 I first encountered the name Ken DeFeis in a book called Basin and Range by John McPhee. As part of a larger project entitled Anals of the Former World, McPhee, a well-known writer for the New Yorker, chronicles a personal geological field excursion across the basin and range area of Nevada accompanied by DeFeis. DeFeis, then a professor at geology, serves as guide, mentor, and friend as McPhee spins some gorgeous prose glorifying the wonders and beauty of geology. DeFeis roots are in the oil patch of Oklahoma, son of a pioneering petroleum engineer. He also has some Chickasaw blood on his mother's side. Growing up in a petroleum family, meant a vagabond existence, and Ken attended nine grade schools through the eighth grade. Ken lived in his high school years in Casper, Wyoming, where he began to develop an interest in geology while poking around the local hills. As a sign of his eclectic interest, Ken took up skiing, won first prize in lapidary work at the Wyoming State Fair, and danced the lead role of the Chippewa Feather Dance also at the Wyoming State Fair. During summers of his high school oncology years, Ken worked a variety of jobs in the oil industry, including lab assistant, pipe yard worker, Roustabout, and seismic crew. In graduation from high school, Ken enrolled at this Colorado School of Mines, majoring in petroleum, geology, lettering, and downhill ski racing. He won an award for undergraduate work in chemistry. His senior year, he was offered a job with Shell, however his career at Shell was rudely interrupted by a draft notice at the end of the Korean War. Ken entered the army and was assigned to a unit that produced topographic maps. For revenge on Uncle Sam, Ken decided to use his GI Bill to attend graduate school at the most expensive place he could find. He chose Princeton, where he was accepted into the masters program in geological engineering. To fill a gap in his undergraduate work, Ken took a course in sedimentology, became his career, and eventually received his PhD from Princeton. In the fall of 1958, Ken rejoined Shell at its research laboratory in Houston. The Shell lab at the time was state of the art. Among its staff of geologists, geophysicists, and petroleum engineers, lab also employed physicists, chemists, and mathematicians, all eager to collaborate on geological problems. Ken points out it is rare in academia to get this kind of group together all working on common problems. That's sort of like a geological version of the Bell Labs that Steven Chu talked about this morning. Among the head honchos of the lab when DeFace was there was the formidable and curmudgeonly M. King Hubbard. DeFace actually got along with Hubbard and struck up a lifelong friendship. 1956, Hubbard, basing an analysis of oil as a finite resource, predicted that U.S. oil production would begin to decline in the early 1970s. At the time that analysis was rejected by nearly everyone in the industry. Hubbard retired from Shell in 1964, proceeded to join the U.S. geological survey staying on for another dozen years. During that period, he reworked and refined that analysis concluding that oil production history essentially followed a bell curve peaking about 1970. In hindsight, it turns out that Hubbard nailed it. The challenge for him and more recently DeFace was to use similar methods to predict the peak of world petroleum production. Actually had the opportunity as a first year graduate student to hear Hubbard speak in either late 1970 or early 1971. Of course, he predicted that oil production should be peaking about right then. We obviously had to wait a few years to know for sure. The Arab oil embargo in 1973 brought that into shocking focus. Well, Hubbard is more readily known. I have to digress for a moment because Hubbard is more readily known to the world at yard large for that prediction. He's also already very well known to structural geologists for a couple of landmark papers authored during earlier work at Shell. Especially those that helped unlock the mysteries of faults. I remember reading a couple of those papers in graduate school having to wade through some pretty daunting mathematics. While today's students of structural geology may not remember the details, they do recall the use, his use of an empty beer can and experiment to demonstrate how a certain type of fault called thrust faults actually work. Imagine a large slab of the Earth's crust, about a kilometer thick, forced to slide up an incline. When taking into account the mass of the slab, an application of some basic physics showed that the forces necessary should have exceeded the crushing strength of the rock. Those thrust faults should not exist, yet they do. Some large blocks such as those present in the Canadian Rockies and the Alps have moved considerable distances, some over 50 kilometers. Hubbard, with co-author Jack Ruby also of Shell Lab, knowing that drillers in the Gulf Coast occasionally encountered abnormally high fluid pressures in the sediments they drilled through, showed that if poor fluid pressures were considered, stresses needed to move the block up the ramp will reduce considerably. Well, I won't go into the details of the experiment. What students tend to remember is the empty beer can. How do you get an empty beer can? And the notion that in the interest of good science, the experiment should be reproducible. Ken only stayed on at Shell for four years in part because he bought into Hubbard's prediction of an impending oil decline and feared he might be facing a declining industry by retirement time. He took a job at the University of Minnesota, but decided shortly thereafter to escape Minnesota winters in order to work with the former Shell colleague at Oregon State, Ken joined Princeton faculty in 1967. This was a time when plate tectonics was just beginning to emerge. And plate tectonic all stars like Harry Hess, Fred Vine and Jason Morgan were members of the Princeton faculty. An exciting time to be part of that. Ken collaborated with two colleagues to write the first introductory geology textbook that was organized around plate tectonics. Ken has published numerous papers and other works in a variety of topics related to sedimentary rocks. Since retirement, Ken has published Hubbard's Peak, 2001 and more recently Beyond Oil, The View from Hubbard's Peak. He has consulted widely within the oil industry. He has visited nearly all corners of the world in his research consulting and teaching. Though later this year he's going on a family trip to the big island of Hawaii, his first trip there. But that makes sense in context. There are no sedimentary rocks in Hawaii, hence no oil. Although I only met Ken yesterday, I can tell that he's a gifted and devoted teacher. I saw it yesterday when he warmly took an interest in his student posts, eagerly offering professorial advice. He's well regarded for his introductory geology course at Princeton. He's one of the founders of a freshman seminar program at Princeton, developing its longest running course, at least until he retired. One that gave first year students the opportunity to study geology in the field by taking a fall break field trip to the Mammoth Lakes area in California. When Ken retired in 1997, he became the program's cook. His cookbook is on his website. Check it out. Ken is a rare breed among modern geologists and probably scientists in general. In today's world, specialists in one subdiscipline can barely talk to a specialist in another. Ken can talk with ease with igneous patrologists, mineralogists and x-ray crystallographers. He is currently working on a book with his son, computerizing atomic structural models, first worked out by Linus Pauling. Ken was talking advanced mathematics last night at dinner with her students. I've told you more than you probably wanted to know about Ken, and I hope I haven't embarrassed him in doing so. But I needed to give you a flavor. He's an interesting man. I hope you find him interesting as well. Please join me in welcoming Ken to phase. We'll speak to you on peak oil here now. This first slide, which you've been seeing, is how you make an author feel bad. That's my 40,000 word book reduced to a coffee mug. I need to preface this by saying two things. I just had the pleasure of having lunch with Walter Youngquist, who started on this quest long before I did. So you can consider this an imitation of Walter Youngquist lecture. The other one concerns a little bit of history. I hope you all know that Alfred Nobel was a major investor in early Russian oil production. Now if somebody wants to do an interesting term paper, try to find out whether he earned more money in the oil business than he did from making safe explosives. And if you do it, email me a copy at DeFay's at Princeton EDU. I think it's interesting. We're facing the problem that we may go through this presidential election without any of the major candidates or minor candidates mentioning this oil crisis that's upon us. People are getting the word. This was Durham, North Carolina, a hybrid gasoline electric automobile with a peak oil license plate. Word is getting around, but it's not getting around very rapidly. And part of my message is that these things are going to happen fairly quickly. And I shuttered a couple of times this morning when we'll have this working in 10 years. Unfortunately, it was quoted once as saying, in 10 years we're going to be back on the Stone Age, which was exaggerating for effect. But when I first retired, I realized that this problem was coming up and my ambition was to own some oil in the ground. I thought it was going to be very profitable. And I talked about 30 different investors about acquiring some shallow oil fields in eastern Oklahoma, eastern Kansas. And all 30 of them, well-informed people, turned me down. And I began to realize, I've got to get the word out. People are not paying attention to this, even though I had given them stuff that had been in nature, Scientific America, one of the papers by Walter Youngquist. And they didn't believe it. I said, oh no, there's a huge sales pitch that needs to be made. And in my first book, I included M. King Hubbard's original 1956 graph of what he thought the US oil production was going to do. And I added the black dots, which is what actually happened. And the peak single year was 1970. And about 1976, Prudeau Bay, Alaska kicks in, biggest oil field ever discovered in the United States. And it wasn't big enough to get us back up to the 1970 peak. So the message is, even big, big oil fields don't turn around a major province. My second book, 2006, has a chapter each on things that might happen, other energy sources that come from the earth. And in it, I used a technique that Hubbard published in his last major paper. And this was 1982. Hubbard was then 79 years old, a stage I now call mid-career. And he used this graph, which is a rather curious one but typical of Hubbard. He didn't mention that population biologists had been using this graph for 10 years before him. On the vertical axis is the annual production divided by the cumulative production up to that year. And the horizontal axis is the cumulative production. And this racket, Q, stands for cumulative. And you'll notice that after 1958, it settles down to a pretty good straight line. So in the next graph, with your permission, my computer and I draw the best fitting straight line from 1958 onwards. Doesn't look bad at all. Now, Hubbard's 1982 paper contains pages of differential equations explaining his theory. And one of the nice things about being retired, I'm not any good at math, but if you do it slow enough, I can figure out, OK, that's the first equation. Oh, now I see how he got the second equation. Time for a nap. And I gradually worked my way through it. And when writing the second book, I discovered that instead of going from A to B in pages of differential equations, I could cover the same ground from B to A, get the same answer in three lines of high school algebra. So here are the three lines of high school algebra. The first, you'll just recognize, is the equation of a straight line. On the second line, I go through and substitute what's on this graph, why the vertical axis is P over Q. A is the intercept, the P over Q at the beginning. And Q sub T is the horizontal intercept. Now, you can make two things out of Q sub T. It's either the total cumulative amount of oil produced when the last well runs dry, or you could say, oh, it's just the geometrical point where the straight line hits the axis. But whichever, it's an algebraic thing. We put it in the equation as Q sub T. And so the second equation is just the equation of a straight line on this graph. The third equation, I go through and multiply both sides by Q, and that's the Hubbard theory. Now, the magic is inside the parenthesis. That's the fraction of oil that hasn't been produced yet. Or if you're exploring, it's a fraction of oil that hasn't been discovered yet. And that is a simple enough assumption. The analogy is to a fishing pond. I go to my favorite pond, and I catch fish. But a few months later, I notice I'm not catching as many fish. Now, I can decide one of two things. Either I need some new technology, and I'll go to the fishing tackle store and buy a very expensive fly rod. Or I've caught most of the fish. I'm going to go to the grocery store and buy fish. And this is the question, as the fishing gets difficult, is it because you've caught most of the fish? And it's just sinking in to some of the major oil companies that you've caught most of the fish. Now, there are two other byproducts. One is that if that statement is true, that the ease of finding oil depends on the fraction of oil that hasn't been found yet, the curve is bilaterally symmetrical. The upside is the mirror image of the downside. Now, a lot of people criticize, oh, you've got to prove that somewhere else. Well, the proof is here. If it's a straight line on this graph, it's a bell shaped symmetrical about the center point. The other byproduct is that the center point by symmetry is when half the oil has been found or half the oil has been produced. And the little plus signs on these graphs are the midpoint, the halfway point. Now, Hubbard himself did take a shot at the world oil production. And this is 1968. And he predicted the more optimistic curve of the peaks of the year 2000, and he has 2,100 billion barrel eventual recovery. Now, I claim, he'll see in a moment, it actually peaked in 2005, not 2000. And instead of 2,100 with the latest data, I have now 2.013 instead of 2.100. Now, a lot of critics have said, see, 2000 came and went, it didn't peak. Hubbard is wrong. For 1968, this is pretty good shooting to get to within five years of the correct peak and within a few percent of the total amount of oil. Now, when I do this for the world, which was the whole point of the exercise, I make the same graph, P over Q versus Q, and put the world data on it. It settles down to a pretty good straight line. And the last dot, which in this case is the 2006 dot, it's beyond the plus mark. Now, the US Energy Information Agency data, which is monthly, currently has the two months of highest world oil production in May of 2005 and December 2005, and it's been down ever since. And you could go through country after country of saying, oh, oh, oh, oh, oh, oh. You know, they're beyond their peak and only a few countries are close to their peak. And it looks for all the world as if, all the world looks as if the world has passed its peak. So my claim is I'm no longer a prophet. I'm now a historian. I'm looking back at the peak. Now, one by one, these things come in. Now, here's March 6, 2003, came across the Dow Jones Newswire that the Saudi government and Saudi Aramco told the oil companies and Western governments that they were maxed out at 9.2 million barrels a day. For a few months off and on, since that date, they've gotten up to 9.5 billion barrels a day, but no big rush of production. And the strange thing is, March 6, I carefully read through my New York Times for the next couple of days, this story didn't appear. So I tiptoed out and bought the Wall Street Journal. I'm a registered Democrat. I tiptoed out and bought the Wall Street Journal and when nobody was looking, read it for two days because Dow Jones is the Wall Street Journal. No mention. And here, this is the biggest story since the Industrial Revolution, the war who runs out of cheap fossil fuels. And no mention. So this is a very refractory story to get the word out. Matthew Simmons, who heads Simmons International, the largest merchant bank in the oil industry, was loaning money out first oil service companies into oil companies. And he decided he better understand this stuff and he became his second career and he was invited to go on a trip to Saudi Arabia. Came back saying something didn't quite make sense and he discovered that he could download 200 papers, technical papers that had been published by Saudi Aramco engineers in the Journal of Petroleum Technology and he sorted it all out and concluded that they were essentially at their peak at the time he wrote this book two years ago. Here next door from Kuwait, the Bergan field, the second biggest field in the world and it looks like Bergan peaked out. So these places that we had counted on that had the elephants, the giant oil fields, one by one, these things are peaking out on us. Now, part of the problem has been that both the Geological Survey and Daniel Jurgen and his company CERA, Cambridge Energy Research Associates, keeps coming up with glorious big numbers and ExxonMobil has a set of very optimistic future predictions and so I put on my graph what Daniel Jurgen said would happen in the next five years and this thing has to take away from the straight line and turn into an exponential growth phase which needless to say hasn't been happening but as long as there are some reputable people out there saying that oh no, don't worry about it, maybe our grandchildren might worry about it. So I got a peak of 2030. This tends to dampen the political discussion. Now, here's the worst of all the news and instead of talking about the year that the oil was produced, I'm now talking about the year that the oil field had its first well. And the, oh, there's, sorry, on the far left hand part of the graph, several of the Middle Eastern fields are so huge that they're way off the paper but the last big one in 1964 was Cantorrell, offshore Mexico and it goes so far down towards the axis that there's not much fiddly left to do with where that straight line is gonna hit the axis. That's where I got 2013 but the US Geological Survey way over in the far right there has got 3,000 trillion barrels, sorry, 2,000 billion barrels that were published in the year 2000. Sorry, 3,000 billion barrels published in the year 2000 and I've got 2013 trillion barrels as the sum of all the discoveries. Now, I'm not the most pessimistic, I found this in a checkout line at the grocery store. One of the things that emerged was, Hubbard could make mistakes and he did make this conceptual mistake. He used the phrase discoveries, which I've avoided up to this point, to mean the total amount of oil produced plus the known reserves in the ground as of that same year. Now, as Shell Oil learned to their great dismay and to a lot of investors dismay, annotating how much oil is in existing oil fields is very difficult and this is illustrated by a joke that was told at the Colorado School of Mines. The Shell was there to interview a geologist, a geophysicist and a petroleum engineer and the question that they were asked, each of them was asked, what's three times three? And the geologist thinks for a while, says it's probably more than eight, probably less than 12, needs more study. And the geophysicist punches it into a calculator and says 8.99999 and whether they asked the petroleum engineer, he jumps up, locks the door, closes the blinds, unplugged the telephone and says, what do you want it to be? So you have to watch the reserve numbers very carefully as to what they actually mean. But the mistake that Herbert made was that he thought the discovery curve was just the production curve shifted earlier by 20 years in the case of world oil. Well, hey, wait a minute, they all began at the same time. Edwin Drake, who actually was an unemployed New Haven streetcar conductor, was sent by the Yale faculty out to drill as well in Pennsylvania and they drilled down to 79 feet and they came out the next morning and the hole was filling with oil. Did Drake say to the driller, oh good, we'll wait 20 years before we produce this puppy so we don't mess up Herbert's theory? Well, of course not. They started producing right away so that hits the finding of new oil fields, production of discoveries all begin at the same time. They all have to have the same area under the curve because we're talking the same oil and as a result the width of the curves gets bigger as you go from hits to discoveries to production. But when I put these in cumulative form, add them up from the left-hand side, an interesting thing emerges. The graph I showed earlier about hits said that the total amount of oil found already is 94% of all the oil we're ever gonna find. And so that last 6%, I've labeled here as exploration, grassroots exploration, I'm looking for it. But in between the discoveries, that's production plus known reserves and exploration is a big thing there that I've labeled for my friend Bob Snyder who pioneered going back into older oil fields that were drilled and mauged in 1920, 1930, 1940. Sombra Jay's been making resistivity logs since the early 1920s. And you can imagine the boss saying in under the economics and technology of 1925, oh, this is nice high resistivity, we'll produce that. Ah, this might be water, forget that. Oh, here's another nice high resistivity zone. Well, Snyder would come along, look back at the old logs that said, hey, those intermediate resistivity things, and there's a calculation that you can do. It was a calculation that was invented by Gus Archie. And none of us knew until we read his obituary that he was Gustavus Archie from Wisconsin. So Gus Archie's equation tells you how to calculate the percentage saturation with oil. And Snyder, doing this very carefully, bought 34 oil fields in the Texas Gulf Coast in West Texas, just in those two limited areas, found several hundred million barrels of additional oil at a finding cost of $2.50 a barrel, and he had a 34% after tax cash flow rate of return. None of us know how rich Snyder is, but it's non-trivial. He's out and dowing fellowships and scholarships. So this, thank you. Stuff that I've labeled Snyder has now become known as redevelopment, going back to old oil fields, and the amount of additional oil to be added from redevelopment is probably a factor of three bigger than the amount of additional oil that'll be added. My grassroots exploration. Now, as we face this crisis, there's some things that we don't want to have happen, and one of them has to do with the prices going crazy. These are natural gas prices in the United States, and up and through about 1985, the price behavior is very smooth. Then you start seeing wintertime peaks, then it goes crazy. One of my friends saw this, and she had been a systems engineer with Bell Labs, who'd you know, for 20 years, and she said, oh, it's queuing theory, and the Bell Labs knew about queuing, because these are people waiting to use the long distance circuits, and she said across a wide range of different queuing systems, the queue will either be very short or very long, and you know this in the bank and the airline check-in counter, there's either nobody in line or a whole lot of people in line. Well, the same thing happens on freeways, it happens in the oil and gas markets, so we're in for a very large dose of price volatility, little tiny things, two hurricanes, and the price goes crazy. Now, this is what we don't want to happen also. This is an ambulance, you can see the Red Cross on the side, and no, this is not what a world we're looking for. When I look to see, well, who's at hazard in this new world, they're all crowded up at the top of the alphabet. Zymergy down at the bottom is the industrial use of yeast and making bread and wine and cheese, but up at the top, agriculture, as you already heard, is very energy intensive the way it's practiced now. The automotive end of it, 20 years ago, the natural gas powered automobile looked very attractive, but we used up all of our surplus natural gas production capacity in North America, building natural gas powered electric generating plants. So we've closed off the natural gas powered automobile. In the case of aviation, there aren't any substitutes. If you fill up a 747 full of alcohol, it doesn't deliver enough energy for its weight to get the plane off the ground. So aviation is very much at risk, and when I wrote my first book, the Hubbard's Peak book, I had my friends in relations read the first draft, and my brother came back saying, you know, I know a vice president at Boeing. When the book comes out, I'm gonna send him a copy of the book. Well, I didn't think anything more about it. And then two years ago, Boeing came out with a 787, which hasn't flown yet, but will shortly. And it has the lowest fuel consumption per seat mile of any airliner, and they're taking, as you probably know, taking orders away from Airbus like crazy. And I got back to my brother and said, did you tell the guy at Boeing about this? And he says, well, I'm not trying to claim credit, but I did send him the book with a note that says, you better read this, you better memorize this. This is your future. So my brother and I claim we bailed out Boeing. Now, this is just a reminder. Actually, this was a review of Beyond Oil in Nature magazine. But during the 1970s, we had these long lines of cars waiting for what little gasoline there was in the filling station. The Nixon administration had fixed the price of oil. And William Sapphire of the New York Times writes funny cell phone interviews with Richard Nixon, who's serving a term in purgatory for price fixing. See if you're conservative, price fixing is a sin. And the bottom line of this message is, there will be rationing. All economists think they learned in Econ 101 that it will be rationing by price. You can't afford it, so the supply will meet demand. This is the Nixon model in the picture rationing by inconvenience. And then towards the end of World War II, Franklin Roosevelt had us running around with little red and blue ration coupons. There would be a huge human cry to do something, and the do something might not be the economics 101 model. I found this one on Taiwan. I don't read Chinese, but there's a message, I think it should say is tell the kids to turn out the lights. And there are a lot of opportunities for children to learn at home about turning out the lights, about avoiding the air conditioner in some times of the year, fall and spring, by opening up the house windows during the night, letting it cool off, closing the windows about nine in the morning or closing before they go off to school. And there are ways to conserve. There are ways to, in fact, one thing that got cut out of my second book was my recipe for strawberry jam made with prepared pectin. And making fruit jam in the summer and telling the kids, look, we're gonna give some of this stuff to grandma for the holidays and we're gonna enjoy it next winter. And next year, start canning peaches and pears and let the kids grow up in an environment where energy is important. And I think it's one of those things that could begin early. All right, at this point then, as was asked in the lecture this morning, what about some new technology? Well, being a geologist, look back and say, how about some old technology? And this is the year 1870 in the city of Paris and what the guy is delivering with a horse-drawn wagon is a mixture of hydrogen and carbon monoxide. Now, a more hazardous toxic picture, it's hard to imagine. But it was widely used for lighting, sometimes for cooking, and underneath the front of the wagon across the street, you can see a street lamp, a gas light. And it was made by burning coal with a limited amount of air and a lot of steam to produce a mixture of carbon monoxide, hydrogen, some carbon dioxide. And it was a standard thing. It was called coal gas or town gas or water gas, but it's now synthesis gas. And the clean coal process is an update of this old process but with better catalyst, higher temperatures, pure oxygen, the Texaco engineers, back when there was a Texaco, greatly improved it and held patents. And after Chevron took over Texaco, they sold off the patents for improving the synthesis gas process. Now, my little cottage industry has to do with the present situation in the oil business. The major companies are taking in $10 billion a quarter in profits. You have to imagine somebody dumping $100 million in the driveway and you want to read the newspaper that was delivered before they dump the $100 million on you, what are you gonna do? And so I have a few examples and you're welcome to keep adding examples of what would you do if you had $10 billion a quarter? One that my colleague Bob Williams is very fond of is dimethyl ether. It's made from coal by using one catalyst to turn the synthesis gas into methanol, methyl alcohol, and then another catalyst to dewater, take one water out from between two methanols and you've got dimethyl ether. It's an almost ideal diesel fuel. There's no carbon to carbon bonds in there which is where soot comes from. It requires a tank like the thing on the back of your camper or underneath your backyard grill full of propane or butane. It's non-toxic and I had to go to the drugstore and read the labels. A lot of the hair sprays today are using dimethyl ether as a propellant instead of the chlorofluorocarbons and when, incidentally, the old ether in the operating room, the anesthetic, was diethyl ether. So this is apparently non-toxic. Lots of people have sprayed it on their hair. It's made from coal and they're pilot plants and now one production plant starting to work in China. Now, if you had that sort of money, you don't have to convince Volvo because here's DME, a dimethyl ether powered diesel truck running down the road. Now, this coal gasification is flexible. You can, after gasifying the coal, they sell the carbon dioxide to the oil fields where it's injected into the oil reservoirs to enhance oil production. You can recover the sulfur and mercury out of it and so the sulfur and mercury get paid for it and it's flexible. You can make gasoline, you can make diesel fuel, you can make dimethyl ether, you can burn it to generate electricity and BP has just licensed, gotten the license to build an electric generating plant in the Los Angeles Basin, which is the toughest place of all in the U.S. to get a permit and it's going to be a clean coal operation, coal burning, selling the carbon dioxide to the oil fields. Okay, so if you've got 10 billion dollars a quarter, what are you gonna do? Well, in the case of dimethyl ether, most of the patents for the later part of the process are owned by Air Products Company, by Air Products Company, don't mess around. Because by the company, it's a profitable company, find yourself a coal or a lignite producer, Westmoreland or a Peabody Coal by the coal company, buy Volvo trucks and diesels, they're separate from Volvo cars now and the biggest distributive diesel in the United States is flying J truck stops and they're privately owned out of Provo, Utah and Matt Simmons is a good old Utah boy, I'll send him in to make an offer. If they turn it down, I'll send in Guido and Vinny from New Jersey and they make an offer, they can't refuse. Ethanol from Cellulose, which talked about this morning, I'll skip that one, but it's potentially coming along. Low energy agriculture is a big target and the fertilizers, as we now use them, are highly energy intensive on the nitrogen and phosphate end. And I won't go into the details, but you probably learn about them in beginning chemistry. There are ways around the nitrogen by using legumes, plants that have little microbes on their roots that can convert gaseous nitrogen from the air into plant soluble nitrogen. In the case of phosphate, we put a lot of energy into converting rock phosphate, which is the same mineral as your teeth and bones, into soluble super phosphate and there have been uses of the raw rock phosphate ground up and you want to be careful to analyze soils and just add enough phosphate, don't douse it with extra phosphate. In the case of pesticides, pesticides are almost all petrochemicals. Chevron for years has been a major manufacturer of pesticides and they are important, they're not just something evil that you can completely do without, but we again need to be using good biological diagnostic tools to use the minimum amount of pesticide where the bugs are at their worst. Amongst crop types, the flying of vegetables and fruit up from the southern hemisphere during our winter is greatly appreciated, but very energy intensive. And root cellars for things like rutabagas and turnips and parsnips, all of which I hate, we're gonna need to use those and potatoes and carrots as local root crops that can be stored in root cellars which are not energy users and we're gonna have to change the way we cook and the way we eat, emphasizing local produce, not because it's politically correct, simply because you haven't paid for the fuel of a hollet a long distance. Now, the question then comes up at the end of this story, well, is it gonna be a hard landing or a soft landing? And my definition of a hard landing, I've borrowed the traditional names for the Four Horsemen of the Apocalypse. It's in the book of Revelation, but I was told when I was young, it's good to read the Bible, but don't read the last chapter, you'll only get confused. And in the last chapter, there are these Four Horsemen which traditionally are named war, famine, pestilence, and death. Famine because the fertilizers are very energy intensive and half the soils in Africa are now fully depleted in nutrients. Pestilence because these things are pesticides, that the Green Revolution of 1970 that made starving to death no longer fashionable may come back to us. And the case of war, here's Amos Noor who's a geophysicist at Stanford and previously had said nothing about the political side of these problems. And essentially he's saying that China and the United States have both made this statement, oil is vital to our economies and we will not be denied access to world oil supplies. Well, they can't both be right. And one of the not very nice fantasies is why are we in Afghanistan? Afghanistan has a border with China and a border with Iran. It's the sole barrier to the Chinese building a pipeline straight into the Middle East oil fields. So there are concerns that conflicts will arise, can arise over access to oil. Now, I would say that this redevelopment of older oil fields is something we need to be focusing on. One of the tragedies that's happening right now is no students want to go into petroleum geology or petroleum engineering. The oil companies know it. Matt Simmons who's a banker is saying there's no freshman class. There's gonna be no training because the current generation, the baby boomers are gonna retire and there may not be a link to a next younger generation of people who would be trained to pull out the unproduced oil from these older oil fields. Alternatives, lots of alternatives. And I wanted to emphasize here the single cell algae because they didn't get mentioned this morning. The cell walls of single cell algae are a hydrocarbon set of chains and they have glycerol innings on them, all fats and waxes, to be this way. And that's where oil comes from. It's not squeezed out of the bodies of dead dinosaurs. It's mostly marine algae. And up through the 1980 energy price crisis, the Department of Energy in the US had research going on single cell algae. The price dropped in 1980. They killed the project. Well, people are going now through the old records, getting the old reports and there's several companies that are trying to start up, freshwater or marine coastal ponds that start raising single cell algae which actually outproduce coin or soybeans or sugarcane in terms of the amount of stuff. So I mentioned these things before but we're going to be trying to find ways that are less energy intensive to manage our agricultural system. There is a division here between what an individual would do and what a government would do. And in part of your usual political messages, all politics is local and get a hold of your congressman. But there also is, I hate to say it, my investments, what little money I have for investment is going all into oil companies where I think there's a good buy in terms of what the stock is selling for now compared to their reserves. In the farming business, a lot of people are saying, what are we going to eat? Well, one of my fantasies which I haven't acted on yet is to find a place that has young volcanic soils because the volcanics, as they break down, give nutrients and have adequate rainfall. And maybe Guatemala, I don't know where this place is yet but the task of protecting yourself as an individual and the task of protecting the United States as a nation or the world as a community are sometimes a bit different and I'm not ashamed to go ahead and say, hey, look, if I can buy a farm in Guatemala, I may do it. I'm a little nervous about owning some stock in Petro-China. It's doing marvelously well but here I am in partnership, business partnership with the government of China. So it comes down to it. Here's a picture of M. King Hubbard in the 1930s and he doesn't look like he was in any way easier to get along with when he was young than when he was mature but it's an interesting story. The major message that I have is the time constant for this is relatively short. We may go through this entire presidential election without a candidate even mentioning the problem and yet it's something that you're going to face you're going to face whether you want to or not. Thank you. Facing it out of coal or out of tar shit. And we'll begin by asking anyone on the panel would like to comment on Dr. DeFey is talking. Dr. Jaskoff. Can you hear me? The bell switched to you. But can you hear me? Yeah. I wanted to give you an opportunity to tell an economist's joke since you've had an opportunity to tell jokes about several other professions. But in economic analysis, the problem that you're looking at is called a depletable resource problem where you have a finite stock of some resource and those models have been well analyzed. In fact, that Joe Stiglitz who spoke here a few years ago has a very famous paper with a very nice pedagogical model of that. And one of the things you learn from simple models is you never run out. What happens is, as you use more and more, the price goes up and as the price goes up, a number of things happen and simple models, consumers consume less. They devote more resources for energy efficiency and they look for alternatives. And I noticed that Price played very little role in your analysis of the depletable resource. In more complicated models, other things happen. Higher prices lead to technological innovation, new drilling techniques. They lead producers to go back and look at all fields that have not been produced years ago and were uneconomical at $2, but at $80 might look a little bit better. And finally, the whole notion of petroleum reserves is not a purely physical concept. The way it's reported by oil companies, it reflects both physical attributes as well as economic attributes. So I just noticed that the International Energy Agency has now moved Canada up close to the bottom of the list of oil reserves to close to the top of the list of oil reserves by adding Alberta and the heavy oil reserves to their list. So maybe one way of getting at these issues would be to talk about how do you think about heavy oil in Alberta, which is now because prices are higher, is an economical resource, or the potential for further exploitation of heavy oil in Venezuela or if prices even get higher, exploitation of shale oil and biofuels in your analysis. You'll notice that I've said very little about reserves and it's the hits of new oil fields and production on which, excuse me, I base my analysis. So the first question was, was that an economics joke that you just told? The opening quote in my second book is from Kenneth Bulding who says that anyone who claims that oil production can go on forever is either a madman or an economist. And there is an enormous division of outlook and enormous division of methodology between economists and geologists at this point. We can't both be right. Can I just do a follow-up? Yes, please. Professor Josco. But maybe we can both be right. If the world now recognizes that the current rate of consumption is ultimately going to lead to significant depletion of the resource, we would expect oil prices to go up. And in the last four years, oil prices have gone from $25 a barrel to $80 a barrel. And maybe that is a resolution between the supply side and the demand and price side that might help to rationalize these things. Okay. Dr. Chu. Maybe I can act as a mediator to this. I think our speaker was talking about convention oil. And as you go to more expensive forms of oil, tar sands, much higher cost of recovery, advanced oil, much higher deep sea oil, where it's a billion dollars a platform, that shifts it. So no longer you just drill a pipe, you've got a lot of oil cheap. Okay. So the production costs as they go to $10, $20, $30 a barrel, then actually does this continuum. So that was an analysis on a single source, a single type of source. So if you talk to the oil companies, they say it's going to be a long pateau because you ratchet up the price and you go after the more unconventional, more expensive sources of oil that you can recover. Thank you, Professor. You made my point. Okay. Go ahead. I have a question here from the audience. What is known about the Arctic seafloor oil reserves? The first thing about seafloor is that oil is a thermal product. It's cracked out, as I said, from marine algae, not from dead dinosaurs, by rising temperatures. The total thickness of the sediment in the open seafloor is typically one or two kilometers, not thick enough to take you up to those temperatures. And we've drilled more than 100 holes with the Deep Sea Drilling Project around the world without encountering oil or natural gas. So in the case of the Arctic, the question is whether the Lomonasoff Ridge has sediments thick enough, it may be mostly volcanics, but if it has sediments thick enough, there could be a streak of oil production there, but it's not to be taken as, oh, our problems are all over. It'll be the Arctic. One thing I also need to say, though, and reply about economics, up until about 1990, the rate of return on investment in the oil industry was higher than in the other industry. In fact, we were asked at Shell, can Shell diversify into anything? And the answer came back after some study. No, in fact, everybody else is trying to diversify into the oil business because it has the highest profit. So what could you do with the money? Well, invest it in research in better ways of finding oil. So the Shell Lab in the 1960s, when I was there, had a bigger budget than Caltech, and that's not the geology department at Caltech, that's all of Caltech. And that's just the exploration and production lab of Shell, refining and chemicals was a separate lab. So the investment in better ways of finding oil was enormous. It's dropped, not just at Shell, it's dropped everywhere, and at this point, Michael E. Commides, who's a petroleum engineer despite his name, is saying that the level of investment in research in the oil industry is now the lowest of any major industry. Dr. Hansen. There's another point that relates to this oil supply and the possible replacement of oil with tar sands or heavy oil or other unconventional fossil fuels, and that's where the climate aspect comes in very clearly. There's absolutely no question that we cannot exploit those unconventional fossil fuels without driving CO2 far beyond the dangerous level. And so it's another example of where the political system and the public are not yet aware of some very fundamental facts, that there is almost the assumption that if oil really does peak, as you say it is peaking now, that we will squeeze a liquid fuel out of something else because we're not planning the infrastructure for an alternative. Well, I claim I'm the best friend the Kyoto Accord ever had in terms of saying you won't be able to burn it. We can't produce it that fast. In the case of the Canadian tar sands, there's a lot of it, but right now they are limited by availability of natural gas because they use a lot of natural gas to heat the stuff up and then every time they break a carbon to carbon bond in that tar to lighten it up where it'll flow in a Canadian pipeline in a Canadian winter, they've got to paste on two hydrogens. The cheapest source of hydrogen right now is natural gas. And when you go from that to the water supply to the people, it turns out it's going to be very difficult to bring on those Canadian tar sands on the time scale that I'm talking about. And it isn't a matter that the stuff exists. It's been very slow, profitable but slow to get that thing expanded at the scale we need to solve the world problem. Yeah, and even if it were, it's just unacceptable from the climate standpoint. It produces much more CO2 than energy. The climate thing is another issue and we were arguing about this at lunch. Professor Chu showed you the short time scale and said, see, it's called the hockey stick, the carbon dioxide starts to build up about 1750, roughly the Industrial Revolution. So if you ask the Sierra Club, they say, well, let's go back to the day before the Industrial Revolution. Well, that was the Little Ice Age. Wolves ranged down into central Europe. You look at Bruegel's paintings. There's snow on the ground. Little Scenes have snow on the ground. And that's because he was in the middle of the Little Ice Age. And then when you looked at Professor Chu's longer time scale, the 400,000 years, that's the core of the Pleistocene Ice Ages. As a geologist, I say, let's shop the whole market. I think the late Miocene might have been nicer than any of these things. It's Miami everywhere. And so I'm saying, don't tell me where you're trying to take me. Let's discuss it. It's okay, Dr. Chu. Actually, I didn't have time to show other slides. If you really want to shop the market and you go back 60 million years, or 250 million years, well, 60 million years, the geological record is pretty good in temperature. Beyond that, it gets a little hazier. There are many times in the history of the Earth where it's much hotter, where carbon dioxide is estimated to be 1%, 2%. It's just a much different world in those times. And so what I was talking about is rapid change causes huge geopolitical, social, economic upheaval, not that life would be wiped out if we went to a much hotter world. If I could comment on that. I mean, that's certainly true. Life has survived much greater climate changes than we're going to induce. But if you want to shop that climate period, what was the sea level then? Civilization has existed in a very limited range of climate variations. Sea level has been remarkably stable for the last 7,000 years. But if you go to a couple of degrees warmer, sea level is 25 meters higher. Now, are you willing to give up all of the cities that exist within 25 meters? I mean, well, I could name scores of cities. I don't think that if humanity understood that, that they would be willing to do that. My counter-challenge is go back 10,000 years. You want to write an environmental impact statement for burying New York City under a mile of ice. Well, we're not about to do that. Well, we're putting the carbon dioxide in to prevent it. A thimble fold. Yeah, as I will show tomorrow, a thimble fall of four-floor carbons is enough to prevent another ice age. We will never have one. Humans are now completely in control. But the problem is that we're going too far in the other direction. But we can show this quantitatively tomorrow. Okay? Well, I have a question from the audience here to kind of follow up on this. Could you expand on the role of carbon capture techniques in the future of the oil industry? No. The question is about carbon capture. Coal, for instance, if you burn it as conventional coal in air, in a power plant, you've got this giant smokestack full of hot gas and it's a very tough chemical engineering problem to try to go in there and grab the CO2 and grab the sulfur. The gasification process gives you a relatively limited amount of gas and it's a much easier task to get the sulfur strip out, the mercury strip out, whatever uglies are in there so that the... designing the process from scratch to capture the carbon dioxide and at the moment sell it to the oil fields because they're hungry for it. But on a longer time scale, injecting it into a band and oil fields, that needs to be done. But the conventional natural gas, sorry, conventional coal burning power plants are, I think, impossibly dirty and I don't see any engineering that's going to make that work. Dr. Chu. I would partially agree with you although the gasification plants, because of the high cost of steel, concrete and other materials in the last couple of years have more of a distant hope in the last couple of years and so the power companies are very skittish now about investing in gasification plants. There is a hope on conventional coal plants but it is fundamentally a metallurgy problem. If you can burn coal in a boiler situation in an oxygen atmosphere, you produce a stream of carbon dioxide. The huge cost is separating the nitrogen from the carbon dioxide and in this oxy burn environment, you actually burn much hotter, you go from 40% to, you could go over 50%, but it's actually for want of reasonable cost, high temperature steels. So for those of you who should be going into plant biology and petroleum engineering, think also of metallurgy as helping save the world. It's also because there's no price on CO2 emissions. Right. That would change everything. Yes. I can make a comment on that. I'll make a comment too on the carbon capture and sequestration. Part of that is capturing the carbon within the power plant, which Dr. Chu and Dr. Faiz were talking about, but the other part is storing it underground securely so that it won't get back out again and there's a lot of work going on on that to test that concept out. I would say it's known how to do this for enhanced oil recovery where you inject carbon dioxide underground, scour out and repress your eyes, get the last parts of the oil. But I think the picture about whether or not you'll be able to store CO2 for geologic time scales for a very long time so it won't get out is still being investigated. There's some hopeful signs, but I think looking toward a low carbon future where you use a lot of coal, this is a critical technology and we really need to find out whether or not it's going to work. Some question about your time frame. It says, when we speak about a relatively short time to deal with this crisis, what is meant by relatively short? Five years. That right now you're feeling the demand, particularly from China, India and Russia, increase. You're seeing the prices increase. You go to the grocery store and stuff costs a whole lot more than it did. And beer is more expensive in Germany. Corn tortillas are more expensive in Mexico. We're feeling it right now and it's going to get worse. So I think the tragedy is we didn't listen to President Jimmy Carter and start doing these things 20 years ago. What will it take to change the U.S. car manufacturers to increase fuel efficiency? They need an economist. It's not a geology question. I don't have any expertise. Yeah, the doctor too. I'll go back to what I said before. I think the today's engines are incredibly efficient. They convert very low emissions, very high horsepower, much more efficient. But they were used to push around heavier cars and fantastic acceleration. I propose only half-heartedly that anyone who wants to drive a car over about 4,400 pounds should start to pay sort of a syntax. I would call it a death tax and the reason is fine. If you look at the statistics of people driving heavier cars, they in fact are safer by about 20% when you go from 4,000 to 6,000. But they're safer in those cars, but if they hit another car, there's three or four times more likely to kill someone in the lighter car. So unless we want to start over, and actually I think sadly Detroit might have wanted to start a little bit of warfare, the heavier you get, the safer you get, the more funny we make. A full-sized car that's 4,000 pounds is incredibly safe. You can fill it with airbags. This is not an issue. They can do much better gas mileage. But when a 2,000-pound car hits a 6,000-pound car, the 2,000-pound car quite frankly is not safe. Between 2,000 and 4,000 pounds, you can get very safe cars, but you've got to get rid of those 6,000-pound cars. And that's the issue. And then you can get much better mileage. I could add something to that too. One of my colleagues at UC Davis, Dan Spurling, has done a study looking at the improvements in engine and drivetrain technology over the last 25 years. Most of it has gone into making higher power and higher power-to-weight ratio. I don't know how many people ever drove Mustangs in the late 1960s and thought of that as a muscle car. Well, kind of the average, you know, I can say it because I am one little old lady car that you drive around now, is about like a 1965 Mustang. So the average car has gotten much, much zippier. And if we were willing to accept the sort of level of performance with regard to that that we had in 1980, we could cut out 25% of the fuel consumption just like that. I think we have to recognize the average car has gotten zippier and bigger because that's what sells. And we know the technology is there, for example, even with heavy cars, to increase mileage by 25% to 30% at really very modest net cost, maybe negative net cost. Ultimately, the problem goes back to consumers being willing to take this into account and are being willing to provide either standards or taxes or prices on carbon emissions. I think it's a practical matter sometime within the next two years. We will have new federal legislation that will increase automobile mileage on average by 30% over the next 12 years. Dr. Lin. So just some comments on how do we get the question was, how do we get U.S. car manufacturers to make more efficient cars? Well, a big part of the answer is to buy more efficient cars, which is up to all of us. A second part of the answer, Dr. Chu mentioned earlier on in response to a similar question, has to do with people expressing, making sustainability and energy efficiency a mainstream as opposed to peripheral political issue. The Clinton administration had a partnership for next generation vehicles, explicitly targeting high efficiency, $300 million a year from the government, $300 million a year from the big three car companies. It was snuffed shortly after the Bush administration began. I have a different understanding on safety with respect to vehicle size, and so at least want to leave that issue as perhaps open and less, to my knowledge, less certain than you mentioned. The National Academy of Sciences did a big study and they did indeed find that smaller cars on average were more unsafe for their occupants. I don't dispute the business of who they get an accident with. The interesting thing, though, actually, UC Davis Transportation Center broke that down into actual model types. They found the reason that the compacts and subcompacts had so many people killed in them was because of the atrocious record of the Neons and the Geos and these other basically low sticker price small cars. They are actually not luxury cars, but things like, for example, the Volkswagen Jetta is a very safe car. In fact, the authors of that study mentioned to me that the real correlation is more with sticker price than mass, but they were afraid to publish that and they might get sued. One of the safest cars is a full-size Lexus, but it's a selection effect as well because the people who drive these rich cars are kind of their older... It's very complicated. All right. One last question. We have sort of a practical one here and we'll decide who wants to talk to a geologist or the economist. How does refinery capacity impact the relationship between oil supply and price? All right. My take on that is that the... If refinery capacity were really limiting, then crude oil would pile up on the one side and there would be empty tanks demanding gas, you know, the gasoline tanks on the other side would be empty. So the price of crude oil would go down if there were a genuine shortage of refineries. But the price of crude oil has gone up, so I don't think there's a refinery capacity problem. The correct answer is as follows. There's something which I'm sure you're familiar with which is called the cracking margin, which is the difference between the price of fuel to the refinery purchases and the price of products, gasoline and heating oil that it sells. The price of crude oil is pretty well determined in world markets. There's abundant evidence that when refining capacity gets tight, as it did about 18 months ago, that the cracking margin goes way up and as refining capacity becomes more abundant, the cracking margin goes way down. One of the problems that refiners have had in this country is for obvious reasons, is finding places to build new refineries. And almost all new refinery capacity in the U.S. has been enhancements to existing refineries. And right now we have a lot of old refineries in the U.S. that are not as available for as many hours a year as they used to be and it's contributed to continuing relatively high cracking margins compared to the 1970s and 1980s. Okay. I almost hate to break this up, but I think we probably need to break for some stimulants here. Remember that the stimulants are to be found in the forum. The building to the north of us here, we will reassemble here.