UNDERSTANDING THE PEAK OIL 

THEORY 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON ENERGY AND AIR QUALITY 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

DECEMBER 7, 2005 

Serial No. 109-41 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

U.S. GOVERNMENT PRINTING OFFICE 

25-627PDF WASHINGTON : 2005 

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(II)

COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

GRESHAM BARRETT, South Carolina 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON ENERGY AND AIR QUALITY 

RALPH M. HALL, Texas, Chairman 

MICHAEL BILIRAKIS, Florida 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

VITO FOSSELLA, New York 

GEORGE RADANOVICH, California 

MARY BONO, California 

GREG WALDEN, Oregon 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

JOE BARTON, Texas 

(EX OFFICIO) 

RICK BOUCHER, Virginia 

 Ranking Member 

MIKE ROSS, Arkansas 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)
(III)

CONTENTS 

Page 

Testimony of: 

Udall, Hon. Tom, A Representative in Congress from the State of New Mexico ........... 10 

Bartlett, Hon. Roscoe G., A Representative in Congress from the State of Maryland .... 24 

Aleklett, Kjell, Professor, Department of Radiation Sciences, Uppsala University ........ 32 

Hirsch, Robert L., Senior Energy Program Advisor, SAIC .............................................. 44 

Esser, Robert, Senior Consultant and Director, Global Oil and Gas Resources, 

Cambridge Energy Research Associates ..................................................................... 54 

Additional material submitted for the record: 

Smith, Murray, Minister—Counsellor Government, Canadian Embassy: 

Testimony................................................................................................................. 62 

UNDERSTANDING THE PEAK OIL 

THEORY 

WEDNESDAY, DECEMBER 7, 2005 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON ENERGY AND AIR QUALITY, 

Washington, DC. 

 The subcommittee met, pursuant to notice, at 9:35 a.m., in room 2322 

of the Rayburn House Office Building, Hon. Ralph M. Hall (chairman) 

presiding. 

 Members present: Representatives Hall, Shimkus, Wilson, Sullivan, 

Murphy, Burgess, Barton (ex officio), Boucher, Green, Allen, and Solis. 

 Staff present: Mark Menezes, Chief Counsel for Energy and 

Environment; Maryam Sabbaghian, Majority Counsel; Peter Kielty, 

Legislative Clerk; David Vogel, Minority Research Assistant; and Bruce 

Harris, Minority Counsel. 

 MR. HALL. It looks like we have an unusual quorum this morning so 

we will get under way. The subcommittee will come to order. 

 Without objection the subcommittee will proceed pursuant to 

Committee Rule 4E, which governs opening statements by members and 

allows the opportunity to defer them for extra questioning time. I think 

we all have been through that and know what we are talking about. 

Hearing no objection, it is so ordered. Prior to the recognition of the first 

witness for testimony, any member when recognized for an opening 

statement may defer his or her three minute opening statement and 

instead have three additional minutes during the initial round of witness 

questioning. 

 So I will recognize myself for just a moment. I would like to thank 

our witnesses for being here today as we look at the theory of Peak Oil. 

We are having this hearing today to learn more about the theory, to hear 

different opinions, and to learn what we can do about it, if anything. 

While some theorists believe that we have reached our peak, the point at 

which the rate of world oil production cannot increase at any time, there 

are others that tell us that we are not going to peak any time soon, and 

others who still believe oil is continuously being created and will 

therefore never peak. 

 We have not been ignoring a possible peak in oil production and this 

energy bill that was signed into law in August had provisions that 

address oil usage by promoting conservation and, in addition, 

(1) 
2

conventional and unconventional production. One provision in particular 

that I was proud of that I sponsored was the Ultra Deep Water and 

Unconventional Onshore Research and Development Program. In the 

Continental U.S. there are significant amounts of oil and natural gas in 

the ground and beneath the seabed that cannot be produced due to limits 

on technology. So this amendment is probably more of a research and 

development amendment than it is an energy amendment, but they fit 

well together. The Ultra Deep Water and Unconventional Nitro Gas and 

Petroleum R&D Program is a fast paced technology lead by industry and 

academic groups with Government and industry cost sharing. Taking 

some advance technologies off the shelf and accelerating the 

development of others could lead to increased domestic oil and gas 

production within maybe three years. 

 According to analysis by the Energy Information Administration, the 

program will increase production of natural gas by 3.8 trillion cubic feet, 

oil by 858 million barrels, and Federal royalties in more than sufficient 

amounts to pay for the effort and lower the price of both fuels. I do not 

know of a better deal than that. We are not talking about tax money; we 

are talking about being paid by royalties that we know are there. If we 

can get them up and carryout this program properly to pay back the funds 

that the Federal Government sets forth and shows that private industry 

does work. I do not know of a more acceptable thrust than that to help 

solve our energy dilemma. An analysis by the Bureau of Economic 

Geology at the University of Texas concludes that investment in 

technologies to develop new gas resources will result in a substantial net 

increase in royalties back to the Government. I am still waiting for them 

to tell us how much, when, and how quickly that is going to happen. 

 Whether or not we are reaching our peak, it seems responsible to 

continue in the vain we are going in by continuing to work on ways to 

conserve energy while increasing our domestic supply of oil and using 

research to develop substitutes for conventional oil. I think that both 

opponents and proponents of the Peak Oil Theory have interesting things 

to say and valid points to make. Therefore, I am looking forward to 

hearing our witnesses’ testimony and to the ensuing discussion. 

 We have good witnesses today and two Members of Congress that 

have given of their time and their ability to bring us some information. 

We will recognize them in just a moment. 

 [The prepared statement of Hon. Ralph M. Hall follows:] 

PREPARED STATEMENT OF HON. RALPH M. HALL, CHAIRMAN, SUBCOMMITTEE ON ENERGY 

AND AIR QUALITY
3

 The Subcommittee will come to order. Without objection, the Subcommittee will 

proceed pursuant to Committee Rule 4(e), which governs opening statements by 

Members and the opportunity to defer them for extra questioning time. 

 Hearing no objection, prior to the recognition of the first witness for testimony, any 

Member, when recognized for an opening statement, may defer his or her three-minute 

opening statement and instead have three additional minutes during the initial round of 

witness questioning. 

 The Chair recognizes himself for an opening statement. 

 I would like to thank our witnesses for being here today as we look at the theory of 

peak oil. We are having this hearing today to learn more about the theory, to hear 

different opinions, and to learn what we can do. While some theorists believe that we 

could reach our peak – the point at which the rate of world oil production cannot increase 

– at any time, there are others who tell us that we are not going to peak anytime soon, and 

others still who believe that oil is continuously being created and will therefore never 

peak. 

 We have not been ignoring a possible peak in oil production. In the energy bill that 

was signed into law in August, we had provisions that address oil usage by promoting 

conservation and additional conventional and unconventional production. One provision 

in particular that I sponsored is the ultra-deepwater and unconventional onshore research 

and development program. The continental U.S. has significant amounts of oil and 

natural gas in the ground, and beneath the seabed, that cannot be produced due to 

limitations on technology. The Ultra-deepwater and Unconventional Natural Gas and 

Petroleum R&D program is a fast-paced technology program led by industry and 

academic consortia with government and industry cost sharing. Taking some advanced 

technologies off the shelf, and accelerating development of others could lead to increased 

domestic oil & gas production within 3 years. According to an analysis by the Energy 

Information Administration, the program will increase production of natural gas by 3.8 

trillion cubic feet and oil by 850 million barrels, increase Federal royalties in more than 

sufficient amounts to pay for the effort, and lower the price of both fuels. An analysis by 

the Bureau of Economic Geology at the University of Texas concludes that investment in 

technologies to develop new gas resources will result in a substantial net increase in 

royalties back to the government. 

 Whether or not we are reaching our peak, it seems responsible to continue in the vain 

we are going in by continuing to work on ways to conserve energy while also increasing 

our domestic supply of oil and using research to develop substitutes for conventional oil. 

I believe that both opponents and proponents of the peak oil theory have interesting 

things to say and valid points to make and therefore am looking forward to hearing our 

witnesses’ testimony and to the ensuing discussion. 

 With that I yield back the balance of my time. 

 MR. HALL. At this time, I recognize Mr. Green of Texas for an 

opening statement. 

 MR. GREEN. Thank you, Mr. Chairman. 

 And our real ranking member Congressman Boucher has a conflict 

this morning and so I am here, but those of you who are testifying, I bet 

it is terrible to see two Texans up here running the committee today 

when we talk about losing our potential for oil. 

 I am glad the chairman and the ranking member called this hearing 

and I welcome our respected witnesses, all of them, particularly our 

colleagues both from New Mexico and from Maryland. 
4

 The oil and gas industry has been life bud and part of the entity of our 

home State of Texas for over 100 years. So when experts say the world 

has run out of oil, we tend to get a little nervous because Texans work in 

oil fields around the world and may of the best exploration companies 

are headquartered in Houston. I think the oil companies know the energy 

companies recognize that they are not really oil or gas companies, they 

are really energy companies so a great many of them have changed their 

name to energy companies. So I think they recognize that we need 

energy from whatever source, whether it is oil or gas or some other 

source. 

 However, after several decades of predictions, many of the so-called 

peaks have come and gone and global oil exploration has in fact 

increased, not decreased, due to a variety of factors. Many oil fields and 

gas fields around the world are off limits due to the variety of 

governmental policies or dangerous conditions. Other fields like Siberia 

and Alaska were originally thought to be remote and inhospitable but 

now in the industry’s mainstream. Other fields like Canadian Oil Sands 

or Venezuela Heavy Oil were previously uneconomic but now are 

becoming mainstream products. For example, my district includes a 

Lyondell-CITGO Refining in Pasadena, Texas, the largest heavy crude 

refinery in the United States which was rebuilt to specifically handle 

Venezuela and heavy crude. 

 Conventional oil technology has also improved in the last 25 years so 

we are able to reach deep water oil previously uneconomic and to 

produce and in much more environmental friendly manners. So I hope 

believers in Peak Oil will forgive some of us from thinking that they 

sound like a little boy that cried wolf, however, I will not forget the fable 

that the wolf does show up in the end. As a result, I want to do our best 

to make sure we prepare for if it really is a Peak Oil with an open mind. 

 Furthermore, it is comforting to know that energy information 

agencies predict peak oil around 2050, which is not exactly right around 

the corner, with fuel cell prototype cars in production it looks like we 

have time to adapt to the new energy economy. Also with prices staying 

high or rise, this effect will further accelerate the development of 

alternative energy technologies, however, the transition in the next 

energy economy will be painful in the short and immediate term 

especially to low income individuals like many of my constituents 

because energy costs are regressive. Poor people pay more as a 

percentage or their income on energy than wealthy people do. If we 

want to prevent people from losing their health insurance, their car, their 

house, their apartment due to high energy costs, they cannot avoid--we 

must avoid Federal policies across many issues that address some of 

these costs, other costs for lower income Americans. 
5

 The real risk is probably not that we will wake up one day and the 

global gas tank will be empty, but that working people will not have the 

ability to manage the transition to the next energy economy which will 

be an intrinsic process. 

 Again, thank you, Mr. Chairman and I yield back. 

 MR. HALL. The chair recognizes the gentleman from Illinois, Mr. 

Shimkus. 

 MR. SHIMKUS. Thank you, Mr. Chairman. 

 I want to welcome our two colleagues here and really appreciate their 

focus on a debate that the public wants to know about. So I know they 

come in sincerity and information is always good and we can sort 

through the issues here. 

 In July, as everyone knows, we passed the Energy Policy Act and part 

of that was addressing the concern of our alliance in foreign oil. We 

have done this numerous times. We address some of those issues in the 

Energy and Policy Act. Of course everyone knows my focus on 

renewable fuels. With the ethanol and soy diesel debate and expansion is 

quite phenomenal. I talked about it in committee all the time. In the last 

Congress, I had a flexible fuel vehicle, a Ford Taurus, but I did not have 

a single retail location to get 85 percent ethanol. Now I can go all 

throughout my district. And in one small community, Harrisburg, there 

is four different retail locations that sell 85 percent ethanol. I drive a 

Ford Explorer that is a flexible fuel vehicle and of course Ford had just 

come out with a major announcement of their plan to expand their line of 

flexible fuel vehicles in response to this issue of one, where are our fuel 

sources coming from in the future, also, the aspect to decrease our 

reliance on foreign oil and look at the renewable arena. 

 The State of Illinois has a tax credit that has allowed many of the 

major road, over the road trucking companies to go with a fuel mix of 11 

percent of biodiesel and that could be soy diesel that could be 

reformulated cooking oil that burns cleaner. So we have made some 

great progress. In fact, in the recent Forbes.com article, California and 

the West Coast is finally getting engaged. Even so I am going to quote 

this, Microsoft’s cofounder Bill Gates seems to want a piece of the action 

when it comes to renewable energy. The billionaire’s investment 

company, Cascade Investment, has agreed to invest $84 million in 

Pacific ethanol which will help it finance construction of several planned 

fuel additive plants on the West Coast. Cascade’s investment gives 

Gates 27 percent stake in Pacific ethanol. 

 So we have made great progress. And I think it is important for the 

public to understand the challenges of the future but also that we have 

not sat empty and not have addressed any of this. The other thing that I 

hope we talk on and I will ask the question to Roscoe after his opening 
6

statement is about the ability of BTU conversion. The country has 250 

years of BTU ability based upon our coal resources. BTU conversion is 

age old technology from World War II. I know Roscoe is very 

knowledgeable of Fisher Tropes technology and the ability to turn coal 

into fuels. And at the supply and demand issue, Economics 101 when 

we have limited supply, higher demand, prices go up, coal or liquid 

technology probably turns profitable around $35 per barrel which is 

where we are at. And so what do we see? We see Soso, a South African 

Company that has this technology looking at locations within the United 

States to do this BTU conversion. And that is the way the market should 

work and that is what the market does. 

 And so we want to continue to encourage that and look at policies to 

address this wherever this timeline is in the future to make sure that we 

can as an economy and as a country and a lot of it because of national 

security to make sure that we are not caught unaware. So I applaud this 

hearing. I think we have made some great strides, Mr. Chairman, in the 

Energy Bill but it is never harmful to look to the future and see what else 

we can do to make sure that we have the ability to meet our demands. 

 On a point that my colleague, Mr. Green mentioned, of course, on 

energy issues we are pretty similar and we work very, very hard. Illinois, 

a southern part of the State of Illinois, my district is a huge, used to be a 

huge oil producing part of the Nation. Now it is still halfway decent. 

We have the largest operating well definitely in the Midwest and mostly 

in the Continental United States based upon new technology. It produces 

a million barrels a year and it drills underneath a State wildlife refuge 

with new technology. So to my colleague’s comments new technologies 

are going to help address some of the immediacy but there are reserves 

based upon the cost of a barrel that we now can get active if we address 

the other issues and environmental concerns that I think we can through 

new technology so I applaud this. 

 Thank you, Mr. Chairman, I yield back my time. 

 [Additional statements submitted for the record follow:] 

PREPARED STATEMENT OF HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND 

COMMERCE

 I would like to begin by welcoming our witnesses and thanking them for their time 

today. I would especially like to welcome the Congressman Roscoe Bartlett from 

Maryland and Congressman Tom Udall from New Mexico. I asked Chairman Hall to 

hold this hearing on the “peak oil” theory at Congressman Bartlett’s request. 

Congressman Bartlett is an active and persuasive advocate for peak oil theorists and I 

look forward to hearing his views and perspectives on peak oil and in particular on his 

House Resolution Number 507. 

 I have been involved in the energy industry for much of my career and the argument 

that oil is a finite resource is not new for me, nor is it new to the energy industry as a 

whole. The themes underlying “peak oil” have circulated ever since the first oil well 
7

began production in Pennsylvania in 1859. The current views on the topic cover a wide 

spectrum and I think that it is important that we are having this hearing. Some say we 

have peaked, some say we are about to peak, some say any peaking is years in the 

distance and some even say that we may never peak. 

 One fact is certain, the more we have been able to explore, the more we know. For 

example, in 1974, natural gas resource estimates in moratoria areas off the Atlantic and 

Pacific coasts were approximately equal to Gulf of Mexico resource estimates. Since 

then, from the areas where we have had access in the Gulf, we have already produced 

more than 3 times the 1974 estimates and the latest government estimates are that almost 

five times as much gas still remains to be produced in the Gulf. Even with this success, 

production off the Atlantic and Pacific coasts remains politically charged. 

 Another bright spot for production comes from our neighbors to the North. Many oil 

resource tabulations exclude “unconventional” resources or sources of oil other than 

conventional crude. The Canadian tar sands are considered an “unconventional” 

resource. Yet there is nothing wrong with oil being recovered unconventionally, and 

because of research and investment into this “unconventional” resource, a once 1.3 

million barrels per day area is projected to become a 5 million barrel per day by 2030. 

That’s a record to be very proud of and I am glad that Mr. Murray Smith from the 

Canadian Embassy will be here to explain to us the development of the Albertan tar 

sands. 

 I’m hopeful that the United States will be able to follow suit with its shale oil 

reserves. The United States shale oil resource base is tremendous. EIA estimates that the 

United States alone holds 2 trillion barrels of this resource. Technologies are being 

developed to make this resource economical to produce and there is a provision in the 

Energy Policy Act of 2005 that directs the Secretary of the Interior to ultimately establish 

a shale oil production program. Once the shale oil production technologies have reached 

commercial maturity (like tar sand technologies that have NOW made Canada's crude oil 

resource base prolific), our crude oil resource base would actually dwarf the reserve 

estimates of countries like Saudi Arabia. 

 Treating oil as a finite resource is the responsible thing to do, but just because oil 

may be a finite resource, doesn’t mean we should stop searching for it, or stop developing 

better technologies and producing it. A piano has a finite number of keys, but musicians 

don’t stop coming up with new songs because some good songs have already been sung. 

The Energy Policy Act of 2005 makes strong strides toward the right solution with 

policies promoting conservation, research and alternatives. Again, the more we explore 

and develop technologies, the more our energy resource base will grow. 

 I thank all of the witnesses again for their time today. I look forward to hearing your 

perspectives. 

 MR. HALL. I thank you. 

 And we have for the first panel today two of our very own and at a 

time when there is a lot of rancor up here, I think it is good to see that 

Republicans and Democrats can work together. These two gentlemen 

have led the House Peak Oil Caucus and have introduced House 

Resolution 507. Roscoe Bartlett, my neighbor upstairs, is a professor 

and I can just imagine what kind of student he was that ruined the curve 

for everybody around him. I never did like anybody like that, but I 

always respected them. He is a research scientist, investor, small 

business owner, and a farmer, an unusual farmer in that he is a successful 

farmer. He has got, I do not know how many grandchildren, but 
8

everybody in his family is involved in the operation and in the dignity of 

work on that farm. I think we could all tear a page out of his book. One 

of three scientists, I do not know how many scientists you need in a 

Congress, but he is one of three, and we are happy to have him. 

 Tom Udall, of a great family, is serving his fourth term in Congress. I 

am impressed by his résumé. He serves on the House Resources, Small 

Business, and Veterans Affairs Committees. He was New Mexico’s 

Attorney General, the first, I am told in a long, long time, if not ever, to 

serve two consecutive four year terms as attorney general; so very a 

responsible position. He is of the Udall family. When I first came to 

Congress 25 years ago, Moe Udall was just across the hall from me and I 

learned more from him than I did all the years I was in law school and 

the years I was in the Texas Senate and on the bench. Moe taught me 

more in a week than they had in all that time. He was a great man and a 

great family so we are anxious to hear from you. 

 Then I think the request has been made that you all join the group in 

questioning the other. And I have had a request from both of you not to 

allow the other one to interrogate each other for you to so we will not 

allow that to happen but you come on and join us here when we have the 

second panel. 

 At this time, we will recognize Mr. Udall. We go on youth to start 

with. You are recognized for as much time as you take, but be 

reasonable. 

STATEMENTS OF HON. TOM UDALL, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF NEW MEXICO; AND 

HON. ROSCOE G. BARTLETT, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF MARYLAND 

 MR. UDALL. I will, Chairman Hall. Thank you for your very 

generous comments and Representative Shimkus, Representative Green, 

good to see you here today, and thank you for having us. 

 We appreciate very much you holding a hearing on this important and 

urgent matter of Peak Oil. Mr. Bartlett and I started the House Peak Oil 

Caucus to bring immediate and serious attention to this issue. The 

continued prosperity of the United States depends on the Nation taking 

immediate and intelligent action concerning Peak Oil. 

 I have had a chance to review the testimony of my colleague, Mr. 

Bartlett, and also that of Mr. Aleklett and I agree with their analysis that 

the peak in oil production will occur in the next two decades and 

potentially as early as 2010. The central theme here is there is not much 

time to act. Today, I would like to use my time to stress how important it 
9

is for the United States to take a bold, new approach to our energy 

supplies. 

 Our economy and way of life is dependent on cheap oil. In many 

ways, cheap oil is responsible for our prosperity. Since oil provides 

about 40 percent of the world’s energy, a peak and global oil production 

will be a turning point in human history. Oil and natural gas literally 

transport heat and feed our country. Therefore, we must act immediately 

to diversify our energy supplies and mitigate the economic recession and 

social and political unrest that will undoubtedly accompany the peak in 

oil and natural gas production if we do not act. 

 The United States' demand for oil continues to increase by about 2 

percent per annum. Furthermore, a global demand has increased faster 

than production and the once substantial cushion between world oil 

production and demand has decreased. This phenomenon has increased 

the price of oil and consequently huge amounts of American money up to 

$25 million per hour goes abroad to pay for foreign oil. And as many 

people have now become increasingly aware, some of this money goes to 

governments and groups who are considered a threat to our national 

security. Middle Eastern Countries flush with oil dollars help fuel the 

terrorism we are fighting. Some say that market forces will take care of 

the Peak Oil problem. They argue that as we approach or pass the peak 

of production the price of oil will increase and the alternatives will 

become more competitive. 

 However, no currently available alternative is anywhere near ready to 

replace oil in the volumes we use it today. Once more, even today’s oil 

prices do not accurately reflect the full social costs of oil consumption. 

Currently in the United States, Federal and State taxes add up to about 40 

cents per gallon of gasoline. A world resources institute analysis found 

that fuel related costs not covered by drivers are at least twice that much. 

The current price of oil does not include the full cost of road 

maintenance, health, and environmental costs attributed to air pollution, 

the financial risk of global warning, or the threats to national security. 

Without these externalities in the market, significant private investment 

in alternative technologies will not occur. 

 Over the past 100 years, fueled by cheap oil, the United States has led 

the revolution in the way the world operates. Replacing this resource in 

a relatively short time is not only an incredible challenge, but also 

imperative to the survival of our way of life. The United States has faced 

such challenges in the past and responds to great challenges and 

inevitable threats. We pooled our resources and ingenuity to build an 

atomic bomb in just a few years and put a man on the moon in a decade. 

We can and must do this again. We must commit to a bold, new 

initiative. 
10

 To eliminate our dependence on foreign oil and develop a new 

economy based on clean, renewable non-polluting energy, we need a 

massive long-term investment in research for both basic and applied 

science similar in scope to past successful investments. We must 

produce effective policies that create a new generation of scientists 

devoted to changing the way we produce energy. We must also commit 

to decreasing our demand for oil. We can start by increasing efficiency. 

The United States consumes 25 percent of the world’s oil. Of that 25 

percent, two-thirds is used for transportation. Hence, trans-portation in 

the United States accounts for 16.5 percent of the world’s oil 

consumption. 

 It is obvious that more efficient transportation is one of the keys in 

reducing our demand for oil. Transporting goods and people by rail is at 

least five times as efficient as automobiles. Therefore, we must revive 

and reinvest in our passenger and freight rail system. A modest increase 

in fuel efficiency of our automobile fleet from 25 miles per gallon to 33 

miles per gallon using existing technology would decrease our demand 

for oil by 2.6 million barrels a day or about 1 billion barrels a year. 

However, the turnover rate for the automobile fleet is 10 to 15 years, 

therefore, we must start immediately. 

 Simple, everyday things like automobile maintenance also increase 

efficiency. According to the Department of Energy, proper inflation of 

car tires can increase fuel efficiency by 3 percent, translating to the 

equivalent of 100 million barrels of oil per year. The buildings in which 

we work and live are terribly inefficient. We could easily reduce their 

energy consumption by one half. We must immediately weatherize and 

make more energy efficient tens of millions of buildings. Our bold new 

initiative must instill these ideas in the American consciousness. 

 The sooner we start the smaller our sacrifices will be. These tasks 

will not be easy but I am confident that we will achieve our goal for we 

have little in the way of alternatives. 

 Thank you, Mr. Chairman and I will be happy to respond to 

questions. 

 [The prepared statement of Hon. Tom Udall follows:] 

PREPARED STATEMENT OF HON. TOM UDALL, A REPRESENTATIVE IN CONGRESS FROM THE 

STATE OF NEW MEXICO

 Mr. Chairman, Ranking Member Boucher and members of the Energy and Air 

Quality Subcommittee, I thank you for holding a hearing on the important and urgent 

matter of Peak Oil. Mr. Bartlett and I started the House Peak Oil Caucus to bring 

immediate and serious attention to this problem. I hope that this hearing will be the start 

of many such discussions that will ultimately lead to legislative action to mitigate this 

inevitable crisis. 
11

 The theory of Peak Oil states that, like any finite resource, oil will reach a peak in 

production after which supply will steadily and sharply decrease. In 1956, Shell Oil 

geologist M. King Hubbert predicted that oil production in the contiguous United States 

would peak in about 1970 and be followed by a sharp decline. At the time, many 

dismissed his predictions as false, but history shows they were remarkably accurate. A 

growing number of geologists, economists and politicians now agree that the peak in the 

world’s oil production is imminent; predicted to occur within one or two decades. Some 

disagree with this prediction, calling it a doomsday scenario and say that technological 

advances will buy us more time before we reach peak production. Theirs, however, is not 

the consensus view and even they agree that a peak in the world’s oil production is 

inevitable. I am here today to stress how important it is for the United States to take 

action concerning our oil and natural gas supplies. Our economy, and way of life for that 

matter, is currently dependent on cheap oil. Oil and natural gas literally transport, heat 

and feed our country. Therefore, we must act immediately to prepare for and mitigate the 

economic recession and social and political unrest that will undoubtedly accompany the 

upcoming peak in oil and natural gas production. 

 The strongest evidence that the peak in world oil production is imminent is that for 

the last thirty years, production of oil has exceeded discovery of new oil resources. The 

reason for this is relatively simple. Oil is a limited commodity and the large oil fields 

with easily extractable resources were naturally the first ones to be exploited. These 

fields were found thirty or forty years ago in the Middle East (Saudi Arabia, Iraq, Iran 

and the United Arab Emirates) and are still the main suppliers of the world’s oil. As the 

finite supply of oil in these deposits diminishes, exploration for new supplies continues. 

However, new discoveries tend to be small and rapidly exhausted, making them less 

economically viable. 

 Meanwhile, global demand for oil, which is at an all time high, continues to rise. The 

United States demand continues to increase by about 2% per annum. Also, with the 

globalization of the market economy and increases in oil-driven industrial production in 

Asia, new consumers are contributing to rising demand. To meet rising demand oil 

companies must increase production, accelerating us towards the peak. Demand has 

increased faster than production and the once substantial cushion between world oil 

production and demand has decreased. This phenomenon has increased the price of oil 

and consequently huge amounts of American money, up to $25 million per hour goes 

abroad to pay for foreign oil. And as many people have now become increasingly aware, 

some of this money goes to governments and groups who are considered a threat to our 

national security. 

 The United States only possesses 2% of the world’s oil reserves and only produces 

8% of the world’s oil capacity. Therefore, we are not in a position to control the world’s 

oil production. However, we can significantly decrease demand. The United States 

consumes 25% of the world’s oil. Of that 25%, two-thirds is used for transportation. 

Hence, transportation in the United States accounts for 16.5% of the world’s oil 

consumption. It is obvious that more efficient transportation is the key in reducing our 

demand for oil. For example, a modest increase in fuel efficiency of our automobile fleet 

from 25 miles per gallon to 33 miles per gallon using existing technology would decrease 

our demand for oil by 2.6 million barrels a day or about 950 million barrels per year. 

These simple changes would account for a significant percentage of the oil we import 

each year. However, the turnover rate for automobiles in our country is 10-15 years. This 

means we must start immediately to avoid reaching the peak in world oil production 

before actions such as higher CAFE standards make a difference. 

 Some say that market forces will take care of the peak oil problem. They argue that 

as we approach or pass the peak of production, the price of oil will increase and 

alternatives will become more competitive. Following this, consumers will act to replace 

our need for non-petroleum energy resources. This philosophy is partly true. However, 
12

the main problem with this argument is that current U.S. oil prices do not accurately 

reflect the full social costs of oil consumption. Currently, in the United States, federal and 

state taxes add up to about 40 cents per gallon of gasoline. A World Resources Institute 

analysis found that fuel-related costs not covered by drivers are at least twice that much. 

The current price of oil does not include the full cost of road maintenance, health and 

environmental costs attributed to air pollution, the financial risks of global warming from 

increasing carbon dioxide emissions or the threats to national security from importing oil. 

Because the price of oil is artificially low, significant private investment in alternative 

technologies that provide a long-term payback does not exist. Until oil and its 

alternatives compete in a fair market, new technologies will not thrive. 

 Oil is a very powerful resource with an incredibly high energy density. For example, 

the energy in just one barrel of oil is equivalent to eight people working full time for a 

year. Over the past 100 years, fueled by affordable oil, the United States has led a 

revolution in the way the world operates. For example, petroleum-based fertilizers are 

used to inexpensively grow remarkable amounts of food and airline transportation allows 

us to reach virtually anywhere in the world within 24 hours helping to create a global 

economy. However, the sustainability of the oil-based economy is rapidly decreasing. 

Reaching a peak in oil production has the potential to destroy our economy and cause 

great social and political unrest. Also, the carbon released using fossil fuels is 

contributing to dramatic changes in the earth’s climate. Therefore, replacing this 

resource in a relatively short time is not only an incredible challenge but also imperative 

to the survival of our way of life. The United States has faced such challenges in the 

past. In response to great challenges and imminent threats, we pooled our resources and 

ingenuity to build an atomic bomb in just a few years and put a man on the moon in a 

decade. We can and must do this again. 

 To reduce and potentially eliminate our dependence on foreign oil and develop a new 

economy based on clean, renewable energy, we need a major investment in research for 

both basic and applied science similar in scope to the ones we have made in the past. We 

must develop and implement policy immediately that inspires our citizens to make 

sacrifices now that will ensure our future prosperity. The sooner we start, the smaller 

those sacrifices will be. We must produce effective policies that create a new generation 

of scientists devoted to changing the way we produce energy. These tasks will not be 

easy, but I am confident that we will achieve our goal, for we have little alternative. 

 Thank you once again for holding this hearing and inviting me to testify. I welcome 

any questions the committee may have. 

MR. HALL. Well thank you, Mr. Udall. 

 Mr. Bartlett, I recognize you, sir. 

 MR. BARTLETT. Thank you very much, Mr. Chairman. I want to 

thank you very much for holding this hearing. 

 I have a few PowerPoint slides. Could we have the next one please? 

 2% of World Oil Reserves 

 8% of World Oil Production 

 5% of World’s Population 
13

 US Consumes 25% of World’s 

Production 

 - 2/3 Imported

 These are some data that inspired 30 of our leading citizens, Boyden 

Gray, McFarland, Jim Woolsey, and 27 others including a lot of retired 

four star admirals and generals to write a letter to the President saying 

Mr. President, the fact that we have only 2 percent of the known reserves 

of oil and we used 25 percent of the world’s oil and import nearly twothirds of what we use is a totally unacceptable national security risk. We 

need to do something about that. 

 I would submit that if you do not believe that there is such a thing as 

Peak Oil, you need to understand that this really is a big national security 

risk. And the things that we need to do to transition to alternatives so 

that we are not so dependent on foreign oil are exactly the same things 

that we need to do to attenuate the affects of Peak Oil. 

 These data, by the way, the significant thing, we have only 2 percent 

of the world’s oil reserves but we are producing 8 percent of the world’s 

oil which means that we are pumping our oil roughly four times faster 

than the rest of the world. We are really good at pumping oil. These 

data encourage me to be for the moment opposed to drilling in ANWR 

and offshore. And the reason for that is if we have only 2 percent of the 

known reserves of oil, I am having a lot of trouble understanding how it 

is in our national security interest to use up that little bit of oil we have as 

quickly as possible. If we could pump the offshore oil and ANWR oil 

tomorrow, what would we do the day after tomorrow? And there will be 

a day after tomorrow. This may be a rainy day. I think there is going to 

be a rainier day and I would like to husband these resources for that 

rainier day. This is very much like having money in the bank that is 

yielding really high interest rates. If you have money in the bank 

yielding really high interest rates, you probably would leave it there and 

that is what I think we need to do for the moment with this oil. 
14

 The next slide please. To put this discussion in context, we really 

need to go back about six decades to the mid-‘40s and ‘50s. A scientist 

in the Shell Oil Company M. King Hubbert looking at oil fields, their 

exploitation and exhaustion. He noted that they all tended to follow a 

rough bell curve and he theorized that if he could add up all those little 

bell curves he would have one big bell curve where he could predict 

when we would reach our maximum production in this country. He 

would have to, of course, guess at the amount of oil we were going to 

find in the meantime. He made a prediction in 1956 that we would peak 

at about 1970 and then the slide here, you see the smooth green curve 

was his prediction, the more ragged larger symbol green curve were the 

actual data points. And you see that they pretty faithfully followed his 

prediction. We are now about halfway down what many people call 

Hubbert’s peak. The red curve there is the Soviet Union. And you see 

that they kind of fell apart after they reached their peak and as a result of 

that, they didn’t reach their potential so they kind of have another. And 

they were just about now over their second little peak on the way down 

the other side of Hubbert’s peak. 
15

 The next slide shows where we get oil from in our country and notice 

how big Texas is there. It has been a big contributor to oil in our 

country. And notice that we did reach maximum oil production in 1970. 

And in spite of Prudhoe Bay which produced for a while about a fourth 

of the oil that we were pumping in our country, it has been pretty much 

downhill just a small blip for Prudhoe Bay and then downhill ever after 

that following down the other side of Hubbert’s peak. 

 I remember and I am sure you do, Mr. Chairman, the fabled Gulf of 

Mexico oil discovery that was supposed to solve our oil problem for the 

foreseeable future. That is the little bit of yellow here. It really is not all 

that big. That is all the contribution that it made. The observation is 

made that we are not running out of oil that is true. There is still a lot of 

oil there. As a matter of fact, worldwide there is probably about half the 

oil there yet to be recovered than we have recovered so far. 

 The same M. King Hubbert that predicted that we would peak in 1970 

and he was correct there, predicted that the world would peak about now 

if you factor in the Arab Oil Embargos and a deep worldwide recession 

as a result of oil price spike hikes. If M. King Hubbert was right about 

our country, why shouldn’t he be right about the world? And we have 

known for at least 25 years that M. King Hubbert was right about our 

country. By 1980 when President Reagan came to office, we were 

already ten years down the other side of Hubbert’s peak and we knew 

very well that we were sliding down Hubbert’s peak. The response to 
16

that observation was to drill more wells. We drilled more wells but 

really did not find anymore oil. You cannot find what is not there. You 

cannot pump what you have not found. 

 The next slide which is on the screen now shows two curves and they 

are superimposed the big bar graph curve is the discoveries of oil and 

you notice that the discoveries of oil occurred 30, 40 years ago. And 

notice for the last two and a half decades really that there has been an 

ever decreasing discovery of oil. Since the early 1980’s, we have been 

using more oil than we have found. And that solid black line represents 

the consumption. Now those who are used to looking at curves, it is 

obvious that you cannot pump more oil than you have found. And so all 

the oil that we can pump from now on in addition to what is projected 

here that we will find, we could find more, we could find less. But all 

the oil that we can pump from now on is going to have to come from 

additional oil that we find or the reserves that we have not yet pumped. 

 And the curve under the discovery cannot be greater than the curve 

under consumption. Now if we have enhanced oil recovery and we can 

recover it more quickly. All that is going to mean is that we are going to 

reach a higher peak a little later but since there is no more total oil 

available, if you do not make more oil available by the enhanced 

recovery, all you will do is change the shape of that down slope and you 

will fall off the other end more quickly. 

 Mr. Green mentioned the wolf, wolf and thank you very much for 

mentioning that. We have cried wolf, wolf several times in the past but 

in the parable, you know, the wolf did come. I think he ate all the sheep 
17

and the people. Is that correct? So one day the wolf will come and that 

is what we are trying to do is to avoid the kind of catastrophe that they 

had in the parable. 

 When we are looking at replacing these fossil fuels we have been 

using, you have to look at energy profit ratio. We are now producing oil 

from the oil shales in Canada at about $30 a barrel, maybe less than that 

when it is selling at $60. That is really a good dollar profit ratio. But I 

understand that they are now using more energy from natural gas than 

they get out of the oil they produce. So the energy profit ratio is 

negative. That is a good thing for them because they got a lot of gas, it is 

cheap, it is hard to transport to other places and oil is in high demand and 

they can sell it for twice the production cost so that makes a lot of sense. 

But at the end of the day with the limited energy resources in the world, 

we really should not be producing energy with a negative energy profit 

ratio. 

 I would just like to make a couple observations about exponential 

growth and that is where we are. Albert Einstein said that that was the 

most powerful force in the universe, the power of compound interest. 

My friend, no relative of mine, but if you have not heard Dr. Albert 

Bartlett’s Hour Lecture on Energy, pull it up and read it. It is the most 

interesting one hour lecture I have ever heard. He gives, really, he gives 

two examples in there of exponential growth which gives us some 

feeling as to the power of exponential growth. One was the discovery of 

the chessboard in an ancient kingdom and the king was so pleased with 

that that he told his subject, I will give you any reasonable thing you ask 

for as a reward for inventing the chess, the game of chess. And the 

inventor said, Mr. King, I am a very simple man, I have very simple 

needs. If you will simply take my chessboard and put one grain of wheat 

on the first square and two gains of wheat on the second square, and four 

on the third square and keep doubling the amount of wheat you put on 

each square of the chessboard, that is all the reward I will need for 

inventing chess. And the king thought stupid fellow, I would have given 

him something really meaningful and all he asked for is a little bit of 

wheat on his chessboard. Had he been able to do that, I understand that 

that would have been the total world harvest of wheat for 40 years. That 

is the power of exponential growth. 

 Albert Bartlett gives another really interesting little example and it 

really relates to our situation with oil. There are some microbes living in 

a one-liter flask and these microbes, they reproduce very quickly and so 

in one minute they double the number of them. And the leaders of this 

little colony of microbes looks around and says gee, you know, with this 

growth rate, we are going to outgrow this flask and so we need to be 

looking for some additional flasks. So they send out scouts and they are 
18

gas because of the enormous amounts of energy that go into producing 

very successful. They find not one or two but they find three additional 

flasks. We now have four times the territory to expand in that we have 

now. If they were to fill the first flask by midnight and they are doubling 

every minute, they have filled the second flask by one minute after 

midnight and they fill the third and fourth flasks by two minutes after 

midnight. This shows the exceptional power of compound growth. 

 The next slide is one that I would like to spend just a moment on 

because--the top one. The bottom one by the way, we have split out 

natural gas and oil, otherwise it is the same as the upper slide. And we 

are looking at only a relative few years. What we do here to look back 

through history when the industrial revolution first started with the 

brown line there which is wood and it was stuttering of course when we 

found coal. And then we found oil and look what happened. And the 

ordinate here is quadrillion BTU’s and the abscissa, of course, is time. I 

would just like to note that the population curve of the world roughly 

follows the curve for oil here. We started out with about a billion people 

and now we have about 7 billion people almost literally eating oil and 
19

e how 

food. Almost half the energy that goes into producing a bushel of corn 

comes from the natural gas that we use to produce the nitrogen fertilizer. 

 Just a comment or two about energy density and how difficult it is 

going to be to replace oil. And by the way, we have been about 100 

years into the age of oil. In another 100 years or so, we will be through 

the age of oil. In 5,000 years of recorded history, 200 or 300 years is just 

a blip, just a tick in the history of man. We found this incredible wealth 

under the ground. And rationally what we should have done as a 

civilization when we found that is to ask ourselves what will we do with 

this incredible wealth to do the most good for the most people over time. 

And when you--it really was incredible wealth because every barrel of 

this oil has enough energy in it to do the work output I have seen eight, I 

think the number usually given, it represents about 50,000 man hours of 

effort for one barrel of oil. And that is the equivalent of having 12 

people work all year for you. That is the amount of work you get out of 

one barrel of oil. And today at the pump with gas prices about $2, it 

costs you, 42 gallons costs you less than $100. That is incredible. 

 If you have some trouble getting your arms around that, imagin

far that one gallon of gas, still cheaper than water in the grocery store. It 

was cheaper at $3 a barrel than small bottles of water in the grocery 

store, how far that gallon of gas or diesel takes your car or truck and how 

long it would take you to pull it there to get some idea of the energy 

density. Now you can’t pull it maybe but with a come-along and fence, 

you know, tree or guardrail you could get your car the 20 or 30 miles that 

it would take. And how long would it take you to get it there? If you go 

out, Mr. Chairman this weekend and work really hard in your yard all 

day, I will get more work out of an electric motor with less than 25 cents 

worth of electricity. That gives us some--that may be kind of leveling 

but that gives you some idea as to the incredible energy density in these 

fossil fuels. What wealth it was we found under the ground. And almost 

like children who found the cookie jar, we had no restraint. We tried to 

use it up as quickly as we could use it up. And there will be an age of 

oil. One day there will be no more economically feasible recovery of oil, 

gas, and coal. 
20

 The next slide is a schematic which shows and I would like to change 

one little thing. I am not sure where we are but notice--well this is a 2 

percent exponential growth curve and the yellow area represents 35 years 

because at 2 percent exponential growth, you double in 35 years and on 

the ordinate here, the top of the yellow is twice as high as the bottom of 

the yellow. I think that we are probably there. And notice that the 

problem starts before you reach peak because this exponential growth 

and this is just 2 percent exponential growth by the way. China is now 

growing nearly 10 percent. If you put that curve on here, it almost stands 

on its end. It looks like a hockey stick. It goes up so sharply 10 percent 

growth. It doubles in seven years, it is four times bigger in 14 years it is 

eight times bigger in 21 years. 

 There is a lot of concern about filling the gap. Because if we do not 

fill that yellow gap, then something is going to happen to our quality of 

life and to the world’s economy. And I would submit that maybe that is 

not the goal that we ought to have filling that gap. Because if there is 

only so much energy out there, the more that you use to fill the gap, the 

lesser it is going to be in the future. There is an old adage that says that 

when you are in a hole stop digging. A good corollary to that would be 

if you are climbing a hill and you know that you are going to fall off a 

precipice on the other side of the hill, the steeper the hill, the higher the 

hill, the bigger the drop will be on the other side. And if all we are doing 

in trying to fill that gap is using up precious energy resources, they will 

not be available for the future. 

 The cheapest oil that we use that we buy is the oil that we do not use. 

In reality, Mr. Chairman, where we are today if you look at this curve, all 

the oil that the world can produce is required by the world’s economies 

or oil would not be $60 a barrel. It opened at just over $60 a barrel this 

morning. And so if we are going to have any energy to invest in 
21

alternatives and it will take three things to invest in these alternatives. 

Money we will not worry about that. You and I worry, Mr. Chairman, 

but many do not. We will just borrow that from our kids and our 

grandkids so we do not worry about money. But you cannot borrow time 

and you cannot borrow energy from our kids and our grandkids. And we 

are going to have to make big investments of both time and energy to get 

these alternatives. In order to have energy to invest, we are going to 

have to have enormous conservation efforts now so that we free up some 

of the oil because if in fact we are reaching peak oil, when we have 

reached peak oil, all the oil that is produced is needed by the world’s 

economies, none will be available to invest in the alternatives that we 

need to invest. 

 So I would suggest that maybe the goal would be to find a way to 

have high quality of life without increasing energy use. Because if you 

look back at that previous slide and see the enormous amounts of energy 

we have used and this age of oil will end. We will transition to 

alternatives. 
22

The next slide addresses that transition to the alternatives. And I use 

gy will need to come from the alternatives. 

d out here the 7 percent renewable energy and 

down to the things that we will transition to in the 

future, solar. This is a graph from 2000. We have been growing at 30 

a little analogy which I think helps us understand where we are. We are 

very much like the young couple whose grandparents have died and left 

them a big inheritance and they now established a lifestyle where 85 

percent of the money they spend comes from their grandparent’s 

inheritance and only 15 percent from their income. But they look at their 

grandparent’s inheritance and the amount they are spending and it is 

going to be gone before they retire. So they are going to clearly have to 

do one of two things. Either spend less money or make more money. I 

use the 85/15, some people use 86/14, but 85 percent of the energy we 

use today comes from fossil fuels. And only 15 percent of the energy 

comes from the alternatives. 

 By and by, all of the ener

Of the 15 percent that is not fossil fuels, a bit more than half of that 

comes from nuclear. This could and should grow probably. But that will 

not be the water reactors we have because fissionable uranium is of finite 

supply in the world. We will have to move to breeder reactors and buy 

the problems that come with that. And that may be quite preferable, Mr. 

Chairman, to shivering in the dark, if that is your alternative in the future. 

 I gladly support on the Science Committee all the money that the 

people working on fusion can profitably use but I think planning to solve 

our energy future with fusion is a bit like you or more planning to solve 

our personal economic problems by winning the lottery. That would be 

nice but do not count on it. And I think the odds of fusion are about the 

same of you and me serving our, solving our personal financial problems 

by winning the lottery. 

 Now we have explode

notice that almost half of that is conventional hydro. We have maxed out 

in our country. We might go to some micro hydro and get almost as 

much and we really need to be exploiting that. But we have dammed up 

all the rivers that we should have dammed and maybe a few that we 

should not. The next biggest source of alternative energy is wood. Not 

the West Virginia hillbilly, it is the timber industry and the paper 

industry wisely burning what would otherwise be a waste product. And 

then the next biggest one is waste and we really ought to be doing more 

of that burning waste. You can make a short trip up here into 

Montgomery County and see waste-burning generation that I would be 

proud to have next to my church or my home. It looks like an office 

building, you never see the waste it is trucked in containers it is dumped 

inside the building. It is really a great technology. It is very profitable to 

go there and see it. 

 And now we are 
23

percent a year. That doubles in two and a half years. We are four times 

bigger. It was .07 percent in 2000 it is now .28 percent, big deal. That is 

a long way from any meaningful contribution. The same thing is true of 

wind. Just a word of caution about energy from agriculture, the world 

has to eat. If we will eat the corn and the soybeans that the pig and the 

chicken and steer would have eaten, maybe we can get more energy from 

agriculture. And be careful, Mr. Chairman, about taking biomass to 

produce energy because we are barely able today to maintain the quality 

of our topsoils with returning much of that biomass that is humus in the 

soil. Geothermal here and there we need to exploit as much of that as we 

can. 

 The last slide shows an interesting analogy and that shows the Apollo, 

we are very much like the Apollo astronauts. They found themselves, 

Apollo 13 astronauts they found themselves with a really big problem. 

They were going to die if they did not do something quickly and do some 

things right. And so they noted all the assets that they had. They looked 

at what they could do with them. And they, you know, a failure was not 

an option. And I think that the kind of commitment that they had, the 

kind of commitment that we had in World War II and you and I lived 

through that, every American was involved in World War II. No new 

cars were made for three years. They rationed gasoline. They rationed 

tires. They rationed sugar. You brought the grease from your kitchen to 

a central depository. And I think, Mr. Chairman, we need a program 

which is kind of the combination of putting a man on the moon, the 
24

 needs to be, if you will do a Google search for Peak Oil and pull 

s:] 

PR GRESS 

FROM THE TATE OF ARYLAND

ubcommittee, I appreciate d friend from New Mexico 

urgency of the Manhattan Project and the involvement of everyone of 

our citizens like in World War II, if we are not going to have a bumpy 

ride. 

 Just like to know--and I think that he is probably more pessimistic 

than he

up Matt Savinar’s article, he may be audacious, Mr. Chairman, but he is 

not an idiot. And he begins that article by saying dear reader, civilization 

as we know it is coming to an end soon. I hope not, Mr. Chairman. We 

need to make sure that Matt Savinar is wrong by galvanizing our people, 

by challenging our technical people to meet this challenge. 

 Thank you very much. 

 [The prepared statement of Hon. Roscoe G. Bartlett follow

EPARED STATEMENT OF HON. ROSCOE G. BARTLETT, A REPRESENTATIVE IN CON

S M 

Chairman Hall, Ranking Member Boucher, Members of the Energy and Air Quality

S the opportunity for me and my goo

Tom Udall to testify before you today in our capacity as the co-chairmen of the House 

Peak Oil Caucus. I thank the Committee for scheduling this hearing and inviting 

distinguished witnesses to discuss House Resolution 507 which expresses “the sense of 

the House of Representatives that the United States, in collaboration with other 

international allies, should establish an energy project with the magnitude, creativity, and 

sense of urgency that was incorporated in the `Man on the Moon' project to address the 

inevitable challenges of `Peak Oil'.” 

 Shell Oil company geologist M. King Hubbert first identified “Peak Oil” in the 

1940’s and 1950’s. He discovered oil field production follows a bell curve. Oil flows 

sl ly at first, then rapidly increases, reaches a maximum or peak when half of the oil ow

has been extracted, and then production declines rapidly. 

 Adding the curves from individual wells in the United States, Hubbert projected in 

1956 that “Peak Oil” for the United States would occur in 1970. He was right. U.S. oil 

production peaked and has declined every year since 1971. Despite sharp increases in 

prices and better technology, US domestic oil production has declined every year since 

then. 

 The U.S. has only two percent of world oil reserves. We contribute eight percent of 

world production. That means we’re pumping our reserves four times faster than the rest 

of the world. We consume 25 percent of world oil production. U.S. natural gas 

production has also peaked. The United States is now the world's largest importer of both 

oil and natural gas. From importing one third of the oil we use before the Arab Oil 

Embargo, the U.S. now imports about two thirds of the oil we use. 

 After U.S. oil production peaked in 1970, our country started and we are continuing 

to accelerate down a path of growing energy insecurity. The United States used to be the 

world’s largest oil producer. After the U.S. peaked in 1970, Saudi Arabia became the 

world’s largest single oil producer and the leader of OPEC nations which became the 

world’s dominant oil suppliers. 

 Just as Hubbert was right about the United States, peak oil has occurred in other 

countries and global peak oil will happen. Oil production is declining in 33 of the 

world’s 48 largest oil-producing countries. The Associated Press just reported that Texas 

oil and natural gas production declined five percent in the first nine months of 2005. 

Global “Peak Oil” has not yet occurred, but will mark the maximum annual world 
25

s almost 300 million and increasing by nearly 30 million 

th the President at the White House on June 29, 2005 and was 

seven reasons why 

national security and the Department of Defense is responding. For 

around $20 per barrel. In recent years, the cushion between world supply 

ike to $71 per barrel after Hurricane Katrina. The price for 10-year contracts 

production of this source of cheap energy. It has utterly transformed America and the 

world in the past 100 years. 

At the start of the age of oil, world population was one billion; now it’s seven billion. The 

population of the United States i

people every decade. Nitrogen fertilizer is made from natural gas. In a very real sense, 

oil feeds the world. 

 President Bush has committed the Administration to reducing America’s energy 

insecurity. I met wi

impressed by his understanding of the need for our government to act now to prepare for 

global “Peak Oil”. On October 5, 2005, Department of Energy Secretary Samuel Bodman 

requested the National Petroleum Council to study “Peak Oil” and the oil and natural gas 

industry's ability to produce enough oil and natural gas at prices that would not cripple 

the American economy. Our country’s leadership is slowly becoming aware of “Peak 

Oil”. However, it is my hope because of hearings like this and the testimonies given by 

some of our most prominent figures, our country’s leadership will start to see the urgency 

in addressing this issue, and make it the centerpiece of their agenda. 

 For example, in testimony before the U.S. Senate Committee on Foreign Relations on 

November 16, former CIA Director James Woolsey discussed “

dependence on petroleum and its products for the lion’s share of the world’s 

transportation fuel creates special dangers in our time.” 1. Transportation infrastructure is 

dependent upon oil 2. The Middle East will continue to be the low-cost and dominant 

petroleum producer. 3. Petroleum infrastructure is highly vulnerable to terrorist and other 

attacks. 4. The possibility is increasing of embargoes or supply disruptions under regimes 

that could come to power in the Greater Middle East. 5. Oil revenue transfers fund 

terrorism. 6. Current account deficits for a number of countries create risks ranging from 

major world economic disruption to deepening poverty that could be reduced by reducing 

oil imports. 7. Oil used for transportation produce greenhouse gases that increase the risk 

of climate change. 

 The planes, ships and trucks of our military run on oil. Tight supplies and high oil 

prices threaten our 

instance, in an October 11, 2005 memo on “Assured Fuels,” Assistant Secretary of the 

Navy for Research, Development and Acquisition John J. Young, Jr., endorsed a 

recommendation by the Naval Research Advisory Committee in its “2005 Summer Study 

of Future Fuels” to set the goal of the Navy to become independent from reliance on 

foreign oil by 2020. Secretary Young explained, “In light of the current painful reality of 

DoD fuel price adjustments, and the risks to our fuel sources posed by natural disasters 

and terrorist threats, I believe we need to act on this recommendation with a sense of 

urgency.” 

 For many years, Saudi Arabia maintained enough production flexibility to leverage 

oil prices at 

and demand whittled away. Three years ago in November 2002, the prompt price for 

immediate delivery of oil was $27 per barrel NYMEX WTI (New York Mercantile 

Exchange – West Texas Intermediate). The price for contracts on 10-year long term 

derivatives combining NYMEX and forward swaps market transactions was between $22 

and $24 per barrel. Beginning in December 2003, the price for 10-year contracts began a 

sharp upward trend that has not abated. The change was prompted by an increase in long 

term contract purchases by the Chinese and the judgment by market participants that 

Saudi Arabia could no longer maintain sufficient extra capacity to drive the price of oil 

down. 

 In November 2005, the prompt price for immediate delivery of oil was $60 per barrel 

after a sp

was $59 per barrel. In the past three years, the prompt price increased two times from $27 

per barrel to $60 per barrel. The 10-year price increased almost three times from $22 per 
26

 Despite the 

orld’s second largest 

the United States must move rapidly to 

 believe global “Peak Oil” presents 

gdom and Canada, to develop the first nuclear weapon in order to 

. Well, I thank you and that was just simply great. Your 

are up. 

ing 

am 

barrel to $59 per barrel. The world's largest banks are the primary transactors in the 

private forward swaps markets on behalf of clients who are among the world's largest and 

best financed institutions and companies. Those price increases in oil, the emergence of a 

well-defined forward swaps market in oil and the larger magnitude increase between the 

prompt and 10-year price represent a dramatic change in world oil markets. 

 A December 1, 2005 CRS report (prepared at my request) documents and ranks 

countries that experienced declines in oil production between 2003 and 2004.

increase in oil prices, United Kingdom oil production declined 228 thousand barrels. 

United States oil production declined 159 thousand barrels. Australia declined 83 

thousand barrels. Norway declined 76 thousand barrels. Indonesia declined 57 thousand 

barrels. Argentina declined 50 thousand barrels. Other countries with production declines 

included: Egypt, Oman, Syria, Yemen Brazil, Columbia and Italy. 

 At the same time, demand for oil is increasing. China and India are increasing their 

oil consumption. China increased consumption 51.3% and is the w

importer of oil, behind the United States. Developing countries around the world are 

increasing their demand for oil consumption at rapid rates. For example, the average 

consumption increase, by percentage, from 2003 to 2004 for the countries of Belarus, 

Kuwait, China, and Singapore was 15.9 percent; 

 In order to keep energy costs affordable, improve the environment, safeguard 

economic prosperity, and reduce the trade deficit, 

increase the productivity with which it uses fossil fuels, and to accelerate the transition to 

renewable fuels and a sustainable, clean energy economy. There is no one silver bullet to 

solve this problem. Only through a combination of conservation, improved efficiency, 

and a combination of alternate sources of energy for transportation and ultimately 

renewable sources of energy (i.e. wind, solar, geothermal, harnessing ocean tides) will we 

be able to meet the energy demands of the future. 

 How and when we as individuals and government leaders will respond to global 

“Peak Oil” is what we need to address immediately. I

our country with a challenge as daunting as the one that faced the astronauts and staff of 

the Apollo 13 program. Contingency planning, training, incredible ingenuity, and 

collaboration to solve the problem brought the Apollo 13 astronauts back home safe. The 

U.S. government must lead and inspire Americans’ unmatched ingenuity and creativity to 

end our unacceptable and unsustainable energy vulnerability and to prevent a worldwide 

economic tsunami from global “Peak Oil”. We in the Congress must work with and on 

behalf of our constituents to debate, develop and start implementing appropriate policy 

changes and legislation to make Americans more secure, as we did in the 1940’s with the 

Manhattan Project. 

 The federal government took an active role in funding a crash program, in partnership 

with the United Kin

defeat Nazi Germany. Now, we again must adopt a crash program, this time in 

cooperation with our international allies. We must overcome the obstacles we can 

foresee and those that will emerge. “Peak Oil” will inflict unprecedented pressure upon 

our citizens and strain the capability of our social, economic, and political institutions. 

We must survive the challenges of “Peak Oil” only with the tools we have available. We 

have no choice. 

 MR. HALL

five minutes 

 MR. BARTLETT. Yes, sir, thank you, sir. You are very charitable. 

 MR . HALL. Well, it was really super and I look forward to read

that again. I am not going to ask you for a second reading, but I 
27

that? 

here. 

ed you 

, ready for questions. You know, my mother always told me 

outh 

L. Do you have, John? 

told in my opening statement I 

oned some of the mid-term type of 

try and that 

 of course, is 

lways use more energy producing 

going to read it myself when this gentleman over here unbelievably has 

taken that down and we will all get to see it again. Everybody is going to 

have an opportunity to see that. It was super. It was great. 

 Tom, I recognize you, sir, for as much time as you take. 

 MR. UDALL. Mr. Chairman, I think I already gave mine. 

 MR. HALL. All right, then you do not have an answer to 

 MR. UDALL. No, no, I am going to wait for the questions 

 MR. HALL. I understood you were to open and close. I notic

were attorney general here. 

 MR. UDALL. Well I am glad that he was closing. Thank you, Mr. 

Chairman. 

 MR. HALL. I think our chairman is gone, isn’t he, Mr. Barton? 

 All right

it is better to remain silent and be thought a fool then to open your m

and remove all doubt. I do not hardly know how I am going to question 

you. As a matter of fact, I do not really have any questions of you two in 

that we work together and we have access to your knowledge. And I am 

not sure that any of us do. Do you have questions of these two 

gentlemen? 

 MR. GREEN. I do not have question. 

 MR. HAL

 MR. SHIMKUS. I just wanted to--I 

mentioned to Roscoe, Roscoe menti

BTU conversion issues and I guess I think what would be helpful as we 

move forward, Roscoe, if we would set some short, mid, and long-term 

goals because I am a real believer in the market. And I believe that as 

we have seen in this environment that when you have constrained 

supplies and high demand and the prices do go up, that is a quicker way 

to get technological response than Government intervention. You see the 

public move to hybrid vehicles because they are paying a lot for gasoline 

at the pump. Government incentives, I always am hesitant to believe that 

the Government moves faster than the market would move. 

 But so on the BTU conversion thing that I said I was going to 

mention, 250-year supply of coal assets within this coun

would probably be a mid-term strategy to help ease this future strain as 

we look for other alternatives in the future. And then I would also like 

you to address the hydrogen economy and finally we did talk about, you 

did mention solar right at the end. Obviously, the Israelis are doing great 

research in solar energy and their ability to turn using solar energy into 

hydrogen. Can you just mention any of those applications? 

 MR. BARTLETT. Well thank you. 

 Let me mention the hydrogen economy first. Hydrogen,

not a source of energy. We will a
28

y

 is a catcher everybody thinks you 

ls our transportation. And you mentioned coal we 

h drogen than we get out of it because we are not going to suspend the 

first and second laws of thermodynamics. That does not mean hydrogen 

is not a good idea. Because when you finally burn it, you get only water. 

You can use it in a fuel cell that has twice the efficiency of a 

reciprocating engine. But to understand what hydrogen will do for us, 

please think of it as a battery. It is just a way of carrying energy from 

one place to another. We use electron batteries now. Hydrogen may, in 

fact, be a more dense energy storage medium than the electron batteries 

but it is not a solution to our energy problem, it is simply a way--for 

instance, using energy from coal, you cannot put a trunk full of coal in 

your car and go down the road. But you can use coal to produce 

electricity. The electricity can split water into hydrogen and oxygen. 

You can then use the hydrogen in a fuel cell to take your car down the 

road. So you can run, you can use coal to take your car down the road. 

So I am much appreciating the interest in hydrogen. I am simply saying 

that is not a solution to our problem-- 

 MR. SHIMKUS. In this debate as we do in the Energy Committee, I 

mean, the problem I have with energy

use. In this debate, people think you are using, we are using crude oil for 

electricity generation. Energy is a big arena. Most of our electricity 

generation is not from oil. So the application for oil is probably in the 

transportation arena. So then if you shift and move to hydrogen fuels, 

you are mitigating that. If you address renewable fuels, you are 

mitigating that but you also have the--if you are generating electricity 

through the nuclear industry, you are also making a possibility to use that 

for hydrogen production. So that is the exciting things that are going on. 

A lot of these were addressed in the Energy Bill and we just have to be 

careful when we talk about this energy debate not--the assumption here 

is crude oil is everything and crude oil is not everything because 

electricity generation, only a small portion of our electricity generation is 

done by crude oil. 

 MR. BARTLETT. Liquid fuels most of which comes from crude oil, 70 

percent of that fue

have 250 years of coal. At current use rates increase its use only 2 

percent exponential, that 250 years shrinks to 85 years. Then allow, you 

have to invest some energy in converting the coal to a gas or a liquid. By 

the way, Hitler ran his whole military on coal oil. When I was a little 

boy, the lamp that burned in the corner, we did not have any electricity 

we called it a coal oil lamp. And after a long time, after using electricity, 

I still call it a coal oil lamp because we went from whale oil to coal oil 

before we went to kerosene. So we certainly can convert this. Now you 

are down to 50 years that is all you have got of pretty dirty stuff. Either 

you are going to pay an environmental penalty or your-- 
29

e electricity plant is 

ity 40 years ago and I 

 really good for Canada. The 

e things God cannot 

ioning. 

y questions 

sting topic and we do need to 

No questions. 

 

 MR. SHIMKUS. Well I would differ. You know it may have been 

very dirty stuff in World War II. I would say that-- 

 MR. BARTLETT. Well it is still dirty, we just-- 

 MR. SHIMKUS. I would say just as your wast

cleaner today, it is cleaner than waste to electric

would submit to you that coal or liquid BTU conversion is as clean if not 

cleaner than any generation we currently have especially the 

grandfathered coal generating facilities. 

 MR. BARTLETT. You mentioned oil shales and tar sands. Of the--as I 

mentioned, the dollar profit ratio is now

energy profit ratio is less than nothing. So we have to find a way to 

make the energy profit ratio positive or you will not end up doing that. 

Shell has had an experiment out in Colorado and they--and I was out at a 

Peak Oil conference in Denver a couple of weeks ago and the 

investigator there was very cautious. This is only experimental, we do 

not know whether it is economically feasible or not. I hope it is. There 

is an enormous amount of energy there. But the technique they use to 

get it is not very scaleable. It will take a long time. 

 And when you talk about the marketplace working, we almost deify 

the marketplace. I would remind you that even som

do. God cannot make a square circle. And when your--the marketplace 

will work if there are infinite resources. There are not infinite resources 

here. And so you have to qualify what the marketplace can do in terms 

of that. Certainly it will work. It is working. I think oil is $60 a barrel 

now rather than $80 a barrel because the increased price of energy has 

reduced the demand for energy. So the marketplace does work. But as 

you will hear in later testimony from SAIC, there is--none of the 

alternatives have the potential for being ramped up quickly enough to 

make up the slack, to fill the gap that we talked about. That is the reality. 

We should have started 20 years ago if we wanted to make sure we were 

not going to have any dislocations in this transfer. 

 MR. HALL. The gentleman yields back his time. 

 Ms. Solis, we would recognize you for your quest

 MR. SOLIS. Thank you, Mr. Chairman. 

 And I apologize for coming in late. I do not have an

except to say that I think this is a very intere

look at alternative resources of energy so I strongly support what you are 

looking at and hope that this resolution will move on. 

 Thank you. 

 MR. HALL. Ms. Wilson? 

 MR. WILSON. 

 MR. HALL. Mr. Sullivan?
30

n us, we invite you to. Thank you 

e are ready for the second panel now if you all are here. 

e will start off with Dr. Aleklett, and recognize you for five 

TATEMENTS OF KJELL ALEKLETT, PH.D., PROFESSOR, 

MR. ALEKLETT. Thank you very much, Mr. Chairman and members 

Theory, some persons might think 

y written testimony, I would like to highlight the 

 All right, if you would like to joi

very, very much for all the time and work you put into it and for the 

presentation. 

 All right, w

All right, we welcome Dr. Aleklett. We thank you Professor for coming 

all the way from Sweden to make this presentation. I hope you had other 

items here in the States and in this area but you made a long journey and 

we look forward to hearing from you. We have Dr. Hirsch, the Senior 

Energy Program Advisor. He came all the way from Virginia and that 

was good of you to do that; Robert Esser, Senior Consultant and Director 

of Cambridge Energy Research Associates of New York; and Murray 

Smith who is a Minister, Counselor of the Canadian Embassy is on a 

conference call right now with the Canadian Premier and he may be back 

in time but he was here and perhaps he will be back in time for us to hear 

him. 

 W

minutes, or as close thereto as you can keep your testimony. Do not let 

Mr. Bartlett be an example for you. We had to make special concessions 

to him because he is our leader up here. 

S

DEPARTMENT OF RADIATION SCIENCES, UPPSALA 

UNIVERSITY; ROBERT L. HIRSCH, SENIOR ENERGY 

PROGRAM ADVISOR, SAIC; AND ROBERT ESSER, SENIOR 

CONSULTANT AND DIRECTOR, GLOBAL OIL AND GAS 

RESOURCES, CAMBRIDGE ENERGY RESOURCE 

ASSOCIATES 

of the committee for inviting me from Sweden for this historic hearing 

on understanding the Peak Oil theory. 

 By choosing the wording Peak Oil 

that this is just a theory and it is not reality. I must say sorry, ladies and 

gentlemen, Peak Oil is reality. And my grandchildren, Olof and Olivia, 

born earlier this year, they will face Peak Oil. And it looks like they are 

going to face it soon. 

 As a summary of m

following points. Peak Oil will come as oil is a limited resource. Fifty 

years ago, we were using 4 million barrels per year and the discovery 

rate at that time was 30 billion barrels per year. Today, we are using 30 

billion barrels per year and the discovery rate in new oil fields are 

approaching 4 billion barrels per year. And the problem is that we can 

only empty the reserves that we have in a limited speed. Depending on 
31

f the correlation between oil consumption and the growth of 

United States of America with 5 percent of the world’s 

 sands in Canada are often mentioned 

Science is an independent nondemand, Peak Oil will happen within the near future. Currently, the 

Year 2010 is the most likely year for Peak Oil. Another problem is that 

most countries, if you look around the world, are planning to increase 

their import of oil. Very few countries are planning to decrease their 

import of oil. And the question is then how should we make the 

delivery, how should we be able to produce more oil to export. And if 

you look at the 20 largest countries for export, you have as number two 

on the list, Soviet Union or excuse me, Russia. Russia will not increase 

their export because they need more oil within Russia. Number three on 

the list is Norway, and the production in Norway is declining now with 

10 percent per year. And I could go down the list. In principle, there are 

only one, two, three, four countries that increase their production on the 

export list. 

 Studies o

GDP in individual countries as for instance Sweden or China, as well as 

for the world, shows that since the Second World War, there has not 

been an increase in GDP without an increase or use of oil. Many 

countries in the world are very poor. It may be necessary to double the 

global GDP to achieve any kind of decent lives for people in these 

countries. The examples of Sweden and China suggest that if past 

economic development patterns are followed, doubling GDP will require 

doubling global oil production. And the question is can this ever be 

done? 

 The 

population should not in the future continue to consume 25 percent of the 

global oil production if this means that other nations will not have 

enough of essential fuels. There should be a human right for energy as 

there is a human right for water. 

 The enormous resources of oil

as a lifesaver for the world. Our group in Uppsala has made studies that 

show that even the crash program for production of oil from Canadian oil 

sands will yield only a limited amount of oil. By 2018, it might be 

possible we could use 3.5 billion barrels per day. If that should rise to 6 

million in 2040, they need to open up a couple of nuclear power plants to 

get heat to get the oil out of the ground. 

 The role of the Swedish Academy of 

Government organization with expertise in most of the sciences. The 

academy has a made a statement about oil and the following is a note 

from this statement. To avoid acute, economic, social, and 

environmental problems worldwide, we need a global approach with the 

widest possible international cooperation. Activities in this direction 

have started and they should be strongly encouraged and intensified. 
32

 The technically advanced countries like the United States have a 

particular responsibility. If you or one of the members of the committee 

have grandchildren, or maybe hope to have grandchildren, they will also 

face Peak Oil. What you decide to do will affect the future for our 

grandchildren. I hope that you are not the kind of politicians we used to 

see that can only promise that they can do better in the future and maybe 

promise to take care of crisis when it happens. As Peak Oil is here in the 

near future, we need action now and I hope the committee has a lot of 

questions and I hope that I can give answers that will straightened out 

those question marks. 

 Thank you very much for inviting me. 

 [The prepared statement of Kjell Aleklett, Ph.D., follows:] 

PREPARED STATEMENT OF KJELL ALEKLETT, PH.D., PROFESSOR,

UPPSALA UNIVERSITY, SWEDEN

Summary: 

• Peak Oil will come, as oil is a limited resource. As we use 30 billion barrels per 

year and new discoveries are much less than this, we are now consuming from 

our reserves. Depending on demand Peak Oil will happen within the near 

future. Currently year 2010 is the most likely year for Peak Oil. 

• Studies of the correlation between oil consumption and the growth of GDP in 

individual countries as well as for the world shows that since 1900 there not has 

been an increase in GDP without an increase in the use of oil. 

• USA with 5 percent of the world’s population should not in future continue to 

consume 25 percent of the global oil production if it means depriving other 

nations of essential fuels. 

• Even a crash program for production of oil from Canadian oil sands will yield 

only a limited amount of oil. 

Mr. Chairman, ladies and gentlemen on the committee: 

 I thank the Committee for this opportunity to discuss Peak Oil and the work of 

Uppsala Hydrocarbon Depletion Study Group, Uppsala University, Sweden. We are also 

members in the network of ASPO, the Association for the Study of Peak Oil and Gas, and 

I’m since 2003 president of ASPO. Members of ASPO, including the ASPO-USA 

affiliata, have an interest in determining the date and impact of the peak and decline of 

the world's production of oil and gas, due to resource constraints (www.peakoil.net). 

The mission is to: 

1. Define and evaluate the world's endowment of oil and gas. 

2. Model depletion, taking due account of demand, economics, technology and 

politics. 

3. Raise awareness of the serious consequences for Mankind. 

 I like to summarize the global situation for Peak Oil the following way: When I 

was born in 1945, none of the four small farms in my little Swedish village used oil for 

anything. Ten years later, the oil age had arrived: we had replaced coal with oil for 

heating, my father had bought a motorcycle, and tractors were seen in the fields. From 

1945 to 1970, Sweden increased its use of energy by a factor of five, or nearly 7 percent 

per year for 25 years. This journey into the oil age transformed Sweden from a rather 
33

poor country into the third wealthiest country (per capita) in the world. Ninety percent of 

the energy increase came from oil. Cheap oil made Sweden rich. 

 Now consider China, a developing country with 21 percent of the global 

population. It consumes 8 percent of the global oil supply, and thinks it is fair to claim 21 

percent of daily global consumption, or 17.6 million barrels per day (mbpd). During the 

last five years the average annual GDP growth in China has been 8.2 percent and the 

average increase in oil consumption 8.4 percent per year. We can now see the same 

correlation between increase in GDP and use of oil in China as in Sweden 50 years ago. 

If China’s economy grows 8 percent per year over the coming five years, we can expect 

that it will need an increase in the consumption of oil of 3 million barrels per day by 

2010. According to Professor Pang Xiongqi at the China University of Petroleum in 

Beijing, China's production will plateau in 2009 and then start to decline. This means that 

the total increase in consumption must be imported. As China is already importing 3 

million barrels per day, it will have to increase imports 100 percent during the next five 

years. Where will it come from? 

 Since 2001, when ASPO was founded, we have tried to tell the world that there will 

soon be a problem supplying the world with crude oil while demand continues to rise. 

The estimated peak-production year at the first depletion workshop in Uppsala in 2002 

was 2010. Two years later at our Berlin meeting it had moved to 2008, and now it looks 

like we are back to 2010, because production from deepwater oil fields will yield more 

than we expected. The exact year for peak oil depends very much on future demand and 

we will not know when we have peaked until we have crossed the threshold. It will 

certainly happen before 2020. 

 Unfortunately, few have heeded our alerts, even though the signs have been so 

obvious that a blind hen could see them. Fifty years ago the world was consuming 4 

billion barrels of oil per year and the average discovery rate (the rate of finding 

undiscovered oil fields) was around 30 billion barrels per year. Today we consume 30 

billion barrels per year and the discovery rate is dropping toward 4 billion barrels per 

year (see figure 1). This is significant; Chevron is even running an ad saying, "The world 

consumes two barrels of oil for every barrel discovered." (By discovery, I mean only new 

oil fields. Some analysts include reserve growth—newly accessible oil in old fields—as 

new discoveries, but we are using the same approach as in World Energy Outlook 2004, 

IEA, International Energy Agency) 

 If we extrapolate the downward discovery slope from the last 30 years in figure 1, 

we can estimate that about 135 billion "new" barrels of oil will be found over the next 30 

years. The latest large oil field system to be found was the North Sea (in 1969), which 

contains about 60 billion barrels. In 1999 the North Sea field production peaked at 6 

mbpd. Our extrapolation suggests that over the next 30 years we will discover new oil 

fields equal to twice the size of the North Sea—a very pessimistic prediction, according 

to our opponents. But I think the oil industry would be ecstatic to find two new NorthSea-size oil provinces. 

 The World Energy Outlook 2005 base-case scenario projects that by 2030 global 

oil demand will be 115 million barrels per day, which will require increasing production 

by 31 million barrels per day over the next 25 years, of which 25 mbpd is predicted to 

come from fields that have yet to be discovered. That is, we'll have to find four petroleum 

systems of the size of the North Sea. Is this reality? 

 Every oilfield reaches a point of maximum production. When production falls 

advanced technologies can reduce but not eliminate the decline. The oil industry and the 

IEA accept the fact that the total production from existing oil fields is declining. 

ExxonMobil informed shareholders that the average production decline rate for the global 

oil fields are between 4 and 6 percent per year (The Lamp, 2003, Vol85, No1). Current 

global production is 84 million barrels per day, so next year at this time current fields 

may produce a total of roughly 80 million barrels per day. Given the expected increase in 
34

global GDP, one year from now total oil demand will be 85.5 mbpd—so new capacity 

might have to make up for 1.5 mbpd plus 4 mbpd, or 5.5 mbpd. Two years from now the 

needed new production will be 11 mbpd and in 2010 at least 25 mbpd. Can the industry 

deliver this amount? If we extend the decline in existing fields through 2030, and accept 

the 2004 scenario by the Energy Information Administration (global demand of 122 

mbpd), then "we need new production that is of the order of 10 new Saudi Arabias." 

Some might call this a doomsday scenario, but if so I'm not the doomsayer—it's Sadad Al 

Husseini, until recently vice-director of Saudi Aramco, the largest oil company in the 

world. 

 Excluding deepwater oilfields, output from 54 of the 65 largest oil-producing 

countries in the world is in decline. Indonesia, a member of the Organization of 

Petroleum Exporting Countries (OPEC), not only can't produce enough oil to meet its 

production quota, it can't even produce enough for domestic consumption. Indonesia is 

now an oil importing country. Within six years, five more countries will peak. Only a few 

countries—Saudi Arabia, Iraq, Kuwait, United Arab Emirates, Kazakhstan, and 

Bolivia—have the potential to produce more oil than before. By 2010, production from 

these countries and from deepwater fields will have to offset the decline in 59 countries 

and the increased demand from the rest of the world. 

 Can they do it? Let's look at Saudi Arabia, which in the early 1980s produced 9.6 

million barrels per day. According to the IEA and the EIA Saudi Arabia must produce 22 

mbpd by 2030. But Sadad Al Husseini claims that "the American government's forecasts 

for future oil supplies are a dangerous over-estimate." The Saudi Ghawar oil field, the 

largest in the world, may be in decline (see for example the book “Twilight in the 

dessert” by Mathew Simmons). Saudi Aramco says that production can be increased to 

12.5 mbpd in 2015. They plan a new pipeline with a capacity of 2.5 mbpd, so it looks like 

they are willing to increase production to 12.5 mbpd, but so far there are no signs of 

reaching 22 mbpd. 

 Now consider Iraq, which in 1979 produced 3.4 mbpd. Iraq officially claims 

reserves of 112 billion barrels of crude oil, but ASPO (and other analysts) think that onethird of the reported reserves are fictitious "political barrels." At a recent meeting in 

London, I was told (privately, by a person who is in a position to know) that Iraqi 

reserves available today for production total 46 billion barrels. If this is the case, it will be 

hard for Iraq to reach its former peak production level in a short time. And so on. It's 

time to ask, can the Middle East ever again produce at the peak rates of the 1970s? 

 Many countries in the world are very poor. It may be necessary to double global 

GDP to achieve any kind of decent life for people in these countries. The examples of 

Sweden and China suggest that, if past economic development patterns are followed, 

doubling GDP will require doubling global oil production. Can this even be done? 

 The United States, the wealthiest country in the world, has 5 percent of the global 

population and uses 25 percent of the oil. It is time to discuss what the United States 

should do to cut consumption—and rapidly. In February 2005 a report for the U.S. 

Department of Energy, DoE, (Peaking of World Oil Production: Impacts, Mitigation, & 

Risk Management) argued that "world oil peaking represents a problem like none other. 

The political, economic, and social stakes are enormous. Prudent risk management 

demands urgent attention and early action." Any serious program launched today will 

take 20 years to complete. 

 What about oil sands? The enormous reserves of oil sands in Canada are often 

mentioned as a lifesaver for the world. The report to DoE in February inspired us to 

undertake a “Crash Program Scenario Study for the Canadian Oil Sand Industry” (B. 

Söderbergh, F. Robelius, and K. Aleklett, to be published). In the study we found that 

Canada must very soon decide if its natural gas should be exported to USA or instead 

used for the oil sands industry. In a short-term crash program the maximum production 

from oil sands will be 3.6 million barrels per day in 2018. This production cannot offset 
35

even the combined decline of just the Canadian and North Sea provinces (see Fig.2). A 

long-term crash program would give 6 million barrels by 2040, but then new nuclear 

power plants would be needed to generate steam for the in-situ production. 

 In view of the importance of the world's future energy supply, The Royal Swedish 

Academy of Sciences (the Academy that awards the Nobel Prizes in physics, chemistry, 

and The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel) has 

recently established an Energy Committee. The Academy is an independent nongovernmental organization, with expertise in most of the sciences as well as economic, 

social, and humanistic fields. The Energy Committee has selected a number of subjects to 

be studied in some depth and one of these deals with oil and related carbon-based fuels. 

The Academy organized hearings and a seminar before subsequently (on October 14, 

2005) issuing a statement about oil (the full statement can be found at the end of this 

text). I'll note just one excerpt from the general remarks: "It is very likely that the world 

is now entering a challenging period for energy supply, due to the limited resources and 

production problems now facing conventional (easily accessible) oil.” 

 From figure 1 we can conclude that the peak of global discovery of oil was around 

1960. In figure 3 we have a well-defined discovery peak for US Lower 48. This peak 

defines how much can be produced and Peak Oil for the region was 35 years later in 

1971. Based on the assumption that we only can consume the oil we have already found 

and expect to find, we have predicted oil production in the future for the world till 2050 

(figure 4). Deep water is the latest oil-production frontier. During the coming years a 

number of large fields will come into production, and we believe that the peak production 

from these fields will define the upper time limit for peak oil. Based on the data available 

today, we can expect global Peak Oil in 2010, with a few years uncertainty. 

 Animals that face food shortages have a hard time adjusting and usually their 

populations decline. Some believe that we as human beings will face a similar situation. I 

can't accept that. As human beings we can think and come up with ideas, and I believe we 

can find solutions. The road will be bumpy and many people will be hurt, but when we 

arrive at the end of this road, it must be as a sustainable society. It will not be possible to 

travel this road without using part of the existing stocks of fossil fuels and, for industrial 

countries, nuclear energy as well, but we can do it in a manner that will have minimal 

impact on the planet. The problem is that we should have started at least 10 years ago. 

We must act now, as otherwise the bumps and holes in the road might be devastating. 

Kjell Aleklett, Professor in Physics 

Uppsala University, Box 535 

SE-751 21 Uppsala, Sweden 

E-mail: Aleklett@tsl.uu.se 

Tel: +46 70425 0604 

Association for the Study of Peak Oil and Gas: www.peakoil.net 

Association for the Study of Peak Oil and Gas - USA: www.aspo-usa.com 
36

Figures: 

Figure 1: Discovery of conventional oil and extrapolation of future discoveries and 

consumption of conventional oil and predicted consumption according to IEA. The 

number for year 2000 is the average number for the years 1995 to 2004, etc. (K. Aleklett, 

www.peakoil.net) 

0

1000

2000

3000

4000

5000

6000

7000

8000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Year

Thousand BBls Per Day

Conventional Oil Production, Canada + The North Sea Total Oil Sands Production, By Project, Soderbergh:

Fig 2. Canadian Conventional + The North Sea + Canadian Oil Sands Crash Program 

Crude Oil Production 2005 – 2018 (B. Söderbergh, F. Robelius, and K. Aleklett, to be 

published)
37

US Lower 48: annual oil "mean" discovery & 

production with Hubbert discovery model

0

1

2

3

4

5

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

year

discovery smooth 5 yr

model Hubbert disc.

production

Hubbert disc. shift 35 yr

oil price

proration

deepwater

depression

Jean Laherrère Jan. 2003

Figure 3: Annual discovery and production of oil in US lower 48 states. (Jean Laherrère, 

January 2003.) 

Figure 4: Oil and gas liquids scenario (updated from K. Aleklett and C.J. Campbell, 

Minerals & Energy, 2003; 18:5-20) 
38

ST A T E M E N T S 1 4 O C T 2 0 0 5 

Statements on Oil 

by the Energy Committee at 

the Royal Swedish Academy of Sciences. 

Introduction 

 The Royal Swedish Academy of Sciences is an independent non-governmental 

organization, with expertise in most of the sciences as well as economical, social and 

humanistic fields. The Academy has recently established a committee to consider today’s 

important energy issues that need our full, unbiased attention. The Energy Committee has 

a national as well as a global perspective and will summarize scientific knowledge on the 

supply and use of energy as well as the predicted impacts on society over the coming 50 

years. Sustainability and environmental considerations are essential for any future energy 

system. Readily available, inexpensive and environment-friendly energy provides the 

foundation for economic growth and prosperity. 

 The Energy Committee has selected a number of subjects to be studied in some 

depth. One of these deals with oil and related carbon-based fuels. Therefore, the 

Committee, organized, together with the Committee of Energy and Environment of the 

Royal Academy of Engineering Sciences, a seminar with the title “Running out of oil – 

scientific perspectives on fossil fuels” held at the Academy on 26 May 2005. Prior to the 

Seminar, the Energy Committee conducted a hearing with the seminar participants. More 

information about this seminar can be found on the Academy’s web page www.kva.se. 

The Committee also arranged a hearing with speakers in an Uppsala seminar on “Global 

oil reserves” on 23 May 23 2005 together with the Graduate School of Instrumentation 

and Measurements (AIM). Members of the Committee participated in the Uppsala 

seminar. Some essential points brought up at the hearings and seminars are highlighted 

below. It should be pointed out that the perspective given here is not purely scientific, 

since there are important social, political and technical factors that need consideration. 

General remarks 

 It is very likely that the world is now entering a challenging period for energy 

supply, due to the limited resources and production problems now facing conventional 

(easily accessible) oil. Nearly 40 % of the world’s energy is provided by oil, and over 

50% of the latter is used in the transport sector. An increasing demand for oil from 

emerging economies, such as China and India, is likely to further accentuate the need for 

new solutions. In addition, it is important that the poorer countries have access to oil at 

reasonable prices to meet their development goals. This places an additional burden on 

responsible, matured economies. Compared to many developing countries, the same 

percentage increase in the crude oil price will be less problematic for Sweden and other 

European countries because of our tax system (the crude oil’s share, c. 25%, in the 

gasoline price is quite small, compared to the taxes). The poor countries will suffer most 

from an increased price. 

 China and India and several nations in South-East Asia and Latin America are now 

experiencing rapid economic development. Continued high oil prices will jeopardize their 

chances of economic growth. Many countries, for example in Africa, may not even be 

able to develop economically in the absence of cheap oil. With China and India emerging 

as engines of the global economy, the sharp increase in the oil prices which we are 

witnessing today could lead to a serious international economic recession, similar to 
39

those that followed the oil price increases in 1973-74 and 1981. The European economies 

may be severely affected. 

 There is at present an extreme dependence on supply from the Middle East holding 

more than 60 % of the global oil reserves. A key country is Saudi Arabia, which is 

supposed to hold about 20% of the global reserves of conventional oil and much of the 

world’s spare capacity. Some analysts maintain that there are inherent technical 

problems in the Saudi oilfields, but this is not an uncontested viewpoint. It is uncertain 

how much the oil production in the Middle East can be increased in the next few years 

and to what extent it would be in the interest of these countries to greatly increase 

production. It is clear that, even in these countries, conventional oil is a limited resource 

that they are almost totally dependent on. It is, however, also clear that the countries of 

the Middle East are undergoing massive internal and regional changes which may have 

negative consequences for the global oil supply system. Mitigation measures must be 

initiated in the next few years in order to secure a continued adequate supply of liquid 

fuels, especially for the transport sector. Over the longer term, completely new solutions 

are required. Therefore, increased R&D (Research and Development) in the energy sector 

is urgently needed. 

Key points 

1. Shortage of oil 

The global demand for oil is presently growing by nearly 2 % per year and the 

current consumption is 84 million barrels per day (1 barrel=159 liters) or 30 billion 

barrels per year. Finding additional supplies to increase the production rate is becoming 

problematical, since most major oilfields are well matured. Already 54 of the 65 most 

important oil-producing countries have declining production and the rate of discoveries 

of new reserves is less than a third of the present rate of consumption. 

2. Reserves of conventional oil 

In the last 10-15 years, two-thirds of the increases in reserves of conventional oil 

have been based on increased estimates of recovery from existing fields and only onethird on discovery of new fields. In this way, a balance has been achieved between 

growth in reserves and production. This can’t continue. 50% of the present oil 

production comes from giant fields and very few such fields have been found in recent 

years. Oil geologists have a wide range of opinions on how much conventional oil there 

is yet to be discovered, but new reservoirs are expected to be mainly found in the deeper 

water, outer margins of the continental shelves, and in the physically hostile and sensitive 

environments of the Arctic, where the production costs will be much higher and lead 

times much longer than they are today. A conservative estimate of discovered oil reserves 

and undiscovered recoverable oil resources is about 1200 billion barrels, according to the 

US Geological Survey; this includes 300 billion barrels in the world’s, as yet unexplored, 

sedimentary basins. 

3. Middle East’s key role 

Only in the Middle East and possibly the countries of the former Soviet Union is 

there a potential to significantly increase production rates to compensate for decreasing 

rates in other countries. Saudi Arabia is a key country in this context, providing 9.5 

million barrels per day (11% of the current global production rate). Their proven reserves 

are 130 billion barrels and their reserve base is said to include an additional 130 billion 

barrels. Iraq also has considerable untapped oil reserves. 
40

4. Unconventional oil resources 

In addition to conventional oil, there are very large hydrocarbon resources, so-called 

unconventional oil, including gas (c. 1000 billion barrels of oil equivalent, much of which 

could be converted to liquid fuels), heavy oil and tar sands (c. 800 billion barrels) and oil 

shales (c.2 700 billion barrels); coal, from which liquid fuels can be produced and 

methane hydrates provide a vast additional potential. During a transition period, gas often 

available adjacent to the oil fields, will help to bridge future deficits of conventional oil. 

With the exception of gas, all unconventional oil is expensive to produce (c. $ 20-

40/barrel) and exploitation involves significant environmental problems. At $ 40 oil, 

which is now commonly accepted as the long term equilibrium price, the cost of 

developing unconventional oil is less problematic. (see pt. 7 below). At present, 1 million 

barrels of oil per day comes from Canadian tar sand and 0.6 million barrels from 

Venezuelan heavy oil. The Canadian government estimates that by 2025 the daily 

production rate will have increased to 3 million barrels per day. Thus, the problem with 

these unconventional oils is not so much price, but lead times and non-price related 

aspects, such as the effects on the environment and availability of water and natural gas 

for the production process. 

5. Immediate action on supplies 

Forceful measures to improve the search for and recovery of conventional oil as well 

as improving the production rate of unconventional oil are required to avoid price spikes, 

leading to instability of the world economy in the next few decades. Improved recovery 

of oil in existing fields can be expected. The estimated reserves of conventional oil are, 

however, located primarily in unexplored sedimentary basins, in environments difficult to 

access. A substantial part has yet to be found! Sizeable contributions from 

unconventional oil need time (some decades) to become really effective. It is necessary to 

have public funding for long term petroleum-related research, since this must not be an 

exclusive task for the oil companies. 

6. Liquid fuels and a new transport system 

Oil supply is a severe liquid fuels problem and less of a general energy supply 

problem; 57 % of the world’s oil is consumed in the transport sector. Unless 

government’s ration oil, there will never be a shortage of oil; just increasing prices. Major 

programs need, therefore, to be implemented to develop alternatives to oil in the transport 

sector. Until these measures have been introduced, (which may take one to two decades) 

demand for oil for the needs of a globally expanding transport sector will continue to rise; 

other users of oil will suffer, including those concerned with power generation. 

7. Economic considerations 

At present the high oil prices are due to the limitations of worldwide production, 

refining and transportation capacities. Furthermore, the price is influenced by the threat 

of terrorist attacks on the world’s oil supply, transport system and infrastructure. In the 

long run, the price of crude oil will be determined by the price of substitutes. Some 

estimates indicate that oil may be produced from tar sand at a price of 20-25 USD a 

barrel, compared to the present cost of about USD 5 for Saudi Arabian oil. Liquid fuels 

from coal could be produced for many decades; cost estimates vary greatly and generally 

exceed USD 30. Factors that are hard to estimate are environmental requirements, 

taxation levels and profit margins. However, we can anticipate continued high oil prices, 

as long as the pressure from the expanding Asian economics is maintained. 
41

8. Environmental concerns 

Unconventional oil will significantly extend the length of the hydrocarbon era, 

assuming that the negative impacts on the environment can be avoided. Constraints 

similar to those imposed on other fossil fuels (for example emission controls and CO2 

sequestration) will be necessary and provide major challenges for industry. The impact 

on the environment, in general, and on the atmosphere and climate in particular, produced 

by combustion of fossil fuels, is not considered here. However, it is worth noting that 

such considerations provide further support for the conclusions presented below. 

9. Increased R&D and international efforts 

To avoid acute economical, social and environmental problems worldwide, we need 

a global approach, with the widest possible international cooperation. Activities in this 

direction have started and they should be strongly encouraged and intensified; the 

technically advanced countries have a particular responsibility. Considerably increased 

resources for R & D on alternative non-fossil energy sources, as well as on efficient and 

sustainable use of energy, particularly electricity, are necessary. In order to develop a 

sustainable energy system beyond the fossil fuel era, we need a full system analysis of the 

energy sector based on realistic time scales. The Energy Committee intends, in the next 

couple of years, to study other sources of energy and evaluate their relative merits and 

impact on environment and climate. 

Members of the Energy Committe at the Royal Swedish Academy of Science: 

Sven Kullander, Professor em., Uppsala University 

Gia Destouni, Professor, Stockholms University 

Harry Frank, Professor, Mälardalens University 

Karl Fredga, Professor em., Uppsala University 

Bertil Fredholm, Professor, Karolinska Institutet 

David Gee, Professor em., Uppsala University 

Karl Grandin, Ph.D., Center for History of Science 

Peter Jagers, Professor, Chalmers Institute of Technology 

Bengt Kasemo, Professor, Chalmers Institute of Technology 

Rickard Lundin, Professor, Swedish Institute of Space Physics 

Karl-Göran Mäler, Professor em., The Beijer International Institute of Ecological 

Economics 

Kerstin Niblaeus, Director General, Council of the European Union 

Bengt Nordén, Professor, Chalmers Institute of Technology 

Contact persons: 

Malin Lindgren, Information Of. cer, +46 8 673 95 22, +46 709 88 60 04, malin@kva.se 

Eva Krutmeijer, Executive Director, +46 8 673 95 95, + 46 709 84 66 38, evak@kva.se 

The Royal Swedish Academy of Sciences 

Box 50005, SE-104 05 Stockholm, Sweden 

Phone: +46 8 673 95 00, Fax: +46 8 15 56 70 

E-mail: info@kva.se, Website: www.kva.se 

 MR. HALL. Thank you, Dr. Aleklett, thank you very much. 

 Dr. Hirsch, I recognize you, sir. 
42

 MR. HIRSCH. Thank you, sir. 

 Mr. Chairman, distinguished members, and staff, peaking of world oil 

production represents an enormous risk to the United States and the 

world. Peak Oil is not a theory. Maximum conventional oil production 

is coming, but we cannot predict when because no one has the verified 

data needed for a credible forecast. Nobody on this planet does. Peaking 

could be soon. Our studies through the Department of Energy indicate 

that soon is within 20 years. 

 The economic future of the United States is inextricably linked to 

Saudi Arabia because they are the lynchpin of future world oil 

production. No one outside of Saudi Arabia knows how much oil they 

have in the ground because that is a closely held state secret. Also, no 

one outside of Saudi Arabia knows how much and how fast the Saudis 

will be willing to develop what they have. Like it or not, Saudi Arabia is 

not required to satisfy world needs and conserving their oil is in their 

national interest. Think risk. 

 The literature is awash in failed forecasts of oil peaking. We talked 

about the boy and wolf a few minutes ago. It has happened a lot of 

times. Since oil and gas have much in common geologically, it is 

instructive to review recent forecasts of North America natural gas 

production to gain some insight into how good those forecasters and 

forecasts have been. For example, in 1999, EIA and the National 

Petroleum Council were both optimistic about abundant natural gas 

supplies in North America for the foreseeable future. That was just a few 

years ago. Today we have a very severe problem with natural gas supply 

in this country and that is only a few short years ago. Today, EIA is 

forecasting adequate world’s oil supplies for decades into the future. The 

question is, are they going to get it right this time? The National 

Petroleum Council has been asked by Secretary Bodman to assess Peak 

Oil. Are they going to get it right this time? Think risk. 

 Until recently OPEC assured the world that oil supply would continue 

to be plentiful, but that situation is now changing. In fact, a number of 

people in OPEC are warning that oil supply will be not be adequate to 

satisfy world needs just 10 to 15 years into the future. A retired Saudi oil 

executive predicts that the world is headed for an oil shortage. He 

contends that a whole new Saudi Arabia will have to be found and 

developed every couple of years to satisfy demand forecasts. He is 

deeply concerned about what he calls the over-optimism of EIA and IEA. 

So from the world’s breadbasket of oil, the bottom line message is 

moving from confident assurance to warnings of approaching shortage. 

Think risk. 

 A recent analysis for the Department of Energy focused on what 

might be done to mitigate the peaking world oil production. It became 
43

abundantly clear early in our study that effect of mitigation would be 

dependent on the large scale implementation of mega projects and mega 

changes that the maximum rate conceivable and possible. We performed 

a transparent scenario analysis based on crash program mitigation 

worldwide which is the fastest that is humanly possible. The timing was 

left open because we do not know when peaking is going to occur. The 

results were startling. If we wait until peaking occurs, the world will 

have a problem with adequate liquid fuels for more than two decades. If 

we start ten years before peaking occurs, that will allay the problem 

somewhat but in ten years after that, a problem will arise. And finally, if 

we initiate a crash program 20 years before peaking occurs, we have the 

possibility, a possibility of avoiding the problem. 

 Oil peaking represents a liquid fuels problem not an energy crisis in 

the sense that that term has been used. Motor vehicles, aircrafts, trucks, 

and ships have no ready alternative to liquid fuels, certainly not the large 

existing capital stock. And that capital stock has lifetimes measured in 

decades. Solar, wind, and nuclear power produce electricity not liquid 

fuels; their widespread use in transportation is at least 30 to 50 years 

away. 

 If we get oil peaking wrong, how bad might the economic damage 

be? Unfortunately, there is a paucity of analysis in this area which is 

tough analysis to do. One study called oil shock wave, which I believe 

was mentioned earlier, was performed by a group of distinguished 

former high level Government officials not too long ago. They 

concluded at a sustained 4 percent global shortfall would result in oil at 

$160 a barrel which would push the United States into recession losing 

millions of jobs. Note that oil shock wave focused on a multi-year drop 

in oil supply of 4 percent total but experts in this business will tell you 

that 4 to 8 percent per year is entirely possible and is happening in many 

parts of the world. Think risk. 

 Chinese officials have forecast the peaking world oil production 

around 2012. As this committee knows, China has been making huge 

investments to secure oil for its own country doing this around the world 

and paying premium prices. They tried to buy Unocal and that did not 

work. They offered a premium in that particular case. 

 The world has never confronted a problem like Peak Oil. Risk 

minimization mandates the massive implementation of mitigation well 

before the onset of the problem. Since we do not know when peaking is 

going to occur, that makes a tough problem for you folks as decision 

makers because if you are going to start 20 years ahead of something that 

is indeterminate, you have a tough time making the arguments. 

Mustering support is going to be difficult. We would all like to believe 
44

that the optimists are right about peak oil, but the risks, again the risks of 

them being wrong, are beyond anything that we have experienced. 

 Think risk and thank you. 

 [The prepared statement of Robert L. Hirsch follows:] 

PREPARED STATEMENT OF DR. ROBERT L. HIRSCH, SENIOR ENERGY 

PROGRAM ADVISOR, SAIC 

SUMMARY 

 The era of plentiful, low-cost petroleum is approaching an end. A recent analysis for 

the DOE focused on what might be done to mitigate the peaking of world oil production. 

It became abundantly clear that effective mitigation will be dependent on the 

implementation of mega-projects and mega-changes at the maximum possible rate. A 

scenario analysis was performed, based on crash program implementation worldwide – 

the fastest humanly possible. The timing of oil peaking was left open because of the 

considerable differences of opinion among experts. The results were startling: Unless a 

mitigation crash program is started 20 years before peaking occurs, the economic 

consequences will be dire. 

 Oil peaking represents a liquid fuels problem, because motor vehicles, aircraft, 

trucks, and ships have no ready alternative to liquid fuels, certainly not for the existing 

capital stock, which has lifetimes measured on a decade scale. 

 The world has never confronted a problem like peak oil. Since it is uncertain when 

peaking will occur, the challenge for decision-makers is vexing. Mustering support for 

an approaching, invisible disaster is much more difficult than for one that is obvious. We 

would like to believe that the optimists are right about peak oil being a distant problem, 

but the risks of error are beyond imagination. 

INTRODUCTION 

 The era of plentiful, low-cost petroleum is approaching an end. The good news is 

that commercially viable mitigation options are ready for implementation. The bad news 

is that unless mitigation is orchestrated on a timely basis, the economic damage to the 

world economy will be dire and long lasting. 

 Oil is the lifeblood of modern civilization. It fuels most transportation worldwide and 

is a feedstock for pharmaceuticals, agriculture, plastics and a myriad of other products 

used in everyday life. The earth has been generous in yielding copious quantities of oil to 

fuel world economic growth for over a century, but that period of plenty is changing. 

 In the following, we describe the nature of the peaking problem, options for 

mitigation, and required timing. The exact date of peaking is not known; some think it 

will be soon, others think a decade or more. However, the date is almost irrelevant 

because mitigation will take much longer than a decade to impact, because of the 

enormous scale of world oil consumption. 

BACKGROUND 

 Oil was formed by geological processes millions of years ago and is typically found 

in underground reservoirs of dramatically different sizes, at varying depths, and with 

widely varying characteristics. The largest oil fields are called “super giants,” many of 

which were discovered in the Middle East. Because of their size and other 

characteristics, super giant oil fields are generally the easiest to find, the most economic 

to develop, and the longest-lived. The world’s last super giant oil fields were discovered 

in the 1960s. Since then, smaller fields of varying sizes have been found in what are 

called “oil prone” locations worldwide -- oil is not found everywhere. 
45

 

 The concept of the peaking of world oil production follows from the fact that the 

output of an oil individual field rises after discovery, reaches a peak, and then declines. 

Oil fields have lifetimes typically measured in decades, and peak production often occurs 

roughly a decade or so after discovery under normal circumstances. It is important to 

recognize that oil production peaking is not “running out.” Peaking is the maximum oil 

production rate, which typically occurs after roughly half of the recoverable oil in an oil 

field has been produced. What is likely to happen on a world scale will be similar to 

what happens with individual oil fields, because world production is by definition the 

sum total of production from all of the world’s oil fields. 

 Oil is usually found thousands of feet below the surface. Oil fields do not typically 

have an obvious surface signature, so oil is very difficult to find. Advanced technology 

has greatly improved the discovery process and reduced exploration failures. 

Nevertheless, world oil discoveries have been steadily declining for decades. 

OIL RESERVES

 “Reserves” is an estimate of the amount of oil in an oil field that can be extracted at 

an assumed cost. Thus, a higher oil price outlook often means that more oil can be 

produced. However, geological realities place an upper limit on price-dependent reserves 

growth. 

 Specialists who estimate reserves use an array of technical methodologies and a great 

deal of judgment. Thus, different estimators might calculate different reserves from the 

same data. Sometimes self-interest influences reserve estimates, e.g., an oil field owner 

may provide a high estimate in order to attract outside investment, influence customers, 

or further a political agenda. 

 Reserves and production should not be confused. Reserves estimates are but one 

factor used in estimating future oil production from a given oil field. Other factors 

include production history, local geology, available technology, oil prices, etc. An oil 

field can have large estimated reserves, but if a well-managed field has past maximum 

production, the remaining reserves can only be produced at a diminishing rate. 

Sometimes declines can be slowed, but a return to peak production is impossible. This 

fundamental is not often appreciated by those unfamiliar with oil production, and it is 

often a major factor in misunderstanding the basic nature of oil production. 

PRODUCTION PEAKING 

 World oil demand is forecast to grow 50 percent by 2025.1 To meet that demand, 

ever-larger volumes of oil will have to be produced. Since oil production from individual 

oil fields grows to a peak and then declines, new fields must be continually discovered 

and brought into production to compensate for the depletion of older fields and to meet 

increasing world demand. If large quantities of new oil are not discovered and brought 

into production somewhere in the world, then world oil production will no longer satisfy 

demand. Peaking means that the rate of world oil production cannot increase; it does not 

mean that production will suddenly stop because there will still be large reserves 

remaining. 

 As indicated in Table I, some forecasters believe that world oil production peaking 

might occur very soon. Others argue that we may have more than a decade of plentiful 

oil. 

 Until recently, OPEC assured the world that oil supply would continue to be 

plentiful, but that position is changing. Some in OPEC are now warning that oil supply 

will not be adequate to satisfy world demand in 10-15 years.2 Dr. Sadad al-Husseini, 

1

 U.S. Department of Energy, Energy Information Administration, International Energy 

Outlook – 2004, February 2004. 2

 Moors, K.F. How Reliable are Saudi Production and Reserve Estimates? Dow Jones 
46

 

retired senior Saudi Aramco oil exploration executive, is on record as saying that the 

world is heading for an oil shortage; in his words “a whole new Saudi Arabia (will have 

to be found and developed) every couple of years'' to satisfy current demand forecasts.3 

So the messages from the world’s “breadbasket of oil” are moving from confident 

assurances to warnings of approaching shortage. 

THE OIL PRICE-RESERVES NEXUS 

 In the past, higher prices led to increased estimates of conventional oil reserves 

worldwide. However, this price-reserves relationship has its limits, because oil is found 

in discrete packages (reservoirs) as opposed to the varying concentrations characteristic 

of many minerals. Thus, at some price, world reserves of recoverable conventional oil 

will reach a maximum because of geological fundamentals. Beyond that point, 

insignificant additional conventional oil will be recoverable at any realistic price. This is 

a geological fact that is often not understood by economists, many of whom are 

accustomed to dealing with hard minerals, whose geology is fundamentally different. 

 Oil companies and governments have conducted extensive exploration worldwide, 

but their results have been disappointing for decades. On this basis, there is little reason 

to expect that future oil discoveries will dramatically increase. The situation is 

illustrated in Figure 1, which shows the difference between annual world oil reserves 

additions and annual consumption.4

 The image is one of a world moving from a long 

period in which reserves additions were much greater than consumption, to an era in 

which annual additions are falling increasingly short of annual consumption. A related 

fact is that oil production is in decline in 33 of the world’s 48 largest oil-producing 

countries.5

IMPACTS OF IMPROVED TECHNOLOGY AND HIGHER PRICES 

 Exploration for and production of petroleum has been an increasingly more 

technological enterprise, benefiting from more sophisticated engineering capabilities, 

advanced geological understanding, improved instrumentation, greatly expanded 

computing power, more durable materials, etc. Today’s technology allows oil fields to be 

more readily discovered and better understood sooner than heretofore. 

 Some economists expect improved technologies and higher oil prices will provide 

ever-increasing oil production for the foreseeable future. To gain some insight into the 

effects of higher oil prices and improved technology on oil production, consider the 

history of the U.S. Lower 48 states. This region was one of the world’s richest, most 

geologically varied, and most productive up until 1970, when production peaked and 

started into decline. Figure 2 shows Lower 48 historical oil production with oil prices 

and technology trends superimposed. In constant dollars, oil prices increased by roughly 

a factor of three in 1973-74 and another factor of two in 1979-80. In addition to these 

huge oil price increases, the 1980s and 1990s were a golden age of oil field technology 

development, including practical 3-D seismic, economic horizontal drilling, dramatically 

improved geological understanding, etc. Nevertheless, as Figure 2 shows, Lower 48 oil 

production still trended downward, showing no pronounced response to either price or 

technology. In light of this experience, there is no reason to expect that the worldwide 

situation will be different: Higher prices and improved technology are unlikely to yield 

dramatically higher conventional oil production. 

Middle East Business Strategies. July 15, 2005. 

3

 Haas, P. The Breaking Point. New York Times Magazine. August 21, 2005. 4

 Aleklett, K. & Campbell, C.J. The Peak and Decline of World Oil and Gas Production.

Uppsala University, Sweden. ASPO web site. 2003. 

5

 O’Reilly, D.J., Chairman and CEO, Chevron Corporation. Washington Post. July 25, 

2005. 
47

 

PEAKING OF WORLD OIL PRODUCTION 

 Various individuals and groups have used available information and geological tools 

to develop forecasts for when world oil production might peak. A sampling is shown in 

Table 1, where it is clear that many believe that peaking is likely within a decade. 

MITIGATION 

 A recent analysis for the U.S. Department of Energy addressed the question of what 

might be done to mitigate the peaking of world oil production.6

 Various technologies 

that are commercial or near commercial were considered: 

1. Fuel efficient transportation, 

2. Heavy oil/Oil sands, 

3. Coal liquefaction, 

4. Enhanced oil recovery, 

5. Gas-to-liquids. 

 It became abundantly clear early in this study that effective mitigation will be 

dependent on the implementation of mega-projects and mega-changes at the maximum 

possible rate. This finding dictated the focus on currently commercial technologies that 

are ready for implementation. New technology options requiring further research and 

development will undoubtedly prove very important in the longer-term future, but they 

are not ready now, so their inclusion would be strictly speculative. 

 A scenario analysis was performed, based on crash program implementation 

worldwide – the fastest humanly possible. The timing of oil peaking was left open 

because of the considerable differences of opinion among experts. Consideration of a 

number of implementation scenarios provided the following startling insights: 

• Waiting until world oil production peaks before taking crash program action leaves 

the world with a significant liquid fuel deficit for more than two decades. 

• Initiating a mitigation crash program 10 years before world oil peaking helps 

considerably but still leaves a liquid fuels shortfall roughly a decade after the time 

that oil would have peaked. 

• Initiating a mitigation crash program 20 years before peaking offers the possibility of 

avoiding a world liquid fuels shortfall for the forecast period. 

 The reason why such long lead times are required is that the worldwide scale of oil 

consumption is enormous – a fact often lost in a world where oil abundance has been 

taken for granted for so long. If mitigation is too little, too late, world supply/demand 

balance will have to be achieved through massive demand destruction and shortages, 

which would translate to extreme economic hardship. On the other hand, with timely 

mitigation, economic damage can be minimized. 

WARNING SIGNS

 In an effort to gain some insight into the possible character of world oil production 

peaking, a number of regions and countries that have already past oil peaking were 

6

 Hirsch, R.L., Bezdek, R. and Wendling, R. Peaking of World Oil Production: Impacts, 

Mitigation and Risk Management. DOE NETL. February 2005. 
48

 

recently analyzed.7 Areas that had significant peak oil production and that were not 

encumbered by major political upheaval or cartel action were Texas, North America, the 

United Kingdom, and Norway. Three other countries that are also past peak production, 

but whose maximum production was smaller, were Argentina, Colombia, and Egypt. 

 Examination of these actual histories showed that in all cases it was not obvious that 

production was about to peak a year ahead of the event, i.e., production trends prior to 

peaking did not provide long-range warning. In most cases the peaks were sharp, not 

gently varying or flat topped, as some forecasters hope. Finally, in some cases post-peak 

production declines were quite rapid. 

 It is by no means obvious how world oil peaking will occur, but if it follows the 

patterns displayed by these regions and countries, the world will have less than a year 

warning. 

IT’S NOT YOUR MOTHER’S ENERGY CRISIS 

 Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that 

term has often been used. Motor vehicles, aircraft, trains, and ships simply have no ready 

alternative to liquid fuels, certainly not for the existing capital stock, which have very 

long lifetimes. Non-hydrocarbon-based energy sources, such as renewables and nuclear 

power, produce electricity, not liquid fuels, so their widespread use in transportation is at 

best many decades in the future. Accordingly, mitigation of declining world 

conventional oil production must be narrowly focused, at least in the near-term. 

RISK MANAGEMENT

 It is possible that peaking may not occur for a decade or more, but it is also possible 

that peaking may be occurring right now. We will not know for certain until after the 

fact. The world is thus faced with a daunting risk management problem. On the one 

hand, if peaking is decades away, massive mitigation initiated soon might be premature. 

On the other hand, if peaking is imminent, failure to quickly initiate mitigation will 

impose large near-term economic and social costs on the world. 

 The world has never confronted a problem like this. Risk minimization requires the 

implementation of mitigation measures well prior to peaking. Since it is uncertain when 

peaking will occur, the challenge for decision-makers is indeed vexing. Mustering 

support for an approaching invisible disaster is much more difficult than for one that is 

obvious. 

POTENTIAL ECONOMIC IMPACTS OF OIL PEAKING 

 How bad might be the economic damage of world oil shortages? There is a paucity of 

analysis of the economic impacts of reductions in world oil supply. One study -- Oil 

Shockwave -- was performed by a group of credible former high-level government 

officials8

. They concluded: 

1. Given today’s precarious balance between oil supply and demand, taking even 

a small amount of oil off the market could cause prices to rise dramatically. A 

roughly 4 percent (sustained) global shortfall in daily supply results in oil 

above $160 per barrel. 

7

 Hirsch, R.L. Shaping the Peak of World Oil Production. World Oil. October 2005. 8 Oil Shockwave Report Finds Severe Economic and National Security Risks From Small 

Global Oil Supply Disruptions. National Commission on Energy Policy & Securing 

America’s Future Energy. September 6, 2005. 
49

2. Oil price shocks of this magnitude could do significant damage to the U.S. 

economy. In Oil ShockWave, the economy goes into recession and there are 

millions of fewer jobs as a result of sustained higher oil prices. 

 Oil Shockwave was focused on a multi-year drop of just 4% in oil supply. Major oil 

companies and others forecast oil declines of 4-8% per year – Yes, per year. 

CONCLUDING REMARKS 

 Chinese officials have forecast the peaking of world oil production around the year 

2012. As this committee knows, China has been making huge oil investments and 

procurement deals all over the world in recent years. They attempted to buy Unocal 

above market price. Indeed they are paying premium prices in many countries in order to 

secure future oil supplies. 

 It is possible that peaking may not occur for a decade or more, but it is also possible 

that peaking is occurring right now. We will not know for certain until after the fact. 

 Over the past century world economic development has been fundamentally shaped 

by the availability of abundant, low-cost oil. Previous energy transitions (wood to coal, 

coal to oil, etc.) were gradual and evolutionary; oil peaking will be abrupt and 

revolutionary. 

 The world has never faced a problem like this. Without massive mitigation at least a 

decade before the fact, the problem will be pervasive and long lasting. 

 Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that 

term has been used. Accordingly, mitigation of declining world oil production must be 

narrowly focused, at least in the near-term. 

 A number of technologies are currently available for immediate implementation once 

there is the requisite determination to act. Governments worldwide will have to take the 

initiative on a timely basis, and it may already be too late to avoid considerable 

discomfort or worse. Countries that dawdle will suffer from lost opportunities, because 

in every crisis, there are always opportunities for those that act decisively. 

 

ACKNOWLEDGEMENTS 

The author deeply appreciates the encouragement and continuing support for the 

author’s work on peak oil by the management the U.S. Department of Energy’s National 

Energy Technology Laboratory. Roger Bezdek and Robert Wendling of Management 

Information Services, Inc. were major contributors to the analyses described herein. 

The Author 

 Robert L. Hirsch is a Senior Energy Program Advisor for SAIC and a consultant in 

energy. Previous employment included executive positions at the U.S. Atomic Energy 

Commission, the U.S. Energy Research and Development Administration, Exxon, 

ARCO, EPRI, and Advance Power Technologies, Inc. Dr. Hirsch is a past Chairman of 

the Board on Energy and Environmental Systems at the National Academies. He has a 

Ph.D. in engineering and physics from the University of Illinois. 
50

Table I. Projections of the Peaking of World Oil Production

Projected Date Source of Projection Background & Reference

2006-2007 Bakhitari, A.M.S. Oil Executive (Iran)9

2007-2009 Simmons, M.R. Investment banker (U.S.) 10

After 2007 Skrebowski, C. Petroleum journal editor (U.K.) 11

Before 2009 Deffeyes, K.S. Oil company geologist (ret., U.S.)) 12

Before 2010 Goodstein, D. Vice Provost, Cal Tech (U.S.) 13

Around 2010 Campbell, C.J. Oil geologist (ret., Ireland)14

After 2010 World Energy Council World Non-Government Org.15

2012 Pang Xiongqi Petroleum Executive (China)16

2010-2020 Laherrere, J. Oil geologist (ret., France) 17

2016 EIA nominal case DOE analysis/ information (U.S.)18

After 2020 CERA Energy consultants (U.S.) 19

2025 or Later Shell Major oil company (U.K.) 20

 

9

 Bakhtiari, A.M.S. World Oil Production Capacity Model Suggests Output Peak by 

2006-07. Oil and Gas Journal. April 26, 2004. 10 Simmons, M.R. ASPO Workshop. May 26, 2003. 

11 Skrebowski, C. Oil Field Mega Projects - 2004. Petroleum Review. January 2004. 12 Deffeyes, K.S. Hubbert’s Peak-The Impending World Oil Shortage. Princeton 

University Press. 2003. 

13 Goodstein, D. Out of Gas – The End of the Age of Oil. W.W. Norton. 2004 14 Campbell, C.J. Industry Urged to Watch for Regular Oil Production Peaks, Depletion 

Signals. Oil and Gas Journal.. July 14, 2003. 15 Drivers of the Energy Scene. World Energy Council. 2003. 16 Pang Xiongqi. The Challenges Brought by Shortages of Oil and Gas in China and 

Their Countermeasures. ASPO Lisbon Conference. May19-20, 2005. 17 Laherrere, J. Seminar Center of Energy Conversion. Zurich. May 7, 2003 

18 DOE EIA. Long Term World Oil Supply. April 18, 2000. See Appendix I for 

discussion. 

19 Jackson, P. et al. Triple Witching Hour for Oil Arrives Early in 2004 – But, As Yet, No 

Real Witches. CERA Alert. April 7, 2004. 20 Davis, G. Meeting Future Energy Needs. The Bridge. National Academies Press. 

Summer 2003. 
51

0 

-20 

20 

40 

1940 2000 

Year 

Billions 

of Barrels

Figure 1. The net difference between annual world oil reserves additions and 

annual oil consumption has been declining for decades. 

Dramatic 

Improvement in 

Oil Field 

Technology 

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

1950 1960 1970 1980 1990 2000 

Figure 2. The decline of U.S. Lower 48 oil production was not reversed by large changes 

in oil prices or the dramatic improvement in oil field technologies. 

Production

Pric

Billions of barrels / 

year 

7

0

2002 dollars 

per barrel
52

 MR. HALL. Thank you. 

 Mr. Esser? 

 MR. ESSER. Mr. Chairman and members of the committee, it is an 

honor for me to be here to address this committee on the critical issue of 

the nation’s and world oil supply as the United States is inextricably 

bound up in a global marketplace. 

 We all recognize the importance of energy to our nation’s future and 

the committee is to be commended for seeking to clarify and elucidate 

this important subject. As a nation, we have previously gone through 

periods of deep concern about the adequacy of energy supplies. Recently 

high prices, tight supplies, rapid demand growth, and political turbulence 

have all come together to put the spotlight on this question once again 

and have combined to create the urgency that is reflected in today’s 

hearing. 

 The committee has asked us to address the question of Peak Oil. In 

our view, this is not a very helpful concept, nor one that provides much 

descriptive power. We at Cambridge Energy Research Associates have 

been conducting continuing research on the future of oil supplies, 

working up from a field by field basis in individual countries. Now that 

we are part of IHS, we can enhance our analysis by calling upon IHS's 

upstream oil field databases which are the largest and most complete in 

the world. 

 The following are our basic conclusions. One, the world is not 

running out of oil imminently, or in the medium term. Our field by field 

activity based analysis points to a substance build up of liquid capacity 

over the next several years. Two, an increasing share of supplies will 

come from non-traditional or unconventional oils from the ultra deep 

waters, from oil sands, from gas related liquids in which we include 

condensates and natural gas liquids and also the conversion of gas to 

liquids. Three, rather than an isolated peak, we should expect an 

undulating plateau, perhaps three or four decades from now. Peaking 

does not imply a precipitous decline towards running out. Four, one 

reason for the general pessimism about future supplies is that based on 

Cambridge Energy’s reserve study, the reserve disclosure rules mandated 

by the Securities and Exchange Commission are based on decades old 

technology and need to be updated to reflect the new technology which is 

now available to verify reserves. Five, the major risk to this outlook, 

however, are not below ground geological factors but above ground 

geopolitical factors. 

 Let me now address these questions in more detail and specifically 

where we see growth coming from. The CERA outlook differs from 

others in that we are forecasting the capacity to produce. This is very 

important and it differs from actual production which can be affected by 
53

such temporary disruptions as weather, accidents, maintenance, labor 

disputes, demand for poor quality oils, and economic cycles that affect 

demand. Recognizing the growing importance of unconventional liquids 

they are also included in our outlook and we also include oil from future 

discoveries. Most of these liquids are excluded from those outlooks 

calling for a near term peak. 

 Our sources of new supply: new capacity comes from the 

development of recent discoveries, older discoveries only recently made 

available – such as all of those huge fields now being developed in the 

Caspian Sea area – existing field reserve upgrades, and the drilling 

response to high prices which will tend to reduce decline rates in mature 

areas. Accordingly, the CERA outlook is a more optimistic picture than 

many of the other publicly available outlets and strongly contradicts 

those who believe Peak Oil is imminent. 

 Key trends: in our core scenario, which is at the high end of our 

expectations, CERA expects capacity could increase by as much as 15 

million barrels a day to 102 million barrels a day by 2010. This is up 

from the 87 million barrels a day currently with a further increase of 6 

million barrels a day to 108 million barrels by 2015. This is a 25 percent 

increase. All regions except the United States and the North Sea will 

show strong growth to 2020. Non-OPEC countries with strong growth in 

exports include Russia, Azerbaijan, Kazakhstan, Angola, Brazil, and 

Canada. Actually right now there is no more intense exploration in 

producing play than the Canadian oil sands. Strong growth takes place 

in both OPEC and non-OPEC countries till 2010, however, we also 

recognize that this will moderate by 2015. 

 Unconventional liquids will continue the strong growth exhibited 

since 2000 and are expected to comprise 30 percent of global capacity in 

2010 and 35 percent in 2015. This is lead by gas related liquids 

associated with the gas under development to meet the soaring demand 

for liquefied natural gas, especially for the United States and other 

country and regional gas demand growth. The inclusion of these gas 

related liquids is certainly warranted as they too satisfy the demand of 

the liquid oil demand. 

 The increases in capacity are also underpinned by the development of 

the characteristic very large discoveries recently made in very deep 

waters since the late 1990’s. The top ten discoveries alone each year add 

something on the order of 2 to 2-1/2 million barrels a day. Accordingly, 

CERA does not recognize a peak in oil capacity until at least 2030. 

 Why do we think the CERA outlook is correct? Well first of all, we 

utilize an activity based methodology that involves a rigorous bottom-up, 

field-by-field analysis of each significant country, including depletion 

and existing production, and a contribution from future discoveries based 
54

on a forecasted pace of exploration in individual areas, and discovery 

results tailored to the current discovery results. Second, our long-term 

geology based experience is applied in analyzing oil field and related 

upstream matters. The expected strong near term growth of 5 million 

barrels a day that is projected to occur between 2004 and next year 2006 

and 11 million barrels a day from 2004 to 2008 is sped by projects 

already sanctioned and under development lending support to the 

projected accelerated growth of liquids capacity. We also monitor the 

significance of recent discovery trends, including those in new areas such 

as India, Malaysia, the Sakhalin Island area, and Mauritania. We also 

have increased recognition by others and these are other people that are 

in this business and do this work of the increase in capacity that is 

underway. 

 What kind of eventual peak is envisioned? CERA envisions the 

eventual global liquid capacity peak as a multiyear undulating plateau 

followed by a long, slowly declining profile rather than an isolate peak 

followed by a rapid decline. This is similar to the pattern exhibited by 

individual fields, by regions, and by countries with their production 

profiles. We also have to look at what could slow the near term 

projected 15 million barrel a day increase in global liquid capacity by 

2010. Many risks loom on the horizon that could impact productive 

capacity. Most of these are above ground risks such as severe lack 

qualified manpower and the shortage of rigs. Political risks occur in 

most OPEC countries especially in Iraq, Iran, Venezuela, and non-OPEC 

Russia. Other risks include access to areas of major under discovered 

reserve potential, a slowdown in the company sanction of new field 

development, and this is most important, an unexpected higher than 

assumed decline rate in some of the large Middle East fields, and lastly, 

delayed Government sanction of certain long awaited projects in Iran, 

Kuwait, and the UAE. Should many of these concerns take place in the 

near future, capacity in 2010 could be 5 million barrels a day lower than 

projected. 

 In summary, CERA expect accelerated growth in liquid oil supply by 

2010, moderating somewhat by 2015. Through 2030, CERA does not 

see a peak in liquid capacity. 

 Thank you for you consideration of this testimony. 

 [The prepared statement of Robert Esser follows:] 

PREPARED STATEMENT OF ROBERT ESSER, SENIOR CONSULTANT AND 

DIRECTOR, GLOBAL OIL AND GAS RESOURCES, CAMBRIDGE ENERGY 

RESEARCH ASSOCIATES

Mr. Chairman, Members of the Committee. 
55

 

It is an honor to address this Committee on the critical issue of the nation's—and the 

world's—oil supply. We need a global perspective; after all, the United States is so 

inextricably bound up in a global marketplace. We all recognize the importance of energy 

to our nation's future, and the Committee is to be commended for seeking to clarify and 

elucidate this important subject. As a nation, we have previously gone through periods of 

deep concern about the adequacy of energy supplies. High prices, tight supplies, rapid 

demand growth, and political turbulence—all these have come together to put the 

spotlight on this question once again and have combined to create the urgency that is 

reflected in today's hearings. 

The Committee has asked us to address the question of Peak Oil. In our view, this is 

not a very helpful concept, nor one that provides much descriptive power. Rather than an 

imminent “peak,” we envision an “undulating plateau” two to four decades away. We at 

Cambridge Energy Research Associates have been conducting continuing research on 

future oil supplies, working up from a field-by-field basis. Now that we are part of IHS, 

we can enhance our analysis by calling upon IHS' upstream oil field data bases, which are 

the largest and most complete in the world.1

This is an issue that needs most serious consideration. After all, the planet has a finite 

resource, and the world is consuming 30 billion barrels a year. But the understanding of 

the situation that needs some clarification. Key considerations include technology, 

economics, timing, fiscal and regulatory terms, and a comprehensive understanding of 

current and future productive capacity. As we see it, the model for peak oil has been and 

continues to be flawed. The resource base is still poorly understood and it appears to 

continue to expand. 

Our key points are as follows: 

1. The world is not running out of oil in the near or medium term. Our fieldby-field activity-based analysis points to a substantial build-up of liquid 

capacity over the next several years. 

2. An increasing share of supplies will come from "non traditional oils"—

from the ultra-deep waters, oil sands, natural gas liquids, gas-to-liquids, coalto-liquids, etc. As time goes on, these "non-traditionals" will become more 

traditional. 

3. Rather than a "peak," we should expect an "undulating plateau," perhaps 

three or four decades from now. 

4. One reason for the pessimism about future supplies is that the reserves 

disclosure rules mandated by the Securities and Exchange Commission are 

based upon three decades old technology, and need to be updated. (We discuss 

this later in this written testimony). 

5. The major risks to this outlook are not below ground, but above ground—in 

such forms as political turbulence, abrupt changes in contract terms, and 

controversy over fiscal terms. 

6. Meeting the energy needs of a growing world in an environmentally-sound 

fashion will be a major challenge. Doing so will require substantial investment 

and continuing technological innovation and will more likely be achieved 

through an open global economy. 

The most fundamental challenge facing the global oil industry is to increase oil 

production capacity. This challenge is not new. Indeed, rising prices and the current thin 

cushion of spare oil production capacity have resurrected an old worry: fear that the 

world is running out of oil. This has been a recurrent theme ever since the first oil well 

began production in Pennsylvania in 1859. It gathers steam and garners media attention 

about once every generation or so—particularly when oil prices are on the rise. 

1

 See Peter Jackson and Robert Essser CERA Private Report, World Liquids Capacity 

Outlook to 2010: Tight Supply or Excess of Riches? 
56

 

Are we running out of oil? CERA’s belief is that the world is not running out of oil 

imminently or in the near to medium term. Indeed, CERA projects that world oil 

production capacity has the potential to rise from 87 million barrels per day (mbd) in 

2005 to as much as 108 mbd by 2015.2 After 2015 we see further growth in capacity. 

Our outlook contradicts those who believe that peak oil is imminent. 

 Although there have been recent downside factors such as the slowing rate of 

expansion of capacity in Russia and continuing problems in Iraq, this is balanced by a 

more positive outlook for major producing countries such as Angola and Brazil, where a 

stream of large projects continues. In addition to crude oil from conventional settings, our 

analysis concludes that unconventional oil—condensates, natural gas liquids (NGLs), 

deepwater production, extra heavy oils and gas-to-liquids (GTLs) will represent about 35 

percent of total capacity in 2015— compared to 10 percent in 1990. 

To be sure, many significant risks to production capacity loom on the horizon, but 

these are largely above-ground risks. Perhaps the greatest problem at present is the severe 

lack of qualified manpower resources and limits imposed by rig and yard availability and 

materials. At current high oil prices most oil companies want to increase activity levels, 

especially with existing producing fields, that will have a rapid return on investment, but 

increased competition has driven the cost of manpower and services higher. In addition, 

although we do not see a global peak in production capacity, the rate of growth in nonOPEC capacity will likely slow after 2010. 

Political risks also have an impact on capacity expansion in the Middle East, where 

the situation in Iraq continues to be highly problematic, and there is growing uncertainty 

over events in Iran. In Russia, changes in ownership, the constraints of geology, and the 

fiscal and regulatory systems, as well as logistical bottlenecks and geological challenges 

– all these have led to the end of Russia’s high supply growth era. In Venezuela fiscal and 

political changes have hindered the recovery of oil production and investment in the 

aftermath of the late 2002/early 2003 disruption and are likely to have continuing impact. 

Our views about the peak oil debate have been reinforced by a detailed new audit of 

our own analysis and also further evidence that has come to light concerning the 

enormous scale of field reserve upgrades of existing fields. We also draw upon the 

proprietary databases of IHS, of which CERA is now part. These are the most extensive 

and complete databases on field production around the world. We see no evidence to 

suggest a peak before 2020, nor do we see a transparent and technically sound analysis 

from another source that justifies belief in an imminent peak. It will be a number of 

decades into this century before we get to an inflexion point that will herald the arrival of 

the “undulating plateau.” 

CERA’s Methodology 

CERA methodology generates an activity-based model that involves a rigorous 

bottom-up analysis of each country, for which we sum component capacity profiles for 

fields in production (FIP), fields under development (FUD), fields under appraisal 

(FUA), and a yet-to-find (YTF) component. Decline rates are built into this analysis. It is 

important to understand that we do not predict production as such, but rather capacity to 

produce, and that our assessment is lower than the industry aggregated total. We do not 

simply focus on crude oil alone, but encompass unconventional liquids including 

condensates, natural gas liquids (NGLs), heavy oils, and ultra deepwater oils. Many of 

the other projections available do not include all of these components, and this may 

explain why CERA’s outlook is different. We also recognize that above-ground 

developments could lead to capacity growth’s falling short of its potential. 

2

 Oil refers to crude oil, condensate, natural gas liquids (NGLs), and other sources of 

liquid hydrocarbons. 
57

Major Trends and Signposts 

Assuming no serious political crises in key producing countries or an unexpected 

shortfall in investment, global oil production capacity will continue to grow strongly 

toward 102.4 mbd by 2010 from the current level of 87.2 mbd. This expansion will be 

fairly evenly split between OPEC and non-OPEC countries: 8.5 mbd and 6.7 mbd, 

respectively. The expansion continues to 2015, but OPEC shows a greater increase: a net 

gain of 12.2 mbd (relative to 2005) versus 8.2 mbd for non-OPEC. At the regional level, 

the United States and North Sea show decreases to 2015 while Canada, West and North 

Africa, Latin America, and the Caspian, and the Middle East continue their current trend 

of strong expansion past 2010 and through 2015. Southeast Asia shows some modest 

growth, but declines after 2010. At the same time, Russian capacity growth slows. 

By 2015 we also see a change in the geographic focus of the sources of liquids 

supply. The proportion of liquids capacity from the top 15 countries will rise from 58 

percent in 2005 to 65 percent in 2015. While nearly every OPEC country, except 

Indonesia, shows potential for a significant increase to 2015, the sources of expansion in 

non-OPEC countries are more limited, with Russia, the Caspian nations, Brazil, Angola, 

and Canada leading the way. We also note the emergence of some new sources of liquids 

capacity both in the deep water, such as offshore Mauritania, and onshore in Sudan. In 

addition, mature areas such as Malaysia are reemerging and a new play is being 

successfully explored and developed in a previously unexplored deepwater area offshore 

Sabah, in northwest Malaysia. However, this shift in emphasis may prove to be to more 

politically and operationally challenging countries, which increases the levels of risk and 

supply anxiety in some consumer countries. 

There are a large number of major projects in both OPEC and non-OPEC countries 

that underpin the increases. The top 10 projects being brought onstream each year will 

together add a cumulative gross capacity of 2.0–2.5 mbd per year until 2010 alone. These 

projects were approved under a much lower oil price regime, and even if the oil price 

falls significantly these projects will proceed. While there has been some slippage (e.g., 

Thunder Horse and Adar Yale), other projects began production ahead of schedule (e.g., 

Kizomba B, Whiterose). 

Trends in Crude Quality and Unconventional Liquids 

Analysis of the composition of new capacity shows that in the medium term there 

will be increasing proportions of light and heavy oils and a reduction in the proportion of 

medium grade crude. However, capacity additions to 2010 are predominately light (8 

mbd), medium (5 mbd), and heavy (3 mbd) We also see a continuing rapid expansion of 

deepwater production capacity up to 2010, with a major surge from 3.4 mbd in 2005 to 

over 9 mbd by 2010. This surge will be dominated by growth from the “big four” 

deepwater areas: the US Gulf of Mexico, Brazil, Angola, and Nigeria, with more modest 

contributions from other areas. 

Production capacity of extra heavy oil from Canada and Venezuela will expand from 

1.8 mbd in 2005 to 4.9 mbd in 2015. Despite accidents earlier in 2005 the Canadian 

projects are moving forward at an accelerating pace. Expansion from 1.2 mbd currently 

to 3.4 mbd by 2015 is anticipated, with approximately half being mined and the 

remainder in situ. In Venezuela the four main Orinoco projects are onstream (totaling 

650,000 bd) and with debottlenecking could reach 700,000 bd by 2010. 

Between 2005 and 2015 there is considerable potential to expand total condensate 

plus natural gas liquids (NGLs) capacity from 14 mbd to 22 mbd.2 Notable condensate 

expansions will occur in Qatar as the liquefied natural gas (LNG) business expands and 

more gas is produced for pipeline exports and GTL conversion. One of the largest 

expansions of condensate capacity will occur in Norway. The story for NGLs is similar, 

with much of the expansion to 2010 occurring in many OPEC countries, including Saudi 
58

 

Arabia, Qatar, and Nigeria. NGLs capacity in the United States will decline by 2010 in 

response to declining gas production. 

Until recently the gas-to-liquids (GTL) business had contributed only a small 

proportion of production (160,000 bd in 2005), but there are a number of projects under 

way and planned that are expected to boost production capacity to 480,000 bd by 2010 

and 1 mbd in 2015. This is a lower buildup than might be anticipated by summing the 

reports of current activity, but we expect that operators will not commit to new GTL 

projects until there is some certainty that the oil price will remain high on a sustained 

basis.3

OPEC Capacity Trends 

Although most OPEC members are currently producing at or very close to capacity, 

they are in a strong position to expand total liquids production capacity to 49.9 mbd in 

2015, with the proportion of condensates and NGLs rising by that time. Much of this 

expansion will tend to come from existing fields and discoveries rather than extensive 

new exploration. The key challenges are to understand the impact of decision making and 

political uncertainties on project execution and to take into account price trends that will 

influence the buildup of capacity over the next half decade. 

• Saudi Arabia possesses the largest resource base in the world, with 268 billion 

barrels of proven reserves. Recent reports suggest that some 200 billion barrels 

of reserves is likely to be added. CERA believes that, in common with other 

countries around the Gulf, the exploration potential is still very high, despite 

the high level of existing proven reserves. While there has been much debate 

about Saudi Arabia’s ability to expand production capacity, we see no 

comprehensive justification of claims that production is about to “fall off a 

cliff.” We anticipate an expansion of crude and condensate capacity from 11.1 

mbd in 2005 to as much as 13.2 mbd by 2015. Saudi Arabia is working to 

sustain its 1.5–2.0 mbd level of surge capacity while concentrating on 

increasing production of lighter and sweeter crude oil. 

• Iran is making slow progress in expanding capacity, which currently stands at 

just under 4.2 mbd. With relatively high annual decline rates, delays in bringing 

new projects onstream, problems with existing projects (Soroush-Nowruz), and 

the changing internal and external political environment, the rate of expansion 

will slow compared to previous projections, but is still expected to reach 5.2 

mbd by 2015. 

• Iraq did not reach its goal of achieving production of 2.8 mbd by April 2004. It 

is currently producing 1.9 mbd and it is difficult to predict exactly when the 

situation will stabilize and allow new investment in the oil and gas sector. We 

believe that progress will be slow, with capacity reaching 2.8 mbd by 2010 and 

4 mbd by 2015. Iraq has the potential for sustained liquids capacity in excess of 

5 mbd and has major exploration potential. It will likely be a major player in 

OPEC expansion after 2010. 

• Libya has reopened its doors to US oil companies following the lifting of 

sanctions. Presanction license holders have renegotiated their contracts. In 

addition, a number of successful licensing rounds have occurred and we 

anticipate that new discoveries will start feeding into the development queue by 

2007/08. Meanwhile, there is a backlog of discoveries to develop and the 

possibility of enhancing production from some of the major fields that have 

seen very little investment for 20 years. Libyan production capacity will 

3

 Condensate and natural gas liguids (NGLs) are gas-related liquids. Condensate is a gas 

at depth but a liquid at the surface. NGLs are liquids removed from rich gas by 

processing and consist of propane, butane, ethane, etc. 
59

average 1.8 mbd in 2005 and climb fairly slowly to 2.5-3.0 mbd by 2015. The 

higher number depends on a successful exploration program combined with a 

focus on improved oil recovery projects. This is still early days for the 

reopening, and it remains to be determined how rapidly activity will pick up. 

• Nigeria’s deepwater projects finally appear to be moving forward. Exploration 

appears to be bearing fruit with the recent new discoveries. Expansion of 

production capacity to 4 mbd by 2010 from the current level of 2.9 mbd is 

strongly supported by current development activity, but problems with ethnic 

tensions and strikes will persist. 

• Indonesian production capacity is dominated by small, mature fields that show 

high rates of decline. Despite progress with the negotiation of the Cepu project 

(170,000 bd by 2008) and other new projects, as well as major efforts to attract 

investment, we believe that Indonesia will struggle to expand capacity much 

above 1 mbd in the foreseeable future. 

• Venezuelan capacity is expected to continue to grow slowly from 2.9 mbd in 

2005 to 3.4 mbd by 2015, despite the huge resource potential. The Orinoco 

extra-heavy projects are currently contributing 650,000 bd. The sluggish 

recovery from the strike in 2002/03 is reflected by the continued slow increase 

in the number of active rigs and a slow buildup in investment. Also, changes in 

the investment and political climate will affect future levels of investment. 

• United Arab Emirates crude plus condensate capacity is expected to expand 

from 2.9 mbd in 2005 to 3.5 mbd in 2015. 

• In Kuwait expansion from 2.5 mbd to 3.5 mbd is expected between 2005 and 

2015. The schedule for implementing Project Kuwait, aimed at increasing the 

production of Northern Fields from 600,000 to 900,000 bd, is not clear at this 

point. 

Non-OPEC Capacity Trends 

Non-OPEC countries have a considerable inventory of projects under way and 

planned by 2010. There are 80 projects with reserves greater than 100 million barrels and 

a further 120 with reserves above 20 million barrels due to come onstream before the end 

of 2008. Non-OPEC production capacity is set to rise to 56.3 mbd by 2010, with the rate 

of growth slowing after that point. Capacity has the potential to reach 57.8 by 2015. This 

apparent reduction in the rate of increase after 2010 could be real, but could also reflect 

the less clarity in that time period as to our lack of knowledge which projects are likely to 

be developed, given that our Supply Expansion outlook is an activity-based model. 

• Brazil. Current production capacity of 1.8 mbd is set to expand to 2.9 mbd by 

2010. With new projects coming on stream, and with the recent successful 

Seventh Licensing Round and continued exploration success, we envisage 

continued expansion in total production capacity well past 2010. 

• Angola. Capacity is expected to expand rapidly from current levels of 1.3 mbd 

to 2.5 mbd by 2010. The string of deepwater discoveries in Angola continues. 

Developments in Angola, Nigeria, and elsewhere in the region will push West 

African liquids capacity up to 9.2 mbd in 2015, from 6 mbd in 2005. 

• United Kingdom. The United Kingdom is typical of a mature basin that is past 

its geometric peak of oil production. Indeed, there were two peaks, in 1985 and 

1999, which marked a plateau lasting more than 15 years. Capacity is now on a 

broadly declining trend despite the relatively high levels of activity. However, 

at the current high oil prices, and capitalizing on the extensive mature 

infrastructure, many small (less than 20 million barrels of oil equivalent) 

projects are being developed and helping to arrest the decline. Occasional 

major discoveries are still made in the United Kingdom, and a discovery on the 

Atlantic Margin could be developed soon after 2010. Even so, the overall trend 
60

 

is lower, and by 2015 we anticipate production capacity of 1.24 mbd (down 

from 2.09 mbd in 2005). 

• Norway shows some slight positive momentum for capacity in the short term, 

but with current rates of success and an inventory of relatively small 

discoveries to develop, CERA predicts that production capacity will decline 

from 3.3 mbd in 2005 to 2.3 mbd in 2015. Interest in the Norwegian continental 

shelf is undiminished, as reflected by the recent APA (awards in predefined 

areas) licensing round and the increasing number of companies seeking to 

qualify to invest. If these and other recent awards yield exploration wells, we 

could see liquids capacity expanding past 2010. The project aimed at 

prolonging the life of the Statfjord field to 2020 is now under way, and other 

mature fields (e.g., Draugen) are being short-listed for similar late life 

interventions. 

• United States. Supply disruption from the 2005 hurricane season could run well 

into 2006. Currently roughly 540,000 bd of oil production remains shut in, with 

as much as one third to be shut in well into 2006. Also it is estimated that less 

than 25,000 bd of capacity will be permanently lost from the destruction of old 

facilities. Disruption of gas supply has resulted in a fall in NGLs production. 

These factors will slow new project start-ups in the short term, exacerbating the 

existing problem with the Thunder Horse facility, which will now probably not 

produce until late in 2006. US liquids capacity is expected to fall from 7.5 mbd 

in 2005 to 7 mbd in 2010. 

• Canada. Major expansion is expected. The main story is the oil sands projects, 

where capacity is expected to increase from 1.2 mbd in 2005 to 2.4 mbd by 

2010 and 3.4 mbd by 2015. Conventional crude capacity of 2.3 mbd will 

decline to 1.9 mbd by 2015. 

• Russia. Although we have adjusted the rate of growth of Russian capacity 

downward in the light of recent events, production is holding up and has 

actually increased to 9.6 mbd recently, and will be buoyed through 2006 by the 

start-up of Sakhalin-1 this year. After a number of years of rapid expansion 

Russia is moving back to slower long-term liquids capacity growth rates. There 

is much debate as to the reasons for the slowdown, and certainly multiple 

factors are at work, but none of these are a shortage of resources in the ground 

3.4

• Caspian region. Progress continues with the completion of the Baku-TbilisiCeyhan pipeline and solid progress with the ACG field development in 

Azerbaijan. In Kazakhstan, the giant Kashagan field may be delayed by a year 

to 2010, but we expect total Caspian production capacity to rise strongly from 

current levels of 2.2 mbd to 4.2 mbd in 2010 and 5.3 mbd in 2015. 

What Could Go Wrong? 

CERA’s outlook for growth in oil production capacity incorporates elements of risk 

involving existing project problems, annual maintenance, new project delays and 

attrition, and the timing and scale of appraisal and exploration projects. But there is 

another group of major risks that will materialize. While there is uncertainty about 

decline rates and the scale of contributions from new projects and exploration, CERA 

believes the risks to capacity expansion are mostly above ground: People, rigs, yard 

space, and raw materials are in very short supply; costs have been driven up; and the 

situation shows no sign of easing. This will limit the expansion of the exploration effort 

and slow the rate at which new projects will be sanctioned. Other above ground risks are 

4

 See the John Webb, Konstantin Kovalenko, and Thane Gustafson CERA Private 

Report, Why is Russian Oil Production Slowing Down?
61

• Operational risks exist, especially in extreme environments such as ultra deep 

water where the cost base and the subsurface risks are also higher. 

• Weather and environmental effects can be broad and unpredictable. The impact 

of Hurricanes Katrina and Rita are still being felt in the US Gulf Coast, where 

some 0.54 mbd of production is still shut in. 

• Creeping nationalization and reconsolidation is occurring in key producing 

countries. 

• Resurgent nationalism in some countries is creating considerable turmoil and 

increased risks for both international oil companies (IOCs) and the now betterpositioned national oil companies (NOCs). 

• Tightening fiscal terms in response to higher oil prices and policy changes 

where governments and NOCs do not see inward investment as absolutely 

essential are an ongoing risk. 

• Violence and insecurity is having an impact on production capacity in some 

areas. 

The Specter of Peak Oil: What Peak? 

The question of a worldwide peak in oil production continues to stimulate debate. 

Our outlook shows no evidence of a peak in worldwide oil production before 2020. It is 

true that total annual global production has not been replaced by exploration success in 

recent years, but production has been more than replaced by exploration plus field reserve 

upgrades. In 1995–2003 global production of 236 billion barrels was more than 

compensated by exploration success and field upgrades that collectively added 144 

billion barrels and up to 175 billion barrels, respectively. Although oil is a finite resource, 

we still do not have an exact estimate of total reserves; meanwhile global resources 

should continue to expand. Many basins, even those producing significant volumes of oil, 

remain underexplored. 

CREATING A RELIABLE DATA SET 

One of the reasons that there is so much debate over the whether the peak of oil 

production is imminent or not is that different observers rely upon different data sets. The 

most visible data are those published by E&P companies through their annual reports and 

the most extensive collection of such reports are the filings under United States Securities 

and Exchange Commission (SEC) rules for companies with securities listed in the US. 

However these data are overly conservative as evidenced by the extent to which upward 

reserve revisions outweigh downward revisions. As we noted earlier, while new 

exploration on its own has not replaced global production, revisions of earlier estimates 

have created a net gain in reserves despite production. Among other things, this structural 

bias provides less useful information to investors and sets a misleading baseline for 

estimating future oil (and natural gas) supplies. 

Earlier this year, CERA published its Special Report In Search of Reasonable 

Certainty, marking the culmination of some nine months of research into whether and 

how the definitions of proved reserves promulgated by the SEC needed to be updated. 

One of the key conclusions of this work was that the rules were stranded in time—

representing a vision of the industry rooted in the technologies and structures of the 

1970s. The result is that large portions of discovered fields maybe excluded from 

disclosure until later in their producing lives and that only a small portion of the overall 

picture is revealed by these disclosures. As often happens with regulatory systems that 

have been in place for three decades, it requires modernization to take into account 

almost revolutionary changes in technologies, and transformations in terms of market 

structure and geography. When the rules were promulgated, the government set U.S.oil 

and gas prices, there were no global markets for natural gas, and the deepwater frontier 

was 600 feet (compared to today’s 12,000 feet). 
62

CERA has been conducting further study around ways in which the excessively 

conservative structural bias of these disclosures could be corrected and expects to publish 

the results of this work early in the New Year. However, the strong conclusion is that it is 

only by separating the roles of standard setting from compliance monitoring that progress 

can be achieved. The most widely accepted definitions for oil and gas reserves are those 

of the Society of Petroleum Engineers-. 

If the SEC were to adopt the SPE definitions and guidelines, this would lead to the 

creation of a globally consistent data set that covered the vast majority of the world’s oil 

and gas reserves. As the very definition of what is oil begins to change with the addition 

of non-traditional resources such as syncrudes and GTLs and even liquid fuels made from 

coal, a reliable dataset will be even more vital to inform the debate about when the world 

may face an undulating plateau of global oil production. 

Robert W. Esser, CERA Senior Consultant and Director, Global Oil and Gas 

Resources at Cambridge Energy Research Associates (CERA), is an authority on 

worldwide oil and gas productive capacity, and on global exploration and producing 

activity. For the past 15 years, he has led CERA’s work on upstream activity, 

prospects for existing world oil production, the significance of recent discoveries, the 

pace of future discoveries and their influence on future productive capacity, and 

North American natural gas supply. Prior to joining CERA, he was the Mobil Oil 

expert responsible for energy resource and oil and gas supplies projections, used by 

Mobil both for crude price forecasts and as a basis for the exploration and production 

strategy. Mr. Esser is a member of the American Association of Petroleum Geologists 

(AAPG) and a trustee of the AAPG Foundation. 

Mr. Esser is the author of many CERA studies. His current reports include: 

World Liquids Capacity Outlook to 2010: Tight Supply or Excess of Riches? (with 

Peter Jackson) and The North American Gas Supply Challenge—The Role of the Gulf 

of Mexico. Other recent studies include The Capacity Race: The Future of World Oil 

Supply; Western Canada’s Oil Sands—Promise Fulfilled at Last?; and The Flexure 

Trend in the Gulf of Mexico: A Panacea for Future US Oil and Gas Production?; 

among others. 

He holds two degrees in geology, a BS from Yale University and an MS from 

Stanford University. 

MR. HALL. I thank you, Mr. Esser. 

 Mr. Smith, the committee, Mr. Smith will not probably be back. He 

is at the Canadian Embassy on some type of emergency. We have his 

statement and without objection I will put it in the record. Is there 

objection? The chair hears none. 

 [The prepared statement of Murray Smith follows:] 

PREPARED STATEMENT OF MURRAY SMITH, MINISTER—COUNSELLOR 

GOVERNMENT, CANADIAN EMBASSY

Overview 

The Government of Alberta, Canada, is pleased to provide this submission on the 

Alberta Oil Sands to the U.S. House Subcommittee on Energy and Air Quality. 

Included is a brief description of the Province of Alberta; our role in North American 

energy security; the extent of oil sands resources in Alberta, including reserves based on 
63

currently available extraction technologies; the role the Government of Alberta plays in 

bringing these valuable resources to market; and, the direct effect this has had 

on investment, production and development-including new technologies. Production of 

crude oil from Alberta's oil sands will continue to ensure Canada remains the primary 

supplier of energy to the U.S. The major points to be made through this submission are 

listed below: 

The Government of Alberta does not have an official opinion regarding the theory of 

“Peak Oil.” 

Conventional oil production from the Western Canadian Sedimentary Basin (WCSB) 

peaked in 1997; Alberta conventional oil production”peaked” in 1973 at 1.3 million 

barrels per day. Today Alberta produces just over 2 million barrels a day and will grow to 

2.5 million in three to four years and about 3 million barrels per day before 2015. 

Alberta is recognized as the home of the second largest oil reserves in the world. 

From initial reserves in place of 1.7 trillion barrels of oil, there are currently 174.5 billion 

barrels of oil in established reserves and 315 billion barrels believed to be ultimately 

recoverable. 

Alberta crude oil production from oil sands is currently in excess of 1 million barrels 

per day (bbl/d). Production is anticipated to reach 3 million bbl/d by 2015, and 5 million 

bbl/d by 2030. 

Alberta is a significant contributor to the energy security of the United States, 

currently supplying 12% of U.S. crude oil imports and 12% of U.S. natural gas 

consumption. 

The people of Alberta own the province’s natural resources, which are administered, 

managed and regulated on their behalf by the Government of Alberta. 

Currently a significant amount of conventional oil and gas is being left in the 

ground. With technological improvement it is believed that additional reserves of 5 

billion barrels of conventional oil, 25 trillion cubic feet (Tcf) of conventional natural gas 

and 100 Tcf of unconventional natural gas, can be produced in Alberta. 

Alberta will continue to be a significant energy producer through ongoing production 

of conventional oil and natural gas, oil production from oil sands, the development of 

“unconventional” natural gas resources, and the development of clean-coal technologies. 

There remains significant scope for additional refining capacity within the province. 

The Government of Alberta, Canada, is pleased to provide this written submission on 

the Alberta Oil Sands to the US Subcommittee on Energy and Air Quality. 

Included is a brief description of the Province of Alberta; our role in North American 

energy security; the extent of oil sands resources in Alberta, including reserves based on 

currently available extraction technologies; the role the Government of Alberta plays in 

bringing these valuable resources to market; and, the direct effect this has had 

on investment, production and development-including new technologies. Production of 

crude oil from Alberta's oil sands will continue to ensure Canada remains the primary 

supplier of energy to the U.S. 

The Province of Alberta 

Albertans are a breed apart. They are driven by the pioneering spirit that first settled 

the land. They hold dear the ethics of hard work and personal responsibility. They cherish 

the ideals of family and community that built the province. 

Our policies focus on free trade and competitive markets as the best way to allocate 

scarce resources. Provincial law prevents the government from subsidizing any 

commercial business entity. The Province has no sales tax, a 10% flat personal income 

tax, and no debt – something that has not been achieved anywhere else in Canada, and 

something of which Albertans are justifiably proud. 

Year after year, Alberta’s economic growth leads Canada, averaging 3.7% annually 

over the past 10 years. We lead the nation in job creation, and our unemployment rate is 
64

consistently among the lowest in Canada. Alberta’s per capita disposable income and 

standard of living are the highest in Canada. Not surprisingly, we continue to experience 

the strongest population growth in Canada, with people from all over Canada and around 

the world migrating to our province to experience the Alberta Advantage for themselves 

and their families. 

North American Energy Security 

Alberta is rich in hydrocarbon resources – producing almost 2 million barrels per day 

of crude oil, and 13.8 billion cubic feet per day of natural gas. The province also 

produces 30.9 million tons of coal per year, from a proven reserve base of 37.5 billion 

tons. Alberta government and industry remain hopeful that significant Natural Gas from 

Coal (NGC) and clean coal developments will ultimately compose a significant portion of 

the province’s energy mix. 

Alberta is vital to the energy security of the United States – we are reliable, secure 

and, importantly, stable suppliers of energy to the US. In 2004, for the sixth year 

running, the US Energy Information Administration recognized Canada as the largest 

supplier of oil (crude and refined) to the US, with the bulk of this coming from Alberta. 

Approximately 12% of US crude oil imports and 12% of its natural gas consumption 

come from Alberta alone. 

Figure 1: USA 2004 Crude Oil Imports by Country of Origin 

U.S. Crude Oil Imports by Country of 

Origin, 2004

Total Imports = 10,038,000 bbl/d

Total Demand = 20,517,000 bbl/d

Saudi Arabia, 15%

Alberta , 12%

Other, 40%

Rest of Canada, 4%

Mexico, 16%

Venezuela, 13%

Alberta’s Oil & Gas Industry and the Province’s first ‘Peak’ 

 Oil was first discovered in Alberta in 1914 at Turner Valley, southwest of Calgary; 

however, it was the 1947 oil discovery at Leduc that radically transformed the province 

from a primarily rural and agricultural province, to the center of Canada’s oil and gas 

industry and a recognized world leader in oil and gas technology development and 

innovation. 

 Conventional oil production, combined light and heavy crude, peaked in the Western 

Canadian Sedimentary Basin (WCSB) in 1997 and has been steadily, albeit slowly, 

declining ever since. Conventional crude oil production in Alberta actually peaked in 

1973, with daily production of 1.3 million bbl/d. Despite this “peak” in conventional oil 

production, total Alberta production of crude oil has been steadily increasing and is 
65

projected to make significant gains over the course of the next several decades. The 

reason for this overall increase in oil production has been the remarkable success of oil 

sands development. In 2001, crude production from oil sands exceeded conventional 

crude production in the province and currently over one-half of Alberta’s oil production 

is derived from oil sands. Within the next decade it is anticipated that crude production 

from oil sands will provide upwards of seventy-five percent of Alberta’s total production. 

Annual oil sands production is growing steadily by about 200,000 -250,000 barrels per 

day (bbl/d) per year, as the industry matures. 

Figure 2: Canadian Oil Production, 1980 - 2015 

What are oil sands? 

 Oil sands are deposits of bitumen, a molasses-like viscous oil that requires heating or 

dilution with lighter hydrocarbons in order to flow. Second only to the Saudi Arabian 

reserves, Alberta's oil sands deposits have been described by Time Magazine as 

“Canada's greatest buried energy treasure,” which “could satisfy the world's demand for 

petroleum for the next century.” 

 Deposits are found in three major areas in northeastern Alberta: Peace River, 

Athabasca (Fort McMurray area), and Cold Lake (north of Lloydminster), totaling 

approximately 54,400 square miles – an area larger than the state of Florida. 
66

Figure 3: Alberta Hydrocarbon Resources 

Source: Canadian Association of Petroleum Producers 

Size of Alberta Oil Sands Reserves

Alberta is home to the largest oil sands reserves in the world with established 

reserves of 174.5 billion barrels. 

Established Reserves 174.5 billion barrels 

Ultimate Potential Reserves 315 billion barrels 

Initial In-Place Reserves 1.7 trillion barrels 

This data is on the public record and confirmed by the Alberta Energy & Utilities 

Board (AEUB), an arms-length regulatory agency. Over 56,000 wells and 6,000 cores 

were the basis of the analysis. 

In December 2002, these figures were recognized by the Oil & Gas Journal, followed 

by the US Energy Information Administration in 2003. 
67

Figure 4: Proven World Reserves (Oil & Gas Journal, Dec 2004) 

0

50

100

150

200

250

300

Saudi Arabia

Canada

Iran

Iraq

Kuwait

Abu Dhabi

Venezuela

Russia

Libya

Nigeria

United States

billion barrels

Includes 174.5 billion barrels of Oil 

Sands reserves, found entirely in 

Alberta.

 Production Methods: Mining and In-Situ 

There are two methods of oil sands production methods: mining and 

in-situ. Oil sands mining involves open pit operations. Oil sands are moved by trucks 

and shovels to a cleaning facility where the material is mixed with warm water to remove 

the bitumen from the sand. Today, all operating oil sands mines are linked with upgraders 

that convert the bitumen to synthetic crude oil. 

For oil sands reservoirs too deep to support economic surface mining operations, 

some form of an in-situ or “in place” recovery is required to produce bitumen. In-situ oil 

sands production is similar to that of conventional oil production where oil is recovered 

through wells. Present operating costs, not including capital recovery, vary between $10-

15/per barrel. 

The AEUB estimates that 80% of the total bitumen ultimately recoverable will be 

with in-situ techniques. In general, the heavy, viscous nature of the bitumen means that it 

will not flow under normal conditions. Numerous in-situ technologies have been 

developed that apply thermal energy to heat the bitumen and allow it to flow to the well 

bore. These include thermal (steam) injection through vertical or horizontal wells such as 

cyclic steam stimulation (CSS), pressure cyclic steam drive (PCSD) and steam assisted 

gravity drainage (SAGD). Other technologies are emerging such as pulse technology, 

vapor recovery extraction (VAPEX) and toe-to-heel air injection (THAI). 

In general, oil sands mines operations are found in central Athabasca deposits 

(around Fort McMurray). In-situ production is used in the Cold Lake, south Athabasca 

and Peace River deposits. 

Government Framework 

The mineral rights in approximately 97% of Alberta’s 54,000 square miles of oil 

sands area are owned by the Government of Alberta (i.e., state-level) and managed by the 

Alberta Department of Energy. The remaining 3% of the oil sands mineral rights in the 

province are held by the federal Government of Canada (i.e., federal-level) within First 

Nation reserves, by successors in title to the Hudson’s Bay Company, by the national 

railway companies and by the descendents of original homesteaders through rights 

granted by the Government of Canada before 1887. These rights are referred to as 

“freehold rights”. 
68

The Alberta government departments of Environment and Sustainable Resource 

Development administer complementary environmental policies. The Alberta Energy & 

Utilities Board (AEUB) regulates oil and gas activities in the province. 

The Alberta Department of Energy is responsible for administering the legislation 

that governs the ownership, royalty and administration of Alberta’s oil, gas, oil sands, 

coal, metallic and other mineral resources. The Department’s main objective is to manage 

these non-renewable resources to ensure their efficient development for the greatest 

possible benefit to the province and its people. 

Oil Sands Royalty Structure 

In 1996, Alberta announced a new generic royalty regime for oil sands based on 

recommendations from a joint industry/government National Oil Sands Task Force 

(NOSTF). This regime is defined in the Mines and Minerals Act and the Oil Sands 

Royalty Regulation 1997, as amended (OSRR 97). Royalty is calculated using a revenueless-cost calculation. 

In early project years before capital investment and other costs are recovered, the 

royalty rate is lower than the rate that is applied after costs are recovered. This helps 

project cash flows in early years. Once costs are recovered, the Province shares in project 

profits. 

• In the pre-payout period (before the project has recovered all of its costs), 

projects pay royalty tied to 1% of gross revenue; 

• In the post-payout period (after the project has recovered all of its costs), projects 

pay royalty tied to the greater of 1% of gross revenue or 25% of net revenue. 

Since 1990, oil sands royalties have totaled over $2.5 billion. 

Announced Investment 

Since 1996, when the generic royalty regime was introduced, there has been 

an estimated $35 billion of investment in the oil sands. It is expected that new capital 

investment in the oil sands could range from $2.5 - $4 billion per year. Looking forward, 

the oil sands industry will command a far greater share of investment compared to the 

conventional oil ands gas sector. An inventory of major projects (valued at $2 million or 

greater) compiled by the province shows oil sands investments underway or announced 

exceed $70 billion, while conventional oil and gas investments are valued at just over $4 

billion. 
69

Figure 5: Total Investment in Petroleum Industry in Alberta 

 

Alberta -- Total Investment by Petroleum Industry 

(Oil Sands & Conventional)

8.358.37

11.67

10.33

8.48

12.85

14.66

11.74

15.50

16.50

5.91

6.75

5.05

6.10

1.54

2.37

4.22 1.91

1.29 0.57

$0

$5

$10

$15

$20

$25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004*

Alberta Oil Sands Investment

Alberta Conventional Oil and Gas Investment

*Estimate as of June 2005. Source: Canadian Association of Petroleum Producers. Billions C$
70

Figure 6: Oil Sands Projects Planned and Under Construction, by Company / 

Consortium as of September 2005

SPONSORS COST (US$) 

Albian Sands Energy Inc. 4,500 million 

BA Energy Inc. 800 million 

Blackrock Ventures Inc. 340 million 

Canadian Natural Resources Ltd. 10,750 million 

Connacher Oil and Gas 150 million 

ConocoPhilips / TotalFinaElf / Devon Energy 1,400 million 

Devon Canada Corporation 950 million 

EnCana Corporation 1,859 million 

ExxonMobil Canada 1,500 million 

Husky Energy Inc. 3,200 million 

Imperial Oil Ltd. 850 million 

Imperial Oil Resources 650 million 

Imperial Oil Resources / ExxonMobil Canada 5,000 million 

Japan Canada Oil Sands Ltd. 450 million 

North West Upgrading Inc. 1,300 million 

OPTI Canada Inc. / Nexen 3,482 million 

Pacific Energy Partners 4 million 

Petro-Canada / UTS Energy Corporation 37 million 

Petro-Canada / UTS Energy Corporation / Teck 

Camino 

2,000 million 

Petro-Canada 1,600 million 

Petro-Canada / Nexen 800 million 

Suncor Energy Inc. 11,050 million 

Syncrude Canada Ltd. 12,300 million 

SynEnCo Energy Inc. / SinoCanada 4,500 million 

Total Canada Ltd. 1,678 million 

Whitesands In Situ Ltd. 44.7 million 

TOTAL 71,194.7 million 

Source: www.alberta-canada.com Major Projects Inventory. 
71

The Way Forward 

To date, only about 2% of the established oil sands resource has been produced. 

Alberta’s oil sands industry is the result of multi-billion-dollar investments in 

infrastructure and technology required to develop the non-conventional resource. In the 

last five years alone, industry has allocated an estimated $28 billion towards oil sands 

development, and the Government of Alberta invested over $700 million over a 20-year 

period. 

Alberta encourages the responsible development of these extensive deposits through 

planning and liaison among government, industry and communities to ensure a 

competitive royalty regime that is attractive to investors, appropriate regulations and 

environmental protection and the management of the Province of Alberta’s rights to oil 

sands while taking into account some of the barriers - higher technological risk and 

higher capital costs - faced by oil sands developers. 

In 2004 Alberta's oil sands were the source of over half of the province's total crude 

oil and equivalent production and over one third of all crude oil and equivalent produced 

in Canada. Over the last three fiscal years, through to 2003/2004, oil sands development 

returned $565 million to Albertans in the form of royalties paid to the Provincial 

government. 

Continuing technology improvements will lead to greater energy efficiency and a 

reduction in natural gas as a fuel input source. As the future unfolds, the only impediment 

to oil sands production could be shortages of skilled labour to complete the projects. Oil 

sands projects will compete for the same skilled workforce as the Mackenzie and Alaska 

natural gas pipelines. 
72

Figure 7: Natural Gas Consumed per Barrel of Oil Produced (CAPP Chart based 

on data from the EUB) 

Development of Alberta's oil sands resources represents a triumph of technological 

innovation. Over the years, government and industry have worked together to find 

innovative and economic ways to extract and process the oil sands and energy research is 

more important today than ever before. Working through the Alberta Energy Research 

Institute, the Alberta government is committed to a collaborative approach with 

counterparts in Canada and the United States to spur new technology and innovation 

programs that will reduce the impact of greenhouse gases and other emissions, and 

reduce the consumption of water and gas. 

Reversing the Peak 

In addition to the significant gains being realized by the oil sands, there is an 

opportunity, through improved technology, to increase the ultimate recoverable 

conventional oil and natural gas in the WCSB. The Alberta Energy Research Institute 

(AERI) estimates that roughly three quarters of the conventional oil and slightly less than 

half of the natural gas in the province is currently being left in the ground. (Report: 

Spudding Innovation Accelerating Technology Development in Natural Gas and 

Conventional Oil http://www.ptac.org/techinnp.html) There is consensus that an ample 

supply of petroleum remains in Alberta: 47 billion barrels of conventional oil, 147 trillion 

cubic feet (Tcf) of conventional natural gas and as much as 1,000 Tcf of unconventional 

gas. AERI estimates that through the deployment of advanced enhanced recovery 

technologies 5 billion additional barrels of conventional oil, 25 Tcf of additional 

conventional natural gas, and 100 Tcf of unconventional gas can be produced and 

brought to market in the coming decades. 

It is also believed that much of the increase in conventional production can be 

facilitated through ongoing developments in the oil sands sector. One means of 
73

increasing conventional oil production is achieved by injecting carbon dioxide (CO2) into 

a well in order to displace additional hydrocarbons. There is currently an industry-led 

plan in development to capture CO2 emissions from the oil sands, transport it via pipeline 

to Alberta’s conventional oil fields and inject it into existing reservoirs to increase 

production. Of added benefit to this plan will be the reduction in CO2 released into the 

atmosphere. 

It is understood that as crude oil production in Alberta grows, so too will 

opportunities for additional value-added activities, including scope for growth in the 

province’s refining capacity. Over the past two years the Hydrocarbon Upgrading Task 

Force (HUTF), consisting of 30 private sector companies and Alberta’s ministries of 

Energy and Economic Development, has developed Vision 2020. This vision assumes 

increased bitumen production from the current 1 million bbl/d, to 3 million bbl/d by 

2020, and 5 million bbl/d by 2030, and that the value of this output can be greatly 

increased by upgrading or refining a large portion of this production in the province. 

APPENDIX 1 

Murray D. Smith 

Minister-Counsellor, Government of Alberta 

Embassy of Canada, Washington DC 

Murray Smith was appointed in January, 2005, as the 

Official Representative of the Province of Alberta to the United 

States of America. He leads the newly established Alberta Office 

in Washington, D.C, co-located in the Canadian Embassy. 

Prior to his diplomatic posting, Murray served for twelve 

years as a Member of the Legislative Assembly in the Province 

of Alberta, Canada (winning three consecutive elections in 

Calgary, Alberta). Premier Ralph Klein (the provincial leader) 

appointed him to four different Cabinet portfolios – Energy, Gaming, Labour, and 

Economic Development. 

As Minister of Energy (2001 to 2004), Murray was responsible for gaining 

international recognition of Alberta’s 176 billion barrels of established oil reserves -- 

including 174 billion barrels of oil sands reserve. During his tenure, Alberta annual oil 

and gas royalty revenue rose to over $9 billion, a record number of wells were drilled 

(over 20,000), and over $60 billion in investment was committed to Alberta oil sands 

projects. Murray was also responsible for Alberta’s electricity sector, guiding the $5 

billion market move to competitive wholesale generation. Increased investment added 

over 5000MW in new generation, and Alberta became the top wind generation province 

in Canada. 

Murray also served as Minister of Gaming (1999 to 2001) and Minister for Labour 

(1996 to 1999). And in his first Cabinet-level post, as Minister of Economic 

Development (1994 to 1996), he initiated the largest industrial tax reduction in the 

province’s history. He was a member of the Cabinet Committee Treasury Board and a 

main contributor to the province’s Debt Retirement Plan, which led the province to 

become the first debt-free jurisdiction in Canada. 

Before serving Albertans as an elected Member of the Alberta Legislature in 1993, 

Murray was an independent businessman. He owned and started a number of Albertabased energy and retail companies. 

Murray is a contributor to many community organizations as well as to the 

University of Calgary, where an endowment has been established in his name. He is the 

recipient of numerous awards and is a past Director of the Calgary Stampede Board. 
74

He is a graduate of the London Business School’s Senior Executive Program. He also 

holds a B.A. (Economics & Political Science) from the University of Calgary, and he is a 

graduate of Notre Dame College in Wilcox, Saskatchewan and a past President of the 

College’s Alumni Association. 

Murray has been married to Barbara Smith for 35 years and has two daughters. He is 

an avid, though unskilled, golfer and a lifetime member of the Riley Park Cricket Club. 

 MR. HALL. Dr. Hirsch, I am a little mixed up on what your position 

is, but I know you know it and maybe I just did not glean it. But, I have 

high regard for you, and Matt Simmons recommended to the Chairman 

to ask you to come here. You seem to believe Peak Oil to be a valid 

theory, but you do not think the data of obtaining it is, I do not know if 

relevant is the word or important or necessary but only you stress the 

time it will take for viable alternatives to become available and we think 

we are underway. Maybe you can tell us if we are not, but we have 

pursued including alternative fuel vehicles and increased methanol 

production, hybrid cars, fuel cell driven automobiles, and a lot of other 

things and H.R. 6 is passed and been signed by the President. Maybe I 

am wrong, but it seems it depends on the assumptions you accept in 

making some determination on the Peak Oil problem. Is that a good 

statement? 

 MR. HIRSCH. This is very complicated and every bit helps and we 

should not think negatively about anything that can contribute 

particularly in the conservation area. 

 MR. HALL. I think Chairman Barton included all of them in H.R. 6 

and I know you are familiar with that, but really thought we touched all 

the bases there. 

 MR. HIRSCH. But you were not considering Peak Oil when you put 

that bill together. If you dig into Peak Oil, it is probably going to be one 

of the most depressing subjects that any of you will ever have to think 

about or worry about because it takes not much time to think about what 

happens if there is less and less oil available and if the price of gasoline 

is $5 or $10, assuming that you can get it. 

 In the study that we did for the Department of Energy, we left the date 

of peaking out because there are so many different views. There are 

some people who think it will be very soon and there are other people 

like CERA that see it way off into the future. And you can find people 

that will pick almost any year that you want to choose to predict Peak 

Oil. What we did is to say we have got to fix the problem when it 

comes. What is it going to take to do that? And by looking at crash 

programs on everything that is commercially viable today, you are 

looking at the very fastest that human beings can do something. That is 

what we looked at. And what we found is that you need to get a head 

start on this 20 years before the problem starts. That is a long time. 
75

Crash programs have not been done on a huge scale since the Second 

World War. 

 MR. HALL. But haven’t the estimates or the guesses or whatever you 

call it, the projections that have been almost dosed with doom that 

symptoms come to our benefit and those projections were wrong? And 

Matt Simmons we talked about and Mr. Esser, I think you were aware of 

his book and knowledgeable about his book, seemed to say and I have 

heard him say ten years ago or five years ago that Saudi Arabia if we 

project what they had to start with and get to where we are now, they are 

out of oil and they are not out of oil. 

 MR. HIRSCH. They are never going to be-- 

 MR. HALL. How do you handle that? 

 MR. HIRSCH. They are never going to be out of oil because a peak in 

production means that it is the maximum that you can have and then you 

go into decline. And decline depends on a whole lot of things like 

geology and history and management and a whole variety of things. So 

we are not about to run out of oil but if we do not have the oil we need 

that is demanded in the United States and the world, then we are in 

serious trouble. 

 MR. HALL. I sure agree with you. For example, on the good news 

that we can hope for in the peak study is--and I know you are aware of 

the Kern River was discovered in California, I believe here in 1899 and 

calculations in 1942 suggested that 54 million barrels remain, however, 

in 1942, after 43 years of depletion remaining reserve for 54 million 

barrels. That seems like that is good news to me for those of us who fear 

that we are peaking. 

 MS. HIRSH. The problem is not that there will not be a lot left after 

the world reaches peak production because there will. Peak will occur at 

something like for conventional oil, peak will occur at something like 50 

to 55 percent of the recoverable reserves so there will be a lot of oil for a 

long period of time but there will not be the oil that we and the rest of the 

world needs as life blood for our economy and our civilization. 

 And the point, part of the point in all of this business, I kept saying 

think risk because in fact what we are doing is we are taking an 

enormous risk. I said I would love to agree with the optimists in this area 

and I asked the questions what are the risks? If the data is not there, 

solid data is not there, if the Saudis and others keep what they have as 

states secrets assuming they even know it, how--what kind of a risk are 

we taking because we are basically depending on them delivering to us in 

the future and if we are not ready when they get their maximum or when 

they decide to hold back, as I said which is in their national interest. 

 MR. HALL. I think I like what I am hearing but my time is almost up. 

Dr. Aleklett, I will get back to you a little bit later, but you have some 
76

difference of opinion there that I would like to go into and the factors 

that you take into consideration for your projection. 

 At this time, I recognize Mr. Boucher, the ranking member. 

 MR. BOUCHER. Well thank you very much, Mr. Chairman. And I 

want to join with you in thanking our witnesses for spending time with 

us this morning and sharing their views on various aspects of the oil 

production peak globally. 

 Whenever we think that peak arrives, I think we all would agree that 

it is prudent now to start developing alternatives. And I would like to 

spend just a moment getting the benefit of your view about some of the 

obvious alternatives. 

 Mr. Esser, I was listening, I believe it was to your comments 

concerning a variety of alternatives to oil that are presently in the process 

of development or on the drawing boards. And you mentioned gas to 

liquids. I did not hear from your comments in reference of coal to 

liquids. And that impresses me as a particularly promising alternative. I 

know that South Africa for many years has been depending upon the 

production of liquids for transportation from coal primarily. We have in 

the United States 250 years of proven coal reserves. That is our 

predominate domestic energy resource. And I am told that the world oil 

price being approximately $35 per barrel, the conversion of coal into a 

liquid fuel is economic and of course oil is $20 above that today and 

likely to remain at elevated levels for some time to come. And so I 

would like to get the views of the panel members with respect to the 

potential for coal to be a viable source of liquid fuels. Where in the 

world is that technology being developed other than South Africa? Is it 

in place other places? What do you think the potential for coal to liquids 

is here in the United States? 

 I will express some skepticism about the viability of a large market 

for natural gas to liquids given the fact that we are experiencing a lot of 

pressure today with regard to having an adequate natural gas supply. 

Natural gas prices are estimated to be 48 percent greater this winter than 

the winter before. And about the only additional source of supply we 

forecast to be less is the importation of liquefied natural gas and with 

respect to that we have major problems in terms of a shortage of import 

terminals and a great deal of difficulty building those terminals for 

environmental reasons. So I am somewhat skeptical about the potential 

of natural gas to be a substantial source for liquid fuels. I would 

welcome some elaboration from you with regard to that. 

 Comment if you would on the potential for oil sands production from 

Canada. I understand that a substantial amount of investment is now 

being made by U.S. companies and others in that development, oil shale 

from Colorado and other places where oil shale is found, and also 
77

comment if you would on the pace of the development of hydrogen fuel 

cells. We have a Federal initiative under funded in my opinion to 

develop transportation fuels based on hydrogen within approximately a 

10-year time frame. Is that realistic? Where are we going to be ten years 

from now in terms of hydrogen replacing liquid fuels that are more 

traditional empowering transportation of this country. 

 So there are a number of subjects to address, Madam Chairman we 

will try to stay within our allotted time here in having the witnesses 

address them but do the best you can. Who wants to begin? Mr. Esser. 

 MR. ESSER. I will start with some of these. I do not have a lot to say 

about coal to liquids. In our longer term outlooks that is something that 

has more to do after 2020. 

 MR. BOUCHER. Well let me ask you this. Why is that? I mean if in 

fact it is commercial at $35 a barrel oil, why aren’t we seeing 

development of that today? 

 MR. ESSER. I cannot tell you why companies have chosen to continue 

activity in other areas. 

 MR. BOUCHER. Have you studied this? 

 MR. ESSER. No, I have not. 

 MR. BOUCHER. That is not part of your analysis? 

 MR. ESSER. It is really not. 

 MR. BOUCHER. All right. 

 MR. ESSER. Regarding oil sands in Canada, I mentioned in my 

testimony that this is probably one of the highest intense oil plays going 

on in the world right now. Companies are struggling to get into the play, 

those that are not there, they are buying interests from other companies 

who are already there and involved, but are running short financially to 

be able to do this work. But there is no play in the world as exciting as 

this is right now. The companies that are there that have projects are 

intending to bring them on sooner at higher rates than they had originally 

considered and expansion projects in all of these individual projects are 

now being brought forward from the 2020 area to the 2015 area. So we 

see oil sands out to about 2020 of around 4 million barrels a day. This is 

up from 1.2 million barrels a day right now. In our longer term outlooks 

which we are actually working on right now out to 2030, we expect over 

6 million barrels a day. This is from a huge resource of oil that is proven 

and we know that it is there. We have heard thoughts that it is very 

energy intensive in order to get the oil out. But you have to understand 

there is nothing more intense right now than company study and how to 

substitute for the use of natural gas in producing oil sands. 

 As far as gas to liquids, there are two huge gas fields in the world, the 

one in Qatar, the Northfield, and the one in Iran, which is the extension 

of the Qatar field into Iranian waters. Between these two fields there are 
78

2,000 trillion cubic feet of gas. It is going to just take a lot to even make 

an impact on producing those reserves. This is the source for a lot of the 

LNG that we expect to import into the United States. And, of course, its 

going to go over to other countries too. The Iranian gas will not come to 

the U.S., but it will not only be used internally but be used for exports to 

adjacent countries. 

 Gas to liquids in general is related to what we call the industry 

stranded gas. There is really no use for this gas. It is far off. It is away 

from everything. We used to think Sakhalin Island, which is north of 

Japan, north into eastern Russia there was often no man’s land. We have 

an LNG project there now and some of that gas is going to come to 

California in 2009. So stranded gas is a great source for gas to liquids. 

There are 200,000 or 300,000 barrels a day of projects on the books to 

develop in Qatar, but the problem is Qatar is becoming a development 

hotbed. There is just hardly room for any more activity along with all 

the LNG facilities that are being developed. But we see this as being a 

major source later on. 

 As far as oil shale is concerned, one company in particular has done 

some work on it. This is still very experimental. This is still something 

after 2020, but we do certainly have the resource here in the United 

States for that. 

 MR. BOUCHER. Well thank you, Mr. Esser. I would like to ask about 

hydrogen but I will defer that to you while we ask the other two 

gentlemen to comment on the basics of the question. 

 MR. HIRSCH. Let me talk about just hydrogen because I was on the 

academy’s panel that reviewed a hydrogen program and provided the 

report that came out about a year ago now. We spent a year looking into 

the issues in a great deal of detail. It is technically feasible to do 

hydrogen, but it is not economically feasible. And for the economics to 

make any sense at all, you have to have breakthroughs in two areas in 

particular. One is in fuel cells which are totally inadequate for the 

application right now and the other is onboard storage. You cannot 

predict when those breakthroughs are going to occur. We took an 

optimistic view as to when these vehicles might enter the market in order 

to see how long it would take for them to have an impact. But do not bet 

on it. You just cannot bet on it because the things that are needed that 

are essential to go do not exist now. 

 MR. BOUCHER. Can we do coal to liquids and then return? 

 MR. HIRSCH. Coal to liquids is something that we included in our 

analysis. We feel strongly that it makes excellent sense. In fact, it can 

be done with essentially commercial technology now. I could go into 

that in detail, take some time if you wanted but I will not. So it is ready 

to go now. And in addition, the CO2 that is produced when one converts 
79

coal to liquids can be used for enhanced oil recovery so one gets a double 

plus out of that. And yes, based on the work that has been done at 

Mitertech in particular and elsewhere, the $35 to maybe $40 barrel 

number is a good number. 

 MR. BOUCHER. Okay. Mr. Aleklett? 

 MR. ALEKLETT. Well, the problem we are facing is that we are using 

too much oil per year, 30 billion barrels per year. You maybe do not 

remember, but you could take the east Texas oil field, that field is 

roughly 5 billion barrels. So if you look at the consumption globally, it 

is just a couple of months in the global consumption and that is a big 

problem. You do not find big fields. The largest field that was found 

during the last 20 years is in Kazakhstan, 10 billion barrels can support 

the world for four months. And we come into these things that should 

replace the oil if you take tar sand for instance, yes, it is a possibility they 

could push up the production to 3 million barrels if you do it in the crash 

program. But the problem with the tar sand is two ways. The tar sand is 

mining and mining if the technology is fine is working, but that is a small 

part of the tar sand. The big part you must get out with in situ and that 

means you must heat it up and take it out, and for that you need a lot of 

energy. And we are looking into a crash program for doing that and just 

now you must use nuclear power to heat up the tar sand to get it out. 

 MS. WILSON. [Presiding] Thank you. I appreciate that. 

 MR. ALEKLETT. Okay. 

 MS. WILSON. I appreciate that. 

 Mr. Sullivan from Oklahoma is recognized for questions for five 

minutes. Dr. Burgess? 

 MR. BURGESS. Thank you for having this hearing today. 

 This is probably almost more than I can understand. I am doing my 

best. Have you all worked with any of the national labs with any of the 

computer modeling since this is--you can’t give us a date, you can tell us 

something bad is going to happen, the date keeps changing, the rules 

keep changing, you can’t depend upon people to give you adequate 

information from other countries. Have you worked with any of the big 

simulation programs with the national labs to see if you can get any type 

of refinement on this or is this going to be one of those large nebulous 

worries that are out there like an asteroid hitting the earth and that sort of 

thing, that one day we will just run out of and there will be-- 

 MR. HIRSCH. My work was for the Department of Energy, National 

Energy Technology Laboratory and I am familiar with the work at other 

laboratories. Computer simulations are not worth a damn if you do not 

have data to go in that has any kind of certainty to it. And that data does 

not exist. It simply does not exist. When CERA makes their estimates, 

they are using estimates. When other people predict other dates for 
80

peaking, they are using estimates. They are taking bits and pieces of 

information, in some cases it is better. In some cases they are basing 

their projections on what somebody tells them without any independent 

verification. So a computer program with bad data is going to give you a 

bad result. 

 MR. BURGESS. Well the data is always going to be bad because the 

technology continues to change and any program that you wrote in 1998 

would not count the impact of hybrid cars across the world. Any 

program that you wrote in 1995 was not--with the hydrogen initiative 

that has been started by the last Congress. But surely there is some 

concept of as the technology evolves this is the savings that we realize or 

this is the additional time that might be added to our time to peak line if 

there is in fact such a concept. Is anybody working on anything along 

those lines or again is this just one of those sky is falling scenarios that 

we are just going to have to live with and one day we will wake up and 

not have enough? 

 MR. HIRSCH. I ran exploration and production research at Atlantic 

Richfield and we looked at not only the technologies that were being 

developed, but we looked off into the future and there have been 

improvements, 3D, 4D seismic has come along, there is horizontal 

drilling that was developed in large part by somebody who was in the 

laboratory that I managed. There is deep water. What has happened 

there is rather dramatic and rather marvelous. But if you look at all of 

those things and the character of the problem, there will definitely be 

improvements made, but they are not going to change the basic picture. 

They will change the time by maybe a matter of years. Also, you have to 

keep in mind that some of those technologies in fact will drain reservoirs 

faster than would otherwise be the case. And under those conditions, 

you are going to have a big ramp up, but then you are going to have a 

much sharper drop afterwards. There is no simple answer to your 

question. 

 MR. BURGESS. Well the area where I live in North Texas you never 

would see a gas rig or an oil rig there when I was growing up. Now the 

place is littered with them because the technology has changed. You 

referenced horizontal drilling. I think in East Texas we perfected the 

slant well. There it was illegal but now we like the concept because we 

can drill under downtown Fort Worth and not disrupt the landscape. But 

again there has to be someone who is some futurist out there who is 

working on the types of technological changes that we might see and 

where we might capture additional capacity. 

 I would also suggest that at my hometown again they are working on 

a big bio diesel project to E85 ethanol vehicles and biodiesel and 
81

biomass do these make any difference in the equation or are they too 

small to really figure into the numbers at this point? 

 MR. ALEKLETT. Well the problem with the technology that you put 

into Texas and to the lower 48 States, but if you look at reality, the 

production in the States are declining. And you have oil companies like 

Chevron for instance, they have many problems with technology that 

they bring in and they find more reserves and so on, but the production is 

declining. I think it has to do with the fact that it is much harder to get it 

out. So if you take Texas, East Texas field that you use all the 

technology you can think about, the decline rate in that field is just 

increasing. You are talking about 10 to 20 percent per in decline now. 

So what technology did was bring it out faster and we see now for 

instance in the North Sea that has had the technology in the sea from the 

beginning, the decline is now at 10 percent per year, 10 percent per year. 

So do not hope that technology will solve the problem. It might make 

the problem even worse in the future. 

 MR. BURGESS. Well if I may, what about the technology that is 

bringing fuels such as biodiesel-- 

 MR. ALEKLETT. We are using as much as this and biodiesel might be 

the thickest of the line at the pump, you know. So again, we need to do 

it, but it is another kind of one that you are talking about. It is not in the 

same month or day that you compare it. 

 MR. BURGESS. Okay. Well I may be the only one here but it seems 

to me that we are willing to talk about problem that is soluble and we do 

not know when it is going to happen but is anyone offering, did I miss 

something because I came in late that someone has a solution that they 

are putting on the table or it is just simply we are going to again add to 

our basket of worries? 

 MR. ALEKLETT. Well I mean for United States, saving oil is the most 

important thing that you can do. I mean why should you consume twice 

as much oil per person than we do in Europe? I mean we are doing quite 

well with half the amount of oil. So that is the first thing you should 

look into and start to do something with. And I mean it is a great 

country. 

 MR. BURGESS. And my time is expired but the chairman did 

reference the Energy Bill that was passed this year that actually did have 

a balance between conservation and exploration. So I would submit that 

it is not that this committee is doing nothing in this regard and we 

appreciate you being here this morning but we have got to have more 

than just worries to lay here on. And again the basket of worries the 

American people have to deal with. 

 Madam Chairman, I will yield back. 

 MS. WILSON. Thank you. 
82

 MR. HIRSCH. Can I make a remark, just a brief one? Your question 

is certainly legitimate. I think that all of us would agree that you do not 

pick winners in a situation like this; you go with anything that is 

reasonable. I totally agree with my colleague here that biodiesel as 

wonderful as it sounds is going to be a sliver in terms of the problem. 

And finally, in terms of having a program, there needs to be a will first 

and there needs to be a worldwide will and then there needs to be 

Government stepping in and facilitating the private sector to doing things 

on a basis that has not been done before. That is the only way you are 

going to minimize the risks. That is not what we are talking about today 

in detail, but that is effectively what has to happen. 

 MS. WILSON. Thank you. 

 MR. BURGESS. I was going to say, I have a lot more faith in the 

private sector than in the Government. Again, I will yield back. 

 MS. WILSON. Thank you, Dr. Burgess. 

 Dr. Aleklett, you were talking about U.S. consumption of oil and a 

young friend of ours made a comment once on the difference between 

Europe and America that may help explain this and he said that he 

figured it out that in Europe 100 miles is a long way. In America, 100 

years is a long time. My guess is that my grocery store and local school 

is a whole lot further from my house than yours is from your house. 

America is a different kind of place that way. And while we need to 

move forward with efforts towards energy independence and balance the 

energy policy and greater conservation, there are some differences 

between our continent and yours. 

 Mr. Allen from Maine is recognized for his questions. 

 MR. ALLEN. Thank you, Ms. Chairman. 

 And thank you all for being here. 

 I do have a different view here. I mean, I think that the great 

challenge we face is not a date. When King Hubbert made his 

predictions in the 1950’s, he was regarded as a crank in the industry but 

he turned out to be right on the money in terms of when peak oil would 

occur in the United States. There are all sorts of people making 

projections today and most of them are going to be wrong either one side 

or the other but it is going to happen. 

 And I thought, Mr. Esser, just a quick question for you. It seems to 

me that the issue, I do not think many of you have talked explicitly much 

about price. We do lots of wishful thinking up here in this Congress 

these days but you have not talked so much about price. If it is an 

undulating plateau or a peak with a sharper decline, who cares? It seems 

to me the problem is that when the moment comes and I am not saying it 

is going to be one moment, it is going to happen, you know, relatively 

gradually over a period of years. It will be too late to take the kind of 
83

action that we need to take today. That is the problem. And Mr. Esser, if 

you could talk a little bit about the undulating plateau, I read your 

remarks and you said our outlook shows no evidence of a peak in 

worldwide oil production before 2020 and you said, you know, maybe 

that is the earliest date you are willing to countenance but that is a scary 

date because in 15 years knowing the way this Congress operates, there 

is no possibility. We did not do a balanced Energy Bill in my--from my 

point if view. We need to act appropriately in relation to the risk not 

something that we may think is balanced but appropriately in relation to 

the risk. And the risk I think correct me if I am wrong is a dramatic rise 

in price that fundamentally changes our economy and makes the United 

States as the most dependent on oil at great risk in our competition and 

with other countries and that is what worries me. 

 MR. ESSER. It does that with the undulating plateau because once you 

are at this flat area and demand is still rising, that is your problem. 

 MR. ALLEN. So you did not mean for us to take comfort in the 

thought that it might be an undulating plateau-- 

 MR. ESSER. That is right. It is certainly not. It is just that we do not 

see an isolated peak with a pretty sharp drop off after that. We put 

together our analysis by looking at existing production. We know the 

decline rates where we do it field by field because we have a production. 

We know what is being discovered. We know when it is coming on. We 

know the rate of exploration right now, what is being discovered, and 

when that could come on. So we feel pretty comfortable out ten years or 

so. But once we get beyond that, then you are guessing. First of all, 

what are going to be the new areas? Can the old ones stay up and we 

have mentioned about the fact that we do not have the data on many of 

the Middle East fields. And some time we are going to be surprised. In 

our outlook in Saudi Arabia, we never get over 14 million barrels a day 

because it is not safe to say that they could be the final producer and can 

supply anything to meet world demand. We know they are going to 12-

1/2 by 2010. We feel that that is essentially in the bag but then after that 

we have to be careful. 

 MR. HIRSCH. If I could make one other comment, could I add 

something? 

 MR. ALLEN. Yes, please do. 

 MR. HIRSCH. Because another analysis very similar to what CERA 

did was done by the editor of Petroleum Review in the United Kingdom. 

And he used much the same projected data that you folks did, but he 

used different decline rates. And whereas they come to a conclusion that 

things are fine and in fact prices may drop before 2010, this other 

analysis using the same input data with a few differences comes up with 

a problem by then. And I do not know who is right and we will know 
84

afterwards. Of course we will recognize that but it illustrates the 

difficulty in what goes into the assumptions and the lack of good data 

that we have. 

 MR. ALLEN. Would any of you care to comment on how the private 

sector is responding to this challenge? I am very worried about the 

American automobile industry for a whole lot of reasons. And the short-

-I would say if I were doing a critique of the auto industry here as 

opposed to the Japanese, I would say that our MBA’s are looking about 

six months ahead at their financial results and the Japanese engineers are 

looking about ten years ahead as to what is going to happen in the world. 

And during the Clinton Administration there was a project, a public 

private partnership to develop hybrid vehicles. And when President 

Bush was elected, they moved away from it. They went--they just did 

not follow up on that. And now the Japanese are--have--you know it is 

one percent of the market or half a percent of the market today but this 

hybrid vehicle is going--hybrid vehicles are going to be a dramatic 

expansion of the market. I bought one in January of ’03 because I was 

convinced that in the ten years I expected to own that vehicle, gasoline 

prices were going to go through the roof and I was not disappointed by 

that but I was disappointed in the fact that there was no American hybrid 

because the U.S. auto industry was so far behind in its future projection. 

 But just generally, can you say anything about where you think the 

private sector is responding well and where it is not to this particular 

challenge, Dr. Aleklett? 

 MR. ALEKLETT. I can do it for Sweden because I have been talking 

about this problem in Sweden for a couple of years. I know now that the 

Swedish companies in general have peak oil in their minds. I know that 

for instance Volvo has it. I know that Saab has it. I know that Sconia 

has it and it is on their agenda. And now the former director of Volvo in 

Sweden will be the vice president of Ford, so I know that Ford will have 

it also in their agenda now because he believes in these things, too. And 

I also know that some of the companies in Sweden will be on the 

forefront on this. And if you talk about the Japanese car makers, yes, 

they have been in Sweden and they have had consultants with us. 

 MR. ALLEN. Any other comments from either of you on how the 

private sector is responding to this challenge? 

 MR. ESSER. That has just changed the subject to natural gas. I would 

say 90 percent of the drilling right now in natural gas is what we call 

unconventional gas, tight sands, shale gas, and cosine methane. This is a 

different type of drilling and a different problem in completing wells. 

The success of it depends on flacking or opening up the reservoir by 

injecting water under pressure with sand in it in order to prop open the 

formation and let it flow. Gas related drilling has never been higher but 
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we cannot see being able to turn around the decline or the moderate 

decline we see right now in natural gas. 

 MR. ALLEN. In production in the U.S.? 

 MR. ESSER. In production in the U.S., and of course because of that, 

we are going to have to import a lot of gas starting now, but the big 

amount will not be here for a while. There are ways that the industry 

could respond more and bring on more gas within three years and that is 

access. We have blocks in the Gulf of Mexico that have been awarded 

for leasing, and block 181 which was up for initial leasing in December 

of 2001 and at the last moment only a sliver along the western side of it 

was allowed to be leased. So what did industry do? They found ten gas 

fields in this area that is going to come on production in 2008 at a billion 

cubit feet a day. The rest of the block you cannot lease, you cannot drill, 

it is just offsetting gas. If that were opened up, we could, in three years, 

have gas out of it. We have a trillion cubic foot field north of this called 

the Destin Dome. The companies had to give it up because they could 

not get it developed. So there are areas and things that could be done to 

bring on gas quickly. Again, Federal lands in the Rocky Mountains are 

some of the most predominant land owners there, but access to these 

lands is impeded at every step. So we could lower our decline so to 

speak in natural gas with access which we do not have, cannot get, 

nobody is interested in doing anything about. 

 MR. ALLEN. Thank you. 

 Mr. Chairman, my time has expired. I yield back. 

 MR. HALL. All right, we will authorize the gentleman who brought 

us here to question the witness if you would like. Mr. Bartlett, I 

recognize you at this time. First is there objection to these two 

gentlemen staying on the committee and questioning the witnesses? The 

chair hears none, let the record reflect. 

 MR. BARTLETT. Thank you very much for letting us ask some 

questions. 

 Let me go through some very hurried observations on what has been 

said and then ask you to comment on any of these that you wish. In 

2000, there was a major paper by Energy Information Agency by an 

economist there who said that oil would never be more than $35 a barrel 

for the foreseeable future. I would just like to caution that what we are 

saying today could be as wrong as what he said there. 

 Ethanol production, you know, one should not look at the total BTU’s 

in ethanol and assume that those are--will contribute to our energy usage. 

The production of ethanol I hope will be--have an energy profit ratio 

which is positive. It will never be very positive. We will always be 

putting a major percentage of the energy into producing ethanol that we 
86

get out of ethanol. Just a word of caution in looking at ethanol and that 

goes for any of the things produced in agriculture by the way. 

 Two hundred and fifty years of coal, I wish we would stop saying that 

unless we qualified it by saying at present use rates because as soon as 

you increase use just 2 percent – we will be darn lucky if we can get by 

increasing it only 2 percent – at 2 percent it shrinks to 85 years. If you 

have to use some energy to convert it to a gas or a liquid to use it, you 

have now shrunk to 50 years. Yeah it is there, it is a finite resource. We 

really need to husband it but it is not 250 years. 

 Toyota and Mack Truck in looking at various scenarios for the future 

are asking what kind of truck will we be building in 2015 when oil is 

$200 a barrel. I understand that the Canadian oil sands are now 

producing oil at about $30 or less per barrel, really a good deal when it is 

selling for $60. I also understand that they may be using more energy 

from natural gas to produce the oil than they are getting out of the oil. 

That is fine if it is stranded gas but ultimately we will have a real 

limitation on what we can do there. They are now thinking of building a 

nuclear power plant there to get the quantities of energy that they use to 

do this. So I would just like to caution that the enormous reserves in the 

oil sands and tar shales are not net energy realizable. It is going--you 

know you may use six barrels of oil and get a net energy of one barrel of 

oil. I do not know what that energy profit ratio will be but it ain’t high. 

 Fuel cells two problems with fuel cells, one is storage that was 

mentioned. We had experts testifying recently and they said of the three 

methods of storing it one is as a gas in a pressure vessel that is just too 

heavy. Another is a liquid. The insulation is too much and the difficulty 

of pressurizing it is too great. But the only feasible way that it will 

become economically widely used is to have solid state storage which 

really means you are dealing with a hydrogen battery. And a 

fundamental question is – is the hydrogen battery fundamentally more 

energy that is more energy efficient than an electron battery which we 

have a whole lot of. 

 I understand if you could wave a magic wand that every vehicle in the 

world today would have a fuel cell in it that we would use all the 

platinum for all the time and all of the world for as much generation of 

fuel cells that will now last 200 hours. So clearly, you have got to have 

some big breakthroughs in fuels cells before this is going to be feasible. 

 One of the ways of producing more oil is to drill as many wells in 

Saudi Arabia as we drilled in our country. We have about what three 

fourths of all the oil wells in the world in our country. Yeah, you will get 

more oil more quickly from Saudi fields but all you are doing is climbing 

a hill and the peak is going to be higher. You are going to fall off the 

peak and the descent, you know, you cannot pump what is not there and 
87

if you are able to pump it more quickly now there is going to be less to 

pump in the future. 

 I would just like to note that there are risks that responding too early, 

you are using resources you might have used for something else but I 

think that the risk of responding too late are overwhelming, that any 

rational people would buy, you know, maybe responding too early. 

Thank God it is too early because if it is too late we are really in for a big 

problem. 

 The new technologies that are counted on to grossly increase 

production in the future, why haven’t they increased production in our 

country? In spite of everything in our country, we are sliding down 

Hubbert’s peak, we have been sliding down. There is nothing we have 

done that has really slowed, that slide down Hubbert’s peak. Just look at 

the data, it is there. And I do not know why, we are a little microcosm of 

the world. I do not know why the world should be all that much different 

than I think we are. 

 I would like to caution about energy from agriculture. Two cautions, 

one, we are barely able to feed the world. Tonight, what, a fourth of the 

world will go to bed, a fifth of the world will go to bed hungry, 

something like that. And I would like to caution to be careful about how 

much biomass you want to rape from our topsoils. We are barely able 

now to maintain the quantity and quality of our topsoils and that is 

because we are returning humus to the topsoils. And I do not know, you 

know, I asked the Department of Agriculture, do you think we have more 

and better topsoil? The answer is no. For every bushel of corn we raise 

in Iowa, we lose three bushels of topsoil down the Mississippi River. So 

I would be very cautious about how much energy you expect--and by the 

way, it is not--the energy profit ratio from agriculture is not high. It is 

about one BTU--ten BTU’s in for one out now. We would have to have 

a much more energy efficient agriculture if we are going to get any 

energy from agriculture in the future. 

 Twenty-five of the 48 oil producing countries in the world are now in 

decline. How are we going to get more oil in the future if that is true? 

And, you know, what to do? I think what we need to do is obvious, a 

massive effort of conservation, a big investment in efficiency, and big 

investments in alternatives. I do not think what we need to do is 

questionable. I think the will to do it may be very questionable. 

 Thank you, Mr. Chairman. I would like to ask for any comments you 

would like to make on these observations. Thank you. 

 MR. HALL. The gentleman answered his own questions pretty well as 

far as I am concerned. 

 MR. BARTLETT. But they may not agree with my conclusions. 

 MR. HALL. Well how many of you agree with him? 
88

 MR. ALEKLETT. Well most of the things he is correct. 

 MR. HALL. Give me about a one minute answer to his question if you 

can. 

 MR. ALEKLETT. We have now 65 countries in the world that are 

major producers of oil; 54 out of those 65 have already passed the peak 

of production and are going down. The next five years, another five 

countries will be past the peak, for instance China and Mexico that we 

know about. And so by 2010 there will be six countries that might be 

closer to increase their production. One of those is Bolivia and they are 

making something like 800,000. Yes, Saudi Arabia will go up to 12.5 

and they are committed to do that, but Kuwait for instance, the big field 

there is declining now. They are officially saying that and many other 

things. So I do not think it is possible to get this increase. And just look 

at numbers and start to think for yourself because that is what we need 

now, even level thinking. 

 MR. HALL. Dr. Hirsch? 

 MR. HIRSCH. Well I would just amplify on his points. If you have 

got the overwhelming number of countries in the world that have been 

oil producers that are already past their peak, that means less production 

from them and world demand continues to increase, therefore, the gap is 

not just the increased gap, it is the increase plus the loss that is associated 

with these others on the down slope and that gets to be bigger, and 

bigger, and bigger, and the rates catch up to you very, very quickly. 

 MR. ESSER. I would just like to add that yes, a lot of countries are in 

decline, but there is some that are going to increase quite rapidly. I do 

not think the conversation has talked about unconventional liquids at all, 

especially gas related liquids. You just have no idea of the amount of 

condensate and natural gas liquids is a byproduct of all these gas wells 

that are going to supply all this LNG to the United States and other 

countries. 

 And Mr. Bartlett, you also talked about the application of new 

technology in the United States. New technology is allowed the deep 

water Gulf of Mexico to produce about 2 million barrels a day. Now 

without that technology we would be much worse off than we are now in 

the United States. 

 MR. BARTLETT. But we are still going downhill. 

 MR. ESSER. We are going downhill. 

 MR. BARTLETT. We are about half of what we produced in 1970. 

 MR. ESSER. I do not like to use these 50 percent rules because then 

you think you know what the total reserve is and in a lot of cases we do 

not and we get surprised. So the 50 percent rule can get you into trouble. 

But I think in the United States it is pretty safe to say we are well on the 

way down. 
89

 MR. HALL. All right, and we thank you very much. And is it fair to 

say of the 59 that you eluded to there, that you did not take into 

consideration the potential of the ultra depths? 

 MR. ALEKLETT. Yes, that is right. 

 MR. HALL. That is all I want to know. 

 MR. ALEKLETT. But take for instance Brazil that is considered to be 

one of the success nations. What they have found down there is 

something like 12 billion barrels of oil in ultra deep water. And 12 

billion barrels when we are consuming 30 billion barrels per year, well 

can that save the world? 

 MR. HALL. I think we get right back down to it is the assumptions 

that we accept as to what the decision is going to be, but we are kind of 

like the pilot that all of his instruments have gone out. He did not know 

where they were going, or when they would get there, but just making 

good time. That is what I have gleaned from this, but it has been very 

good and I appreciate it. 

 We are going to recognize our colleague from New Mexico. I 

recognize you for your time. 

 MR. UDALL. Thank you, Mr. Chairman. And I think this has been a 

very productive hearing and we appreciate you doing this. 

 I think the crucial part of the debate here and you have--the panelists 

have hit it several times that it does not matter when we peak. The 

important thing and, you know we have people today that are reliable 

folks that are saying that we peaked already. And one of our panelists 

says it is 2030, others it could be 2010, we do not know. But I do not 

think we should be getting in that debate. The focus we should have on 

that is what are the things we should be doing at this time to move us 

forward. And clearly these panelists have hit on the idea of political will 

around the world and I think that is very, very important, us to have the 

will and the stamina to really take this on. 

 We have mentioned several things and I view these as really low 

hanging fruit and I would like your comments on them but are we doing 

the kind of research at the level that we could be doing the research 

compared to other sectors. And I am talking research in the energy area. 

My understanding we are doing a very small amount of research 

compared to what people do and Governments do in other areas. 

Another thing I am interested in that I would like to have your comment 

on is the price of gas and gasoline at the pump. I mean, we--I know this 

is a difficult thing but estimates, predictions, I mean what are we looking 

at in 2010, 2015, 2020? What as you get these production declines, I 

mean what are we looking at? And then if you also could comment, we 

face this issue of global warming which is a big one which the scientists 

tell us is, the science on that is getting stronger every day. How does that 
90

intersect with what we are talking about here today, the use of fossil fuels 

and moving to alternatives and any of our panelists please jump in. 

 MR. ALEKLETT. Let me start with the global warming, please, 

because if you look into these scenarios about how much carbon dioxide 

that will be produced in the future, it is obvious that they are 

overestimating the amount that can be produced from oil and natural gas. 

And it is now more or less agreed that we can burn all the natural gas and 

the conventional oil and it will not affect so much the global change. 

The problem is coal. We should work on coal. We should not have the 

carbon dioxide coming out in the air from coal. That is a big problem for 

the future. And it is--yeah, I think I will leave it for the others for that. 

 MR. HIRSCH. I would like to comment on your point about political 

will because the political will in our system with the way things are 

working right now is very hard to muster. In fact, the current 

circumstances, the high probability would be to wait until the problem 

hits because then the political will will be there because the consumers 

will be screaming. I would say that in my testimony, China has the 

political will and China is out acquiring and investing in ways to secure 

their own supply. They seem to have the political will which we do not 

have as yet. 

 MR. UDALL. China is also are they not investing in these efficiencies 

in automobiles, I mean producing the--I know they are going to be 

putting many, many millions of automobiles on the road but they are also 

looking at efficiencies that are way above what we are achieving here in 

the United States isn’t that correct? 

 MR. ALEKLETT. Another thing with China is that they can say that 

you are not allowed to buy a car that takes so much gas; you must buy 

one that takes a smaller amount. Another thing is we have the world 

problem with diesel coming out. Everyone thinks that diesel should be 

used because you get better efficiency on the cars. But the problem is 

that the capacity of producing diesel in the refineries is not enough in the 

world. And looking to China, they think they have their own solution for 

that, because they will use now natural gas for the trucks in China. They 

are preparing to build a filling station for natural gas for trucks and so on 

and in a couple of years, I think that will be running a big fraction of the 

trucks and so will natural gas. Another thing I think we have to consider 

is the countries in the Middle East and North Africa. These countries 

have 75 percent of the remaining resources of oil in the world and these 

people also understand that this is the only resource they have to make 

money for the future. And I have been down in the Middle East a couple 

of times now and every time when I am down there they said we had to 

think about future generations, our children and grandchildren; they must 

get money for something also. So why should we pump all now that we 
91

do not need the money when our children need it in the future. And I 

could take one example of Kuwait. Whenever it comes up that they 

should increase their production, the parliament over there what they 

have, they say no. We should save it for future generations, so do not 

count on that these countries should increase their production, because 

they know that they need it in the future. I was in Berkley for several 

years and worked there and I liked to go up in the gold country and the 

ghost towns there were quite chilling. If you take Virginia City, if you 

have been there, you know the bars and restaurants were built at the end 

of the Nineteenth Century. That must have been glorious at that time. 

Today it is a ghost town and the reason is that there was a limited 

resource of gold that was there for a time and then it was gone. That is 

what my findings of the Middle East if these people are forced to pump 

oil much faster than they really need. 

 MR. UDALL. Mr. Esser, did you have any thoughts on that? 

 MR. ESSER. No. 

 MR. UDALL. Okay. Mr. Chairman, any predictions at all on prices in 

terms of gasoline? I mean are we going to go back down in terms of the 

price per barrel? 

 MR. HALL. Where are we on that? 

 MR. HIRSCH. I do not think anybody could tell you. And anybody 

that gives you a prediction may not understand the problem. It is too 

complex. There are too many forces at work. There are things that 

happen that are unpredictable. You cannot predict the price. 

 MR. ALEKLETT. I used to say that price offset in trades in London 

and New York and we get the price according to how much you are 

willing to pay for it. 

 MR. UDALL. Mr. Chairman, thank you for your courtesies. 

 MR. HALL. Why thank you. Dr. Aleklett, Dr. Hirsch, Mr. Esser, we 

thank you very much. To Mr. Bartlett and Mr. Udall, thank you for 

bringing this to our attention and to have requested this hearing and for 

your participation, the time you have prepared, the questions you have 

asked, and answers you have given. We thank you for it. You had to 

travel a long way. You had to be prepared over the last 15 or 20 or 30 

years to be as intelligent as you are to come here and then you give us 

your time and we appreciate it. Thank you. Each member of this 

committee thanks you and each Member of Congress will read your 

testimony. They will have copies of it. So it is not just these few that 

you are testifying to, it is the Congress and anybody that really wants to 

see it anywhere. Thank you very much and with that we are adjourned. 

 [Whereupon, at 11:50 a.m., the subcommittee was adjourned.] 

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