Normally staid IEA says oil will peak in 2020


Fatih Birol, chief economist to the International Energy Agency, told the UK’s Guardian today:

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,” 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 (see “A real energy plan for America: Efficiency now, 10% renewables by 2012, and one million plug-in hybrids by 2015“) and who has assembled a really smart energy team (see “A Nobelist for Energy Secretary who gets both climate and energy efficiency?“).

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 (see “IEA: Oil price to rebound to $100 when economy recovers, then soar to $200 by 2030“):


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 (see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!“):

“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 (see “Why electricity is the only alternative fuel that can lead to energy independence“).

The peak is nigh. The time to act is January 20, 2009.

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12 Responses to Normally staid IEA says oil will peak in 2020

  1. Russ says:

    It sure is interesting watching what seems to be this ongoing tug-of-war among factions in the IEA. It’s like Kremlinology.

    Still, one thing that doesn’t change is how they keep hedging, stipulating that every projection, cornucopian or not, is contingent upon the requisite investment being made in good time (and most of those investment #s being dubiously high).

    They’re sure trying to set it up so that no matter what happens they can say they were right.

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  3. Bob Wallace says:

    Steven Earl Salmony –

    Please find some other place to publish your sermonettes.

    Buy some advertising space and quit stealing it.

  4. Bob Wallace says:

    OK, can we please quit trying to scare ourselves by talking about oil in terms of a bell shaped curve?

    We would be better served by using a price/time curve. It’s not that oil is going to “disappear”, that we’re going to fall off of some “oil cliff” and perish. There’s bazillions of gallons of oil in the ground, it is just going to get more expensive to extract it.

    (Expensive in terms of money, EROEI, pollution,….)

    The really cheap oil was scooped up from the surface long ago. Then we pumped up the shallow well stuff. Now we’re going deeper and out to sea. And we’re starting to harvest some from the next most expensive sources such as tar sands.

    What we should be looking at is the fact that oil is poised to get pricey in the near future. There’s likely to be an up sweep in the line as we return to $100+ barrels.

    Will we zoom right up to $200 barrels? I doubt it.

    We’ve already demonstrated to ourselves that there is a price where demand decay sets in. And a price where alternative power sources/transportation systems come to market.

    Remember, the estimated decline in “cheap” oil is estimated be 2% or less per year. That says that we need to move no more than 2% of our transportation away from current practices in order to keep demand balanced with supply.

    2% – short term – more public transportation, car pooling, curtailing unnecessary trips, sleeping in the office, etc.

    Nissan says that they will start mass producing a 100 mile range all electric car in 2010. We’re already producing extra night time electricity from our wind farms. By bringing more PHEVs and BEVs to market and continuing to build wind generation to meet peak needs we can stay ahead of the 2% decline in $100 oil.

  5. The IEA admitting to trouble ahead in the rosy oily future of energy is like the Bush administration admitting to peak oil:

    Yet I was staggered to see just that – a reference to the peak having been surpassed deep within a pdf the DOE put out last month: footnote 8:

    “Constraints on Traditional Energy Supply

    In the United States, domestic oil production peaked in 1972 and natural gas production peaked in 1973.7 Globally, oil production may be approaching its peak today.[8]

    [8] Hubbert’s Peak:
    The Impending World Oil Shortage (New Edition)
    Kenneth S. Deffeyes
    Both domestic and foreign oil are becoming more expensive to obtain, as quality (sour crudes) lessens and supplies become more difficult to extract.

    While domestic coal is relatively plentiful, environmental concerns limit its use. Moreover, the cost of building traditional coal-fired power plants has been escalating, driven by pollution control requirements, high construction levels globally, tightness in the equipment and engineering markets, and high prices for raw materials.

    Overall, capital costs for coal power plants have risen 78 percent since 2000.[10] General Electric gives estimates of $2,000–$3,000 per kW for new conventional coal-fired plants, and Duke Energy is proposing to spend $1.83 billion to build an 800-MW plant in North Carolina, or $2,300/kW.[11] At $2,500 per kW installed, the delivered price of electricity to consumers would be roughly 10 to 12 cents per kWh, more than 60 percent above current average industrial electricity prices.[12]

  6. I wonder – are there energy bureaucrats within the DOE that transcend administrations?

    And could they be signalling for help from inside the prisoncamp as they see the end is nigh for the Bush administration?

  7. Bob Wallace – we looked good for EVs by 2010 – till this complete collapse of the autoindustry. Now its going to be like extracting the baby from the dying woman, getting those EVs out.

    What do you think of the CalCars idea to mass order EVs and PHEVs – now the utilities are getting in on the idea – like switching production lines for WWII:

  8. David B. Benson says:

    And according to David Rutledge, peak coal will happen in about 2030 CE.

  9. Bob Wallace says:

    Susan –

    I doubt that the current economic downturn will have much, if any, effect on battery development. Manufacturers now have the smell of the grain bag in their nose and they’re not likely to be deterred from speeding toward the finish line. There’s a lot of money to be made in battery sales in years to come.

    Mass purchase of PHEVs/BEVs could be a good thing. Apparently one of the reasons that battery packs are so expensive is an economy of scale problem. It’s like lots of other new technologies, if we can get production levels up we often can bring retail prices down.

    Having the government buy up large fleets might not be the optimal place to put these new machines. We might want to give thought to how much they will be driven. It might make more sense to get them into the hands of people who drive a lot of miles. Not into the parking space of someone who drives three miles per day. Decreasing oil demand benefits us all when we pull up to the pump.

  10. Bob Wallace says:

    Getting there….

    Someone feel free to correct my thinking, I’m way out of my knowledge base. That said…

    Seems like we’ve got about 24 gigwatts of installed wind turbines. And they’re producing about 2% of our power.

    We’re installing about 6 gigs this year (2008). Hard to believe that we couldn’t install 4x as much if we decided to. Crank it up and bring another 2% per year on line.

    We get about 50% of our electricity from coal. 50%/2% says that we could get coal free by 2033. Now add in some thermal solar, geothermal, PV, negawatts….

    I just don’t get it when people say “no way by 2030”.

  11. ccpo says:

    Bob Wallace said: Someone feel free to correct my thinking, I’m way out of my knowledge base.

    I agree. You said, despite the new IEA report, that cheap oil is/will decline at 2% a year. I don’t know where that came from, but it doesn’t matter even if true. What is important is the overall decline rates of @9% in old fields and 6.7 overall. How in the world can oil declining in availability not be important? How does that not impact prices and economic development?

    Please note that in the recessions in @ ’73 and @ ’79 GDP and oil production fell by the same percentage. Is this coincidence? I think not. What we are likely to see is an exacerbation of the energy problem due to reduced development of oil production because of financial issues. Thus, when the economy attempts a rebound, the energy won’t be there to support it.

    A simple way of looking at it is this: Approximately 1 to 1.2 Trillion recoverable barrels left of crude. Over the next 12 years we will likely use between 200B and 300B barrels. That puts us squarely into the 50 to 60% depletion range, and nowhere to go but down. (This is optimistic, actually, as replacing 4 KSA’s is a joke and decline should be even sharper.)

    That is, 2008 is likely to be the peak of a plateau that started four years ago, and we will almost certainly never go above that. Sans major developments in renewables/alternatives, we are in deep doo-doo.

    Without the energy development requires, it can’t happen.