Peak oil panic: is the planet running out of gas? If it is, what should the Bush administration do about it?

• Author: Bailey, Ronald
• Position: Cover story

THE PRINCETON GEOLOGIST Ken Deffeyes warns that the imminent peak of global oil production will result in "war, famine, pestilence and death" Deffeyes, author of 2001's Hubbert's Peak: The Impending World Oil Shortage and 2005's Beyond Oil: The View from Hubbert's Peak, predicted that the peak of global oil production would occur this past Thanksgiving.

Deffeyes isn't alone. The Houston investment banker Matthew Simmons claims in his 2005 book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, that the Saudis are lying about the size of their reserves and that they are really running on empty; last September he announced that "we could be looking at $10-a-gallon gas this winter." Colin Campbell, a former petroleum geologist who is now a trustee of the U.K.-based Oil Depletion Analysis Centre, warned way back in 2002 that we were headed for peak oil production, and that this would lead to "war, starvation, economic recession, possibly even the extinction of homo sapiens." In his 2004 book Out of Gas: The End of the Age of Oil, the Caltech physicist David Goodstein wrote that the peak of world production is imminent and that "we can, all too easily, envision a dying civilization, the landscape littered with the rusting hulks of SUVS." Jim Motavalli, editor of the environmentalist magazine E, writes in the January February 2006 issue, "It is impossible to escape the conclusion that we're steaming full speed ahead into a train wreck of monumental proportions."

And James Schlesinger, the country's first secretary of energy, declared in the Winter 2005-06 issue of the neoconservative foreign policy journal The National Interest that "a growing consensus accepts that the peak is not that far off." He added, "The inability readily to expand the supply of oil, given rising demand, will in the future impose a severe economic shock."

Even some traditionally calm voices are starting to sound panicky. In March 2005, the New York investment bank Goldman Sachs issued a report suggesting that oil prices would experience a "super spike" in 2006, reaching up to $105 per barrel. ChevronTexaco's willyoujoinus.com campaign, featuring a series of full-page newspaper ads that urge Americans to conserve energy, flatly declares, "The era of easy oil is over."

Such forecasts have been bolstered by a steep rise in oil prices over the last three years, going from $18 a barrel in 2002 to $70 last fall. If the price of something goes up, after all, that means it's becoming scarcer.

The good news is that the peak oil doomsters are probably wrong that world oil production is about to decline forever. Most analysts believe that world petroleum supplies will meet projected demand at reasonable prices for at least another generation. The bad news is that much of the world's oil reserves are in the custody of unstable and sometimes hostile regimes. But the oil producing nations would be the ultimate losers if they provoked an "oil crisis," since that would spur industrialized countries to cut back on imports and develop alternative energy technologies.

Apocalypse Yesterday

Predictions of imminent catastrophic depletion are almost as old as the oil industry. An 1855 advertisement for Kier's Rock Oil, a patent medicine whose key ingredient was petroleum bubbling up from salt wells near Pittsburgh, urged customers to buy soon before "this wonderful product is depleted from Nature's laboratory" The ad appeared four years before Pennsylvania's first oil well was drilled. In 1919 David White of the U.S. Geological Survey (USGS) predicted that world oil production would peak in nine years. And in 1943 the Standard Oil geologist Wallace Pratt calculated that the world would ultimately produce 600 billion barrels of oil. (In fact, more than 1 trillion barrels of oil had been pumped by 2006.)

During the 1970s, the Club of Rome report The Limits to Growth projected that, assuming consumption remained flat, all known oil reserves would be entirely consumed in just 31 years. With exponential growth in consumption, it added, all the known oil reserves would be consumed in 20 years. These dour predictions gained credibility when the Arab oil crisis of 1973 quadrupled prices from $3 to $12 per barrel (from $16 to $48 in 2006 dollars) and when the Iranian oil crisis more than doubled oil prices from $14 per barrel in 1978 to $35 per barrel by 1981 (from $45 to $98 in 2006 dollars).

In response, the federal government imposed price controls on oil and gas in the 1970s and established fuel economy standards to encourage the sale of more efficient automobiles. The sense of doom did not dissolve. In 1979 Energy Secretary Schlesinger proclaimed, "The energy future is bleak and is likely to grow bleaker in the decade ahead." The Global 2000 Report to President Carter, issued in 1980, predicted that the price of...