Wednesday, November 11, 2009

World Oil Reserves Running Out Much Faster Than Previously Believed

A whistleblower from the International Energy Association (IEA) has told the Guardian UK that the agency has been deliberately misleading the public about oil reserves in order to avert a panic on world markets.

The senior official, who was unwilling to be identified for fear of reprisals inside the industry, says the US encouraged the IEA to underestimate the decline in worldwide oil reserves while overestimating the potential for new reserves.

World oil production is currently 83 million barrels a day. Since 2005, the IEA has had to downwardly asses its projections for 2030 from 120 millions barrels per day to 116, and then to 105.

But even that is highly inflated, according to the official.

"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. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he told the British paper.

A second IEA source, no longer with the agency, backed his former colleague's claims. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he said.

The implications for the US and the rest of the industrial world are stark.

International observers have long suspected that the IEA's projections for future oil output were misleading.

Yet last summer, the IEA's chief economist publicly stated that most of the world's major oil fields have already passed their peak production.

Dr Fatih Birol said the world is heading for a catastrophic energy crunch because oil is running out far faster than previously predicted. He noted that global production is likely to peak in about 10 years.

The Guardian's latest report reveals this projection to be overly optimistic.

The first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, found that most of the biggest fields have already peaked and that the rate of decline in oil production is now 6.7%.

It's worth noting that the doubling rate of 7% is 10 years. In other words, anything growing or shrinking by 7% will see a doubling effect in 10 years.

In its landmark assessment of the world's major oil fields, the IEA concluded that global consumption of oil was "patently unsustainable", with expected demand far outstripping supply.

Dr Birol said that even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030.

That assessment was quite sobering. But in light of the new warning from the IEA whistleblowers, the future of oil production and supply appears downright scary.

It seems that production will in no way be able to meet growing world demand, and that our lives in the heavily oil-dependent modern economy are simply unsustainable and need to change quickly.

Eventually, there will be major disruptions and shortages. Such events will cripple the world economy and radically alter our way of life.

In a grim and perhaps tacit warning last summer, Dr. Birol said the following:

"One day we will run out of oil. It is not today or tomorrow, but one day we will run out of oil. And we have to leave oil before oil leaves us. And we have to prepare ourselves for that day. The earlier we start, the better, because all of our economic and social system is based on oil. So to change from that will take a lot of time and a lot of money and we should take this issue very seriously."

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