AMY GOODMAN: Earlier this week, Bush stated some of his ideas to address the problem. This is the President speaking to the trade group for ethanol producers on Tuesday in Washington, D.C.

PRESIDENT GEORGE W. BUSH: We got to be wise about energy policy here in America. We got to make sure that we protect the environment. We also got to make sure that we find additional supplies of crude oil, in order to take the pressure off the price of crude, which takes the pressure off the price of gasoline at the pump. Now, all I’ve outlined here today are interim strategies, short-term and interim strategy. The truth of the matter is the long-term strategy is to power our automobiles with something other than oil.

We owe it to the American people to be aggressive on price-gouging now. We owe it to the American people to be promoting alternative ways to drive their cars, so as to make us less dependant on foreign sources of oil. We owe it to the American people to be aggressive in the use of technology, so we can diversify away from the hydrocarbon society, and that’s precisely what we’re doing. And I’m glad to stand with you.

AMY GOODMAN: Well, this week, a conference is being held in New York City, examining an issue that’s getting increasing attention. The Peak Oil Conference, sponsored by Local Energy Solutions and the Five Borough Institute, is bringing together experts in energy, agriculture, economics and geology to address what they say is partly the cause of high oil prices. Peak oil occurs when half of all existing oil has been pulled from the ground. Therefore, oil becomes more expensive and the economy goes into recession. Some experts believe we’re at peak now, while others disagree.

We go now to a debate on the issue. We’re joined in our Firehouse studio by Julian Darley, founder and director of the Post Carbon Institute and Global Public Media. He’s also author of High Noon for Natural Gas: The New Energy Crisis, co-author of the forthcoming book, Relocalize Now!: Getting Ready for Climate Change and the End of Cheap Oil. On the phone from Amherst, Massachusetts, we are joined by Michael Lynch, President of the Strategic Energy & Economic Research. Previously, Michael was Director of Asian Energy and Security at the Center for International Studies at M.I.T. We welcome you both to Democracy Now!

Julian Darley, let us begin with you. Can you explain the concept of peak oil?

JULIAN DARLEY: Peak oil is essentially quite a simple idea. It comes about because when you have a reserve of conventional oil, either in a single reservoir or more particularly in a nation, when you get roughly halfway through, as you said, roughly halfway through that reservoir or that nation’s stock, if you like, of conventional oil, then you see a decline in that oil. In other words, the production rises over a period of time — that depends partly on how much effort you put in and also, to some extent, on the geology in the reservoirs themselves — rises up.

When you get roughly halfway through — in fact, the world averages about 53%; there’s nothing magical about 50% — when you get roughly halfway through, then, because of a mixture of technical, economic and geological factors in the structures of reservoirs themselves, you go into a decline. There are no exceptions to this for reservoirs, unless you apply very powerful so-called secondary and tertiary recovery techniques, which means pushing in water or carbon dioxide and things like that. Even so, you can hold some reservoirs at a plateau for a while, and then they go into decline. They still go into decline. One of the dangers is when you do that, your decline is even faster and difficult to predict.

AMY GOODMAN: And what makes you think it’s happening now?

JULIAN DARLEY: Well, history has shown — the most dramatic example being that of the U.S., which its own oil production peaked in 1970 — history shows that this happens to all nations. Now, when it happened to the U.S., it was able to import yet more oil. It was already an oil importer in 1970. It was able to yet import yet more oil. Now it imports approximately 60% and rising. So when this happens to a nation, it turns to other oil-producing nations. The trouble is when it happens to the world, and the world is roughly halfway through its conventional oil, there are no other planets to turn to to import from. So then, you get this phenomenon of global oil peak. There’s no one else to import from, so the decline begins to happen.

And it does look as if we’re about halfway through the conventional oil reserve of some two-and-a-bit trillion barrels. We’ve used a bit more than a trillion now. And so it’s absolutely inevitable that it will happen. There are corroborating data from various other sources which suggest it’s happening around about now. And there’s some more technical data — we can go into them if you’d like. So, it’s not just the fact that production figures suggest we’re about halfway through, there’s lots of other corroborating data, as well.

AMY GOODMAN: Michael Lynch, your response?

MICHAEL LYNCH: Actually, I think the problem here is that Julian and a lot of the people making these arguments are not that familiar with the technical terms in the oil industry. The estimates that there’s about two trillion barrels of oil resource are actually done by some very simplistic models, which have not always failed, but almost always failed on both the national and a global level. The oil conventional oil resource base, the oil in place, is about eight to ten trillion barrels. And right now, most estimates are that about 40% of that will be recovered, in other words, about three, three-and-a-half trillion. But the amount we’ll recover will grow over time. So we’re not — we’re really not even close to halfway through the conventional oil resource base.

AMY GOODMAN: Your response?

JULIAN DARLEY: Most estimates don’t say that we’ve got about that much, and the oil reservoirs don’t grow in time. Give it a billion years and you might see quite a bit more oil in the ground, but I don’t think we have a billion years. So I’m afraid I disagree with both those statements on factual grounds.

MICHAEL LYNCH: Well, actually, I think the problem is that most of the people who write about peak oil have not been reporting the recent estimates done by geologists and firms and so forth. And in fact, although you see many claims that the amount of reservoirs — the oil in the reservoirs don’t grow over time, that is, the amount you can recover don’t grow over time, there’s a huge amount of data and a lot of research that shows this is true, and I’ve challenged the peak oil theorists on this. And, in fact, their own research says that it’s true, but they’ve chosen to ignore those numbers. You really can’t find anything other than claims and assertions that they don’t grow. If you simply look at the trade press and the engineering articles, you see hundreds and hundreds of examples of this.

AMY GOODMAN: Julian Darley?

JULIAN DARLEY: The amount of oil in the ground simply doesn’t grow. What happens is the amount of reported oil can grow, but most geologists now accept and have long admitted privately, that they know roughly what’s in the ground when they make the discoveries, but it’s not wise or convenient for integrated oil companies, the large oil companies, to report those early numbers. So they report a much lower amount. They’re forced to by the S.E.C. and other reporting regulations, so it makes legal sense for them to report less than they believe to be there. The nice thing about that, from their point of view, is let’s say you find a billion barrels and you only report half of it — and it’s perfectly legal to do so — that means next year, when you, say, don’t find very much, you can report a bit more, and then the same thing the next year after that. So it’s been very convenient for the oil companies, but it doesn’t mean the amount of oil in the ground grows, and this is very, very important. It simply doesn’t.

What is there is there from about a billion or so years of geological and plant activity. There were two large charges about 150 million years ago and about 90 million years ago, ironically from two periods of enhanced global warming. There have been several other periods, although those look like the biggest periods of deposition and creation, production of oil in the ground. That doesn’t grow. What makes some difference is new technology, which has been in place for the last 20, 30, 40 years, although there is considerable evidence that even new technology doesn’t really increase the recovery factor very much, at least not very much in the last 20 to 30 years. It helps you to get it out more quickly, doesn’t increase that recovery factor, which varies between about 25% and 40% normally. It can be a bit higher.

So, what you’re looking at is, number one, real oil that we can really get out does not grow, just the reporting of it. And now, as you see from Shell a couple of years ago, they were forced to admit that their reserves were not nearly as big as they said. Very complex issue. It’s true, that this is a matter of reporting. And ultimately, it’s molecules that people need to put in their cars and to feed the petrochemical industry, not just reports of molecules.

And so, what you find is that you can, for instance, tell —- you can be creative with how much you’ve got in your bank account, for instance. But there comes a point when you have to be honest about it, because the bank will say to you, “You haven’t got that much, and you can’t spend that much.” And to some extent, this is what’s been going on with global oil companies. It’s not that they’ve been lying. They have been forced to behave like this, but it’s been convenient, as I say. And now we’re reaching the point where the truth is coming out. These so-called replacement ratios, for instance ExxonMobil reputedly replaced 117%. Many of the other oil companies haven’t done so well, of their oil supplies, year-on-year. But in point of fact, when you look at it, they include gas, as well as oil in that, and more and more, it’s been gas that’s been making up for oil in terms of replacement and reserves. So -—

AMY GOODMAN: Let’s get Michael Lynch’s response to that.

MICHAEL LYNCH: Yeah, I mean, the point is that we’re both talking — neither of us is talking about the oil, the molecules in the ground. We’re talking about reported molecules in the ground. And Julian thinks that when he sees the numbers of two trillion, that that’s the molecules in the ground, not the reported. The estimates, when he talks about the two trillion, the people who make those estimates have raised their estimates over time by about 400 or 500 billion barrels.

I mean, I’ve dealt with the people who have done the original research that he’s relying on, and, you know, I’ve pointed out the flaws in their arguments and the fact that they have had to repeatedly revise their estimates and research. It’s the claim that is often made by people like Matt Simmons or Colin Campbell that you can’t increase the recovery factor much, you’re just getting now faster. But if you look, you’ll find that they say this over and over again, and they don’t give you any real evidence to back it up. If when you talk to the industry, and I’ve debated with Matt in front of the Society of Petroleum Engineers, and you tell them that Matt says this — he doesn’t say this to the engineers, because they would laugh at him — that’s the reaction. I mean, these guys are working all the time to raise the amounts that they can get out of the ground.

AMY GOODMAN: We’re going to go to break, and then when we come back, continue this discussion on peak oil.

[break]

AMY GOODMAN: We’re talking to Julian Darley, founder and director of the Post Carbon Institute and Global Public Media. We are also joined on the phone by Michael Lynch. Michael Lynch is the President of Strategic Energy & Economic Research, previously director of Asian Energy and Security at the Center for International Studies at M.I.T. Isn’t the real issue not so much that oil will — we’ll run out of oil, but that the price will become increasingly prohibitive to drill it out? And then, that raises the issue of the geopolitics of the whole situation?

JULIAN DARLEY: Geopolitics and price are all very important issues. I think it’s also important to stress that, at the moment, we’re not running out, it’s more that we’re running down, and the running down is key. When you always need more of something and you start to run down in your supply, that’s absolutely critical. Running out — actual running out, i.e. no oil left in the ground, that would be a very long way off, but when you’re using 85 million barrels a day and you need to increase, that becomes the issue. As to price of getting it out, if you’re referring to that, that is undoubtedly increasing, and not only the dollar price, but the energy price of getting oil and indeed other energy materials out of the ground, that’s also increasing.

So, as the years go on, we will see or we will find — and it will be difficult to measure — that we will be getting less energy, as it were, for our energy buck. So that will start to have an important effect. You see the difficulties with the amount of money things cost. For instance, the tar sands in Canada, it’s hard to get an exact amount of how much that costs, but certainly when you go to polar and arctic oil and gas, that is going to be really expensive. We’re thinking of North Canadian gas and Russian gas. That is going to really start to show up how difficult it is, and I think it shows you how desperate we’re getting that all the easy oil from Saudi Arabia and indeed from the U.S., all the cheap stuff is now in decline or indeed has disappeared in some cases, and so we really are getting pretty desperate.

AMY GOODMAN: Michael Lynch?

MICHAEL LYNCH: Well, I think the real problem here is the geopolitical one, which is we’re always going to be dependent on the Middle East, and the Middle East is politically unstable, as are Venezuela, Nigeria, you know, California. So the notion that the easy oil is gone is one I’ve been hearing for 30 years. My grandfather drilled oil in West Virginia, and he used a mule rig, and he probably didn’t think that was easy, compared to what they’re doing now. The thing is technological advances have generally in the mineral industry, offset the increase in cost that you get from depletion. So that’s why, for instance, the price of copper and iron ore and so forth don’t tend to rise over the long term, even though we’ve used them a lot longer than we’ve used oil.

AMY GOODMAN: I want to ask about Iran and China, the whole issue of whether the whole issue of oil is directing U.S. policy toward these countries. Julian?

JULIAN DARLEY: I think the issue of oil, in terms of Iran and China, is clearly extremely important. To pick China first, it is a major oil supplier on its own. It produces about three-and-a-half million barrels a day. But it, unfortunately for itself, it uses over six-and-a-half million barrels a day, which now makes it a very large oil importer indeed. And what’s about to complicate that, as if it hasn’t already been enough of an effect, is that China’s own oil production is about at peak and about to go into decline. I think it’s fairly clear from looking at the evidence that that’s going to happen. So China’s going to go from a situation where it was importing more than its increasing production was able to deliver, to the situation where its own oil production is going to go into decline, and yet it’s still trying to increase its oil imports. So I think we’re going to see a considerable increase in China’s demand for oil.

Then, the matter of Iran, if one just says to oneself, “If Iran had no oil, would there be all this interest in Iran?” I think it’s pretty clear that the answer would be no, there wouldn’t be much interest in it. Iran is a very large oil producer and a fairly major oil exporter. It also has heavy oil, as well, which is not so easy to deal with, but it exists. So it’s quite clear that oil, I think, is a very large factor, not the only factor in Iran, but a very large important one.

AMY GOODMAN: Michael Lynch?

MICHAEL LYNCH: Oil is actually very important in terms of foreign policy in this country and many others. Some of that is perception. There’s a sense that we’re not going to get the oil unless we do something special. In reality, most countries find that they can just buy the oil they need. You know, global oil consumption has been rising for about a hundred years, and China, Chinese oil consumption has been rising sharply for about 15 years now, and we actually had two price collapses during that period. So I think, you know, you just have to remember oil is a cyclical commodity and we’re at the up part of the cycle. We do have to worry about countries like China, which get carried away out of fear that they won’t get the resource and maybe undertake certain foreign policy moves that we would rather they didn’t in support of that.

AMY GOODMAN: Can you explain the concept of Iranian bourse?

JULIAN DARLEY: Yes, Iran wants to sell oil in euros. It developed an exchange system to do that. It was supposed to come online in March. It didn’t. Some people suggested it didn’t because there was a shortage of trained personnel. I don’t know exactly why it didn’t. It is said that it will still come on stream later on this year. The reason why that might be a worry is — to American policy-makers at the top — is that it is said that if you sell oil in something other than dollars, it will have a very negative effect on the value of the dollar, and it is true that Saddam Hussein began selling oil in euros in November the year 2000, and was it a coincidence that he was invaded later on? I’m not saying that was the only reason. But there is an interesting correlation.

AMY GOODMAN: Why does selling it in euros matter?

JULIAN DARLEY: If you sell it in euros, it means that people will then want to buy euros in order to trade for oil, rather than buying dollars. This is what’s put forward, and I think it’s a very interesting argument. Well, if you then turn away from — you don’t need so buy so many dollars and you’re starting to buy euros, when you reduce the demand for anything, then generally speaking, the price will go down, and the value of it will go down. So that’s regarded as the big worry. If you start pricing oil in euros, the value of the dollar will go down.

AMY GOODMAN: Michael Lynch?

MICHAEL LYNCH: I think he overstates the case somewhat. I know that many people in OPEC have discussed over the last 30, 40 years, every time the dollar weakens, they say, we should switch to another currency, and they usually don’t do it, because, you know, the change in the demand for euros or dollars by shifting currencies, would not be very large on a global scale, and I don’t think it’s the sort of thing that people worry about that much in Washington. They watch that, but it’s the kind of thing where you get a lot of coincidental effects, and you don’t want to overdraw the actual causality there.

AMY GOODMAN: Last question, and that is the theory of peak oil connected to oil wars, wars fought for oil. Julian Darley?

JULIAN DARLEY: I think unfortunately there is a connection, and as we go into oil decline, sometime between about now and at the very latest, I think, 2007, 2008, whatever difficulties we’ve seen in terms of fighting for oil — and some people say we’ve been fighting for it for nearly a hundred years — I think those difficulties are likely to worsen.

AMY GOODMAN: Michael Lynch?

MICHAEL LYNCH: Well, I think what we’ll find more likely, you know, oil will remain important in foreign policy, because it’s a vital commodity. On the other hand, I think the big fear is that we’ll have much lower oil prices in the next couple of years, and countries like Venezuela, Nigeria, Iran, maybe even Saudi Arabia, will then be threatened with economic and political instability, and this could cause some problems for us.

JULIAN DARLEY: I think that there will be some problems. And I think there will be instabilities, both geopolitical and economic, and I think we are going to find that we haven’t really faced anything like this before. We’ve not built nations so — and systems, industrial systems like the one we’ve got. We haven’t had one like this before. It’s so dependent on these flowing resources. They’re not really minerals. Oil and gas, upon which are said to flow, and that’s different from coal and other things we have to dig up. And of course, most of our transport depends on oil, well over 90% of it, all that we move around, which is so much of what the economy, the real economy actually is. So I think we can unfortunately look forward to instabilities of a very high sort, and the plea is, “Let’s start planning for that.” The market system, which I think is implicated in a lot of this, is very bad at planning; indeed it doesn’t say it’s trying to plan. We must start planning for this. We can see it coming.

AMY GOODMAN: And how do you plan? What are the solutions?

JULIAN DARLEY: Some of the responses we should be looking at are undoubtedly from government. Government must start trying to assess how much energy we use. We must assess what this decline looks like. That’s one of the reasons why public awareness and political awareness is so important in this matter. What does this decline look like? How much energy are we using? How could we start reducing our demand? And in reducing our demand, we have to be — I think the grave danger is that unemployment will go up dramatically, unless we plan for it.

If we plan and understand that we must start using only what’s sufficient, not of great surplus, we use enough rather than too much, then if we use planning techniques — and I’m not referring to large-scale command and control techniques — planning doesn’t have to be that — then we may be able to and we must try to offset the unemployment and the other breaks in supply chain. We’re all, after all, dependent on food. Food comes a very great distance, mainly powered by oil and gas. So these are very, very important planning issues, and governments have tended to throw away the levers of power, the levers of planning. They’ve given them away to the market. It’s going to be very tricky for them try and pull all those levers back, but planning is what we must start doing.

AMY GOODMAN: Well, we’re going to leave it there, but we’ll continue to discuss the issue. Julian Darley, founder and director of Post Carbon Institute and Global Public Media. Also Michael Lynch, President of Strategic Energy & Economic Research, previously was at the Massachusetts Institute of Technology. Thank you both very much.