Oil and gas are finite resources, and their production will indisputably peak. Fifty years from now, the actual peak of global oil production will be a distant memory. Despite the apparent breadth of current projections of the peak year of oil production—predictions range from now until 2040, with the most common estimates between 2010 and 2020—even the most optimistic projections offer little time to adapt, given the vast public and private infrastructure built in anticipation of inexpensive fossil fuels for decades to come. The Task Force concluded that the peak is likely to occur sooner rather than later, but the actual timing has only a modest effect on the magnitude and urgency of the overall issue. (Appendix 1 summarizes issues relating to the timing of the peak.)
Several events occurred during the Task Force’s work, however, that could be interpreted to suggest that peak oil is well off in the future and that any action can be delayed. In fact, a close examination of these developments confirms the need to take urgent action and helps make clear why the range of predictions is a relatively minor issue.
First, in September 2006 media reports announced a “new” oil field in the Gulf of Mexico. While large by today’s standards, it is small by historical standards, and its existence has been known for years. If the early estimates are confirmed by further drilling, the field represents only one to six months worth of oil at current levels of world consumption and would have no noticeable effect in delaying the peak. In addition, the field is located in a hurricane-prone area under 7,000 feet of water and another 20,000 feet below the ground, which will adversely affect costs and production.
Second, Cambridge Energy Research Associates, a major economic consulting firm, released a report in November 2006 with the most optimistic forecast yet of ultimately recoverable reserves, proposing that world oil production will not peak before 2030. The estimate has come under heavy criticism, and the Task Force sees no reason to reverse its opinion of the seriousness of the problem or its recommendations. Even if this forecast does turn out to be accurate, it does not eliminate the problem, but only postpones it briefly, providing much-needed time to take preventive and mitigating actions. Taking no action in the near term increases the likelihood of an emergency situation in the future. The impacts of delaying action and being wrong are far more damaging than the impacts of preparing now and being wrong. In fact, the impacts of waiting until 2030 to respond will make the inevitable adjustment even more difficult, since the economy will have become still more dependent on fossil fuels in the meantime. It is only prudent to begin to plan and prepare now; if indeed the optimistic estimate proves correct, Portland would be unwise to squander the good fortune of a grace period.
Third, oil prices declined from a high of $79 per barrel in July and August to $58 per barrel in October; correspondingly, gasoline prices dropped from about $3.00 per gallon to $2.25, and predictions circulated on the internet and elsewhere that gasoline could drop to as low as $1.15 per gallon. Short-term fluctuations can be misleading, however, and it is the long-term trends that are key. Crude oil prices averaged about $15 per barrel from 1986 to 1999, with an annual average value of $20 per barrel in 1990 leading up to the first Gulf War and an annual average low of $10 per barrel in 1998 as a result of the East Asian financial crisis. Prices averaged about $25 per barrel from 2000 to 2003 and climbed to almost $37 per barrel in 2004, $51 per barrel in 2005, and $62 per barrel through November 2006. From 2000 to 2005, crude oil prices rose an average of 14 percent annually.
Several other forces may also create conditions that look and act much like peak oil and provide further grounds for action: