Report by the Connecticut Legislative Peak Oil and Natural Gas Caucus to the governor and legislative leaders, outlining the current world energy situation and its potential impacts on the state of Connecticut. It also includes a list of "Intelligent Responses" -- recommendations for action on the part of the state.
[Read the full report in pdf format.]
Report to Legislative Leaders and the Governor
Global oil production appears to have stagnated and may soon be headed toward terminal decline. International demand is increasing at a compounding rate yearly. Escalating oil cost is evident and supply shortage and disruption have occurred both in the US and internationally. Rising cost for oil has and will continue to affect every product, every citizen, every business and every function of Government. Contraction in the state’s economy is likely at current and possible higher oil prices. The state is unprepared for this permanent shift in the international energy regimes. Our society has only once ever faced a contraction of affordable and plentiful oil -—during World War II. Today we have no simple model to remedy the rising situation. There is no short-term fix.
"Peak Oil" is the point in time when an oil well, an oil field, a state, a nation, a continent or the world hits maximum production. Thereafter production declines, perhaps after a plateau, perhaps precipitously.
It is the position of the Caucus that the extent of oil reserves, either confirmed or estimated, is not necessarily the driving issue behind the rapidly emerging Peak oil story. Rather, known or estimated reserves are only one factor, albeit an important one, limiting maximum global production. Reserves are very difficult to validate and often they are "national security secrets" of the counties that own the oil. More than 90% of the world’s oil reserves are controlled by national oil companies. More than 65% of the known oil is located in countries that have a strained relationship with the United States. Additionally, current oil discoveries accessible to the US and other countries are increasingly found in deep oceans or arctic regions and will take a decade to develop, if it is possible, and decades to extract. How much oil is in the earth is somewhat irrelevant to the issues at hand: maximum production and increasing demand. Knowing there is oil is not the same as being able to extract it or to afford it.
The Caucus realizes that the current run-up of oil to above $98.00 per barrel may in part be due to oil riding a bubble in the markets, particularly when considering the sub-prime impact and the incredible sinking dollar. Many other factors might reduce the price of oil in the short term. One factor might be a recession that would cut demand. Depending on the severity of any recession, the cure would be as bad as the illness. This however does not change the fact that oil seems to have a technical floor of $70.00+ per barrel with future cost being estimated to raise as much as $10.00 to $12.00 per barrel per year as flows flatten or fall and developing nations demand more oil.
This report is not intended to be a technical paper nor is it comprehensive. While energy use and extraction has an inherent impact on the environment, this report does not contemplate environmental issues. Rather it serves as warning, a red flag, to the complacency and ignorance regarding oil, to which we have all been party.