Let’s “hope and pray that Hirsch is wrong” about our oil supply

Summary:  The global recession might push back the arrival of peak oil for three reasons.

  1. Less consumption now leaves more oil in the ground for future use.
  2. Less investment now in oil exploration and development means less consumption in the next few years (or decade).
  3. Alternative energy technology has more time to develop, reducing future oil consumption.

This is a grace period, useful if we make good use of the time.  If we squander it, we might find ourselves in more poorly prepared foe peak oil than if the recession had never happened.  For example,

  1. energy research might fall victim to budget cuts, and
  2. programs to develop unconventional and alternative energy sources might be scrapped.

The recession ends 5 years of torrid economic growth, and hence provides a reprieve from peak oil — not a pardon.  The following article providess one look into a future we cannot ignore.

When will the oil run out?“, George Monbiot, The Guardian, 15 December 2008 — “George Monbiot puts the question to Fatih Birol, chief economist of the International Energy Agency – and is both astonished and alarmed by the answer.”

Can you think of a major threat for which the British government does not prepare? It employs an army of civil servants, spooks and consultants to assess the chances of terrorist attacks, financial collapse, floods, epidemics, even asteroid strikes, and to work out what it should do if they happen. But there is one hazard about which it appears intensely relaxed: it has never conducted its own assessment of the state of global oil supplies and the possibility that one day they might peak and then go into decline.

If you ask, the government always produces the same response: “Global oil resources are adequate for the foreseeable future.” It knows this, it says, because of the assessments made by the International Energy Agency (IEA) in its World Energy Outlook reports.

In the 2007 report, the IEA does appear to support the government’s view. “World oil resources,” it states, “are judged to be sufficient to meet the projected growth in demand to 2030,” though it says nothing about what happens at that point, or whether they will continue to be sufficient after 2030. But this, as far as Whitehall is concerned, is the end of the matter. Like most of the rich world’s governments, the UK treats the IEA’s projections as gospel.

Earlier this year, I submitted a freedom of information request to the UK’s department for business, asking what contingency plans the government has made for global supplies of oil peaking by 2020. The answer was as follows: “The government does not feel the need to hold contingency plans specifically for the eventuality of crude-oil supplies peaking between now and 2020.”

So the IEA had better be right. In the report on peak oil commissioned by the US department of energy, the oil analyst Robert L Hirsch concluded that “without timely mitigation, the economic, social and political costs” of world oil supplies peaking “will be unprecedented”. He went on to explain what “timely mitigation” meant. Even a worldwide emergency response “10 years before world oil peaking”, he wrote, would leave “a liquid-fuels shortfall roughly a decade after the time that oil would have peaked”. To avoid global economic collapse, we need to begin “a mitigation crash programme 20 years before peaking”. If Hirsch is right, and if oil supplies peak before 2028, we’re in deep doodah.

So burn this into your mind: between 2007 and 2008 the IEA radically changed its assessment. Until this year’s report, the agency mocked people who said that oil supplies might peak. In the foreword to a book it published in 2005, its executive director, Claude Mandil, dismissed those who warned of this event as “doomsayers”. “The IEA has long maintained that none of this is a cause for concern,” he wrote. “Hydrocarbon resources around the world are abundant and will easily fuel the world through its transition to a sustainable energy future.”

In its 2007 World Energy Outlook, the IEA predicted a rate of decline in output from the world’s existing oilfields of 3.7% a year. This, it said, presented a short-term challenge, with the possibility of a temporary supply crunch in 2015, but with sufficient investment any shortfall could be covered. But the new report, published last month, carried a very different message: a projected rate of decline of 6.7%, which means a much greater gap to fill.

More importantly, in the 2008 report the IEA suggests for the first time that world petroleum supplies might hit the buffers. “Although global oil production in total is not expected to peak before 2030, production of conventional oil … is projected to level off towards the end of the projection period.” These bland words reveal a major shift. Never before has one of the IEA’s energy outlooks forecast the peaking or plateauing of the world’s conventional oil production (which is what we mean when we talk about peak oil).

But that is as specific as the report gets. Does it or doesn’t it mean that we have time to prepare? What does “towards the end of the projection period” mean? The agency has never produced a more precise forecast – until now. For the first time, in the interview I conducted with its chief economist Fatih Birol recently, it has given us a date. And it should scare the pants off anyone who understands the implications.

Birol, the lead author of the new energy outlook, is a small, shrewd, unflustered man with thick grey hair and Alistair Darling eyebrows. He explained to me that the agency’s new projections were based on a major study it had undertaken into decline rates in the world’s 800 largest oilfields. So what were its previous figures based on?

It was mainly an assumption, a global assumption about the world’s oil fields. This year, we looked at it country by country, field by field and we looked at it also onshore and offshore. It was very, very detailed. Last year it was an assumption, and this year it’s a finding of our study.

I told him that it seemed extraordinary to me that the IEA hadn’t done this work before, but had based its assessment on educated guesswork. “In fact nobody had done this research,” he told me. “This is the first publicly available data.”

So was it not irresponsible to publish a decline rate of 3.7% in 2007, when there was no proper research supporting it?

No, our previous decline assumptions have always mentioned that these are assumptions to the best of our knowledge – and we also said that the declines [could be] higher than what we have assumed.

Then I asked him a question for which I didn’t expect a straight answer: could he give me a precise date by which he expects conventional oil supplies to stop growing?

In terms of non-Opec [countries outside the big oil producers’ cartel] we are expecting that in three, four years’ time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that Opec will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is, of course, not good news from a global-oil-supply point of view.

Around 2020. That casts the issue in quite a different light. Birol’s date, if correct, gives us about 11 years to prepare. If the Hirsch report is right, we have already missed the boat. Birol says we need a “global energy revolution” to avoid an oil crunch, including (disastrously for the environment) a massive global drive to exploit unconventional oils, such as the Canadian tar sands. But nothing on this scale has yet happened, and Hirsch suggests that even if it began today, the necessary investments and infrastructure changes could not be made in time. Birol told me: “I think time is not on our side here.”

When I pressed him on the shift in the agency’s position, he argued that the IEA has been saying something like this all along.

We said in the past that one day we will run out of oil. We never said that we will have hundreds of years of oil … but what we have said is that this year, compared with past years, we have seen that the decline rates are significantly higher than what we have seen before. But our line that we are on an unsustainable energy path has not changed.

This, of course, is face-saving nonsense. There is a vast difference between a decline rate of 3.7% and 6.7%. There is an even bigger difference between suggesting that the world is following an unsustainable energy path – a statement almost everyone can subscribe to – and revealing that conventional oil supplies are likely to plateau around 2020. If this is what the IEA meant in the past, it wasn’t expressing itself very clearly.

So what do we do? We could take to the hills, or we could hope and pray that Hirsch is wrong about the 20-year lead time, and begin a global crash programme today of fuel efficiency and electrification. In either case, the British government had better start drawing up some contingency plans.


If you are new to this site, please glance at the archives below.  You may find answers to your questions in these.

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For more information from the FM site

To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp relevance to this topic:

Posts on the FM site about peak oil and energy:

Some posts about unconventional and alternative energy sources

  1. Links to articles and presentations of some A-team energy experts , 11 November 2007
  2. The most dangerous form of Peak Oil , 8 April 2008
  3. The three forms of Peak Oil (let’s hope for the benign form) , 23 April 2008
  4. The world changed last week, with no headlines to mark the news, 25 April 2008
  5. Fusion energy, too risky a bet for America (we prefer to rely on war) , 4 May 2008
  6. Peak Oil Doomsters debunked, end of civilization called off , 8 May 2008
  7. When the King of Saudi Arabia talks about oil, we should listen , 2 July 2008
  8. Red Alert: the Saudi Princes have annouced the arrival of Peak Oil , 11 July 2008
  9. Good news about oil, but for our grandkids – not us , 14 July 2008
  10. The secret cause of high oil prices , 6 August 2008
  11. Another example showing how energy research is just inspired guessing, since America prefers being blind, 23 September 2008

A series about energy myths

  1. Our massive reserves of unconventional oil.
  2. We’ll run crash programs to solve peak oil, just as we mobilized for WWII.
  3. Demand creates supply, by raising prices.
  4. Oil is Oil, even if it is not oil
  5. Demand creates supply, from new technology.
  6. The greenest of energy: inedible biofuels

Originally published at Fabius Maximus and reproduced here with the author’s permission.

6 Responses to "Let’s “hope and pray that Hirsch is wrong” about our oil supply"

  1. Clifford Wirth, Ph.D.   January 11, 2009 at 1:09 pm

    The IEA is wrong, Peak Oil is now.The top story of the year is that global crude oil production peaked in 2008.The media, governments, world leaders, and public should focus on this issue.Global crude oil production had been rising briskly until 2004, then plateaued for four years. Because oil producers were extracting at maximum effort to profit from high oil prices, this plateau is a clear indication of Peak Oil.Then in August and September of 2008 while oil prices were still very high, global crude oil production fell nearly one million barrels per day, clear evidence of Peak Oil (See Rembrandt Koppelaar, Editor of “Oil Watch Monthly,” December 2008, page 1) http://www.peakoil.nl/wp-content/uploads/2008/12/2008_december_oilwatch_monthly.pdf.Peak Oil is now.Credit for accurate Peak Oil predictions (within a few years) goes to the following (projected year for peak given in parentheses):* Association for the Study of Peak Oil (2007)* Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008)* Tony Eriksen, Oil stock analyst; Samuel Foucher, oil analyst; and Stuart Staniford, Physicist [Wikipedia Oil Megaprojects] (2008)* Matthew Simmons, Energy investment banker, (2007)* T. Boone Pickens, Oil and gas investor (2007)* U.S. Army Corps of Engineers (2005)* Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005)* Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)* Chris Skrebowski, Editor of “Petroleum Review” (2010)* Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)* Energy Watch Group in Germany (2006)* Fredrik Robelius, Oil analyst and author of “Giant Oil Fields” (2008 to 2018)Oil production will now begin to decline terminally.Within a year or two, it is likely that oil prices will skyrocket as supply falls below demand. OPEC cuts could exacerbate the gap between supply and demand and drive prices even higher.Independent studies indicate that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.Alternatives will not even begin to fill the gap. There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:””By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.”With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.Documented:http://www.peakoilassociates.com/POAnalysis.htmlhttp://survivingpeakoil.blogspot.com/

  2. Steven   January 11, 2009 at 7:50 pm

    The high cost of fuel this past year did serious damage to our economy and society. After a brief reprieve gas prices are inching back up again. Our nation should not allow other nations to have such power over us and our economy . We have so much available to us in the way of technology and free sources of energy. WE seriously need to get on with becoming an energy independent nation. We are spending billions upon billions in bail out dollars. Why not spend some of those billions in getting alternative energy projects set up. We could create clean cheap energy, millions of badly needed new green jobs and lessen our dependence on foreign oil all in one fell swoop. Globally we are using oil at the rate of 2X faster than new oil is being discovered. Added to the strain on our supply once underdeveloped countries are exploding in populations and becoming more modern, putting more vehichles on their roads, further adding tot he strain. Oil is finite, it will run out one day in the not too distant future. Now is the time to start planning ahead. I just read an eye opening book by Jeff Wilson called The Manhattan Project of 2009. It would cost the equivalent of 60 cents per gallon to drive and charge an electric car.If all gasoline cars, trucks, and SUV’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Why don’t we use some of the billions in bail out money to bail us out of our dependence on foreign oil? This past year the high cost of fuel so seriously damaged our economy and society that the ripple effects will be felt for years to come. http://www.themanhattanprojectof2009.com

  3. Nicolas   January 11, 2009 at 9:05 pm

    You say:

    “The global recession might push back the arrival of peak oil for three reasons.1. Less consumption…2. … less consumption …3. … reducing future oil consumption.”

    If there’s going to be less consumption as of now, then there will also be less production. Ergo, peak oil production will not have been pushed back, it will have arrived and is in the past.The lack of investment now, coupled with natural declines in existing oil wells between now and the re-launch of investment at some future date means production will never exceed the past maximum production level.

    • Dan Herkes   January 12, 2009 at 6:13 am

      Well reasoned. But, the price could just as easily go back up. Was the oil price peak just a speculative bubble?

  4. Todd   January 12, 2009 at 6:06 pm

    I agree with the above comment. The current reduction in consumption and investment may mean that then the economy picks back up oil producers may not be able to ratchet production back up to the levels of summer ’08 which means we may have peaked already. Of course, we won’t know this for some time.

  5. Anonymous   January 13, 2009 at 4:09 am

    http://zawya.com/Story.cfm/sidv51n50-2EF02/IEA%20Forecasts%20First%20Annual%20Oil%20Demand%20Contraction%20For%2025%20Years/Excerpt: “In the latest monthly Oil Market Report, published on 11 December, the agency [the IEA] says: “Global oil demand is now expected to contract in 2008 for the first time since 1983, shrinking by 200,000 b/d, with the total this year revised down by 350,000 b/d to 85.8mn b/d. In 2009 demand will grow again to a downward-adjusted 86.3mn b/d. This forecast is based on the IMF assumption that the global economy will gradually recover from 2H09.”Okay, let’s compare supply destruction to demand destruction then.http://www.worldoil.com/INFOCENTER/STATISTICS_DETAIL.ASP?STATFILE=_WORLDOILPRODUCTIONProduction is 86,460,000 million barrels per day as of October 2008, according to this group. 6.7% from that number means 5,792,820 barrels per day of supply destruction. Not to mention year one is just the beginning of that supply destruction. Demand, by comparison, they say went down by an anemic 200,000 barrels per day in 2008. It may take a year, two, or even three for things to get really ugly, but there’s no way this will have a good ending. No way.