Big Oil on Peak Oil

Big Oil on Peak Oil
April 19, 2007 -- The Wall Street Journal Energy Roundup Blog

Energy Roundup and several other energy bloggers participated in a conference call yesterday with Red Cavaney, president and CEO of the American Petroleum Institute. Topics included peak oil, ethanol, the Canadian tar sands, refinery capacity and greenhouse-gas emissions caps.

Some highlights:

Cavaney is sanguine about the prospect of peak oil. He believes that, even after the world’s oil production hits its peak — whenever that happens — the downward slope of production will likely be gradual, rather than sharp. He also thinks much of the world is “under-explored,” suggesting the peak can be put off a little while longer with more exploration overseas. He also thinks hydrocarbons will always be with us, in one capacity or another. “Man left the Stone Age not because he ran out of stone. We’ll leave the age of oil, but it won’t be because we ran out of oil. It will be because other technologies have come in that will be more reliable and cost-effective.”

He claimed his industry is agnostic about the controversies surrounding global warming. “We’re not scientists or experts in that area,” he said. “But we have concluded there are sufficient signals that it’s important we get on with trying to mitigate the outcomes that may flow from path we’re on.”

He also expressed no preference for any of several potential congressional actions to limit greenhouse-gas emissions. But he also said he doubted a carbon tax would be imposed any time soon. “Most economists…say a carbon tax would be the most efficient way to maximize reductions,” he said. “But…if you talk to political advisors, that’s the last vote they’ll take.”

He was a little more heated in defending his industry against charges that it is standing in the way of a broader rollout of ethanol in the U.S. The Wall Street Journal reported earlier this month that oil-company policies make it harder for many service stations to stock a fuel called E85, a blend of 85% ethanol and 15% gasoline. And earlier this year, representatives of auto makers and the Clean Fuel Development Coalition told the Journal that oil companies weren’t doing their part to make ethanol more widely available.

Cavaney said such critics “have their own agenda.” The auto industry, he implied, has not taken ethanol use seriously, using flex-fuel vehicles and E85 primarily as marketing tools. He said his industry is doing everything it can to encourage ethanol use, but that corn-based ethanol will never be a widespread substitute for gasoline and cellulosic ethanol is still years away from commercial viability.

He also warned against relying on any one substitute for fossil fuels. “There is no one silver bullet,” he said. “Anybody that focuses that way will miss a lot of opportunities.”