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The peak oil crisis: a report to remember

Last week the International Energy Agency released its annual report (600 pages) on just where energy production and consumption in the world is going over the next 25 years.

Four or five years back, producing the annual World Energy Outlook was a rather straightforward task. All the IEA had to do was to take the world's current rate of economic growth, calculate how much oil, coal and natural gas it would take to support that growth and publish the results. There was never much consideration of whether resources would start to run out or become too expensive to exploit, or what, if anything, the massive amount of carbon dioxide that was being dumped into the atmosphere was doing to the climate.

In the last few years the IEA's annual report has come to recognize that the next 25 years are unlikely to be anything like the last 25 and the report has become much more nuanced. Gone are the extreme predictions that the world will be consuming 50 percent more oil 25 years from now. In their place are forecasts that global oil production will depend heavily on what alternative policy paths are taken by major governments and how much ($38 trillion is necessary) will be spent to find and exploit fossil fuel resources in the coming years.

As global energy policies and the realities and costs of production are very much in flux these days the EIA has decided to look at the future from three differing perspectives and forecast how the future might evolve if one of these three paths is followed. The first of course, is business as usual with no major changes to the energy policies of the major countries. The second is termed "new policies" which looks at what might happen if the major energy consumers do what they say they will do with regards to carbon emissions. The third, the "450 Scenario," examines what might happen if the world takes seriously the warning that we must keep atmospheric carbon below 450 parts per million which is believed will keep global warming down to a 2oC increase in average global temperature.


This year’s World Energy Outlook issues a number of dire warnings, some of which imply that human life on this earth might just be in its last century or so.

This year's World Energy Outlook issues a number of dire warnings, some of which imply that human life on this earth might just be in its last century or so. The strongest of these warnings is that we only have five years left to stop investing in carbon dioxide emitting infrastructure or we will have "locked in" or guaranteed that the world will soon be emitting enough carbon to drive global temperatures beyond the 2oC increase which many believe will be the tipping point. For what it's worth, some qualified observers believe that after the 2oC increase, it's straight downhill to plus 6oC and the extinction of most life on earth. The theory behind the IEA's "lock-in" is that new fossil fuel burning facilities such as electric power stations are so expensive that, once built, nobody is going shut them down and stop the belching of carbon into the atmosphere for another 50 years. Hence it will only take another five years of building these things before it is too late. Keep in mind that the Chinese open a new coal-fired power station every week. As the Agency says, if we don't change our ways in the next five years, "the door to 2 degrees will be closed forever."

If you are among those believing that ambient air temperatures at the end of the century are something for the grandchildren to worry about, then IEA has plenty of warnings about what just might be in store in the next few years. The Agency's chief economist currently is running around reminding anyone who will listen that, "we have to leave oil before it leaves us." Words to remember as you contemplate your next SUV. Oil prices are destined to remain high for decades to come, unless, of course, there are supply disruptions from geopolitical upheavals which will send them still higher.

There is too much wisdom in this 600 page tome to convey here, but here are a few of the more interesting points:

  • "Coal has met almost half of the increase in global energy demand over the last decade. Whether this trend alters and how quickly is among the most important questions for the future of the global energy economy."

  • "Rising transport demand and upstream costs reconfirm the end of cheap oil. All of the net increase in oil demand comes from the transport sector in emerging economies, as economic growth pushes up demand for personal mobility and freight."

  • "China's consumption of coal is almost half of global demand and its Five-Year Plan for 2011 to 2015, which aims to reduce the energy and carbon intensity of the economy, will be a determining factor for world coal markets."

  • An investment of $38 trillion is needed in the next 25 years if we are to adequately meet global energy needs. If this investment, takes place, a highly unlikely proposition given the state of the global economy, we might just get oil production up to 99 or perhaps 107 million b/d from the current.

Among the more interesting reactions to the new report was the one from Greenpeace which is among the more outspoken and militant environmental groups. Somewhere in its report the IEA opines that if we want to keep industrial civilization humming along, maybe we should be investing more in nuclear power stations which don't emit carbon. This of course is like waving a red shirt at a bull and brought back a blast about the Agency's being intellectually and morally inconsistent.

Despite the IEA's having made great progress along the stop-emitting-now-or-we-are-all-dead path, Greenpeace takes umbrage at the IEA's skepticism that renewables will be enough to keep civilization intact and the assertion that fossil fuels are likely to be around for a while.

This new EIA report is clearly not for the faint hearted.

Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

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