Oil & Gas:

Peak oil study group's Baldauf discusses policy options

Should Congress address peak oil in its next energy package? What are the policy options for minimizing the impact of a potentially shrinking supply of oil? During today's OnPoint, Jim Baldauf, co-founder and president of the Association for the Study of Peak Oil and Gas, discusses the economic and geopolitical impacts of peak oil. He gives his take on the United States' policy options for addressing a peak and weighs in on the ongoing debate over production numbers.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Jim Balduaf, cofounder and president of the Association for the Study of Peak Oil and Gas. Jim, thanks for coming on the show.

Jim Baldauf: Thank you, Monica.

Monica Trauzzi: Jim, peak oil is something we've been hearing about for years. It's somewhat slipped under the radar here in Washington a bit over the last few years. Why doesn't the peak oil discussion play a more significant role when we talk energy policy in Washington?

Jim Baldauf: Well, that's why our conference is being held in Washington this year. We are trying to bring the message to policymakers. The message has been out there for quite a while. Just about everyone understands peak oil now, from major oil companies to academics to the environmental community. Oil is a finite resource. It's under the ground. It's an endowment of energy that has taken hundreds of millions of years to accumulate and we've ripped through about half of it in 150 years.

Monica Trauzzi: There isn't complete agreement on peak oil though. Some say we have a very long time before it becomes an issue. Others say we're going to continue to find new reserves and oil supplies, so we don't really need to worry about it at this point. So, do we know what the actual supply levels are now and what they are going to be in the future?

Jim Baldauf: Pretty much, Monica, pretty much. Peak oil is a theory the way gravity is a very. It's pretty much everyone acknowledges peak oil. I mean Peak oil is a finite resource. Any finite resource has a beginning, a middle, and an end. We're not saying that we're out of oil. We're saying that we're about halfway out of it. There's still oil in the ground, but it's going to be more difficult, more costly to acquire from this point on. I happen to be an oilman in Texas is a very small way and I've seen peak oil play out under my own drill bit. We're having to drill twice as deep at twice the cost to get a third of the production. 2010 has been the year of hydrocarbon hell. We started out the year with a coal mine disaster explosion in West Virginia, killed 29 people. Throughout the year industry has been trying to squeeze oil and gas out of shale formations with fracking technology that appears to be polluting aquifers and, of course, we've ended the year now with this Gulf of Mexico disaster, this BP disaster. So we've had all three of the major energy sources, oil, natural gas, and coal giving severe problems during this last year.

Monica Trauzzi: What kind of timeframe are we looking at for a peak in production? A lot of people say 2017, 2018.

Jim Baldauf: Well, some people say that it peaked around 2005, between 2005 and 2008. Others are saying it will be 2012, 2015. We're not too concerned about when the actual peak occurs. We're already feeling the impact of peak oil. That's why we're drilling in the middle of the Gulf of Mexico, three miles down, there's nowhere else to drill. That's why we're trying to squeeze oil and gas out of shale formations. Traditional reservoirs are no longer available. In the sense of coal mining, we're moving mountaintops to get low-grade lignite coal. The high-grade anthracite coal is almost gone.

Monica Trauzzi: So then what are the potential economic impacts for the U.S. as a result of peak oil?

Jim Baldauf: Profound and the U.S. military understands it. They just produced a JOE report they call it, where they express real concern about the availability of liquid fuels. It's interesting, the Army doesn't have an ideology to follow. They don't have to get elected. They have a mission to move troops and tanks and etc. and they know the importance of liquid fuel. So, the U.S. military, the German military, the British government, just about everybody in the world has been producing really detailed scientific study saying that we've got an energy crisis on our hands. Now, we're in the middle of a recession, which has sort of masked the effects of peak oil. But I hasten to point out that even in the middle of this recession oil is at $83 a barrel this morning. It was in 2005 that oil topped $50 a barrel for the first time. And now, in the middle of a recession , it's at 83.

Monica Trauzzi: So, what does peak oil mean then for the oil and gas industries?

Jim Baldauf: Well, it doesn't mean the end of the oil and gas industry. We are going to have a need for oil and gas, an ongoing need. Let's say that we do some bold transition to alternatives, solar, wind. You can't fly a jet plane with solar panels. You've got to have jet fuel. You cannot make chemical products from wind turbines. You need petrochemical products from oil, from petroleum; so, fertilizer, pesticides, plastic, pharmaceutical supplies, not to mention certain transportation like jet planes. Now, one thing we can do is we can electrify our conventional transportation fleet.

Monica Trauzzi: So that means if we have more renewables, more alternatives online, that means we have more wiggle room, a little more time to play with in terms of how much oil we have?

Jim Baldauf: That's right and, you see, we're always going to need the oil, but we need to save the oil for those things that only oil can do. We don't need to be wasting it to run cars. We can run cars with electricity.

Monica Trauzzi: Sounds like we need to be teaching conservation.

Jim Baldauf: Conservation, efficiency, research and development in effective alternatives. I say effective because not too many years ago people were very excited about corn ethanol until they realized it took a gallon and a half of gasoline to make a gallon of ethanol. So in these alternatives we always have to be guided by the principle of net energy. In other words, are we getting more energy out of it than we're putting into it?

Monica Trauzzi: So what's the response on the Hill to what you're saying?

Jim Baldauf: Well, you know, politics is a strange creature. We're having a congressional briefing tomorrow however, our organization, ASPO-USA, as part of our conference and we're having a very good reception and response to this congressional briefing that we're going to be holding tomorrow morning.

Monica Trauzzi: All right, well, it will be interesting to see how that turns out. I thank you for coming on the show.

Jim Baldauf: Monica, thank you for having us.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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