Denial of Peak Oil Grows Dangerous

Does it seem like we’ve been here before?

A barrel of Brent Crude (the truest indicator of worldwide oil scarcity) sits at $118, up from $75 per barrel in July 2010 – a 57% increase in 11 months. In the U.S., the average price of gasoline is $3.69 per gallon this week, up 37% in the last year and up 100% in the last 30 months.

The pundits and politicians are responding predictably. They blame the Libyan revolution, the dreaded speculators and that old fallback — Big Oil. When the Middle East turmoil began in earnest in January, gas prices had already risen 15% in three months, spurred by increased worldwide demand and by Ben Bernanke’s printing press. Congresspeople have reacted in their usual knee-jerk politically motivated fashion by demanding that supplies be released from the Strategic Oil Reserve.

Congress has a little trouble with the concept of “strategic.” They also have difficulty dealing with a reality that has been staring them in the face for decades. Politicians will always disregard prudent, long-term planning for vote-generating talk and gestures.

Peak oil has been a mathematically predictable occurrence since American geophysicist M. King Hubbert figured out the process in 1956. His model predicted that oil production in the United States would peak in 1970. He wasn’t far off. In 1971, when the U.S. was producing 88% of its oil needs, domestic production approached 10 million barrels per day and has been in decline ever since.

The Department of Energy was established in 1977 with a mandate to lessen our dependence on foreign oil. At the time, the U.S. was importing 6.5 million barrels per day. In 1985 the country was still able to produce enough to cover 75% of its needs. Today, 34 years later, the U.S. imports 10 million barrels per day, almost half of what it uses.

President Obama’s 2011 Budget proposal included priorities for the DOE:

• Positions the United States to be the global leader in the new energy economy by developing new ways to produce and use clean and renewable energy.
• Expands the use of clean, renewable energy sources such as solar, wind and geothermal while supporting the administration’s goal to develop a smart, strong and secure electricity grid.
• Promotes innovation in the renewable energy sectors through the use of expanded loan guarantee authority.

That’s what goes on in talk space.

The Street