Peak oil pumps up experts

Denver conference discusses possible global crisis

DENVER - The Denver World Oil Conference is less about petroleum than a lack of it.

Randy Udall called it the "depletion Woodstock." Udall, director of the Community Office for Resource Efficiency in Aspen, organized the conference with Superior resident and energy consultant Steve Andrews.

The kickoff event of the Association for the Study of Peak Oil-U.S.A. attracted some of the world's leading oil analysts and more than 400 attendees from around the country to the Sherman Street Events Complex Thursday and today.

The main message Thursday was both comforting and dire.

The world's supply of oil is not running out, speaker after speaker stressed. But to trigger widespread societal pain in a petroleum-dependent world, it doesn't have to. Oil production must simply peak and slowly decline amid growing global oil demand driven by transportation, pharmaceuticals, plastics and fertilizer, among other needs.

"We are every bit as dependent on oil as the Sioux were on bison," Udall said, calling Americans an "oil tribe" drinking 140 pounds of petroleum per person per week.

U.S. oil production peaked in 1970. Global peak oil may be history, also. Or it could be coming in the next year or two, or in a decade or longer. It doesn't really matter, said Thomas Petrie, longtime oil-industry analyst and founder of energy investment bank Petrie Parkman & Co. in Denver.

"It's like 4 o'clock tomorrow from a policy standpoint," Petrie said.

But a combination of antiquated reporting requirements and corporate and national interests have rendered information on oil reserves notoriously unreliable. The result has made formulating oil policy like doctoring without accurate vital signs.

Today's global oil demand - about 84 million barrels per day - is stretching production. The United States , with 4 percent of the world's population, consumes about 20 million barrels per day. The world's oil producers have less than 2 percent spare capacity, and it takes at least five years to bring new supplies online, Petrie said.

The world's major oil companies figure global demand is rising at a rate of about 2 percent per year. Production from existing reservoirs is falling at 5 percent per year or faster. To boot, the world consumes oil at a pace between twice and four times as fast as new discoveries are announced.

No one quite knows what the consequences of a yawning gap between oil supply and demand would be. They could involve high inflation, rationing and perhaps even food-supply shortages as farmers switch from food crops to biofuel inputs, said Chris Skrebowski, editor of the British journal Petroleum Review.

"If we ignore this issue, we will live in a far darker world," said Matthew Simmons, head of Houston investment bank Simmons & Co. and author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy."

Simmons said alternative sources such as the tar sands of Alberta won't come close to closing the demand gap - Canadian production is expected to yield 5 million barrels a day by 2030. Regarding oil shale of the sort ballyhooed in Colorado, he said. "We don't have a clue how to turn it into usable oil."

Some were less pessimistic. Longtime Houston energy consultant Henry Groppe said fully 20 million barrels per day of global oil consumption goes to heating and industrial uses in the developing world. He said businesses are already switching to different fuels with crude-oil prices hovering near $60 per barrel. Groppe said he thinks such prices will reduce oil demand to the point that it stays flat in the coming years without hurting the global economy.

Also at the conference, CU Physics Professor Emeritus Albert Bartlett was awarded one of the new organization's first M. King Hubbert awards for Bartlett's work related to sustainability.