Why We Can’t Quit

So what's the answer, then?
We need to move on both the supply and demand sides simultaneously and urgently. On the supply side, we need to invest more. OPEC nations have about two thirds of the world's proven conventional crude reserves, and one third of its production capacity. So they certainly have the resource base to relieve the pressure. Saudi Arabia, for one, is spending $50 billion to increase their spare capacity by an extra 2 million barrels a day, which will provide a cushion for the world. Other countries should follow suit. But … first and foremost comes demand. We can't blame this problem on OPEC, because we have so much wasteful and inefficient consumption. The automobiles we have on the road today are quite inefficient—less than 20 percent of the fuel energy is actually converted to useful energy. We should certainly increase hybrid ownership, but I believe that hydrogen fuel cells are the breakthrough technology we need.

It appears to me that too many of these countries are using their oil revenues to subsidize their current populations' needs, rather than for long-term investments.
Directionally, you're right. Certainly some of these countries could do more. Iraq and Iran are critical. Outside of Saudi Arabia, they have the two biggest endowments in conventional oil reserves. But they're not investing enough. In Iraq, that's for obvious reasons—there's a security issue. In Iran, because of their political issues, they've limited reinvestment, too.

Are you pessimistic about the future?
To date, a total of 1 trillion barrels of oil have been produced, and it's conventionally understood that we have 2 trillion barrels left in the ground. That leads a lot of people to assume things are going to be fine. Unfortunately, the frontiers are getting more difficult to access, and some oil-producing nations are giving priority to their political agendas. The IEA [International Energy Agency] predicts global demand to average 98.5 million barrels a day in 2015; it's hard to see how we can meet that level of production. To have sustainable economic growth 10 years from now, both consumers and producers need to start acting now.

© 2008