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Peak oil? Ask an oilman.

We’ve all been reading and hearing about peak oil—that there is a fixed amount of crude oil in the earth, and we have by now extracted so much that the supply will soon pass the point of diminishing return, if it already hasn’t. Some deny it, some shrug it off, but once we get past the knee-jerk reactions, the real story is more complex.

Rob Neilley

November 9, 2009

2 Min Read
Peak oil? Ask an oilman.

Since 1995, John B. Hess has been chairman and CEO of Hess Corp., a global player in oil and gas exploration and production with 2008 sales of more than $42 billion. That qualifies him as a real oilman, but don’t rush to judgment.

On Oct. 21, Hess spoke at the Oil & Money Conference, and here’s how he concluded his talk: “What kind of world do we want to leave to our children? If we do nothing, there will be severe consequences. Skyrocketing prices could become a way of life in a crisis-led world.” But he’s not fomenting panic by any means.

Hess makes the point that 85% of the world’s energy today comes from hydrocarbons, adding that renewable energy sources can’t scale up fast enough to avert an oil crisis in the next five to 10 years—if we do nothing. When the economy recovers from its current malaise, oil demand is projected to grow by a million barrels a day as global population moves from today’s 6.8 billion to 9 billion by 2050. People in emerging economies want more cars. “The U.S. has 1000 cars for every 1000 people; China has 10 cars per 1000,” noted Hess.

With 3 trillion barrels of recoverable oil available, we are not running out of oil, he says. The issue is global production capacity, and he cites a report from the U.K. Energy Research Centre that says we risk a peak in global oil production before 2020, and it could enter into terminal decline.

Hess says the U.S. needs to take a leadership role—for example, by having the courage to demand 50 mpg as our national standard. He asserts that a gas tax of $1/gal would boost conservation and pay down the federal deficit.
He further calls for international collaboration in a global energy policy forum, noting that if OPEC-led oil-producing nations would build more production capacity, we could add 5 million bbl/day of incremental supply over the next 10 years. “The price of $140 per barrel oil was not an aberration,” says Hess, “It was a warning.”

Read the full text of Hess’s speech. For further reading, try the Post Carbon Institute.

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