Sunday, June 15, 2008

More Peak Oil - Hirsch Report

Here is another report on peak oil by Dr. Robert Hirsch (2005). The link below is actually a brief summary of a larger Department of Energy report which I have not yet finished. The summary covers all the basic peak oil points, but has as interesting passage regarding mitigation that I would like to highlight here.

A scenario analysis was performed, based on crash program implementation worldwide – the fastest humanly possible. Three starting dates were considered:

1. When peaking occurs;
2. Ten years before peaking occurs; and
3. Twenty years before peaking.

The timing of oil peaking was left open because of the considerable differences of opinion among experts. Consideration of a number of implementation scenarios provided some fundamental insights, as follows:

• 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 offers
the possibility of avoiding a world liquid fuels shortfall for the
forecast period.

The reason why such long lead times are required is that the worldwide
scale of oil consumption is enormous – a fact often lost in a world where
oil abundance has been taken for granted for so long. If mitigation is too
little, too late, world supply/demand balance will have to be achieved
through massive demand destruction (shortages), which would translate to
extreme economic hardship. On the other hand, with timely mitigation,
economic damage can be minimized.
As I highlighted in this post, most expert studies have predicted peak oil dates ranging from now until 2030. In all but the most optimistic studies, we are within the 20 year time frame. Many factors will come into play...conventional vs. unconventional oil sources, other alternatives as well as conservation efforts reducing demand and consumption. Hirsch then makes an astute point concerning the risk vs. reward for (in)action:
It is possible that peaking may not occur for a decade or more, but it is also possible that peaking may be occurring right now. We will not know for certain until after the fact. The world is thus faced with a daunting risk management problem. On the one hand, if peaking is decades away, massive mitigation initiated soon would be premature. On the other hand, if peaking is imminent, failure to quickly initiate mitigation will impose large near term economic and social costs on the world.

The two risks are asymmetric:
• Mitigation initiated prematurely would result in a relatively modest
misallocation of resources.
• Failure to initiate timely mitigation with an appropriate lead-time is
certain to result in very severe economic consequences.

The world has never confronted a problem like this. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge for decisionmakers is indeed vexing. Mustering support for an invisible disaster is much more difficult than for one that is obvious to all.
Interesting times ahead...

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