[Congressional Record (Bound Edition), Volume 154 (2008), Part 2]
[House]
[Pages 1781-1787]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                PEAK OIL

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 18, 2007, the gentleman from Maryland (Mr. Bartlett) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. BARTLETT of Maryland. Mr. Speaker, our government has paid for 
four studies looking at the world energy situation, particularly at 
oil. Two of those studies were reported in 2005, and two of them were 
reported in 2007. The two in 2005 were the SAIC report known as the 
``Hirsch Report,'' and then later in the year there was a report by the 
Army Corps of Engineers, and then in 2007 there were two reports, one 
of them by the Government Accountability Office and the second one by 
the National Petroleum Council.
  They all said essentially the same thing in different words. I have 
here some quotes from the first one of these, and the largest one. 
Remember, this is now in 2005, and this is from the Hirsch Report. 
``Peaking of World Oil Production: Impacts, Mitigation, & Risk 
Management'' was the title of their work.
  World oil peaking is going to happen. By peaking, we mean that time 
at which the world reaches its maximum capacity for producing oil. 
After that time, regardless of the demand for oil and regardless of the 
desire to produce more oil, the world will not have the ability to ramp 
up in oil production to produce more oil.
  World production of conventional oil will reach a maximum and decline 
thereafter. That maximum is called the peak. A number of confident 
forecasters project peaking within a decade. Others contend it will 
occur later. Prediction of the peaking is extremely difficult because 
of geological complexities, measurement problems, pricing variations, 
demand elasticity and political influences. Peaking will happen, but 
the timing is uncertain. Oil peaking presents a unique challenge.
  And then they make this statement: the world has never faced a 
problem like this. There is no precedent in history that we can use to 
judge what the impact of this peaking will be. Without massive 
mitigation more than a decade before the fact, the problem will be 
pervasive and will not be temporary. Previous energy transitions, wood 
to coal and coal to oil, were gradual and evolutionary. Oil peaking 
will be abrupt and revolutionary.
  The second chart has some additional quotes from this same report. 
The peaking of world oil production presents the U.S. and the world 
with an unprecedented risk-management problem. As peaking is 
approached, liquid fuel prices and price volatility will increase 
dramatically. A couple of weeks ago, oil was $100 a barrel. And without 
timely mitigation, and there has been essentially none, without timely 
mitigation, the economic, social, and political costs will be 
unprecedented, unprecedented, meaning nothing in the past can we use as 
a guide to what the consequences will be.
  Viable mitigation options exist on both the supply and demand sides. 
But to have substantial impact, they must be initiated more than a 
decade in advance of peaking.
  Now, as we will see in a chart or two, it is very probable that 
peaking has already occurred. So, obviously, we can't prepare for it a 
decade ahead. Dealing with world oil production, peaking will be 
extremely complex, involve literally trillions of dollars and require 
many years of intense effort. This is from the SAIC, a very prestigious 
organization, a report paid for by our government.

                              {time}  2130

  The next chart is a graph of oil production in the United States. To 
see the impact of this we have to go back more than half a century to 
1956, the

[[Page 1782]]

8th day of March, in San Antonio, Texas, when M. King Hubbert gave a 
speech to a group of oil engineers and executives which I think will 
shortly be recognized as the most important speech given in the last 
century.
  What M. King Hubbert told that group was that in just 14 years from 
1956, that is, 1970, the United States would reach its maximum oil 
production, and after that, no matter what it did, the United States 
would not be able to increase its oil production.
  At that time, the United States, that means in 1956, the United 
States was king of oil, I believe producing more oil, using more oil 
and shipping more oil than any other country in the world. Nobody 
believed M. King Hubbert. He was derided. But when in 1970, right on 
schedule, we peaked in oil production, he became a legend in his own 
day. He died just a few years ago.
  What he predicted was oil production in the Lower 48, that is, Texas 
and the rest of the United States, that is the gray and blue part of 
the graph here, we found a lot of oil in Alaska and we are able to get 
some natural gas liquids, and when you add those two together, you see 
there was a little blip in the slide down the other side of Hubbert's 
Peak. But in spite of feverishly drilling, we have drilled more oil 
wells in our country than all the rest of the world put together. We 
have about four times as many oil wells in the Gulf of Mexico, about 
4,000, about four times as many in the Gulf of Mexico as in all of 
Saudi Arabia, for instance. In spite of finding oil in Alaska and in 
spite of finding oil in the Gulf of Mexico, the yellow wedge there, we 
are now producing about half the oil we did in 1970.
  The next chart shows a quote, a very recent quote from the Shell Oil 
Company, January 22. ``By the end of 2100, the world's energy system 
will be radically different from today's.''
  It will indeed.
  ``The world's current predicament limits our maneuvering room. We are 
experiencing a step change in the growth rate of energy demand.'' China 
and India and the Third World are coming on line to industrialize.
  Shell estimates that after 2015, that is just around the corner, 
``after 2015, supplies of easy-to-access oil and gas will no longer 
keep up with demand.'' A very significant statement. ``As a result, 
society has no choice but to add other sources of energy.''
  The next chart is also some very recent data. Now, remember, M. King 
Hubbert made his prediction in 1956. Remember that it was in 2005 that 
SAIC, the Hirsch Report, made their predictions.
  There are two agencies in the country that do a very good job of 
tracking the production and consumption of oil, and, of course, since 
we use all we produce, those lines are the same. We are not storing it 
up in large quantities anywhere, significant quantities. One of these 
two agencies is the International Energy Agency, the IEA. You see them 
referenced in the news relative to Iran. They are the international 
group that is watching the development of nuclear energy activity in 
Iran.
  Then there is our own EIA, Energy Information Agency, an arm of our 
Department of Energy. They do a very good job of tracking the use of 
oil. Here are their curves. The red curve is the IEA and the green 
curve is the EIA. You notice they are very similar. They should be, 
because they are looking at the same data. Notice for about the last 30 
months, both of those have oil production essentially plateauing.
  The same gentleman that predicted that the United States would reach 
its maximum oil production in 1970, that was M. King Hubbert, predicted 
that the world would be reaching its maximum production about now. It 
would appear, it would appear from Shell's statement and would appear 
from the graph here from these two organizations that are tracking the 
production and consumption of oil, that indeed it looks like we are 
plateauing, which would mean that we very probably have reached a peak.
  Notice what has happened with price. There is a lot of volatility, 
which was predicted by the Hirsch Report. And notice what has happened 
in the last few months; up, up, up. It at one time touched $100 a 
barrel. It now is down just under $90 a barrel. When I first came to 
the floor about 2\1/2\ years ago to talk about oil, it was about $40 a 
barrel. Look what has happened to the price of oil since then.
  There are three groups that have common cause in a rational solution 
to this problem and two other problems. The first of these three groups 
are those that are concerned about global warming and climate change. 
What they would do to ameliorate this problem is to shift from the use 
of fossil fuels, which are releasing CO2 which was 
sequestered a very long time ago, now present in oil and gas and coal, 
they would replace that with renewable sources where you are simply 
recycling the CO2. The trees grow and they use 
CO2 to grow, and then when they are mature, you cut them and 
you burn them and oxygen is consumed in burning them and the 
CO2 is released, so there is no net CO2 increase 
when you do that.
  A second group that has common cause in wanting to replace our fossil 
fuels with renewables are those who are concerned about our national 
security. The President noted that we were far too dependant on foreign 
oil. We have only 2 percent of the known reserves of oil in the world. 
We use about 25 percent of the world's oil. We import almost two-thirds 
of what we use. The obvious solution to that problem is to get our 
energy from somewhere else so that we don't have to import this oil, 
and the rational place to get that is from renewables.
  Then there is the group of people that I am kind of representing 
tonight when I talk about this aspect of energy, and those are the 
people who believe that there is a finite amount of oil in the world 
and that at some point in time the world will reach that maximum 
capacity to produce oil. That happened in the United States, as that 
chart showed, in 1970. After that, no matter what we do, reasonably, no 
matter what we do, the production of oil will fall steadily off.
  Now, we aren't running out of oil. We are not falling off a cliff. 
What we are running out of is our ability to produce oil as fast as we 
would like to use it. That point is called peak oil. What the peak oil 
concerned people would like to do is to move to some alternative which 
is a substitute for oil.
  So we have these three groups with very different agendas, very 
different premises, but all three of them have exactly the same 
solution to their problem; climate change and global warming. What you 
want to do is stop releasing this sequestered CO2 in the 
fossil fuels and use renewables.
  What you want to do if you are concerned about our national security 
and the fact we are so dependent on foreign oil is to find a substitute 
for oil so we don't have to buy that foreign oil.
  If you are concerned about peak oil, that it just isn't going to be 
there in the quantities you would like to use it in the future, 
obviously you have got to find another source of energy. So these three 
groups have common cause.
  I am joined this evening by one of my colleagues that is a real 
expert in the first one of these I mentioned, Wayne Gilchrest, Wayne, 
thank you very much for joining us. Wayne is perhaps the best authority 
in the Congress on climate change or global warming, and different 
people talk about this problem in different ways.
  Wayne, thanks for joining us.
  Mr. GILCHREST. Thank you very much, Mr. Bartlett, for letting me 
share your hour here this evening. I think you are doing an 
extraordinary service, not only to we Members of Congress, but to the 
public at large, to understand the nature of the energy crisis and how 
it is inextricably linked with global warming.
  If we take a look at both of these issues, especially the issues that 
Mr. Bartlett raises about energy security and what is in the future for 
our energy needs, which is the basis for a prosperous economy, there 
are many changes coming based pretty much on these two issues: Energy 
and climate change. As far as energy security and the economic 
viability of this country,

[[Page 1783]]

environmental issues and ethical issues for future generations, these 
two issues are inextricably linked. They are issues for the most part 
that are still misunderstood by the public, and they are issues that 
are not in the headlines every day for the news media and elected 
officials to do their own research, like Mr. Bartlett has done, and 
voice this issue to the public so that they become much more educated 
as a result of it.
  If these issues are handled appropriately, and that means if we the 
government and the public at large become informed about these issues, 
they can then become much more competent in dealing with these issues 
and there will be a bright future. If these issues of energy and 
climate change are not handled appropriately, if the focus is on the 
wrong priority, then energy security and climate security for this 
country will be severely jeopardized.
  Mr. Bartlett talks about peak oil. The United States peaked in 1970 
and the world at large is about ready to peak. We looked at in just the 
last couple of years more than a doubling of the cost for a barrel of 
oil.
  The issue is similar in global warming, which is called today climate 
change. Why is there a difference in the verbiage on discussing global 
warming? The difference in verbiage is that global warming will cause 
the climate to change, disruptions in the climate.
  Is there global warming? Well, there is a 90 percent certainty among 
the American scientists and international scientists that global 
warming is linked to human activity. That means the burning of fossil 
fuel.
  Let's take a quick look at one example as to why we link global 
warming to human activity. We can go scientifically back 20,000 years 
at the height of the last ice age and we can test through a number of 
different means, especially ice cores, 20,000 years ago.
  I want to make one other comment also. If you look over the past 
20,000 years, you will see a fluctuation, a variation in climate 
change, and you will also see a fluctuation in variation of 
temperature. The temperature corresponds to the amount of greenhouse 
gasses in the atmosphere. The more greenhouse gasses over the eons of 
time, the warmer the climate.
  If we go back 20,000 years to the height of the last ice age, carbon 
dioxide, which is the chief greenhouse gas, one of the chief greenhouse 
gasses, there was 180 parts per million of CO2 in the 
atmosphere. As a result of that small amount of CO2, we were 
in an ice age. It was very cold.
  As climate variability changes over the course of time, we come to 
1890 when we could evaluate how much CO2 was in the 
atmosphere. 1890, a little over 100 years ago, there was 280 parts per 
million of CO2 in the atmosphere. It took basically nearly 
20,000 years to go from 180 parts per million of CO2 to 280 
parts per million, an increase of 100 parts per million over 20,000 
years.
  Well, what were we really involved in in 1890? The industrial 
revolution, the burning of coal, the early stages of the age of oil.
  It is 2008. There are 380 parts per million of CO2 in the 
atmosphere. What does that mean? That means the natural cycle took 
20,000 years to increase CO2 by 100 parts per million, and 
during the industrial age, it took just 100 years to increase 
CO2 by 100 parts per million. The correspondence to warming 
is linked to the amount of greenhouse gasses. So we are warming.
  There are many, many other examples of this; receding glaciers 
worldwide, shrinking ice sheets on Greenland, temperature of the air 
and temperature of the water.

                              {time}  2145

  Another problem is the acidification of the oceans. The point here is 
that we are facing enormous changes in a very short period of time. 
Will we be ready? We are facing peak oil.
  In some sense, in maybe less than 100 years, we will be at the end of 
the Asian oil, and what will we replace this enormous source of energy 
with? We are facing enormous changes in the next few decades with the 
climate changing as a result of human activity.
  Let's take just a brief look at some of the issues of a changing 
climate. What will it do to agriculture in the United States with the 
drought and rain cycles changing, and we are already beginning to see 
that. What will it do to our national forests and forests globally with 
the infiltration of pests that weren't there before? We see that now in 
the northern regions of Alaska and wild fires; fresh water, quantity 
and quality with changing rain cycles; coastal zones, flooding areas, 
more hurricanes. We have already seen more tornadoes.
  What about sea level rise? This is an important aspect of global 
warming. If sea level rose just a couple of feet, and there is a good 
chance it will rise more, what will happen to New York City or Miami or 
New Orleans or a town close to me called Chestertown? How will the eco-
systems change? What will diseases be like in areas that are a lot 
warmer?
  We only need now to look at some of the areas of central Africa or 
Central America or South America. Ocean acidification is an issue with 
the kinds of marine life that will be in the world's oceans. Ocean 
acidification has a direct impact on the spawning activities of all the 
sea mammals and the other marine creatures in the ocean.
  Global warming, 90 percent assurance from the world's scientists that 
human activity is causing it to change. It is changing the face of our 
planet, the link with the other issue of energy. The lack of it will 
change dramatically the face of our planet if we don't select the right 
priorities as soon as we can.
  What are some of the questions we ask about this scene, this 
relatively confusing scene of an energy crisis with nothing right now 
to replace it, and a global warming climate-change crisis, some of the 
confusing issues. Are we in just another cycle of high energy costs and 
different climate? We know that climate cycles change, and we know that 
energy costs change over a period of time.
  Are we not just in another cycle? Well, this time we are not just in 
another cycle. But if you want to say we are in a cycle, this cycle is 
being dramatically affected by human activity.
  In the energy crisis arena, we are burning more oil than we have in 
reserves. In the climate crisis arena, we are burning fossil fuel, 
infusing greenhouse gasses in the atmosphere in the last few decades 
that it took millions of years for the natural processes to lock up.
  Now, one last comment, and then I want to go back to my good friend 
from Maryland (Mr. Bartlett) who will go over some of the issues that 
can ameliorate the problem with the climate crisis, the problem with 
the energy crisis. Both these issues, energy crisis and climate change, 
are going to take something in the order of magnitude that we dealt 
with in the Manhattan Project and sending a man on the Moon.
  This is an economy-wide issue. The economy issue and the global 
warming issue are economy-wide, and they are international in scope. 
One of the suggestions for the global warming issue is an economy-wide 
cap and trade program, similar to what we dealt with from sulfur 
dioxide and acid rain from power companies a little more than 10 years 
ago, which has been very successful, a cap and trade program, economy-
wide, where you actually trade carbon in a similar way that you would 
trade stock on the stock market.
  You place a cap on the emission of CO2 and other 
greenhouse gasses. You incrementally implement this over a period of 40 
years and gradually, by the year 2050, you can reduce greenhouse gas 
emissions by 70 percent below 1990 levels by finding alternatives to 
fossil fuel.
  What is at the bottom of the bottomless pit? We used to think it was 
oil, that we could burn it forever and it wouldn't hurt the 
environment.
  But we now know it's not oil. What needs to be at the bottom of the 
bottomless pit is ingenuity, good old-fashioned American ingenuity.
  I want to thank the gentleman from Maryland, my good friend Mr. 
Bartlett for recognizing me for this time.
  Mr. BARTLETT of Maryland. Thank you very much for joining us in this 
discussion of energy. You know, Congressman Gilchrest, some might say,

[[Page 1784]]

gee, won't the global warming problem be solved if, in fact, we were at 
peak oil? It would be nice if that would solve the problem, but it 
won't.
  You see, we have now used about 1 trillion barrels of oil. That's 
about half of the oil that we ultimately will use. There is about 
another 1 trillion barrels of oil to use. So as we go through this last 
half of the age of oil, we will release as much CO2 from 
burning that oil and gas and coal as we have released now in the first 
half of the age of oil.
  So the CO2 contributed during this industrial age and 
burning the fossil fuels will double. It will be twice as big at the 
end of this time.
  I have here an interesting graph, a little cartoon here. There is a 
huge SUV there and it's labeled ``demand,'' and there is a gas pump 
there and it's labeled ``supply,'' and it's little, and the motor is 
saying, Gee, just why is gas so expensive? Well, that's the reason, of 
course: There is a big demand and a little supply. When you have that, 
that makes prices go up.
  The next chart is a quote from the second of these studies, which 
your government paid for and has pretty much been ignoring. This is the 
Corps of Engineers: ``Oil is the most important form of energy in the 
world today.'' The President recognized that in his State of the Union 
a year or so ago.
  ``Historically, no other energy source equals oil's intrinsic quality 
of extractability, transportability, versatility, and cost. The 
qualities that enabled oil to take over from coal as a front-line 
energy source for the industrialized world in the middle of the 20th 
century are just as relevant today as they were then.''
  Oil is, indeed, an incredible energy source. One barrel of oil, and 
when I first heard this statistic, I said, gee, that can't be true, one 
barrel of oil has the equivalent of 25,000 man-hours of labor, that's 
12 people working all year. I thought, gee, can that be true, just 1 
barrel of oil, 42 gallons of oil.
  Then I thought how far that gallon of gasoline, still at $3, by the 
way, cheaper than water in the grocery store, how far that gallon of 
gasoline carries my Prius. I drive a Prius and we get just a little 
under 50 miles per gallon with it. I could pull my Prius 50 miles, but 
how long would it take me to pull my Prius 50 miles?
  When I looked at that and I figured, gee, maybe it's true that a 
barrel of oil has the energy equivalent of 12 men working all year.
  The incredibly high quality of life that almost all the world enjoys 
today is the result of our ability to tap into the stored energy in 
fossil fuels.
  The next chart is a quote from Admiral Hyman Rickover. He gave a 
speech, it will be 51 years ago the 14th day of this May, to a group of 
physicians in St. Paul, Minnesota. These are some excerpts from his 
speech. He really was prophetic. He is the father, of course, of our 
nuclear submarine.
  ``There is nothing man can do to rebuild exhausted fossil fuel 
reserves. They were created by solar energy'' he says, 500 million 
years ago ``and took aeons to grow to their present volume. In the face 
of the basic fact that fossil fuel reserves are finite,'' and they are, 
``the exact length these reserves will last is important in one 
respect. The longer they last, the more time we have to invent ways to 
live off renewable or substitute energy resource and to adjust our 
economy to the vast changes which we can expect from such a shift.''
  Fifty-one years ago we were only then about 100 years into the age of 
oil. He had no idea how long the age of oil will last. Now we know 
pretty much how long the age of oil will last.
  He said that how long it lasted was important in only one respect, 
that the longer it lasted, the more time did we have to plan for the 
transition to renewables, which ultimately we will do. Geology will 
ensure that eventually we transition to renewable fuels.
  ``Fossil fuels resemble capital in the bank. A prudent and 
responsible parent will use his capital sparingly in order to pass on 
to his children as much as possible of his inheritance.''
  I thought often of that very sage counsel. You know, it doesn't even 
come close to our attitude towards oil. With no more responsibility 
than the kids who found the cookie jar or the hog who found the feed 
room door open, we have just been pigging out. We have been pumping oil 
as fast as we could all over the world eager to find new places from 
which to pump oil.
  We just found some more oil in the Gulf of Mexico under 7,000 feet of 
water, 30,000 feet of rock. We aren't starting to exploit that yet 
because oil at $100 a barrel or $88 a barrel apparently is not high 
enough.
  ``A selfish and irresponsible parent will squander it in riotous 
living and care not one whit how his offspring will fare.''
  Boy, that is quite precisely what we have done with this incredible 
wealth under the ground. When we found that wealth 150 years ago, we 
should have stopped and said, gee, what can we do with this to do the 
most good for the most people for the longest time? Rather than doing 
that, what we did was to act as if oil were forever, that there would 
never be an end of oil, just keep drilling, just keep pumping, and it 
will always be there.
  The next chart shows the industrial age and the transition from wood, 
the brown line here to coal, and then to gas and oil. Boy, look what 
happened. Look at the slope of that line.
  Now, if I put world population on this, it would be hardly 
indistinguishable from that energy curve, because the world's 
population just shot up. It was less than 1 billion people for a very 
long time. Now it's approaching 7 billion people, and that increase in 
population follows exactly this dramatic increase in the release of 
energy from the use of gas and oil.
  A couple of interesting things about this chart, notice where that 
line would be if it kept on going up, way off the top of the chart by 
this time. That dip there, as you notice from the abscissa, occurred in 
the 1970s, was the Arab oil spike price spots and the worldwide 
recession that resulted from that. There was demand destruction. We 
didn't need as much oil because we were in a recession, a depression in 
many places.
  The production went down and, boy, did the price go down. It dropped, 
do you remember, about $10 a barrel. All of those activities, which 
were looking at producing substitutes, they just all died because you 
can't compete with oil at $10 a barrel.
  We now are very much more efficient than we were at this time. The 
slope of this curve, by the way, is really interesting. That's during 
the Carter years. During the Carter years, every decade we used as much 
oil as had been used in all of previous history. That's a stunning 
statistic.
  What that means is that when you have used half of your oil, how much 
will remain, 10 years. We are now very much more efficient than we were 
then. We are able to live better than we were then, using less energy 
because your air conditioner is probably three times as efficient; so 
is your refrigerator. Your car is more efficient. If they would keep 
them small, they would get better mileage even.
  The next chart is really an interesting one, and looking at this 
chart causes you to do a lot of reflection. This is ``The World 
According to Oil,'' and it depicts two things. One is who has the oil. 
And the other one is who uses the oil. The yellow and the green there 
are the people who are using the oil, and the blues and the grays are 
the people who have the oil.

                              {time}  2200

  You notice this is what the world's map would look like if the size 
of the country was relative to the amount of oil it had in reserve. 
Saudi Arabia is huge. It represents about 22 percent, almost a fourth 
of all of the oil reserves in all of the world.
  Little Kuwait here, a tiny country, Saddam Hussein thought it looked 
like an errant province of Iraq and he went to reclaim it a decade or 
so ago, but little Kuwait has as much oil as Iraq. There is Iran. 
United Arab Emirates, you can hardly see them on the map. Look at 
Venezuela. It dwarfs us.
  Here we are with 2 percent of the reserves. We are yellow because we 
use 25

[[Page 1785]]

percent of all of the world's oil. Notice that Venezuela is several 
times larger than we are.
  Russia is pretty big, what three, four times bigger than we are, but 
they aren't using anywhere near as much oil as we are per capita so 
they are a big exporter and they have lots of money.
  What is striking on this map is the size of China and India. Notice 
them here. Together they don't have as much oil as the United States, 
but together they have 2.3 billion people. With booming economies, 
China growing 11.4 percent, that was the statistic I saw for the last 
quarter.
  Mentioning China, the next chart looks at what China is doing around 
the world. China is going around the world and buying oil wherever they 
can. And they are not just buying oil; they are buying goodwill. Would 
you like a soccer stadium, maybe a hospital, or roads is what you need 
in your country. This symbol here is for Unocal. They almost bought an 
oil company in our country a few years ago.
  Why is China doing that? In today's world it doesn't make one bit of 
difference who owns the oil. From that previous chart when you saw 
those huge reserves of oil in north Africa and the Middle East, those 
people are using very little oil. He who comes with the dollars, let's 
hope it stays dollars and not your euros or we'll be in a world of 
hurt, he who comes with the dollars gets the oil. It doesn't make any 
difference in today's world who owns the oil, so why is China buying 
oil?
  China has 900 million people in what they call rural areas. They may 
be in rural areas, but many of them have television and they are seeing 
the results of industrialization and they are demanding for themselves 
the increased quality of life that comes from the industrialization 
that they see in other countries in the world. So China has a problem 
in providing adequate industrialization to meet the emotional needs of 
these people so, and this is a judgment call on my part, so they don't 
become a problem and revolt.
  I think the day may come when China may tell the rest of the world, 
Gee, guy, we're sorry, this is our oil and we have 2.3 billion people 
and we can't share it with you. To make that a reality, they will need 
a big navy. They will need a big navy to hold open the sea lanes and 
get that oil to their country. They are growing a navy very rapidly. 
This is open source literature. You can do a Google search for 
``China'' and ``navy'' and you can see how aggressively they are 
growing their navy.
  What China is doing here resulted in a statement in 2006 by 
Condoleezza Rice which is in our next chart here. ``We do have to do 
something about the energy problem. I can tell you that nothing has 
taken me aback more as Secretary of State than the way that the 
politics of energy is, I will use the word warping diplomacy around the 
world. We have simply got to do something about the warping now of the 
diplomatic effort by the all-out rush for energy supply.''
  The next chart presents some numbers that I went through a bit ago. 
These numbers, by the way, prompted about 3 years ago now, 30 of our 
prominent Americans, Boyden Gray, and McFarland and Jim Woolsey and 27 
others, among them retired four star admirals and generals, they wrote 
a letter to the President saying: Mr. President, the fact that we have 
only 2 percent of the world's oil reserve and we use 25 percent and we 
import almost two-thirds of what we use is a totally unacceptable 
national security risk. We need to do something about it. You may 
remember the President mentioned this in one of his State of the Union 
speeches. Indeed we do have to do something about that.
  We represent a bit less than 5 percent of the world's population. We 
are one person in 22 in the world, and we use a fourth of the world's 
oil. That statistic is not lost on the rest of the world, by the way. 
They are noting that.
  With only 2 percent of the world's oil reserves, we are pumping 8 
percent of the world's oil. What does that mean? Very simply, it means 
we are pumping our oil four times faster than the rest of the world, 
which means that our supplies are going to run down faster than the 
rest of the world.
  We have 630,000 producing oil wells in our country. That is more than 
all of the rest of the world put together, so we are really good at 
pumping oil.
  The next chart is really a very important chart. If you were going to 
talk about energy, oil, and the world's future, and you had only one 
chart, this would be the one that you would use. This comes from the 
oil chart. You can do a Google search for ``oil charts'' and you can 
find this and a lot more information.
  Peak oil, the growing gap. The bars here represent when we discovered 
oil. Boy, it started way back in World War II, back in the 1940s. Then 
we discovered a whole lot in the 1950s, a whole bunch, and a lot of oil 
in the seventies. Oil in the eighties, and look at what has happened. 
Down, down, down, down. And that is in spite of ever-better techniques 
for discovering oil, computer modeling and 3D seismic, and it is in 
spite of an ever-greater effort in going out and drilling new wells.
  The solid black line here represents the amount of oil which we are 
producing and using. We use everything we produce, so it is the same 
line. Notice again up to the 1970s what has happened. If that line kept 
going up at that rate, we would be off the top of the chart here. But 
the Arab price oil spikes, at this point produced a worldwide recession 
that reduced the demand for oil, and then we became very much more 
efficient. Notice the low slope of this line compared to this one. 
Maybe that was a wake-up call that we needed, because if we hadn't had 
that, we would be in even more trouble today because we wouldn't have 
invested in those efficiencies.
  But notice that since about 1980, we have been using more oil than we 
produce by this amount. So we have been dipping in reserves we had.
  What will the future look like? One thing is certain: You cannot pump 
oil you have not found. So you can make your own judgment as to how 
much more oil we will find. Most of the world's experts believe we have 
probably found 95 percent of all of the conventionally recovered oil 
that we will ever find.
  The light shaded area here represents the future, and they are 
showing peaking at about 2010 and downhill after that.
  This area tails out until it comes down to zero, which will be 
another 150 years from now, because that is about how long we have been 
in the age of oil.
  The difference between the amount you discover and the amount you are 
using has to be filled in by the reserves you have here. Now, you can 
make that future look a little different by enhanced oil recovery and 
going out and pumping live steam and pushing CO2 down there 
to push the oil out, but if you do that, you will simply move this peak 
out a little, and then you will kind of fall off the cliff because, 
again, you can't pump what you haven't found.
  The next chart is an interesting one. We show again here Hubbert's 
peak and the production of oil in our country. The yellow symbols here 
are what M. King Hubbert predicted for the lower 48. The green is what 
actually happened. This is a really interesting chart. It was produced 
by CERA, Cambridge Energy Research Associates. They produced this chart 
in an effort to convince you that you shouldn't have any confidence in 
M. King Hubbert's predictions because he really got it wrong. Maybe to 
a statistician they might reach a conclusion that he got it wrong, but 
I think to the average layman this green curve and those yellow 
triangles are not all that different. He seemed to get it pretty right 
to me.
  The red here is the additional oil that we found in the Gulf of 
Mexico and in Alaska. M. King Hubbert's prediction was just for the 
lower 48. And by the way, we are pumping 25 percent of our oil through 
that four-foot pipeline. I have been up to Deadhorse where it begins. 
Even with that, we had just a blip on the slide down the other side of 
Hubbert's peak.
  The next chart is interesting. It is another one from the Cambridge 
Energy Research Associates, CERA. There

[[Page 1786]]

are only two major entities that I know of in the world today that will 
claim that peaking of oil is not either present or imminent. One of 
those is ExxonMobil. The other oil company, I started with a quote from 
Shell saying we are probably there, are on board with the peak oil 
concept, and CERA, Cambridge Energy Research Associates.
  I mentioned that we have discovered about 2 trillion barrels of oil. 
Here they have 1.9 trillion. That is pretty close to 2. If that is the 
amount of oil available, which is what we showed on the previous chart, 
if you add up all on the bars on the previous chart, they will come to 
about 2 trillion, and we have now pumped about half of that. We have 
the other half to pump. If that is all of the oil we have, they now 
show peaking here at about now, right? About 2010, roughly now they 
show peaking.
  They are presuming that we are going to find another trillion barrels 
of oil, that we are going to find as much oil as all of the oil that we 
used in the 150 years since we started using oil. If you believe we are 
going to find that much more oil, then you push the peak out to about 
2035. That's just the take after tomorrow really, isn't it?
  They are also projecting that we may find some unconventional oil, 
like we will be able to exploit a lot of oil from the tar sands and the 
oil shales. There are incredible amounts of potential oil there. The 
problem is can we really get it out in any timely fashion. We use 21 
million barrels of oil a day in our country. The world uses 84 million 
barrels of oil a day. Try to get your mind around that, 21 million 
barrels of oil a day, each one of them with the energy equivalent of 12 
people working all year. Wow, no wonder we live such great, high-
quality lives.
  The next chart shows a schematic. By the way, you can make this peak 
look sharp by compressing the abscissa and expanding the ordinate. But 
this is 2 percent growth. And 2 percent growth is small. Our stock 
market doesn't like 2 percent. If it is only 2 percent, they think that 
the sky is going to fall and stocks drop.
  But 2 percent growth doubles in 35 years. It is 4 times bigger in 70 
years. It is 8 times bigger in 105 years. It is 16 times bigger in 140 
years.
  Albert Einstein said that the most powerful force in the universe was 
the power of compound interest when he was asked: Gee, Dr. Einstein, 
after the discovery of nuclear energy, what is the next big force in 
the universe? That was his answer: It is the power of compound 
interest.
  I believe we are about here, just about at peaking. This is where we 
would like to be in 35 years, two times higher than we are now, and we 
have a huge gap to fill. Most people are looking at how can you fill 
that gap.

                              {time}  2215

  I don't think that there's even a prayer that we can come close to 
filling that gap. I think we'll be more than lucky if we can produce 
enough energy from alternative sources to fill in this area, if we 
simply have a plateau in production of oil.
  The next chart is the one from our Energy Information Agency, and 
it's an interesting chart. The USGS has estimated the amount of 
reserves by doing a lot of computer modeling. And of course, as you 
know, in computer modeling, the quality of what you get out is 
dependent on the quality of information you put into your model.
  And they take the mean of what they get from this modeling, and they 
say that that's the 50 percent average, ``F'' for frequency. Somehow 
that got translated to ``P'' when it went from the USGS report until it 
appears now in the Energy Information Agency report. And so now they're 
dealing with probabilities. And they make the bizarre statement that 
something which is 50 percent probable is more probable than something 
which is 95 percent probable.
  And I'm going to spend just a moment on this. They have here, they 
did this projection back here, what, about 1995 or so. And they have 
four different curves there. One is the 95 percent probability; that's 
the yellow one. The green one is the mean, which they say is the most 
probable, 50 percent probability; and the blue is the 5 percent 
probability.
  Well, these probabilities are kind of like the picture on the weather 
channel of where the hurricane is going. Tomorrow you know pretty 
precisely where it's going to be. A week from now you have some 
uncertainty, so they have a big funnel out there.
  So if they are going to do this, there should be another green line 
down here and another blue line down here. You don't have the foggiest 
notion hardly what it's going to be if you have only a 5 percent 
probability.
  But notice the actual data points, which are in red here. By the way, 
these are discoveries, and this is that big peak back, you know, in the 
1950s, and this is the big peak up here. This is kind of rounding out 
those bar graphs that we had in the previous chart. Notice the actual 
data points have been following what you would expect them to follow, 
the 95 percent of probability.
  The next chart is one from the Corps of Engineers study again, and 
they quote Jean Laherrare, who is a French expert in this area. And he 
says the USGS estimate implies a fivefold increase in discovery rate 
and reserve addition, for which no evidence is presented. Such an 
improvement in performance is, in fact, utterly implausible, given the 
great technological achievements over the industry over the past 20 
years, the worldwide search and the deliberate effort to find the 
largest remaining prospects. Indeed, I think it is most implausible 
that that's going to happen.
  And the next chart, again, this is from the ``Hirsch Report.'' And 
then even if that did happen, the real question is, so what? What if we 
found as much more oil as all the oil that yet remains to be pumped? 
And that's what they're assuming here. This is about 2 trillion 
barrels. They're assuming we're going to find another trillion barrels, 
and that's what this red curve is. And you see, it peaks in about 2016. 
So it pushes that peak out only about a decade. That's the power of 
compound growth. So even if we found as much more oil as all the oil 
that yet remains to be pumped in the world, according to this chart it 
would push it out only to 2016.
  Now, you can push it out even further if you use enhanced oil 
recovery, but you can't pump what you don't have, so then you fall off 
a cliff. That's not what you want for your children and your 
grandchildren, I think.
  The next chart shows a number of experts and when they have predicted 
it would peak, and you see most of them, some of them thought it would 
be from here way out to 2100. But most of them have it, it could start 
or would start fairly quickly.
  I have one more chart, and then I've got to close very quickly 
because time is running out. This chart shows quality of life and how 
good you feel about your station in life compared to how much energy 
you use. How good you feel about life, how much energy you use: the 
United States out here using more energy than anybody else; 24 
countries use less energy than we and feel better about their quality 
of life than we.
  Now, my wife tells me I shouldn't be talking about these things 
because don't I remember that in ancient Greece they killed the 
messenger that brought bad news. I tell her this is a good-news story. 
The sooner we start, the easier the trip will be. I'm really 
exhilarated by this. There's no exhilaration like the exhilaration of 
meeting and overcoming a big challenge. This is a huge challenge. We 
have the most innovative, creative society in the world. Properly 
informed and properly motivated, I think we're equal to the challenge. 
I see this as a very challenging fun future, where we really have 
something we can all pull together to accomplish.
  I hope we'll be back here next week, and at that time I want to spend 
most of the time talking about what are the potential replacements for 
oil, what are the potentials, and which are the most promising, and 
what do we need to do.

[[Page 1787]]



                          ____________________