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U.S. Unprepared For Oil Supply Crisis: Government Report

CNBC.com
Thursday, 29 Mar 2007 | 5:59 PM ET

As crude oil prices surge on rising political tensions with Iran, a new government report released Thursday said that the U.S. is unprepared to face an oil supply crisis and urged U.S. policymakers to develop a strategy in order to reduce potential risks related to an oil shock.

The report from the U.S. Government Accountability Office concluded that the U.S. has no plans in place to address "peak oil," the future point in history of maximum oil production, which would be followed by irreversible declines in oil fields around the world.

"While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable," the GAO report said.

An expert told CNBC on Thursday that peak oil is the "the single biggest issue to threaten sustainable society" in the United States.

"We are on the verge of actually replacing global warming by this term peak oil," said Matthew Simmons, author of Twilight in the Desert: The Coming Oil Shock and the World Economy. "We have demand roaring ahead and supply is faltering."

Most studies predict oil production will peak sometime between now and 2040, the agency said.

"We're basically held hostage by countries that aren't friendly to us in terms of what's available," John Kilduff, senior vice president of energy risk management at Fimat USA, told CNBC. "That is so dangerous to the United States economy you can't believe it. We have big problems on our hands."

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