Obama Administration Warns of Oil Shortages Ahead

Jim Brown
 
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I had to read it twice because I could not believe that any official in a U.S. administration would actually admit the possibility of peak oil. According to Glen Sweetman, a Dept or Energy director, "a chance exists that we may experience a decline" in liquid fuels between 2011-2015.

Glen's full title is Director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the DoE. Another DoE official responsible for liquid fuels, Lauren Mayne, explained, "Once maximum world oil production is reached, that level will be approximately maintained for several years hereafter, creating an undulating plateau. After this plateau period, production will experience a decline." This is one of the peak scenarios commonly repeated by the peak oil community. As demand exceeds production, price will slow demand and this will continue for several cycles before existing production is too small for even the drastically slowed demand. That will begin the peak oil decline.

Sweetman said the first stage of the undulating plateau could begin between 2011-2015 "IF THE INVESTMENT IS NOT THERE." This is a common excuse used and propagated by the IEA to describe why their forecast of 125 million barrels per day by 2030 has been cut to 105 million and is expected to decline to 90 million over the next couple of years. They claim there is plenty of oil but there would need to be $20 trillion in capital expenditures to "find" it and produce it. (How do they know it is there if it is not yet found?)

The real smoking gun came from a DoE meeting on liquid fuels in April 2009. The meeting went unnoticed until recently when some very pessimistic comments started to find their way into the public domain. In the graphic below from that meeting it shows what the DoE expects in the form of liquid fuel production through 2030. This looks suspiciously like the same charts the peak oil prophets show at their meetings and the press always laughs at them. How is it that the DoE has come up with their own analysis and it looks the same? Are we on the verge of a mainstream awakening that peak oil is real?

EIA Chart - 2009

According to the presentation and the transcript of DoEs April 2009 round-table, many oil producing regions should see their extractions diminish before 2015.

Non-OPEC conventional oil extractions (more than half of the world crude oil production today) should already be in decline, from 46.9 Mbpd in 2008 to 44.8 Mbpd in 2011, shows the graph page 8 of the DoE round-table presentation.

Total non-OPEC liquid fuel production has been stable since 2008, says the IEA in Paris. But the IEA does not provide figures dealing with just conventional crude oil extractions. In 2005, in the French newspaper Le Monde, the IEA chief economist Fatih Birol predicted that non-OPEC oil production would decline "soon after 2010". Till 2015, among the top 15 oil producing countries, only 6 will manage to significantly increase their liquid fuel production, shows the graph page 9 of the DoE round-table presentation.

7 of the 15 biggest producers are supposed to evolve towards substantial reductions of their outputs over a period starting in 2007 and ending in 2015 : Russia (- 0.15 Mbpd), China (- 0.2), Iran (- 0.4), Mexico (- 0.9), the United Arab Emirates (- 0.3), Venezuela (- 0.25) and Norway (- 0.7). Iraq's and Koweit's supplies should remain practically flat.

The DoE expects that the largest increase of production will need to come from within the United States: a 1.8 Mbpd boost over 8 years (from 2007 to 2015) that would equal to more than a quarter of the present U.S oil production. Since the early 70's, U.S oil production has been steadily plummeting.

So how is the U.S. going to raise its output by nearly 2 mbpd? The DoE says it will come from increased ethanol production not actual oil production. The DoE said, "U.S crude oil extractions have been decreasing for four decades because there are no fresh oil reserves of significant scale coming on-stream in Alaska or elsewhere in the "Lower 50s".

This is a surprising statement of facts from the DoE since their official position is that there will be plenty of oil through 2030. Sweetman acknowledged that OPEC Secretary General El-Badri had warned that out of 135 projects due to come on-stream over the next few years over 35 have now been put on hold until after 2013 due to lack of pricing power to fund the investment.

This is the same DoE that published a study in 2004 claiming oil production would rise steadily until 2037. This is the same DoE that published a Sweetman study in 2008 claiming the undulating plateau would not be reached until 2030 and the final peak oil decline would not occur until 2090.

This makes you wonder if the DoE staff and Sweetman in particular are taking their prescribed medications faithfully or are these vast changes in view a new symptom of the new DoE suffering withdrawal from the IEA cornucopia drug.

Since Sweetman is supervising the preparation of the next annual International Energy Outlook it makes you wonder what version we are going to get this year. Such a sense of uncertainty cast by the Department of Energy is unseen in times past. The DoE usually stands among the most optimistic sources regarding the issue of depletion of world oil reserves. Has the Fatih Birol honesty virus begun to spread?

Jim Brown

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