Peak Oil, the Economic Meltdown, and the 2008 World Energy Report

The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable….environmentally, economically, socially.” – IEA, World Energy Outlook 2008 Edition

Once the economy recovers and the demand bounces back, we think about 2010, 2011, we may be caught by surprise and this will be a nasty surprise, which would mean that we can see prices which may be even higher than what we have seen last summer”  – Dr Fatih Birol, IEA Chief Economist, November 2008

The International Energy Agency [IEA] released their annual and much anticipated World Energy Outlook this week.  The reason for much of the anticipation was the inclusion in this years report of a depletion analysis of the world’s 800 operating oil fields.  The reason this depletion analysis is so important, is that it gives the world a clear picture of just how much new oil needs to discovered and brought on line just to maintain production at current levels.  The news is not encouraging.

The IEA estimates “that the average production-weighted observed decline rate worldwide is currently 6.7% for fields that have passed their production peak.”  This decline rate is predicated on substantial investment in Enhanced Oil Recovery techniques to mitigate a “natural decline rate estimated at 9.1% for post peak fields”.  To put this into perspective, using the 6.7% figure, about 5.025 million barrels per day of production would have to be brought on line every year just to equal current declines in production.  That’s the equivalent of one new Saudi Arabia every two years!

Incredibly, the IEA thinks that not only can we keep up with current decline rates, but that we can grow production by an average of 1% per year to the year 2030.  They base this assertion on a projected oil and gas exploration and development investment of $8.4-Trillion between now and the year 2030.

However, this is where IEA’s confidence in a stable future oil supply begins to erode.  The bulk of this investment would have to be made in the 13 member states of OPEC where the IEA thinks most of reserves will be found.  Aside from the possibility that those reserves may not exist, given the growing forces of “Resource Nationalism” and “saving reserves for future generations”, this investment is doubtful.  In addition, because some 30 million barrels per day of new capacity is needed by 2015, substantial new investment needs to be made NOW to avoid an oil supply crisis after 2010.  This investment must be made in the face of falling oil prices and a global economic meltdown.  The current and inconvenient reality is that exploration and development projects are being postponed and cancelled rather than initiated, setting us up for Dr. Birol’s nasty surprise sometime after 2010.

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3 responses to “Peak Oil, the Economic Meltdown, and the 2008 World Energy Report

  1. The last 168 BILLION DOLLAR round of stimulus checks did NADA for our economy. We must not as a nation forget the role the high cost of our dependence on foreign fuel played in the demise of businesses from the largest to the smallest. The exorbitant cost of gas the past year has done serious damage to our economy and society. Jobs and homes have been lost at a record rate. The increased cost of production and shipping of every consumer good imaginable have been passed on to the consumer.What OPEC has in store for our future is not pretty. We need to take lessons from our mistakes.WE also need to get out from under the grip our dependence on fore gin oil has on us. Why not take some of these billions and invest in America becoming energy independent. Driving an electric car would cost the equivalent of 60 cents a gallon. The electricity could be generated by solar or wind power. Green technology would create millions of badly needed new jobs. What America needs is a green revolution. It is time for us to move forward with alternative energy. I just read Jeff Wilson’s new book The Manhattan Project of 2009. I highly recommend this book to anyone who is concerned about the downward spiral of our economy and it’s effect on our society and would like to see our country become energy independent!

  2. Left it too late. All those solar panels and wind generators require not only massive investment in the facilities to make them…….but massive amounts of oil, coal, gas, etc to power those plants. Should have been doing it all along, investing our power from oil, gas, coal etc into building and producing renewable resources, now it is too late. Get ready for the collapse of civilisation and don’t bother whinging about it as you read this response while there are several lights in your house burning that nobody is using, and the TV is probably going and nobody watching it either……not to mention that tiny little matchbox car called a hummer or SUV you have parked outside…… are all to blame.

  3. Too late to avoid 20 years of a very painful transition, but not too late to avoid a catastrophic collapse. We are all to blame, but only because most of us know not what we do.

    It may not be as bad as you seem to think.

    In the words of Joanna Macy:

    The most remarkable feature of this historical moment on Earth is not that we are on the way to destroying the world—we’ve actually been on the way for quite a while. It is that we are beginning to wake up, as from a millennia-long sleep, to a whole new relationship to our world, to ourselves and each other. – Joanna Macy

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