The IEA has claimed for years that peak oil did not exist. The always overly optimistic agency is tasked with predicting oil flows for decades in advance and then putting a positive spin on the results or face losing their contract with the countries that hire the agency.
Jeffrey Rubin, the former chief economist at CIBC World Markets, had an interesting article in the Huffington Post recently. I am reprinting that article Below. He was one of the first economists to predict high oil prices as far back as 2000. He authored a book called, "Why Your World Is About to Get a Whole Lot Smaller."
THE INTERNATIONAL ENERGY AGENCY FORECASTS PEAK OIL
The optimism typically found in the International Energy Agency's annual World Energy Outlook report is strangely missing this year. Instead, the IEA is taking a far more sober perspective on the world's oil-consuming future due to our ever-greater reliance on costly unconventional oil sources.
Output from currently producing fields is projected to fall precipitously, looking ironically like the steeply declining trajectory of peak oil's Hubbert curve. (I say ironically because the IEA has historically denied the existence of peak oil.) According to the report, by 2035 three quarters of currently operating oil fields won't be producing anymore. In fact, current fields are only expected to account for less than one fifth of that year's production.
That leaves over 80 percent of the IEA's 2035 production projection coming from new oil fields, ones that either haven't yet been developed or haven't even been discovered. And the contribution from that undiscovered category alone is still far greater than the one from currently producing fields. That's a tall order for new field discovery.
Undeveloped or undiscovered oil fields, growth in tar sands production and increased reliance on natural gas liquids account for all the expected growth in world oil production over the next two and a half decades. Curiously absent from this list is any contribution from conventional oil production - you know, the type you can afford to burn in your car, the type the global economy can afford to use to power transoceanic trade? According to IEA projections, it now appears that the production of conventional oil peaked - dare I say it? - back in 2006.
Of course that doesn't mean the world is literally running out of oil, as the World Energy Outlook emphasizes with its forecast of ever-greater reliance on unconventional oil resources. But for these resources to become legitimate reserves, they have to be accessed at prices consumers can afford to pay. Yet even the IEA acknowledges that oil prices as high as $200 per barrel will be needed to make these resources economically viable in the future.
And therein lies the greatest weakness of their projections. The agency's forecast rightly projects that oil prices will soon rise to triple-digit range - albeit nowhere near the pace that would be required to drive their supply forecast for robust growth in the use of unconventional oil. But nowhere is there any appreciation for what that would mean for world economic growth.
The global economy experienced its most severe post-war recession after its brief initial encounter with the very same prices that are now being forecast for our oil-consuming future. And that recession occurred despite the mitigation of record fiscal stimulus and bailouts that have left countries like Ireland bankrupt and may potentially threaten the solvency of creditor countries like the UK.
So what are the chances our economy will ever be able to afford to burn the oil that the IEA's supply forecast says we'll find?
I listened to a speech by Jeff recently and he was dead on in his analysis. He, as do a lot of other economists, believe the recession was caused by high oil prices. They also believe that an even greater global recession is coming when oil demand exceeds production on a permanent basis as soon as 2014. Everyone reading this needs to plan now for what could be a decade long recession that alters permanently our way of life. Cheap oil will no longer be available to transport us wherever we want to go, whenever we want to travel. Transporting goods from China, Brazil, fruit and produce from South America, beef from Venezuela, etc will be a thing of the past.
Would you have done anything different in 2006 if you new the 2008 recession was coming? Prepare for coming global oil recession in your long term plans now. It will be a LOT worse.
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