SAIC Report for DOE: Mitigating the Effects of Peak Oil

5 March 2005

The Association for the Study of Peak Oil & Gas (ASPO) published in its March newsletter a summary of a new report produced by SAIC for the Department of Energy on mitigating the impact of the impending peak production of oil.

The summary was sent in by the report’s lead author, Dr. Robert L. Hirsch.

The report focuses on the impact of peak oil, rather than a forecast date, although it does note: “Optimistic oil production forecasts deserve to be viewed with considerable skepticism”.

A recently completed study for the U.S. Department of Energy analyzed viable technologies to mitigate oil shortages associated with the upcoming peaking of world oil production.  Commercial or near-commercial options include improved vehicle fuel efficiency, enhanced conventional oil recovery, and the production of substitute fuels.  While research and development on other options could be important, their commercial success is by no means assured, and none offer near-term solutions.

Improved fuel efficiency in the world’s transportation sector will be a critical element in the long-term reduction of liquid fuel consumption, however, the scale of effort required will inherently take time and be very expensive. For example, the U.S. has a fleet of over 200 million automobiles, vans, pick-ups, and SUVs. Replacement of just half with higher efficiency models will require at least 15 years at a cost of over two trillion dollars for the U.S. alone.  Similar conclusions generally apply worldwide. [...]

Analysis of the simultaneous implementation of all of the options showed that an impact of roughly 25 million barrels per day might be possible 15 years after initiation. Because conventional oil production decline will start at the time of peaking, crash program mitigation inherently cannot avert massive shortages unless it is initiated well in advance of peaking.  Specifically,

• Waiting until world conventional oil production peaks before initiating crash program mitigation leaves the world with a significant liquid fuel deficit for two decades or longer.

• Initiating a crash program 10 years before world oil peaking would help considerably but would still result in a worldwide liquid fuels shortfall, starting roughly a decade after the time that oil would have otherwise peaked.

• Initiating crash program mitigation 20 years before peaking offers the possibility of avoiding a world liquid fuels shortfall for the forecast period.

Without timely mitigation, world supply/demand balance will be achieved through massive demand destruction (shortages), accompanied by huge oil price increases, both of which would create a long period of significant economic hardship worldwide.[...]

Oil peaking discussions should focus primarily on prudent risk management, and secondarily on forecasting the timing of oil peaking, which will always be inexact.   Mitigation initiated earlier than required might turn out to be premature, if peaking is slow in coming. If peaking is imminent, failure to act aggressively will be extremely damaging worldwide.

World oil peaking represents a problem like none other.  The political, economic, and social stakes are enormous.  Prudent risk management demands urgent attention and early action.

SAIC is a highly reputable research and engineering company, serving commercial and government customers. (Akin to RAND, in some areas, although from my perspective, with more of a focus on producing actual product—such as IT systems and prototype engines. It’s good to remember, though, that the seeds of the Internet were at RAND in Paul Baran’s work.)

The attempt at quantifying the impact of peak oil and outlining mitigation strategies is helpful. The problem, at least in terms of catalyzing action, is in the non-specific date. If oil has decades to run, then the work that’s being done now in terms of increasing efficiency and hydrogen development will satisfy the policy makers. (Geopolitical and environmental concerns will argue differently.)

On the other hand, if peaking hits sooner than that—say, within the next decade as it increasingly appears—then we’re well behind, and headed, at best, for the 10-year scenario, at worst for the “at-peak” scenario.

Even if oil peaks in 20 years, we globally are still far from a crash program approach to dealing with the problem.

This would be a good report to make public in its entirety.