Physicist Warns Global Oil Production Peak Could Bring Economic Disaster

Article excerpt

PASADENA, Calif. (AP) -- It's not the energy crisis that worries Caltech physicist David Goodstein. It's the economic crisis he fears it could cause.

Goodstein recently looked at a famous 1950s analysis that correctly predicted U.S. oil production would peak about 1970. Expanding the scope, he estimated world production could hit a peak in 2007 -- decades ahead of previous predictions.

The United States could draw on the rest of the world's supply to meet its demand when the domestic supply declined in 1970. But when the world supply peaks, oil will become scarce because "nature is not making any more oil," Goodstein says.

If government and industry leaders don't push hard and fast to develop alternative energy sources and the infrastructure to support them, Goodstein says the world could be pushed over an economic cliff created by skyrocketing oil prices.

While some experts say Goodstein's scenario is a possibility, others say he should stick to physics. They point out that estimates of the world's oil reserves have been increasing over the years, and contend that alternative fuel sources will be developed before there is a serious oil shortage.

"This is a classic example of why physicists shouldn't do economics, just like economists shouldn't do physics," said Stanford economist Frank Wolak, who has tracked the energy industry for years.

The oil and auto industries have moved into alternative fuel research but actual conversion is slow because the price of oil is relatively cheap, even at today's prices, Wolak says, so there is little incentive to switch.

Wolak and Goodstein note that a liter of bottled water -- about a quart -- is more expensive than a liter of gasoline in California.

But unlike Goodstein, Wolak sees a smooth transition to alternative energy because he says the free market has always created investment incentives for new technology. He also points out that higher prices have the effect of increasing exploration and development of new oil recovery techniques that were too costly at lower prices.

Besides, Wolak says, supply and demand always find a balance.

"We'll never run out of oil," Wolak says, "because as it becomes more and more scarce, the price will move to allocate it to those who need it most."

Michelle Foss, director of the University of Houston Energy Institute, says oil consumption has typically slowed dramatically when prices reach about $30 to $35 a barrel.

"If it gets above that, people use a lot less of it," Foss said.

Dan Butler of the U.S. Department of Energy says government studies show the earliest global production peak arriving some time in the 2030s, despite an estimated average consumption of up to 120 million barrels a day.

"Estimates of worldwide resources are dramatically increasing," said Butler, an analyst for the DOE's Energy Information Administration, an independent agency that forecasts oil supplies. …