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Nonactuarial Pursuits
Oil Supply Concerns
By Marty Adler 

Gail Tverberg is distressed that the world is running out of cheap oil, because the world’s economies were built on cheap oil. She believes this lack of cheap oil has serious financial implications. She first became concerned in 2005, when she read The Empty Tank: Oil, Gas, Hot Air, and the Coming Global Financial Catastrophe by Jeremy Leggett. Ever since, she has devoted considerable time and energy to the problem, currently 40 hours or more a week, as a writer, a blogger, a speaker at international conferences, and as a member of the editorial board of an organization studying the issues.

In May 2006 she wrote an article for Tillinghast’s publication Emphasis titled, “Oil Shortages: The Next Katrina?” She has written several articles for actuaries since then, including:

  • “Our Finite World: Implications for Actuaries,” Contingencies, May 2007.   
  •  “The Expected Impact of Oil Limitations on the Property-Casualty Insurance Industry,” Casualty Actuarial Society E-Forum, Fall 2010.   
  •  “Systemic Risk Arising from a Financial System that Requires Growth in a World with Limited Oil Supply,” Essay for the SOA series “Risk Management: Part Two—Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis,” (

Wanting to avoid a potential conflict of interest, Gail retired from Towers Perrin (now Towers Watson) in March 2007, specifically to work on this issue. She believes that some of the implications are so dire that no one working for an insurance company would dare write about them, which pretty much leaves the research to be done by retirees. She says that no government agency wants to talk about the issue (although the Paris-based International Energy Agency did mention in a report last year that conventional oil production has been past peak since 2006). Certainly, there is no funding by governments for studies. So the work has to be by volunteers.

As a result of her work, Gail was asked to join the staff of The Oil Drum, an organization whose theme is “Discussions about Energy and Our Future.” It has a staff of about 30 volunteers around the world who research and write articles on issues related to energy and the future. Most of the staff members have PhDs or have substantial backgrounds working in the oil and gas industry. The organization can be thought of as a think tank devoted to the issue of oil limitations and the impact these limitations are likely to have on the world. The Oil Drum’s parent is the Institute for the Study of Energy and Our Future, a not-for-profit 501(c)(3) educational institution.

Gail not only writes articles but serves on the editorial board, deciding which articles will run and what changes are needed for submissions.

The Oil Drum is widely read with about 25,000 to 30,000 visitors each day. Readers include journalists from many major newspapers. About half of the readers have master’s degrees or higher educational degrees. They discuss all fossil fuels, as well as suggested replacements for fossil fuels.

Initially everyone at The Oil Drum used pseudonyms for fear of reprisals from their employers (generally universities). Gail uses “Gail the Actuary,” but people do know her real name.

Gail also writes a blog called, “Our Finite World”. Its focus is broader than The Oil Drum. It also addresses the financial implications of oil limitations. Gail has concluded that oil limits do not look the way people expect—they tend to look more like recessions than shortages. The result can even be a “glut” of high-priced oil on the market. She updates “Our Finite World” one to three times a week. Many posts from “Our Finite World” later run on The Oil Drum Web Site.

Gail has spoken at conferences in Italy, Spain, and in various U.S. cities. She has visited an oil platform (offshore in the Gulf of Mexico); the oil sands in Alberta, Canada; and oil installations in Ecuador. When she visited a natural gas installation in Wyoming, she stayed in the women’s section of a dormitory for oil workers, in a room about 8' x 8', with a group bathroom down the hall.

She has also been invited as a speaker at symposiums at the Massachusetts Institute of Technology and the U.S. Naval War College in Rhode Island. The latter seemed to be interested in the subject in order to know what issues to be concerned about when developing its war games.

Gail is currently working on a book for the textbook publisher Springer, tentatively titled, Beyond Hubbert: How Limited Oil Supplies Cause Economic Crises. It is to be part of a series of shorter texts in a series called Briefs in Energy under the direction of Dr. Charles Hall, a professor at the State University of New York at Syracuse. The book is about mechanisms by which oil shortages cause economic crises. One of these mechanisms is high oil prices inducing recession. Also, if the economic growth rate declines because of high oil prices, debt default rates tend to rise, because it is much more difficult to pay back debt with interest when the economy is declining than when it is growing.

Gail’s involvement with this project started with a financial forecast for 2008, which she made early in that year that turned out to be surprisingly accurate. Dr. Hall leads a group of professors around the country who are interested in a new field called biophysical economics. This field looks at the connection between energy supplies and the economy. The belief of this group of scientists is that neoclassical economics overlooks the connection between the physical world and the economic world. Since we live in a finite world, at some point low cost supplies will disappear, and high cost supplies will have a severe significant impact on the economy.
Oil Rig

Dr. Hall heard about Gail’s financial forecast for 2008 and invited her to present at the 2009 Biophysical Economics Conference. Dr. Hall wanted to know what Gail saw that others missed that allowed her to predict so accurately what would happen in 2008. Her talk, “Delusions of Finance,” later appeared as an Oil Drum post. In 2010 she did more work on the subject and was invited to give a talk in Barcelona this past October. She also wrote an academic paper, “Oil Supply Limits and the Continuing Financial Crisis,” which she recently submitted to the journal Energy. She is awaiting word on whether it will be accepted.

When not working on this important issue, Gail Tverberg is president of her company, Tverberg Actuarial Services, Inc., in Kennesaw, Georgia. NAP Needs Your Input! Do you have or know a CAS member who has an interesting nonactuarial pursuit? If so, we’d like to hear from you. Send an e-mail to and let us know what you do in your off hours.

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