Ferguson's Forecast: Risky Diet 2005

As noted last week in this publication's "Shorts Circuit" section, the annual energy report I write for the Center for Energy Efficiency and Renewable Technologies is now available. This year's edition, Risky Diet 2005, has been expanded to include chapters on oil, coal, and global warming as well as natural gas. Regular readers of "Ferguson's Forecast" will find little new in the gas chapter but should find the sections on oil of special interest. Government agencies such as the U.S. Energy Information Administration and the International Energy Agency continue to project that petroleum supplies will remain plentiful and prices moderate for the next several decades. Other experts forecast that supplies will begin to decline within a few years. Risky Diet 2005 looks at the data and finds nothing to support the official outlook, which hinges on the assumption that Saudi Arabia can double its production within a few years. On the other hand, the forecasts of imminent decline appear premature. I conclude that global supplies of crude oil are likely to decline within 10 to 20 years. If supplies decline, consumption must also decline, of course, and prices high enough to make consumption decline are very high indeed. The era of plentiful and cheap oil appears to be drawing to a close. The implications for California, the U.S., and the rest of the world are huge. Readers are encouraged to look at my analysis and form their own opinion as to the likelihood of the declining-oil-consumption scenario. I doubt that any thoughtful reader will conclude that the probability is negligible. However, energy policy makers continue to neglect the reality of limited oil supplies, as the current puerile energy debate in Congress demonstrates. My hope is that Risky Diet 2005 can provide the impetus and background for serious energy policy debate on how to cope with a future in which there is less oil to burn and competition for the remainder is fierce. There is precious little time in which to prepare for one of the most serious challenges we have ever faced. Experience tells me that politicians will continue to keep their heads firmly buried in the Middle Eastern sand, but I continue to hope otherwise. Comments and feedback on Risky Diet 2005 would be most appreciated. The document can be downloaded at www.ceert.org/pubs/crrp/natgas/RiskyDiet2005.pdf .

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Ferguson’s Forecast: Risky Diet 2005

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