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The peak oil crisis: the Council of Governments

The Metropolitan Washington Area Council of Governments (COG) recently released its 2006 Strategic Energy Plan. Reports like this of course are lengthy —220 pages - and are unlikely to be read outside of a narrow circle of local officials and energy professionals. As it deals with a topic soon to be vital to those of us who live around the nation's capitol, I thought it would be worthwhile to read it for you and pass on some insights as to what COG thinks we should be doing.

The report starts out with the proposition we are moving to a "new energy era" and cites rising global demand, tight energy supplies, and high energy prices as evidence something is up. So far so good! The authors then bring up the "peak oil debate" which is described "as worldwide discussion as whether the world will reach its highest capacity to produce oil starting 20 years from now." Uh oh!

Now those of you who follow the issue should be aware that the real peak oil debate is whether: a) world oil production has already peaked; b) will peak in 2008 or 2009 as the current round of new oil production projects is completed: or c) will come around 2010 to 2015. Nobody who understands the problem or follows the numbers would say "starting 20 years from now" unless they are sadly uninformed or are being paid to make optimistic noises so we consumers will keep on buying stuff or not start dumping our investments.

While the Council of Governments can't be accused of being overly alarmist, the reader is left with the impression that the real problems just might not start for another 20 years rather than in 20 months or perhaps even 20 weeks, as some believe. At least the authors, a firm of consulting economists, got in the notion that from an energy standpoint, the 21st Century is unlikely to look much like the 20th.

The first major point of the report is that, collectively, we Washingtonians are unlikely to give up or slow down much on our regional energy consumption until the price of gasoline is so high, the regional economy is "adversely affected." In the ominous words of the study, "if prices get to the point where they begin to reduce driving, then the whole regional economy will have some big challenges, with driving being among the least of the problems."

Before going on much further, we should note that COG's major responsibility is to study regional issues and to coordinate policies among the 21 jurisdictions that make up the organization. Back in the energy crises of the 1970's, COG coordinated the famous odd-even days at the gas pumps so that the whole region got in the gas lines together.

The next major point of the study is that we must have some overarching goals to keep in mind as we go through the coming transition to new forms of energy. The study came up with six, which paraphrase as: 1) keep the regional economy going as higher and higher gas prices wreak havoc; 2) get ready for disruptions in energy supplies; 3) watch out for the poor as the cost of living becomes unaffordable; 4) keep public services going as costs rise and tax revenues dry up; 5) watch out for the environment; and finally 6) coordinate energy with land use. All in all, that is not a bad summery of what our local governments are likely to be confronting in the near future.

As could be expected, we really have not done much planning or monitoring of energy since the last energy crisis ended 25 years ago. Thus the first recommendation of the report is that the region mounts a full-scale effort to construct an Energy Intelligence System to collect data on a continuing basis about our energy use at the "micro-level" (zip code and census tract).

Without such information it will be difficult to assess what policies might make sense or whether new policies are doing any good. The report recommends that energy suppliers —electric utilities, natural gas suppliers, and fuel depots— develop mechanisms to provide a continuing flow of information regarding prices, availability and rates of energy flows to regional authorities.

This seems to make eminently good sense. As gasoline and other energy prices rise, current evidence suggests people will simply reduce spending on other things to keep their credit cards from maxing out. At some point however, gasoline will inevitably get so high, people simply will have to start curtailing their driving. As gasoline is taxed by the gallon and many other taxes are levied as a percentage, higher gasoline prices will have no effect on gasoline taxes, but could have a considerable impact on local revenues as people give up much else to their cars moving.

As could be expected, the bulk of the report deals with how to stop using so much conventional energy: conservation, efficiency, and consumer behavior. The areas discussed are appliances, buildings, vehicles, behavior, and renewables. There are policy implications galore in these topics. Raise taxes enough and you cut consumption. Changing High Occupancy Vehicle (HOV) rules or expanding HOV programs to more lanes and roads might accomplish the same thing. There will clearly be lots of tools available to governments and policy makers when the time comes.

So what do our 220 pages tell us? The report acknowledges and even describes in much detail that there is a debate going on about peak oil. Unfortunately when the authors start talking about production starting to peak 20 years from now the sense of urgency is somehow lost. However, the good news is that the report was clearly drafted last summer when we were all paying upwards of $3 for a gallon of gasoline. The notion that a problem is on the way comes through loud and clear. Unfortunately the pace and the scope of the emerging problem are left murky.

The overriding theme is that as a society we are going to keep driving until the gas pump will no longer accept our maxed-out credit cards. In the greater scheme of things however, this is likely to be a brief interval. The notion that we are going to need much more precise and timely information about our energy consumption is clearly a good one. Let's hope the governments in the region can get moving on this one in time.

Editorial Notes: Several related governmental and quasi-governmental reports have been posted recently: -BA

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