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June 28, 2007

"We Have A Very Big Problem" Peak Oil

Jerome-a-Paris links to an unusually frank interview in Le Monde (in French) with Fatih Birol, chief economist of the International Energy Agency. Birol (Jerome's translation):

If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert.

Iraqi production rises exponentially? Saudi Arabia fulfills all its promises? What are the chances?

Jerome says:

The whole interview is amazingly frank and free of diplomatic obfuscation. He blasts biofuels ("not based on any kind of economic rationality"), he notes that Africa is suffering the most already from expensive oil, he points out that even a slowing of China's growth will not reduce oil demand, and he talks pretty explicitly about production peaks and depletion:
Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out. There are new proofs of that fact every day. At the same we'll see the peak of China's economic growth. The two events will coincide: the explosion of Chinese growth, and the fall in non-OPEP oil production. Will the oil world manage to face that twin shock is an open question.

He says it again twice in the interview: the gap between demand and supply will widen, and he blasts our governments for doing so little:

Unfortunately, there's a lot of talk, but very little action. I really hope that consuming nations will understand the gravity of the situation and put in place radical and extremely tough policies to curb oil demand growth.

Of course, we might need to curb more than "demand growth", and actually move to curb "demand" itself, but his words are at least quite direct and explicit. Even more interestingly, he puts the finger on two important but rarely discussed items: field depletion (he mentions an 8% decline rate for mature fields, but indicates that even a 1% difference in the actual number would mean huge volumes by 2020), and Saudi reserves:

I understand the Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia - as well as other producing countries and oil companies - should be more transparent in their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.

While not a direct attack on Saudi numbers, this is by far the most explicit voicing of doubt about their reserves from any official of a major organisation that I have ever read. "No official reason to doubt"??? That's a pretty gaping hole there to sneak other kinds of doubts... He notes that he believes Saudi Arabian promises to be able to bring its capacity from 12mb/d today to 15mb/d in 2015, but notes at the same time that (i) it's the only place in the world (other, potentially, than Iraq) where production can grow and (ii) it's less than the expected demand growth by then from China alone. [Emphasis in the original]

Birol is an expert, but even he says, "the numbers are very simple, there's no need to be an expert." It's coming, and probably sooner than you think.

Posted by Jonathan at June 28, 2007 05:52 PM  del.icio.us digg NewsVine Reddit YahooMyWeb


Two words: solar hydrogen
The Sahara is just sitting there, waiting....

Posted by: Jason at June 29, 2007 07:58 AM

Two words: solar hydrogen
The Sahara is just sitting there, waiting....

Yes, of course, technology will save us....

Posted by: Derek at June 29, 2007 10:39 AM

Actually it's coming as soon as I thought. I'm somewhat prepared. I've got my front row seat for the collapse on ten acres of isolated farmland. Technology? It's too late my freind, even if it did work.

Posted by: bruce from chicago at June 29, 2007 06:58 PM

You're quite right, we should just sit back and do sweet f all.

Posted by: Jason at July 2, 2007 03:57 AM