Thursday, October 30, 2008

IEA predicts oil decline

The Financial Times (UK) has leaked an International Energy Agency (IEA) report that predicts global oil prediction annual declines of between 6.4% and 9.1%. Since the IEA is a truly international organization, and also is not given to pessimistic scenarios, this is indeed alarming.

World will struggle to meet oil demand

By Carola Hoyos and Javier Blas

Published: October 29 2008 02:00 | Last updated: October 29 2008 02:00

Output from the world's oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de-mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries' demand will require investments of $360bn (£230bn) each year until 2030. The agency says even with investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.....

It should be noted that this kind of decline means that the world needs to discover a new Saudi Arabia every few years just to keep up. Given that global oil discoveries peaked in the mid-to-late 1960s, I find it hard to believe that this will happen. What the IEA is essentially saying here is that the age of cheap, readily available petroleum is likely coming to an end.

Also, given the way that industrial economies -- especially the United States -- are highly dependent upon ready supplies of cheap petroleum, it seems that a transitory phase of human civilization is rapidly approaching. Personally, I find it hard to imagine that many of the highly centralized and specialized institutions we have come to take for granted will survive the end of cheap oil. As Chris Martenson says in his "crash course" on economics, energy and the environment, "The next twenty years will be very different from the last twenty years."

It seems the debate over peak oil has largely ended. The new debate has to be one of preparedness and adjustment. I guess I fall on the side of the "pessimists" who do not believe that technology will save us -- after all, technology and energy are actually two different things, in spite of beliefs to the contrary prevalent in our society -- and that our future will be much more localized and offer much less in the way of material comfort.

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