Dept. of Energy Report Warns of "Peak Oil" Risk

A report on the Aljazeera website states that a study commissioned by the US Department of Energy warns of the risk of a peak in world oil production... and that its impact on the US economy could be catastrophic.

Peak oil is the theory that the world is running out of major oil reserves, and existing reserves will ultimately be exhausted, with demand for oil outstripping supply. "World oil peaking is going to happen," the report says. Only the "timing is uncertain".

"Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. But the process will not be easy. Expediency may require major changes to ... lengthy environmental reviews and lengthy public involvement."

The report suggest three scenarios: The first is that governments and the energy industry seek and implement alternative energy solutions 20 years before peak oil occurs; the second is that they do so 10 years before peak oil, and the third is that solutions are implemented when peak oil is apparent.

The report also offers some warning signs that would indicate when peak oil is nearing. "As world oil peaking is approached, excess production capacity ... will disappear, so that even minor supply disruptions will cause increased price volatility as traders, speculators, and other market participants react to supply/demand events... Simultaneously, oil storage inventories are likely to decrease, further eroding security of supply, aggravating price volatility, and further stimulating speculation ... oil could become the price setter in the broader energy market, in which case other energy prices could well become increasingly volatile and unpredictable."

UPDATE: Salon reports that S. Herold Inc., the Wall Street firm that warned of the Enron debacle nearly a year before the energy giant went bankrupt, is sounding the peak oil alarm as well. Herold believes that the major oil producers will hit their peaks between 2007 and 2009. Not to say that the wells will start drying up after that, but oil producers will no longer be able to ratchet up production at will to meet an ever-growing demand (China and India are expected to double their consumption within the next decade). As a result, oil prices will soar, producers will be forced to turn to unconventional (and expensive) oil sources such as tar sands and shale, OPEC will gain more leverage than ever over the world economy, and the US will remain ever more dependent on oil imported from unstable and unfriendly parts of the globe. Similarly, oil industry analyst Charley Maxwell believes that non-OPEC producers will hit their peaks within the next five years. Alternative energy sources such as solar, wind, clean coal, natural gas and even nuclear power could help offset an energy shock, but the real consumption culprit is the automobile -- to which end the US will be forced to aggressively pursue hybrids, hydrogen-fueled cars and an improved public transportation infrastructure.

Sources: Future Now, Futurismic