusion is a bit like you or me hoping to solve our personal financial problems by winning the lottery. That would be real nice. I think the odds are somewhere near the same. I am about as likely to win the lottery as we are to come to economically feasible fusion.

I hope I am wrong. Frequently my hopes and my anticipations are different. My anticipation is we are not going to get there because of the enormous engineering challenges. My hope is I am wrong and we are going to get there.

Two other ways to get energy from nuclear. One is the light water reactor, which is all we have in this country. By the way, tonight when you go home, every fifth home and every fifth business would be dark if we did not have nuclear. It produces 20 percent of all of our electricity. But there is not all that much fissionable uranium in the world, so we are not going to get there with light water reactors. France produces about 80 percent of its electricity from nuclear. They have a lot of breeder reactors. They do what the name implies, they make more fuel than they use, with big problems, in enrichment, shipping it around, squirreling away the products for a quarter of a million years. That presents enormous challenges to us.

So there is the potential here in nuclear, but a lot of problems involved with it. It is not just that simple. By the way, it takes a lot of oil to build a nuclear power plant.

At some point, you pass the point of no return where there is not enough readily available high-quality fossil fuels to support our present economy while we make the investment we have got to make to transition to these renewables. And then we come to true renewables: solar, wind, geothermal, ocean energy. All of these suffer.

By the way, I am a big supporter of these. I had the first hybrid electric car in Maryland. I had the first one in the Congress. I have a vacation home that is off the grid and totally powered by solar. And I am going to put in a wind machine. I am a big supporter of this.

But the energy density here is very low. And it is intermittent. It takes a lot of solar panels to produce the electricity that you use in your home. It takes 12 of them to power your ordinary refrigerator just as an example. So those are real potential, and they are growing. Wind machines now produce electricity at 3 1/2 cents a kilowatt hour. That is getting competitive. A whole lot of them in California. They are in West Virginia. We are putting some up on Backbone Mountain in western Maryland.

Boy, if we could get down there to geothermal we would have it, would we not?

There is not a single chimney in Iceland because they do not need them. They have got geothermal. They have a little bit of it in the West. But for most of the world that molten core is far too deep for us to tap.

Mr. GILCHREST. If the gentleman would yield just for a second, I am sure he knows, but the general public, I do not think realizes it is not necessary to be sitting right on top of a volcanic area, an earthquake zone to get geothermal energy. We on the Eastern Shore of Maryland have a number of schools that are actually providing heat for those schools from geothermal energy. Some of these things are sort of a hidden secret. But it is the classical conventional wisdom that keeps us from exploring some of these things a little bit further. And I think the gentleman is bringing those out tonight.

Mr. BARTLETT of Maryland. Is this tying the school to the molten core, or is it simply using a heat pump and exchanging, not with the air? What you are trying to do in the winter-time is cool the air and what you are trying to do in the summer time is heat the air.

Mr. GILCHREST. It is actually bringing water up from the surface, from the subsurface. The water is much warmer further down.

Mr. BARTLETT of Maryland. It is indeed. But you still have to have energy to use that. You are much more efficient using a heat pump that is tied to the ground, to groundwater than it is to the cold air in the winter and the hot air in the summer. If you are thinking about what you are trying to do is to cool the cold air in the winter time and to heat the hot air in the summertime. And obviously ground water is very much better in both seasons than either the air in the winter or the cold, the hot air in the summer or the cold air in the winter.

Ocean energy. You know, it takes an enormous amount of energy to lift the ocean 2 feet. That is roughly what the Moon does in the tides, is it not? But the problem with that is energy density.

There is an old adage that says what is everybody’s business is nobody’s business. And the corollary to that in energy is if it is too widely distributed, you probably cannot make much of it. And we have really tried to harness the tides. In some fjords in Norway where they have 60-foot tides you put a bar there, when it runs in you trap it and then you run it out through a turbine. When it is running out, you can get some energy from it. And there is potential there, a lot of potential energy. But you know it is very dispersed. We have a hard time capturing that energy.

I suspect that our hour is about up, and this is maybe a good place to end. We are going to come back and spend another hour looking at agriculture, enormous opportunities from agriculture. But let me remind the gentleman that we are just barely able to feed the world now. And if we start taking all of this biomass off the field, what is going to happen to the tilth of our soil, to the organic matter in our soil, which is essential to the availability of nutrients in the soil by the plant. So there are lots of challenges here. There are lots of opportunities here. And we will spend another hour talking about them. Thank you very much. And I yield back, Mr. Speaker.


In the 109th Congress, Bartlett serves as Chairman of the Projection Forces Subcommittee of the Armed Services Committee.  One of three scientists in the Congress, Dr. Bartlett is also a senior member of the Science Committee.  Due to his ten years of experience as a small business owner, he also serves on the Small Business Committee and is its Vice Chairman. More info at


20 Apr 2005 by US Congressional Record. Our Dependence on Oil by Roscoe Bartlett

Mr. BARTLETT of Maryland. Madam Speaker, on March 24 of this year, 30 of the prominent leading individuals in our country wrote a letter to the President about what they considered a very critical national security issue. The letter was signed by Robert McFarlane, James Woolsey, Frank Gaffney, Boyden Gray, Timothy Wirth, and 30 other people, including 12 retired generals and admirals, five Secretaries of Defense Departments, and several retired Senators and Representatives.

To understand their concern, we need to go back about 6 decades to a sequence of events that brought us to a situation that very much concerned them. We have only 2 percent of the world’s oil reserves, we use 25 percent of all of the oil used in the world, and we import two-thirds of that. We have less than 5 percent of the world’s population.

How did we get here? The next chart shows us that, and this goes back the 6 decades that I mentioned to a Shell oil scientist by the name of M. King Hubbert who, in the 1940s and 1950s watched the exploration, the pumping, and the exhaustion of oil fields, and he noted that each of the fields followed a bell curve. It rose to a maximum, and then it fell off as they pumped out the remaining oil. He noticed that at the peak of that curve, that about half of the oil had been consumed from the average field. It is logical that the second half of the oil would be harder to get and take more time, and it would not flow as quickly. He theorized that if you added up all of the individual fields in the country, you could predict when that country would peak in its oil production. And in 1956, he made a projection for the United States. Fourteen years later, which was when he said it would occur, the United States peaked in its oil production.

This curve here in green, the smooth, green curve was his prediction. The little more ragged curve, the points that do not fall quite on the curve were the actual data points which we see fell remarkably close to his prediction. We are now well down that curve. We are now producing less than half of the oil that we produced in 1970.

The red curve there, by the way, is the curve for Russia. There is going to be a second peak there, because after the Soviet Union fell, they kind of got their act together and they are going to have a second peak, but not so high, and so their real peak was when it is shown there.

The next chart shows us the elements of the oil in this country, where we got it from. We see a whole bunch of it came from Texas, and then the rest of the United States, and then nos gas liquids, the red above, and we see what is called Alaska there. That is all the oil that we got from Prudhoe Bay, the north slope, a lot of oil.

But it really did not make a very big difference. You see, we are still sliding down that slope and there is just a little blip produced by Prudhoe Bay, and then we slide down the slope.

Mr. Speaker, we remember a couple of years ago, the Gulf of Mexico oil, and that oil was going to solve our oil problem. That oil is represented by that yellow there. Not a whole lot, and it did not stop our slide down Hubbert’s peak. The amount of oil that may be present in ANWR is predicted to be, who knows; it may be very little, it may be a whole lot, but the prediction is about half of what was in Prudhoe Bay. So you may agree or disagree that we should drill in ANWR, but it really does not matter because there is not enough oil in ANWR to really make a difference.

The next curve we have shows a very simple curve, the problem that we face. If, in fact, we have reached peak oil, and I spoke here on the Floor a bit more than 5 weeks ago for an hour on this subject and we have had a lot of people come through our offices and a lot of phone calls and e-mails from all around the world, and I will tell my colleagues that there is nobody who does not believe that we are either at peak oil or will shortly be at peak oil. As this chart shows, you do not have to be at peak oil to have a problem. If peak oil occurs here, and we are here, you see that there is a bit of yellow between our use curve and by the way, this use curve is only a 2 percent growth. Now, we think that if our economy is not growing 2 percent, that the sky may fall, the stock market reacts very badly, and this is only a 2 percent growth curve. Look what happens with this 2 percent curve, with that yellow there, that is what we would like to use at only 2 percent growth, and the blue line there shows us the oil that will be available. Now, we cannot use oil that is not there. So that is going to be all the oil that we have available to use if, in fact, this is correct.

Now, I would point out 2 things. One is that M. King Hubbert was right about the United States. Using exactly the same prediction techniques, he predicted that the world would peak in about 2000. It did not quite, because he could not have known about the Arab oil embargo or the big price spike hikes or the world recession that resulted from that net delay that is probably occurring about now. But we have a problem of a shortfall before we actually get to peak, and that is probably where we are now.

Let me just spend a moment on this chart, because I want to point out some realities here. This is the amount of oil that we would like to use, following up this just 2 percent slope. And the amount of oil we will have to use is represented by the blue curve here. But we cannot use all of that oil for the present purposes for which we use oil, because if we do, there will be no oil left over to make the investments we have to make in the alternatives and the renewables that ultimately must take the place of oil, because you see, we are shortly going to be sliding down Hubbert’s peak.

The next chart shows us the slopes of these peaks when you have more than a 2 percent growth. This is the 2 percent growth line, if you chart out with 2 percent growth and then extrapolate that as a straight line, but that is not what growth is. Growth is always exponential. It is like compounding interest, and people understand compound interest, and I am not sure why they do not understand exponential growth, but 2 percent growth follows this curve, it does not follow this straight line curve. The next curve above it is only 4 percent growth. I would note that last year, the world economies grew by 5 percent on average. Now, we did not do quite that well, but China did a whole lot better. China grew at 10 percent. I was kind of playing around with this chart and I think the 10 percent curve goes about here.

Mr. Speaker, with a 10 percent growth curve, every 7 years, it doubles. That means in 14 years, it is 4 times bigger, and in 21 years, it is 8 times bigger. As a matter of fact, one of the biggest forces in this world is the force of exponential growth, and it is very difficult for a lot of people to understand. Albert Einstein was asked, Dr. Einstein, you have been instrumental in developing nuclear energy. It is really very powerful; from a little tiny bit of this, you get a great big explosion. What will be the next big energy source? And his response was the most powerful force in the universe is the power of compound interest, which is an exponential growth curve.

The next chart shows a reality here that we really need to pay attention to, and this was the reason, this was the reason for the letter that these gentlemen wrote. It was in the letter that they said, the United States’ dependence on imported petroleum poses a risk to our homeland security and economic well-being. If we have only 2 percent of the known reserves, and we use 25 percent of the world’s oil, and we import more than two-thirds of it, and as the President said himself, much of that oil, he said, we rely upon energy sources from countries that do not particularly like us. Yes, Mr. President, that is true. Most of the reserves of oil are in the Middle East, and many of those countries go a bit further than just do not particularly like us.

What we have here on the easel is a view of the world which shows what China has been doing. China has been scouring the world, looking for oil. And all of the blue, here is where China has been: In the Orient, in the Middle East, several places in the Middle East, in our backyard. They have contracts in Canada, they have contracts in Colombia, they have contracts in Venezuela, they have contracts in Brazil, they have contracts in Argentina, and they almost bought an oil company in our country; they were just outbid a little. They will be back again trying to secure an oil company in our country.

China now is the second largest importer in the world. Last year, they increased their demand for oil by 25 percent. Now, that will not go on year after year, because last year, they shut down a lot of coal-fired power plants because the pollution was killing them, so they bought a whole bunch of diesel generators; I suspect that the pollution might be almost as much from them, but they are more widely distributed, which is one of the reasons they used so much oil last year.

The next chart shows us something very interesting about energy and the effect that it has had on civilization and on growth of economies. On this chart, and I am sorry that most of it is blank, but that is just the reality of what has happened through history. We started out the industrial revolution relying on wood, and here it is, the brown curve here. We were burning wood. As a matter of fact, the industrial revolution almost floundered before we discovered that we could get energy from coal, because we had largely denuded New England in sending the trees to England to produce charcoal to produce coal. There is a little relic of bygone years up by Thurmont, Maryland, and they denuded the hills of Thurmont, Maryland for a tiny foundry there in Catoctin, up near Thurmont, and then we discovered coal. And notice, there is a big jump. This is quadrillion Btus.

We were going along with the coal economy, they are about leveled out, and we discovered that we could get even more energy from oil. And look what happened in the age of oil: way up. This chart points out something very interesting and very important about these fuels.

Every time we went to a new fuel, we went to a higher density fuel, higher energy density fuel. The energy density in oil is just incredible. One 42-gallon barrel of oil, which if you bought it for $50-some and refined it, maybe another $40-some, it would cost you $100 for the refined products of that barrel of oil.

But the energy you get from that is the equivalent of 25,000 man-hours of labor. That would be 12 people who did nothing but work for you all year long. Everything they did was for you, and the energy they would expend in that full year is the energy equivalent of one barrel of oil.

Now, you may have a little trouble understanding that, but let me give you a little anecdote that may be simpler to understand. A couple of weeks ago we took my brother-in-law and his wife down to West Virginia. And we have a little Prius car, we get 45 miles per gallon, not that time because it was very heavily loaded and we were going up mountains. And the worst mileage we got was 20 miles per gallon in this Prius hybrid electric, hybrid car, carrying this big load up this steep mountain in West Virginia.

That was 1 gallon of gasoline. Still cheaper, by the way, than water in the grocery store. But look at the energy in that 1 gallon of gasoline. It took this car, heavily laden, 20 miles up a steep mountain in West Virginia. Now, how long do you think, Madam Speaker, that it would take you or me to pull that car up the mountain?

Obviously, we cannot pull it, but we can use a little mechanical advantage and get it up there. It is a winch called a come-along and there is a guardrail and there are trees and you can use a chain, and you could get the car 20 miles up the mountain. Do you think you can do it in 90 days? If you did it in 90 days that would be just about the equivalent. By the way, that would be a tough pull. That is a long distance per day to go 20 miles in 90 days pulling your car up the mountain.

That is the kind of energy density that is there. So the big challenge we have is finding alternatives that have something near the energy density of oil, because there is an enormous amount of energy density there.

The next chart I want to show you is a very interesting one, because one of things that we have got to do very quickly is to conserve the use of oil. We have got to buy time through efficiency and conservation. This is a very interesting chart. This shows the energy use for people in California and the energy used per person in the United States.

And notice that the people in California are only using about 60 percent of the energy that is used by the average person in the rest of the United States. Now, nobody told them that they had to do that. I know that they have some regulations that are a little more stringent than some in other States because they have some bigger problems with pollution.

But you remember several years ago they had some blackouts there and it was predicted that they were going to have rolling blackouts year after year there. They did not have any. That is because voluntarily the Californians, without anybody telling them they had to do it, reduced their consumption of electricity by 11 percent. It was enough that they did not have any rolling blackouts.

I will tell you, it is going to be awfully hard to argue that people in California do not live as well as the people in the rest of the United States. And they are doing it on just a bit more than half of the energy that the average person in the rest of the United States uses. So this is really doable, friends. We can conserve. We can reduce our use of oil. And we must do that, because as the next chart shows, we have got to ultimately move to some other sources of energy.

Oil is not going to run out. But the age of cheap oil is probably over, and we are going to be sliding down Hubbert’s Peak; there is going to be less and less oil. No matter how hard you suck on that, you cannot get more out if it is not there.

This shows the alternatives that are available to us. Some of those are finite resources. Some of them are pretty big, by the way. It may be difficult to get it, but the tar sands of Canada, I am going up there in a month or so to look at that, Canadians called after they heard our speech 5 weeks ago, please come up and visit us and look at our tar sands. We have a lot of oil shale in our country. At $50, $60, $70 a barrel, that is probably going to be competitive, and we can get some oil from the tar sands and the oil shale.

Now we have coal, and I should have brought a chart, next time we will bring a chart on coal. Because what it shows is that when we really start using coal to make up for the oil we are not going to have, there is only about 50 years of it there, at just a 2 percent growth rate, now the world grew 5 percent last year. China is growing 10 percent. We sure as heck would like to grow more than 2 percent, but at just a 2 percent growth, that coal lasts only about 50 years.

They will tell you there is a 250-year supply now. That is at current-use rates. But if we have to start using it faster; it is not going to last anywhere near as long. Then we come to nuclear. There are three kinds of nuclear. We need to explore all of them. I had in my office today a gentleman who really believes that we are going to get to fusion. Now, it is not tomorrow, it is not the day after tomorrow, as a matter of fact it is maybe 30 years from now; but he believes we will get there.

Fusion is the kind of energy you have from the sun. It is the kind of energy that you have in a nuclear weapon. If we can really get there, we are kind of home free. But I will tell you, I think the odds of our solving our energy problems, at least for the immediate future through fusion, is about the same as you and me, Madam Speaker, solving our personal economic problems by winning the lottery. It would be nice if it happened, but the odds are not very good that we are going to solve our personal economic problems that way.

There are two other kinds of nuclear power. One is the light water reactor. That is what we use in our country. And we need to have more of them. We produce now about 20 percent of our electricity through nuclear. Some of those who have been violently opposed to nuclear, looking at the peak oil problem, are now reevaluating whether we should go to nuclear or not.

But there is not fissionable uranium in the world. So then you have got to go to breeder reactors, and they have lots of byproducts that you have to squirrel away somewhere for a quarter of a million years. So we face some real challenges that we have to think through what we are going to do with nuclear.

Than we look at all of the renewables, solar and wind and geothermal, if you are close enough to the molten core of the Earth. Ocean energy. Boy, the moon raises the ocean about 2 feet on average. But it is awfully dispersed. It takes a lot of energy to raise the oceans 2 feet. It is going to be hard to harness that. But we are trying and we need to try further.

And then enormous opportunity in agriculture. And several previous speakers spoke to that, about agriculture:
soy diesel, biodiesel, ethanol, methanol, bio mass. And our agriculture really has an opportunity to contribute here.

And then waste to energy. We have a lot of waste that ends up in the landfill. Some places are burning it. More people ought to be burning it. Then hydrogen from renewables. By the way, hydrogen is not an energy source.

Hydrogen is simply a convenient way of moving energy around. You burn it very cleanly. It produces only water.

You can use it in a fuel cell and get twice the efficiency in a reciprocating engine. I would just like to close by going back to one of the charts I had before and to mention that the real challenge now is to use conservation and efficiency to reduce our demands for oil so that we have enough oil left to make the investments in these alternatives and renewables so that we can take the place of the oil that we are not going to have because we are sliding down Hubbard’s Peak.

Now, we have very clever people in our country. We are really innovative, we are really creative, and what we need is leadership, Madam Speaker, to make this happen.

Apr 19, 2005  PFC Energy’s Diwan, GOP Rep. Bartlett of Maryland look at supply, price, economies

Congressman Roscoe Bartlett has discussed global peak oil in a one-half hour taped program, E&E TV.s .On Point. Host Colin Sullivan, Editor of Environment and Energy Daily, moderated the discussion with Congressman Bartlett and Mr. Roger Diwan, Managing Director, Markets and Countries Group, PFC Energy. It can be downloaded from E&E TV.s website
Congressman Bartlett previously discussed the challenges of global peak oil in a one-hour Special Order speech on March 14, 2005. It can be downloaded from Congressman Bartlett.s website,

Congressman Bartlett is one of three scientists in the Congress and had successful careers as a scientist, professor, engineer, farmer, and small business owner prior to his election to Congress. He designed and built his own solar-powered home and was the first member in Congress to take delivery of a gas-electric hybrid Prius. Congressman Bartlett earned both a Master’s degree and a Doctorate in Human Physiology from the University of Maryland at College Park.

Congressman Bartlett is currently the Chairman of the Projection Forces Subcommittee of the House Armed Services Committee and Vice Chairman of the Small Business Committee. He served as Chairman of the Energy Subcommittee of the House Committee on Science in the 107th Congress and was a key author of the alternative and renewable provisions in the pending Energy bill.

Transcript of interview:

Colin Sullivan: Welcome to OnPoint. I’m Colin Sullivan. With us today is Roger Diwan, and oil markets expert at PFC Energy, and Congressman Roscoe Bartlett, Republican from Maryland. Our subject today is peak oil and whether or not the world is running out of cheap oil and what effect that might have on the global economy. Thank you both for being here. Congressman, I’d like to first start with you. You made some very strong statements in the past about how world production capacity is headed towards peak, or is at its peak, or in decline. What are the consequences of that, and what makes you so convinced that oil production is in decline and reached its peak?

Roscoe Bartlett: Well, two things, one is the science that led to the prediction that the United States would peak in oil production in 1970. It did, and we have fallen in our production the curve that was predicted. Was predicted, by the way, in 1956 by a scientist and geologist named M. King Hubbert, who worked for worked for Shell Oil Co. He made a prediction that the world would peak in oil production about 2000. Now, we didn’t. We had a few years of grace, because he couldn’t have known about the Arab oil embargo or the oil price spikes or the worldwide recession that occurred, which reduced the demand for oil. The second thing is that oil is now over $50 a barrel. For the fourth week in a row, gas prices have increased in our country. If countries had the ability to increase oil production, $50 a barrel ought to be a big incentive to increase oil production. If we are not at peak oil, we’re very close to peak oil, and so we really ought to be talking about what now and what should we have been doing that we didn’t do, and what do we absolutely have to do now.

Colin Sullivan: Mr. Diwan, what’s your response to that? Does $50 oil sustained mean we’re at peak oil?

Roger Diwan: Well, what we have here, in many ways, is a number of cyclical and structural issues which have brought us $50 oil. It’s true that we’re running at very high capacity. Right now we’re producing at 98 percent. It means that we have very little spare capacity. We’ve rarely had that phenomenon. And in term of this issue of peak oil, if you look at the current conditions, and if you trend them up for the next 10, 15 years, you see that, you know, with the present technology and the present access to resources, it’s difficult to imagine that we’re going to be able to produce a lot more than 100, 105 million barrel per day, which probably could be around 2015. So we’re entering that era, if we don’t have two dramatic changes. One is technology, both on supply and demand, and second one is access to the reserve which do exist in the Middle East.

Colin Sullivan: Well, is there any reserve capacity in the world besides in Saudi Arabia going forward the next 20 years? Or do you have rely exclusively on the Saudis and the Middle East?

Roger Diwan: No, no, I mean you have a lot of oil in the ground, in Saudi Arabia, in Iran, in Iraq, in Kuwait, in the UAE, in Russia. The question is how do we have access to those reserves, and are these countries willing to develop these reserve at the pace we want them to develop them.

Colin Sullivan: And will it be just as inexpensive as it’s been for the past 50 years, or are we talking about more expensive oil production?

Roger Diwan: It could be a little bit more expensive; but, you know, if you’re producing oil at $7 or $8 or $9 in the Middle East, and prices are $50, there’s, you know, it’s not a big issue.

Colin Sullivan: Congressman, what do you see as the consequences of this — if we have reached peak oil, as you say? What are the consequences on our long-term economic growth and the global economy and U.S. economy?

Roscoe Bartlett: Although there’s a lot of oil left in the world, and we agree that there’s roughly 900 to 1,000 gigabarrels of oil left in the world, you need to put that in context. Up until the Carter years, every decade, we used as much oil as had been used in all of previous history. Now, with exponential growth, if you’re at about a 7 percent growth rate, and we were using oil at about 7 percent more per year, the world was, that explains how we got on that curve. Now, the fact that we have about half of all the oil that was ever in the world still there, doesn’t mean that the next 50 years, 100 years are going to be like the last 50 years, 100 years, because the world is now demanding a whole lot more oil. Last year, China increased their use probably 25 percent. In less than three years, that doubles their use of oil. They probably won’t continue on that growth path, but India’s increasing. China’s now the No. 2 importer in the world. What are the consequences of this? Boy, economic and geopolitical. When the world recognizes that there’s only so much oil that can be produced, and we need more oil — by the way, if our economy doesn’t grow at least 2 percent a year, we can’t service our debt. And if we don’t think the economy’s growing at 2 percent a year, the stock market starts tanking. You know, we have to get used to the fact that there is not going to be oil in the quantities there have been in the past available in the future, and we should have started a long time ago, ’cause we knew — the world knew — by at least 1980, that M. King Hubbert was right about our country. If he’s right about the United States, why shouldn’t he be right about the world? And we should have been doing some things that we’ve now blown 25 years, that we could have been doing some very meaningful things to prepare for this time when the world reaches its peak ability to produce oil. We didn’t do those things then. We really need to start doing them now.

Colin Sullivan: Mr. Diwan, what’s your take on what the long-term economic consequences may be?

Roger Diwan: Well, if we don’t believe that the world can produce more than 100 or 105 million barrel per day, and we’re at 80, 84, 85 right now, it’s certainly time to start preparing for what to do next. I mean the technology exists to consume less. You have car technologies. You have other sources of energy: gas, coal. So there’s a lot to be done. The question is how proactive the consuming country are about it, and so far we haven’t, because energy was very cheap. Hopefully, $50 oil will open the eyes and start thinking about that and plan for tomorrow.

Colin Sullivan: So what are the alternatives, especially in the transportation sector? I mean hydrogen seems pretty far out. Fuel cells seem pretty far out.

Roger Diwan: Yeah.

Colin Sullivan: Hybrids are starting to become more — the public seems to be more interested in buying hybrids now. But, still, there’s a consumption of gasoline with hybrids. What’s the alternative? Development of a energy source we haven’t conceived yet?

Roger Diwan: Well, if we can consume less, we have more oil in many ways. So the question is what technology can be put on the market very quickly. And you’re right, fuel cells and hydrogen are not for the next 10, 15 years. So it’s hybrid and it’s more — it’s cars that are a lot more efficient. After all, we’re still using 100-year-old technology. We can do better than that. We can have small cars. We can have lighter cars, and we can certainly have cars which are a lot more efficient.

Colin Sullivan: Congressman, what’s your take on what the alternatives should be going forward?

Roscoe Bartlett: Well, certainly, we need to conserve, and we certainly need to be more efficient. But that alone won’t solve the problem. With the industrial growth in China and India and Third World would like to do for their people what we’ve done for our people and have an Industrial Revolution that will improve the quality of life for their people. We’re going to have to start moving to alternatives. That’s just the reality. This is a very daunting challenge because of the energy density in fossil fuels. One barrel of oil is the equivalent of 25,000 man hours of labor. That’s like you having 12 people that work exclusively for you for one year, and all it costs you is a little over a hundred dollars. That’s the $50 for the barrel of oil and maybe $50 for refining it. And you get that kind of labor intensity. The energy intensity is just phenomenal. I have a little personal experience. I was in West Virginia with a heavily loaded Prius, a hybrid car which we drive, and the worst mileage I got was 20 miles per gallon — 20 miles per gallon going up a steep West Virginia mountain. The car was heavily loaded. How long would it take me to push that car 20 miles up the mountain? Obviously, I can’t do it. I could do it with a come-along and chains and so forth, and if I did it in 90 days, I’d be very lucky, which is really about what the 25,000 man hours of labor per barrel of oil is. None of the alternatives have anything like the energy density of the fossil fuels except nuclear, but you can’t put a nuclear power plant in the back of your car. And, by the way, hydrogen is not an energy source. It’s not a solution to the problem. It’s a good idea, because it’s a handy way to move energy around. And when you finally use it, it’s non-polluting. You get just water from it. but I think that probably more than half of our people believe that it’s an energy source and we can solve our energy problem with hydrogen. You’ve got to produce more energy — you’ve got to use more energy to produce the hydrogen than you will get out of the hydrogen. Nevertheless, it’s a good idea, because it burns so cleanly when you finally use it.

Colin Sullivan: Do you agree with what the congressman has to say on hydrogen, specifically?

Roger Diwan: Yes, I do. I also think that we have a lot of oil still left in the ground, and if oil use is only geared toward transportation, we can actually extend the life of our barrels here. It means also that we need to destroy demand in other use — in industrial and non-transportation. And that’s also feasible, because, as oil prices increase, we’re going to find alternatives, and we’re going to certainly be more efficient. The efficiency gains in burning energy are still improving, and we need to make sure that that continues. Often, the technology exists. It has not been deployed.

Colin Sullivan: Congressman, it seems like you’re saying that the Republicans Party’s — or factions of the Republican Party’s preoccupation with drilling in the Arctic National Wildlife Refuge is a little bit misled. I mean do you — what’s your comment on that? Do you think that drilling in ANWR is just a drop in the bucket and that’s not what an energy policy should be all about?

Roscoe Bartlett: Oh, it is indeed a drop in the bucket. ANWR is going to be probably half or maybe less than half, but about half of Prudhoe Bay, and Prudhoe Bay — we have a chart that we’ll show — Prudhoe Bay had a pretty insignificant impact on oil production in our country. We were on the down slope of Hubbert’s curve when we discovered oil in Alaska; and we had a little bump, but we still went down, and we’re still going down. I’m opposed to drilling in ANWR for a couple of reasons. We use 25 percent of the world’s oil, and we have only 2 percent of the known reserves. Now if you have only 2 percent of the known reserves, I’m having a lot of trouble understanding why it’s in our advantage to use up that 2 percent as quickly as possible. If we could pump ANWR tomorrow, what would we do the day after tomorrow? And I think pumping ANWR will give a false sense of security that is totally irrelevant. ANWR will not solve our problems. We can’t drill our way out of this problem. It just isn’t going to happen. We’re going to have to — as Mr. Diwan says — we’re going to have to use conservation and efficiency, and then we’ve got to use the time we buy with that to move to alternatives. I mentioned that up until the Carter years, every decade we used as much oil as in all of previous history. If that curve had continued, when we’ve used half of the world’s oil, we’d have 10 years of oil left. Now we’re better off than that. At current use rates, we have 40 years, because it won’t be current-use rates. We’d like to use more, but it’s going to be decreasingly available. It’s going to fall off. By the way, nobody yet has mentioned an enormously important use of gas and oil, and that’s the big petrochemical industry. We live in a plastic world. We fertilize our crops with natural gas. All of the nitrogen fertilizer comes from natural gas. And, by the way, when we talk about the depletion of oil, natural gas will follow just about along with it, won’t it?

Roger Diwan: Oh, we have a lot more gas reserves than oil, and we have mined them much less. So in a way, if you look at the ratio of production and reserve, gas is actually the next source of energy. We do have a lot more gas —

Roscoe Bartlett: But we’re now using gas at an increasing —

Roger Diwan: At an increasing rate, but, in a way, we’re 20 — or I would — more like 30 years behind oil. So we have gas, and gas in many ways is our transition fuel here. Question is what happened after oil and gas. But gas is used, as you said, for petrochemicals and for industrial and for electricity, not for transportation.

Roscoe Bartlett: And there’s another problem with gas, and that is that it’s very difficult to move across the ocean.

Roger Diwan: Correct.

Roscoe Bartlett: It’s now used pretty much where it’s produced through a very complex system of pipelines moving it around. To move it across the ocean, you’ve got to what? Liquefy it and store it at very cold temperatures.

Roger Diwan: Yeah.

Roscoe Bartlett: In a pressurized ship.

Roger Diwan: But that’s the next 10, 15 years, we’ll see a dramatic increase in the LNG, in the liquefied natural gas.

Roscoe Bartlett: So we will be dealing — we will be in — using oil — gas more than we are now. But even that will run out. If all we’re doing is finding clever ways to use the little bit that’s there more quickly, we’ve missed the point. Gas and oil are not forever, and we need to be moving to technologies that free us. From a national security basis, by having only 2 percent and using 25 percent is an enormous national security risk. That alone should drive us to do something else, should it not?

Colin Sullivan: Mr. Diwan, changing the subject a little bit, your consulting firm recently released a study that said, “Depletion of oil resources will cause a shift in geographic dominance of production sources.” What kind of shift are we talking about? Are we talking about people — countries in the Middle East being able to dominate more easily now the world energy markets than they are now?

Roger Diwan: Oh, what you have is the declines in oil fields are very steep, in the United States, in the North Sea. So, in general, in the OECD countries and in some of the countries like Mexico, which are close to the United States, and probably even Venezuela, and the reserves that we know of are based in the Middle East and a little bit in Russia. So as we demand more energy, and energy production plateaus or declines in the OECD countries, the gap has to be filled by the producers in the Middle East. So you see that shift happening already over the last two years, over, actually, the last five years. Most of the increase of production came from the Middle East or from Russia.

Colin Sullivan: Now, the Saudis say that they can meet demand growth over the next 20, 30, 40 years. But there’s never really been an audit done on Saudi capacity. How do you do that? Should we believe what the Saudis say about their capacity, about their reserves?

Roger Diwan: They don’t say that. They say they can increase their production to 12 and 14 million barrels per day, which I think is feasible with a lot of investment. But is that enough to meet the increase in demand, and that’s what the Saudis do not answer. I do not believe that they — that if we start to see the big decline setting in later this decade or the next decade in the United States in a number of major fields coming on-stream right now in West Africa, that Saudi Arabia will be able to produce 20 and 25 million barrels per day. I don’t think Saudi Arabia wants to produce 25 million barrels per day. There is a limit of how much production can come from a lease, even if the reserves do exist. To get those reserves into production, you need to spend tens, if not hundreds of billions of dollars. And I’m not sure these countries want to do that — to spend that amount of money that fast to meet the energy needs of the West.

Colin Sullivan: Now, if we are on a decline, if we are past the peak, isn’t it just more expensive to get this oil out of the ground? Isn’t that part of the problem? And we’re going to continue to see sustained oil prices beyond $50 a barrel.

Roscoe Bartlett: Yeah, Goldman Sachs says they’re going to 105, and Americans may change their driving habits when gas is $4 a gallon. But the reality is that we will reach a peak. We may have reached a peak now. A lot of authorities believe that we’ve reached a peak now, but we will reach a peak, and then there will be a decline after that. It’s not a matter of spending more money. Certainly, oil is going to cost more. But not only will it cost more, there’s going to be less of it. And those who believe that the marketplace will take care of this problem, you know, and I have a lot of colleagues in the Congress who aren’t worried about this at all. Not to worry, they say, the marketplace will take care of this. But I’ll tell you, you can’t get blood out of a turnip, and the marketplace can’t do what can’t be done, and the ability to produce oil just isn’t there. And the present surge capacity in the world is what? A million, million-and-a-half barrels a day?

Roger Diwan: Probably. Around a million-and-a-half.

Roscoe Bartlett: That’s about what it is. You know, China will slurp that up almost overnight with their increased demand for oil. If we’re not at peak oil, we very shortly will be at peak oil. We ought to be behaving like the reality says we ought to behave, and that is that oil is going to become increasingly more expensive and decreasingly available. And what will the world do? What will the major countries in the world do when they recognize that there’s not going to be as much oil there as needed to support our economy? What do you think the world will do?

Colin Sullivan: Well, what kind of response do you get when you take this message to the Republican Caucus in the House, especially?

Roscoe Bartlett: Well, right now we’re kind of in an education mode. We did one special order for an hour. We got a great response on that. Next week, we hope to do another special order. And most of the people in the country, including my colleagues, we have representative government, and the representatives generally reflect the general knowledge in the population, and most people in our country don’t know that we’re facing a crisis. One of the writers on this, by the way, starts his article by saying, “Dear Reader, Civilization as we know it will end soon.” Now your first impulse is to put down the article. This guy’s a nut. But if you don’t put it down and read through the article, you’re hard-pressed to argue with his conclusions. That if we don’t do some rational things now — what we need is a war, the equivalent of a war on this. We need the equivalent of a Manhattan Project squared if we are going to produce energy from alternatives in adequate quantities to satisfy the enormous needs of our society.

Colin Sullivan: Mr. Diwan, what do you think about this projection of $105 oil? Is that outlandish, unrealistic?

Roger Diwan: Yeah, I mean I read the report. What the report says, oil prices will be around $50. If we have a big supply disruption in the world, prices will spike. And they put the $105 number. I don’t know why they put $105. Why not $85 or $150? So there’s no reason for that. It’s clear that we don’t have a lot of excess capacity. And, in a world without excess capacity, there is a risk premium, and we can have a spike in oil prices. We need to have a disruption to go there. But what we need to think, also, that we had an economic cycle which was very strong, so demand was very strong in 2003-2004. Still strong in 2005, but also the global economy’s slowing down, so the demand actually will slow down at the same time when a lot of investment made earlier in this decade, both in the former Soviet Union and in West Africa, will be coming onboard. So I imagine that in the next five years, if we had a slower economy, actually oil prices will subside. It doesn’t solve the problem. What it might do is dull the problem. You can say, “Well, oil is now at $30. We don’t need to think about it anymore.”

Colin Sullivan: So we might see prices level off over the next couple years, but then long-term we’re gonna see spikes up to —

Roger Diwan: Yes, because —

Colin Sullivan: $50, $60, $70 a barrel.

Roger Diwan: Correct, I mean the question is where we’re going to find our next [supply] of oil if we don’t have a dramatic breakthrough in technology to be able to pump more of the oil in the ground. Because, right now, we have recovery rates between 30 and 50 percent. In any oilfield, this is how much oil you recover. So you can increase your reserve by lifting more oil from the ground. So we need that to change. Well, that, you know, could be 10, 15, 20 years down the road.

Colin Sullivan: So the days of $20 a barrel oil, $1 a gallon gasoline, is over, a thing of the past?

Roger Diwan: Probably, unless we have a very major recession.

Colin Sullivan: Congressman?

Roscoe Bartlett: Oh, I would agree. Unless there’s a worldwide depression, you’ll never see dollar gas again. By the way, this was a resource which was depletable. Oil never should have been a dollar a barrel. Saudi Arabia, early on, what, they got $5, it was a dollar and a half a barrel or something. They got 5 cents of that. You know, recognizing that this is a resource which is not infinite. Oil has never been priced at its real replacement cost. We’re still not pricing it at its true replacement cost. If we have to replace the energy we get from fossil fuels with alternatives, it’s going to cost a whole lot more than the equivalent of $50 a barrel.

Colin Sullivan: OK, we’re just about out of time. Congressman, Roger Diwan, thanks for being here. Join us tomorrow for another edition on OnPoint. Until then, I’m Colin Sullivan for E&ETV.

21 November 2005  Peak Oil resolution in U.S. House of Representatives

Mr. BARTLETT of Maryland, Mr. UDALL of New Mexico, Mr. GOODE, Mr. GRIJALVA, Mr. JONES of North Carolina, Mr. TANCREDO, Mr. GINGREY, Mr. KUHL of New York, Mr. ISRAEL, Mr. BUTTERFIELD, Mr. UDALL of Colorado, Mr. VAN HOLLEN, Mr. GILCHREST, and Mr. WYNN) submitted the following resolution; which was referred to the Committee on Energy and Commerce


The Caucus was founded by Roscoe Bartlett. He knows that “There is no such thing, ultimately, as sustainable growth.” Hear his presentation at the Denver ASPO-USA Conference:
<> (for the frank admission about “sustainable growth,” go to 18:56). He knows that “our whole monetary system is based on the premise that we will always have growth.” And he knows that those two insights add up to a new world of sacrifice and transformation.



Tom Udall
Virgil Goode
Raul Grijalva
Walter Jones
Tom Tancredo
Phil Gingrey
Randy Kuhl
Steve Israel
G.K. Butterfield
Mark Udall
Chris Van Hollen
Wayne Gilchrest
Al Wynn
John McHugh
Jim Moran
Dennis Moore


Expressing the sense of the House of Representatives that the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the `Man on the Moon¹ project to address the inevitable challenges of `Peak Oil¹.

Whereas the United States has only 2 percent of the world¹s oil reserves;

Whereas the United States produces 8% of the world’s oil and consumes 25% of the world’s oil, of which nearly 60% is imported from foreign countries;

Whereas developing countries around the world are increasing their demand for oil consumption at rapid rates; for example, the average consumption increase, by percentage, from 2003 to 2004 for the countries of Belarus, Kuwait, China, and Singapore was 15.9%;

Whereas the United States consumed more than 937,000,000 tonnes of oil in 2004, and that figure could rise in 2005 given previous projection trends;

Whereas, as fossil energy resources become depleted, new, highly efficient technologies will be required in order to sustainably tap replenishable resources;

Whereas the Shell Oil scientist M. King Hubbert accurately predicted that United States domestic production would peak in 1970, and a growing number of petroleum experts believe that the peak in the world¹s oil production (Peak Oil) is likely to occur in the next decade while demand continues to rise;

Whereas North American natural gas production has also peaked;

Whereas the United States is now the world¹s largest importer of both petroleum and natural gas;

Whereas the population of the United States is increasing by nearly 30,000,000 persons every decade;

Whereas the energy density in one barrel of oil is the equivalent of eight people working full time for one year;

Whereas affordable supplies of petroleum and natural gas are critical to national security and energy prosperity; and

Whereas the United States has approximately 250 years of coal at current consumption rates, but if that consumption rate is increased by 2 percent per year, coal reserves are reduced to 75 years: Now, therefore, be it

Resolved, That it is the sense of the House of Representatives that– (1) in order to keep energy costs affordable, curb our environmental impact, and safeguard economic prosperity, including our trade deficit, the United States must move rapidly to increase the productivity with which it uses fossil fuel, and to accelerate the transition to renewable fuels and a sustainable, clean energy economy; and

(2) the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency of the `Man on the Moon¹ project to develop a comprehensive plan to address the challenges presented by Peak Oil.


July 23, 2007. Peak Oil Caucus chairs Bartlett, Udall comment on National Petroleum Council report.

Posted in Congressional Record U.S., Other Experts | Leave a comment

Michael Klare: The Bush/Cheney energy strategy

[I am going through the material I’ve accumulated since 2000 about energy, this one is of interest to those following the history of U.S. energy policy.  Alice Friedemann, ]


A Paper Prepared for the Second Annual Meeting of the Association for Study of Peak Oil Paris, France, 26-27 May 2003

By Michael T. Klare Professor of Peace and World Security Studies, Hampshire College, Amherst, MA 

When first assuming office as President in early 2001, George W. Bush’s top foreign policy priority was not to prevent terrorism or to curb the spread of weapons of mass destruction (or any of the other goals he has espoused since 9/11); rather, it was to increase the flow of petroleum from foreign suppliers to markets in the United States. In the year preceding his assumption of office, the United States had experienced severe oil and natural gas shortages in many parts of the country, along with periodic electric-power blackouts in California. In addition, U.S. oil imports had just risen over 50 percent of total U.S. consumption for the first time in American history, provoking great anxiety about the security of America’s long-term energy supply. For these and other reasons, Bush asserted that addressing the nation’s “energy crisis” was his most important task as President.


Addressing the energy crisis was seen by Bush and his advisers as a critical matter for several reasons.   To begin with, energy abundance is essential to the health and profitability of many of America’s leading industries, including automobiles, airlines, construction, petrochemicals, trucking, and agriculture, and so any shortages of energy can have severe and pervasive economic repercussions. Petroleum is especially critical to the U.S. economy because it is the source of two-fifths’ of America’s total energy supply – more than any other source – and because it provides most of the nation’s transportation fuel. In addition to this, petroleum is absolutely essential to U.S. national security, in that it powers the vast array of tanks, planes, helicopters, and ships that constitute the backbone of the American war machine.

Given these realities, it is hardly surprising that the incoming Bush Administration viewed the energy turmoil of 2000-2001 as a matter of great concern. “America faces a major energy supply crisis over the next two decades,” Secretary of Energy Spencer Abraham told a National Energy Summit on March 19, 2001. “The failure to meet this challenge will threaten our nation’s economic prosperity, compromise our national security, and literally alter the way we lead our lives.”/1/

To address this challenge, President Bush established a National Energy Policy Development Group (NEPDG) composed of senior government officials and charged it with the task of developing a long-range plan for the meeting the nation’s energy requirements. To head this group, picked his closest political adviser, Vice President Dick Cheney, a former executive of the Halliburton Company. Cheney, in turn, turned to top officials of U.S. energy firms, including the Enron Corporation, to provide advice and recommendations on major issues./2/

As the NEPDG began its review of U.S. energy policy, it quickly became apparent that the United States faced a critical choice between two widely diverging energy paths: it could continue down the road it had long been traveling, consuming ever-increasing amounts of petroleum and – given the irreversible decline in domestic oil production – becoming ever more dependent on imported supplies; or it could choose an alternative route, entailing vastly increased reliance on renewable sources of energy and a gradual reduction in petroleum use. Clearly, the outcome of this decision would have profound consequences for American society, the economy, and the nation’s security. A decision to continue down the existing path of rising petroleum consumption would bind the United States ever more tightly to the Persian Gulf suppliers and to other oil-producing countries, with a corresponding impact on American security policy; a decision to pursue an alternative strategy would require a huge investment in new energy-generation and transportation technologies, resulting in the rise or fall of entire industries. Either way, Americans would experience the impact of this choice in their everyday life and in the dynamics of the economy as a whole; no one, in the United States or elsewhere, would be left entirely untouched by the decision on which energy path to follow./3/

The National Energy Policy Development Group wrestled with these choices over the early months of 2001 and completed its report by early May. After careful vetting by the White House, the report was anointed as the National Energy Policy (NEP) by President Bush and released to the public on May 17, 2001./4/ At first glance, the NEP – or the “Cheney Report,” as it is widely known – appeared to reject the path of increased reliance on imported oil and to embrace the path of conservation and renewable energy. The NEP “reduces demand by promoting innovation and technology to make us the world leader in efficiency and conservation,” the President declared on May 17./5/ But despite all of the rhetoric about conservation, the NEP does not propose a reduction in America’s overall consumption of oil. Instead, it proposes to slow the growth in U.S. dependence on imported petroleum by increasing production at home through the exploitation of exploiting untapped reserves in protected wilderness areas.

As is widely known, the single most important step toward increased domestic oil production proposed by the NEP was the initiation of drilling on the Arctic National Wildlife Refuge (ANWR), a vast, untouched wilderness area in northeastern Alaska. This proposal has generated enormous controversy in the United States because of its deleterious impact on the environment; but it has also allowed the White House to argue that the Administration is committed to a policy of energy independence. However, careful examination of the Cheney report leads to entirely different conclusion. Aside from the ANWR proposal, there is nothing in the NEP that would contribute to a significant decline in U.S. dependence on imported petroleum. In fact, the very opposite is true: the basic goal of the Cheney plan is to increase the flow of oil from foreign suppliers to the United States.

In the end, therefore, President Bush did make a clear decision regarding America’s future energy behavior, but the choice he made was not that of diminished dependence on imported oil, as suggested by White House rhetoric. Knowing that nothing can reverse the long-term decline in domestic oil production, and unwilling to curb America’s ever-growing thirst for petroleum products, he decided to continue down the existing path of ever-increasing dependence on foreign oil.

The fact that the Bush energy plan envisions increased rather than diminished reliance on imported petroleum is not immediately apparent from the President’s public comments on the NEP or from the first seven chapters of the Cheney report itself. It is only in the eighth and final chapter, “Strengthening Global Alliances,” that the true intent of the Administration’s policy – increased dependence on imported oil – becomes fully apparent. Here, the tone of the report changes markedly, from a professed concern with conservation and energy efficiency to an explicit emphasis on securing more oil from foreign sources. “We can strengthen our own energy security and the shared prosperity of the global economy,” the NEP states, by working with other countries to increase the global production of energy. To this end, the President and his senior associates are enjoined by the Cheney report to “make energy security a priority of our trade and foreign policy.”/6/

But while acknowledging the need for increased supplies of imported petroleum, the Cheney report is very circumspect about the amount of foreign oil that will be required. The only clue provided by the report is a chart of of America’s net oil consumption and production over time. According to this image, domestic U.S. oil field production will decline from about 8.5 million barrels per day (mbd) in 2002 to 7.0 mbd in 2020 while consumption will jump from 19.5 mbd to 25.5 mbd, suggesting that imports or other sources of petroleum (such as natural gas liquids) will have to rise from 11 mbd to 18.5 mbd./7/ It is to procure this increment in imported petroleum – approximately 7.5 mbd, or the equivalent of total current oil consumption by China and India combined – that most of the recommendations in Chapter 8 of the NEP are aimed.

To facilitate American access to overseas sources of petroleum, the Cheney report provides a roster of 35 foreign policy recommendations – exactly one-third of all of the recommendations in the report. Although many of these proposals are region or country-specific, the overall emphasis is on removing obstacles – whether political, economic, legal, and logistical – to the increased procurement of foreign oil by the United States./8/

The Cheney report’s emphasis on procuring ever-increasing supplies of imported energy to satisfy America’s growing demand will have a profound impact on American foreign and military policy in the years ahead. Not only will American officials have to negotiate access to these overseas supplies and arrange for the sorts of investments that will make increased production and export possible, but they must also take steps to make certain that foreign deliveries to the United States are not impeded by war, revolution, or civil disorder. These imperatives will govern U.S. policy toward all significant energy-supplying regions, especially the Persian Gulf area, the Caspian Sea basin, Africa, and Latin America.

As will become evident from the discussion that follows, moreover, implementation of the Cheney energy plan will also have significant implications for U.S. security policy and for the actual deployment and utilization of American military forces. This is so because most of the countries that are expected to supply the United States with increased petroleum in the years ahead are riven by internal conflicts or harbor strong anti-American sentiments, or both. This means that American efforts to procure additional oil from foreign sources are almost certain to encounter violent disorder and resistance in many key producing areas. And while U.S. officials might prefer to avoid the use of force in such situations, they may conclude that the only way to ensure the continued flow of energy is to guard the oil fields and pipelines with American soldiers.


To add to Washington’s dilemma, the very fact of U.S. troop deployments in the oil-producing areas is likely to stir up resentment from inhabitants of these areas who fear the revival of colonialism or who object to particular American policies (such as, for example, U.S. support for Israel). As a result, American efforts to safeguard the flow of oil could well result in the intensification rather than the diminution of local disorder and violence – leading, in turn, to the deployment of additional American troops and a continuing spiral of confrontation and conflict./9/

To fully appreciate the manifold consequences of the Bush Administration’s energy plan for American foreign and military policy, it is useful to examine U.S. interests and behaviors in each of the regions that are seen in Washington as a major source of imported petroleum in the years ahead, notably the Persian Gulf, the Caspian Sea basin, the West coast of Africa, and Latin America.


Although the United States currently obtains only about 18 percent of its imported petroleum from the Persian Gulf area, Washington perceives a significant strategic interest in the stability of Gulf energy production because its major allies, including Japan and the Western European countries, rely on imports from the region, and because the Gulf’s high export volume has helped to keep world oil prices relatively low, thus benefitting the petroleum-dependent U.S. economy. With domestic production in decline, moreover, the United States will become ever more dependent on imports from the Gulf. For this reason, the NEP observes, the Persian Gulf “will remain vital to U.S. interests.”/10/

American policy with regard to the protection of Persian Gulf energy supplies is unambiguous: when a threat arises, the United States will use whatever means are necessary, including military force, to ensure the continued flow of oil. This principle was first articulated by President Jimmy Carter in January 1980, following the Soviet invasion of Afghanistan and the fall of the Shah, and has remained American policy ever since./11/   In accordance with this principle – known since 1980 as the “Carter Doctrine” – the United States has used force on several occasions: first, in 1987-88, to protect Kuwaiti oil tankers from Iranian missile and gunboat attacks, and then in 1990-91, to drive Iraqi forces out of Kuwait. /12/

In explaining the need to use force on these occasions, U.S. officials have repeatedly stressed the importance of Persian Gulf oil to American economic stability and prosperity. “Our strategic interests in the Persian Gulf region, I think, are well known, but bear repeating,” then Secretary of Defense Dick Cheney told the Senate Armed Services Committee on September 11, 1990, five weeks after the Iraqi invasion of Kuwait. In addition to our security ties to Saudi Arabia and other states in the area, “We obviously also have a significant interest because of the energy that is at stake in the Gulf.” Iraq already possesses 10 percent of the world’s oil reserves, he explained, and, by seizing Kuwait, it acquired another 10 percent; the occupation of Kuwait also placed Iraqi forces within a few hundred miles of another 25 percent, in the Eastern Province of Saudi Arabia. “Once [Hussein] acquired Kuwait and deployed an army as large as the one he possesses, he was clearly in a position to be able to dictate the future of worldwide energy policy, and that gave him a stranglehold on our economy and on that of most of the other nations of the world as well.” It is for this reason, Cheney insisted, that the United States had no choice but to employ military force in the defense of Saudi Arabia and other friendly states in the area./13/

Once Iraqi forces were driven from Kuwait, the United States adopted a policy of “containment” of Iraq, employing severe economic sanctions and the enforcement of a “no-fly zone” over northern and Southern Iraq to weaken the Hussein regime and to prevent any new attacks on Kuwait and Saudi Arabia. At the same time, Washington substantially expanded its military presence and basing structure in the Persian Gulf area in order to facilitate future U.S. military operations in the region. Most importantly, the Department of Defense “pre-positioned” vast quantities of arms and ammunition in Kuwait and Qatar so that American troops could be sent to the region and rushed into combat without having to wait weeks or months for the delivery of their heavy equipment from the United States. /14/


By the early spring of 2002, the Bush Administration had concluded that the policy of containment was not sufficient to eliminate the threat posed to American interests in the Gulf by Saddam Hussein, and that more aggressive action was required. Although Iraq’s alleged possessed of weapons of Mass destruction (WMD) was cited as the main reason for acting in this manner, it is instructive to note that Dick Cheney gave equal importance to U.S. energy security in his much-quoted speech of August 26, 2002. “Should [Hussein’s] ambitions [to acquire WMD] be realized, the implications would be enormous for the Middle East and the United States,” he told the annual convention of the Veterans of Foreign Wars. “Armed with an arsenal of these weapons of terror and a seat at the top of ten percent of the world’s oil reserves, Saddam Hussein could then be expected to seek domination of the entire Middle East, take control of a great portion of world’s energy supplies, [and] directly threaten America’s friends throughout the region.”/15/

Of course, oil had nothing to do with Washington’s motives for America’s March 2003 invasion of Iraq – or so we were told. “The only interest the United States has in the region is furthering the cause of peace and stability, not in [Iraq’s] ability to generate oil,” said Ari Fleischer, the White House spokesperson, in late 2002./16/ But a close look at the Administration’s planning for the war reveals a very different picture. In a January briefing by an unnamed “senior Defense official” on U.S. plans for protecting Iraqi oil fields in the event of war, the Pentagon leadership revealed that General Tommy Franks and his staff “have crafted strategies that will allow us to secure and protect those fields as rapidly as possible in order to preserve those prior to destruction.”/17/

As indicated by the “senior official” (presumably Deputy Secretary Paul Wolfowitz), the Bush Administration sought to capture Iraq’s oilfields intact in order to quickly resume Iraqi oil exports and thereby obtain a source of revenue for the occupation and reconstruction of the country. But this is just the beginning of America’s interests in Iraqi petroleum. According to the U.S. Department of Energy (DoE), Iraq possesses proven reserves of 112.5 billion barrels – more than any other country except Saudi Arabia – and is thought to possess another 200 billion barrels in as-yet-undeveloped fields./18/ If these assumptions prove accurate, and if the new regime in Baghdad opens its territory to exploitation by U.S. firms, Iraq could become one of America’s leading oil suppliers in the decades ahead./19/


With the successful U.S. invasion of Iraq, it now appears that the United States is in firm control of the Persian Gulf area and its critical oil supplies. But a realistic assessment of the situation in the Gulf would suggest that long-term stability cannot be assured. Looking into the future, it is evident that American policymakers face two critical challenges: first, to ensure that Saudi Arabia and other Gulf producers increase oil production to the extent required by growing U.S. (and international) demand; and second, to protect the Saudi regime against internal unrest and insurrection.

The need to increase Saudi production is particularly acute. Possessing one fourth of the world’s known oil reserves – an estimated 262 billion barrels – Saudi Arabia is the only country (other than Iraq) with the capacity to satisfy ever-increasing U.S. and international demand for petroleum. According to the DoE, Saudi Arabia’s net petroleum output must increase by 133 percent over the next 25 years, from 10.2 mbd in 2001 to 23.8 mbd in 2025, in order to satisfy anticipated world requirements at the end of that period./20/ But expanding Saudi capacity by 13.6 mbd – the equivalent of total current production by the United States and Mexico – will cost hundreds of billions of dollars and produce enormous technical challenges. The best way to achieve this increase, American analysts believe, is to persuade Saudi Arabia to open up its petroleum sector to substantial U.S. oil-company investment – and this is exactly what the Cheney report calls for. However, any effort by Washington to apply pressure on Riyadh to allow greater American oil investment in the kingdom is likely to meet with significant resistance from the royal family, which nationalized U.S. oil holdings in the 1970s and is fearful of being seen as overly subservient to American bidding.

The Administration faces yet another problem in Saudi Arabia: America’s long-term security relationship with the Saudi regime has become a major source of tension in that country, as growing numbers of young Saudis turn against the United States because of its close ties to Israel and what is seen as Washington’s anti-Islamic bias. It was from this anti-American milieu that Osama bin Laden recruited many of his followers in the late 1990s and obtained much of his financial support. After September 11, the Saudi government cracked down on some of these forces, but underground opposition to the regime’s military and economic cooperation with Washington persists. Finding a way to eradicate this opposition while at the same time persuading Riyadh to increase its oil deliveries to the United States will be one of the most difficult challenges facing American policymakers in the years ahead.

The United States also faces a continuing standoff with Iran. Although Iranian leaders expressed sympathy with the United States following 9/11 and provided modest assistance to U.S. forces during the campaign in Afghanistan, relations between the two countries remain strained. Iran was, of course, included among the three members of the “axis of evil” in President Bush’s January 2002 State of the Union address, leading many in Tehran to fear that the American victory in Iraq will be followed by a U.S. invasion of Iran. Such fears are compounded by American charges that Iran is proceeding with the development of nuclear weapons. And while these concern may not lead to the early outbreak of war between the two countries, it is likely that tensions between Iran and the United States will remain high for the foreseeable future./21/


Although the United States will remain dependent on oil from the Persian Gulf area for a long time to come, American officials seek to minimize this dependency to the greatest degree possible by diversifying the nation’s sources of imported energy. “Diversity is important, not only for energy security but also for national security,” President Bush declared on May 17, 2001. “Over-dependence on any one source of energy, especially a foreign source, leaves us vulnerable to price shocks, supply interruptions, and in the worst case, blackmail.”/22/ To prevent this, the Administration’s energy plan calls for a substantial U.S. effort to boost production in a number of non-Gulf producing areas, including the Caspian Sea basin, the West coast of Africa, and Latin America.

Among these areas, the one that is likely to receive greatest attention from American policymakers is the Caspian Sea basin. According to the DoE, this area houses proven reserves (defined as 90 percent probable) of 17 to 33 billion barrels of oil, and possible reserves (defined as 50 percent probable) of 233 billion barrels – an amount that, if confirmed, would make it the second largest site of untapped reserves after the Persian Gulf area./23/ To ensure that much of this oil will eventually flow to consumers in the West, the U.S. government has made a strenuous effort to develop the area’s petroleum infrastructure and distribution system. (Because the Caspian Sea is land-locked, oil and natural gas from the region must travel by pipeline to other areas; any efforts to tap into the Caspian’s vast energy reserves must, therefore, entail the construction of long-distance export lines.)

The United States first sought to access to the Caspian’s vast oil supplies during the Clinton Administration. Until that time, the Caspian states (except for Iran) had been part of the Soviet Union, and so otside access to their energy reserves was tightly constricted. Once these states became independent, however, Washington waged an intensive diplomatic campaign to open their fields to Western oil-company investment and to allow the construction of new export pipelines. President Clinton himself played a key role in this effort, repeatedly telephoning leaders of the Caspian Sea countries and inviting them to the White House for periodic visits./24/   These efforts were essential, Clinton told President Heydar Aliyev of Azerbaijan in 1997, to “diversify our energy supply and strengthen our nation’s security.”/25/

The Clinton Administration’s principal objective during this period was to secure approval for new export routes from the Caspian to markets in the West. Because the Administration was reluctant to see Caspian oil flow through Russia on its way to Western Europe (thereby giving Moscow a degree of control over Western energy supplies), and because transport through Iran was prohibited by U.S. law (because of its pursuit of weapons of mass destruction), President Clinton threw his support behind a plan to transport oil and gas from Baku in Azerbaijan to Ceyhan in Turkey via Tbilisi in the former Soviet republic of Georgia. Before leaving office, Clinton flew to Turkey to preside at the signing ceremony for a regional agreement permitting construction of the $3 billion Baku-Tbilisi-Ceyhan (BTC) pipeline./26/


While concentrating on the legal and logistical aspects of procuring Caspian energy, the Clinton Administration also sought to address the threat to future oil deliveries posed by instability and conflict in the region. Many of the states on which the United States hoped to rely for increased oil supplies or for the transport of Caspian energy were wracked by ethnic and separatist conflicts. With this in mind, the Administration initiated a number of military assistance programs aimed at strengthening the internal security capabilities of friendly states in the region. This entailed, inter alia, the provision of arms and military training to these forces, along with the conduct of joint military exercises./27/

Building on the efforts of President Clinton, the Bush Administration seeks to accelerate the expansion of Caspian production facilities and pipelines. “Foreign investors and technology are critical to rapid development of new commercially viable export routes,” the Cheney report affirms. “Such development will ensure that rising Caspian oil production is effectively integrated into world oil trade.” Particular emphasis is placed on completion of the BTC pipeline and on increasing the participation of U.S. companies in Caspian energy projects. Looking further ahead, the Administration also seeks to build an oil and gas pipeline from Kazakhstan and Turkmenistan on the east shore of the Caspian to Baku on the west shore, thus permitting energy from Central Asia to flow to the West via the BTC pipeline system./28/

Until September 11, U.S. involvement in the Caspian Sea basin and Central Asia had largely been restricted to economic and diplomatic efforts, accompanied by a number of military aid agreements. To combat the Taliban and Al Qaeda in Afghanistan, however, the Department of Defense deployed tens of thousands of combat troops in the region and established military bases in Kyrgyzstan and Uzbekistan. Some of these troops have now been recalled to the United States, but it appears that the Department of Defense plans to retain its bases in Central Asia. Indeed, there is every indication that the United States plans to maintain a permanent military presence in the area and to strengthen its ties with friendly regimes in the area./29/ This presence is supposedly intended to assist in the war against terrorism, but it is clear that it is also intended to safeguard the flow of petroleum. Most noteworthy, in this regard, is the U.S. decision to deploy U.S. military instructors in Georgia in order to provide counter-insurgency training to the special units that will eventually guard the Georgian segment of the BTC pipeline./30/

Although the Bush Administration has high hopes for the development of Caspian Sea energy supplies, it is evident that many obstacles stand in the way of increased petroleum exports from this region. Some of these are logistical: until new pipelines can be built, it will be difficult to transport large quantities of Caspian oil to the West. Other obstacles are political and legal: the largely authoritarian regimes now in control of most of the former Soviet republics are riddled with corruption and reluctant to adopt the legal and tax reforms needed to attract large-scale Western investment. But when all is said and done, the major problem facing the United States in seeking to rely on the Caspian basin as an alternative to the Persian Gulf is the fact that the Caspian is no more stable than the Gulf, and so any effort to ensure the safety of energy deliveries will entail the same sort of military commitments that the United States has long made to its principal energy suppliers in the Gulf./31/


Another area that is viewed by the Bush Administration as a promising source of oil is West Africa. Although African states accounted for only about 10 percent of global oil production in 2000, the DoE predicts that their share will rise to 13 percent by 2020 – adding, in the process, another 8.3 mbd to global supplies./32/ This is welcome news in Washington. “West Africa is expected to be one of the fastest-growing sources of oil and gas for the American market,” the Cheney report observes./33/

The Administration expects to concentrate its efforts in two countries: Nigeria and Angola. Nigeria now produces about 2.2 mbd, and is expected to double its capacity by 2020 – with much of this additional oil going to the United States. But Nigeria lacks the wherewithal to finance this expansion on its own, and its existing legal system – not to mention widespread corruption and ethnic unrest – tends to discourage investment by outside firms./34/ The Cheney report thus calls upon the Secretaries of Energy, Commerce, and Energy to work with Nigerian officials “to improve the climate for U.S. oil and gas trade, investment, and operations.” A similar outlook governs the Administration’s stance toward Angola. With sufficient external investment, the Cheney report notes, Angola “is thought to have the potential to double its exports over the next ten years.”/35/ But here, too, endemic corruption and an uninviting legal climate have discouraged substantial investment by foreign firms./36/

Much as in the Caspian region, moreover, American efforts to obtain additional oil from Africa could be frustrated by political unrest and ethnic warfare. Indeed, much of Nigeria’s production was shut down during the spring of 2003 because of ethnic violence in the Delta region, the site of much of Nigeria’s onshore oil./37/ The United States is not likely to respond to these challenges by deploying American troops in the area – that undoubtedly would conjure up images of colonialism and so would provoke strong opposition at home and abroad. But Washington is willing to increase its military aid to friendly regimes in the region. Total U.S. assistance to Angola and Nigeria – the two countries of greatest interest to Washington – amounted to some $300 million in Fiscal Years 2002-2004, a significant increase over the previous three-year period./38/   And while the deployment of American troops in the region is not a likely prospect in the short term, the Department of Defense has begun to look at potential basing sites in the region – most notably in the islands of Sno Tomé e Principe – in the expectation that such a deployment may someday be deemed necessary./39/


Finally, the Cheney plan calls for a significant increase in U.S. oil imports from Latin America. The United States already obtains a large share of its imported oil from these countries – Venezuela is now the third largest supplier of oil to the United States (after Canada and Saudi Arabia), Mexico is the fourth largest, and Columbia is the seventh – and Washington hopes to rely even more heavily on this region in the future. As indicated by Secretary of Energy Spencer Abraham, “President Bush recognizes not only the need for an increased supply of energy, but also the critical role the hemisphere will play in the Administration’s energy policy.”/40/

In presenting these aspirations to governments in the region, U.S. officials stress their desire to establish a common, cooperative framework for energy development. “We intend to stress the enormous potential of greater regional energy cooperation as we look to the future,” Abraham told the Fifth Hemispheric Energy Initiative Ministerial Conference in Mexico City on March 8, 2001. “Our goal [is] to build relationships among our neighbors that will contribute to our shared energy security….”/41/ But however sincere, these comments overlook the fundamental reality: all of this “cooperation” is essentially aimed at channeling more and more of the region’s oil supplies to the United States.

The Bush energy plan places particular emphasis on the acquisition of additional oil from Mexico and Venezuela. “Mexico is a leading and reliable source of imported oil,” the Cheney report observes. “Its large reserve base, approximately 25 percent larger than our own proven reserves, makes Mexico a likely source of increased oil production over the next decade.”/42/   Venezuela is considered vital to U.S. energy plans because it possesses large reserves of conventional oil, and because it houses vast supplies of so-called heavy oil – a sludge-like material that can be converted to conventional oil through a costly refining process. According to the NEP, “Venezuelan success in making heavy oil deposits commercially viable suggests that they will contribute substantially to the diversity of global energy supply, and to our own energy supply mix over the medium to long term.”/43/

But U.S. efforts to tap into abundant Mexican and Venezuelan energy supplies will run into a major difficulty: because of a long history of colonial and imperial predation, these two countries have placed their energy reserves under state control and have established strong legal and constitutional barriers to foreign involvement in domestic oil production. Thus, while they may seek to capitalize from the economic benefits of increased oil exports to the United States, they are likely to resist both increased U.S. participation in their energy industries and also any significant increase in oil extraction.   Such resistance will no doubt prove frustrating to American officials, who seek exactly these outcomes. The NEP thus calls on the Secretaries of Commerce, Energy, and State to lobby their Latin American counterparts to eliminate or soften barriers to increased American oil investment.

These endeavors are likely to meet particularly strong resistance in Venezuela, where oil production has long been under state control. A new Constitution adopted in 1999 bans foreign investment in the oil sector, and President Hugo Chávez has taken other steps to impede such investment. Following a prolonged general strike organized by opponents of the President in late 2002 and early 2003, Chávez effectively seized control of the state-owned oil company, Petróleos de Venezuela, S.A. (PdVSA), and fired those managers considered most amenable to links with foreign firms./44/   (Although the United States is not known to have played a direct role in the strike, many of its leaders had been received warmly in Washington and given signals of the Administration’s sympathy for their cause.) So long as Chávez remains in power, then, it is likely that Washington will continue to favor his replacement with someone more sympathetic to U.S. energy priorities.

Energy considerations are also likely to figure prominently in U.S. relations with Colombia. Although known primarily for its role as a supplier of illegal drugs to the United States, Colombia is also a major oil supplier to this country./45/ Efforts to increase Colombian oil production have been hampered, however, by the frequent attacks on oil installations and pipelines mounted by anti-government guerrilla groups. Claiming that these groups also provide protection to the drug traffickers, the United States is assisting the Colombian military and police in their efforts to suppress the guerrillas. Furthermore, under a special $94 appropriation awarded by Congress in 2002, American military instructors are providing counter-insurgency training to the Colombian forces assigned to the protection of the 500-mile-long CaZo Límon pipeline, connecting oilfields in the interior to refineries and export facilities on the Caribbean coast./46/ In seeking additional supplies of energy, therefore, the United States is likely to become increasingly embroiled in the civil war in Colombia.



The implications of all of the above are unmistakable: in its pursuit of ever-growing supplies of imported petroleum, the United States is intruding ever more assertively into the internal affairs of the oil-supplying nations and, in the process, exposing itself to an ever-increasing risk of involvement in local and regional conflict situations. This reality has already influenced U.S. relations with the major oil-producing nations and is sure to have an even greater impact in the future.

At no point, however, does the NEP acknowledge this fundamental reality. Instead, the Cheney plan focuses on the economic and diplomatic dimensions of U.S. energy policy – suggesting thereby that America’s energy dilemmas can somehow be overcome in this fashion. But the architects of the Bush/Cheney policy know better: an energy plan that calls for increased reliance on the Persian Gulf countries and on other suppliers located in areas of recurring turmoil will not be able to overcome every conceivable threat to American energy interests through economic and diplomatic efforts alone. At some point, it may prove impossible to ensure access to a particular source of oil without the use of military force.

It is in this regard that one cannot help but be struck by the striking parallels between the Administration’s energy policy and its preferred military strategy. Here again, as in the case of the Administration’s energy plan, there is a great deal of misunderstanding about what is truly intended. In the view of most observers, the principal thrust of the Administration’s military policy is the development of super-sophisticated weapons and the establishment of a national ballistic missile defense system. But while these are, in fact, major objectives of the Administration plan, they are not the most important objective. Rather, the Administration’s top objective is the enhancement of America’s “power projection” forces – meaning those forces that can be transported from established bases in the United States and Europe to distant combat zones, and then fight their way into the area or otherwise come to the assistance of a beleaguered ally. Typically, power projection forces are said to include both the ground and air combat units intended for penetration of enemy territory plus the ships and planes used to carry these units into the battle zone. Power projection forces also include long-range bombers and the naval platforms – aircraft carriers, surface combatants, and submarines – used to launch planes or missiles against onshore targets.

It is precisely these sorts of forces that have been accorded top priority in the military plans of the Bush Administration. In his first major speech on U.S. military policy, while still a candidate, Bush declared, “Our forces in the next century must be agile, lethal, readily deployable, and require a minimum of logistical support.” In particular, our land forces “must be lighter [and] more lethal”; our naval forces must be able “to destroy targets from great distances”; and our air forces “must be able to strike from across the world with pinpoint accuracy.”/47/ These are exactly the sort of weapons that the Bush Administration has sought since assuming office in February 2001, and, as we have seen, these are precisely the sort of weapons that the Department of Defense relied upon when conducting the March/April 2003 invasion of Iraq.

By the beginning of 2003, the White House had succeeded in incorporating many of its basic strategic objectives into formal military doctrine. These objectives stress the steady enhancement of America’s capacity to project military power into areas of turmoil – that is, to strengthen precisely those capabilities that would be used to protect or gain access to overseas sources of petroleum. Whether this was the product of a conscious linkage between energy and security policy is not something that can be ascertained at this time; what is undeniable is that President Bush has given top priority to the enhancement of America’s power projection capabilities while at the same time endorsing an energy strategy that entails increased U.S. dependence on oil derived from areas of recurring crisis and conflict.


What we have, therefore, is a two-pronged strategy that effectively governs U.S. policy toward much of the world. One arm of this strategy is aimed at securing more oil from the rest of the world; the other is aimed at enhancing America’s capacity to intervene in exactly such locales. And while these two objectives have arisen from different sets of concerns, one energy-driven and the other security-driven, they have merged into a single, integrated design for American world dominance in the 21st Century. And it is this combination of strategies, more than anything else, that will govern America’s international behavior in the decades ahead./48/

* * * * *

  1. 1. Spencer Abraham, “A National Report on America’s Energy Crisis,” remarks before the National Energy Summit, March 19, 2001, electronic document accessed at on April 24, 2001.
  2. 2. See Richard A. Oppel, Jr., “White House Acknowledges More Contacts with Enron,” The New York Times, May 23, 2003.
  3. 3. For background and discussion of these choices, see Strategic Energy Policy Challenges for the 21st Century, Report of an Independent Task Force Sponsored by the James A. Baker III Institute for Public Policy of Rice University and the Council on Foreign Relations, Edward L. Morse, Chair, April 2001, electronic document accessed at
  4. 4. National Energy Policy Development Group, National Energy Policy (Washington, D.C.: The White House, May 2001). (Hereinafter cited as NEPDG, NEP 2001.)
  5. 5. From the transcript of Bush’s speech at River Centre Convention Center, St. Paul, Minn., May 17, 2001, as published in The New York Times, May 18, 2001.
  6. 6. NEPDG, NEP 2001, chap. 8, pp. 1, 3-4.
  7. 7. Ibid., Figure 2, p. x.
  8. 8. To give just one example, the NEP calls on the Secretaries of Energy, Commerce, and State “to deepen their commercial dialogue with Kazakhstan, Azerbaijan, and other Caspian states to provide a strong, transparent, and stable business climate for energy and related infrastructure projects.” Ibid., chap. 8, p. 13.
  9. For elaboration of this point, see Klare, “The Deadly Nexus: Oil, Terrorism, and America’s National Security,” Current History, December 2002, pp. 414-20.
  10. NEPDG, NEP 2001, chap. 8, p. 4.
  11. For background, see Michael A. Palmer, Guardians of the Gulf (New York: The Free Press, 1992). See also Michael Klare, Resource Wars: The New Landscape of Global Conflict (New York: Metropolitan Books, 2001), pp. 51-80.
  12. See Palmer, Guardians of the Gulf, pp. 102-242.
  13. 13. U.S. Congress, Senate, Committee on Armed Services, Crisis in the Persian Gulf Region: U.S. Policy Options and Implications, Hearings, 101st Congress, 2nd Session (Washington, D.C.: U.S. Government Printing Office, 1990), pp. 10-13.
  14. For details, see Klare, Resource Wars, pp. 62-68.
  15. From the transcript of Cheney’s speech in The New York Times, August 27, 2002.
  16. As quoted in Serge Schmemann, “Controlling Iraq’s Oil Wouldn’t Be Simple,” The New York Times, November 3, 2002.
  17. From the transcript of a Department of Defense news briefing, The Pentagon, January 24, 2003, electronic document accessed at on January 27, 2003.
  18. U.S. Department of Energy, Energy Information Administration, “Iraq,” Country Analysis Brief, electronic document accessed at www.eia.doe/gov/cabs/iraq.html on October 23, 2002.
  19. For discussion of Iraq’s long-term energy potential and the potential involvement of international firms, see International Energy Agency (IEA), World Energy Outlook 2001 (Paris: IEA, 2001), pp. 104-7. See also “Don’t Mention the O-Word,” The Economist, September 14, 2002, pp. 25-27; Neela Banerjee, “Iraq Is a Strategic Issue for Oil Giants, Too, The New York Times, February 22, 2003.
  20. DoE/EIA, IEO 2003, Table D1, p. 235.
  21. For background and discussion, see Kenneth Katzman, Iran: Current Developments and U.S. Policy, Issue Brief for Congress (Washington, D.C.: Congressional Research Service, Library of Congress, March 13, 2003). See also David S. Cloud, “U.S., Iran, Stall on Road to Rapprochement,” Wall Street Journal, May 12, 2003.
  22. From the transcript of Bush’ speech of May 17, 2001, as published in The New York Times, May 18, 2001.
  23. U.S. Department of Energy, Energy Information Administration, “Caspian Sea Region,” Country Analysis Brief, February 2002, electronic document accessed at on February 22, 2002.
  24. For background, see Klare, Resource Wars, pp. 84-92.
  25. “Visit of President Heydar Aliyev of Azerbaijan,” statement by the Press Secretary, the White House, August 1, 1997, electronic document accessed at on March 2, 1998. [add: background on US oil company /admin interest in Caspian]
  26. For background and discussion, see Klare, Resource Wars, pp. 88-92, 100-4.
  27. Ibid., pp. 95-97.
  28. NEPDG, NEP 2001, chap. 8, pp. 12-13.
  29. See “The Yankees Are Coming,” The Economist, January 19, 2002, p. 37; Jean-Christophe Peuch, “Central Asia: U.S. Military Buildup Shifts Spheres of Influence,” Radio Free Europe/Radio Liberty, Prague, January 11, 2002.
  30. See Chip Cummins, “U.S. Plans to Send Military Advisers to Georgia Republic,” Wall Street Journal, February 27, 2002; Oil and Gas Journal Online, “Azerbaijan, Georgia Address Security Threats to BTC Pipeline,” January 23, 2003, electronic document accessed at on January 24, 2003.
  31. For discussion, see Jim Nichol, Central Asia’s New States: Political Developments and Implications for U.S. Interests, Issue Brief for Congress (Washinton, D.C.: Congressional Research Service, Library of Congress, April 1, 2003). See also Martha Brill Olcott, “The Caspian’s False Promise,” Foreign Policy, Summer 1998, pp. 95-113.
  32. DoE/EIA, IEO 2002, Table D1, p. 239.
  33. NEPDG, NEP 2001, chap. 8, p. 11. See also “Black Gold,” The Economist, October 26, 2002, pp. 59-60; James Dao, “In Quietly Courting Africa, White House Likes Dowry,” The New York Times, September 19, 2002.
  34. See U.S. Department of Energy, Energy Information Administration, “Nigeria,” Country Analysis Brief, January 2002, electronic document accessed at on October 21, 2002.
  35. NEPDG, NEP 2001, chap. 8, p. 11.
  36. U.S. Department of Energy, Energy Information Administration, “Angola,” Country Analysis Brief, November 2002, electronic document accessed at on December 2, 2002.
  37. See “Nigerian Troops Move Into Delta to Put Down Ethnic Riots,” The New York Times, March 20, 2003; Sarah Moore, “Nigeria’s New Challenge for Big Oil,” Wall Street Journal, July 26, 2002; Somini Sengupta, “Nigerian Strife, Little Noted, Is Latest Threat to Flow of Oil,” The New York Times, March 22, 2003.
  38. U.S. Department of State, Congressional Budget Justification: Foreign Operations, Fiscal Year 2004, February 2003, electronic document accessed at on February 27, 2003.
  39. See Antony Goldman and James Lamont, “Nigeria and Angola to Discuss U.S. Plan for Regional Military Base,” Financial Times, October 4, 2001; “U.S. Naval Base to Protect Sao Tome Oil,” BBC News World Edition, August 22, 2002, electronic document accessed at on March 6, 2003.
  40. Spencer Abraham, Remarks before the Fifth Hemispheric Energy Initiative Ministerial Conference, Mexico City, March 8, 2001, electronic document accessed at on April 24, 20041. Ibid.
  41. NEPDG, NEP 2001, chap. 8, p. 9.
  42. Ibid., Chap. 8, p. 10.
  43. See “Venezuela Oil Woes Are Long Term,” Wall Street Journal, February 14, 2003; Juan Forero, “Venezuelan Oilman: Rebel with a New Cause,” The New York Times, Febriary 9, 2003. For background on the Venezuelan oil industry, see U.S. Department of Energy, Energy Information Administration, “Venezuela,” Country Analysis Brief, December 2002, electronic document accessed at on December 20, 2002.
  44. For background on the Colombian oil industry, see U.S. Department of Energy, Energy Information Administration, “Colombia,” Country Analysis Brief, May 2002, electronic document accessed at on May 29, 2002.
  45. See Juan Forero, “New Role for U.S. in Colombia: Protecting a Vital Oil Pipeline,” The New York Times, October 4, 2002.
  46. Speech by Governor George W. Bush at The Citadel, Charleston, South Carolina, September 23, 1999, electronic document accessed at on December 2, 1999.
  47. The author first laid out this argument in Klare, “Les vrais desseins de M. George Bush,” le Monde Diplomatique, November 2002, pp. 1, 16.
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Kurt Cobb: Can Democracy survive without Fossil Fuels?

June 29, 2005  Can Democracy Survive Without Fossil Fuels?  By Kurt Cobb

Is it an accident that the great modern revolutions, both American and French, occurred shortly after James Watt vastly increased the efficiency of the steam engine? Recall that the steam engine’s primary purpose at the time was to pump water out of coal mines. Its perfection ignited an industrial revolution built on fossil fuels. Those fuels also indirectly ignited huge social and political changes that included modern demands for greater equality and democracy. Can those values thrive without fossil fuels?

Ancient Athens was democratic long before fossil fuels were discovered. In reality, democracy depends on some energy source that makes it possible for citizens to have the time to govern themselves. The citizenry must also enjoy a rough equality that doesn’t put some citizens so far above others as to threaten their solidarity. So, what was that energy source? Slaves.

This explains, in part, why some founders of the American republic were able to embrace slavery. It had existed alongside democracy before. But, even as they embraced it, industrial development on the American continent began to erode its necessity. The plenitude of energy from fossil fuels would ultimately render slavery uneconomic. A free man in charge of a machine run on fossil fuels could do far more work than any human in bondage could ever hope to do manually. And, thus owning machines and their fuel supplies became more important than owning the labor to run them. The machine age required labor to become more mobile–in essence, to go where the machine rather than the master dictated. Is it yet another accident of fate that the first successful American oil well was drilled in 1859 and that the Civil War, the war that ended slavery, followed only two years later?

The power of fossil fuels was already erasing the biological differences in physical strength between men and women. The women’s suffrage movement which had begun many years before the Civil War was intent on erasing their political differences as well. But fossil fuels also sent women and children into the factories where their size and strength mattered less than their docility.

As more and more energy was extracted from the ground in the form of oil and coal, modern industrial nations found they no longer required the labor of children. Nor was it necessary to maintain poor working conditions and living standards among the working classes in order to allow the rich to live well. Fossil fuels began to create enough wealth to go around. Rising prosperity muted competitive spirits.

In the middle of the cheap oil boom in America, many middle-class mothers could stay at home with their children. Only fathers worked. The subsidy of fossil fuels had essentially reached its apex. By this time those middle-class mothers could vote, slavery (though not discrimination) was a distant memory and child labor had long been outlawed. Social and political progress had coincided with the parabolic trajectory of America’s fossil fuel supplies.

Politically this was the period of strong labor unions, high taxes and huge public projects–schools, hospitals, highways, and public power. Is it another coincidence that this period of fast growth and narrowing inequality came to a halt shortly after the production of oil in the United States peaked in 1970?

As fossil fuels deplete, especially oil and natural gas, will we be able to maintain the solidarity and consent that make modern democracies so stable? Or will we each fall back on our competitive natures as we struggle for our share of dwindling resources. It depends on whether alternative energy sources can provide sufficient energy at affordable prices.

It may also depend on how we organize ourselves. A lower energy future may cause political power to flow back to local communities as central governments lose their influence for lack of energy resources. If we can relearn our cultural instincts for local governance, perhaps we can retain much of the political and social progress that has been, in part, a gift of the fossil fuel age. If we can’t reawaken those instincts, we may sadly find out that the only thing between us and despotism is a barrel of oil, one that may soon be taken away.

[Alice Friedemann comment: I fear that in a world where “might makes right” and men are more valued for their muscle and fighting power than women, whatever gains women have made will be lost.  It’s already happening even without the decline of fossil fuels already, the 2016 Republican candidates all vie to outdo each other in denying women the rights to their own bodies via birth control and abortion ]

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Review of Schneider-Mayerson “Peak Oil Apocalyptic Environmentalism and Libertarian Political Culture”

I just finished a great book about life in Russia called “Nothing is true and everything is possible, the surreal heart of the new Russia” by Peter Pomerantsev. He reveals how Soviet propaganda is propagated through TV shows whose goal is to keep people so entertained and unaware of the depth of corruption that they see no need to try to change the system. As I read it I couldn’t help thinking about the fact there are no wall street or banking executives in jail for their mortgage, student loan, insurance, and dozens of other white collar crime scams.  However bad things are here, they’re not as bad as the Soviet Union, but the point of the book is to show how vulnerable we are to falling to such depths, and it does appear we are heading that way.

Anyhow, it made me even more aware of the ways in which Matthew Schneider-Mayerson’s Phd thesis “Peak politics resource scarcity and libertarian political culture in the United States”, which was made into the book “Peak Oil Apocalyptic Environmentalism and Libertarian Political Culture” is flawed.

It does not criticize Peak oil scientifically, but instead uses uses damning language to imply the “labyrinthine subculture of peakists” are evangelical cult members and selfish individualist survivalists.

Before I start my critique, let me say that Schneider-Mayerson is not a “limits to growth” denier, understands why peak oilers believe what they do, and says many things I agree with.

It was interesting to see what an outsider made of the peak oil movement, but it will be a shame if this is a document future historians base their understanding on.

His strange critique of those with peak oil awareness appears to be driven by his perception that those with peak oil beliefs aren’t politically active enough, and not doing much to change things at the governmental level, and sees this as mainly because it is  an internet movement, but political movements need communities that see each other in person.

He thinks it is just another apocalyptic movement because he believes there are solutions to the oil crisis.

I skimmed the 301 pages because I’ve been part of the peak oil community since 2000 and upset that a Ted conference would cover this University of Chicago press book.

I also don’t like his use of the word “peakist”, which is a derogatory term, similar to the word “Darwinist” used by creationists to denigrate those who believe in evolution.

He describes “peakists” with political labels: 29% are liberal and 27% are very liberal with only 7% defining themselves as conservative.

Science is not political.  How people vote has nothing to do with scientific evidence and facts.  Spinning “climate change” belief as “democratic” is a propagandist way of deflecting attention away from scientific evidence and making it appear as though any evidence that exists is “liberal” rather than scientific.

In Chris Mooney’s book “The Republican Brain: The Science of Why They Deny Science – and Reality”, he explains why liberals believe in scientific evidence and conservatives are less likely to do so. I can’t remember the exact number, but something like 85% of university science professors vote democratic, and the rest are mostly independents, because the essence of science is changing your beliefs as new evidence arises. Conservatives like fixed, unchanging ideas and on average do not do well at universities. If so-called peakists are mainly liberal, that may also reflect a higher scientific awareness of the earth’s problems than the average citizen. Whether they are liberal or not is irrelevant.

Peak oil smeared as a religious cult

“Peakists” are smeared with labels such as “Cassandra’s evangelism” or “peak oil Jeremiah James Howard Kunstler”.  He describes people who become “peak oil aware” as converted, as if it were a cult.  Or as having had “an ideological transformation”… and “Peak oil believers described their awareness of oil depletion and environmental crisis in terms that were strikingly similar to a religious conversion… Many believers found new occupations, purchased land, and sundered ties with friends and family.”

Peak oil just another one of many apocalyptic movements

The author states “While peakism may seem like an unusual belief-system to some readers, the peak oil movement does not seem quite as “fringe” when situated in the context of American apocalypticism.  In 1999, for example, 36% of Americans admitted to planning to “stock pile food and water” in preparation for the fallout of the “Y2K” computer bug, while a 2006 poll found that a quarter of Americans believed that Jesus Christ would return to the Earth the following year.  Connecting contemporary events to millennial prophecies is also not uncommon – in 2002, for example, one in four Americans claimed that the Bible had predicted the September 11th attacks. While peakism lacks a concept ion of the sacred or supernatural, it certainly has religious dimensions.

Peak oil beliefs come from watching too many apocalyptic movies

“Of all media platforms and genres, Hollywood disaster films exerted perhaps the strongest influence on peak oil believers.”

There are 35 pages (182-217) of this drivel about apocalyptic books and movies influencing those with peak oil awareness, rather than scientific evidence from peer-reviewed journals such as energy policy and the obvious fact that there are limits to growth on a finite planet.

Furthermore, of all the possible videos explaining peak oil, he picks the stupidest most outrageous one possible: “Oily Cassandra” in her 2007 YouTube video “Porn. Peak Oil. Enjoy”, where half of the screen is a woman dancing erotically. Not videos of Richard Heinberg, Gail Tverberg, Nate Hagens, Kurt Cobb, Colin Campbell, and so on.

Environmentalists smart, peakists simple

“Whereas most environmentalists now see resource scarcity as tightly bound to economic and social issues that are highly variable, peakists tend to hold fast to a simplistic version of the limits-to-growth environmental paradigm where economic and social issues are at the mercy of ecological limits.”

Where’s the science?

There is a notable absence of science and the scientists within the peak oil sphere. His thesis spends a lot of time on James Howard Kuntler and someone I have never heard of, “Peak Shrink” Kathy McMahon.  Where are Charles A.S. Hall Colin Campbell, Walter Youngquist, Kjell Aleklett, Tad Patzek, David Pimentel, Ken Deffeyes, and so on?

He accuses peakists of selfish individual survivalism, not activism

He condemns the peak oil movement for being individualist in preparation rather than a collective movement like Occupy rather than composed of dedicated environmental activists.

But what about House Representative Roscoe Bartlett and the Peak Oil caucus he formed there?

What about Denver Mayor Hickenlooper (now governor of Colorado) who was a keynote speaker at the first Association for the Study of Peak Oil (ASPO) 2005 conference in Denver?  One of the sessions was led by members of the Boulder City council about why it was so hard for them to take action on peak oil issues.

What about San Francisco, Portland, Oakland, and many other cities with Peak oil task forces?

What about all the peak oil meetup groups?

He does mention Transition towns, and how ineffective they have been in most cities in the U.S., which is a fair criticism.  But just as an obscure ecology club in Argentina was the seed of a local currency used across the country when their economic system collapsed in 2001, Transition towns and other groups will help the rest of their community cope when times get harder.

Also a great deal of peak oil activism is “hidden” — taking place in the local food movement, bicycling advocates, and many other groups that are “peak oil aware” but deliberately choose not to mention this because it frightens people and/or isn’t their core mission. Also, these other activists think that batteries, wind, solar, nuclear, wave, tidal, and other mainly electrical solutions could save us, but don’t think this will happen in time to prevent a hard landing due to existing political and economic business interests.

He also ignores the fact that Heinberg, many scientists, and many peak oil activists have written and met with thousands of political leaders from city councilmen to state and national political leaders, not just in the U.S., but around the world. Matt Simmons met with former president George W. Bush. High-level European Union politicians have spoken at the peak oil conferences in Europe.  The Australian parliament had meetings all over Australia to get the input of their citizens on how to cope with peak oil.

He seems to be totally unaware of the reasons why political, economic, and scientific leaders deny peak oil and aren’t doing anything about it despite being aware of the problem (as I describe in .

Also, we have all tried to convince others via blogs, conversations, and so on, to little effect.  This is too depressing a movement to ever catch on.  Most of the people who came to the Oakland meetup that began in 2004 never returned.

He is misguided in thinking that there is no activism.  Nate Hagens recently organized a conference at Stanford on Net Energy, which Nobel Prize winner Steven Chu spoke at.

ABOVE ALL, THERE IS NO SOLUTION.  This is why there is not a movement.  We are way over carrying capacity and there is no substitute for diesel for trucks, trains, or ships, which can not be electrified or run on batteries (see my upcoming book from Springer “When Trucks Stop Running: Energy and the Future of Transportation”). Without trucks, civilization collapses in less than a month.

The problem is that making preparations to shift to back to a 14th century agricultural society are simply not possible because no one but a segment of peak oilers believe this. Do you really think any politician is going to fund a program to breed more oxen, or shift from industrial to organic agriculture?  Of course not. They believe that fusion, solar, wind, nuclear, hydrogen and so on will save us.  And why not?  They have law degrees and know little about systems ecology, energy, physics, and other scientific matters.

The peak oil arguments have great scientific justification — it is not an apocalyptic fantasy!  Although oil is the master resource that makes all others possible, peak everything — topsoil, aquifers, forests, phosphorous, coal, natural gas, and consequent resource wars mean we cannot continue business as usual for much longer. Again: this is a scientific, not a political or apocalyptic point of view.

Throughout this book he slams the movement in both big and in smaller ways, even though he holds environmental beliefs himself, as in this description of the ASPO 2009 conference: “Like other subcultures, peakists expressed and advertised their identities through commercially produced and distributed goods.  Next to us, Smiley Oil, a conference sponsor, was busy demonstrating its educational pea k oil video game, Energy Worlds.  Its logo was sinister but somehow appropriate to its referent, a cartoonish drop of black gold with a white Cheshire grin.  A young woman sold ASPO mugs alongside shirts that proclaimed “I [heart] Peak Oil,” and a much wider variety of items could be found online, including bumper stickers, flags, and baby bibs.”

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Reduce vehicle fuel consumption to increase energy security

[This is a really interesting House session that discusses U.S. energy policy, the need for consumers to be educated about why they should buy more fuel efficient cars, and just a little of of the push-back from the auto industry (see the full 140 pages for more), which appears to have been strong enough to prevent better fuel economy standards despite the obvious risks of oil shocks and the very high cost of war in the Middle East.  Alice Friedemann,

Excerpts from: U.S. House. February 9, 2005. Improving the nation’s energy security:- can cars and trucks be made more fuel efficient ? Committee on science, House of Representatives, Serial No. 109-3. 140 pages.

Also see: David L. Greene, ORNL: Raise cafe standards and gas tax

Committee on Science Chairman BOEHLERT

Fuel economy is not just an energy issue, it is not just an environmental issue, it is, first and foremost, a national security issue.

Our nation is ever more dependent, stunningly dependent on the world’s most unstable region for the energy that is the lifeblood of our economy. Could anything be more critical? We are like a patient in critical care who needs a daily transfusion and can only hope to get it from an iffy, black market supplier. And yet we act as if everything will be healthy forever.

We are doing next to nothing to reduce our reliance on foreign oil. About 60% of the oil we consume each day is used for transportation; 45% just for cars and light trucks. We can not reduce our oil consumption meaningfully unless we address transportation. That is a simple, unarguable fact. And yet while many areas of the economy have been significantly more energy efficient over the past three decades or so, our nation’s fuel economy is worse than it was 15 years ago. That ought to be unacceptable.

It ought to be especially unacceptable, intolerable, really, when we have the technology to improve fuel economy without reducing safety, without harming the economy, and without reducing the options people have in the automobile showroom. There really is no debate about whether we have the technology we need to improve fuel economy. The only debate is whether we are willing to do something about it. I want everyone to remember the costs of inaction: they can be measured in dollars, particularly in the funds we spend on the military and homeland security, and they can also be measured in lives, as we can see in daily news reports. We need to consider the very real costs of being utterly dependent on unstable regions to carry out our most basic daily tasks.

In our view, CAFE increases provided the largest demand reduction by far. New technologies like hybrids and diesels will enter the fleet slowly and be used, we believe, in large part to increase power, weight, and other performance attributes instead of fuel economy absent increases in CAFE.

William K. Reilly. co-chair of the National Commission on Energy Policy.

Over the next 20 years, the United States and the world at large anticipate a 50%-plus increase in oil demand. That is a very large number.  The 20 years from 1980 to 2000 was a time of tremendous innovation in technology, and new development capacity in the oil industry when the amounts of hydrocarbons obtained from a field were increased from 20% to 50%. It was a period when deep-water oil exploration and development more than 5,000 feet deep became possible in the Gulf and other places. It was a period when there was a lot of new technology that allowed drilling from one well to go out into several fields from that single point.

Yet despite all that innovation, all that new technology, and all that effort, the oil industry worldwide experienced only a 20% increase in production over that 20-year period. As we look ahead to the next 20 years, seeing a 50% expected demand increase, it just isn’t there. The energy sector has for several years experienced a consistent and growing gap between oil production and the discovery of replacement reserves.

House Representative Michael M. Honda, California 

I continue to be amazed by the response of many people in this country to the prospect of conserving energy. We know that fossil fuel supplies both here and abroad are limited—they are fossil fuels, remnants from biological processes that took place [a long time] ago but aren’t occurring now. These fuels will run out eventually. There may be legitimate debate about exactly when that will happen, but the fact is that they will run out. Since our nation is nearly completely dependent on a finite source of energy, it seems to me that what we need to do in the short-term is reduce our levels of consumption of our finite energy supplies to make them last longer. CAFE standards are an excellent way of improving fuel economy in vehicles. By requiring vehicles to be efficient, the government can stand up for the long-term health of our nation and planet.

GAL LUFT Executive Director, Institute for the Analysis of Global Security (IAGS).

I would like to address the strategic context of our current dependence on imported oil and its implications on national security and offer new approaches to the fuel efficiency debate.

China’s demand for energy and other raw materials and its hunt for steady oil supplies in areas where the U.S. has strategic interests could undermine Sino-American relations. The U.S.–China Economic and Security Review Commission warned in its 2004 report that China’s growing dependence on imported oil is a key driver of its relations with terrorist-sponsoring governments. The report said: ‘‘China’s approach to securing its imported petroleum supplies through bilateral arrangements is an impetus for nonmarket reciprocity deals with Iran, Sudan, and other states of concern, including arms sales and WMD-related technology transfers that pose security challenges to the United States.’’ There is growing recognition within the oil industry that the rise of China will bring about a bidding war for Middle East supply between East and West. Dave O’Reilly, chief executive of ChevronTexaco warned recently against alliances formed between Asian countries and Middle East entities, calling for the U.S. Government to recognize and understand the implications of such a geopolitical shift. Without a comprehensive strategy designed to prevent China from becoming an oil consumer on par with the U.S., the U.S. might find itself in the future facing aggressive competition from China over access to Middle East oil with grave implications for global security.

The Strategic Impact of Our Oil Dependence

In 2004 oil prices have grown by close to 40%. As a result, the United States spent more than $18 million per hour on foreign oil. In the same period, OPEC’s oil export revenues grew by 42% to $338 billion. According to the U.S. Energy Information Administration (EIA) throughout 2005 oil prices will continue to stay high and OPEC will rake $345 billion in revenue. This transfer of wealth [to the Middle East) is of historical proportions and not only exacting a hidden tax on the American economy but also undermining our national security and the security of the world at large. It is unfortunate that most major oil producing countries are either politically unstable and/or at odds with the U.S. Some of the world’s largest oil producing nations are sponsors of or allied with radical Islamists who foment hatred against the U.S. The petrodollars we provide such nations contribute materially to the terrorist threats we face. In time of war, it is imperative that our national expenditures on energy be redirected away from those who use them against us.

Beyond the underwriting of terror, our present dependency creates unacceptable vulnerabilities. As we have learned from Osama bin Ladin’s messages, al Qaeda terrorists know that oil is the Achilles heel of the world economy and disrupting the world’s oil supply is central to their efforts to defeat the U.S. and its democratic allies. In Iraq and Saudi Arabia, America’s enemies have demonstrated that they can advance their strategic objective by attacking critical oil infrastructure and personnel. In Iraq alone there have been more than 200 attacks against pipelines and oil installations in the past 20 months. These targets are readily found not only in the Mid East but also in other regions to which Islamists have ready access such as the Caspian Basin and Africa. Over time, these attacks are sure to become more sophisticated and their destructive effects could be difficult, costly and time-consuming to undo.

In the longer run America’s national security can be adversely influenced by China’s growing demand for oil. Chinese oil consumption is increasing seven times faster than that of the U.S. and its imports have grown by over 35% per year for 2 consecutive years. All signs indicate that China’s appetite for oil will continue to grow in the years to come. According to the International Energy Agency, by 2030 China will import more oil than the U.S. does today. There is no doubt that China’s robust economic growth has already been felt on the global energy scene and has been a major contributor to last year’s spike in prices.

U.S. Approach to Oil Dependence

In light of intensifying military involvement in the Middle East, terrorist attacks on oil infrastructure, persistently high global oil prices, and the rise of China, oil dependence has become an incipient national security emergency. To address the problem of our dependence on volatile suppliers, the U.S. has pursued a 3-part strategy: • Diversifying sources; • Managing inventory in a strategic reserve; • Increasing the transportation sector’s energy-consumption efficiency

Diversifying resources is no more than a stopgap solution. In May 2001, when the Bush administration released its National Energy Policy, it proposed to reduce dependence on Middle East oil dependence by targeting alternative oil-supplying nations for government investment and closer alliances, including Angola, Azerbaijan, Colombia, Kazakhstan, Nigeria, Russia, and Venezuela. All of these nations are undemocratic, vulnerable to global terrorism and face significant political and social instability. Increasing U.S. reliance on these states would do little to address U.S. security and economic threats stemming from oil dependency. Given the integrated nature of the world economy we accomplish nothing if we merely shift our own purchases of oil from one of the world’s regions to another. An oil crisis will affect all our economies, regardless of the source of our own imports.

Furthermore, non-OPEC reserves are being depleted almost twice as fast as OPEC’s. This will ensure that our dependence on OPEC will only grow as time goes by. With OPEC countries sitting in the driver’s seat with respect to the world’s oil supply and oil prices, the world’s economic and political future will be compromised. Inventories are a critical element of energy security. But they are limited in scale and only useful to address a short term supply disruption. However, at this moment most major oil consuming nations do not have significant strategic petroleum reserves. This means that a supply disruption will still send international oil prices to the roof regardless of how much stock is kept in the U.S. Though over time it would be advisable to see more countries developing robust strategic petroleum reserves, such action at the point of high oil prices would only create additional demand and hence drive prices up even further.

Improving fuel efficiency in U.S. vehicles is the only course of action which carries no negative consequences. On the contrary, studies show that by reducing demand for oil in the transportation sector and transitioning the economy into an economy based on next generation fuels and automobiles, the U.S. could generate millions of new jobs and billions of dollars worth of investment opportunities.

New Approach to Fuel Efficiency

In the past three decades the debate on improving fuel efficiency has focused mainly on the tension between auto manufacturers, consumers and the government. Though everybody agrees that the U.S. should reduce its oil bill, neither Detroit nor the American consumer is willing to do so for the greater good. The U.S. auto industry shies away from embarking on revolutionary changes in its designs and production lines and by and large resists significant rise in CAFE standards. The American consumer is not willing to accept compromise on cost, comfort, power or performance.

To end the stalemate in the fuel efficiency issue we need to change the terms of the debate. Today when it comes to CAFE the auto industry shoulders the entire burden. But long-term security and economic prosperity depends on technological transformation not only at the vehicle level but also in the fuel that powers it. In other words, to get people to travel more miles per gallon of gas one need not focus only on redesigning the car, making it lighter or improving its engine. We should think in terms of gallon stretchers—making our fuel more efficient. For example, a number of commercially available fuel additives can enhance combustion efficiency by up to 20%.

Apply efficiency standards for heavy-duty trucks. Most of our effort to improve fuel efficiency is focused on light-duty vehicles. But improving the fuel economy of heavy-duty trucks offers no smaller opportunity for oil savings. The heavy-duty trucks sector is responsible for the consumption of close to three million barrels per day of oil. Over two-thirds of this energy is consumed by the heaviest trucks, such as tractor-trailers weighing over 33,000 lbs. Technology assessments by the American Council for an Energy-Efficient Economy (ACEEE) found that conventional technology improvements including enhancements to aerodynamics, weight reduction, improved engine fuel injection and the introduction of hybrid gasoline-electric or diesel-electric drive trains can achieve truck fuel-efficiency advances of 26 to 70 percent at cost-effectiveness. Congress should therefore begin to apply some of the standards for the small cars to the larger vehicle classes especially heavy trucks from 8,500 to 10,000 lbs.

Invest in Public Education. Consumers still rank fuel efficiency way below power, performance, cost and safety in their car buying considerations. As a result the Nation’s fuel efficiency standards have remained stagnant while our oil dependence continues to grow. Barring a catastrophic oil disruption this could only change if the public is to become more aware of the huge impact oil dependence has on our national security. Reduction of our oil bill should be viewed by consumers as a patriotic duty, not pure economic calculation. There is clear need for public education program to connect the dots between our behavior on the road and our national security, between the number of Hummers on the road and the number of Humvees in the Persian Gulf. Another issue on which public education is desirable is the true cost of oil. The most recent estimates suggest that in a non-war year the United States spends $20 to $40 billion in military costs to secure access to Middle East oil supplies, which means that the American taxpayer is paying at least an additional $4 to $5 a barrel for crude oil above market price. These extra dollars are being paid by consumers through their income tax but are not reflected at the price at the gas station. If Americans were more aware of what they pay outside the gas station it would be politically easier to introduce legislative efforts to transfer that tax burden from an indirect mechanism such as income tax to a direct pay-as-you-go tax at the pump.

America takes pride in offering choice in every aspect of our lives. Yet, when it comes to transportation fuels we are offered nothing but petroleum products. We must embark on an effort to diversify our fuel market by introducing domestically produced fuels that are made from waste products or other resources the U.S. is rich in, and that are clean and affordable. The U.S. is no longer rich in oil or natural gas. It has, however, a wealth of other energy sources from which transportation fuel can be safely, affordably and cleanly generated. Among them: hundreds of years-worth of coal reserves, 25 percent of the world’s total (especially promising with Integrated Gasification and Combined Cycle technologies); billions of tons a year of biomass, and further billions of tons of agricultural and municipal waste. Vehicles that meet consumer needs like ‘‘plug-in’’ hybrids can tap America’s electrical grid to supply energy for transportation, making more efficient use of such clean sources of electricity as solar, wind, geothermal, hydroelectric and nuclear power.

Because of the national security imperative we have no time to wait for commercialization of immature technologies such as fuel cells. Far too much focus is being placed on them at the expense of more quickly available solutions. We should focus on real world solutions and implement technologies that exist today and are ready for widespread use. We also don’t have the time and money to embark on massive infrastructure changes. The focus should be on utilizing competitive technologies that do not require prohibitive or, if possible, even significant investment in changing our transportation sector’s infrastructure. Instead, we should permit the maximum possible use of the existing refueling and automotive infrastructure. We need to remember that oil dependence is a global issue which should be addressed internationally. Even if the U.S. was no longer dependent on foreign oil, if the rest of the world still remains beholden to the small club of oil producers the national security problems discussed before will not go away. Only a global effort led by the U.S. to reduce demand for petroleum by distributing the above-mentioned technologies will bring about prosperity and strengthen global security.


The average new car fuel economy rose from 12.9 miles per gallon (mpg) in 1974 to 27.6 mpg in 1985—slightly more than the 27.5 mpg required by the CAFE standards that year. (The average for new light trucks, the category that now includes pickups, SUVs and mini-vans, rose to 19.5 mpg over the same time period.) Today, the standards stand at 27.5 mpg for cars and 21.0 mpg for light trucks.

The average fuel economy of new vehicles sold in the U.S. has declined since reaching a peak in 1987. The major reason is the explosive growth in SUVs, mini-vans, and pickup trucks, which must meet a fuel economy standard that is lower than that for passenger cars. The number of light trucks sold has more than tripled since 1980, while the number of passenger cars has declined slightly over the same period. Today more than half the new cars sold are light trucks. At the same time, CAFE standards have remained stagnant. The fuel economy standard for new cars has not changed since 1990. And until this year, the standard for new light trucks had not changed since 1996. In 1974 cars got 12.9 mpg, in 2005 the café standard was 27.5. In 1985 light trucks, SUVs and mini-vans got 19.5 mpg, now 20.7.

Any improvements in fuel economy in a particular model have been offset by declines in fuel economy in other models (or by increased sales of models with lower fuel economy), allowing the average—which is based on sales of all makes and models—to drop. Proponents of CAFE standards argue that government action is the only way to raise the average by pushing improvements across automakers’ fleets.


K.G. DULEEP.   Managing Director at Energy & Environmental Analysis (EEA). The consumer side of the equation should also not be neglected. Consumers appear to value other attributes, notably size, luxury features and performance over fuel economy, and the appeal for SUV models has not diminished much even at the current gasoline price of $2 per gallon. The market share for light trucks continues to increase and reached a record of almost 55% of the total light vehicle market in 2004. Cars and light trucks with astounding horsepower ratings of 400, 500 and 600 HP are in demand in a country where the national speed limit rarely exceeds 70 mph. These trends will serve to eventually erase the benefits of any amount of technology introduction. Hence, future fuel economy related efforts should include efforts directed at consumer motivation to purchase more efficient rather than more powerful or larger vehicles. This has always been a difficult area for Congress, as any restriction on consumer choice appears politically unacceptable.

The auto industry today makes over 100 models that achieve 30 or better miles per gallon on the highway, yet the sales of these vehicles are very low.

Automaker PUSH-BACK to café standards

Automakers point out that they have made cars and trucks more efficient, pound for pound, by significantly increasing the power and size of vehicles without much change in fuel economy. And they argue that customers prefer power, size and luxury over fuel efficiency. As a result, average vehicle weight has increased by 24% since 1981 and average horsepower has increased by 93%.

Automakers question whether consumers will be willing to pay for efficiency technologies. Even if the technology pays for itself in gasoline savings over the life of the vehicle, they say, many consumers do not consider those kinds of long-term benefits when choosing a vehicle.

According to House Rep Michael M. Honda, Café Standards have not increased over the years because of industry insistence that increased standards would make U.S. manufacturers less competitive and would make vehicles less safe (which the National Academy of Sciences says is NOT TRUE). House Rep Sheila Jackson Lee added that the possible shift of large car manufacturing off-shore raised concerns of domestic job losses.


The Academy identified technologies that in combination, would allow fuel economy increases of 12 to 27 percent for cars and 25 to 42 percent for light trucks without any reduction of safety, and would pay for themselves in fuel savings.

The National Academy of Sciences panel concluded that CAFE standards have played a leading role in preventing fuel economy levels from dropping as much as they otherwise would have as fuel prices declined in the 1990s, and that fuel use by cars and trucks today is roughly one-third lower than it would have been had fuel economy not improved since 1975.

How much oil would an increase in fuel economy save? According to the National Commission on Energy Policy, improving car and light truck fuel economy by 10, 15, and 20% by 2015 would result, by 2025, in an estimated fuel savings of approximately two, three, and 3.5 million barrels of oil a day respectively. Such savings represent a 25 to 40% reduction in the additional amount of oil by which U.S. demand is currently projected to grow by that time, absent other policy interventions.

William K. Reilly. I am one of 3 co-chairs of the National Commission on Energy Policy. My Co-chairs are John Rowe, CEO of Excelon, and John Holdren, a professor at the Kennedy School at Harvard. We are an independent bipartisan group of 16 who came together in 2002 with support from the Hewlett Foundation and foundations: The MacArthur Foundation, Packard Foundation, and the Pew Charitable Trusts.

The Commission released a report at the end of last year entitled “Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges”. The first chapter of this report is about enhancing oil security. The placement of oil security first among all issues reflects the Commission’s view that improving our nation’s oil security is the most significant near term energy challenge we face.

We are going to have to find new efficiencies, new opportunities to be more productive in our use of liquid fuels, alternative fuels, and try to put an economy together, for transportation particularly, that respects a new energy environment.

We recommended that Congress should instruct the National Highway Traffic Safety Administration to significantly strengthen automobile fuel requirements. New standards, we propose, should be phased in between 2010 and 2015.

Our proposal is specifically designed to address political and technical objections to traditional CAFE increases which are: (1) impacts on competitiveness of domestic manufacturers; (2) impacts on domestic jobs; and (3) safety concerns. These are the big 3 that are raised as objections to increases in CAFE.

Spare capacity to compensate for supply disruptions has fallen to a mere 2% of global demand. Left unchanged, these factors suggest that the U.S. economy will continue to suffer from high and volatile oil prices and is at risk of more frequent and serious supply disruptions. Second, the rate of improvement in U.S. oil economic intensity has slowed in recent years. Oil economic intensity is a measure of how much oil is required for the U.S. economy to produce a dollar of economic output. This measure is important because the ability of the U.S. economy to weather oil price shocks improves as oil’s share of our economic output decreases. Since 1970, the U.S. oil economic intensity has dropped by half—a tremendous achievement—largely due to CAFE standards in the late 1970s and early 1980s, and to a shift in the electricity sector away from the use of petroleum. Further improvements would further insulate the U.S. economy from oil price shocks.

Hybrid and passenger diesel vehicles hold the promise for dramatic improvements in vehicle fuel economy. But historical trends suggest that potential fuel economy gains may be undermined unless government acts to reinforce the need for improved vehicle fuel economy. Although U.S. fuel economy has been stagnant since 1987, the vehicle industry has made considerable strides in efficiency. However, these efficiency improvements have been used to increase vehicle horsepower and weight, while still complying with Corporate Average Fuel Economy (CAFE) standards.

This trend—favoring horsepower, weight and other attributes over fuel economy improvements—is likely to continue absent government action. If we as a nation are serious about addressing our dependence upon oil, we must seize the opportunity presented by hybrids and passenger diesels to improve the fuel economy of our vehicle fleet.

During its deliberations, the Commission considered a variety of both major and minor transportation policy measures. These included many of the usual suspects: a gasoline tax, a CAFE increase, alternative fuels, as well as some new ideas: heavy-duty tractor trailer fuel economy, efficiency standards for replacement tires, congestion charges in urban areas. We examined these policy measures against four criteria: (1) the ability to save 1 million barrels per day of oil by 2025, (2) the cost per barrel of oil saved, (3) administrative complexity, (4) political feasibility. Of all the policies reviewed by the Commission, passenger vehicle fuel economy improvements represented the largest opportunity for oil savings over the next 20 years.

K.G. DULEEP.   Managing Director at Energy & Environmental Analysis (EEA). The available conventional technologies have been extensively researched and I can state that there is a consensus among engineers regarding these technologies and their costs and benefits. Table 1 (attached) provides such a listing and is restricted to conventional technologies that are sold in at least one mass-market model in the U.S. as of 2005, to avoid any controversy about technology readiness for the market place.

The data in the table suggests that a total fuel economy improvement of about 26% in small cars to 28% in larger cars and light trucks is possible for much of the new car fleet with no weight reduction whatsoever. These estimates are a little lower than the ones derived by the National Academy of Sciences for two reasons. First, the choice of only those technologies already in the market as of 2005 is more restrictive than the definition used by the NAS. More importantly, I also believe that all of the cost-effective technology in the table could be adopted under free market conditions in most vehicles by 2015 if gasoline prices do not decline significantly, simply due to the fact these technologies pay for themselves. We estimate that about half of the improvement will counterbalanced by consumers buying more luxurious and larger vehicles, SUV models and four-wheel drive

HYBRID & DIESEL TECHNOLOGY. Both technologies offer the prospect for fuel economy improvements of 40 to 50%, more than double the total available from all cost effective conventional technology.

Mr. PORTNEY. If I have a car that gets 50 miles per gallon, but I drive that car 50,000 miles per year, I use more gasoline than if I have a car that gets 10,000— or 10 miles per gallon that I only drive 5,000 miles per year. So it is not just the fuel economy of the car, it is also the number of vehicle miles traveled that the—that determine how much gasoline we use, and therefore how much we are contributing to the greenhouse gas burden in the atmosphere or how insecure our energy supply is becoming. And so, while no one likes to vote for tax increases, just requiring that cars be more fuel-efficient only gets at part of this. And when cars become more fuel efficient, it becomes cheaper to drive each mile, so you lose a little bit, because people cheat and drive more miles, because they have more fuel-efficient cars.

Typically, people don’t take into account the fact that the gasoline that they use is contributing to the atmospheric burden of carbon dioxide. They don’t take into account, in their own purchase decisions, this dependence on imported oil, and that is why, in a case where you wouldn’t get involved if there weren’t these external costs, that there is a good reason for economic efficiency that you can justify some form of government involvement in the fuel economy—in the case of fuel economy. We can certainly argue about what is the best way to do it, but I think there is a case there that, because there is a form of market failure, that you need some kind of government intervention.

Chairman BOEHLERT. You know, I watched the Super Bowl, and I must confess, a lot of people did. I will tell you, when you talk about consumer demand, I would say I have to commend your industry, one member of it, that ad that Ford put on for the new Mustang was one of the stars of the whole commercials. And I think a lot of people watch the Super Bowl just to watch the commercials, and they don’t give a darn about the Patriots or the Eagles. But it seems to me that the auto industry drives by your marketing and advertising approach. And I don’t know if there are any examples of members of your Alliance selling safety or selling fuel efficiency. But I will tell you this, I have been around this town long enough to remember when a hot shot young vice president from Ford came to town and told the Congress, and I was on the staff at that time, ‘‘If you mandate seat belts, that will have a devastating negative impact on the industry I represent.’’ Fast forward several years, that guy then was chairman of the board of another automobile company and was on saying, you know, ‘‘Buy our product. We have got airbags to protect you, and no one requires it, but we are concerned for your safety.’’ So I would suggest that a lot of this has to do with your marketing approach. And we all have to be sensitive to your industry. It is a very vital part of our overall economy. And for us to put undue burdens on the auto industry is counterproductive.

Mr. Miller: This committee had hearings on hydrogen fuel cells in the last Congress and there seemed to be a great deal of skepticism that there is not an ample supply of hydrogen out there, that, in fact, the hydrogen has to come from other fossil fuels, has to be stripped out, that it is not a particularly clean process to do that. It doesn’t really free us from our dependency on foreign—on fossil fuels. We seem to be pursuing hydrogen to the exclusion of other alternative fuels, and we have some massive amount of money tied up in transporting liquid fuels. Where would the hydrogen come from if we really dramatically changed from a fossil to a hydrogen economy?

Mr. STANTON. Somewhere down the line it has got to come from renewables if we are going to work our way out of this.

Mr. PORTNEY. Everyone is optimistic about anything that has the potential technological promise of hydrogen of being a completely clean energy source, but I think we need to do something sooner than the time frame in which hydrogen will become the major propulsion for motor vehicles [which is] 15 or 20 years away. I would love to be more optimistic than that. I think we can’t wait 15 or 20 years before we try to do something, regardless of what it might be, to try to improve the fuel economy of the overall fleet, whether it is through higher taxes or technological fuel economy requirements or whatever. I would hate to put all of our eggs in the hydrogen basket and not do anything for 20 years in the hopes that that will be available and to solve the problem.

Mr. EHLERS. I would like to comment about market forces. A number of people have talked about this as if somehow these are some magic, independent things that automatically lead to good results. [Auto companies keep] talking about market forces. ‘‘We are just making what the people want.’’ And I simply remind them of their advertising budget. How much do you spend advertising SUVs compared to how much do you spend advertising low-cost, high fuel economy vehicles? It is very disproportionate. And we are not talking peanuts here. If I buy a new car, I am paying about $400 for the advertising that they bought to persuade me to buy the car. And so market forces don’t operate in a vacuum. I think the auto industry has taken a pass on that. They can greatly influence the choices consumers make through education, through advertising. A part of the problem, and part of the reason market forces don’t work very well is the public simply does not understand energy. They can’t see it, they can’t touch it, they can’t taste it, they can’t feel it, and it is frustrating to me, as a physicist, because that is one thing I do understand. But I have often said I wish energy were purple. If energy were purple and people could see it and they are driving down the highway and a Toyota Prius comes by with just a little purple around it, and it is followed by an SUV with a big purple cloud, people are going to say, ‘‘Hey, you know, I am going to get one of those Prius,’’ because they could see it. They could see the impact. As it is, their only tie to reality, in terms of the energy, is the price at the gas pump. And that is a little too ephemeral to directly affect their purchases. I wish the automobile companies would try to influence purchases.

Chairman BOEHLERT. I think it is a national security imperative to reduce oil demand, and I think we all can accept that. Can we just rely on market forces to do that? We prefer market forces, but if market forces aren’t doing what needs to be done, and we have a national security imperative to reduce demand for oil and look at the emerging giants in India and China, the demand, you know—there is not an unlimited supply of oil around the world.

Mr. REILLY. If the question is “could not use higher prices as a way to create demand for more fuel efficient vehicles?”, I do think that there is an appropriate role for the government, through tightening CAFE standards. I do, but there I would come back to the point that I made before, that I would only do that if I gave up on the use of market forces, which I am not prepared to do, and it is so important that car makers be given sufficient time to do this, rather than be required to get unrealistically high improvements in unrealistically short periods of time, because then we are back to downsizing and down weighting, which was a counterproductive way to go about this in the first place.

Chairman BOEHLERT. And we established the fact that it is not necessary to downsize and down weight to get the increased fuel efficiency that we are looking for. We have established that fact.

Hon. William K. Reilly, answers questions submitted by Representative W. Todd Akin

Q1. If the CAFE program has been successful, could you please explain why we are more dependent on foreign oil today and consuming more gasoline in our vehicles than we were when the program was originally put into place? And if that is the case, how will increasing the CAFE requirements to higher levels reverse this trend and accomplish the original goals of CAFE?

A1. Was CAFE successful? In a study published in 2002 entitled ‘‘Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,’’ the National Academy of Sciences found that fuel use by passenger vehicles is roughly one-third lower today than it would have been had fuel economy not improved since 1975. CAFE was identified as a ‘‘major reason’’ for the fuel economy improvement. The NAS estimated a 2.8 million barrel per day savings between 1975 and 2000, or 14 percent of current U.S. consumption (20 million barrels per day).

If CAFE was successful, why are we consuming more oil? We are consuming more oil because vehicle miles traveled (a function of increasing numbers of vehicles on U.S. roadways and the trend towards driving greater distances each year) have outstripped the oil savings achieved by improved fuel economy in the late 1970s and 1980s. Vehicle miles traveled (VMT) has been increasing steadily since 1966. Fuel use declined between 1978 and 1983 due to improved vehicle fuel economy and a decline in the use of oil by electric utilities, but has risen steadily since then as passenger vehicle fuel economy levels have stagnated.

Responses by K.G. Duleep, Managing Director of Transportation, Energy and Environmental Analysis, Inc. Questions submitted by Chairman Sherwood L. Boehlert

Q1. In your testimony you called the demand for 400, 500, and 600 horsepower engines ‘‘astounding’’ since the speed limit in this country rarely exceeds 70 miles per hour. What effect do you believe this increase in horsepower will have on fuel economy? On safety?

A1. Large increases in horsepower do affect fuel economy and safety if vehicles. Typically a 10% increase in horsepower decreases fuel economy by 2.5% if the vehicle technology level is unchanged and the horsepower gain is achieved by engine upsizing. Larger increases in horsepower of 20% or more also require improvements to the brakes, tires and the drive line, thereby increasing vehicle weight and causing additional losses in fuel economy over and above the effect of engine upsizing. The doubling of horsepower that has occurred over the last 20 years has led to an implied loss in fuel economy of about 30 to 35 percent.

The CAFE standards for cars set in 1975 by Congress are still in force today at the same level of 27.5 mpg while light-truck CAFE standards have also continued for the last 20 years with almost no change. Hence, the benefits of these standards have long since been swamped by population growth, increases in car ownership, and increased driving per car.

Q2. You suggest in your testimony that to advance the adoption of new technologies to improve fuel economy, the government should enact tax credits for the purchase of advanced technology vehicles. However, if CAFE standards were to remain constant, since they are based on a fleet-wide average, the purchase of advanced high efficiency vehicles could be off-set by the sale of more fuel inefficient vehicles or the deployment of these technologies for greater power or size, resulting in little or no change in the overall consumption of fuel by the fleet. How do we avoid this outcome when supporting incentives for the purchase of advanced vehicles?

A1. Your question gets to the heart of one of the problems of the CAFE program. There is nothing that says the consumer must purchase ‘‘fuel economy.’’ The CAFE program only says that vehicle manufacturers must produce a fleet that averages a certain fuel economy level regardless of what consumers want or choose to purchase. The auto industry today makes over 100 models that achieve 30 or better miles per gallon on the highway, yet the sales of these vehicles are very low.

We can’t change consumer-purchasing habits, but we can make some of these advanced technology vehicles in the most popular vehicle lines. There are already two hybrid-electric SUVs available and more are planned for production. There is also a diesel-powered SUV available. It is the manufacturers task to introduce advanced technologies in vehicles that consumers want to purchase.

Petroleum use increased to 18.8 million barrels per day in 1978, the first year in which the CAFE standards were in force. From that level, U.S. petroleum consumption decreased to 15.7 million barrels per day in 1985, for practical purposes the last year in which the CAFE standards increased. The reduction in petroleum consumption from 1978 to 1985 was achieved despite a 15% increase in miles traveled by light-duty vehicles over the same period (from 1,426 billion vehicle miles in 1978 to 1,637 billion in 1985).2 Because it takes more than 10 years to turn over most of the stock of light-duty vehicles, the benefits of higher new vehicle fuel economy persisted beyond 1985 even though the rate of growth in vehicle travel exceeded the rate of increase in fuel economy. By 1992, the turnover of the stock of vehicles was nearly complete and on-road light-duty vehicle fuel economy reached a plateau of approximately 19.5 miles per gallon. Had light-duty vehicle fuel economy remained at the 1978 level of 13.6 mpg, the 2,078 billion miles traveled by passenger cars and light trucks in 1992 would have required 46 billion gallons (three million barrels per day) more petroleum than it did.


U.S. SENATE March 7, 2006. Energy independence S. HRG. 109-412. Committee on energy & natural resources.

DIANNE FEINSTEIN, U.S. SENATOR from CA (raise fuel economy, close SUV/light-truck loophole)

The amount of oil imported into the United States has climbed from 6 million barrels of oil per day in 1973 to 12 million barrels per day in 2004 (Energy Information Administration). And the percentage of foreign oil consumed in the U.S. has climbed from 35% in 1973 to 59% in 2004.

So while there has been a lot of talk about decreasing our nation’s dependence on foreign oil, most of it has been empty rhetoric. This week’s cover story of BusinessWeek is ‘‘The New Middle East Oil Bonanza.’’ With oil prices so high, partially due to fear of oil production disruptions in Nigeria, Saudi Arabia, Venezuela, and elsewhere, billions of dollars are going into the coffers of oil-producing nations.

I am seriously concerned about the impacts of America’s overdependence on foreign oil. This cannot continue. For foreign policy and for environmental reasons, the overdependence on oil is a real problem. With 5% of the world’s population, we cannot continue to use 25% of the world’s oil supply. Especially not with India and China developing at their current pace. There are things we could do today to reduce our dependency on oil, and yet we need the political will to get them accomplished. Specifically, we must raise the nation’s fuel economy standards. The Consumer Federation of America estimates that increasing the fuel economy of our domestic fleet by 5 miles per gallon would save about 23 billion gallons of gasoline each year, reducing oil imports by an estimated 14%. A fleet-wide increase of 10 miles per gallon would save 38 billion gallons, cutting imports by almost 20%. That is why I have introduced a very modest bill for the past three Congresses that would close a loophole in current law that allows SUVs and other light trucks to meet less stringent fuel economy standards than other passenger vehicles.

If the SUV loophole were closed, the savings would be rather dramatic. More than 480,000 SUVs were sold in the first quarter of 2005. If those SUVs achieved an average fuel economy of 27.5 miles per gallon, we would reduce gasoline use by more than 81 million gallons of a year. And that’s just for SUVs sold in the first quarter of 2005. If this bill were to pass, the United States would save 1 million barrels of oil a day and decrease foreign oil imports by 10%. Yet the automobile manufacturers continue to fight this proposal tooth and nail and for reasons I cannot understand. The technology to make these vehicles more efficient is available today and American auto companies are making vehicles to meet fuel economy standards in other countries. China, for instance, has issued fuel efficiency standards that are more stringent than ours. If American auto companies hope to make cars that will compete in China, then they will need to make them more fuel efficient. I hope the representative from Ford will be able to address this issue in her statement. If the Federal Government is not going to act, Congress should not stop the States from acting.


[my comment: never happened]: The Vehicle and Fuel Choices for American Security Act (VFCASA makes significant reductions in our oil use. My bill would reduce projected oil use by 2.5 million barrels per day in 2016 and 7 million barrels per day in 2026. It also provides tools to meet these aggressive targets by improving the efficiency of vehicles

One of the lessons from September 11th is that we can no longer be so dependent on places like Saudi Arabia, Russia and Venezuela for our energy supply. Yet we are more dependent on foreign oil from hostile countries today than we were on September 11th—making us more vulnerable and putting the United States in a uniquely disturbing position of bankrolling both sides in the War on Terror. This goes to the heart of our security and our sovereignty. As the world confronts the prospect of a nuclear Iran, our leverage is dramatically limited by the fact that Iran is the second largest exporter of oil. We and our allies are vulnerable to energy blackmail. A few months ago, the Russians decided they weren’t pleased with the Ukrainian elections, so they simply decided to stop exporting natural gas to them— nearly causing an economic crisis in the region.

Decreasing the oil intensity of our economy will help us weather price shocks and make us more secure. We can reduce oil intensity by reducing our demand for oil.

The risks faced above ground by depending on unstable suppliers and good weather are too great and to a certain extent out of our control.

We must bring the same urgency to energy security that we have on the War on Terror.

[my comment: never happened] The Vehicle and Fuel Choices for American Security Act (VFCASA makes significant reductions in our oil use. We chose this title because nothing less than our national security is at stake. This bill would reduce projected oil use by 2.5 million barrels per day in 2016 and 7 million barrels per day in 2026. It also provides tools to meet these aggressive targets by improving the efficiency of vehicles and increasing the production and use of biofuels. VFCASA includes new approaches for manufacturers, the federal government, scientists and consumers, all designed to encourage greater energy security. Other Senators are Joseph Lieberman of Connecticut, Sam Brownback of Kansas, Norm Coleman of Minnesota, Lindsey Graham of South Carolina, Ken Salazar of Colorado, Jeff Sessions of Alabama, Bill Nelson of Florida, Richard Lugar of Indiana, Barack Obama of Illinois, Johnny Isakson of Georgia and Lincoln Chafee of Rhode Island. I hope that in the future we all look back on the day this bill was introduced as the beginning of a major shift in our national security strategy. I hope that history will say we saw a challenge to our national security and prosperity and then met it and mastered it.

The legislation requires that in 2012, 10% of vehicles manufactured be flexible fuel vehicles, alternative fueled vehicles, hybrids, plug-in hybrids, advanced diesels and other oil saving vehicle technologies. This percentage rises each year until 50% of the new vehicle fleet will be one of these oil saving technologies. It also provides tax incentives for U.S. manufacturing facilities to retool existing facilities to produce advanced technology vehicles which will help shift the vehicle fleet to more efficient vehicles while minimizing the job impact of an increased market share of advanced technology vehicles. The bill builds on the Energy Policy Act (EPAct) of 2005 by expanding the number of consumers that can take advantage of the tax credit available for the purchase of more efficient vehicles. It offers a tax credit to private fleet owners who invest in more efficient vehicles.

VFCASA contains robust research provisions in the areas of electric drive transportation, including battery research, lightweight materials and cellulosic biofuels. Each of these technologies hold great potential to play a key role in reducing our dependence on oil. For instance, lightweight materials, such as carbon composites and steel alloys, hold the promise of being able to double automotive fuel economy while improving safety without increasing the cost of the vehicle.

The average American automobile might remain in operation for 15 years or more. This means that it is essential that we begin immediately to deploy oil saving technologies.


While geologists and economists can debate when the oil supply will ‘‘peak,’’ what is indisputable is that demand is now exploding as developing nations such as India and China increase consumption.

According to the IEA, global demand for oil—now about 85 million barrels a day— will increase by more than 50% to 130 million barrels a day between now and 2030 if nothing is done. The industrialized world’s dependence on oil heightens global instability. The authors of the IEA report note that the way things are going ‘‘we are ending up with 95% of the world relying for its economic well-being on decisions made by five or six countries in the Middle East.’’

We are just one well-orchestrated terrorist attack or political upheaval away from a $100-a-barrel overnight price spike that would that would send the global economy tumbling and the industrialized world, including China and India, scrambling to secure supplies from the remaining and limited number of oil supply sites. History tells us that wars have started over such competition.

Left unchecked, I fear that we are literally watching the slow but steady erosion of America’s power and independence as a nation—our economic and military power and our political independence. We are burning it up in our automobile engines and spewing it from our tailpipes because of our absolute dependence on oil to fuel our cars and trucks. We need to transform our total transportation infrastructure from the refinery to the tailpipe and each step in between because transportation is the key to energy independence.

China is moving aggressively to compete for the world’s limited supplies of oil not just with its growing economic power, but with its growing military and diplomatic power as well. Second, today we must depend for our oil on a global gallery of nations that are politically unstable, unreliable, or just plain hostile to us. All that and much more should make us worry because if we don’t change—it is within their borders and under their earth and waters that our economic and national security lies. Doing nothing about our oil dependency will make us a pitiful giant—like Gulliver in Lilliput—tied down by smaller nations and subject to their whims. And we will have given them the ropes and helped them tie the knots.


We consume roughly two thirds of the oil we use in the transportation sector. Because of its large share of consumption, policy changes affecting the transportation sector can have a significant impact on reducing foreign dependence. Increased mileage standards, elimination of boutique fuels, lowered speed limits, and greater use of alternative fuels are just a few of the many ideas that have been advanced to decrease the transportation sector’s consumption of oil. I contend that coal can make a difference in the transportation sector as well. Wyoming recently announced plans to construct a coal-to-liquids plant. The National Mining Association believes that continued use of this technology could replace as much as 2 million barrels per day of oil and 5 trillion cubic feet of natural gas per day by 2025.

James Woolsey, CIA Director 1993-1995

Energy independence for the U.S. is in my view preponderantly a problem related to oil and its dominant role in fueling vehicles for transportation.

Transportation infrastructure is committed to oil and oil-compatible products. So major investments… in electricity generation of different types… has very little impact today on oil use.  And hydrogen will take too long to satisfy some of the urgency that should be attached to our current oil dilemma.

So the United States and other oil-importing countries should: (1) encourage a shift to substantially more fuel-efficient vehicles within the existing transportation infrastructure, including promoting both battery development and a market for existing battery types for plug-in hybrid vehicles; and (2) encourage biofuels and other alternative and renewable fuels that can be produced from inexpensive and widely-available feedstocks—wherever possible from waste products.

Government policies with respect to the vehicular transportation market:

Encourage improved vehicle mileage, using technology now in production The following three technologies are available to improve vehicle mileage substantially.  [We should] take advantage of diesels’ substantial mileage advantage over gasoline-fueled internal combustion engines. Heavy penetration of diesels into the private vehicle market in Europe is one major reason why the average fleet mileage of such new vehicles is 42 miles per gallon in Europe and only 24 mpg in the U.S.

Hybrid gasoline-electric vehicles now on the market generally show substantial fuel savings over their conventional counterparts. Constructing vehicles with inexpensive versions of the carbon fiber composites that have been used for years for aircraft construction can substantially reduce vehicle weight and increase fuel efficiency while at the same time making the vehicle considerably safer than with current construction materials.


Analysis performed by EIA and the National Renewable Energy Lab estimates that even under optimistic assumptions, alternative transport fuels, excluding electric hybrid plug-ins, can be expected to displace or replace a maximum of 10% of conventional liquid transport fuels by 2030, leaving petroleum-based fuels, new technologies, conservation, and improved efficiency gains to deal with the remaining 90%. For purposes of comparison, a billion gallons of alternative fuels per year roughly translates to 65,000 barrels a day of conventional gasoline and maybe less depending on energy context. And we currently consume over nine million barrels a day of gas every day. In short, while contributions from alternate fuels will be helpful as a component in meeting increased consumer demand, petroleum-based fuels are likely to remain the overwhelming fuel of choice for at least the next 20 years.

At the same time, however, we cannot ignore preparations for transitioning to the inevitable post-oil world, a transition which former Energy and Defense Secretary, Jim Shlesinger, has characterized as the greatest challenge this country and the world will face outside of war.

To the extent practicable, every effort should be made to pursue policies and changes that fully take into account investment in market practices and utilize as much as possible existing infrastructure and currently available technologies.

And fuels alone are not the answer. We need radical changes to our motor vehicles, both in terms of energy and design and construction material, as well as to the way we transport goods and people.

Posted in Automobiles, Congressional Record U.S., Transportation | Leave a comment

David L. Greene, ORNL: Raise cafe standards and gas tax

Excerpt from: U.S. House. February 9, 2005. Improving the nation’s energy security: can cars and trucks be made more fuel efficient? Committee on science, House of Representatives, Serial No. 109-3. 140 pages.


Following the oil crises of the 1970s, nearly every developed economy in the world adopted fuel economy standards in some form (IEA, 1984; 1991). All of these standards were effective in raising fuel economy levels,… curbing the growth of world oil demand in the 1980s and, in combination with the market response to higher oil prices led to the OPEC cartel’s loss of control over world oil markets in 1986. We do know how to reduce dependence on petroleum and we have done so effectively in the past. The combination of higher oil prices and policies aimed at increasing energy efficiency led to almost 15 years of low oil prices. Unfortunately, after these efforts were successful and oil prices crashed in 1986, we stopped trying. With OPEC nations holding more than two thirds of the world’s proven oil reserves and more than half of the world’s ultimate conventional oil resources, and with growing demand for oil for transportation in developed and developing economies, it was only a matter of time before they regained control of world oil markets.

Potentially effective fuel economy policies range from standards to market-based measures. Developed economies that have recently tightened their fuel economy or carbon emission standards for motor vehicles include Japan, the entire European Union (EU) and Australia. China has also recently adopted fuel economy standards with the aim of curbing their rapidly growing demand for oil. Each country has a different form of standard, and each one is different from our own Corporate Average Fuel Economy (CAFE) Standards. Japan and China have mandatory standards that vary (in different ways) across vehicle weight classes. The EU and Australia negotiated voluntary standards with automobile manufacturers collectively that are based on the sales-weighted average emissions of carbon dioxide per vehicle kilometer.

GASOLINE TAXES. If the market for automotive fuel economy operated efficiently, increasing the tax on gasoline would be the most economically efficient way to increase fuel economy. Over the years, higher gasoline taxes have proven to be unpopular, but that is not an argument against their desirability from an economic efficiency standpoint. There are, however, good reasons to believe that the market for fuel economy is not efficient and, therefore, that standards have an important role to play. First, even nations with gasoline prices 2 to 3 times higher than those in the US have felt it necessary to have fuel economy standards. This includes the entire EU and Japan. If the market for fuel economy were efficient, gasoline prices in the range of $3 to $5 per gallon should be sufficient to raise vehicle fuel economy. Still, the EU and Japan found it necessary to have fuel economy standards.

Recent evidence from surveys indicates that consumers are indeed undervaluing fuel economy. First, survey evidence, generally supported by automobile manufacturers, indicates that consumers expect an expenditure on fuel economy technology to be paid back in fuel savings within 2–4 years, far less than the full lifetime of a modern automobile. A recent study by the University of California at Davis (Turrentine and Kurani, 2005) conducted in-depth interviews with 60 households in California. Few even considered fuel economy in their purchase decisions. None explicitly calculated the potential value of fuel savings by any method. In short, there was no evidence whatsoever of textbook, economically rational behavior with respect to fuel economy.

Despite the apparent imperfection of the market for fuel economy, increasing the price of gasoline would be a sound and beneficial policy. It would signal consumers of the importance of reducing fuel use, making it easier for manufacturers to sell higher fuel economy vehicles.

It would mitigate and could eliminate the rebound effect, the tendency for motorists to drive a little more when higher fuel economy reduces the fuel cost per mile of travel.

Finally, a higher tax on gasoline would make up for revenues that would otherwise be lost to the highway trust fund in the future when higher levels of fuel economy reduce the demand for motor fuel.


The government can encourage the adoption of technologies to improve fuel economy without leading automakers to make vehicles less safe. First, there are many technologies that can be used to improve fuel economy that should have no impact on vehicle safety. Technologies such as variable valve timing and lift control, displacement on demand, reduced aerodynamic drag, continuously variable transmissions, and engine friction reduction should be independent of vehicle safety. Several reports have developed lists of such technologies and estimate their likely impacts on vehicle costs and fuel economy. The 2002 NRC study of the CAFE standards provides an extensive analysis of how such technologies could be used to cost-effectively increase passenger car and light truck fuel economy.

Given the availability of such technologies, manufacturers should be able to respond to the demands of a higher fuel economy standard without compromising safety.

The argument that fuel economy improvement inevitably leads to weight reduction which inevitably leads to increased fatalities and injuries is not correct. The role of weight reduction versus technology in achieving the fuel economy improvements of the past 30 years has been greatly exaggerated. Weight reduction was indeed an early strategy for increasing fuel economy. Vehicle weight reduction began before the CAFE standards went into effect, probably a response to the fuel shortages and higher prices caused by the first oil crisis of 1973–74. It continued after fuel economy standards went into effect in 1978 but ended in 1981. Fuel economy continued to improve through 1987 while weight increased. Since then, weight has increased while the average fuel economy of new light-duty vehicles has gradually declined, in large part due to the increasing market share of light trucks. According to data published by the Environmental Protection Agency, the average 2004 model year light-duty vehicle actually weighed 6 pounds more than the average light-duty vehicle sold in 1975. The average fuel economy of a new light-duty vehicle sold in 2004 was 58% higher than in 1975. Clearly, none of this increase can be attributed to weight reduction since today’s new light-duty vehicles are actually slightly heavier than their 1975 counterparts.

It has been argued, however, that further increases in fuel economy standards would inevitably lead to downsized or down-weighted vehicles and that smaller, lighter vehicles are inherently less safe. By and large, this objection has focused on weight reduction as the principal threat to safety. Reducing vehicle mass is certainly one way, though by no means the only way or even the most effective way, to increase fuel economy.1 In a dissent to the 2002 NRC CAFE report, Marianne Keller and I pointed out that the evidence for a causal link from fuel economy to weight reduction to increase traffic fatalities and injuries was highly dubious. Since that report, our position has been strengthened by 4 scientific studies. With the support of Honda, Van Auken and Zellner (2002) attempted to replicate Kahane’s (1997) path-breaking analysis of the relationship between vehicle weight and crash fatalities using more recent data from a somewhat different subset of states. They found that a reduction in the weight of passenger cars and light trucks of 100 pounds would not increase net highway fatalities.

BIOGRAPHY FOR DAVID L. GREENE A Corporate Fellow of Oak Ridge National Laboratory (ORNL), David Greene has spent 25 years researching transportation energy and environmental policy issues. Dr. Greene received a B.A. degree from Columbia University in 1971, an M.A. from the University of Oregon in 1973, and a Ph.D. in Geography and Environmental Engineering from The Johns Hopkins University in 1978. After Joining ORNL in 1977, he founded the Transportation Energy Group in 1980 and later established the Transportation Research Section in 1987. Dr. Greene spent 1988–89 in Washington, DC, as a Senior Research Analyst in the Office of Domestic and International Energy Policy, U.S. Department of Energy (DOE). He has published more than one hundred seventy-five articles in professional journals, contributions to books and technical reports, and has authored or edited three books (Transportation and Energy, Transportation and Global Climate Change, and The Full Costs and Benefits of Transportation). Dr. Greene served as the first Editor-in-Chief of the Journal of Transportation and Statistics, and currently serves on the editorial boards of Transportation Research D, Energy Policy, Transportation Quarterly, and the Journal of Transportation and Statistics. Dr. Greene has been active in the Transportation Research Board (TRB) and National Research Council (NRC) for over 25 years, serving on several standing and ad hoc committees dealing with energy and environmental issues and research needs. He is past Chairman and member emeritus of the TRB’s Energy Committee, past Chair of the Section on Environmental and Energy Concerns and a recipient of the TRB’s Pyke Johnson Award. In recognition of his service to the National Academy of Science and National Research Council, Dr. Greene has been designated a lifetime National Associate of the National Academies.

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the Transportation Research Board, Washington, DC, January.

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Vehicle Fuel Economy, Carbon Dioxide Emissions, and Consumer Surplus. DOE/
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Greene, D.L. and J.L. Hopson. 2004. ‘‘Analysis of Alternative Forms of Fuel Economy Standards for the United States,’’ Transportation Research Record 1842,
Paper No. 03–3945, Transportation Research Board, Washington, DC.

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Guzzler Taxes: A Study of Incentives for Increased Fuel Economy,’’ Energy Policy,

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Press, Washington, DC.

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Fuel Economy Standards in the United States and Canada. ANL/ESD/02–5, Argonne
National Laboratory, Argonne, Illinois.

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Economy Credit Systems.’’ Presented at the 84th Annual Transportation Research
Board Meeting, Washington, DC, January 9–13.

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and Use Decisions of Households,’’ Presented at the 84th Annual Meeting of the
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California, January.

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