August 25, 2006

Gasoline shortages and even higher prices loom, a new government report says, and it will take decades and trillions of dollars to replace American dependence on foreign oil.

The U.S. Department of Energy report directly addressed the concept of peak oil and how to deal with it. Peak oil means oil production is maximized and supply goes down from that point forward. Coupled with a surge in demand from countries like China and India, some energy experts say this could be a problem for America's economy.

"The world is consuming more oil than it is finding, and at some point within the next decade or two, world production of conventional oil will likely peak," the report says.

In Congress, U.S. Rep. Tom Udall, D-N.M., has co-founded the House Peak Oil Caucus aimed at tackling this issue. "I have a sense that the frustration is building, and whenever that happens, that's the opportunity to get something done," he said Thursday.

Udall said with gas at $3 a gallon, people are nervous and anxious about how they will meet their budgets.

The July report was written by Robert Hirsch of Science Applications International Corp., and Roger Bezdek and Robert Wendling of Management Information Services Inc., based in Washington, D.C.

The report also said many new American jobs could be created in the effort to replace imported oil with positive effects on the economy.

Popular alternatives -- such as ethanol fuel, biodiesel and electric cars -- were dismissed as having minimal overall impacts in the next 20 years. However, the study noted that new technology in these areas could make them more significant.

The country currently consumes more than 20 million barrels of oil a day, and of that, about 60 percent comes from other countries. Current ethanol technology, with maximum production, could give the country up to 8 percent of its fuel supply, one industry official has said. Ethanol supplies about 3 percent of the fuel supply now, Chris Standlee of Abengoa Bioenergy Corp. said in a recent interview.

The report analyzed four options to produce large amounts of liquid fuels in the U.S.: increasing vehicle efficiency; creating petroleum from coal, called coal liquefaction; oil shale, which is rock that can be distilled to produce oil; and enhanced oil recovery, which means better ways to get oil from existing fields.

"It is important to note that initiation of all of the options simultaneously does not even satisfy half of the U.S. liquid fuels requirements prior to 2025," the report says. "If the peaking of world conventional oil production occurs before 2025, the U.S. may not have a choice in terms of a massive national physical mitigation program."

That means options designed to save or make large amounts of liquid fuels, which require big investments and consumer spending, the report explained.

Udall said he's heard from his constituents in Northern New Mexico's 3rd Congressional District. "I think they're very frustrated with the lack of policies from the federal government," Udall said of his constituents. "They don't think that the Republican-led Congress has been interested in renewables and alternative forms of energy and conservation."

U.S. Sen. Pete Domenici, R-N.M., has promoted alternatives in the Energy Policy Act of 2005, such as incentives for oil shale research, wind power, ethanol production, nuclear power and new research in the ethanol arena.