GAO Peak Oil Report Highlights Challenges in Transportation Sector
30 March 2007
The US Government Accountability Office (GAO) has published a report examining peak oil, exploring (1) when oil production could peak, (2) federal agency efforts that could reduce uncertainty about the timing of peak oil production or mitigate the consequences, and (3) the potential for transportation technologies to mitigate the consequences of a peak and decline in oil production.
In terms of timing, the report could only conclude, based on its survey of research, interviews and expert panels, that the point of peak production will occur sometime between now and 2040. The GAO report also stressed the potential geopolitical and economic—rather than geological—limitations on future oil production as well as possible governors on demand.
Other important sources of uncertainty about future oil production are potentially unfavorable political and investment conditions in countries where oil is located. For example, more than 60 percent of world oil reserves, on the basis of Oil and Gas Journal estimates, are in countries where relatively unstable political conditions could constrain oil exploration and production.
Finally, future world demand for oil also is uncertain because it depends on economic growth and government policies throughout the world. For example, continued rapid economic growth in China and India could significantly increase world demand for oil, while environmental concerns, including oil’s contribution to global warming, may spur conservation or adoption of alternative fuels that would reduce future demand for oil.
The report’s authors also found that the US federal government has no formal strategy for coordinating and prioritizing federal efforts to deal with peak oil issues. Given that the US, as the largest consumer of oil and the nation most heavily dependent on oil for transportation, “may be particularly vulnerable” to peak oil, the report recommends that the Secretary of Energy lead an effort in coordination with other relevant federal agencies to establish a peak oil strategy.
Such a strategy should include efforts to reduce uncertainty about the timing of a peak in oil production and provide timely advice to Congress about cost-effective measures to mitigate the potential consequences of a peak. In commenting on a draft of the report, the Departments of Energy and the Interior generally agreed with the report and recommendations.
In reviewing the potential for reduction in oil demand in the transportation sector over the next several decades, the GAO focused on:
Ethanol (corn and cellulosic) and biodiesel;
Biomass- and coal-to-liquids;
Natural gas vehicles;
Advanced combustion engine technologies;
Hybrids and Plug-in Hybrids;
Advanced lightweight materials; and
Hydrogen fuel-cell vehicles.
The report concludes that the development and deployment of these technologies will take time and effort:
The technologies examined currently supply the equivalent of only about 1% of US annual consumption of petroleum products;
DOE estimates that even under optimistic scenarios, these technologies could displace only the equivalent of about 4% of projected annual consumption by around 2015.
DOE projects that these technologies could displace up to the equivalent of 34% of projected US annual consumption of petroleum products in the 2025 through 2030 time frame, assuming the challenges the technologies face are overcome.
Under these circumstances, an imminent peak and sharp decline in oil production could have severe consequences, including a worldwide recession. If the peak comes later, however, these technologies have a greater potential to mitigate the consequences. The level of effort dedicated to overcoming challenges to alternative technologies will depend in part on the price of oil; without sustained high oil prices, efforts to develop and adopt alternatives may fall by the wayside.
Ultimately, however, the consequences of a peak and permanent decline in oil production could be even more prolonged and severe than those of past oil supply shocks. Because the decline would be neither temporary nor reversible, the effects would continue until alternative transportation technologies to displace oil became available in sufficient quantities at comparable costs.
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