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Energy Security – The Best Report You’ve Never Heard of

What Happens To The US Economy As Global Oil Production Begins Its Inexorable Decline?

Peak oil is a liquid fuels problem, as well as reducing our energy security.A lot of people have difficulty understanding the real meaning of ‘peak oil,’ the idea that oil production rises, peaks, and declines. It’s easy to get confused because we understand quantities better than we understand rates.

A lot of people have difficulty understanding the real meaning of ‘peak oil,’ the idea that oil production rises, peaks, and declines. It’s easy to get confused because we understand quantities better than we understand rates.

For example, it just doesn’t make much sense that a huge new discovery of, say, a billion barrels (a quantity), won’t help us much. The truth is, though, that we’re limited by how fast we can get it out of the ground and to market. We use 87 million barrels per day (a rate), so new discoveries should be judged not by how much is in the ground but how much it’ll help us keep the oil flowing at rates that support the economy.

The Hirsch Report, officially titled, Peaking Of World Oil Production: Impacts, Mitigation, & Risk Management, states the problem clearly and looks at the practical issues surrounding how we make the transition to a less oil-dependent world. In my opinion, this is one of the best reports the government has ever produced, and one that far too few people have even heard of.

Of that discrepancy between quantities and rates, the Hirsch Report said:

When world oil production peaks, there will still be large reserves remaining. Peaking means that the rate of world oil production cannot increase; it also means that production will thereafter decrease with time.

It’s all about rates, how fast we can pump the stuff (“oil that is, black gold, Texas tea“), not how much is left in the ground.  We still need to get a few more years out to know for sure if we’ve already hit the peak or not, but global oil production has been pretty steady in the 85-87 million barrels per day range since 2004. It’s no coincidence that the price of oil (and thus gasoline) has risen so dramatically during this same period.

The Hirsch Report, published by the US Department of Energy in 2005, did a great job of analyzing the issue of peak oil and looking at what we can do to mitigate it and manage the risks. If you want a good, down-to-Earth explanation of what peak oil is all about, you can’t do much better than the opening part of this paper.

What I found to be the most powerful part of the report was their chapter VIII, called Three Mitigation Scenarios:

  • Scenario I assumes that action is not initiated until peaking occurs.
  • Scenario II assumes that action is initiated 10 years before peaking.
  • Scenario III assumes action is initiated 20 years before peaking.

Which of those three do you think we’re most likely to do? Well, if peak is already past or happening now, how much have we prepared? Not a whole heck of a lot. We’ve got a little bit of activity in biofuels (including the wasteful diversion of corn-based ethanol), some electrification of transportation, but not much else. I’d say we’re mostly in Scenario I.

Here’s what the authors found:

  • Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.
  • Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.
  • Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

I added the emphasis to their conclusions so you can really see how much of a pickle we’ve gotten ourselves into. They provided graphics to show how the three scenarios play out, and below you see the one for Scenario I.

The Hirsch Report shows that we're in a dangerous position regarding energy security because of peak oil.

One point that the report makes clear is that peak oil is really a liquid fuels problem more than it’s a full-blown energy crisis. Oil is an amazing substance. Its liquid state allows for easy transport. Its high energy density drives our world since it’s the backbone of our transportation system, especially here in the US.

Getting back to their conclusions, if indeed we’re facing a decades-long liquid fuels crisis, how do we handle that? As I wrote last week, the US military is all over this issue, warning that we may face oil shortages by 2015. Take a look at your life and imagine how it works in a world of oil shortages. This may turn out to be more than an academic exercise.



You can download the full Hirsch Report (pdf) from the DOE website.

This Post Has 15 Comments

  1. If the military is all over
    If the military is all over it, then why is my Congressmen, Mike Pompeo R-KS, USMA, Harvard; not on the Bandwagon?

  2. John: I
    John: I think it’s because the main aim of most politicians is to do and say things that get themselves re-elected, not solving problems. Doesn’t matter what party they’re in either. Otherwise we’d be dealing with Scenario III, not I.

  3. Thanks for another great post
    Thanks for another great post on this topic, Allison. I downloaded the report and will give it a read. Would 20 of my friends download and read it if they new where it was located? Probably not. Would they even care? Probably not. Would they continue commuting to work by car ~70 miles/day, five days each week? Most likely. Therein lies a big part of the problem, me thinks.

  4. John P.:
    John P.: You’re welcome. The drive-till-you-qualify housing market is coming to an end. Location efficiency, a topic for a future article in this series, is becoming much more important as the price of oil goes up.

  5. Of course the military is all
    Of course the military is all over this. Secretary Gates said “every time the price of oil goes up by 1 dollar per barrel, it costs us about 130 million dollars”. He is talking about cutting military pay to make up for some of the shortfall. It’s been reported that a gallon of fuel delivered to a Forward Operating Base in Afghanistan costs us about $40, after trucking it in from Pakistan, over the Khyber Pass, and paying off the warlords for safety. Then the military convoys truck it through IED ridden territory to get it out to the troops. Great developments are probably going to come out of military research in the alternative energy area. We can’t afford to do anything less.

  6. Intriguing read, but sadly
    Intriguing read, but sadly not surprising information. This is one of the elephants in the room our incompetent government leadership is ignoring.  
    I’m curious what slant is behind the report – no one is completely objective. From where (what industry, companies, etc) did the consultants who did the work come? Oil? “Green” energy industry? Environmentalists? A combo? In other words, what steps where taken to ensure the report remained objective. This is a very contentious topic, and there’s a lot of room for subjective data-manipulation. Regardless, we are a race and as good stewards of the earth and our own best health interests have an inherent motivation to find a better way to power our existence. 
    Personally, I believe we need to tap the tremendous reserves our country sits upon in natural gas and oil, and use that as a small stop-gap while also investing heavily into cleaner energy sources like nuclear, solar, wind, etc. No options should be left off the table. 
    And someone needs to talk to China about their behavior with energy – they certainly do not appear to be “green” or tremendously ecologically concerned.

  7. In a town of about 100,000
    In a town of about 100,000 with 98% rental occupancy rate, “location efficiency” is not easy to achieve. The next town over, population about 95,000, 25 miles or from center to center, has above 95% occupancy rate. Odessa and Midland unemployment rate is 4%, so people are trying to move into the area looking for work, as well, meaning for now at least the occupancy rates are not going to decline very fast. Granted, within either Midland or Odessa, pretty much anything is within 6 or 7 miles, but if you have to make the 25-plus-mile trek from one city to the other daily, a car (or car-pool) is necessary because there is no public transportation link between the two. Again, it’s not John’s 70 miles per day, but my commute averages 33 miles per day (round trip)

  8. I write a couple of columns
    I write a couple of columns on military and veterans affairs issues for on-line news groups ( and, and I must say it is almost impossible to discuss military affairs issues and not touch upon energy. The other day on Glen Beck, his guest suggested we were running out of oil…WRONG. 
    I have written about US energy and the fact that conservative estimates put us at around 3 trillion barrels still in the ground. The recent oil shale finds in the Eagle Shale find in Texas and the Bakken Shale find in Dakota/Montana/Canada have added substantially to our reserves…enough for an estimated 300 years and we are not done yet, See: for a list of US oil shale fields.  
    Unfortunately we have to deal with the environmental morons, and politicos that think we can get from point A to point B with a sail on our vehicles. They say trains are the answer as Amtrak loses another $6 billion. Tell me please, how is a plumber or construction worker going to come out to your house to go to work without a truck? Those hammers, ladders, and saws are going to make the trains pretty crowded.

  9. Hi Lee, 

    Hi Lee, 
    My comment wasn’t directed generally at anyone who has no choice but to drive to work each day. Rather, it was an expression of my frustration with colleagues of mine who actually do have some choices with mass transit (train), telecommuting, and car pooling, but still regularly make that long commute, one person per car, everyday, and argue with me that any of the alternatives would hinder their daily schedule or impact their careers because of the importance that our corporate culture still places on “face time”, even though the time spent commuting could always be put to better use actually getting things done. 
    As Allison points out, folks need to seriously think about what their lives would be like if we suddenly found ourselves faced with a major shortage in just a few years. And most folks I know are, quite frankly, indifferent about these things until something finally happens. 
    Anyway, the context of my comment was my own personal situation, and I certainly hope that I haven’t offended anyone who really has no choice. Certainly don’t mean to! 🙂 
    Regards, ~John

  10. Walt S.:
    Walt S.: You may well be right. The military is doing a lot, not only in research in new technology but also in reducing their own energy use by doing things we already know how to do. It’s going to take all that and more, IMHO. 
    Matt S.: You can read a little bio of Robert Hirsch at Wikipedia. He’s a mainstream energy consultant who’s worked on oil, gas, fission, fusion…you name it. I believe the other two authors have similar backgrounds. Yes, you can bet we’ll be exploiting as many of our resources as possible to mitigate the problem. This report was a look at how that might play out.  
    Lee T.: You’re right smack dab in the middle of the oil patch, so it’s not surprising that location efficiency is low there. 
    Ed M.: You’ve confused quantities and rates, one of the main points of this article. Yes, we have enormous resources, but we use them up way faster than we can bring new ones to market. That’s why we import so much oil. See my first article in this series for more perspective: Energy Independence Is a Fantasy – Let’s Focus on Energy Security There’s also a huge difference between the conventional oil that we’ve gotten addicted to and unconventional sources like shale, which needs enormous quantities of energy to process.

  11. China (along with the EU and
    China (along with the EU and others) are making massive investments in cleantech and greentech including energy efficiency and conservation. The next five year plan starts soon and is very aggressive on this front. Is it perfect? Of course not, there is end-running regulations and what not. Sound familiar at all! However, there are serious consequences for those that don’t comply in many instances. For example, if you own a factory in China, you get an energy allocation per month. Use it up and they turn the power off. That’s motivation to get more efficient. It’s extremely convenient to point a finger at China, and while that should happen to some degree, it’s decidedly not black and white.

  12. Steve:
    Steve: Thanks for the info about what other countries are doing. I think as the problems get worse, we’re going to see more of the kind of approach that China is taking. The ‘R’ word*, I believe, will become part of our vocabulary again.  

  13. Allison, thank you for this
    Allison, thank you for this post. I think the Chinese are readily aware of the crisis. North America has just moved industrial jobs to China and a huge amount of their energy use is due to products that they export to us. This energy use belongs to us.

  14. Mike: You
    Mike: You’re welcome. Yeah, China knows what’s coming. That’s why they’ve been going all over the world to try to get agreements with oil producers for the past decade.  
    You also bring up a good point that affects energy statistics for the US. I wrote an article a couple of months ago (News Flash: Americans Use Less Energy When It Costs More) that showed our per capita energy use is below 1970 levels. A big reason for that is that energy prices have gone up, but another reason may be that we’ve outsourced so much of our manufacturing to other countries like China.

  15. It’s very important to
    It’s very important to realize that oil is not isolated from other energy sources, nor it is isolated from any other aspect of our lives. As we see an end to cheap oil, we see an end to cheap anything.  
    We will grasp at anything to replace oil and in the process that energy source will suddenly be competing with gasoline and the price will increase with the demand. If we start running our cars on natural gas, the cost of heating our homes will increase. If we begin running our cars on ethanol, we start to run out of clean water and suddenly realize how energy intensive our farming operations have become. 
    With the exception of the sunlight that hits the Earth, this is a zero-sum game. We have to live within our energy means… something that has become an un-American concept.

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