Editor’s note: This is part one of a two part story about the looming energy crisis. Part two will run in the Autumn issue. 

One major issue will dominate our discourse for the next decade; the world-wide decline in the rate of petroleum production, referred to as “peak oil.”  According to The Hirsch Report, the geological phenomenon of peak oil is about to result in a decade long shortage of our liquid transportation fuels, gasoline and diesel.  This will disrupt the United States economy, due to our acute dependence on inexpensive transportation.  Because the scope of the problem is so large, government intervention will be required.  Today’s elected officials need to understand the importance of the issue and act accordingly if we are to survive the upcoming crisis. 

The decline of petroleum extraction rates underlies the concept of Peak Oil which was developed by a Shell geophysicist named M. King Hubbert. In 1956, Hubbert predicted that US production would peak and then decline in the early 1970’s, approximately 40 years after the peak in oil discoveries.  Hubbert had determined that the life of oil fields follows a bell shaped curve from the initial drilling through to depletion.  Hubbert was right, his critics were wrong, and American oil production peaked in 1971. 

Since then, a number of petroleum geologists have applied the model to global oil extraction rates, and have warned of an impending peak and decline of world production.  One by one, and in accordance with the model, most of the oil-producing countries have reached their production peak. The peak in global oil discoveries occurred in 1964, and current applications of Hubbert's model suggest that global production should be reaching its maximum within the next few years, and then start falling.  There is no precedent for this situation, as previous supply and price crises (1973, 1979, and 1991) were due to temporary and artificial supply disruptions.  This coming decline will be world-wide, unprecedented, unavoidable, and permanent.  We are at the end of a hundred year long era of plentiful and inexpensive petroleum. 

The fundamental global problem is of demand exceeding supply, and the entire delivery system is stretched thin.  There is no longer any reserve capacity in the world’s gargantuan system for extracting, transporting, and refining oil.  The world is producing and consuming some 84.5 million barrels of petroleum per day, probably the most that it ever will.  While demand continues to rise in order to fuel the growing economies of oil hungry consumer nations, especially the United States and China, the exporting nations struggle to maintain production rates in the face of declining reserves.  The United States has traditionally looked to Saudi Arabia to make up the difference, but they have been unable to increase exports since 2003, their reserves are not as large as originally estimated, and they consist of a heavy, sour crude, a sulphur containing type that will require large investments in new refineries. 

As Dick Cheney famously stated when he was the CEO of Halliburton, “We’re not talking about soap-flakes here.”  Oil is the world's most strategic resource, providing 40 percent of global energy and over 90 percent of our transportation fuel.  It is also the feedstock for a large number of essential products including plastics, paints, pharmaceuticals, and pesticides.   

As the Hirsch Report to the US Department of Energy noted, ”Oil peaking will create a severe liquid fuels problem for the transportation sector, resulting in dramatically higher oil prices, which will cause protracted economic hardship in the United State and the world.”

In other words; gasoline, diesel, heating oil, and aviation fuel price hikes are only symptoms of the much more serious underlying problem of resource depletion.  Coping with the inevitable and ongoing decline in petroleum production associated with peak oil is the real issue facing our generation.  It is an enormous challenge that we should all be actively preparing for. 

Some economists and oil industry spokesmen refer to peak oil as a theory.  Unfortunately for all of us, the phenomenon of peak oil is not a theory.  It is a fact of geology.  It has been amply demonstrated by the history of the industry in the United States, where oil production peaked in 1971 and has been declining ever since.  Due to the finite nature of the resource, a world decline will inevitably come, but when it will occur and what effect it will have on the global economy, nobody knows. 

After its peak occurred, the United States was able to make up the difference by importing oil from other countries, but the world will not be able to do the same by importing oil from other planets. 

In a broader context, we as a species are approaching the end of a two hundred year period of ever increasing technological, population, and economic expansion, all made possible by the one-time use of stored energy (coal, oil, and natural gas), which was deposited millions of years ago, not to be duplicated.  Within a few generations, we will once again be living on our annual allotment of power from the sun, and while that amount is not meager, it will not support six billion of us in the manner to which we have become accustomed, especially here in the United States.  We represent only 5 percent of the world’s population, but we are consuming 25 percent of the petroleum.