Comment on the IEA’s World Energy Outlook 2004
The following is a translation of a letter that has been sent on March 3rd by the Ludwig Bukow Systemstechnik Institute in Munich to Hans-Josef Fell, a prominent member of the German Parliament. It is particularly apposite given the IEA’s subsequent radical change of posture.
Dear Mr. Fell,
The latest publication of the IEA, the ‘World Energy Outlook 2004’, leaves an ambiguous impression. The abstract and the press release speak on the one hand of great challenges for the future which will have to be overcome, while on the other hand, it is assumed that the worldwide primary energy consumption could climb in the coming decades by as much as 60%. This is especially true for growth in petroleum consumption, which is expected to climb from 77 million barrels per day in 2002 to 121 million barrels per day in 2030.
Upon reading the complete report, it is clear that the authors have a solid grasp of the underlying facts of the oil sector. Chapter 3, ‘Oil Market Outlook’, contains in its description of the current state of affairs many correct and vital pieces of information:
The analysis of the reserves and the documented fossil record draws on the industry database of the IHS (and not on the statistics of the Oil & Gas Journal or the BP Statistical Review, both of which are unsuitable for a serious analysis). It is demonstrated that various sources for the estimation of the currently existing oil reserves all reach a similar conclusion.
It is shown how dubious the current reserve figures of corporations and governments are. Therefore, the report rightly encourages a greater transparency given that dependable data is an essential precondition for the plans of governments and the oil industry.
The concept of ‘oil peak’ is explicitly described as true and viewed as the essential paradigm shift of the future. The problem of the ‘decline’ in oil production in the existing production system is clearly addressed: in 2030, the oil fields of today will hardly be producing at all. The production will then almost completely have to come from new sources.
Many clues in this part of the text can only be interpreted to mean that the authors hold it for possible—if not for probable—that the supply situation will in the near future dramatically sharpen.
The report becomes problematic when dealing with long-term projections for future development. The basis is here no longer the reserves, but rather the ‘resources’, which are well known to be much larger. The USGS study of 2000 is used, as in the two previous editions of ‘World Energy Outlook’, to estimate the ‘resources’. This is the methodological trick! The resource discussion in the study has no recognizable connection to the previous analyses of reserves; it is as if one were in a parallel universe. Several of the previously mentioned estimations, well suited for reaching conclusions about the total oil available (Estimated Ultimate Recovery), are simply ignored. This is especially true for the so-called industry database of IHS-Energy where reserve revisions of a field are attributed to the year of discovery of the field and not to the year of the revision.
The most probable projection of future development, given the trends of the past years, can be taken from the history of the documented fossil fuel records. The many, substantiated criticisms of the USGS study are not mentioned at all. As we have shown in several publications, the results of the USGS study are far off the mark of every observable development.
In brief, the projection of the IEA, based on the result of the USGS study, states that the resource basis is sufficient for a growth in production to 121 million barrels per day in 2030, and that the peak will come no sooner than that.
Still, many preconditions would have to be met before such a scenario could materialize. These range from assumptions concerning economic and political conditions affecting investment in the oil industry to the simple fact that the essential resource basis would have to be available for such growth to occur. It should be noted that if the worldwide oil reserves are in fact less than predicted by the USGS, then the oil peak could be reached sooner, perhaps even by 2015. Every attentive reader, even if only a little informed, cannot have the impression that the assumptions in the report are realistic.
There are thus two options for interpreting the report. The first option is to presume that the authors, despite knowledge to the contrary, intentionally paint a rosy picture for the future, a picture which allows an unbroken continuance of current trends over the coming decades.
The other option is to assume that the authors, standing under massive political pressure, had no choice but to describe the current situation realistically while obfuscating and concealing the key conclusions concerning future development. The political pressure may possibly have been exercised in the following manner: the USA, as one of the most important member states of the IEA, pressed the IEA to take the USGS study of 2000 as their basis, to bar critical investigations of other studies, and to reject even the consideration of other studies. If this is the case, then the conclusions about the future supply of crude oil would have been practically peremptory.
The portrayal of the IEA of the possibility of an unbroken continuation of future growth in oil supply is, given the clearly recognizable limitations, a false and dangerous signal.
Dear Mr. Fell, we therefore put the following questions to you:
How do you and your fraction evaluate the WEO of 2004, and what conclusions do you draw from it?
How does the federal government view these matters?
Dr. Werner Zittel
What do you think? Leave a comment below.
Sign up for regular Resilience bulletins direct to your email.