'Peak oil' is coming, but country is ill-prepared

'Peak oil' is coming, but country is ill-prepared
United States needs energy security insurance policy

By STEVE A. YETIV

From the article:

BUDGET deficits explode. Inflation rules. Stock markets plunge. Houses foreclose. Great powers clash. This may be our future if we do not take more serious steps on energy than those offered in the energy bill that President Bush recently signed.

With oil prices hitting all-time highs and war raging in Iraq, serious concerns about 'peak oil' slowly have appeared on the public radar screen. Simply put, peak oil refers to a key turning point when global oil production peaks and then begins to decline, signaling a future of dwindling supplies.

Analysts predict that the peak will occur between 2006 and 2011, that global oil reserves are far more limited than believed, partly because leading producers such as Saudi Arabia overestimate or obfuscate their oil reserves, and that we are headed for a massive energy crunch.

Such concerns may be exaggerated, but we still need to plan ahead more zealously. This is because whenever peak oil does arrive, it will likely produce three effects for which we are not prepared.

First, in the absence of serious alternatives to oil, oil prices will spike possibly to more than $100 dollars a barrel in anticipation that demand for oil will slowly outrun supply. That could trigger a global recession or worse. Even if rising prices spur research into affordable alternatives, it will take many years, perhaps decades, for the global economy to shift to them because oil penetrates all walks of life. We can't switch away from it overnight. Even if peak oil comes in 2020 or 2025, we are still behind in the race.

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