BRUSSELS--The petroleum market is glutted, the member
                           states of the Organization of Petroleum Exporting Countries
                      are bickering among themselves even more than usual and gasoline
                      pump prices are lower in real terms than in the 1950s heyday of the
                      finned Caddy. That makes it the perfect time to start worrying about
                      running out of oil! 
                           Enjoy those ponderous four-wheel drives and "utes" while you
                      can. For the next decade or so, ample world supplies of petroleum
                      seem likely. But the same kind of statistical barometers that, during
                      the trumped-up 1970s energy "crisis," suggested there was actually
                      plenty of oil, now suggest that the world is approaching its
                      oil-production upper bound. 
                           Sometime in the next 20 years or less, global petroleum output
                      may begin a permanent decline, even as world oil demand continues
                      to rise. Though market forces and improved oil-production
                      technology should keep petroleum flowing well into the 21st
                      century, the peak of the Oil Age may come far earlier than
                      conventional thinking now assumes. As Craig Hatfield, a professor
                      of geology at the University of Toledo, notes, "The world has
                      burned more oil since the year 1970 than throughout its entire
                      history to that point. Huge volumes of oil have been found since the
                      1970s, but we're using that oil so much more rapidly that the top of
                      the curve is no longer hard to see." 
                           Here's the math. Since the dawn of the Oil Age, the world has
                      burned about 800 billion barrels of petroleum. Somewhere between
                      1,000 billion and 1,600 billion barrels of oil are estimated to remain
                      in formations where production would be economically feasible.
                      (These calculations assume future price increases to draw out oil
                      that cannot now be produced economically.) This suggests there
                      may be twice as much (affordable) oil still in the ground as the
                      world has used so far. 
                           That may sound like a vast amount, but at the current rate of
                      world oil consumption, 1,600 billion barrels would be depleted in
                      about 60 years. And world consumption is not standing still but
                      increasing. Current global petroleum use, already a mind-bending
                      71 million barrels a day, is rising at almost 2% a year. Sound small?
                      A 2% annual increase doubles a figure in 34 years. At just a 2%
                      annual increase in oil demand, by 2010 the world will have
                      consumed half the total amount of petroleum that appears
                      economically and technologically feasible to extract. 
                           The rate of consumption growth may accelerate, depending on
                      whether developing-nation economies prosper. China today imports
                      800,000 barrels of oil daily. At its current rate of growth, by the
                      year 2015, China will be importing 8 million barrels a day, the same
                      as current U.S. imports. By 2025, China may import twice as much
                      oil as the U.S. now does. If demand continues to expand while
                      reserves decline, the oil-price equilibrium will rise; eventually, supply
                      will become scarce relative to demand, and a permanent oil-price
                      spiral could begin. 
                           Think there must be lots of oil out there waiting to be
                      discovered? That's possible, but most studies show discoveries
                      trending down. Continental domestic U.S. oil production peaked in
                      1970, and has been declining since. Production in Alaska and the
                      former Soviet Union peaked in 1988 and has been declining since,
                      though economic recovery in the new Commonwealth of
                      Independent States might alter that equation. OPEC claims a
                      reserve of about 660 billion barrels of oil, but this number is widely
                      considered exaggerated. Extensive quantities of petroleum are
                      locked up in oil shale and tar sands, but, so far, no one has devised
                      an economical means to extract such fuels. Unless there exists some
                      large petroleum formation so far unknown, or some fundamentally
                      new form of extraction technology, global oil production seems
                      likely to peak while many cars you see parked outside your office
                      window are still on the road. 
                           This isn't a doomsday concern, just a reason why a national
                      commitment to alternative energy forms makes sense now, when
                      there is time to work on the problem rationally. But the legacy of the
                      ersatz '70s "crisis" makes it hard for the political, economic and
                      media realms to give this the attention it deserves. 
                           The short version of the 1970s energy "crisis" is that it was
                      caused not by any underlying lack of supply but by Middle East
                      politics and regulatory rules that impeded market forces. Once
                      President Jimmy Carter decontrolled oil and natural-gas prices, the
                      "crisis" ended. By the mid-1980s, reduced demand, led mainly by
                      energy-efficiency and auto miles-per-gallon improvements in the
                      U.S., caused the bottom to fall out of oil prices, and OPEC to
                      disintegrate as a monopoly. 
                           But in a classic case of learning the lesson of the last war, most
                      observers now seem determined to believe that since the last energy
                      SOS was phony, all future alarms must be phony, too. News
                      organizations that looked silly in the 1970s by squealing about the
                      end of energy now overcompensate by treating energy supply as
                      old news, when the genuine news on this subject is yet to come.
                      Economists, clear winners of the 1970s energy disputes, now place
                      too much faith in their own rhetoric, asserting that higher prices
                      endlessly will refill petroleum reserves by granting increased
                      incentives to produce. This was true in the 1970s, when price
                      controls discouraged production; it may not be true after 2010,
                      when feasible reserves begin to decline. As Hatfield points out,
                      "Market forces are wonderful, but they cannot increase the amount
                      of oil that exists to be discovered." 
                           Consumers and producers, both of whom benefit from ample
                      cheap oil, may be engaged in a game of mutual wishing-away of
                      larger trends. Right now, 4WDs, "light" trucks and enormous "utes"
                      are so popular even Sierra Club members are barreling down the
                      freeway in eco-nightmare conveyances that look like armored
                      attack vehicles designed for Desert Storm. You can't blame
                      business for supplying what the market wants, but that does not
                      make what the market wants good national policy. 
                           Through the 1980s and early 1990s, the "energy intensity" of the
                      U.S. economy--the BTU's needed for a dollar of output--was
                      declining, even as the economy grew and people drove more miles
                      in nicer cars. Steady improvements in U.S. energy efficiency kept
                      world oil demand soft, holding down prices and moderating the
                      balance of payments deficit. But beginning in 1995--roughly when
                      the big-vehicle craze began, though that is not the only factor--U.S.
                      energy use per dollar of gross domestic product started back up for
                      the first time since the 1973 oil crunch. So far, no price has been
                      paid. But it's Pollyanna logic to suppose no price will ever be paid,
                      should the trend for increasing oil consumption continue. 
                           In an unlikely move, British Petroleum and Royal Dutch Shell,
                      two of the largest oil companies, recently have begun to say it is
                      time society started preparing for the decline of oil. In April, Shell
                      became the first large oil company to announce support for the
                      Kyoto greenhouse-gas reduction treaty, encouraging more efficient
                      fossil-fuel use. The company's reasoning was that if increased
                      petroleum efficiency is needed anyway, why not get climate
                      protection as a bonus? Take note that for all the ideological razzle
                      over the rather modest reforms the Kyoto treaty asks--a nasty fight
                      is expected between the Clinton administration and congressional
                      GOP--even a small negative change in the petroleum
                      supply-demand equilibrium rapidly would swamp in significance all
                      proposed regulatory initiatives regarding global warming. 
                           Companies like BP and Shell are not speaking of the decline of
                      petroleum because they have been infected with green virus. They
                      want to remain large profitable fuel companies, and are simply
                      aware that the energy future now lies in replacing oil. Many
                      attractive alternatives exist, some with the virtues of being
                      zero-pollution or wholly renewable. Bus and taxi fleets in several
                      cities already run on compressed natural gas, which is cheaper than
                      oil and has lower greenhouse gas emissions. Ethanol, made from
                      corn, has unimpressive economics, but new forms of ethanol, made
                      from genetically engineered grasses or dwarf trees, might be cheap
                      and environmentally transparent, since plants used to "grow" this
                      fuel subtract from the air the same amount of carbon dioxide that
                      cars burning the fuel release. Forward-thinking oil companies are
                      beginning to pursue such ideas, in part because the first to offer
                      practical alternative fuels will have a fantastic marketing advantage
                      over companies whose fates remain tied to politically vulnerable
                      petroleum supplies. 
                           Other oil alternatives are not far off. Hydrogen made from
                      natural gas or even by using solar energy might power "fuel cell"
                      vehicles with no emissions of any kind, other than warm water
                      vapor. An energy economy based on solar-power
                      conversion--increasingly close to practical--would be endlessly
                      renewable, since its driving force would be the sun. 
                           Right now, the perception of alternate fuels is that they represent
                      some kind of unpleasant, retrenched standard of living for an age of
                      limits. Quite the contrary. The attraction of alternate fuels is they will
                      make possible the sustenance of the consumer lifestyle, by allowing
                      the U.S. to kiss expensive, polluting Middle East oil good-bye. If
                      the automobile continues to gobble declining fossil fuels and spew
                      carbon dioxide, it might die as a product category, but if car culture
                      can convert to benign, renewable fuels, for good or ill, the private
                      car will be with us indefinitely. Chrysler, Ford, Toyota, Mercedes
                      and other auto makers already are saying that the first practical
                      fuel-cell cars will be on the market by around 2005. 
                           The conversion to renewable energy will not happen, however,
                      without a serious national commitment to new forms of fuel. The
                      world went from petroleum being an oddity, to a petroleum-based
                      transportation economy in less than 50 years. The transition to an
                      alternative-fuels economy might be accomplished faster--fast
                      enough to head off the economic disruptions of a global oil
                      production peak. 
                           But the second, genuine energy crisis will be avoided only if
                      preparations are made well in advance. Now, with prosperity high
                      and petroleum politics quiet, is the ideal time to begin. Better to fix
                      the roof while the sun is shining. 
                                              - - -

                      Gregg Easterbrook's New Book, "Beside Still Waters," Will Be
                      Published in November. in 1980, he Won the Investigative
                      Reporters and Editors Award for a Series of Articles Showing
                      That Oil Supplies Were Far More Plentiful Than Was Then
                      Assumed