Back in August, we covered an unexpected outbreak of honesty from the International Energy Agency regarding global oil supplies. At that time, we had the IEA Chief Economist admitting for the first time that most of the world’s largest oil fields were at or near peak production.
This week more IEA people are going off the reservation and declaring that the IEA’s official statements regarding future oil supplies were basically just shit they made up and had no basis in reality.
“The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.
“Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.”
IEA Petroleum Production Estimates (IEA, The Guardian)
The problem here is that the last time I looked, global demand for oil products was around 85m barrels a day. And that is in a depressed global economy. That only leaves about 10m bbl/day in excess capacity to support a robust economic recovery. Since plunging to $38 or so in April, crude futures have climbed consistently back up into the mid-60′s and 70′s this summer and have started to show support in the $80 range the last week or so. The upshot of all this is that as soon as economic growth begins to take off, demand is going to come close to supply and oil prices are going to go back to very high levels. This will effectively put the brakes on any serious recovery.
Time is not on our side in the move to move our economies out of their dependence on oil. To my mind, energy policy will need to be front anc center once the health-care debate is finished.
