Kenneth Deffeyes is professor emeritus of geosciences at Princeton University. The author of Hubbert's Peak: The Impending World Oil Shortage offered his insights on the upcoming and ongoing oil crisis and some possible ways to respond to it. What follows is a partial transcript of his talk at WTF 2004.
Geologists are always guilty of driving while looking in the rear-view mirror. I also have a tremendous disconnect about time. When I read about the chemists tweaking molecules at nanoseconds, I figured out that I was at a disconnect of about 10 to the 30. A long time ago, people said that electrical power was going to become too cheap to meter. That hasn't happened. But what has become too cheap to meter is telecommunications.
Princeton University Press has kept all their back list in print by turning it over to one of those print-on-demand outfits. If a bookstore orders it and returns it, Princeton Press throws it in the trash. The geology department runs three Beowulf-like computer clusters lashed together with gigabit Ethernet. Dartmouth College stopped charging their students for long-distance calls because they were spending too much money billing their students for those calls. And academic journals are changing. I'm not the biggest fan of peer review; those people can be as stupid as anybody else. And even though Google might not be the right search engine, it's the library of Alexandria.
Bob Ballard at the University of Texas was the main person diving in claustrophobic, ball-shaped submarines. He said that there was no sense in sending the gall bladder and kidneys. Just send the sense organs. The people witnessing the Mars rover are doing thi. If you want to hear the wind blowing on Mars, just send more data back.
Back in 1956, M.K. Hubbert, a geologist and geophysicist down in Houston at the Shell research lab, predicted that the United States oil production would peak in the 1970s and then decline. It was widely criticized. But it happened. 1970 was the peak year, and we didn't know it right away. In 1972, the Texas Railroad Commission allowed unlimited production. That meant we didn't have any more surplus capacity. Production was starting to drop.
A year ago, with very little news coverage, the Dow Jones news wire carried this story. In March 2003, the Saudi government told the major oil companies and western governments that if they wanted a war in Iraq, sorry, we're maxed out. About 9.2 billion barrels per day is their production capacity. That won't rise. People say that the Saudis aren't being honest about their reserves, but they might have to dig more wells and find some more oil.
The good news is that Opec is no longer in charge of the price of oil. The bad news is that nobody's in charge of the price of oil. I wanted to get this on the agenda. My book is largely a failure because it didn't sell a lot of copies, but Alan Greenspan is now talking about natural gas in the United States. Why he doesn't pay attention to the oil side, I don't know.
These oil fields we're depending on are getting old. We have a serious international problem. It's hard to get people's attention, but to my surprise, some help has come from the religious Right. What would Jesus drive? This is not what they were thinking about. A new derivation of Hubbert's methodology is coming out at the end of the year. There's a kind of graph that M.K. Hubbert used at the end of his career. He finally published a paper that said what he did when he did it and why he chose the methods he chose.
Unites States production history shows that the U.S. is the most drilled area in the world. Someday, Iraq will look like Kansas, with holes all over. If I draw a straight line through the data, you're in trouble because you've just bought into Hubbert's theory [because you can see that production is on the decline]. If we look at production over time, just take the reciprocal of the equation. There is an integration constant in there. Now that we're equipped, let's take on the world.In 1983 on, it's another straight line. If your ability to produce oil depends on the amount not produced yet, the simplest hypothesis you can apply is Occam's Razor. Is that OK? At the halfway point, the world's smooth symmetrical peak will occur around Thanksgiving 2004. Growth has essentially stopped.
To confirm this, the next thing Hubbert did, and I'm slavishly using his methods exactly, was define discoveries in a very particular way. Discoveries are the cumulative amount of oil you've produced plus the reserves that remain. Reserves are very difficult to report. Shell had to make restatements. In the 1980s, Opec made restatements. The last big discovery was in 1975.
There's a third attribute, which I'll call hits. It's an irreversible act when the first well starts to produce. One way of saying Hubbert is wrong is to bring Iraq in as the 51st state. Come on. We need to draw a red line around an area and define geography. Let's look at the lower 48 states. The highest production took place during the '30s, the worst economic times we've ever faced. Why did that happen? Some companies said that this is going to be important some day and didn't fire their research teams. The last billion-barrel discovery in the United States took place in western Texas in 1948. All the good stuff was already gone.
Since 1950, we've gone for half a century without finding another billion-barrel oil field. If you've caught most of the fish in the pond, that fancy fly rod isn't going to do very well. That's the reality here. We've found oil fields that contain 95% of the oil we've ever going to find. That's the worst of the bad news. What comes next will look more like change in the change register. A penny is still worth $300 million in oil. That's a non-trivial amount, but the game is essentially over. That's pretty bad.
Hubbert did make a mistake. His mistake was to say that the discovery curve would look exactly like the production curve, only displaced in time. The time constant hit is shorter than the time to add it to reserves, which is discovery. And it's shorter than the time constant for production. It's the same area under the curves, but we're very close to the peak for production. Another good statistical question is what's the uncertainty? The ways to wiggle out of this are getting smaller and smaller.
We're going to have to share society in several ways. We're going to have to prioritize. How do you do it? One possibility is to say that we'll ration by price. The price will go up, and some people won't afford it anymore. They're freezing in the dark, but it's good economics. Unintentionally, you can add inconvenience. There will be some form of rationing, and what form it takes is a political question.
I have this fear of what the world will look like when supply rolls over. When I look at what's happened since 2000 isn't very attractive. A lot of what's happening — Sept. 11, the recession — is largely because energy is no longer going to be cheap. Across a wide range of queueing systems, where there's a large demand on the system, the length of the queue can become quite volatile. Even just a year ago, the price of natural gas doubled. We can expect a large dose of volatility and uncertainty. It's very clear that Opec is no longer steering oil, so we're going to see some volatility.
75% of the oil the United States uses goes into transportation. The natural gas-fueled vehicle that looked so attractive doesn't any more because we've exhaustes our natural gas surplus. There are vehicles that can outdo the Japanese hybrids. Aviation is also at risk. I'm going to feel that where it hurts when I'm not able to get out-of-season asparagus and other vegetables. Those locally grown, seasonal vegetables will become part of the new fashion diets.
It's not outside the realm of possibility that there will be an international effort to seize the Middle East's oil fields. But to go back to your industry, the two realms are going to diverge. There's going to be a big squeeze on hauling molecules while there's increased capacity to move bits. The EFF folks get a lot of mileage out of the frontier theme. It's the Wild West. Well, my great grandfather drove cattle on the Chisholm Trail. I'm afraid that my grandson will have to drive cattle on the Chisholm Trail to make a living.
On the five-year time span, we have to go with what we know how to do right now. That's diesel, wind, and nuclear. I don't have a strong feel for which of those technologies is going to win. [Fast Company Now]