The IEA and peak oil

Dr. Fatih Birol, Chief-Economist of the IEA (the agency which advices OECD countries on oil, including the US) and “one of the most powerful men on earth” according to the British newspaper, The Guardian[1] has lately attracted extensive media attention.

Indeed, in a recent interview to the British newspaper, The Independent[2], Dr. Birol was reported to say that the world was heading for a catastrophic energy crunch that could cripple a global economic recovery.

The article added, “In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated”.

In fact, in 2008 the IEA conducted for the first time[3] a detailed field-by-field analysis of global oil production and its findings are bleak. Asked by a journalist on what the previous analysis relied on, the Chief-Economist of the IEA admitted, “it was mainly an assumption”[4]. In the 2008 World Energy Outlook (the key document on oil used by OECD countries), they have analysed about 800 fields, which account for ¾ of global reserves and more than 2/3 of global oil production[5]. They come to the conclusion that decline rates are far higher than previously thought, between 6.7 and 8.6% a year[6]. As result, they now estimate that to maintain the current levels of oil production (about 85 MBD) by 2030 the world would need to develop and produce 45 MBD; as said by Dr. Fatih Birol, approximately four new Saudi-Arabias[7].

Simultaneously, they have analysed all the projects that are financially sanctioned in all the countries in the world (about 230) up to 2015. As it takes five to ten years to produce oil from a new field, they have a clear image of the coming situation. When they add all the projects together (if all of them see the light of the day – unlikely with the current credit crunch[8]-) they will bring about 25 millions barrels per day[9]. However, because of the important decline rates, the world will still be short of “at least” 12.5 MBD before 2015[10]. Asked by a journalist if this means Peak Oil, Dr. Birol answered, “We are facing a serious threat”[11].

Nevertheless, things are never clear when it comes to the IEA and Peak Oil, especially with Dr. Birol.

“Misquoted by the journalist…”

On the 27th of August[12], David Strahan, a British journalist, asked the IEA press office confirmation that the IEA recognised Peak Oil would happen “in about 10 years” as reported by The Independent.

Amazingly, an IEA spokesman (initially) answered:

I spoke with Fatih who said he was misquoted by the journalist…The article incorrectly made it sound that the total oil production (including unconventional oil etc.) is going to peak at that time. Taking into consideration gains from unconventional oil, oil peak will be later than 2020, more around 2030…

The first obvious question anyone would ask is: if Dr. Birol really was misquoted, why didn’t he issue an official statement when the article was published? The answer may well be that he wasn’t really misquoted at all.

Tags:  IEA