United States Government Accountability Office

GAO Report to Congressional Requesters

CRUDE OIL

Uncertainty about 

Future Oil Supply 

Makes It Important to 

Develop a Strategy for 

Addressing a Peak and 

Decline in Oil 

Production 

February 2007 

 

GAO-07-283 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2007

CRUDE OIL

Uncertainty about Future Oil Supply 

Makes It Important to Develop a Strategy 

for Addressing a Peak and Decline in Oil 

Production 

Highlights of GAO-07-283, a report to 

congressional requesters 

The U.S. economy depends heavily 

on oil, particularly in the

transportation sector. World oil 

production has been running at 

near capacity to meet demand, 

pushing prices upward. Concerns

about meeting increasing demand

with finite resources have renewed 

interest in an old question: How

long can the oil supply expand 

before reaching a maximum level 

of production—a peak—from 

which it can only decline?

GAO (1) examined when oil 

production could peak, 

(2) assessed the potential for 

transportation technologies to

mitigate the consequences of a

peak in oil production, and

(3) examined federal agency efforts 

that could reduce uncertainty

about the timing of a peak or

mitigate the consequences. To 

address these objectives, GAO 

reviewed studies, convened an

expert panel, and consulted agency

officials. 

What GAO Recommends

To better prepare for a peak in oil 

production, GAO recommends that 

the Secretary of Energy work with

other agencies to establish a

strategy to coordinate and

prioritize federal agency efforts to

reduce uncertainty about the likely 

timing of a peak and to advise 

Congress on how best to mitigate 

consequences. In commenting on a 

draft of the report, the 

Departments of Energy and the 

Interior generally agreed with the 

report and recommendations. 

Most studies estimate that oil production will peak sometime between now 

and 2040. This range of estimates is wide because the timing of the peak 

depends on multiple, uncertain factors that will help determine how quickly 

the oil remaining in the ground is used, including the amount of oil still in the 

ground; how much of that oil can ultimately be produced given 

technological, cost, and environmental challenges as well as potentially 

unfavorable political and investment conditions in some countries where oil 

is located; and future global demand for oil. Demand for oil will, in turn, be 

influenced by global economic growth and may be affected by government 

policies on the environment and climate change and consumer choices 

about conservation. 

In the United States, alternative fuels and transportation technologies face 

challenges that could impede their ability to mitigate the consequences of a 

peak and decline in oil production, unless sufficient time and effort are 

brought to bear. For example, although corn ethanol production is 

technically feasible, it is more expensive to produce than gasoline and will 

require costly investments in infrastructure, such as pipelines and storage 

tanks, before it can become widely available as a primary fuel. Key

alternative technologies currently supply the equivalent of only about 1 

percent of U.S. consumption of petroleum products, and the Department of 

Energy (DOE) projects that even by 2015, they could displace only the 

equivalent of 4 percent of projected U.S. annual consumption. In such 

circumstances, an imminent peak and sharp decline in oil production could 

cause a worldwide recession. If the peak is delayed, however, these

technologies have a greater potential to mitigate the consequences. DOE 

projects that the technologies could displace up to 34 percent of U.S. 

consumption in the 2025 through 2030 time frame, if the challenges are met.

The level of effort dedicated to overcoming challenges will depend in part on 

sustained high oil prices to encourage sufficient investment in and demand 

for alternatives. 

Federal agency efforts that could reduce uncertainty about the timing of 

peak oil production or mitigate its consequences are spread across multiple 

agencies and are generally not focused explicitly on peak oil. Federally 

sponsored studies have expressed concern over the potential for a peak, and 

agency officials have identified actions that could be taken to address this 

issue. For example, DOE and United States Geological Survey officials said 

uncertainty about the peak’s timing could be reduced through better 

information about worldwide demand and supply, and agency officials said 

they could step up efforts to promote alternative fuels and transportation 

technologies. However, there is no coordinated federal strategy for reducing 

www.gao.gov/cgi-bin/getrpt?GAO-07-283. uncertainty about the peak’s timing or mitigating its consequences. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jim Wells at 

(202) 512-3841 or wellsj@gao.gov.
Contents 

Letter 1

Results in Brief 4 

Background 6

Timing of Peak Oil Production Depends on Uncertain Factors 12 

Alternative Transportation Technologies Face Challenges in

Mitigating the Consequences of the Peak and Decline 29 

Federal Agencies Do Not Have a Coordinated Strategy to Address 

Peak Oil Issues 35 

Conclusions 38

Recommendation for Executive Action 39 

Agency Comments and Our Evaluation 40 

Appendix I Scope and Methodology 43 

Appendix II Key Peak Oil Studies 47 

Appendix III Key Technologies to Enhance the Supply of Oil 49 

Enhanced Oil Recovery 49 

Deepwater and Ultra-Deepwater Drilling 50 

Oil Sands 52 

Heavy and Extra-Heavy Oils 53 

Oil Shale 54 

Appendix IV Key Technologies to Displace Oil Consumption in the 

Transportation Sector 57 

Ethanol 57

Biodiesel 58

Coal and Biomass Gas-to-Liquids 60 

Natural Gas 61 

Advanced Vehicle Technologies 63 

Hydrogen Fuel Cell Vehicles 65 

Appendix V Comments from the Department of Energy 67 

GAO Comments 70 

Page i GAO-07-283 Peak Oil Production
Appendix VI Comments from the Department of the Interior 72 

GAO Comments 75 

Appendix VII GAO Contact and Staff Acknowledgments 76

Figures 

Figure 1: U.S. Oil Production, 1900-2005 8 

Figure 2: World Crude Oil and Other Liquids Production, 1965-2005 9 

Figure 3: Annual U.S. Oil Consumption, by Sector, 1974-2005 10 

Figure 4: Real and Nominal Oil Prices, 1950-2006 11 

Figure 5: Key Estimates of the Timing of Peak Oil 13 

Figure 6: World Oil Reserves, OPEC and non-OPEC, 2006 16 

Figure 7: Worldwide Proven Oil Reserves, by Political Risk 22 

Figure 8: Worldwide Proven Oil Reserves, by Investment Risk 24 

Figure 9: Top 10 Companies on the Basis of Oil Production and 

Reserves Holdings, 2004 25 

Figure 10: World Oil Production, by OPEC and Non-OPEC 

Countries, 2004 Projected to 2030 26 

Figure 11: Daily World Oil Consumption, by Region for 2003 and 

Projected for 2030 27 

Page ii GAO-07-283 Peak Oil Production
Abbreviations 

CO2 carbon dioxide 

DOE Department of Energy 

DOT Department of Transportation 

EIA Energy Information Administration 

EOR enhanced oil recovery 

GDP gross domestic product 

GTL gas to liquids

IEA International Energy Agency 

OECD Organization for Economic Co-operation and Development 

OPEC Organization of the Petroleum Exporting Countries 

USDA United States Department of Agriculture 

USGS United States Geological Survey 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page iii GAO-07-283 Peak Oil Production
United States Government Accountability Office

Washington, DC 20548 

February 28, 2007 

The Honorable Bart Gordon 

Chairman 

Committee on Science and Technology 

House of Representatives 

The Honorable Roscoe G. Bartlett 

The Honorable Judy Biggert 

The Honorable Wayne T. Gilchrest 

The Honorable Vernon J. Ehlers 

The Honorable Lynn C. Woolsey 

House of Representatives 

U.S. consumers paid $38 billion more for gasoline in the first 6 months of 

2006 than they paid in the same period of 2005, and $57 billion more than 

they paid in the same period of 2004, in large part because of rising oil 

prices, which reached a 24-year high in 2006 when adjusted for inflation. 

Oil is a global commodity, and its price is determined mainly by the 

balance between world demand and supply. Since 1983, world 

consumption of petroleum products has grown fairly steadily. The 

Department of Energy’s (DOE) Energy Information Administration (EIA) 

states in a 2006 report that world consumption of petroleum had reached

84 million barrels per day in 2005.1

 EIA also projects that world oil 

consumption will continue to grow and will reach 118 million barrels per 

day in 2030.2

 About 43 percent of this growth in oil consumption will come 

from the non-Organization for Economic Co-operation and Development 

Asian countries, including China and India, but the United States will 

remain the world’s largest oil consumer. In 2005, the United States 

accounted for just under 25 percent of world oil consumption. World oil 

 1

This number comes from EIA’s Monthly Energy Review (December 2006), table 11.2. EIA

labels this table as petroleum consumption, but DOE pointed out in its comments that the

consumption data include some ethanol, which is not a petroleum product. EIA staff told 

us that the ethanol in the 2005 figure amounts to 265,000 barrels per day, amounting to just

under one-third of 1 percent of world consumption. 

2

This projection comes from EIA’s International Energy Outlook 2006 and reflects 

assumptions used in EIA’s reference case scenario. To assess uncertainties in the reference 

case projections, EIA also runs low and high oil price scenarios, in which the projected 

world oil consumption in 2030 is 102 million and 128 million barrels per day, respectively. 

Page 1 GAO-07-283 Peak Oil Production
production has been running at near capacity in recent years to meet 

rising consumption, putting upward pressure on oil prices. The potential

for disruptions in key oil-producing regions of the world, such as the 

Middle East, and the yearly threat of hurricanes in the Gulf of Mexico have

also exerted upward pressure on oil prices. These conditions have 

renewed interest in a long-standing question: Will oil supply continue to 

expand to meet growing demand, or will we soon reach a maximum 

possible level of production—a peak—beyond which oil supply can only 

decline? 

Historically, U.S. oil production peaked around 1970 at close to 10 million

barrels per day and has been generally declining ever since, to about 5 

million barrels per day in 2005. While recent discoveries raise the prospect 

of some increases in U.S. oil production, significant reductions in world oil 

production could still have important consequences for the nation’s 

welfare. The United States imported about 66 percent of its oil and 

petroleum products in 2005, and the U.S. economy—particularly the 

transportation sector—depends heavily on oil. Overall, transportation 

accounts for approximately 65 percent of U.S. oil consumption. New 

technologies have been introduced that displace some oil consumption 

within the sector, but oil consumption for transportation has continued to 

increase in recent years. According to a 2005 report prepared for DOE, 

without timely preparation, a reduction in world oil production could 

cause transportation fuel shortages that would translate into significant 

economic hardship.3

The U.S. government addresses or examines world oil supply in several 

ways. For example, DOE is responsible for promoting the nation’s energy 

security through reliable and affordable energy, including oil. DOE 

supports development of technologies for producing and using oil and for 

making alternative fuels, such as ethanol or hydrogen. The department 

also publishes statistics on energy production and consumption through 

EIA. In addition, the United States Geological Survey (USGS), within the 

Department of the Interior (Interior), assesses the amount of oil 

throughout the world. The United States also is a member of the 

International Energy Agency (IEA), an organization of 26 member 

countries whose objectives include coping with disruptions in the oil 

 3

Robert L. Hirsch, Roger Bezdek, and Robert Wendling, Peaking of World Oil Production:

Impacts, Mitigation, and Risk Management (February 2005). 

Page 2 GAO-07-283 Peak Oil Production
supply and providing information on the international oil market, among 

other things.4

In this context, we (1) examined when oil production could peak, (2) 

assessed the potential for transportation technologies to mitigate the 

consequences of a peak and decline in oil production, and (3) examined 

federal agency efforts that could reduce uncertainty about the timing of 

peak oil production or mitigate the consequences. 

In conducting our work, we identified and reviewed key studies on when 

oil production will peak. We reviewed estimates of the amount of oil 

throughout the world and the amount of oil held by national oil 

companies, and we analyzed forecasts of political and investment risks in 

oil-producing regions. To assess the potential for transportation 

technologies in the United States to mitigate the consequences of a peak 

and decline in oil production, we examined options to develop alternative 

fuels and technologies to reduce energy consumption in the transportation 

sector. In particular, we focused on technologies that would affect 

automobiles and light trucks. We consulted with experts to devise a list of

key technologies in these areas and then reviewed DOE programs and 

activities related to developing these technologies. We did not attempt to 

comprehensively list all technologies or to conduct a governmentwide 

review of all programs, and we limited our scope to what federal 

government officials know about the status of these technologies in the 

United States. We did not conduct a global assessment of transportation 

technologies. We reviewed numerous studies on the relationship between

oil and the global economy and, in particular, on the experiences of past 

oil price shocks. To identify federal government activities that could 

address peak oil production issues, we spoke with officials at DOE and 

USGS, and gathered information on federal programs and policies that 

could affect uncertainty about the timing of peak oil production and the 

development of alternative transportation technologies. To gain further 

insights into the federal role and other issues surrounding peak oil 

production, we convened an expert panel in conjunction with the National 

Academy of Sciences. These experts commented on the potential 

economic consequences of a transition away from conventional oil, 

factors that could affect the severity of the consequences, and what the 

federal role should be, among other things. A more detailed description of 

the scope and methodology of our review is presented in appendix I. We 

 4

The European Commission also participates in the work of IEA. 

Page 3 GAO-07-283 Peak Oil Production
performed our work between July 2005 and December 2006, in accordance 

with generally accepted government auditing standards. 

Most studies estimate that oil production will peak sometime between 

now and 2040, although many of these projections cover a wide range of 

time, including two studies for which the range extends into the next 

century. The timing of the peak depends on multiple, uncertain factors 

that will influence how quickly the remaining oil is used, including the 

amount of oil still in the ground, how much of the remaining oil can be 

ultimately produced, and future oil demand. The amount of oil remaining 

in the ground is highly uncertain, in part because the Organization of 

Petroleum Exporting Countries (OPEC) controls most of the estimated 

world oil reserves, but its estimates of reserves are not verified by 

independent auditors. In addition, many parts of the world have not yet 

been fully explored for oil. There is also great uncertainty about the 

amount of oil that will ultimately be produced, given the technological,

cost, and environmental challenges. For example, some of the oil 

remaining in the ground can be accessed only by using complex and costly 

technologies that present greater environmental challenges than the 

technologies used for most of the oil produced to date. 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. 

Results in Brief 

In the United States, alternative transportation technologies face 

challenges that could impede their ability to mitigate the consequences of 

a peak and decline in oil production, unless sufficient time and effort are 

brought to bear. For example: 

• Ethanol from corn is more costly to produce than gasoline, in part because 

of the high cost of the corn feedstock. Even if ethanol were to become 

more cost-competitive with gasoline, it could not become widely available 

Page 4 GAO-07-283 Peak Oil Production
without costly investments in infrastructure, including pipelines, storage 

tanks, and filling stations. 

• Advanced vehicle technologies that could increase mileage or use different 

fuels are generally more costly than conventional technologies and have 

not been widely adopted. For example, hybrid electric vehicles can cost 

from $2,000 to $3,500 more to purchase than comparable conventional 

vehicles and currently constitute about 1 percent of new vehicle 

registrations in the United States. 

• Hydrogen fuel cell vehicles are significantly more costly than conventional

vehicles to produce. Specifically, the hydrogen fuel cell stack needed to

power a vehicle currently costs about $35,000 to produce, in comparison 

with a conventional gas engine, which costs $2,000 to $3,000. 

Given these challenges, development and widespread adoption of 

alternative transportation technologies will take time and effort. Key 

alternative technologies currently supply the equivalent of only about 1 

percent of U.S. consumption of petroleum products, and DOE projects 

that even under optimistic scenarios, by 2015 these technologies could 

displace only the equivalent of 4 percent of projected U.S. annual 

consumption. 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. DOE projects that 

these technologies could displace up to the equivalent of 34 percent of 

projected U.S. annual consumption of petroleum products in the 2025 

through 2030 time frame, assuming the challenges the technologies face

are overcome. 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. 

Federal agency efforts that could reduce uncertainty about the timing of 

peak oil production or mitigate its consequences are spread across 

multiple agencies and generally are not focused explicitly on peak oil. For 

example, efforts that could be used to reduce uncertainty about the timing 

of a peak include USGS activities to estimate oil resources and DOE 

efforts to monitor current supply and demand conditions in global oil 

markets and to make future projections. Similarly, DOE, the Department 

of Transportation (DOT), and the U.S. Department of Agriculture (USDA) 

all have programs and activities that oversee or promote alternative 

transportation technologies that could mitigate the consequences of a 

Page 5 GAO-07-283 Peak Oil Production
peak. However, officials of key agencies we spoke with acknowledge that 

their efforts—with the exception of some studies—are not specifically 

designed to address peak oil. Federally sponsored studies we reviewed 

have expressed a growing concern over the potential for a peak and 

officials from key agencies have identified some options for addressing 

this issue. For example, DOE and USGS officials told us that developing

better information about worldwide demand and supply and improving 

global estimates for nonconventional oil resources and oil in “frontier” 

regions that have yet to be fully explored could help prepare for a peak in

oil production by reducing uncertainty about its timing. Agency officials 

also said that, in the event of an imminent peak, they could step up efforts 

to mitigate the consequences by, for example, further encouraging 

development and adoption of alternative fuels and advanced vehicle 

technologies. However, according to DOE, there is no formal strategy for 

coordinating and prioritizing federal efforts dealing with peak oil issues, 

either within DOE or between DOE and other key agencies. 

While the consequences of a peak would be felt globally, the United States, 

as the largest consumer of oil and one of the nations most heavily 

dependent on oil for transportation, may be particularly vulnerable. 

Therefore, to better prepare the United States for a peak and decline in oil 

production, we are recommending that the Secretary of Energy take the 

lead, 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. 

Oil—the product of the burial and transformation of biomass over the last 

200 million years—has historically had no equal as an energy source for its 

intrinsic qualities of extractability, transportability, versatility, and cost. 

But the total amount of oil underground is finite, and, therefore, 

production will one day reach a peak and then begin to decline. Such a 

peak may be involuntary if supply is unable to keep up with growing 

demand. Alternatively, a production peak could be brought about by 

voluntary reductions in oil consumption before physical limits to 

continued supply growth kick in. Not surprisingly, concerns have arisen in

recent years about the relationship between (1) the growing consumption 

of oil and the availability of oil reserves and (2) the impact of potentially 

dwindling supplies and rising prices on the world’s economy and social 

Background 

Page 6 GAO-07-283 Peak Oil Production
welfare. Following a peak in world oil production, the rate of production 

would eventually decrease and, necessarily, so would the rate of 

consumption of oil. 

Oil can be found and produced from a variety of sources. To date, world 

oil production has come almost exclusively from what are considered to 

be “conventional sources” of oil. While there is no universally agreed-upon

definition of what is meant by conventional sources, IEA states that 

conventional sources can be produced using today’s mainstream 

technologies, compared with “nonconventional sources” that require more 

complex or more expensive technologies to extract, such as oil sands and 

oil shale. Distinguishing between conventional and nonconventional oil 

sources is important because the additional cost and technological 

challenges surrounding production of nonconventional sources make 

these resources more uncertain. However, this distinction is further 

complicated because what is considered to be a mainstream technology 

can change over time. For example, offshore oil deposits were considered

to be a nonconventional source 50 years ago; however, today they are 

considered conventional. For the purpose of this report, and consistent 

with IEA’s classification, we define nonconventional sources as including 

oil sands, heavy oil deposits, and oil shale.5

 Some oil is being produced 

from these nonconventional sources today. For example, in 2005 Canada

produced about 1.6 million barrels per day of oil from oil sands, and 

Venezuelan production of extra-heavy oil for 2005 was projected to be 

about 600,000 barrels per day. Currently, however, production from these 

sources is very small compared with total world oil production. 

According to IEA, most countries outside the Middle East have reached 

their peak in conventional oil production, or will do so in the near future. 

The United States is a case in point. Even though the United States is 

currently the third-largest, oil-producing nation,6

 U.S. oil production 

peaked around 1970 and has been on a declining trend ever since. (See

fig. 1.) 

Oil Production Has Peaked 

in the United States and 

Most Other Countries 

Outside the Middle East 

 5

The distinction as to what portion of heavy oil is conventional is debated by experts. For 

example, contrary to the IEA definition, USGS considers the heavy oil produced in

California as conventional oil. 

6

Saudi Arabia and Russia, respectively, lead in world oil production. 

Page 7 GAO-07-283 Peak Oil Production
Figure 1: U.S. Oil Production, 1900-2005 

0

1

2

3

4

5

6

7

8

9

10

1900 1915 1930 1945 1960 1975 1990 2005

Year

Source: GAO analysis of Energy Information Administration data.

Million barrels per day

Looking toward the future, EIA projects that U.S. deepwater oil 

production will slightly boost total U.S. production in the near term. 

However, this increase will end about 2016, and then U.S. production will 

continue to decline. Given these projections, it is clear that future 

increases in U.S. demand for oil will need to be fulfilled through increases 

in production in the rest of the world. Increasing production in other 

countries has to date been able to more than make up for declining U.S. 

production and has resulted in increasing world production. (See fig. 2.) 

Page 8 GAO-07-283 Peak Oil Production
Figure 2: World Crude Oil and Other Liquids Production, 1965-2005 

Million barrels per day

Source: GAO analysis of British Petroleum data.

0

10

20

30

40

50

60

70

80

90

100

1965

1970

1975

1980

1985

1990

1995

2000

2005

Note: These data include crude oil, shale oil, oil sands, and natural gas liquids—the liquid content of 

natural gas. They exclude liquid fuels from other sources, such as coal derivatives.

Oil Is Critical in Satisfying 

the U.S. and World 

Demand for Energy 

Oil accounts for approximately one-third of all the energy used in the 

world. Following the record oil prices associated with the Iranian 

Revolution in 1979-80 and with the start of the Iran-Iraq war in 1980, there 

was a drop in total world oil consumption, from about 63 million barrels 

per day in 1980 to 59 million barrels per day in 1983. Since then, however, 

world consumption of petroleum products has increased, totaling about 84 

million barrels per day in 2005. In the United States, consumption of 

petroleum products increased an average of 1.65 percent annually from 

1983 to 2004, and averaged 20.6 million barrels per day in 2005, 

representing about one-quarter of all world consumption. EIA projects 

that U.S. consumption will continue to increase and will reach 27.6 million 

barrels per day in 2030. 

As figure 3 shows, the transportation sector is by far the largest U.S. 

consumer of petroleum, accounting for two-thirds of all U.S. consumption 

and relying almost entirely on petroleum to operate. Within the 

transportation sector, light vehicles are the largest consumers of 

Page 9 GAO-07-283 Peak Oil Production
petroleum energy,7

 accounting for approximately 60 percent of the 

transportation sector’s consumption of petroleum-based energy in the 

United States. Figure 3 also shows that while consumption of petroleum 

products in other sectors has remained relatively constant or increased 

slightly since the early 1980s, petroleum consumption in the transportation 

sector has grown at a significant rate. 

Figure 3: Annual U.S. Oil Consumption, by Sector, 1974-2005 

Year

0

2

4

6

8

10

12

14

Electric

Transportation

Industrial

Commerical

Residential

Source: GAO analysis of Energy Information Administration data.

Million barrels per day

199

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

3

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

Relationship of Supply and 

Demand of Oil to Oil Price 

The price of oil is determined in the world market and depends mainly on 

the balance between world demand and supply. Recent world production

of oil has been running at near capacity to meet rising demand, which has 

put upward pressure on oil prices. Figure 4 shows that world oil prices in 

nominal terms—unadjusted for inflation—are higher than at any time 

 7

According to the Transportation Energy Data Book, light vehicles include cars; light 

trucks (two-axle, four-tire trucks); and motorcycles.

Page 10 GAO-07-283 Peak Oil Production
since 1950, although when adjusted for inflation, the high prices of 2006 

are still lower than were reached in the 1979-80 price run-up following the 

Iranian Revolution and the beginning of the Iran-Iraq war. 

Figure 4: Real and Nominal Oil Prices, 1950-2006 

Dollars per barrel

Source: GAO analysis of British Petroleum, Energy Information Administration, and Bureau of Labor Statistics data.

0

10

20

30

40

50

60

70

80

90

100

Real price (2005 dollars)

Nominal price

1950

1957

1964

1971

1978

1985

1992

1999

2006

Note: Crude oil price data are annual averages of Arabian Light prices for 1945 through 1983 and 

Brent oil prices for 1984 through 2005. The 2006 price is an average of daily Brent oil prices from 

January 3 to December 20, 2006.

All else being equal, oil consumption is inversely correlated with oil price, 

with higher oil prices inducing consumers to reduce their oil 

consumption.8

 Specifically, increases in crude oil prices are reflected in 

the prices of products made from crude oil, including gasoline, diesel,

home heating oil, and petrochemicals. The extent to which consumers are 

 8

Oil consumption also depends on other factors; therefore, it is sometimes difficult to 

isolate the changes in consumption caused by changes in oil prices. For example, gasoline 

consumption generally increases as incomes rise and people choose to drive more. In

addition, higher incomes mean that oil plays a smaller role in a consumer’s budget, and,

therefore, higher-income consumers may be less sensitive to changes in oil prices than 

lower-income consumers.

Page 11 GAO-07-283 Peak Oil Production
willing and able to reduce their consumption of oil in response to price 

increases depends on the cost of switching to activities and lifestyles that 

use less oil. Because there are more options available in the longer term, 

consumers respond more to changes in oil prices in the longer term than 

in the shorter term. For example, in the short term, consumers can reduce 

oil consumption by driving less or more slowly, but in the longer term, 

consumers can still take those actions, but can also buy more fuel-efficient 

automobiles or even move closer to where they work and thereby further 

reduce their oil consumption. 

Supply and demand, in turn, affect the type of oil that is produced. 

Conventional oil that is less expensive to extract using lower-cost drilling 

techniques will be produced when oil prices are lower. Conversely, oil that 

is expensive to produce because of the higher cost technologies involved

may not be economical to produce at low oil prices. Producers are 

unlikely to turn to these more expensive oil sources unless oil prices are 

sustained at a high enough level to make such an enterprise profitable. 

Given the importance of oil in the world’s energy portfolio, as cheaper oil

reserves are exhausted in the future, nations will need to make the 

transition to more and more expensive and difficult-to-access sources of 

oil to meet energy demands. Recently, for example, a large discovery of oil 

in the Gulf of Mexico made headlines; however, this potential wealth of oil 

is located at a depth of over 5 miles below sea level, a fact that adds 

significantly to the costs of extracting that oil. 

Most studies estimate that oil production will peak sometime between 

now and 2040, although many of these projections cover a wide range of 

time, including two studies for which the range extends into the next 

century.9

 Key uncertainties in trying to determine the timing of peak oil are 

the (1) amount of oil throughout the world; (2) technological, cost, and 

environmental challenges to produce that oil; (3) political and investment 

risk factors that may affect oil exploration and production; and (4) future 

world demand for oil. The uncertainties related to exploration and 

Timing of Peak Oil 

Production Depends 

on Uncertain Factors 

 9

One key difference between the studies is in how much oil they assume is still in the 

ground. Some studies consider a peak in conventional oil, while other studies consider a

peak in total oil, including conventional and nonconventional oils. Because of these 

differences in the peak concept used in the various studies, we have not attempted to

define a peak as either a peak in conventional oil or conventional plus nonconventional 

oils. Instead, we have focused on identifying key factors that cause uncertainty in the

timing of the peak. These factors would cause such uncertainty regardless of whether the

peak concept focused on conventional or total oil. 

Page 12 GAO-07-283 Peak Oil Production
production also make it difficult to estimate the rate of decline after the 

peak. 

Studies Predict Widely 

Different Dates for Peak 

Oil 

Most studies estimate that oil production will peak sometime between 

now and 2040, although many of these projections cover a wide range of 

time, including two studies for which the range extends into the next 

century. Figure 5 shows the estimates of studies we examined. 

Figure 5: Key Estimates of the Timing of Peak Oil 

Source: GAO study.

2000 2020 2040 2060 2080 2100 2120

After 2020

After 2030

After 2030

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

(l)

(m)

(n)

(o)

(p)

(q)

(r)

(s)

(t)

(u)

Note: These studies are listed in appendix II of this report. Estimates of 90 percent confidence 

intervals using two different reserves data sources are provided for study g. One additional study that 

is not represented in this figure, referenced as study v, states that the timing of the peak is 

“unknowable.” 

Page 13 GAO-07-283 Peak Oil Production
Studies that predict the timing of a peak use different estimates of how 

much oil remains in the ground, and these differences explain some of the 

wide ranges of these predictions. Estimates of how much oil remains in 

the ground are highly uncertain because much of these data are selfreported and unverified by independent auditors; many parts of the world 

have yet to be fully explored for oil; and there is no comprehensive 

assessment of oil reserves from nonconventional sources. This uncertainty 

surrounding estimates of oil resources in the ground comprises the 

uncertainty surrounding estimates of proven reserves10 as well as 

uncertainty surrounding expected increases in these reserves and 

estimated future oil discoveries. 

Amount of Oil in the 

Ground Is Uncertain

Oil and Gas Journal and World Oil, two primary sources of proven 

reserves estimates, compile data on proven reserves from national and 

private company sources. Some of this information is publicly available 

from oil companies that are subject to public reporting requirements—for 

example, information provided by companies that are publicly traded on 

U.S. stock exchanges that are subject to the filing requirements of U.S. 

federal securities laws. Information filed pursuant to these laws is subject 

to liability standards, and, therefore, there is a strong incentive for these 

companies to make sure their disclosures are complete and accurate. On 

the other hand, companies that are not subject to these federal securities 

laws, including companies wholly owned by various OPEC countries 

where the majority of reserves are located, are not subject to these filing 

requirements and their related liability standards. Some experts believe 

OPEC estimates of proven reserves to be inflated. For example, OPEC 

estimates increased sharply in the 1980s, corresponding to a change in 

OPEC’s quota rules that linked a member country’s production quota in

part to its remaining proven reserves. In addition, many OPEC countries’ 

reported reserves remained relatively unchanged during the 1990s, even as

they continued high levels of oil production. For example, IEA reports that 

reserves estimates in Kuwait were unchanged from 1991 to 2002, even

though the country produced more than 8 billion barrels of oil over that 

period and did not make any important new oil discoveries. At a 2005 

 10Proven reserves are classified as oil in the ground that is likely to be economically 

producible at expected oil prices and given expected technologies. Conventional reserves 

are often classified according to the degree of certainty that they exist and can be extracted 

profitably. Even this classification is fraught with uncertainty because there are no

harmonized rules about the assumptions to be used when determining this profitability. 

Page 14 GAO-07-283 Peak Oil Production
National Academy of Sciences workshop on peak oil, OPEC defended its

reserves estimates as accurate. The potential unreliability of OPEC’s selfreported data is particularly problematic with respect to predicting the 

timing of a peak because OPEC holds most of the world’s current 

estimated proven oil reserves. On the basis of Oil and Gas Journal

estimates as of January 2006, we found that of the approximately 1.1 

trillion barrels of proven oil reserves worldwide,11 about 80 percent are 

located in the OPEC countries,12 compared with about 2 percent in the 

United States. Figure 6 shows this estimate in more detail. 

 11As previously discussed in this report, there is no universally agreed-upon definition of

conventional oil. The Oil and Gas Journal includes Canadian oil sands in its estimates.

IEA classifies oil sands as nonconventional, and, therefore, since we are using the IEA 

classification throughout this report, we have removed the Oil and Gas Journal estimate 

of 174 billion barrels of oil from the Canadian oil sands data. USGS experts emphasized the 

importance of these oil sands in future oil production and stated that in their view, these 

resources are now considered to be conventional. 

12OPEC’s members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi

Arabia, the United Arab Emirates, and Venezuela. Beginning with January 2007 data, new 

OPEC member Angola would also be included in OPEC reserves estimates. 

Page 15 GAO-07-283 Peak Oil Production
Figure 6: World Oil Reserves, OPEC and non-OPEC, 2006 

OPEC

(all other

countries)

OPEC (Saudi Arabia only)

Non-OPEC

Non-OPEC (United States only)

21.4

Billions of barrels

Source: GAO analysis of Oil and Gas Journal data.

Algeria - 11.4

Iran

Iraq

Kuwait

Libya - 39.1

Nigeria - 35.9

Qatar - 15.2

United Arab

Emirates

Venezuela

266.8

634.8

216.8

132.5

104.0

79.7

97.8

115.0

Indonesia - 4.3

USGS, another primary source of reported estimates, provides oil 

resources estimates, which are different from proved reserves estimates. 

Oil resources estimates are significantly higher because they estimate the 

world’s total oil resource base, rather than just what is now proven to be 

economically producible. USGS estimates of the resource base include 

past production and current reserves as well as the potential for future 

increases in current conventional oil reserves—often referred to as 

reserves growth—and the amount of estimated conventional oil that has 

the potential to be added to these reserves.13 Estimates of reserves growth 

and those resources that have the potential to be added to oil reserves are 

important in determining when oil production may peak. However, 

 13USGS defines conventional oil accumulation based primarily on geology. The time 

horizon for these data is 30 years. This definition does not incorporate economic or

political factors, such as deepwater, remoteness, harsh climate, regulatory status, or 

engineering techniques. Not included in this USGS definition are oil sands and oil shale. 

Interior’s Minerals Management Service oversees oil production on federal lands offshore.

Officials from the Minerals Management Service stated in comments on a draft of this 

report that, with regard to some offshore areas, resource estimates are based on data that

are 20 to 25 years old. They also pointed out that resource estimates can change 

dramatically with improvements to technology and information. 

Page 16 GAO-07-283 Peak Oil Production
estimating these potential future reserves is complicated by the fact that 

many regions of the world have not been fully explored and, as a result, 

there is limited information. For example, in its 2000 assessment, USGS 

provides a mean estimate of 732 billion barrels that have the potential to 

be added as newly discovered conventional oil, with as much as 25 percent 

from the Arctic—including Greenland, Northern Canada, and the Russian 

portion of the Barents Sea. However, relatively little exploration has been 

done in this region, and there are large portions of the world where the 

potential for oil production exists, but where exploration has not been 

done. According to USGS, there is less uncertainty in regions where wells 

have been drilled, but even in the United States, one of the areas that has 

seen the greatest exploration, some areas have not been fully explored, as

illustrated by the recent discovery of a potentially large oil field in the Gulf 

of Mexico. 

Limited information on oil-producing regions worldwide also leads USGS 

to base its estimate of reserves growth on how reserves estimates have 

grown in the United States. However, some experts criticize this 

methodology; they believe such an estimate may be too high because the 

U.S. experience overestimates increases in future worldwide reserves. In 

contrast, EIA believes the USGS estimate may be too low. In 2005, USGS 

released a study showing that its prediction of reserves growth has been in

line with the world’s experience from 1996 to 2003.14 Given such 

controversy, uncertainty remains about this key element of estimating the 

amount of oil in the ground. In 2000, USGS’ most recent full assessment of 

the world’s key oil regions, the agency provided a range of estimates of 

remaining world conventional oil resources. The mean of this range was at

about 2.3 trillion barrels comprising about 890 billion barrels in current 

reserves and 1.4 trillion barrels that have the potential to be added to oil 

reserves in the future.15

Further contributing to the uncertainty of the timing of a peak is the lack 

of a comprehensive assessment of oil from nonconventional sources. For 

example, the three key sources of oil estimates—Oil and Gas Journal, 

 14T.R. Klett, Donald L. Gautier, and Thomas S. Ahlbrandt, “An Evaluation of the U.S. 

Geological Survey World Petroleum Assessment 2000,” American Association of 

Petroleum Geologists Bulletin. Vol. 89, no.8 (August 2005). 

15Thomas S. Ahlbrandt, Ronald R. Charpentier, T.R. Klett, James W. Schmoker, Christopher 

J. Schenk, and Gregory F. Ulmishek, Global Resource Estimates from Total Petroleum 

Systems (The American Association of Petroleum Geologists: Tulsa, Oklahoma, 2005).

Page 17 GAO-07-283 Peak Oil Production
World Oil, and USGS—do not generally include oil from nonconventional

sources. This is an important issue because oil from nonconventional 

sources is thought to exist in large quantities. For example, IEA believes 

that oil from nonconventional sources—composed primarily of Canadian 

oil sands, extra-heavy oil deposits in Venezuela, and oil shale in the United

States—could account for as much as 7 trillion barrels of oil, which could 

greatly delay the onset of a peak in production. However, IEA also points 

out that the amount of this nonconventional oil that will eventually be 

produced is highly uncertain, which is a result of the challenges facing this

production. Despite this uncertainty, USGS experts noted that Canadian 

oil sands and Venezuelan extra-heavy oil production are under way now 

and also suggested that proven reserves from these sources will be 

growing considerably in the immediate future. 

Uncertainty Remains 

about How Much Oil Can 

Be Produced from Proven 

Reserves, Hard-to-Reach 

Locations, and 

Nonconventional Sources 

It is also difficult to project the timing of a peak in oil production because 

technological, cost, and environmental challenges make it unclear how 

much oil can ultimately be recovered from (1) proven reserves, (2) hardto-reach locations, and (3) nonconventional sources. 

To increase the recovery rate from oil reserves, companies turn to 

enhanced oil recovery (EOR) technologies, which DOE reports has the 

potential to increase recovery rates from 30 to 50 percent in many 

locations. These technologies include injecting steam or heated water; 

gases, such as carbon dioxide; or chemicals into the reservoir to stimulate 

oil flow and allow for increased recovery. Opportunities for EOR have 

been most aggressively pursued in the United States, EOR technologies 

currently contribute approximately 12 percent to U.S. production, and 

carbon dioxide EOR alone is projected to have the potential to provide at 

least 2 million barrels per day by 2020. However, technological advances, 

such as better seismic and fluid-monitoring techniques for reservoirs 

during an EOR injection, may be required to make these techniques more 

cost-effective. Furthermore, EOR technologies are much costlier than the 

conventional production methods used for the vast majority of oil 

produced. Costs are higher because of the capital cost of equipment and 

operating costs, including the production, transportation, and injection of 

agents into existing fields and the additional energy costs of performing 

these tasks. Finally, EOR technologies have the potential to create 

environmental concerns associated with the additional energy required to

conduct an EOR injection and the greenhouse gas emissions associated 

with producing that energy, although EIA has stated that these 

environmental costs may be less than those imposed by producing oil in

previously undeveloped areas. Even if sustained high oil prices make EOR 

Page 18 GAO-07-283 Peak Oil Production
technologies cost-effective for an oil company, these challenges and costs 

may deter their widespread use. 

The timing of peak oil is also difficult to estimate because new sources of 

oil could be increasingly more remote and costly to exploit, including 

offshore production of oil in deepwater and ultra-deepwater. Worldwide, 

industry analysts report that deepwater (depths of 1,000 to 5,000 feet) and 

ultra-deepwater (5,000 to 10,000 feet) drilling efforts are concentrated 

offshore in Africa, Latin America, and North America, and capital 

expenditures for these efforts are expected to grow through at least 2011. 

In the United States, deepwater and ultra-deepwater drilling, primarily in 

the Gulf of Mexico, could reach 2.2 million barrels per day in 2016, 

according to EIA estimates. However, accessing and producing oil from 

these locations present several challenges. At deepwater depths, 

penetrating the earth and efficiently operating drilling equipment is 

difficult because of the extreme pressure and temperature. In addition, 

these conditions can compromise the endurance and reliability of 

operating equipment. Operating costs for deepwater rigs are 3.0 to 4.5 

times more than operating costs for typical shallow water rigs. Capital 

costs, including platforms and underwater pipeline infrastructures, are 

also greater. Finally, deepwater and ultra-deepwater drilling efforts 

generally face similar environmental concerns as shallow water drilling 

efforts, although some deepwater operations may pose greater 

environmental concerns to sensitive deepwater ecosystems. 

It is unclear how much oil can be recovered from nonconventional 

sources. Recovery from these sources could delay a peak in oil production

or slow the rate of decline in production after a peak. Expert sources 

disagree concerning the significance of the role these nonconventional 

sources will play in the future. DOE officials we spoke with emphasized 

the belief that nonconventional oil will play a significant role in the very 

near future as conventional oil production is unable to meet the increasing 

demand for oil. However, IEA estimates of oil production have 

conventional oil continuing to comprise almost all of production through 

2030. Currently, production of oil from key nonconventional sources of 

oil—oil sands, heavy and extra-heavy oil deposits, and oil shale—is more 

costly and presents environmental challenges. 

Oil sands are deposits of bitumen, a thick, sticky form of crude oil, that is 

so heavy and viscous it will not flow unless heated. While most 

conventional crude oil flows naturally or is pumped from the ground, oil 

sands must be mined or recovered “in-situ,” before being converted into an 

upgraded crude oil that can be used by refineries to produce gasoline and

Oil Sands 

Page 19 GAO-07-283 Peak Oil Production
diesel fuels. Alberta, Canada, contains at least 85 percent of the world’s 

proven oil sands reserves. In 2005, worldwide production of oil sands, 

largely from Alberta, contributed approximately 1.6 million barrels of oil 

per day, and production is projected to grow to as much as 3.5 million 

barrels per day by 2030. Oil sand deposits are also located domestically in

Alabama, Alaska, California, Texas, and Utah. Production from oil sands, 

however, presents significant environmental challenges. The production 

process uses large amounts of natural gas, which generates greenhouse 

gases when burned. In addition, large-scale production of oil sands 

requires significant quantities of water, typically produce large quantities

of contaminated wastewater, and alter the natural landscape. These 

challenges may ultimately limit production from this resource, even if 

sustained high oil prices make production profitable. 

Heavy and extra-heavy oils are dense, viscous oils that generally require

advanced production technologies, such as EOR, and substantial 

processing to be converted into petroleum products. Heavy and extraheavy oils differ in their viscosities and other physical properties, but 

advanced recovery techniques like EOR are required for both types of oil. 

Known extra-heavy oil deposits are primarily in Venezuela—almost 90 

percent of the world’s proven extra-heavy oil reserves. Venezuelan 

production of extra-heavy oil was projected to be 600,000 barrels of oil per 

day in 2005 and is projected to be sustained at this rate through 2040. 

Heavy oil can be found in Alaska, California, and Wyoming and may exist 

in other countries besides the United States and Venezuela. Like 

production from oil sands, however, heavy oil production in the United 

States presents environmental challenges in its consumption of other 

energy sources, which contributes to greenhouse gases, and potential 

groundwater contamination from the injectants needed to thin the oil 

enough so that oil will flow through pipes. 

Heavy and Extra-Heavy Oils

Oil shale is sedimentary rock containing solid bituminous materials that 

release petroleum-like liquids when the rock is heated. The world’s largest 

known oil shale deposit covers portions of Colorado, Utah, and Wyoming, 

but other countries, such as Australia and Morocco, also contain oil shale 

resources. Oil shale production is under consideration in the United 

States, but considerable doubts remain concerning its ultimate technical 

and commercial feasibility. Production from oil shale is energy-intensive,

requiring other energy sources to heat the shale to about 900 to 1,000 

degrees Fahrenheit to extract the oil. Furthermore, oil shale production is 

projected to contaminate local surface water with salts and toxics that 

leach from spent shale. These factors may limit the amount of oil from 

Oil Shale 

Page 20 GAO-07-283 Peak Oil Production
shale that can be produced, even if oil prices are sustained at high enough

levels to offset the additional production costs. 

More detailed information on these technologies is provided in appendix 

III. 

Political and Investment 

Risk Factors Create 

Uncertainty about the 

Future Rate of Oil 

Exploration and 

Production 

Political and investment risk factors also could affect future oil 

exploration and production and, ultimately, the timing of peak oil 

production. These factors include changing political conditions and 

investment climates in many countries that have large proven oil reserves. 

Experts we spoke with told us that they considered these factors 

important in affecting future oil exploration and production. 

In many countries with proven reserves, oil production could be shut 

down by wars, strikes, and other political events, thus reducing the flow of 

oil to the world market. If these events occurred repeatedly, or in many 

different locations, they could constrain exploration and production, 

resulting in a peak despite the existence of proven oil reserves. For 

example, according to a news account, crude oil output in Iraq dropped 

from 3.0 million barrels per day before the 1990 gulf war to about 2.0 

million barrels per day in 2006, and a labor strike in the Venezuelan oil 

sector led to a drop in exports to the United States of 1.2 million barrels. 

Although these were isolated and temporary oil supply disruptions, if 

enough similar events occurred with sufficient frequency, the overall 

impact could constrain production capacity, thus making it impossible for 

supply to expand along with demand for oil. Using a measure of political

risk that assesses the likelihood that events such as civil wars, coups, and 

labor strikes will occur in a magnitude sufficient to reduce a country’s 

gross domestic product (GDP) growth rate over the next 5 years,16 we 

found that four countries—Iran, Iraq, Nigeria, and Venezuela—that 

possess proven oil reserves greater than 10 billion barrels (high reserves) 

also face high levels of political risk. These four countries contain almost 

Political Conditions Create 

Uncertainties about Oil 

Exploration and Production 

 16The political risk measure comes from Global Insight’s Global Risk Service. Global Insight 

is a worldwide consulting firm headquartered in Massachusetts. The Global Risk Service 

political risk score is a summary of probabilities that different political events, such as civil 

war, will reduce GDP growth rates. The subjective probabilities are assessed by country

analysts at Global Insight, on the basis of a wide range of information, and are reviewed by

a team to ensure consistency across countries. The measures are revised quarterly; the 

measure we used comes from the second quarter of 2006. 

Page 21 GAO-07-283 Peak Oil Production
one-third of worldwide oil reserves. Countries with medium or high levels

of political risk contained 63 percent of proven worldwide oil reserves, on 

the basis of Oil and Gas Journal estimates of oil reserves. (See fig. 7.)17

Figure 7: Worldwide Proven Oil Reserves, by Political Risk 

Source: GAO analysis of Oil and Gas Journal and Global Insight data.

Medium

High

Low

4

Political risk

unknown

314

389 413

Billions of barrels

Note: Oil and Gas Journal reserves estimates are based on surveys filled out by the countries. See 

appendix I of this report for limitations of these data and their effect on our use of these data. 

Even in the United States, political considerations may affect the rate of 

exploration and production. For example, restrictions imposed to protect 

environmental assets mean that some oil may not be produced. Interior’s 

Minerals Management Service estimates that approximately 76 billion 

barrels of oil lie in undiscovered fields offshore in the U.S. outer 

continental shelf. However, Congress has enacted moratoriums on drilling 

and exploration in this area to protect coastlines from unintended oil 

 17Because we examined a forecast of risk factors, it would have been ideal to have a 

forecast of what oil reserves are likely to be in each country for the next 5 years, including 

reserve growth and potential future discoveries. However, such reserve predictions are not 

publicly available, and, therefore, we used published country-level data on proven reserves

from the Oil and Gas Journal. Consistent with our previous presentation of proven 

reserves, the information we present here does not include Canadian oil sands data. 

Page 22 GAO-07-283 Peak Oil Production
spills. In addition, policies on federal land use need to take into account

multiple uses of the land, including environmental protection.18

Environmental restrictions may affect a peak in oil production by barring 

oil exploration and production in environmentally sensitive areas. 

Foreign investment in the oil sector could be necessary to bring oil to the 

world market,19 according to studies we reviewed and experts we 

consulted, but many countries have restricted foreign investment. Lack of 

investment could hasten a peak in oil production because the proper 

infrastructure might not be available to find and produce oil when needed, 

and because technical expertise may be lacking. The important role 

foreign investment plays in oil production is illustrated in Kazakhstan, 

where the National Commission on Energy Policy found that opening the 

energy sector to foreign investment in the early 1990s led to a doubling in 

oil production between 1998 and 2002.20 In addition, we found that direct

foreign investment in Venezuela was strongly correlated with oil 

production in that country, and that when foreign investment declined

between 2001 and 2004, oil production also declined.21 Industry officials 

told us that lack of technical expertise could lead to less sophisticated 

drilling techniques that actually reduce the ability to recover oil in more 

complex reservoirs. For example, according to industry officials, some 

Russian wells have difficulties with high water cut—that is, a high ratio of

water to oil—making oil difficult to get out of the ground at current prices. 

This water cut problem stems from not using technically advanced 

methods when the wells were initially drilled. We have previously reported 

that the Venezuelan national oil company, PDVSA, lost technical expertise 

when it fired thousands of employees following a strike in 2002 and 2003.

In contrast, other national oil companies, such as Saudi Aramco, are 

widely perceived to possess considerable technical expertise. 

Investment Climate Creates 

Uncertainty about Oil 

Exploration and Production 

 18GAO, Oil and Gas Development: Increased Permitting Activity Has Lessened BLM’s 

Ability to Meet Its Environmental Protection Responsibilities, GAO-05-418 (Washington,

D.C.: June 17, 2005). 

19According to IEA, infrastructure investment in exploration and production would need to

total about $2.25 trillion from 2004 through 2030. This investment will be needed to expand 

supply capacity and to replace existing and future supply facilities that will be closed 

during the projection period. 

20National Commission on Energy Policy, Ending the Energy Stalemate: A Bipartisan

Strategy to Meet America’s Energy Challenges (December 2004), available at 

www.energycommission.org.

21GAO, Energy Security: Issues Related to Potential Reductions in Venezuelan Oil 

Production, GAO-06-668 (Washington, D.C.: June 27, 2006).

Page 23 GAO-07-283 Peak Oil Production
According to our analysis, 85 percent of the world’s proven oil reserves are 

in countries with medium-to-high investment risk or where foreign 

investment is prohibited, on the basis of Oil and Gas Journal estimates of 

oil reserves. (See fig. 8.) For example, over one-third of the world’s proven 

oil reserves lie in only five countries—China, Iran, Iraq, Nigeria, and 

Venezuela—all of which have a high likelihood of seeing a worsening 

investment climate. Three countries with large oil reserves—Saudi Arabia, 

Kuwait, and Mexico—prohibit foreign investment in the oil sector, and 

most major oil-producing countries have some type of restrictions on 

foreign investment. Furthermore, some countries that previously allowed 

foreign investment, such as Russia and Venezuela, appear to be reasserting 

state control over the oil sector, according to DOE. 

Figure 8: Worldwide Proven Oil Reserves, by Investment Risk 

Source: GAO analysis of Oil and Gas Journal and Global Insight data.

Medium

High

4

Investment risk unknown

Low

165

384

164 402

Billions of barrels

No foreign investment 

allowed in oil sector

Note: Oil and Gas Journal reserves estimates are based on surveys filled out by the countries. See 

appendix I of this report for limitations of these data and their effect on our use of these data. 

Foreign investment in the oil sector also may be limited because national 

oil companies control the supply. Figure 9 indicates that 7 of the top 10 

companies are national or state-sponsored oil and gas companies, ranked 

Page 24 GAO-07-283 Peak Oil Production
on the basis of oil production. The 3 international oil companies that are 

among the top 10 are BP, Exxon Mobil, and Royal Dutch Shell. 

Figure 9: Top 10 Companies on the Basis of Oil Production and Reserves Holdings, 

2004 

Source: GAO analysis of data from Petroleum Intelligence Weekly (Dec. 12, 2005).

Percentage

0

10

20

30

40

50

60

70

80

90

100

International oil and gas company

National oil and gas company

Exxon Mobil (U.S.) 8%

Royal Dutch Shell (U.K./Netherlands) 7%

BP (U.K.) 7%

Lukoil (Russia) 2%a

Saudi Aramco (Saudi Arabia) 28%

National Iranian Oil Co. (Iran) 12%

Petroleos Mexicanos (Mexico) 11%

Petroleos de Venezuela (Venezuela) 8%

Kuwait Petroleum Co. (Kuwait) 7%

Iraq National Oil Co. (Iraq) 6%

Petro China (China) 6%

Saudi Aramco (Saudi Arabia) 32%

National Iranian Oil Co. (Iran) 16%

Iraq National Oil Co. (Iraq) 14%

Kuwait Petroleum Co. (Kuwait) 11%

Petroleos de Venezuela

(Venezuela) 10%

Abu Dhabi National Oil Co. (U.A.E.) 6%

Libya NOC (Libya) 4%

Nigerian National Petroleum

Co. (Nigeria) 3%

Petroleos de Mexico(Mexico) 2%

22%

78%

98%

Top 10 oil and gas companies on

the basis of oil reserves holdings, 2004

Top 10 oil and gas companies on

the basis of oil production, 2004

Note: The Petroleum Intelligence Weekly data relies on company reports, where possible, as well as

other information sources provided by companies. See appendix I of this report for limitations of these 

data and their effect on our use of these data. 

a

Lukoil is the only company in the top 10 based on reserves that is not 100 percent state-sponsored.

National oil companies may have additional motivations for producing oil, 

other than meeting consumer demand. For instance, some countries use 

some profits from national companies to support domestic socioeconomic

development, rather than focusing on continued development of oil 

exploration and production for worldwide consumption. Given the amount 

of oil controlled by national oil companies, these types of actions have the

potential to result in oil production that is not optimized to respond to 

increases in the demand for oil. 

In addition, the top 8 oil companies ranked by proven oil reserves are 

national companies in OPEC-member countries, and OPEC decisions 

could affect future oil exploration and production. For example, in some 

Page 25 GAO-07-283 Peak Oil Production
cases, OPEC countries might decide to limit current production to 

increase prices or to preserve oil and its revenue for future generations. 

Figure 10 shows IEA’s projections for total world oil production through 

2030 and highlights the larger role that OPEC production will play after 

IEA’s projected peak in non-OPEC oil production around 2010. 

Figure 10: World Oil Production, by OPEC and Non-OPEC Countries, 2004 Projected

to 2030 

0

10

20

30

40

50

60

70

80

90

100

OPEC

Non-OPEC

2004 2010 2020 2030

Source: International Energy Agency.

Million barrels per day

Note: This projection excludes production from nonconventional oil sources, such as Canadian oil 

sands. 

Future World Demand for 

Oil Is Uncertain

Uncertainty about future demand for oil—which will influence how 

quickly the remaining oil is used—contributes to the uncertainty about the 

timing of peak oil production. EIA projects that oil will continue to be a 

major source of energy well into the future, with world consumption of 

petroleum products growing to 118 million barrels per day by 2030. Figure 

11 shows world petroleum product consumption by region for 2003 and 

EIA’s projections for 2030. As the figure shows, EIA projects that 

consumption will increase across all regions of the world, but members of 

Page 26 GAO-07-283 Peak Oil Production
the Organization for Economic Cooperation and Development (OECD) 

North America,22 which includes the United States, and non-OECD Asia, 

which includes China and India, are the major drivers of this growth. 

Figure 11: Daily World Oil Consumption, by Region for 2003 and Projected for 2030 

Source: Energy Information Administration.

0 5 10 15 20 25 30 35

2030

2003

OECD North America

OECD Europe and

Eurasia

OECD Asia

Non-OECD Europe and

Eurasia

Non-OECD Asia

Middle East

Africa

Central and South America

Million barrels per day

Region

Future world oil demand will depend on such uncertain factors as world

economic growth, future government policy, and consumer choices. 

Specifically:

• Economic growth drives demand for oil. For example, according to IEA, in 

2003 the world experienced strong growth in oil consumption of 2.0 

percent, with even stronger growth of 3.6 percent in 2004, from 79.8 

 22OECD is a group of 30 member countries sharing a commitment to democratic 

government and a market economy. 

Page 27 GAO-07-283 Peak Oil Production
million barrels per day to 82.6 million barrels per day and China accounted 

for 30 percent of this increase, driven largely by China’s almost 10 percent 

economic growth that year. EIA projects the Chinese economy will 

continue to grow, but factors such as the speed of reform of ineffective 

state-owned companies and the development of capital markets adds 

uncertainty to such projections and, as a result, to the level of future oil 

demand in China. 

• Future government policy can also affect oil demand. For example, 

environmental concerns about gasoline’s emissions of carbon dioxide, 

which is a greenhouse gas, may encourage future reductions in oil demand

if these concerns are translated into policies that promote biofuels. 

• Consumer choices about conservation also can affect oil demand and 

thereby influence the timing of a peak. For example, if U.S. consumers 

were to purchase more fuel-efficient vehicles in greater numbers, this 

could reduce future oil demand in the United States, potentially delaying a 

time at which oil supply is unable to keep pace with oil demand. 

Such uncertainties that lead to changes in future oil demand ultimately 

make estimates of the timing of a peak uncertain, as is illustrated in an EIA 

study on peak oil.23 Specifically, using future annual increases in world oil 

consumption, ranging from 0 percent, to represent no increase, to 3 

percent, to represent a large increase, and out of the various scenarios 

examined, EIA estimated a window of up to 75 years for when the peak 

may occur. 

Factors that create uncertainty about the timing of the peak—in particular,

factors that affect oil exploration and production—also create uncertainty 

about the rate of production decline after the peak. For example, IEA 

reported that technology played a key role in slowing the decline and 

extending the life of oil production in the North Sea. Uncertainty about the 

rate of decline is illustrated in studies that estimate the timing of a peak. 

IEA, for example, estimates that this decline will range somewhere 

between 5 percent and 11 percent annually. Other studies assume the rate

of decline in production after a peak will be the same as the rise in 

production that occurred before the peak. Another methodology, 

Factors That Create 

Uncertainty about the 

Timing of the Peak Also 

Create Uncertainty about 

the Rate of Decline 

 23John H. Wood, Gary R. Long, and David F. Morehouse, Long Term World Oil Supply

Scenarios: The Future Is Neither as Bleak or Rosy as Some Assert, Energy Information 

Administration, U.S. Department of Energy (2004). 

Page 28 GAO-07-283 Peak Oil Production
employed by EIA, assumes that the resulting decline will actually be faster 

than the rise in production that occurred before the peak. The rate of 

decline after a peak is an important consideration because a decline that is 

more abrupt will likely have more adverse economic consequences than a 

decline that is less abrupt. 

In the United States, alternative transportation technologies have limited 

potential to mitigate the consequences of a peak and decline in oil 

production, at least in the near term, because they face many challenges 

that will take time and effort to overcome. If the peak and decline in oil

production occur before these technologies are advanced enough to 

substantially offset the decline, the consequences could be severe. If the 

peak occurs in the more distant future, however, alternative technologies 

have a greater potential to mitigate the consequences. 

Development and widespread adoption of the seven alternative fuels and 

advanced vehicle technologies we examined will take time, and significant 

challenges will have to be overcome, according to DOE. These 

technologies include ethanol, biodiesel, biomass gas-to-liquid, coal gas-toliquid, natural gas and natural gas vehicles, advanced vehicle technologies, 

and hydrogen fuel cell vehicles. 

Ethanol is an alcohol-based fuel produced by fermenting plant sugars. 

Currently, most ethanol in the United States is made from corn, but 

ethanol also can be made from cellulosic matter from a variety of 

agricultural products, including trees, grasses, and forestry residues. Corn 

ethanol has been used as an additive to gasoline for many years, but it is 

also available as a primary fuel, most commonly as a blended mix of 85 

percent ethanol and 15 percent gasoline. As a primary fuel, corn ethanol is

not currently available on a large national scale and federal agencies do

not consider it to be cost-competitive with gasoline or diesel. The cost of 

corn feedstock, which accounts for approximately 75 percent of the 

production cost, is not projected to fall dramatically in the future, in part,

because of competing demands for agricultural land use and competing 

uses for corn, primarily as livestock feed, according to DOE and USDA. 

DOE and USDA project that more cellulosic ethanol could ultimately be 

produced than corn ethanol because cellulosic ethanol can be produced 

from a variety of feedstocks, but more fundamental reductions in 

Alternative 

Transportation 

Technologies Face 

Challenges in 

Mitigating the 

Consequences of the 

Peak and Decline 

Development and 

Adoption of Technologies 

to Displace Oil Will Take 

Time and Effort 

Ethanol 

Page 29 GAO-07-283 Peak Oil Production
production costs will be needed to make cellulosic ethanol commercially 

viable. Production of ethanol from cellulosic feedstocks is currently more 

costly than production of corn ethanol because the cellulosic material 

must first be broken down into fermentable sugars that can be converted

into ethanol. The production costs associated with this additional 

processing would have to be reduced in order for cellulosic ethanol to be 

cost-competitive with gasoline at today’s prices. 

In addition, corn and cellulosic ethanol are more corrosive than gasoline,

and the widespread commercialization of these fuels would require 

substantial retrofitting of the refueling infrastructure—pipelines, storage 

tanks, and filling stations. To store ethanol, gasoline stations may have to

retrofit or replace their storage tanks, at an estimated cost of $100,000 per

tank. DOE officials also reported that some private firms consider capital

investment in ethanol refineries to be risky for significant investment, 

unless the future of alternative fuels becomes more certain. Finally, 

widespread use of ethanol would require a turnover in the vehicle fleet 

because most current vehicle engines cannot effectively burn ethanol in

high concentrations. 

Biodiesel is a renewable fuel that has similar properties to petroleum 

diesel but can be produced from vegetable oils or animal fats. It is 

currently used in small quantities in the United States, but it is not costcompetitive with gasoline or diesel. The cost of biodiesel feedstocks—

which in the United States largely consist of soybean oil—are the largest 

component of production costs. The price of soybean oil is not expected 

to decrease significantly in the future owing to competing demands from 

the food industry and from soap and detergent manufacturers. These 

competing demands, as well as the limited land available for the 

production of feedstocks, also are projected to limit biodiesel’s capacity 

for large-volume production, according to DOE and USDA. As a result, 

experts believe that the total production capacity of biodiesel is ultimately 

limited compared with other alternative fuels. 

Biomass gas-to-liquid (biomass GTL) is a fuel produced from biomass 

feedstocks by gasifying the feedstocks into an intermediary product, 

referred to as syngas, before converting it into a diesel-like fuel. This fuel 

is not commercially produced, and a number of technological and 

economic challenges would need to be overcome for commercial viability. 

These challenges include identifying biomass feedstocks that are suitable

for efficient conversion to a syngas and developing effective methods for 

preparing the biomass for conversion into a syngas. Furthermore, DOE 

researchers report that significant work remains to successfully gasify 

Biodiesel 

Biomass Gas-to-Liquid 

Page 30 GAO-07-283 Peak Oil Production
biomass feedstocks on a large enough scale to demonstrate commercial 

viability. In the absence of these developments, DOE reported that the 

costs of producing biomass GTL will be very high and significant 

uncertainty surrounding its ultimate commercial feasibility will exist. 

Coal gas-to-liquid (coal GTL) is a fuel produced by gasifying coal into a 

syngas before being converted into a diesel-like fuel. This fuel is 

commercially produced outside the United States, but none of the 

production facilities are considered profitable. DOE reported that high 

capital investments—both in money and time—deter the commercial 

development of coal GTL in the United States. Specifically, DOE estimates 

that construction of a coal GTL conversion plant could cost up to $3.5 

billion and would require at least 5 to 6 years to construct. Furthermore, 

potential investors are deterred from this investment because of the risks 

associated with the lengthy, uncertain, and costly regulatory process 

required to build such a facility. An expert at DOE also expressed concern 

that the infrastructure required to produce or transport coal may be 

insufficient. For example, the rail network for transporting western coal is

already operating at full capacity and, owing to safety and environmental 

concerns, there is significant uncertainty about the feasibility of expanding 

the production capabilities of eastern coal mines. Coal GTL production 

also faces serious environmental concerns because of the carbon dioxide 

emitted during production. To mitigate the effect of coal GTL production, 

researchers are considering options for combining coal GTL production 

with underground injection of sequestered carbon dioxide to enhance oil 

recovery in aging oil fields. 

Natural gas is an alternative fuel that can be used as either a compressed 

natural gas or a liquefied natural gas. Natural gas vehicles are currently 

available in the United States, but their use is limited, and production has 

declined in the past few years. According to DOE, large-scale 

commercialization of natural gas vehicles is complicated by the 

widespread availability and lower cost of gasoline and diesel fuels. 

Furthermore, demand for natural gas in other markets, such as home 

heating and energy generation, presents substantial competitive risks to 

the natural gas vehicle industry. Production costs for natural gas vehicles 

are also higher than for conventional vehicles because of the incremental 

cost associated with a high-pressure natural gas tank. For example, lightduty natural gas vehicles can cost $1,500 to $6,000 more than comparable 

conventional vehicles, while heavy-duty natural gas vehicles cost $30,000 

to $50,000 more than comparable conventional vehicles. Regarding 

infrastructure, retrofitting refueling stations so that they can 

accommodate natural gas could cost from $100,000 to $1 million per 

Coal Gas-to-Liquid 

Natural Gas and Natural Gas 

Vehicles 

Page 31 GAO-07-283 Peak Oil Production
station, depending on the size, according to DOE. Although refueling at 

home can be an option for some natural gas vehicles, home refueling 

appliances are estimated to cost approximately $2,000 each. 

Advanced vehicle technologies that we considered included lightweight 

materials and improvements to conventional engines that increase fuel 

economy, as well as hybrid vehicles and plug-in hybrid electric vehicles 

that use an electric motor/generator and a battery pack in conjunction 

with an internal combustion engine. Hybrid electric vehicles are 

commercially available in the United States, but these are not yet 

considered competitive with comparable conventional vehicles. DOE 

experts report that demand for such vehicles is predicated on their costcompetitiveness with comparable conventional vehicles. Hybrid electric 

vehicles, for example, cost $2,000 to $3,500 more to buy than comparable 

conventional vehicles and currently constitute around 1 percent of new 

vehicle registrations in the United States. In addition, electric batteries in 

hybrid electric vehicles face technical challenges associated with their 

performance and reliability when exposed to extreme temperatures or 

harsh automotive environments. Other advanced vehicle technologies, 

including advanced diesel engines and plug-in hybrids, are (1) in the very 

early stages of commercial release or are not yet commercially available

and (2) face obstacles to large-scale commercialization. For example, 

advanced diesel engines present an environmental challenge because, 

despite their high fuel efficiency, they are not expected to meet future 

emission standards. Federal researchers are working to enable the engine

to burn more cleanly, but these efforts are costly and face technical 

barriers. Plug-in hybrid electric vehicles are not yet commercially feasible 

because of cost, technical, and infrastructure challenges facing their 

development. For example, plug-in electric hybrids cost much more to 

produce than conventional vehicles, they require significant upgrades to 

home electrical systems to support their recharging, and researchers have 

yet to develop a plug-in electric with a range of more than 40 miles on 

battery power alone. 

A hydrogen fuel cell vehicle is powered by the electricity produced from 

an electrochemical reaction between hydrogen from a hydrogencontaining fuel and oxygen from the air. In the United States, these 

vehicles are still in the development stage, and making these vehicles 

commercially feasible presents a number of challenges. While a 

conventional gas engine costs $2,000 to $3,000 to produce, the stack of 

hydrogen fuel cells needed to power a vehicle costs $35,000 to produce. 

Furthermore, DOE researchers have yet to develop a method for feasibly

storing hydrogen in a vehicle that allows a range of at least 300 miles 

Advanced Vehicle Technologies 

Hydrogen Fuel Cell Vehicles 

Page 32 GAO-07-283 Peak Oil Production
before refueling. Fuel cell vehicles also are not yet able to last for 120,000

miles, which DOE believes to be the target for commercial viability. In 

addition, developing an infrastructure for distributing hydrogen—either 

through pipelines or through trucking—is expected to be complicated, 

costly, and time-consuming. Delivering hydrogen from a central source 

requires a large amount of energy and is considered costly and technically 

challenging. DOE has determined that decentralized production of 

hydrogen directly at filling stations could be a more viable approach than 

centralized production in some cases, but a cost-effective mechanism for 

converting energy sources into hydrogen at a filling station has yet to be

developed. 

More detailed information on these technologies is provided in appendix 

IV. 

Because development and widespread adoption of technologies to 

displace oil will take time and effort, an imminent peak and sharp decline 

in oil production could have severe consequences. The technologies we 

examined currently supply the equivalent of only about 1 percent of U.S. 

annual consumption of petroleum products, and DOE projects that even 

under optimistic scenarios, these technologies could displace only the 

equivalent of about 4 percent of annual projected U.S. consumption by 

around 2015. If the decline in oil production exceeded the ability of 

alternative technologies to displace oil, energy consumption would be 

constricted, and as consumers competed for increasingly scarce oil 

resources, oil prices would sharply increase. In this respect, the 

consequences could initially resemble those of past oil supply shocks, 

which have been associated with significant economic damage. For 

example, disruptions in oil supply associated with the Arab oil embargo of 

1973-74 and the Iranian Revolution of 1978-79 caused unprecedented 

increases in oil prices and were associated with worldwide recessions. In 

addition, a number of studies we reviewed indicate that most of the U.S. 

recessions in the post-World War II era were preceded by oil supply 

shocks and the associated sudden rise in oil prices. 

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. Furthermore, because oil production could decline

Consequences Could Be 

Severe If Alternative 

Technologies Are Not 

Available 

Page 33 GAO-07-283 Peak Oil Production
even more each year following a peak, the amount that would have to be 

replaced by alternatives could also increase year by year. 

Consumer actions could help mitigate the consequences of a near-term 

peak and decline in oil production through demand-reducing behaviors 

such as carpooling; teleworking; and “eco-driving” measures, such as 

proper tire inflation and slower driving speeds. Clearly these energy 

savings come at some cost of convenience and productivity, and limited 

research has been done to estimate potential fuel savings associated with 

such efforts. However, DOE estimates that drivers could improve fuel 

economy between 7 and 23 percent by not exceeding speeds of 60 miles 

per hour, and IEA estimates that teleworking could reduce total fuel 

consumption in the U.S. and Canadian transportation sectors combined by

between 1 and 4 percent, depending on whether teleworking is undertaken 

for 2 days per week or the full 5-day week, respectively.

If the peak occurs in the more distant future or the decline following a 

peak is less severe, alternative technologies have a greater potential to 

mitigate the consequences. DOE projects that the alternative technologies 

we examined have the potential to displace up to the equivalent of 34 

percent of annual U.S. consumption of petroleum products in the 2025 

through 2030 time frame. However, DOE also considers these projections

optimistic—it assumes that sufficient time and effort are dedicated to the 

development of these technologies to overcome the challenges they face.

More specifically, DOE assumes sustained high oil prices above $50 per 

barrel as a driving force. The level of effort dedicated to overcoming 

challenges to alternative technologies will depend in part on the price of 

oil, with higher oil prices creating incentives to develop alternatives. High

oil prices also can spark consumer interest in alternatives that consume 

less oil. For example, new purchases of light trucks, SUVs, and minivans 

declined in 2005 and 2006, corresponding to a period of increasing 

gasoline prices. Gasoline demand has also grown slower in 2005 and 

2006—0.95 and 1.43 percent, respectively—compared with the preceding 

decade, during which gasoline demand grew at an average rate of 1.81

percent. In the past, high oil prices have significantly affected oil 

consumption: U.S. consumption of oil fell by about 18 percent from 1979

to 1983, in part because U.S. consumers purchased more fuel-efficient 

vehicles in response to high oil prices. 

While current high oil prices may encourage development and adoption of

alternatives to oil, if high oil prices are not sustained, efforts to develop

and adopt alternatives may fall by the wayside. The high oil prices and 

fears of running out of oil in the 1970s and early 1980s encouraged 

Page 34 GAO-07-283 Peak Oil Production
investments in alternative energy sources, including synthetic fuels made 

from coal, but when oil prices fell, investments in these alternatives 

became uneconomic. More recently, private sector interest in alternative 

fuels has increased, corresponding to the increase in oil prices, but 

uncertainty about future oil prices can be a barrier to investment in risky 

alternative fuels projects. Recent polling data also indicate that 

consumers’ interest in fuel efficiency tends to increase as gasoline prices 

rise and decrease when gasoline prices fall. 

Federal agency efforts that could contribute to reducing uncertainty about 

the timing of a peak in oil production or mitigating its consequences are 

spread across multiple agencies and are generally not focused explicitly

on peak oil issues. Federal agency-sponsored studies have expressed a 

growing concern over the potential for a peak, and officials from key 

agencies have identified options for reducing the uncertainty about the 

timing of a peak in oil production and mitigating its consequences. 

However, there is no strategy for coordinating or prioritizing such efforts. 

Federal agencies have programs and activities that could be directed to 

reduce uncertainty about the timing of a peak in oil production or to 

mitigate the consequences of such a peak. For example, with regard to 

reducing uncertainty, DOE provides information and analysis about global 

supply and demand for oil and develops projections about future trends. 

Specifically, DOE’s EIA regularly surveys U.S. operators to gather data 

about U.S. oil reserves and compiles reserves data for foreign countries 

from other sources. In addition, EIA prepares both a domestic and 

international energy outlook, which includes projections for future oil 

supply and demand. As previously discussed, USGS provides estimates of 

oil resources that have the potential to add to reserves in the United 

States. Interior’s Minerals Management Service also assesses oil resources 

in the offshore regions of the United States. 

In addition, several agencies conduct activities to encourage development 

of alternative technologies that could help mitigate the consequences of a 

decline in oil production. For example, DOE promotes development of 

alternative fuels and advanced vehicle technologies that could reduce oil

consumption in the transportation sector by funding research and 

development of new technologies. In addition, USDA encourages 

development of biomass-based alternative fuels, by collaborating with 

industry to identify and test the performance of potential biomass 

feedstocks and conducting research to evaluate the cost of producing 

Federal Agencies Do 

Not Have a 

Coordinated Strategy 

to Address Peak Oil 

Issues 

Federal Agencies Have 

Many Programs and 

Activities Related to Peak 

Oil Issues, but Peak Oil 

Generally Is Not the Main 

Focus of These Efforts 

Page 35 GAO-07-283 Peak Oil Production
biomass fuels. DOT provides funding to encourage development of bus 

fleets that run on alternative fuels, promote carpooling among consumers, 

and conduct outreach and education concerning telecommuting. In 

addition, DOT is responsible for setting fuel economy standards for 

automobiles and light trucks sold in the United States. 

While these and other programs and activities could be used to reduce 

uncertainty about the timing of a peak in oil production and mitigate its 

consequences, agency officials we spoke with acknowledged that most of 

these efforts are not explicitly designed to do so. For example, DOE’s 

activities related explicitly to peak oil issues have been limited to 

conducting, commissioning, or participating in studies and workshops. 

Several federally sponsored studies we reviewed reflect a growing concern 

about peak oil and identify a need for action. For example: 

Agencies Have Options to 

Reduce Uncertainty and 

Mitigate Consequences 

but Lack a Coordinated 

Strategy 

• DOE has sponsored two studies.24 A 2003 study highlighted the benefit of 

reducing the uncertainty surrounding the timing of a peak to mitigate its 

potentially severe global economic consequences. A 2005 study examined 

mitigating the consequences of a peak and concluded the following: 

“Timely, aggressive mitigation initiatives addressing both the supply and 

the demand sides of the issue will be required.” 

• While EIA’s 2004 study of the timing of peak oil estimates that a peak

might occur closer to 2050, EIA recognized that early preparation was 

important because of the long period required for widespread commercial 

production and adoption of new energy technologies.25

 24David L. Greene, Janet L. Hopson, and Jai Li, Running Out Of and Into Oil: Analyzing 

Global Oil Depletion and Transition Through 2050, Oak Ridge National Laboratory,

Department of Energy (2003); and Robert L. Hirsch, Roger Bezdek, and Robert Wendling,

Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, Science 

Applications International Corporation and Management Information Services Inc. 

(February 2005). 

25John H. Wood, Gary R. Long, and David F. Morehouse, Long Term World Oil Supply

Scenarios: The Future Is Neither as Bleak or Rosy as Some Assert, Energy Information 

Administration, U.S. Department of Energy (2004). 

Page 36 GAO-07-283 Peak Oil Production
• In its 2005 study of energy use in the military,26 the U.S. Army Corps of 

Engineers emphasized the need to develop alternative technologies and 

associated infrastructure before a peak and decline in oil production. 

In addition, in response to growing peak oil concerns, DOE asked the 

National Petroleum Council to study peak oil issues. The study is expected 

to be completed by June 2007. 

In light of these concerns, agency officials told us that it would be 

worthwhile to take additional steps to reduce the uncertainty about the 

timing of a peak in oil production. EIA believes it could reduce uncertainty

surrounding the timing of peak oil production if it were to robustly extend

the time horizon of its analysis and projection of global supply and 

demand for crude oil presented in its domestic and international energy 

outlooks. Currently, EIA’s projections extend only to 2030, and officials 

believe that consideration of peak oil would require a longer horizon. Also, 

the international outlook is fairly limited, in part because EIA no longer 

conducts its detailed Foreign Energy Supply Assessment Program. EIA is 

seeking to restart this effort in fiscal year 2007. In addition, USGS officials 

told us that better and more complete information about global oil 

resources could be used to improve estimates by EIA of the timing of a 

peak. USGS officials said their estimates of global oil resources could be 

improved or expanded in the following four ways: 

• Add information on certain regions—which USGS refers to as “frontier 

regions”—where little is known about oil resources. 

• Add information on nonconventional resources outside the United States.

USGS believes these resources will play a large role in future oil supply, 

and, therefore, accurate estimates of these resources should be included in

any attempts to determine the timing of a peak.

• Calculate reserves growth by country. USGS considers this information 

important because of the political and investment conditions that differ by 

country and will affect future oil production and exploration.

 26Donald F. Fournier and Eileen T. Westervelt, Energy Trends and Their Implications for 

U.S. Army Installations, U.S. Army Corps of Engineers, Engineer Research and 

Development Center, ERDC/CERL TR-05-21 (September 2005). 

Page 37 GAO-07-283 Peak Oil Production
• Provide more complete information for all major oil-producing countries. 

USGS noted that its assessment has some “holes” where resources in 

major-producing countries have not yet been estimated completely. 

In addition to these actions reducing the uncertainty about the timing of a 

peak, agency officials also told us that they could take additional steps to 

mitigate the consequences of a peak. For example, DOE officials reported 

that they could expand their efforts to encourage the development of 

alternative fuels and advanced vehicle technologies. These efforts could 

be expanded by conducting more demonstrations of new technologies, 

facilitating greater information sharing among key industry players, and 

increasing cost share opportunities with industry for research and 

development.27 Agency officials told us such efforts can be essential to 

developing and encouraging the technologies. 

Although there are many options to reduce the uncertainty about the 

timing of a peak or to mitigate its potential consequences, according to 

DOE, there is no formal strategy to coordinate and prioritize federal 

programs and activities dealing with peak oil issues—either within DOE or 

between DOE and other key agencies. 

The prospect of a peak in oil production presents problems of global 

proportion whose consequences will depend critically on our 

preparedness. The consequences would be most dire if a peak occurred 

soon, without warning, and were followed by a sharp decline in oil 

production because alternative energy sources, particularly for 

transportation, are not yet available in large quantities. Such a peak would 

require sharp reductions in oil consumption, and the competition for 

increasingly scarce energy would drive up prices, possibly to 

unprecedented levels, causing severe economic damage. While these 

consequences would be felt globally, the United States, as the largest 

consumer of oil and one of the nations most heavily dependent on oil for 

transportation, may be especially vulnerable among the industrialized 

nations of the world. 

Conclusions 

 27Experts we spoke with noted that it is important that the government not choose one 

viable alternative technology to the exclusion of another technology.

Page 38 GAO-07-283 Peak Oil Production
In the longer term, there are many possible alternatives to using oil, 

including using biofuels and improving automotive fuel efficiency, but 

these alternatives will require large investments, and in some cases, major 

changes in infrastructure or break-through technological advances. In the 

past, the private sector has responded to higher oil prices by investing in 

alternatives, and it is doing so now. Investment, however, is determined 

largely by price expectations, so unless high oil prices are sustained, we 

cannot expect private investment in alternatives to continue at current 

levels. If a peak were anticipated, oil prices would rise, signaling industry 

to increase efforts to develop alternatives and consumers of energy to 

conserve and look for more energy-efficient products. 

Federal agencies have programs and activities that could be directed 

toward reducing uncertainty about the timing of a peak in oil production, 

and agency officials have stated the value in doing so. In addition, agency

efforts to stimulate the development and adoption of alternatives to oil use 

could be increased if a peak in oil production were deemed imminent. 

While public and private responses to an anticipated peak could mitigate 

the consequences significantly, federal agencies currently have no 

coordinated or well-defined strategy either to reduce uncertainty about the 

timing of a peak or to mitigate its consequences. This lack of a strategy 

makes it difficult to gauge the appropriate level of effort or resources to 

commit to alternatives to oil and puts the nation unnecessarily at risk. 

While uncertainty about the timing of peak oil production is inevitable, 

reducing that uncertainty could help energy users and suppliers, as well as 

government policymakers, to act in ways that would mitigate the 

potentially adverse consequences. Therefore, we recommend that the 

Secretary of Energy take the lead, in coordination with other relevant

agencies, to prioritize federal agency efforts and establish a strategy for 

addressing peak oil issues. At a minimum, such a strategy should seek to 

do the following: 

Recommendation for 

Executive Action 

• Monitor global supply and demand of oil with the intent of reducing 

uncertainty surrounding estimates of the timing of peak oil production. 

This effort should include improving the information available to estimate 

the amount of oil, conventional and nonconventional, remaining in the 

world as well as the future production and consumption of this oil, while 

extending the time horizon of the government’s projections and analysis. 

Page 39 GAO-07-283 Peak Oil Production
• Assess alternative technologies in light of predictions about the timing of 

peak oil production and periodically advise Congress on likely costeffective areas where the government could assist the private sector with 

development and adoption of such technologies. 

We provided the Departments of Energy and the Interior with a draft of 

this report for their review and comment. 

DOE generally agreed with our message and recommendations and made 

several clarifying and technical comments, which we addressed in the 

body of the report as appropriate. Appendix V contains a reproduction of 

DOE’s letter and our detailed response to their comments. Specifically, 

DOE commented that the draft report did not make a distinction between 

a peak in conventional versus a peak in total (conventional and 

nonconventional) oil. We agree that we have not made this distinction, in 

part because the numerous studies of peak oil that we reviewed did not 

always make such a distinction. Furthermore, we do not believe a clear 

distinction between these two peak concepts is possible, in part because 

the definition of what is conventional oil versus nonconventional oil is not

universally agreed on. However, the information we have reported 

regarding uncertainty about the timing of a peak applies to either peak oil

concept. 

DOE also commented that our use of certain technical phrases, including 

the distinction between heavy and extra-heavy oils and the distinction 

between oil consumption and demand, may be confusing to some readers, 

and we have made changes to the text to avoid such confusion. DOE 

commented that the draft report wrongly attributed environmental 

concerns to the use of enhanced oil recovery techniques, stating that the

environmental community prefers such techniques on existing oil fields to

exploration and development of new fields. We do not disagree that the 

environmental costs of these techniques may be smaller than for other 

activities and we have added text to express DOE’s views on this matter. 

However, our point in listing the cost and environmental challenges of 

enhanced oil recovery techniques is that increasing oil production in the 

future could be more costly and more environmentally damaging than

production of conventional oil, using primary production methods. For 

this reason we disagree with DOE’s comment that we should remove the 

references to environmental challenges. 

Finally, DOE pointed out that the draft report was primarily focused on 

transportation technologies that are used to power autonomous vehicles,

Agency Comments 

and Our Evaluation 

Page 40 GAO-07-283 Peak Oil Production
and they stated that a broader set of technologies that could displace oil 

should be considered. We agree with their characterization of the draft 

report. We chose transportation technologies because transportation 

accounts for such a large part of U.S. oil consumption and because DOE 

and other agencies have numerous programs and activities dealing with 

technologies to displace oil in the transportation sector. We also agree that 

a broader set of technologies should be considered in the long run as 

potential ways to mitigate the consequences of a peak in oil production. 

We encourage DOE and other agencies to fully explore the options to 

displace oil as they implement our recommendations to develop a strategy 

to reduce the uncertainty surrounding the timing of a peak in oil 

production and advise Congress on cost-effective ways to mitigate the 

consequences. 

Interior generally agreed with our message and recommendations in the

draft report and made clarifying and technical comments, which we 

addressed in the body of the report as appropriate. Appendix VI contains a 

reproduction of Interior’s letter and our detailed response to its 

comments. Specifically, Interior emphasized that it has a major role to play 

in estimating global oil resources, and that this effort should be made in 

conjunction with the efforts of DOE. We agree and encourage DOE to 

work in conjunction with Interior and other key agencies in establishing a 

strategy to coordinate and prioritize federal agency efforts to reduce the 

uncertainty surrounding the timing of a peak and to advise Congress on 

how best to mitigate consequences. Interior also commented that 

mitigating the consequences of a peak is outside their purview. We agree,

and, in this report, we focus on examples of work that Interior could 

undertake to assist in reducing the uncertainty surrounding the estimates 

of global oil resources. 

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution of it until 30 days from 

the report date. At that time, we will send copies of this report to 

interested congressional committees, other Members of Congress, the 

Secretaries of Energy and the Interior, and other interested parties. We 

also will make copies available to others upon request. In addition, the 

report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

Page 41 GAO-07-283 Peak Oil Production
Should you or your staffs need further information, please contact me at

202-512-3841 or wellsj@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made contributions to this report are listed 

in appendix VII. 

Jim Wells 

Director, Natural Resources and Environment 

Page 42 GAO-07-283 Peak Oil Production
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To examine estimates of when oil production could peak, we reviewed key 

peak oil studies conducted by government agencies and oil industry 

experts. We limited our review to those studies that were published and 

excluded white papers or unpublished research. For studies that we cited 

in this report, we reviewed their estimate of the timing, methodology, and 

assumptions about the resource base to ensure that we properly 

represented the validity and reliability of their results and conclusions. We 

also consulted with federal government agencies and oil companies, as 

well as academic and research organizations, to identify the uncertainties 

associated with the timing of a peak.

As part of our examination of the timing of peak oil production, we 

assessed other factors that could affect oil exploration and production. 

Specifically, we examined the challenges facing future technologies that 

could enhance the global production of oil, including technologies for 

increasing recovery from conventional reserves as well as technologies for 

producing nonconventional oil. To examine these technologies, we met 

with experts at the Department of Energy’s (DOE) National Energy 

Technology Laboratory, and synthesized information provided by these 

experts. 

In addition, we examined political and investment risks associated with 

global oil exploration and production using Global Insight’s Global Risk 

Service. For each country, Global Insight’s country risk analyst estimates 

the subjective probability of 15 discrete events for political risk, and 22 

discrete events for investment risk in the upstream oil and gas sectors. The 

probability is estimated for the next 5 years. Senior analysts then meet to 

review the scores to ensure cross-country consistency. The summary 

score is derived by weighting different groups of factors and then 

summing across the groups. For political risk, external and internal 

political risks are the two groups of factors. For investment risk in the oil 

and gas sectors, the factors are: investment/maintenance risk, input risk, 

production risk, sales risk, and revenue/repatriation risk. We compared 

political and investment risk with Oil and Gas Journal oil reserves 

estimates. Oil and Gas Journal reserves estimates are limited by the fact 

that they are not independently verified by the publishers and are based on

surveys filled out by the countries. Because most countries do not reassess 

annually, some estimates in this survey do not change each year. We 

divided the countries into risk categories of low, medium, and high on the 

basis of quartiles and natural break points in the data. To obtain the 

percentage of reserves held by public companies and by national oil 

companies, we used the Petroleum Intelligence Weekly list of top 50 

companies worldwide. The Petroleum Intelligence Weekly data are limited 

Page 43 GAO-07-283 Peak Oil Production
Appendix I: Scope and Methodology 

by reliance on company reports and other information sources provided 

by companies and the generation of estimates for those companies that do 

not release regular or complete reports. Estimates were created for most 

of the state-owned oil companies in figure 9 of this report. The limitations 

of these data reflect the uncertainty in estimates of the amount of oil in the 

ground, and our report does not rely on precise estimates of oil reserves 

but rather on the uncertainty about the amount of oil throughout the world 

and the challenges to exploration and production of oil. Therefore, we 

found these data to be sufficiently reliable for the purposes of our report. 

We also spoke with officials at the Securities and Exchange Commission 

and with DOE as well as experts in academia and industry. In addition, we 

reviewed documents from the Department of the Interior and the 

International Energy Agency (IEA). 

To assess the potential for transportation technologies to mitigate the 

consequences of a peak and decline in oil production, we examined 

options to develop alternative fuels and technologies to reduce energy 

consumption in the transportation sector. In particular, we focused on 

technologies that would affect automobiles and light trucks. We consulted 

with experts to devise a list of key technologies in these areas and then 

reviewed DOE programs and activities related to developing these 

technologies. To assess alternative fuels and advanced vehicle 

technologies, we met with various experts at DOE, including 

representatives from the National Energy Technology Laboratory and the 

National Renewable Energy Laboratory, and reviewed information 

provided by officials from various offices at DOE. In addition, we spoke 

with officials from the U.S. Department of Agriculture (USDA) and the 

Department of Transportation regarding the development of these 

technologies in the United States. We did not attempt to comprehensively 

list all technologies or to conduct a governmentwide review of all 

programs, and we limited our scope to what government officials at key 

federal agencies know about the status of these technologies in the United 

States. In addition, we did not conduct a global assessment of 

transportation technologies. We reviewed numerous studies on the 

relationship between oil and the global economy and, in particular, on the 

experiences of past oil price shocks. 

To identify federal government activities that could address peak oil 

production issues, we spoke with officials at DOE and the United States 

Geological Survey (USGS), and gathered information on federal programs 

and policies that could affect uncertainty about the timing of peak oil 

production and the development of alternative transportation 

technologies. To gain further insights into the federal role and other issues 

Page 44 GAO-07-283 Peak Oil Production
Appendix I: Scope and Methodology 

surrounding peak oil production, we convened an expert panel in 

Washington, D.C., in conjunction with the National Research Council of 

the National Academy of Sciences. On May 5, 2006, these experts 

commented on the potential economic consequences of a transition away 

from conventional oil; factors that could affect the severity of the 

consequences; and what the federal role should be in preparing for or 

mitigating the consequences, among other things. We recorded and 

transcribed the meeting to ensure that we accurately captured the panel 

members’ statements. 

The following 13 experts served on the panel:

• Stephen Brown, Director of Energy Economics and Microeconomic Policy 

Analysis, Federal Reserve Bank of Dallas 

• David Greene, Corporate Fellow, Oak Ridge National Laboratory 

• Howard Gruenspecht, Deputy Administrator, Energy Information 

Administration 

• James Hamilton, Professor of Economics, University of California, San 

Diego 

• Robert Hirsch, Senior Energy Program Advisor, SAIC 

• Hillard G. Huntington, Executive Director Energy Modeling Forum, 

Stanford University 

• James Katzer, Visiting Scholar, Massachusetts Institute of Technology 

(MIT), and Manager (retired), Strategic Planning and Performance 

Analysis, ExxonMobil Research and Engineering Company 

• Robert Kaufmann, Professor, Center for Energy & Environmental Studies, 

Boston University 

• Paul Leiby, Oak Ridge National Laboratory 

• Nicola Pochettino, Senior Energy Analyst, Economic Analysis Division, 

International Energy Agency 

• Edward Porter, Research Manager, American Petroleum Institute 

• James Smith, Maguire Chair of Oil and Gas Management, Edwin L. Cox 

School of Business, Southern Methodist University 

Page 45 GAO-07-283 Peak Oil Production
Appendix I: Scope and Methodology 

• James Sweeney, Professor, Management Science and Engineering, 

Stanford University 

Page 46 GAO-07-283 Peak Oil Production
Appendix II: Key Peak Oil Studies Appendix II: Key Peak Oil Studies 

This appendix lists the studies cited in figure 5 of this report. 

(a) L.F. Ivanhoe. “ Updated Hubbert Curves Analyze World Oil Supply.” 

World Oil. Vol. 217 (November 1996): 91-94. 

(b) Albert A. Bartlett. “ An Analysis of U.S. and World Oil Production 

Patterns Using Hubbert-Style Curves.” Mathematical Geology. Vol. 32, no.1 

(2000). 

(c) Kenneth S. Deffeyes. “ World’s Oil Production Peak Reckoned in Near 

Future.” Oil and Gas Journal. November 11, 2002. 

(d) Volvo. Future Fuels for Commercial Vehicles. 2005. 

(e) A.M. Samsam Bakhtiari. “ World Oil Production Capacity Model 

Suggests Output Peak by 2006-2007.” Oil and Gas Journal. April 26, 2004. 

(f) Richard C. Duncan. “ Peak Oil Production and the Road to the Olduvai 

Gorge.” Pardee Keynote Symposia. Geological Society of America, 

Summit 2000. 

(g) David L. Greene, Janet L. Hopson, and Jai Li. Running Out Of and 

Into Oil: Analyzing Global Oil Depletion and Transition Through 2050. 

Oak Ridge National Laboratory, Department of Energy, October 2003. 

(h) C.J. Campbell. “ Industry Urged to Watch for Regular Oil Production 

Peaks, Depletion Signals.” Oil and Gas Journal. July 14, 2003. 

(i) Merril Lynch. Oil Supply Analysis. October 2005. 

(j) Ministére de l’Economie Des Finances et de l’Industrie. L’industrie 

pétrolière en 2004. 2005. 

(k) International Energy Agency. World Energy Outlook 2004. Paris 

France: 101-103. 

(l) Jean Laherrère. Future Oil Supplies. Seminar Center of Energy 

Conversion, Zurich: 2003. 

(m) Peter Gerling, Hilmar Remple, Ulrich Schwartz-Schampera, and 

Thomas Thielemann. Reserves, Resources and Availability of Energy 

Resources. Federal Institute for Geosciences and Natural Resources, 

Hanover, Germany: 2004.

Page 47 GAO-07-283 Peak Oil Production
Appendix II: Key Peak Oil Studies 

(n) John D. Edwards. “ Crude Oil and Alternative Energy Production 

Forecasts for the Twenty-First Century: The End of the Hydrocarbon Era.” 

American Association of Petroleum Geologists Bulletin. Vol. 81, no. 8 

(August 1997). 

(o) Cambridge Energy Research Associates, Inc. Worldwide Liquids 

Capacity Outlook to 2010, Tight Supply or Excess of Riches. May 2005. 

(p) John H. Wood, Gary R. Long and David F. Morehouse. Long Term 

World Oil Supply Scenarios. Energy Information Administration: 2004. 

(q) Total. Sharing Our Energies: Corporate Social Responsibility Report 

2004.

(r) Shell International. Energy Needs, Choices and Possibilities: 

Scenarios to 2050. Global Business Environment: 2001. 

(s) Directorate-General for Research Energy. World Energy, Technology 

and Climate Policy Outlook: WETO 2030. European Commission, EUR 

20366: 2003.

(t) Exxon Mobil. The Outlook for Energy: A View to 2030. Corporate 

Planning. Washington, D.C.: November 2005. 

(u) Harry W. Parker. “ Demand, Supply Will Determine When World Oil 

Output Peaks.” Oil and Gas Journal. February 25, 2002. 

(v) M.A. Adelman and Michael C. Lynch. “ Fixed View of Resource Limits 

Creates Undue Pessimism.” Oil and Gas Journal. April 7, 1997. 

Page 48 GAO-07-283 Peak Oil Production
Appendix III: K

the Supply of 

ey Technologies to Enhance 

Oil 

Page 49 GAO-07-283 

Appendix III: Key Technologies to Enhance 

the Supply of Oil 

This appendix contains brief profiles of technologies that could enhance 

the future supply of oil. This includes technologies for (1) increasing the 

rate of recovery from proven oil reserves using enhanced oil recovery; (2) 

producing oil from deepwater and ultra-deepwater reservoirs; and (3) 

producing nonconventional oil, such as oil sands and oil shale. For each

technology, we provide a short description, followed by selected 

information on the key costs, potential production, readiness, key 

challenges, and current federal involvement. Although some of these 

technologies are in production or development throughout the world, the 

following profiles primarily focus on the development of these 

technologies in the United States. 

Enhanced oil recovery (EOR) refers to the third stage of oil production, 

whereby sophisticated techniques are used to recover remaining oil from

reservoirs that have otherwise been exhausted through primary and 

secondary recovery methods. During EOR, heat (such as steam), gases 

(such as carbon dioxide (CO2

)), or chemicals are injected into the 

reservoir to improve fluid flow. Thermal and gas injection techniques 

account for almost all EOR activity in the United States, with CO2

 injection 

being the technique that is currently attracting the most commercial 

interest. In the United States, EOR methods are currently being applied in

a variety of regions, although most CO2

 EOR occurs in the Permian Basin 

in Texas. Most EOR efforts in the United States are currently managed by

small, independent operators. Globally, EOR has been introduced in a 

number of countries, but North America is estimated to represent over half

of all global EOR production. 

Key Costs 

Enhanced Oil 

Recovery 

• Costs associated with EOR production vary by reservoir, but reported 

marginal costs for oil recovery using EOR can range from $1.42 per barrel 

to $30 per barrel. 

• Key capital costs include new drills, reworking of existing drills, 

reconfiguring gathering systems, and modification of the injection plant 

and other surface facilities. 

Potential Production 

• EOR currently contributes approximately 12 percent to the U.S. 

production of oil. 

Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

• EOR is projected to increase average recovery rates in reservoirs from 30 

percent to 50 percent. 

• Upper-end estimates of EOR’s future recovery potential in the United 

States include the following: 1.0 million barrels per day by 2015 and 2.5 

million barrels per day by 2025. 

Readiness 

• Thermal, gas, and chemical injection technologies are currently 

commercially available. 

• Key areas for further development exist, including sweep efficiency and 

water shut-off methods. 

Key Challenges 

• Key challenges facing the development of EOR include the following: (1) a 

lack of industry-accepted, economical fluid injection systems; (2) a 

reliance on out-of-date practices and limited data due to lack of familiarity 

with state-of-the-art imaging and reluctance to risk investment in 

technologies; and (3) unwillingness on the part of some operators to 

assume the risks associated with EOR.

Current Federal Involvement 

• DOE is involved in several industry consortia and individual programs, 

designed to develop EOR, including conducting research and development 

and educating small producers about EOR. 

Deepwater drilling refers to offshore drilling for oil in depths of water 

between 1,000 and 5,000 feet, while ultra-deepwater drilling refers to 

offshore drilling in depths of water between 5,000 and 10,000 feet, 

according to DOE. The department reported that oil production at these 

depths involves a number of differences over shallow water drilling, such 

as drills that operate in extreme conditions, pipes that withstand 

deepwater ocean currents over long distances, and floating rigs as 

opposed to fixed rigs. The primary region for domestic deepwater drilling 

is the Gulf of Mexico, where deepwater drilling has become a major focus 

in recent years, particularly as near-shore oil production in shallow water 

has been declining. Globally, deepwater drilling occurs offshore in many 

locations, including Africa, Asia, and Latin America. 

Deepwater and UltraDeepwater Drilling 

Page 50 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

Key Costs 

• Costs vary by rig type, but the three key components of cost for deepwater 

and ultra-deepwater drilling include the following: (1) the daily vessel 

rental rate, (2) materials, and (3) drilling services. 

• The average market rate for Gulf of Mexico rigs can range from $210,000

per day to $300,000 per day. 

• Overall, the projected marginal costs of deepwater drilling range from 3.0 

to 4.5 times the cost of shallow water drilling. 

Potential Production 

• Current deepwater production in the Gulf of Mexico is estimated at 1.3 

million barrels per day. 

• Deepwater production in the Gulf of Mexico is projected to exceed 2 

million barrels per day in the next 10 years. 

Readiness 

• Commercial deepwater drilling at depths of more than 1,000 feet in the 

Gulf of Mexico has been under way since the mid-1970s. 

• Companies are currently exploring prospects for drilling in depths of more 

than 5,000 feet, and since 2001, 11 discoveries of ultra-deepwater wells at 

depths of more than 7,000 feet have been announced. 

Key Challenges 

• Examples of some of the key challenges facing the development of 

deepwater and ultra-deepwater drilling include the following: (1) rig 

issues, such as finding ways to adapt and use lower-cost rigs and 

improving the ability to moor vessels in deepwater; (2) drilling equipment

reliability at high pressures and temperatures; and (3) reducing the costs 

of drilling and producing at deepwater and ultra-deepwater depths. 

Current Federal Involvement 

• DOE is not directly involved in deepwater and ultra-deepwater drilling, but 

it does fund projects that could impact such drilling. 

Page 51 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

• The Energy Policy Act of 2005 authorized some funding for research and

development of alternative oil and gas activities, including deepwater 

drilling. 

Oil sands are deposits of bitumen, a thick, sticky form of crude oil, which 

is so heavy and viscous that it will not flow unless heated or diluted with 

lighter hydrocarbons. It must be rigorously treated to convert it into an 

upgraded crude oil before it can be used by refineries to produce gasoline 

and diesel fuels. While conventional crude flows naturally or is pumped 

from the ground, oil sands must be mined or recovered “in-situ,” or in 

place. During oil sands mining, approximately 2 tons of oil sands must be 

dug up, moved, and processed to produce 1 barrel of oil. During in-situ 

recovery, heat, solvents, or gases are used to produce the oil from oil 

sands buried too deeply to mine. The largest deposit of oil sands globally 

is found in Alberta, Canada—accounting for at least 85 percent of the 

world’s oil sands reserves—although DOE reported that deposits of oil 

sands can also be found in the United States in Alabama, Alaska, 

California, Texas, and Utah. 

Key Costs 

Oil Sands 

• Commercial Canadian oil sands are being produced at $18 to $22 per 

barrel. 

• Key infrastructure costs to support oil sands production in the United 

States would include construction of roads, pipelines, water, and energy

production facilities. 

Potential Production 

• The 2005 production of Canadian oil sands yielded 1.6 million barrels of oil 

per day and production is projected to grow to as much as 3.5 million 

barrels per day by 2030.

• Current U.S. production of oil sands currently yields less than 175,000 

barrels per year, and future production of U.S. oil sands will depend on the 

industry’s investment decisions. 

Readiness 

• Production of Canadian oil sands is currently in the commercial phase. 

Page 52 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

• U.S. oil sands production is only in the demonstration phase, and adapting

Canadian technologies to the characteristics of U.S. oil sands will require 

time. 

Key Challenges 

• Examples of key challenges facing the development of oil sands include 

the following: (1) evaluating and alleviating environmental impacts, 

particularly concerning water consumption; (2) accessing the federal lands 

on which most of the U.S. oil sands are located; (3) addressing the 

increased demand on roads, schools, and other infrastructure that would 

result from the need to construct production facilities in some remote 

areas of the west; and (4) addressing the increased need for natural gas, 

electricity, and water for production.

Current Federal Involvement 

• There are currently no federal programs to develop the U.S. oil sands 

resource, although the Energy Policy Act of 2005 called for the 

establishment of a number of policies and actions to encourage the 

development of unconventional oils in the United States, including oil 

sands. 

• The Bureau of Land Management, which manages most of the federal 

lands where oil sands occur, maintains an oil sands leasing program. 

Heavy and extra-heavy oils are dense, viscous oils that generally require

advanced production technologies, such as EOR, and substantial 

processing to be converted into petroleum products. Heavy and extraheavy oils differ in their viscosities and other physical properties, but 

advanced recovery techniques like EOR are required for both types of oil. 

Heavy and extra-heavy oil reserves occur in many regions around the 

world, with the Orinoco Oil Belt in Eastern Venezuela comprising almost 

90 percent of the total extra-heavy oil in the world. In the United States, 

heavy oil reserves are primarily found in Alaska, California, and Wyoming, 

and some commercial heavy oil production is occurring domestically. 

Key Costs 

Heavy and ExtraHeavy Oils 

• The cost of producing heavy and extra-heavy oil is greater than the cost of 

producing conventional oil, due to, among other things, higher drilling, 

refining, and transporting costs. 

Page 53 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

Potential Production 

• The 2005 Venezuelan extra-heavy oil production was estimated to be 

600,000 barrels of oil per day and is projected to at least sustain this 

production rate through 2030. 

• In 2004, production of heavy oil in California was 474,000 barrels per day.

In December 2005, heavy oil production in Alaska was 42,500 barrels per 

day, but some project Alaskan production to increase to 100,000 barrels 

per day in 5 years. 

Readiness 

• Extra-heavy oil production is in the commercial phase in Venezuela. 

• Heavy oil production technologies are currently commercially available 

and employed in the United States.

Key Challenges 

• Development of the heavy oil resource in the United States faces 

environmental, economic, technical, permitting, and access-to-skilledlabor challenges. 

Current Federal Involvement 

• There has not been a specific DOE program focused on heavy oil, as most 

of the research and developments have been handled under the general 

research umbrella for EOR. 

• The Energy Policy Act of 2005 called for an update of the 1987 technical 

and economic assessment of heavy oil resources in the United States. 

Oil shale refers to sedimentary rock that contains solid bituminous 

materials that are released as petroleum-like liquids when the rock is 

heated. To obtain oil from oil shale, the shale must be heated and the 

resultant liquid must be captured, in a process referred to as “retorting.” 

Oil shale can be produced by mining followed by surface retorting or by 

in-situ retorting. The largest known oil shale deposits in the world are in 

the Green River Formation, which covers portions of Colorado, Utah, and 

Wyoming. Estimates of the oil resource in place range from 1.5 trillion to 

1.8 trillion barrels, but not all of the resource is recoverable. In addition to

the Green River Formation, Australia and Morocco are believed to have oil

Oil Shale 

Page 54 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

shale resources. At the present time, a RAND study reported there are 

economic and technical concerns associated with the development of oil 

shale in the United States, such that there is uncertainty regarding whether 

industry will ultimately invest in commercial development of the resource. 

Key Costs 

• On the basis of currently available information, oil shale cannot compete 

with conventional oil production. 

• At the present time, and given current technologies and information, Shell

Oil reports that it may be able to produce oil shale for $25 to $30 per 

barrel. 

• Infrastructure costs for oil shale production include the following: 

additional electricity, water, and transportation needs. A RAND study 

expects a dedicated power plant for the production of oil shale to exceed 

$1 billion. 

Potential Production 

• The Green River Basin is believed to have the potential to produce 3 

million to 5 million barrels per day for hundreds of years. 

• Given the current state of the technology and associated challenges, 

however, it is possible that 10 years from now, the oil shale resource could 

be producing 0.5 million to 1.0 million barrels per day. 

Readiness 

• Oil shale is not presently in the research and development stage. 

• Shell Oil has the most advanced concept for oil shale, and it does not 

anticipate making a decision regarding whether to attempt 

commercialization until 2010. 

Key Challenges 

• Examples of key challenges facing the development of oil shale include

the following: (1) controlling and monitoring groundwater, (2) permitting 

and emissions concerns associated with new power generation facilities, 

(3) reducing overall operating costs, (4) water consumption, and (5) land 

disturbance and reclamation. 

Page 55 GAO-07-283 Peak Oil Production
Appendix III: Key Technologies to Enhance 

the Supply of Oil 

Current Federal Involvement 

• The Energy Policy Act of 2005 called for the establishment of a number of 

policies and actions to encourage the development of unconventional oils

in the United States, including oil shale. 

Page 56 GAO-07-283 Peak Oil Production
A

Consumption in the Transporta

ppendix IV: Key Technologies to Displace Oil 

tion Sector 

Page 57 GAO-07-283 

Appendix IV: Key Technologies to Displace 

Oil Consumption in the Transportation Sector

This appendix contains brief profiles of key technologies that could 

displace U.S. oil consumption in the transportation sector. These 

technologies include alternative fuels to supplement or substitute for 

gasoline as well as advanced vehicle technologies to increase fuel 

efficiency. For each technology, on the basis of information provided by 

federal experts, we provide a short description, followed by selected

information on the costs, potential production or displacement of oil, 

readiness, key challenges, and current federal involvement. Although some 

of these technologies are in production or development throughout the 

world, the following profiles primarily focus on the development of these 

technologies in the United States. 

Ethanol is a grain alcohol-based, alternative fuel made by fermenting plant 

sugars. It can be made from many agricultural products and food wastes if 

they contain sugar, starch, or cellulose, which can then be fermented and 

distilled into ethanol. Pure ethanol is rarely used for transportation; 

instead, it is usually mixed with gasoline. The most popular blend for lightduty vehicles is E85, which is 85 percent ethanol and 15 percent gasoline. 

The technology for producing ethanol, at least from certain feedstocks, is

generally well established, and ethanol is currently produced in many 

countries around the world. In Brazil, the world’s largest producer, ethanol 

is produced from sugar cane. In the United States, more than 90 percent of 

ethanol is produced from corn, but efforts are under way to develop 

methods for producing ethanol from other biomass materials, including 

forest trimmings and agricultural residues (cellulosic ethanol). Currently, 

corn ethanol is primarily produced and used across the Midwest. 

Key Costs 

Ethanol 

• The current cost of producing ethanol from corn is between $0.90 to $1.25 

per gallon, depending on the plant size, transportation cost for the corn, 

and the type of fuel used to provide steam and other energy needs for the 

plant. 

• The projected cost of producing ethanol from biomass is expected to drop

significantly to about $1.07 per gallon by 2012. 

• The current cost of producing of ethanol from biomass is not cost 

competitive, but by 2012 it is projected to be about $1.07 per gallon. 

• Key infrastructure costs associated with ethanol include retrofitting 

refueling stations to accommodate E85 (estimated at between $30,000 and 

Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

$100,000) and constructing or modifying pipelines to transport ethanol. 

Potential Production 

• The 2005 production of ethanol in the United States was approximately 4 

billion gallons. By 2014-15, corn ethanol production is expected to peak at 

approximately 9 billion to 18 billion gallons annually. 

• Assuming success with cellulosic ethanol technologies, experts project 

cellulosic ethanol production levels of over 60 billion gallons by 2025-30.

Readiness 

• Corn ethanol is commercially produced today and continues to expand 

rapidly. 

• Cellulosic ethanol is in the demonstration phase, but it is projected to be

demonstrated by 2010. 

Key Challenges 

• For corn ethanol, key challenges include the necessary infrastructure 

changes to support ethanol distribution and the ability and willingness of 

consumers to adapt to ethanol. 

• For cellulosic ethanol, several technical challenges still remain, including 

improving the enzymatic pretreatment, fermentation, and process 

integration.

• For cellulosic ethanol, economic challenges are high feedstock and 

production costs and the initial capital investment. 

Current Federal Involvement 

• The federal government is currently involved in numerous efforts to 

develop ethanol. Several federal agencies collaborate with industry to 

accelerate the technologies, reduce the cost of the technologies, and assist 

in developing the infrastructure. 

Biodiesel is a renewable fuel that has similar properties to petroleum 

diesel, but it can be produced from vegetable oils or animal fats. Like 

petroleum diesel, biodiesel operates in compression-ignition engines. 

Blends of up to 20 percent biodiesel (B20) can be used in nearly all diesel 

Biodiesel 

Page 58 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

equipment and are compatible with most storage and distribution 

equipment. These low-level blends generally do not require any engine

modifications. Higher blends and 100 percent biodiesel (B100) may be 

used in some engines with little or no modification, although

transportation and storage of B100 requires special management. Biodiesel 

is currently produced and used as a transportation fuel around the world. 

In the United States, the biodiesel industry is small but growing rapidly, 

and refueling stations with biodiesel can be found across the country. 

Key Costs 

• The current wholesale cost of pure biodiesel (B100) ranges from about 

$2.90 to $3.20 per gallon, although recent sales have been reported at $2.75 

per gallon. 

• To date, there has been limited evaluation of the projected infrastructure 

costs required for biodiesel. However, it is acknowledged that there are 

infrastructure costs associated with installation of manufacturing capacity, 

distribution, and blending of the biodiesel. 

Potential Production 

• In 2005, U.S. production of biodiesel was 75 million gallons, and DOE 

projects about 3.6 billion gallons per year by 2015. 

• Under a more speculative scenario requiring major changes in land use 

and price supports, experts project it would be possible to produce 10 

billion gallons of biodiesel per year. 

Readiness 

• While biodiesel is commercially available, in many ways it is still in 

development and demonstration. Key areas of focus for development and 

demonstration include quality, warranty coverage, and impact of air 

pollutant emissions and compatibility with advanced control systems. 

• Experts project that, with adequate resources, key remaining 

developments could be resolved in the next 5 years. 

Key Challenges 

• Initial capital costs are significant and the technical learning curve is 

steep, which deters many potential investors. 

Page 59 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

• Economic challenges are significant for biodiesel. In the absence of the $1 

per gallon excise tax, biodiesel would not likely be cost-competitive. 

Current Federal Involvement 

• DOE is currently collaborating with the biodiesel and automobile 

industries in funding research and development efforts on biodiesel use, 

and USDA is conducting research on feedstocks.

Gas-to-liquid (GTL) alternatives include the production of liquid fuels from 

a variety of feedstocks, via the Fisher-Tropsch process. In the FischerTropsch process, feedstocks such as coal and biomass are converted into

a syngas, before the gas is converted into a diesel-like fuel. The diesel-like 

fuel is low in toxicity and is virtually interchangeable with conventional 

diesel fuels. Although these technologies have been available in some form 

since the 1920s, and coal GTL was used heavily by the German military 

during World War II, GTL technologies are not widely used today. 

Currently, there is no commercial production of biomass GTL and the only 

commercial production of coal GTL occurs in South Africa, where the 

Sasol Corporation currently produces 150,000 barrels of fuel from coal per 

day. Extensive research and development, however, is currently under 

way to further develop this technology because automakers consider GTL 

fuels viable alternatives to oil without compromising fuel efficiency or 

requiring major infrastructure changes. 

Key Costs 

Coal and Biomass 

Gas-to-Liquids 

• Coal. Construction of a precommercial coal GTL plant is estimated at $1.7 

billion, while construction of a commercial coal GTL is estimated at $3.5 

billion. 

• Biomass. Potential costs associated with biomass GTL are uncertain, 

given the early stage of the technology. 

• Infrastructure costs associated with both biomass and coal GTLs are 

expected to be substantial, given the necessary modifications to pipelines,

refueling centers, and storage facilities. 

Potential Production 

• Coal. Experts project that, at most, 80,000 barrels per day could be 

produced by 2015 and 1.7 million barrels per day by 2030. 

Page 60 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

• Biomass. Some experts project biomass GTL to have the potential to 

produce up to approximately 1.4 million barrels-of-oil-equivalent per day 

by 2030. 

Readiness 

• Coal. Coal GTL is commercially available in South Africa, but the 

technology has not yet been commercially adopted in the United States. 

• Biomass. Biomass GTL is currently in research and development, nearing 

the demonstration stage. Experts project that biomass GTL production 

could be demonstrated at the pilot scale by 2012. 

Key Challenges 

• Coal. Key challenges facing coal GTL include technology integration, for 

example integrating various processes with combined cycle turbine and 

CO2 capture operations, and market risk. 

• Biomass. The challenges are mostly technical in nature, for example, 

pretreatment of biomass feedstocks, identification of high-efficiency 

feedstocks, improving cleanliness of the syngas, and process integration. 

Current Federal Involvement 

• Coal. DOE does not receive any direct funding for coal GTL, but funding 

for other programs indirectly supports and benefits some coal GTL 

research. 

• Biomass. DOE funds some biomass conversion research. 

Natural gas is an alternative fuel that can be used as either heavy-duty 

compressed natural gas or liquefied natural gas to power natural gas 

vehicles. These vehicles require pressurized tanks, which have been 

designed to withstand severe impact, high external temperatures, and 

environmental exposure. Natural gas can be used by either retrofitting an 

existing gasoline or diesel engine or purchasing a natural gas vehicle. 

Natural gas vehicles are in use in many countries, totaling more than 5 

million natural gas vehicles and over 9,000 refueling stations. The United 

States has about 130,000 natural gas vehicles and 1,340 refueling stations. 

Natural Gas 

Page 61 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

Key Costs 

• Light-duty natural gas vehicles are estimated to cost an additional $1,000

per vehicle.

• Heavy-duty natural gas vehicles are estimated to cost an additional $10,000

to $30,000 per vehicle. 

• Natural gas refueling stations are estimated to cost $100,000 to $1 million 

to build, while home fueling appliances cost approximately $2,000 per 

year. 

Potential Production 

• Currently, natural gas vehicles displace approximately 65 million gallons 

of diesel fuel per year. 

• There is a potential niche market in heavy-duty vehicles for natural gas, 

which could displace 1,500 million gallons of gasoline per year. 

Readiness 

• Natural gas vehicles are commercially available now, but their overall use 

is limited on a national scale and production has been declining in recent 

years. 

• Heavy-duty natural gas vehicles are in the final stages of research and 

development. 

Key Challenges 

• Examples of some key challenges facing the adoption of natural gas 

vehicles include the following: (1) the higher cost of high-pressure fuel 

tanks for consumers, (2) the costly upgrades to the existing refueling 

infrastructure, and (3) the availability and cost of natural gas. 

Current Federal Involvement 

• There is currently no federal funding or research focusing on natural gas 

vehicles. 

Page 62 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

Vehicle technologies encompass several different efforts to reduce 

vehicles’ oil consumption. Increasing the efficiency of the internal 

combustion engine, specifically advanced diesel engines, is considered a 

first step toward other engine technologies. For example, researchers are

working to improve the emissions profile of advanced diesel engines 

through techniques such as low-temperature combustion, which would 

enable the engine to burn more cleanly so that emissions control at the 

tailpipe is less burdensome. Another set of technologies are hybrid electric 

and plug-in hybrid electric vehicles. Hybrid vehicles use a battery 

alongside the internal combustion engine to facilitate the capture of 

braking energy as well as to provide propulsion, while plug-in hybrids use 

a different battery and can be powered by battery alone for an extended

period. Researchers are examining how to build longer-lasting and lessexpensive batteries for hybrid and plug-in hybrid vehicles. Finally, a range 

of ongoing work is attempting to improve the efficiency of conventional 

vehicles. For example, lightweight materials have the potential to improve 

efficiency by reducing vehicle weight. Oil consumption can also be cut by

reducing the rolling resistance of tires, increasing the efficiency of 

transmission technologies that move the energy from the engine to the 

tires, and improving how power is managed within the vehicle. 

Key Costs 

Advanced Vehicle 

Technologies 

• Advanced diesel engines. DOE does not have information on the potential 

cost of this technology. Officials told us that this information is 

proprietary. 

• Hybrid electric and plug-in hybrid vehicles. DOE officials told us that 

these vehicles can cost several thousand dollars more than conventional

vehicles, although some of the incremental cost in hybrid vehicles 

currently on the market may be related to additional amenities, rather than

the hybrid technology. 

• Lightweight materials. DOE officials told us that lightweight carbon fiber 

materials currently cost approximately $12 to $15 per pound, and that 

their goal is to reduce this cost to $3 to $5 per pound. Information was not 

available on costs associated with other technologies to improve 

conventional vehicle efficiency. 

Potential Displacement of Oil 

• DOE estimates that the oil savings that would result from its vehicle 

technology efforts, including research on internal combustion engines, 

hybrids, and other vehicle efficiency measures, is 20,000 barrels per day by

Page 63 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

2010, up to 1.07 million barrels per day by 2025. 

• DOE was not able to estimate oil savings for plug-in hybrids for fiscal year 

2007. 

Readiness 

• Advanced diesel engines. Low-temperature combustion that would reduce 

the emissions burden of diesel engines is under research and development. 

• Hybrid electric and plug-in hybrid electric vehicles. Hybrid electric 

vehicles are currently on the market, although research continues on 

longer-lasting, less expensive batteries for both hybrid and plug-in hybrid 

electric vehicles. DOE’s goal is to have plug-in hybrids commercially 

available by 2014, although officials considered this an aggressive goal. 

• Lightweight vehicle materials. Lightweight materials, such as aluminum, 

magnesium, and polymer composites, have made inroads into vehicle

manufacturing. However, research and development are still under way on 

reducing the costs of these materials. By 2012, DOE aims to make the lifecycle costs of glass- and carbon-fiber-reinforced composites, along with 

several other lightweight materials, comparable to the costs for 

conventional steel. 

Key Challenges 

• Advanced diesel engines. Reducing the emissions of nitrogen oxides and 

particulate matter to meet government requirements is a key challenge for 

the diesel engine combustion process. Emissions reduction will help make 

more efficient advanced diesel engines cost-competitive with gasoline 

engines because it will reduce the cost and energy consumption of tailpipe 

emissions treatment. 

• Hybrid electric and plug-in hybrid electric vehicles. Battery cost is one of 

the central challenges for hybrid electric and plug-in hybrid electric 

vehicles. DOE officials told us that their goal is to reduce the cost of a 

battery pack for a hybrid electric vehicle from approximately $920 today 

to $500 by 2010. Technological challenges include extending the life of the 

battery pack to last the life of the car, and improving power electronics in 

the vehicle. Researchers are using lithium-ion and lithium polymer 

chemistries in the next generation of batteries, instead of the current 

nickel metal hydride. Officials told us that plug-in hybrids face 

infrastructure challenges, such as the capacity of household electric 

wiring systems to recharge a plug-in, and the capacity of the electricity 

Page 64 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

grid if plug-in hybrids are widely adopted. Battery lifetime and cost are 

also challenges for plug-in hybrids. 

• Lightweight vehicles. The cost of lightweight materials is the largest 

barrier to their widespread adoption. In addition, manufacturing capacity 

for lightweight materials occurs primarily in the aerospace industry and is

not available for producing automotive components for lightweight 

materials. 

Current Federal Involvement 

• Advanced diesel engines. DOE currently conducts research into 

combustion technology. For example, federal funds are supporting 

fundamental research to understand low-temperature combustion 

technology, and the industry is attempting to establish the operating 

parameters of an engine that facilitate low-temperature combustion. 

• Hybrid electric and plug-in hybrid electric vehicles. DOE’s FreedomCAR

program sponsors research that supports the development of hybrid 

vehicles, specifically with respect to improving the performance, and 

reducing the cost, of electric batteries. 

• Lightweight vehicles. DOE currently funds research and development on

lightweight materials. 

A hydrogen fuel cell vehicle is powered by the electricity produced from 

an electrochemical reaction between hydrogen from a hydrogencontaining fuel and oxygen from the air. A fuel cell power system has 

many components, the key one being the fuel cell “stack,” which is many 

thin, flat cells layered together. Each cell produces energy and the output 

of all of the cells is used to power a vehicle. Currently, hydrogen fuel cell 

vehicles are still under development in the United States, and a number of 

challenges remain for them to become commercially viable. In the United

States, government and industry are working on research and 

demonstration efforts, to facilitate the development and 

commercialization of hydrogen fuel cell vehicles. 

Key Costs 

Hydrogen Fuel Cell 

Vehicles 

• Because hydrogen fuel cells are still in an early stage of development, the 

ultimate cost of hydrogen fuel cells is uncertain, but the goal is to make 

them competitive with gasoline-powered vehicles. 

Page 65 GAO-07-283 Peak Oil Production
Appendix IV: Key Technologies to Displace Oil 

Consumption in the Transportation Sector 

• A fuel cell stack currently costs about $35,000, and a hydrogen fuel cell 

vehicle about $100,000. 

• An ongoing cost-share effort between the federal government and the 

industry is working toward price targets of $2 to $3 per gallon of gasoline 

equivalent for hydrogen at the refueling station. 

Potential Displacement of Oil 

• Federal experts project that hydrogen fuel cell vehicles could have the 

potential to displace 0.28 million barrels per day by 2025. 

Readiness 

• Hydrogen fuel cell vehicle technologies are still in research, development,

and demonstration. 

• Federal experts project that the technology is not likely to be

commercially viable before 2015. 

Key Challenges 

• Key challenges facing the commercialization of hydrogen fuel cell vehicles 

include the following: (1) hydrogen storage; (2) cost and durability of the 

fuel cell; and (3) infrastructure costs for producing, distributing, and 

delivering hydrogen. 

Current Federal Involvement 

• The federal government conducts research with industry to improve the 

feasibility of the technology and reduce the costs. 

• The government facilitates information-sharing among industry leaders by 

analyzing sensitive information on hydrogen fuel cell performance from 

leading automotive and oil companies. 

Page 66 GAO-07-283 Peak Oil Production
Appendix V: Comments from the Department Appendix V of Energy : Comments from the Department 

of Energy 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 67 GAO-07-283 Peak Oil Production
Appendix V: Comments from the Department 

of Energy 

See comment 1. 

See comment 2. 

See comment 3. 

Page 68 GAO-07-283 Peak Oil Production
Appendix V: Comments from the Department 

of Energy 

See comment 4. 

See comment 5. 

See comment 6. 

Page 69 GAO-07-283 Peak Oil Production
Appendix V: Comments from the Department 

of Energy 

The following are GAO’s comments on the Department of Energy’s letter 

dated February 7, 2007. 

1. We agree that we have not defined a peak as either a peak in 

conventional or total oil—conventional plus nonconventional. In the 

course of our study, we found that experts conducting the timing of 

peak oil studies also do not agree on a single peak concept. Different 

studies by these experts use different estimates for oil remaining and, 

as a result, implicitly have different concepts of a peak—a

conventional versus a total oil peak. We have added language to the 

report to clarify this point. The lack of agreement on a peak concept 

mirrors the disagreement about the very definition of conventional oil 

versus nonconventional oil. The distinction regarding what portion of 

heavy oil is conventional is debated by experts. For example, USGS 

would consider the heavy oil produced in California as conventional 

oil, while IEA would not—the latter considers all heavy (and extraheavy) oil to be nonconventional. For the purposes of this report, we 

have adopted IEA’s definition of nonconventional oil, which includes 

all heavy oil. 

GAO Comments 

2. We agree that the use of heavy and extra-heavy oil may be confusing in 

sections of this report, and we have implemented some of the 

suggestions that DOE provided in their technical comments. 

3. With regard to the inclusion of some ethanol in petroleum 

consumption as reported on page 1 of the report, we asked EIA staff to 

identify how much of such nonpetroleum liquids are in the figure. They 

told us that just under one-third of 1 percent of the world petroleum 

consumption data they report is comprised of ethanol, and we noted 

this in a footnote on page 1 of the report. We decided to continue to 

call it petroleum consumption, rather than “liquids consumption” as 

suggested by DOE because the former is what EIA calls it and because

the nonpetroleum component is so small. 

4. We agree that our language regarding the use of oil consumption and 

oil demand is confusing in some sections of the report. Overall, the 

report makes the point that, all other things equal, the faster the world 

consumes oil, the sooner we will use up the oil and reach a peak. The 

report also makes the point that future demand for oil, which depends 

on many factors, including world economic growth, will determine just 

how fast we consume oil. We have made some changes to the text to 

clarify when we are talking about consumption of oil and when we are 

talking about the demand for oil. 

Page 70 GAO-07-283 Peak Oil Production
Appendix V: Comments from the Department 

of Energy 

5. We do not disagree that the environmental costs of EOR are lower 

than for some of the other technologies examined, and we did not try 

to rank the environmental costs of all the alternatives we examined. 

However, we believe that these costs are relevant for assessing the 

potential impacts of producing more of our oil using such 

technologies. Therefore, we left that discussion in the report but added 

language attributing DOE’s views on this. 

6. We agree with DOE’s assessment that there is a broader range of 

transportation technologies besides those used to power autonomous 

vehicles. We chose to focus on the technologies that experts currently 

believe have the most potential for reducing oil consumption in the 

light-duty vehicle sector, which accounts for 60 percent of the

transportation sector’s consumption of petroleum-based energy. We 

encourage DOE and other agencies to consider the full range of oildisplacing technologies as they implement our recommendations to 

develop a strategy to reduce uncertainty about the timing of a peak in 

oil production and advise Congress on cost-effective ways to mitigate 

the consequences of such a peak. 

Page 71 GAO-07-283 Peak Oil Production
Appendix VI: Comments from the Department Appendix VI: Comments from the of the Interior 

Department of the Interior 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 72 GAO-07-283 Peak Oil Production
Appendix VI: Comments from the Department 

of the Interior 

See comment 1. 

See comment 2. 

Page 73 GAO-07-283 Peak Oil Production
Appendix VI: Comments from the Department 

of the Interior 

Page 74 GAO-07-283 Peak Oil Production
Appendix VI: Comments from the Department 

of the Interior 

The following are GAO’s comments on the Department of the Interior’s 

letter dated February 14, 2007. 

1. We agree that DOE and Interior will both play a vital role in 

implementing our recommendation. We have made the appropriate 

wording change to the Highlights page of the report to clarify that our 

recommendation is that DOE work in conjunction with other key 

agencies to establish a strategy to coordinate and prioritize federal 

agency efforts to reduce the uncertainty surrounding the timing of a 

peak and to advise Congress on how best to mitigate consequences. 

GAO Comments 

2. We agree that mitigating the consequences of a peak is outside the 

purview of Interior. The examples cited highlight the areas where 

Interior can help reduce the uncertainty surrounding the estimates of 

global resources. We have changed the wording accordingly to make 

this distinction clear. 

Page 75 GAO-07-283 Peak Oil Production
Appendix VII: 

A

GAO Contact and Staff 

cknowledgments 

Page 76 GAO-07-283 

Appendix VII: GAO Contact and Staff 

Acknowledgments 

GAO Contact Jim Wells, (202) 512-3841

In addition to the contact person named above, Mark Gaffigan, Acting 

Director; Frank Rusco, Assistant Director; Godwin Agbara; Vipin Arora; 

Virginia Chanley; Mark Metcalfe; Cynthia Norris; Diahanna Post; Rebecca

Sandulli; Carol H. Shulman; Barbara Timmerman; and Margit WillemsWhitaker made key contributions to this report. 

Peak Oil Production

Staff 

Acknowledgments 

(360601) 
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