The United States is a case in point. Recent world production  of oil has been running at near capacity to meet rising demand, which has  put upward pressure on oil prices. Supply and demand, in turn, affect the type of oil that is produced. Timing of Peak Oil Production Depends on Uncertain Factors

Most studies estimate that oil production will peak sometime between  now and 2040, although many of these projections cover a wide range of  time, including two studies for which the range extends into the next  century. Key uncertainties in trying to determine the timing of peak oil are  the (1) amount of oil throughout the world; (2) technological, cost, and  environmental challenges to produce that oil; (3) political and investment  risk factors that may affect oil exploration and production; and (4) future  world demand for oil. However, some experts criticize this  methodology; they believe such an estimate may be too high because the  U.S. experience overestimates increases in future worldwide reserves. It is unclear how much oil can be recovered from nonconventional  sources. Future World Demand for Oil Is Uncertain

Uncertainty about future demand for oil—which will influence how  quickly the remaining oil is used—contributes to the uncertainty about the  timing of peak oil production. Future world oil demand will depend on such uncertain factors as world  economic growth, future government policy, and consumer choices. Alternative Transportation Technologies Face Challenges in Mitigating the Consequences of the Peak and Decline

In the United States, alternative transportation technologies have limited  potential to mitigate the consequences of a peak and decline in oil  production, at least in the near term, because they face many challenges  that will take time and effort to overcome. If the  peak occurs in the more distant future, however, alternative technologies  have a greater potential to mitigate the consequences. As a primary fuel, corn ethanol is  not currently available on a large national scale and federal agencies do  not consider it to be cost-competitive with gasoline or diesel. The technologies we  examined currently supply the equivalent of only about 1 percent of U.S.  annual consumption of petroleum products, and DOE projects that even  under optimistic scenarios, these technologies could displace only the  equivalent of about 4 percent of annual projected U.S. consumption by  around 2015. DOE projects that the alternative technologies  we examined have the potential to displace up to the equivalent of 34  percent of annual U.S. consumption of petroleum products in the 2025  through 2030 time frame. The level of effort dedicated to overcoming  challenges to alternative technologies will depend in part on the price of  oil, with higher oil prices creating incentives to develop alternatives. Federal Agencies Do Not Have a Coordinated Strategy to Address Peak Oil Issues

Federal agency efforts that could contribute to reducing uncertainty about  the timing of a peak in oil production or mitigating its consequences are  spread across multiple agencies and are generally not focused explicitly  on peak oil issues. Federal agency-sponsored studies have expressed a  growing concern over the potential for a peak, and officials from key  agencies have identified options for reducing the uncertainty about the  timing of a peak in oil production and mitigating its consequences. However, there is no strategy for coordinating or prioritizing such efforts. For example, DOE officials reported  that they could expand their efforts to encourage the development of  alternative fuels and advanced vehicle technologies. To assess the potential for transportation technologies to mitigate the  consequences of a peak and decline in oil production, we examined  options to develop alternative fuels and technologies to reduce energy  consumption in the transportation sector. Oil Supply Analysis.
Why GAO Did This Study

The U.S. economy depends heavily on oil, particularly in the transportation sector. World oil production has been running at near capacity to meet demand, pushing prices upward. Concerns about meeting increasing demand with finite resources have renewed interest in an old question: How long can the oil supply expand before reaching a maximum level of production--a peak--from which it can only decline? GAO (1) examined when oil production could peak, (2) assessed the potential for transportation technologies to mitigate the consequences of a peak in oil production, and (3) examined federal agency efforts that could reduce uncertainty about the timing of a peak or mitigate the consequences. To address these objectives, GAO reviewed studies, convened an expert panel, and consulted agency officials.

What GAO Found

Most studies estimate that oil production will peak sometime between now and 2040. This range of estimates is wide because the timing of the peak depends on multiple, uncertain factors that will help determine how quickly the oil remaining in the ground is used, including the amount of oil still in the ground; how much of that oil can ultimately be produced given technological, cost, and environmental challenges as well as potentially unfavorable political and investment conditions in some countries where oil is located; and future global demand for oil. Demand for oil will, in turn, be influenced by global economic growth and may be affected by government policies on the environment and climate change and consumer choices about conservation. In the United States, alternative fuels and transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear. For example, although corn ethanol production is technically feasible, it is more expensive to produce than gasoline and will require costly investments in infrastructure, such as pipelines and storage tanks, before it can become widely available as a primary fuel. Key alternative technologies currently supply the equivalent of only about 1 percent of U.S. consumption of petroleum products, and the Department of Energy (DOE) projects that even by 2015, they could displace only the equivalent of 4 percent of projected U.S. annual consumption. In such circumstances, an imminent peak and sharp decline in oil production could cause a worldwide recession. If the peak is delayed, however, these technologies have a greater potential to mitigate the consequences. DOE projects that the technologies could displace up to 34 percent of U.S. consumption in the 2025 through 2030 time frame, if the challenges are met. The level of effort dedicated to overcoming challenges will depend in part on sustained high oil prices to encourage sufficient investment in and demand for alternatives. Federal agency efforts that could reduce uncertainty about the timing of peak oil production or mitigate its consequences are spread across multiple agencies and are generally not focused explicitly on peak oil. Federally sponsored studies have expressed concern over the potential for a peak, and agency officials have identified actions that could be taken to address this issue. For example, DOE and United States Geological Survey officials said uncertainty about the peak's timing could be reduced through better information about worldwide demand and supply, and agency officials said they could step up efforts to promote alternative fuels and transportation technologies. However, there is no coordinated federal strategy for reducing uncertainty about the peak's timing or mitigating its consequences.