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Oil Supply Crunch: 2011-2015

Concerns are mounting about peak oil, and there continues to be much debate over when the peak will be reached, whether a plateau can be sustained or whether the onset of decline would occur quickly, whether we will hit peak demand before we hit peak supply, etc.

There is convincing evidence that conventional oil production has already peaked, since we have been stuck at around 74 mbpd for over half a decade (despite the incentive of record high prices).

There also seems to be growing consensus that global liquids production (currently around 86 mbpd) is likely to peak within the next decade and almost certainly at less than 95 mbpd.

(Mainstream opinion a few years ago predicted no peak before 2030, with output at 130 mbpd.)

However, there are increasing warnings about an “oil supply crunch” within the next few years, not because of geological constraints, but because of under-investment.

These warnings began just over two years ago, yet the mainstream media have rarely mentioned them, so the public remains largely unaware.

Listed below is a chronology of some of these warnings, with URL links to the original sources.

One of the first warnings came from the chief economist of the International Energy Agency, Fatih Birol in the summer of 2007 and then reiterated in Nov. 2007, cited here:
http://www.davidstrahan.com/blog/?p=73

In May 2008 the Wall Street Journal ran an article entitled, Energy Watchdog Warns of Oil Supply Crunch:
http://online.wsj.com/article/SB121139527250011387.html

This was followed by a study from Chatham House, a highly regarded think-tank in the UK. In August 2008, it published a paper entitled The Coming Oil Supply Crunch in which author Paul Stevens predicted a shortage within the next 5-10 years. His 40-page study (which includes a May 09 reaffirmation of his 08 prediction) is available here:
http://www.chathamhouse.org.uk/publications/papers/view/-/id/652/

On Nov. 15, 2008 the International Energy Agency released its annual World Energy Outlook, which was something of a bombshell. The IEA, which had been quite dismissive of peak oil, suddenly warned, “What is needed is nothing short of an energy revolution… the era of cheap oil is over… time is running out….”

It further warned, “Some 30 mb/d of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil-supply crunch in that timeframe” (WEO, Executive Summary, p. 7).
The Executive Summary of the 2008 WEO is available here:
http://www.worldenergyoutlook.org/docs/weo2008/WEO2008_es_english.pdf

The release of the 2008 WEO was quickly followed by George Monbiot’s recorded interview with Mr. Birol and this article in The Guardian (Dec. 08):
http://www.guardian.co.uk/business/2008/dec/15/oil-peak-energy-iea

In August 2009 the IEA’s chiel economist again mentioned the likelihood of an oil supply crunch, this time indicating that it could occur any time after 2010:
http://www.independent.co.uk/news/science/warning-oil-supplies-are-runni...

In October 2009 Global Witness in the UK released its Heads in the Sand study which addressed government inaction on peak oil. This study also warns of a potential 7 mbpd gap between supply and demand by 2015 (p. 7 & 36):
http://www.globalwitness.org/media_library_detail.php/854/en/heads_in_th...

In Dec 2009 the CEO of Petrobras made a presentation in which he predicted an oil supply crunch for 2012 and 2013 (see figure 6 here):
http://canada.theoildrum.com/pdf/theoildrum_6169.pdf

In Feb. 2010 the UK Industry Task Force on Peak Oil & Energy Security (ITPOES) released its second report. ITPOES analyst Chris Skrebowski predicts a loss of spare capacity and a price spike “as early as 2012/2013 and certainly no later than 2014/2015” (p. 15).
http://peakoiltaskforce.net/

On Feb. 18, 2010, the US Joint Forces Command issued its Joint Operating Environment (JOE) which warned that “ By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD” (p. 29). A review of the 2010 JOE (with link to the original) is available here: http://www.energybulletin.net/node/52029

In March 2010 the Financial Times mentioned a crunch “in the middle of this decade” and blamed it on uncertainties caused by biofuels policies:
http://www.ft.com/cms/s/0/ea030306-26e8-11df-8c08-00144feabdc0.html

Also in March we had the chief scientist for the UK quoted as saying, “We’re talking supply not meeting demand in 2014-2015”:
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7500669...

In April 2010 the Guardian (UK) cited the US JOE report and raised an interesting question: why are warnings over near-term oil supply (in the 2012- 2015 time-frame) being issued by the US Department of Defense, while the civilian Department of Energy has issued no such warning?
http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-suppl...

As the above information indicates, these warnings are numerous, consistent in their time-frame, and from highly credible sources.

What do you think? Leave a comment below.

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