1.

WHERE IS THE HIRSCH REPORT?
By Richard Heinberg

MuseLetter (Santa Rosa, CA) [Jul. 30 posting on Allen Roland's Radio Weblog]
July 2005

http://blogs.salon.com/0002255/2005/07/30.html#a846

[Introduction by Allen Roland]

The Hirsch Report's explosive executive summary begins with the following paragraph: "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, and, without timely mitigation, the economic, social, and political costs will be unprecedented. 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."

Evidently the U.S. Department of Energy was interested enough in the Peak Oil debate to commission this report on the subject -- but, get this, they obviously completely ignored its doomsday findings. Denial is the name of the game for this administration and welfare state for the rich.

Peter Phillip's Project Censored didn't ignore the findings and filed this must read expose by Richard Heinberg, of the peak oil time bomb which is less than five years away from exploding in our face -- with potential devastating effects on ourselves and the world.

Over the past few months controversy has raged over the timing of Peak Oil-the moment when global oil production will reach its all-time maximum and begin its inevitable descent.

Oil optimists say the event won't occur for twenty years or more, and that market forces will result in an imperceptible transition to alternative forms of energy. "The Stone Age didn't end for lack of stones," say the optimists, "and the Petroleum Age won't end because we run out of oil" -- but because we find something better and cheaper with which to fuel our society.

Pessimists point out that global oil discoveries have been plummeting for decades and that supply and demand are now closely matched (hence the run-up in oil prices over the past few months); moreover, there simply isn't an alternative energy source available that can take oil's place in the near term. They say we may be at peak now, and that the consequences will be staggering.

In short, oil pessimists spin out end-of-civilization scenarios while optimists insist that there is nothing to worry about.

Evidently the U.S. Department of Energy was interested enough in the Peak-Oil debate to commission a report on the subject .

Released in February this year by Science Applications International Corporation (SAIC), and titled "Peaking of World Oil Production: Impacts, Mitigation and Risk Management," the report examines the likely consequences of the impending global peak. It was authored principally by Robert L. Hirsch, and is as remarkable for its subsequent reception as for its content.

The report's Executive Summary begins with the following paragraph:

"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, and, without timely mitigation, the economic, social, and political costs will be unprecedented. 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."

The report's authors were not asked to assess when the global peak is likely to occur; however they do survey the range of forecasts from optimists and pessimists alike, projecting a peak date anywhere from 2005 to 2037.

The Hirsch report examines three scenarios: one in which mitigation efforts are not undertaken until global oil production peaks; a second in which efforts commence ten years in advance of peak; and a third in which efforts begin twenty years prior to the peak. Each scenario assumes a "crash program rate of implementation." In the first case, the study concludes that peak will leave the world with a "significant liquid fuels deficit for more than two decades" that "will almost certainly cause major economic upheaval"; even with a ten-year lead time for mitigation efforts government intervention will be required and the world will experience a ten-year fuel shortfall. A crash program initiated twenty years ahead of the event will offer "the possibility" of avoiding a fuel shortfall. The report emphasizes repeatedly that both supply- and demand-side mitigation options will take many years to implement and will cost "literally trillions of dollars"; it also notes that "the world has never faced a problem like this."

The Hirsch report concludes that substantial mitigation of the economic, social, and political impacts of Peak Oil can come only from efforts both to increase energy supplies from alternative sources and to reduce demand for oil. With regard to the claim that efficiency measures by themselves will be enough to forestall dire impacts, Hirsch et al. note that, "While greater end-use efficiency is essential, increased efficiency alone will be neither sufficient nor timely enough to solve the problem. Production of large amounts of substitute liquid fuels will be required." Further, "Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large." Hirsch, et al., also point out that "The problems associated with world oil production peaking will not be temporary, and past 'energy crisis' experience will provide relatively little guidance."

Oil optimists often say that efforts aimed at mitigating the effects of Peak Oil undertaken too soon would entail a cost to society. The SAIC Report agrees. However, it concludes that, "If peaking is imminent, failure to initiate timely mitigation could be extremely damaging. Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation."

Optimists also insist that the market can take care of the problem: high oil prices will stimulate more exploration, the development of more efficient cars, and the deployment of alternative energy technologies. Interference with market mechanisms would be harmful, they say, and so the government should steer clear of the problem by avoiding setting higher efficiency standards, subsidizing renewables, and so on.

The report's authors dismiss these claims. Price signals warn only of immediate scarcity; however, the mitigation efforts needed in order to prepare for the global oil production peak must be undertaken many years in advance of the event. Hirsch et al. maintain that "Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. The experiences of the 1970s and 1980s offer important guides as to government actions that are desirable and those that are undesirable, but the process will not be easy."

Here, then, is a significant report produced by an independent research company for the U.S. Department of Energy, warning of a global problem of "unprecedented" proportions with economic, social, and political impacts that are likely to be extremely severe. The authors forecast "protracted economic hardship" for the United States and the rest of the world. It is a problem that deserves "immediate, serious attention."

Yet, half a year after its release, the Hirsch report is nowhere to be found. For several months it was archived, in PDF format, on a high school web site (Hilltop High School in Chula Vista, Calif.). On July 7 the report disappeared from that site. The Atlantic Council (www.acus.org) is considering publishing the Hirsch report; however there is no projected date of release. When contacted, Dr. Hirsch replied that the document is "a public report, paid for and released by DOE NETL, and that it therefore could be reposted at will."

Project Censored is therefore posting the report in full at: www.projectcensored.org/newsflash/ The_Hirsch_Report_Proj_Cens.pdf

If the content of the Hirsch report is to be believed -- and there is every reason to think it should be -- then this is a document that deserves the close attention of every leader of government and industry in the U.S. Newspapers and newsmagazines should be running excerpts and summaries. Instead, there is nearly total silence. In late May Robert Hirsch presented the substance of the report at the annual Workshop of the Association for the Study of Peak Oil (ASPO) in Lisbon, Portugal to an audience of about 300.

That event received virtually no press coverage in the U.S.

Meanwhile oil is hovering around $60 and is likely to head higher, and analysts look to the fourth quarter of 2005 unsure whether supply will be able to keep up with burgeoning demand.

2.

PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT
By Robert L. Hirsch, Roger H. Bezdek, and Robert M. Wendling

IV International Workshop on Oil and Gas Depletion
Association for the Study of Peak Oil and Gas
Lisbon
May 19-20, 2005

http://www.cge.uevora.pt/aspo2005/abscom/Abstract_Lisbon_Hirsch.pdf

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, and, without timely mitigation, the economic, social, and political costs will be unprecedented. 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.

In 2003, the world consumed nearly 80 million barrels per day (MM bpd) of oil. U.S. consumption was almost 20 MM bpd, two-thirds of which was in the transportation sector. The U.S. has a fleet of about 210 million automobiles and light trucks (vans, pick-ups, and SUVs). The average age of U.S. automobiles is nine years. Under normal conditions, replacement of only half the automobile fleet will require 10-15 years. The average age of light trucks is seven years. Under normal conditions, replacement of one-half of the stock of light trucks will require 9-14 years. While significant improvements in fuel efficiency are possible in automobiles and light trucks, any affordable approach to upgrading will be inherently time-consuming, requiring more than a decade to achieve significant worldwide fuel efficiency improvement. Besides further oil exploration, there are commercial options for increasing world oil supply and for the production of substitute liquid fuels: 1) Improved Oil Recovery (IOR) can marginally increase production from existing reservoirs; one of the largest of the IOR opportunities is Enhanced Oil Recovery (EOR), which can help moderate oil production declines from reservoirs that are past their peak production: 2) Heavy oil / oil sands represents a large resource of lower grade oils, now primarily produced in Canada and Venezuela; those resources are capable of significant production increases; 3) Coal liquefaction is a well-established technique for producing clean substitute fuels from the world’s abundant coal reserves; and finally, 4) Clean substitute fuels can be produced from remotely located natural gas, but exploitation must compete with the world’s growing demand for liquefied natural gas.

Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort. To explore these complexities, three alternative mitigation scenarios were analyzed:

• Scenario I assumed that action is not initiated until peaking occurs.

• Scenario II assumed that action is initiated 10 years before peaking.

• Scenario III assumed action is initiated 20 years before peaking.

Estimates of the possible contributions of each mitigation option were developed, based on an assumed crash program rate of implementation. Our approach was simplified in order to provide transparency and promote understanding. Our estimates are approximate, but the mitigation envelope that results is believed to be directionally indicative of the realities of such an enormous undertaking. The inescapable conclusion is that in the most optimistic case, more than a decade will be required for the collective contributions to produce results that significantly impact world supply and demand for liquid fuels. Under real world conditions, mitigation will surely require more time.

Important observations and conclusions from this study are as follows:

1. When world oil peaking will occur is not known with certainty. A fundamental problem in predicting oil peaking is the poor quality of and possible political biases in world oil reserves data. Some experts believe peaking may occur soon. This study indicates that “soon” is within 20 years.

2. The problems associated with world oil production peaking will not be temporary, and past “energy crisis” experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis.

3. Oil peaking will create a severe liquid fuels problem for the transportation sector, not an “energy crisis” in the usual sense that term has been used.

4. Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship worldwide. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.

5. In the developed nations, the problems will be serious. In the developing nations peaking problems have the potential to be much worse.

6. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large.

7. While greater end-use efficiency is essential, increased efficiency alone will be neither sufficient nor timely enough to solve the problem. Production of large amounts of substitute liquid fuels will be essential. A number of commercial or near-commercial substitute fuel production technologies are currently available for deployment, so the production of vast amounts of substitute liquid fuels is feasible with existing technology.

8. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. The experiences of the 1970s and 1980s offer important guides as to government actions that are desirable and those that are undesirable, but the process will not be easy.

Mitigating the peaking of world conventional oil production presents a classic risk management problem:

• Mitigation initiated earlier than required may turn out to be premature, if peaking is long delayed.

• If peaking is imminent, failure to initiate timely mitigation could be extremely damaging.

Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation. A unique aspect of the world oil peaking problem is that its timing is uncertain, because of inadequate and potentially biased reserves data from around the world. In addition, the onset of peaking may be obscured by the volatile nature of oil prices. Since the potential economic impact of peaking is immense and the uncertainties relating to all facets of the problem are large, detailed quantitative studies to address the uncertainties and to explore mitigation strategies are a critical need.

The purpose of this analysis was to identify the critical issues surrounding the occurrence and mitigation of world oil production peaking. We simplified many of the complexities in an effort to provide a transparent analysis. Nevertheless, our study is neither simple nor brief. We recognize that when oil prices escalate dramatically, there will be demand and economic impacts that will alter our assumptions. Consideration of those feedbacks will be a daunting task but one that should be undertaken.

The key to mitigation of world oil production peaking will be the construction a large number of substitute fuel production facilities, coupled to significant increases in transportation fuel efficiency. The time required to mitigate world oil production peaking is measured on a decade time-scale. Related production facility size is large and capital intensive. How and when governments decide to address these challenges is yet to be determined.

Our analysis was not meant to be limiting. We believe that future research will provide additional mitigation options, some possibly superior to those we considered. Indeed, it would be appropriate to greatly accelerate public and private oil peaking mitigation research. However, the reader must recognize that doing the research required to bring new technologies to commercial readiness takes time under the best of circumstances. Thereafter, more than a decade of intense implementation will be required for world scale impact, because of the inherently large scale of world oil consumption.

In summary, the problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society. The challenges and uncertainties need to be much better understood. Technologies exist to mitigate the problem. Timely, aggressive risk management will be essential.

REFERENCE

Hirsch, R.L., Bezdek, R., Wendling, R. Peaking of World Oil Production: Impacts, Mitigation, & Risk Management. U.S. Department of Energy, National Energy Technology Laboratory. February 2005.

--Robert L. Hirsch, SAIC, Alexndria, VA USA RLHirsch@Comcast.net; Roger H. Bezdek and Robert M. Wendling, Management Information Systems, Inc (MISI) Oakton, VA USA rbezdek@misi-net.com