IEA's World Energy Report: The End of Oil as We Know It, Part 2
There will be an energy crisis in the near future that will make anything we've experienced so far seem like a pleasant memory.
For example, if the very center of the earth were entirely filled with oil, but we could only get to it through a single, very thin tube (limiting how fast we could pull the oil out), it wouldn't really matter how much was there -- a hundred trillion barrels could be there -- because how much we could do with it would be limited by the rate of extraction. Exponential economic growth requires increases in fuel consumption. It always has and it always will, unless and until a brand-new model of economics is developed.
Again, the lack of awareness of this basic concept of the difference between rates and amounts leaves the New York Times piece very much in doubt.
I could go on, but it's not all that helpful to once again catch the New York Times playing fast and loose with the facts in order to advance an agenda; for now, let's just observe that peak oil refers to a condition where the rate of extraction cannot be increased. If it were about amounts, then I suppose we would call it "peak reserves," but it's not, and for a reason: We care about the flow rates.
It is on this matter of flow rates that the IEA report was especially jarring and succinct: Peak oil has happened.
At this point, it may be good to remind ourselves that last year an IEA whistle-blower said that the organization had willfully underplayed looming shortages due to political pressures from the US.
Please read the following very carefully; it represents very important context for what we are about to discuss next. (I'm quoting at length because it's all essential):
The world is much closer to running out of oil than official estimates admit, according to a whistle-blower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.
The allegations raise serious questions about the accuracy of the organization's latest World Energy Outlook on oil demand and supply to be published tomorrow -- which is used by the British and many other governments to help guide their wider energy and climate change policies.
Now the "peak oil" theory is gaining support at the heart of the global energy establishment. "The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year," said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. "The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.
"Many inside the organization 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 added.
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organization was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.
The idea expressed above is simple enough: The oil data has been fudged to the upside by the IEA. Pressure has allegedly been applied upon the IEA to paint a rosier picture than a strict interpretation of the data would warrant. To speculate, the reason why is that there are a host of interlocking vested interests in the financial but especially political spheres that would find the public recognition of peak oil to be disruptive and therefore unwelcome.
This is just another example of fuzzy numbers, but the consequences of fibbing to ourselves about oil are far more dire than when we lie about employment. If it weren't so serious, it would be just another somewhat regrettable obfuscation of reality created to serve narrow and temporal political purposes.
Note: There is a well-recorded history, going back at least 13 years, of the IEA being fully aware of peak oil but bowing to political pressure to soften the message. Read paragraphs four and five of this piece by Colin Campbell for some more essential background.
Here's where we are:
The IEA has known about looming peak oil issues for more than a decade and is only now explicitly recognizing the idea in their public documents.
- People inside and outside of the IEA say that the organization has downplayed both the timing and potential severity of peak oil.
- Peak conventional oil has already happened.
- Any possible growth in future oil that the IEA can envision -- and we might suspect that even this is fudged to the upside and will retreat in subsequent reports -- is going to be almost entirely eaten up by China and India.
What this means is very, very simple: There will be an energy crisis in the near future that will make anything we've experienced so far seem like a pleasant memory.
The very best personal investments you can make at this stage will involve increasing your energy resilience. Make your house require less heating and cooling, use the sun wherever and whenever possible, and increase your personal storage of the fuels you use (if and when possible).
The potential knock-on effects of less energy to the complex system known as our economy are unpredictable in their exact details and timing, but are thoroughly knowable via their broad, topographical outlines. The economy will become simpler and less ordered.
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