Peak Oil - Presidential Panic?

President Bush is to address the nation tonight, in his first live press conference in over a year. While he will focus mostly on his proposed Social Security plans, part of the session will be devoted to talking about skyrocketing gas prices. Bush is expected to push Congress to pass his long-stalled energy plan. Soaring oil and gasoline prices are beginning to take a toll on U.S. economic growth and on Bush's approval ratings and recently Bush convinced Saudi Crown Prince Abdullah to increase that country's oil production. Saudi leaders had little to offer Bush beyond that, saying the high prices are the result of a lack of adequate refining capacity in the United States and elsewhere.

Of course, the oil companies are delighted by current high prices, with every major oil company recording record profits right now. "It goes without saying that the industry is enjoying an unprecedented level of high oil prices and strong business fundamentals in general," said Fadel Gheit, an analyst with Oppenheimer & Co."Everyone is taking advantage of it before the party ends. It doesn't look like it will end anytime soon."


However, that is not the end of the story.

Yesterday, in a speech to a Small Business Administration conference in Washington, Bush proposed a series of energy initiatives, including more oil refineries and nuclear plants, to combat what is seen as the problem of US dependence on overseas oil. The five point proposal he outlined comprised:

Expanding his existing tax credit proposal, which currently applies to hybrid and fuel-cell vehicles, to include those using new clean diesel technology.

A call to Congress to grant federal authority (via the Federal Energy Regulatory Commission) over the location of new liquefied natural gas terminals in an effort to increase the supply of natural gas and reduce prices.

Reduce uncertainty in the licensing process of nuclear power plants. The president proposed federally provided "risk insurance" to mitigate the cost of possible delays in the licensing of new reactors but no-one is as yet prepared to say how much that insurance could cost

A plan to encourage building oil refineries on former military sites. Administration officials said Bush will ask federal agencies to work with states and local communities to try to identify ways for refinery expansion.

Expanded international cooperation in cleaner and more efficient energy technologies.

It's like the president suddenly woke up to the approaching crisis of "peak oil" which every industry analyst with the gumption to give an estimate says is coming within the next year to ten. One wonders how this remarkable task was done. Maybe a picture book? "See Spot...See Spot run...See Spot run out of oil."

Peak Oil is suddenly being talked about a lot, and is no longer purely the realm of the tinfoil hat brigade (although they are still around) but instead is very mainstream. Colin Campbell was chief geologist for Amoco, a vice-president of Fina, and has worked for BP, Texaco, Shell, ChevronTexaco and Exxon in a dozen different countries. Last week he told a group of Swiss financiers:

Don't worry about oil running out; it won't for very many years. The issue is the long downward slope that opens on the other side of peak production. Oil and gas dominate our lives, and their decline will change the world in radical and unpredictable ways. About 944bn barrels of oil has so far been extracted, some 764bn remains extractable in known fields, or reserves, and a further 142bn of reserves are classed as 'yet-to-find', meaning what oil is expected to be discovered. If this is so, then the overall oil peak arrives next year.

After "peak oil", global oil production can be expected to decline steadily at about 2-3% a year, the cost of everything from travel, heating, agriculture, trade, and anything made of plastic rises. And the scramble to control oil resources intensifies. As one US analyst said this week: "Just kiss your lifestyle goodbye."

So it's just as well that Bush has been woken to the realities of the coming crisis. It remains to be seen how successful his proposals will be. Extending tax credits to include clean deisel engines is a good idea but is only a stop-gap. Environmentalists may well find themselves in common cause with small-government libertarians in opposing a huge federally funded insurance scheme to build nuclear plants. States will no doubt resist handing over the power to locate natural gas refineries. International co-operation on new technologies would be more likely to find answers if Bush hadn't gutted government spending on scientific research, particularly in renewable energy, before he awoke from his dream of endless oil.

Oh and the military bases? His friends in the oil industry are already talking down the idea, saying that military sites may be unacceptable due to chemical contamination or be too far inland to be cost effective.

Who would wish to be the sitting President and leader of America, beholden to oil money for his chair, at the time that peak oil hits? With the big oil people able to make ever more money as the crisis takes a grip but the common people and the country suffering? I bet Bush is feeling the pressure tonight.