ASPO-5 Live

Tuesday, July 18, 2006

ASPO-5 Day 1: Robert Hirsch Says Mitigating Peak Oil Will Cost a Trillion Dollars a Year for 20 Years

Confronting peak oil will cost industrialized nations dearly, Robert Hirsch told ASPO-5, offering the crowd a preview of his new report -- set to be issued in the next few months -- that follows up on his groundbreaking US Dept. of Energy sponsored study from 2005.

Hirsch said that the peaking of “net energy” is not as important as hitting the peak of “clean liquid fuels.” His model focuses on the issue of liquid fuels and in particular how it impacts the United States, but the results are broadly applicable worldwide. He employed "reliable econometric models" that measured the costs and effectiveness of “aggressive mitigation” efforts including stepped-up vehicle efficiency, coal-to-liquids and gas-to-liquids projects, enhanced oil recovery, and shale oil programs.

All told, Hirsch found that crash-program initiatives on these fronts are going to be enormously expensive, requiring an investment of more than $20 trillion over 20 years, and still yield only marginal increases in liquid fuels – just 15 million barrels per day or so (CTL could yield an extra 5 mbpd, oil shale about 4 mbpd, enhanced recovery techniques about 2.5 mbpd, and better vehicle fuel efficiency about 2 mbpd). Yet plenty of jobs would be created in the process – around 500,000 according to Hirsch’s model.

Hirsch was surprised to find that bumping up vehicle fuel efficiency could be the costliest of all the options ($130 per barrel), followed by oil shale, coal-to-liquids and enhanced oil recovery. Oil shale presents timing problems because it requires heating the shale for a long time and building power plants, all of which delays rollout of shale oil projects by 7-8 years.

Hirsch’s model also factors in the rising costs for people and machinery required by crash programs. For the US alone, implementing the full range of mitigation programs would cost from $4-6 trillion over 20 years. And since the US makes up about a quarter of the world’s economy, the world would need to invest about $20 trillion over this period.

There’s a host of wild cards that could stymie efforts to boost liquid fuel production, Hirsch said, drawing the distinction between “geological peaking” and “political peaking.” Geological peaking assumes societies extract as much oil as possible, but political peaking depends on all kinds of unpredictable events like insurrection, terrorism or government policies to hold back production.

“Political peaking cold occur well before geological peaking,” Hirsch told the conference.

Hirsch doubts that the world can keep increasing oil flows for much longer. “CERA sees a long plateau ahead,” he said. “But I can’t find a plateau in the data I’m looking at.” The downturn, when it comes, could take the world by surprise. “Peaking could come with little warning and sharp declines,” he said.