How To Live the Good Life Without Oil

Discover magazine picked this as the #1 science story of 2006.

In September Chevron announced the discovery of a field containing up to 15 billion barrels of oil beneath the Gulf of Mexico, touting it as “a platform for growth for years to come.” Read the fine print, though, and you get a different story. To recover the first samples of oil there in 2004, engineers floating 175 miles off the Louisiana coast had to send drill gear into 7,000-foot-deep water and penetrate four miles of rock. The company spent tens of millions of dollars on computer modeling, cutting-edge seismological tools, and exploratory drilling; just renting the drill rig cost Chevron and its partners more than $200,000 a day. The results suggest that oil from the new reservoir, called Jack 2, could cost three to four times as much to extract as oil from traditional locations, including rigs on land.

You don’t need to look as far off as Jack 2 for signs that the end of cheap oil is nigh. In 2006 oil prices hit a record high, $77 a barrel in the summer. Analysts blamed the price hikes on damage from the 2005 hurricanes, continued turmoil in the Middle East, and jitters over tightening supplies from Venezuela to Iran. Prices have eased since then, but the relief is probably temporary: Oil consumption is growing rapidly in China and India as their middle classes awaken to the taste for consumer spending that Americans have long enjoyed. These two oil-poor economic giants are buying up oil interests in places like Nigeria; early this year China spent $2.7 billion for an offshore field there.

The upside of stratospheric oil prices is reflected in what is happening on the other side of the balance sheet. The past year looks like the turning point when alternatives to fossil fuels – everything from solar energy, wind turbines, ethanol, and the hybrid car – finally hit the mainstream. “It’s hard to argue it’s not,” says Richard Hamilton, CEO of California biocrops startup Ceres. “We’ll look back and say this is the year where people rallied together to start down the irreversible path of becoming less dependent on oil,” says Samir Kaul, a partner in venture capital firm Khosla Ventures in Menlo Park, California, which invests in energy and other tech startups.

Hamilton and Kaul are cheerleaders for the renewable energy industry, but even hardened policy types see the need for new sources of energy. Security hawks have stepped up their rhetoric during this election year to push for more hybrid cars and biofuels, and for billions in new research to reduce the country’s dangerous dependence on foreign petroleum. “We are fighting a war against terror and paying for both sides of the war,” says James Woolsey, a member of the Set America Free Coalition.

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