A Crude Awakening: The Oil Crash (2006) - full transcript

Supported by a powerful mix of archival footage, NASA shots of burning oil fields, and, often unintentionally hilarious, historical film excerpts, OilCrash guides us on an exotic, visual journey from Houston to Caracas, the Lake of Maracaibo, the Orinoco delta, Central Asia's secretive republic of Azerbaijan with its ancient capital Baku and the Caspian Sea, via London & Z├╝rich. OilCrash visits cities around the world to learn of our future from such leading authorities as oil investment banker Matthew Simmons, former OPEC chairman Fadhil Chalabhi, Caltech's head of physics, Professor David Goodstein, Stanford University political scientist, Terry Lynn Karl, peak oil expert, Matthew Savinar and many more.

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Oil is the excrement of the devil,
El excremento del diablo.

Oil is black blood.

Oil is the blood of the dinosaurs.

This is the bloodstream of the world economy.

Oil is the blood of the Earth.

We are moving from an era
of cheap, abundant energy

to an era of scarce, hard
to get, expensive energy.

At the same time, we are
making ourselves dependent

on some extremely unstable regimes in
some very nasty parts of the world.

Keeping the World dependent
on oil as long as possible

is important.

Not one in fifty, not one in a
hundred of the people in our country

have any inkling of the potential
problem that we're facing.

Increased unemployment, poverty,
bankruptcy, starvation,

they're all of a kind of the things
that happen when a society collapses.

So we enter an entirely new world
of quite unbelievable dimensions,

and yet it's only a few years away.

Hello, folks, I'm a carbon atom.

And since I'm an essential part in
each of the hydrocarbons in crude oil,

I'm here to give you the
inside dope on gasoline.

Oil is not like wheat, we are
not growing it every year.

Oil is an outcome of many millions
of years of geological history.

The great bulk of the World's oil was
formed at just two very brief moments

of extreme global warming, 90
and 150 million years ago.

Animals and plants that died in
the ocean were compressed by

more deposits of sand, and over the years

these deposits squished and
compacted more and more,

and then, over time, they were cooked,
which was what we call "the kitchen".

And when the organic material was

buried to a depth of about 2000 meters,

chemical reactions converted it into oil.

This was formed once, briefly,
over geological time.

And so, we are using this stuff
up over one or two centuries.

One barrel of oil, the refined product
that with 42 gallons of gasoline

you can buy for a little
over a hundred dollars

will produce as much energy, as much work

as you would get from 12 people
working all year for you.

You take an average man, performing
physical labor for 25000 hours,

to produce the amount of energy just
contained in that one barrel of oil.

That barrel of oil, if it's
pulled out of the ground in Iraq,

can be pulled out of the
ground for one dollar.

You invest a dollar and you get
back 25000 hours of human labor.

That is an energy source that is so
dense, it's essentially free energy.

All non-renewable, it's all
extremely capital intensive

and it's probably the most invaluable raw
natural resource we've ever discovered.

You are about to know the thrill of seeing
that which has never been seen before.

You are about to enter a beautiful,
exciting, wonderful new world.

The world if 1960.

For the first time in history, you'll see:

A wonderful new world of Fords.

The 1960 Thunderbird!

Oil is our God. And ok, if somebody
says they worship Jesus, Buddha, Allah,

whoever, they actually worhip petroleum.

70% of the barrel of oil is refined
into transportation fuels.

Which include motor gasoline,
diesel fuel, jet fuel,

railroad fuel and maritime fuel.

98% of all transportation
energy comes from oil.

Construction of an average car

consumes somewhere between
the energy equivalent of

27 and 54 barrels of oil, depending
on whose statistics you use.

Construction of an average desktop computer

consumes 10 times its weight in fossil fuels.

Microchip consumes 630 times its weight
in fossil fuels during its construction.

For every calorie that you
eat in the United States and

probably similar number in
other industrialized nations,

burns 10 calories of hydrocarbon energy.

There are 6.4 billion people, I
think, living on the planet now,

most of them are reasonably well
fed and that's the consequence of

what was called the Green Revolution in
the second half of the 20th century.

Green Revolution consisted
in very large measure

of fertilizing land with petrochemicals,

fertilizers that are derived from petroleum.

Farming has changed more in the last 50
years than it did in the previous 1000.

A farmer today can work 5 times
the land his father worked,

and still have time for leisure
that his father never knew.

The petroleum that runs
these modern hired hands

has not confined progress
and farming to the fields,

Life is easier for the farm wife, too.

What it comes down to is that the oil
industry has to please Mrs. Martin,

and millions just like her.

Already today she has used
some 87 petroleum products,

including the plastic bacon wrapper
and the wax of the milk cotton.

She'll top a 100 before the day is over.

Liquids that come out of oil
as it's processed and refined,

create the building block for all of our

petrochemical, chemical,
plastic, pharmaceutical,

you know, zillions of things: Tires,

insecticides, cosmetics, weed killers,

A whole galaxy of things to
make a better life on Earth.

And you know, it isn't just oil companies

that try to outdo each other
competing for the customer's dollar,

the same story is true of
almost every successful

business enterprise on the whole planet.

Well, whether you know it or not,

every single preparation on this
beautiful lady's dressing table,

every single thing she is
wearing, is influenced by oil.

Just before her, let's take away all
these articles dependent upon petroleum:

Her hand mirror, cosmetics, perfume

and manicure set made of plastics.

Her synthetic silk negligee,
her silk under...

ooh, science can go no further.

The Caspian Sea was one of the
earlies oil provinces in the world.

People were simply digging
holes to produce oil in Baku

and oil production really took
off when western oil companies

were granted concessions in the late 1800's.

By 1900, 95% of Russian
oil was coming from Baku.

In their heyday these
oilfields produced up to

5000 tons of crude oil per day.

Baku then became a huge industrial centre

and one of the most affluent
cities in the world.

Where is daddy, mommy?

Well, Jeff, I'll just show you.

We are here, in the United States.

And daddy is down here, in Venezuela.

Here, where the lake
Maracaibo oil fields are.

That's where daddy is working, Jeff.

And when he finds a place for us to live,

we're going down there too.

Venezuela discovered oil at the
beginning of the 20th century.

The real first discovery was about 1914.

The real turning point was on
the 16th of December, 1922

when there was a blowout in a well
that was being drilled at Cabimas,

and it became known as the
day of the black rain.

150 thousand barrels in the air,
for two or three days running.

And that put Venezuela an the
world oil map, once and for all.

In that one time, Venezuela became
the largest exporter in the world.

It was the US, not Saudi Arabia that was
the world's leading producer of oil,

and in fact much of our
military and industrial might

arose out of our giant oil industry.

We were, essentialy, the Saudi Arabia
of the world up until about the 1950s.

McCamey was a boom town for many, many years.

Their attitude was that this
was going to last from now on,

and I know that those people
then could not foresee

you were ever going to pump all the oil
out of the ground in this part of Texas.

And they couldn't picture
ever running out of oil

because it was everywhere
and got on everything.

Off course now we realize that
you're going to deplete your supply,

sooner or later.

They're not making a lot
of dinosaurs anymore.

Oil is a magnet for war.

Oil starts wars.

The Sudan, for example, Darfur.

What everybody is treating as an
ethnic and a religious struggle

is infact, in part, a struggle about
major oil finds located in the south.

Which means that the government
in the north, a different

ethnic and religious makeup,
is displacing those people

and moving them out of the area
so that those oil revenues

belong to them.

Oil has always been associated with war.

Our very first wars, World
War I, World War II,

have very important elements of oil in them,

as a reason for the war, as
allowing the war to go on,

as a way of securing supply.

During World War II, which was the war
of engines, the continuous supply

of oil from Baku ensured the Russian
victory against the Germans.

During the 70s there were the
political problems, the war between

the Egyptians and the Israelis in
which the oil boycott took place.

Khomeini's revolution, we have
the Palestinian problems,

wars between Iraq and Iran...

First war that was absolutely
about oil was Saddam Hussein's

invasion of Kuwait which was
really about seizing an oil field.

Excellency, ladies and gentlemen,

Iraq oil is a giant that has been
kept dormant for so many, many years

This oil has been the least explored,

the least developed, and the least produced.

There are lots of people
who will tell you that

oil had nothing to do with the
war, if you go to Washington.

And we used to call it the
O-word that nobody would say.

But in fact, all evidence points
to the fact that the United States

which did not secure areas of
weapons of mass destruction,

but did in fact secure the oil fields.
The United States had plans

to bring in US companies in Iraq where they

have previously not been allowed to operate.

That there were maps of the oil fields
involved in the planning of the war,

that in 1998, long before the war
people were arguing for this

as the way of securing energy
supplies in the United States.

I can't get inside their heads to know all
of the rationale for going to war in Iraq

but there are many people who believe
at least a part of the reasons

for being there is the geopolitical
position of Iraq and the fact

that it's right in the
middle of world's oil patch.

The Iraqis wanted to get
rid of Saddam Hussein.

And they were happy that the Americans
helped, but look at what happened.

After Saddam Hussein,
there is no institutions,

there's no state, there's no army,
there's no real police force,

people are kidnapped, killed, decapitated...

There is no law, they made the
country stateless, without a state.

Instead of creating conditions for peace,

they are making conditions for conflict.

More and more oil is going to come
from less and less stable places.

Less and less secure places,
places that actually challenge

taking of oil in the first place.

Oil fuels war, it's a catalyst for war,

it is something that prolonges
war, it intensifies war,

this is not a pretty picture.

I suppose that the classification of reserves

depends on the motivations of the
person that's classified them.

Try to keep people guessing in
a way, keep them off balance.

Most numbers that you will see
around the world that lead

to these numbers that we
were talking about include

proven plus probable, and
sometimes even possible.

In fact, the public data is extremely
misleading and misunderstood,

OPEC exaggerated how much oil it's got
left, for all sorts of political reasons.

You know, this is an old story,

casting doubt on the numbers of reserves
in the Middle East, as published.

In 1985 Kuwait over night
added 50% to its reserves,

at that time the OPEC quota, that
is the amount of oil that each

of the OPEC countries could produce was based

on the reported reserves.

So the more you reported,
the more you could produce.

Two years later Venezuela doubled
its reserves over night,

and that caused the other
countries, finally Saudi Arabia

to announce enormous increases over night,

simply to protect their production quota.

And these numbers have not changed since.

And it's absolutely implausible
to imagine that the

number should stay the same, when
they're all the time producing.

I've asked them that same question.

You know, you produce 8 or 9
million barrels of oil a day,

and at the end of the year the
reserves are the same as they were

at the beginning, as the same
as they were 10 years ago,

they said "Well that's our plan."

You know, "We produce this oil,
then we prove up reserves to offset

the oil that we produced
during the year, so at

the beginning of the next year, our
reserves are exactly what they were

the year before."

Would you believe that or not? I don't
know, but that's what they say.

Their plan, that's the way it works.

OPEC countries do not care about
what might happen 20 years from now,

or 30 years or 40 years, they care
about what they get now today.

Because, these are politicians,
they want more money,

more money to spend.

Rationally or irationally, whatever
it is, but they have budgets.

And they became prisoners of their budget.

What may happen 20 years from now,

by that time they are dead. They don't care.

I'm afraid that we're gonna
run out of oil and gas

a lot sooner than lots of people think.

Well it appears to me that when it peaks,

that they've taken more than
half of it out of the ground.

Of course, as time goes
on they might find a way

to extract more of that oil than they do now.

They can extract it over a period
of time, but it's not necessarily

economically feasible, well it
might be at $50 a barrel or more.

But we're gonna come to time
when we don't have oil.

This is one of the, you know,

the obsession of many oil people and,

they say "Well, we will reach a point in which
oil production will not increase anymore

and we'll be equally peaking out."

And then it will decrease slowly. We are
here, we are near, we are not, nobody knows.

They tried to take the example of the
oil production in the United States.

The real saga of petroleum continues
at a greater pace than ever.

Down in Peru, in California,
Texas, Oklahoma, Pennsylvania.

Millions of workers, engineers,
geologists find new reserves,

build new rigs, sink new shafts.

US have been the largest oil producer
on Earth for almost a hundred years.

And nobody thought we'd ever peak.

The pump does not know when midnight comes.

Days are the same to it.

Each day, every day

it brings us another 24 hours of progress.

Building our nation, guarding its security,

assuring the future of America.

And many, if not all, oil geologists
thought that that was going forever.

Throughout this half century, Dr. Hubbert

has been a continuous
student of energy resources

and their implications in human affairs.

As long as 20 years ago, Dr. Hubbert was

pointing out to his colleagues
in the petroleum industry

that the United States would
probably reach its peak

of petroleum production
within 10 to 15 years.

He was virtually laughed out of his profession
for making such a ridiculous prediction.

The optimists back then
were saying "This is crazy,

we're finding 6 barrels of oil for
every barrel that we consume."

"We're never gonna run out or
peak, or anything like that."

He realized that oil discovery had
peaked in the 1930s and was declining.

And he could extrapolate that to figure out
how much oil there would be altogether.

The amount that you discover initially
starts out rising very rapidly

but after a while it slows down because
there's less of it to discover.

And eventually it will turn over and
come back down again like that.

Now the rate of production of
oil, extraction and use of oil

will be a second bell-shaped curve
and it comes necessarily later

that this, because you have to
discover it before you can produce it.

So it will be a second curve
like this, for production.

And it too will eventually go
to zero, and this peak here,

the peak in the production curve, is
what's referred to as Hubbert's peak.

If we have only produced about
50 billion barrels in 100 years,

and if we have 100 billion
barrels still to go...

I wonder how long will it be
before there's an oil shortage?

The US will hit the peak of oil production
in about 10 or 15 years from that date.

When 1970 came along, sure enough, it
happened just as he said it would.

It turns out that in December 1970

the US peaked at 10.2 million barrels a day,

and then oil prices went through the roof,

we went on a drilling
boom of epic proportion.

10 years later we were drilling
and completing 4.5 times

more oil wells than we were
doing back when we peaked,

and our domestic oil production
from the lower 48 and

the shallow waters of the intercontinetal
shelf had already declined

from 10.2 million barrels a day
to 6.9 million barrels a day.

It doesn't sound terribly
illogical for the living on

more oil consumed every year
than we found for 30 years.

I guess it's inevitable sooner or
later we were gonna reach that.

The last great frontiers
of new oil discoveries

turned out to be Alaska North Slope oil,

Siberian oil and the North Sea.

And those discoveries
happened in 1967, 68 and 69.

Finding oil in the North
Sea was a big surprise,

noone could reasonably have expected that.

Our famous Lady Thatcher came to power,

she said we want initiative
and enterprise and enthusiasm

and competition and all these things.
And, sure enough,

everybody went to produce oil
as fast as they knew how.

But there's a strange irony
relating to this subject,

that the better you do the job
of exploiting oil and gas

the sooner it is gone.

The British government now admits

that it becomes a net
importer next year, I think.

And that it's gone in 2020.
This is a huge change.

So to imagine that there's any well missed

as big as North Sea is just implausible.

As we look around the world
into other countries,

we see this same pattern being
repeated in one country after another.

Today there's about 58 countries
that are physically producing

less today than they have in the past.

The world has now been sufficiently explored

for the oil industry to know
now all the promising areas.

All the big promising areas
have been identified.

We're always a drill bat away,
from some fabulous new territory,

that's the great thing about exploration.
But, realistically

it's been a long, long period of time,

since we've actually discovered
a significant new basin.

I am hopeful and optimistic about the way

inovation, scientific
technology and oil engineers

can continue findind more oil.

I love hearing all these
economists say, well,

"Technology and ingenuity will
bring out all these changes."

And I say "Give me a break." I do
know oil field technology backwards

and forwards and the blackboard is dry.

And it took 30 to 35 years to
develop all of these great tools.

We already have fantastic
technology to find oil,

we have seismic surveys which
are of unbeliveable resolution,

you can see the smallest
formations in the Earth's crust.

We have very advanced
engineering to produce oil.

And all of these great tools that
ended up being great enhanched

production techniques, were
basically super-straws

just sucking the last easy oil out
of the ground at faster rates,

and to no extent significantly
increasing the amount of oil

that was gonna be produced
from a significant oil field.

That was all myth.

Some oil is cheap, easy, fast to
produce, others is the exact opposite.

There's a big difference
between producing oil from

free flowing well in the Middle
East that just comes roaring out,

and digging up a tar sand in Canada,

which is more or less a mining operation.

They are using more energy from natural gas

to produce the oil than they're getting
from oil shales and tar sands.

So that even the fact that people are saying
"Well, we're gonna tap the oil sands."

that right there tells you
that we're close to peaking.

Because you don't go to those areas,
unless you've used up all the good stuff.

2/3 of the oil reserves
are in the Middle East,

which mean basically the
Persian Gulf, and that's

10 times as much as any other source.

Right now, the only region of the world
that hasn't peaked is the Middle East.

Most of the serious projections
for 2030 envision the Middle East

producing 50-51 million barrels a day.

We know that Iran peaked at 6
million barrels a day back in 1978,

struggles to stay between 3 and
3.5 million barrels a day.

Kuwait struggles to keep their 2.5
million barrels a day intact,

they keep "Maybe we can add a
half million barrels a day,

maybe the UAE can add half a million
barrels a day." So to get there

you would have to have Saudi Arabia
be producing between 20 and 25

million, or even 30 million barrels a day.

Those days are long gone. You know,
up to 15 million barrels a day is now

their sort of new magic number
for 50, 75 or even a 100 years.

There are other powerful
voices within Saudi Arabia

that are clearly sending the message out

"12 million barrels a day? Yeah, that's
probably ok, but we really shouldn't

even think about producing
any more than that, ever."

They had an intense exploration
effort for the last 35 years

and with the exception of one field,
the Qatif Field, that's the only

significant exploration success
they had from 1967 through 2005.

If Saudi Arabia has now exceeded
their sustainable peak supply,

then I would argue with
some clarity that the World

has now exceeded sustainable peak supply.

When you reach the peak, you're
at the top of the mountain.

Sometimes, down the other side is

very, very gradual slide, and other times
down the other side is fairly stiff.

What really matters, and matters
enormously, is the view

that comes into sight on the other side
of this peak, when we see this long

relentless, remorseless decline
heading off into the valley.

Point is that the whole world has got
used to this growing side of the

mountain range, has to
face the opposite side.

We have moved now to the point in which

virtually everyone accepts
that there is a peak.

M. King Hubbert had predicted that
worldwide it should be occuring about the

turn of the century. That slipped a little
because of the Arab oil embargo and the

oil price spike highs and the
worldwide recession that

reduced the demand for
oil quite significantly.

And it's now pushed peak oil off till,
many people believe, about now.

We are coming to the end of the
first half of the age of oil.

During this 150 years,
we have seen the growth

of everything. Of industry,
transport, trade, agriculture.

We've seen an explosion
of the number of people.

All of this was made possible by the cheap,
abundant supply of oil based energy.

Demand is on the march, and
supply is flattening out.

You will have to supply, if
you want to meet the demand,

from the current level of 80
million barrels a day to a 120

millions barrels a day in year 2030.

But, in order to meet that profile,

you would have to add new oil in the
amount of 200 millions barrels a day.

Because a lot of that new oil will
have to go to compensate for depletion

of existing wells.

In the early 70s over half the globe
essentially didn't use any oil.

The only serious oil consumers were Europe,

not an awful a lot of
Japan, the United States,

Canada, and the former Soviet Union.

Africa didn't use any oil of any volume.

Middle East didn't use any oil. None of
Asia used any oil, and neither did Japan.

Today, Papua New Guinea hardly uses any oil.

There's probably a two or three islands in
the South Pacific that don't use any oil.

Everybody else is hooked on trying to
create a society that looks like us.

The demand for energy is rising faster
than was predicted even 5 years ago.

People all around the world can see
the way the developed countries live,

and how good life the
people have in those areas.

So they want to emulate us, they
want to be able to drive cars,

they wanna live in nice houses.
They wanna have air conditioning

and refrigeration. And why shouldn't they?

Demand for energy will only increase
as India's standard of living rises,

its economy becomes even
more diverse and dynamic,

and it continues to narrow the
gap with more developed nations.

China is not about to have a hard
landing, they're exponentially

expanding their need for energy.

And they're just getting started.

Most urban Chinese believe that
they will own a car within 5 years,

it is the fastest growing
automobile market on Earth.

Something like a third of them
already have driver's licences.

And so, the demand for oil
and for gasoline in China

is really going to take off.

Last year China increased their
importation of oil by 25%,

they're now the number 2
importer in the world.

They increased their use of
oil, I read a figure of 14.7%.

But that's very consistent with an
economy that's growing at 10% a year and

by the way, at 10% growth
rate it doubles in 7 years,

4 times bigger in 14 years and they're
requiring more and more energy.

China and India are kind of
getting to the party when the

glass is literally half empty, at this point.

So, they're gonna have to fight with
the rest of us to get what's left.

Well, the Hummer, I believe
is more of a status symbol.

Where, you know, "Look at me, look at me."

"I can afford the Hummer,
I'm driving the best."

You're going to get somewhere around 10
miles per gallon, constant on the road.

That's either highway or city driving.

6.0 liter, 325 horse power at
380 foot-pounds of torque.

Well, we are a role model
whether we like it or not,

we use 25% of the world's oil.

We're only 1 person in 22, we have
only 2% of the known reserves of oil.

We are prohibitive users of energy.

But we'll go on doing that so long as
we are rich and the energy is cheap.

We pay more for bottle of drinking
water than we go for gasoline.

Gasoline is just about the cheapest
liquid you can buy in the United States,

and as long as that's true, Americans
are not going to be concerned.

Service that is tops, and
gas that's extra fine

there's a smile for every
mile at the Esso sun.

E - s - s - o - makes - your - car - gooo.
Happy motoring!

In America we right now think... People
are having their eyes gouged out

paying $3.20 for a gallon of gasoline.
That's 20 cents a cup.

And 20 cents a cup sound pretty trivial
but if you have a passenger car,

average american passenger car,
you can get 1 to 6 people in it

throw a bunch of stuff in the trunk,

go a mile and a half in
20 minutes, for 20 cents.

Now if you don't have gasoline,

and you try to bargain with a
guy with a horse driven car

or someone coming by with a bicycle or maybe
you're lucky enough to have a rikshaw.

"Excuse me, would any of you like to
take me and my friends a mile and a half

for 20 cents?" Those
people would laugh at you.

So, I would think that we would
need to get oil prices up to

you know, $5 a cup, some number
that starts to equate with

what we actually spend readily on a
lot of things that are nearly as

valuable and also are non-renewable.

People in third world countries
cannot understand why, for instance

the Europeans try their best in
conservation measures and taxation measures

and the Americans are not doing it.

Not one in fifty, not one in a
hundred of the people in our country

have any inkling of the potential
problem that we're facing.

If we wait until peak oil to start
making the transition, there will be

very serious economic consequences.
If we anticipated by 10 years

there would be meaningful
economic consequences.

To have no economic consequences, you
need to anticipate it by 20 years.

I'm almost dead certain
we don't have 20 years,

I don't think we have 10 years, I
think we're pretty much there.

Thank you all for coming, please be seated.

Lay the facts out for everybody to see.

I don't think that people in
positions to tell the public

about it from an official standpoint

have been totally honest
with us about the problem.

The person who will win an election
is somebody who can most persuasively

lie to the population, which is
tell them what they wanna hear.

Which is that the future's gonna
be great, just follow me.

If our energy resources
are properly developed,

they can fulfill our energy
requirement for centuries to come.

What is needed now is decisive and
responsible action to increase

our energy supplies. Action which takes
into account the needs of our economy,

of our environment, and
of our national security.

In Ancient Greece, the person who
brought bad news was executed,

and politicians who bring bad news
frequently are not reelected.

Our political system is just
controlled by major corporations.

The steps we need to take to reasonably
address this, in some type of rational way

require downscaling.

So if you are the CEO of a big company
are you gonna contribute money

to the politician who says "Hey,
I wanna slow down the economy."

"I wanna sell fewer cars."

Obviously, more people will drive less,
and that will cause people to...

The cars won't need to be maintained as much.

That will shrink the automotive
manufacturing sector, which will

shrink the entire economy.
Nobody's gonna vote for that.

I don't even know if I'd vote for that.

More than any other country in the
world, America is a nation on wheels.

The automobile and the power behind it

have been major factors in
the growth of our country.

We can drive anywhere we want to,
at any time, for any reason,

including fun.

We're in some ways a
victim of our own success.

Suburbia is in a lot of trouble because
the whole model of suburbia is

you commute 30, 40, 50 miles
to your job and back.

And that's only viable so long as you've
got relatively cheap oil and gas.

It's not just that the country is
spread out, we've evolved our cities

for the use of cars. The cities will
have to be rebuilt from scratch

practically to have more efficient
and usable public transportation.

This is quite different from the
cities in Europe which were already

basically in place before
the car was invented.

So, yes, it's going to be a terrible
blow to the United States when we

no longer have the oil that we love so much.

What we avoided so long and the three things
that we need are now in very short supply.

One of them is money and in our country
we don't worry about money, we just

borrow it from our kids and our
grandkids and accumulating a debt.

But the other two things we can't
borrow from our kids and our

grandkids, and that's time and energy.

In order to make energy available
to invest and buy time

we have to have a very
vigorous conservation program.

Since the US uses the fourth of all the
world's oil, we clearly need to lead there.

I believe that our American
people have a great spirit of

entrepeneurship and patriotism,
if they really knew what the

problem was, that they would be very
responsive in doing what I think

are the necessary things to get
ourselves to the other side

with as few bumps as possible.

If you tell the Americans "There's
a brand new hydrogen powered car

that you can go and buy instead of
your car." They'll say "OK, great."

And they'll go buy it. But if you tell
them they're gonna have to use a bicycle,

that's the type of adaptation
that they have to make.

People aren't willing to do it.

Sunday, July 20th, 1969.

Around the world, nearly a billion
people watch this moment on television

as the first man from Earth
prepared to set foot upon the Moon.

If the president of the United
States, as JFK said in the 1960

"We will put a man on the Moon
in this decade.", and we did

an enormous technical challenge
to do that, but we did it.

If a president of the United States
said "I challenge our scientists

and engineers to teach us how to kick
the fossil fuel habit in a decade.",

I think it could be done.

Well the problem that we're
facing is probably more like

colonizing Pluto, than
putting the man on the Moon.

If JFK had said "We're gonna
have a 100 thousand people

living in three-bedroom houses
on Pluto in ten years.",

well obviously we would not have
been able to accomplish it.

In the last 40 years, the Bush administration
is the administration that has

the closest connections with
oil companies themselves.

And it is the the administration
that has most greatly married

energy security with national
security and the US foreign policy.

When you have only 2% of the
known reserves of oil and

use 25% of the world's oil and
import 2/3 of what you use,

that has to affect your foreign policy.

They believe that the way
to secure oil supplies

that would in fact get the support
of the American people and

create a more stable world is
to democratize the Middle East.

They believe that this issue of
promoting democracy to the Middle East

is a way of actually securing oil supplies.

East and West are united in pioneering
a new frontier of progress.

Serving the interest of the Saudi Arabs,
serving the interest of the United States,

and demonstrating the vitality of the
American system of free enterprise.

A system, which from this new frontier

is pumping into the trade of the world oil,

one of the materials that is
making a truly great contribution

to our modern civilisation.

The basis of our foreign policy in
the United States from 1945 to today

was essentially an exchange of
secure, cheap, reliable oil

to the United States in return for protection

for the governing rulers of Saudi Arabia.

That exchange is in fact threatened.

10, 15 years ago the per capita income
in the country was about $28000,

today it's $6000. There has been a huge drop

in the standard of living
of the average Saudi.

Saudi Arabia has got a very young population,

a lot of people coming on to the
labor market, not the jobs for them

and the sense they don't feel that they
are the stakeholders in the society,

They feel alienated.

There are lots of tensions between the
oligarchy which rules the country

and the population which inhabits
the country and many people think

within the fundamentalist movement that the

regime, the goverment of Saudi
Arabia is totally corrupt,

that it is basically selling the
oil to the West, and the West

is arming the regime, and the regime uses
the guns against its own population.

The fundamentalist movement
is strong and it's dangerous.

No doubt that some of these
people who are making

problems in Iraq and committing terorrist
chastises are actually Saudis.

This is a formula for real
conflict, this is a formula

for a country that is on the way

to some very very dangerous outcomes.

The stability of Saudi Arabia over the
long run is in fact questionable.

If their kingdom was to fall
apart, it's very unlikely that

the United States, particularly, would
simply stand by and let it fall apart,

given its significance as
an oil exporting country.

We would see certainly the
US intervention, despite

all the lessons and the problems
that have been associated with Iraq.

One thing that many people, me included,
fear is that when this happens

we will simply go and take by force
of arms the oil that we need.

And that will make us into
a very different country

and the world into a very different world.

We're looking at, essentially,
a generation long,

multigenerational resource wars.

Ultimately, there really
are only two options.

One is to militarize the
taking of oil, which means to

get your population to understand
that if they want to continue

to drive SUV's and have the cars and
consume energy in the way they are,

that they will be in war after war.

The other position is to begin to
prepare for what we all see coming,

which is an end to the era of cheap oil,

and to invest in alternative
technologies for energy

that are cleaner, safer, and
have less detrimental effects

on the political and social makeup of
oil exporting countries themselves.

For a century we didn't spend a nanosecond

actually really taxing ourselves as
to could we ever actually come up

with a replacement for oil and natural gas.

Natural resources can become depleted

but human creativity is inextiguishable

I believe that once oil depletes,
the genious of humankind

will invent alternative sources
of nutrition and fuel.

The Stone Age ended not
because we ran out of stones,

we moved from the horse to the automobile
not because we ran out of hay.

I don't dismiss the ingenuity of man.

The step that we are embarking
on today is the hybrid electric

automobile, which has both an
internal combustion engine

and an electric motor.

I drive a Prius car, it gets 45 miles
per gallon, if gas were $10 a gallon

I could still fill a tank and go 500
miles on it, and that's not too bad.

Well, even if you waved the
magic wand and hybridized

every car on the road right
now, we'd still be consuming

the same amount of gasoline that
we are now, in about 5 or 7 years.

Because, again, with each passing
year the economy grows, and we

have to consume more and more oil.

We have very big challenges
to face in this century.

This is a planet that has 6
billion people on it now, perhaps

9 billion people by the end of the century.

The problem is enormous, 14
terawatts of energy we need

by 2050, we need a new
source of that much energy.

That's the equivalent of 220
million barrels of oil, per day.

We've got 700 million internal combustion

engines running around
the roads of the world.

Again, we're talking about the scale

and we are thinking about what does it take

to really replace fossil
fuels for transportation.

The big one, of course, which is
hydrogen, that's the one that's gonna

do the trick and replace oil, eventually.

Well, the hydrogen economy
is conceptually a good idea.

If you look in reality,
it has major challenges.

The problem also for industry is
sort of a chicken and an egg thing.

Industry is reluctant to
really invest heavily into

fuel cell technology, because
there's no hydrogen infrastructure

to deliver and produce cheaply hydrogen.
On the other hand

this infrastructure is not in place
because there's no demand for hydrogen.

So how do you get this started?
And both again

need substantial breakthroughs in technology,

fuel cell technology, hydrogen
production technology,

transportation of hydrogen
and storage of hydrogen,

fundamentally unresolved issues.

The economics right now are
that we use the equivalent

of 3 to 6 gallons of gasoline
to make enough hydrogen to

drive a car the same distance that 1
gallon of gasoline would drive it.

So, the hydrogen economy at
this point makes no sense.

If you talk about hydrogen, it
may take at least 40 years.

Easily 30 to 50 years. Easily.

The principal drawback to biomass is
that it's generally pretty inefficient.

A couple of pretty respected
scientists in our country believe that

if you look at all of the energy
inputs in the producing ethanol

you put more fossil fuel into producing
the ethanol than the energy you get out.

The quantities that could be
made available from ethanol

and biodiesel are very very
small, and would replace

only a small percentage of the
fuels that we consume today.

Even if you took the biodiesel
production, scaled it up to the maximum,

and that scaled that up another ten
times, you're still talking about

a drop in the bucket compared
to what we get from oil.

How much of our food acreage are
we gonna convert to growing fuel?

How much world hunger can we stand
if that's the fuel of choice?

Nuclear energy will be expensive,
and the experience that

we have gathered over the last 20, 30,
40 years in terms of safe storage of

materials, especially in Europe where
there's much more discussion about

how to treat the waste and
what to do with that.

This needs to be rethought.

People are nervous about the
risk of an explosion or a

nuclear event of some sort and then
there's a danger of terrorist activity.

If you wanted to build enough to replace
all the fossil fuels that we burn

worldwide today, which is 10 terawatts,
you would have to build 10 thousand

of the biggest possible nuclear plants.
And if you did that

and burn U-235 in them, the
worldwide reserves of uranium would

be exhausted in somewhere
between one and two decades.

So, it would be a bridge, at best.

Wind energy is becoming more
popular and economically viable,

but because of its intermittency and
low power density, it will never

contribute more than a small
fraction of our energy supply.

When you talk about wind or solar energy...
these are very small.

- Oh, yeah, I see it's started.
- Can we turn that on a little bit more?

- There it goes.
- OK.

So here, this is actually artificial light,
but in sunshine it does the same thing,

and so this little machine is converting
light directly into electric power.

It will convert 10 or 12% of sunlight
directly into electric power.

We have the technology right
now, we know how to do it.

We wont build big power plants
tomorrow morning, but we know how.

It takes a lot of development and so
on, but we know how to do it now.

Total amount of sunlight
that falls on the planet

is 20000 times the amount of
fossil fuel power we're using now.

So we are awash in sunlight, there's
plenty of energy from sunlight,

we just haven't begun to learn
how to use it properly.

The real barrier to implementing
solar electricity now is its cost.

To generate the same amount of
power we now use in fossil fuel

you'd have to cover land area roughy half
the size of the state of California.

All of the solar cells made in
the world up till now probably

would only cover about 10 square
kilometers, it's a tiny fraction of it, so

not impossible, not unthinkable, but
really a huge technological challenge.

We've got to look at all
of these sources of energy

and if you add them all together,
you must be very optimistic about

each of these sources to believe
that we can produce anything like

the quantity and quality of energy
that we're getting from fossil fuels.

Our worldwide demand now is
somewhere between 25 and 30

billion barrels a year and it's
increasing at an alarming rate.

And that's really where the problem
is, the demand is so huge,

there is nothing that we can imagine
to replace oil in those quantities.

There are lots of ideas around, and
the ideas are just vapour until

somebody actually tries them and
shows that they either work and

have side effects or don't have side
effects or don't work or whatever.

That's called research and that's
exactly what we're not doing.

You can't undo where you are, so...

Evolution is always forwards,
we're never going backwards, so

we will never be back to the
farm because evolution just went

into different way, so we basically just
have to adapt to the new conditions.

It's very unlikely that once we've run
down the other side of Hubbert's peak

that we're going to be able to
maintain the kind of lifestyles

that we're now maintaining.
This oil is so cheap,

it's so readily available, there was just
such an enormous temptation to exploit this

and to set up a quality of lifestyle
that will be impossible to maintain.

There is something about the
horse that has an appeal

that the automobile doesn't. The
horse is a living thing and it's...

Often times between an owner and a horse

a certain amount of affection develops.

We're going about 9 miles an hour right now.

We had a kind of a trial run for
what would happen when oil peaks.

No gas. - No gasoline? - No.

There was a temporary peak in 1973.
Middle East and OPEC countries

were angry about the 1973 war in
Israel and they embargoed the oil.

And we immediately had panicked
toward the future of our way of life

and made mile long lines at gas stations.

In the future, things like driving
cars and air travel period

will be not something that the
average person can afford

but something that's only available
to the super-elite, the 1/10 of 1%.

About the graduate student that came
to see me and he said "Tell me,

will my grandchildren ever
ride in an airplane?"

It was a ripping question because
the answer might very well be "No."

And the air travel will essentially stop.

Many people tend to think that it was
money that made the world go round,

when in reality it was the underlying supply

of cheap energy, much of it coming from oil.

You end up with asking "What is more
real, is it the financial market,

or is it the oil supply in the ground?"

And everybody will come to the
conclusion what is more real,

is the oil supply in the ground. The
financial system is a system full of

petrodollars and if you take
them out it's bound to shrink.

There isn't a company quoted
on the stock exchange

that doesn't tacitly assume a business
as usual supply of cheap oil.

Well, that isn't there anymore, that
means that virtually every company

is overvalued on the stock exchange.
And as the financial community

recognizes this, well that might
trigger some kind of overreaction

and stock market collapse.
I think it's very likely.

I wouldn't be surprised, personally,
if it doesn't trigger another

Great Depression comparable to the
one of the 1930s if not worse,

because this one is imposed by nature
rather than being a speculative bubble.

I've taken this timespan here from 5000
years ago to 5000 years in the future.

What we call recorded history
began about 5000 years ago.

So, what this shows is that this spike
here is the episode of the fossil fuels,

coal, oil and natural gas, and every other
kind of fossil fuel in human history.

It's the most disturbing thing that's
ever happened to human species.

It's responsible for our
technological society and

and in terms of human history
is a very brief epoch.

At the time of Christ there were about
300 million people on the planet.

Which had about doubled by the end
of 18th century, when coal came on,

then came good old oil and suddenly
the population went up 6 times.

I don't think that we could sustain
the present population of the globe,

much less what it will be in 20 or 30 years,

without the use of petrochemicals.

Does it mean we have got
to go back to a population

not much different than
what it was before oil?

In the absence of fossil fuels, how
many people can the world support?

Many people believe maybe
1.5, 2 billion people.

You don't often hope you're
wrong, I really hope I'm wrong,

everybody I know who's concerned
about peak oil hopes they're wrong.

I don't think I'm wrong, I
don't think they're wrong.

We are facing some sort of
unprecedented, unparallaled situation,

and that explains why it is so
difficult for one to really

accept it, one thinks there's
got to be a solution.

It's somehow contrary to our mindset
to think about these things,

we just don't like to do it, we've
gotten used to the filling station

that has been there for as
long as we can remember, and

normal people say "Well it's
gonna be there into the future."

It's very hard. And it's doubly hard because
it really has never happened before.

It's a strange issue of mindset and
attitude and experience and behaviour that

somehow leaves us so
unprepared for this situation.

We identify as species called
hydrocarbon mammal who lives

on the strength of all of this oil,
well his days are definitely numbered.

Whether modern kind of homo
sapiens as a species altogether

will carry on living some
different, simple way,

that's another question.

Right now we don't have the kind of
political leadership, not only we in US,

the whole world doesn't have the kind of
political leadership that would make us

aware of this problem and
do something about it.

There's little hope for the
politicians taking the lead in this

'couse it's difficult in
government for people to...

It's much easier for a politician to
react to a crisis when it's happened,

than to take steps to prepare for it.

It's only about the public that calls their
representatives and Congress and says

"You must do something and we
are prepared to support you

in whatever you'll take." You
don't have those telephone calls

being made today.