Normally staid IEA says oil will peak in 2020
Fatih Birol, chief economist to the International Energy Agency, told the U.K.’s Guardian this week:
“In terms of non-Opec [countries outside the big oil producers' cartel],” he replied, “we are expecting that in three, four years’ time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that Opec will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is, of course, not good news from a global-oil-supply point of view.”
That is a triple shocker. First, as a famous 2005 study funded by the Bush DOE “Peaking of World Oil Production,” [PDF] concluded:
The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
The IEA says conventional supply will not be able to meet rising global demand in about a decade, while the DOE makes clear that you need much more than a decade of sustained, “massive” effort to transition away from oil to avoid catastrophic impacts. This looks like a job for a President who plans an activist clean energy agenda and who has assembled a really smart energy team.
The second shocker is that this warning comes from the IEA, which has, for most of its existence, been a bland and staid reporter of conventional wisdom. When I was at the DOE in the 1990s, no one paid much attention to the latest IEA report that explained how the future would be just like the recent past. So if the IEA is telling the world oil might peak in a decade, the world better listen up.
Third, this is an apparent reversal from their most recent report, which had this figure:
I say “apparent reversal” since the report itself painted a far less rosy scenario than some of its figures:
The IEA estimates that by 2010 oil companies will have to commit to projects producing almost as much oil as Saudi Arabia — or about 7m barrels a day — if the world is to avoid a supply crunch by the middle of the next decade … The stark assessment comes as companies cancel projects from Kazakhstan to Canada because the collapse in oil prices makes them uneconomical.
The industry will have to invest $350bn each year until 2030 to counter the steep rates of decline of existing fields and find enough extra oil to satisfy the growing demand of countries such as China, the report states.
Indeed, Birol was not soft-pedaling the grim reality to anybody who would listen:
“We have found that if we want to stand still — that is, continue producing 85 million barrels per day — for the next 22 years, we need new production of 45 million barrels per day to compensate for the decline. That means four Saudi Arabias.” Add on a demand increase of the sort seen the past couple of decades — equivalent to another two Saudi Arabias — and the world will have to work that much harder to meet rising demand, Birol says.
Those six Saudi Arabias do not exist underground — they can only be found in the nation’s (and the world’s) cars, trucks, buildings, factories, power plants, and farms. America is the Saudi Arabia of wasted energy. And we now know what the winning low-carbon alternative fuel is.
The peak is nigh. The time to act is January 20, 2009.
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