Peak Oil : IEA's predictions seeming more and more infeasible with time
25 Nov, 2009 10:28 am
On November 9, the Uppsala University in Sweden published a report titled "The Peak of the Oil Age - The Uppsala World Energy Outlook". The report performs an analysis of the oil production forecast done by the International Energy Agency in 2008. One day before the release of the IEA 2009 edition of its World Energy Outlook report, the team of researchers notably pointed to a world oil supply in 2030 some 26 Mb/d lower than the IEA's predictions. Dr Michael Lardelli, one of the co-authors of the study, answers Scitizen's questions.
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Personally I was surprised that the whistleblowers should reveal this information on the IEA distortions. I wonder if it was a coincidence that the "Peak Of The Oil Age" paper was released on the very same day that the allegations came out? Certainly, word was spreading that the Global Energy Systems group in Uppsala had reanalysed the IEA data and their result implied that the peak of oil production was last year, and that a scientific publication was being prepared. Professor Aleklett who leads the Global Energy Systems group had presented this story in numerous venues in early June of this year. One would expect this to create some tension within the IEA. On the other hand, the WEO 2009 report was due for release two days later with little change in the production volume prognosis so the whistleblowers may have been prompted by the fact that the IEA's predictions were seeming more and more infeasible with time.
As the study proves evidence that we have reached Peak Oil, do you think it will once and for all cut short the discussion?
Unfortunately not. The so-called "Economic theory of energy" has too strong a hold on our business and political elite. This is the idea that high energy prices will stimulate new energy production which will ultimately cause energy prices to fall again. This theory "works" while the energy profit on energy extraction is high as it has been for oil in the past. However, as the size and abundance of newly discovered oilfields decreases, (as it has been doing since the 1960s) it becomes more and more difficult to find and extract oil. The energy profit decreases as does the rate of oil production. (Remember that Peak Oil is about rate of production, not how much is left.) For the next decade I expect you will hear governments and businesses crying that what is needed is massive investments in order to maintain or raise oil production. The IEA is already making these noises in WEO 2009. But the fact that the money does not exist for the necessary level of investment is just a reflection of the fact that our civilisation has insufficient spare energy to divert back into energy production. Looked at another way, the necessary price per barrel to make new oil development worthwhile/profitable is approaching the oil price at which economic activity is damaged. Until our leaders understand energy laws rather than economic theory they will not truly believe in peak oil.
To what extent should policy makers and investors then rethink their future plans for economic growth ?
In the past the IEA has based its predictions of future oil production on the expected level of future economic growth. The reason for this is that economic growth (increased real economic activity, not the illusion of rising stockmarkets due to inflationary low interest rates and money printing) requires an increased rate of energy use. Now that oil production is set to decrease (and, by the way, the energy profitability of oil production will decrease even faster but this was not mentioned in the paper) we will necessarily see a decrease in economic activity unless new sources of energy can be found. Unfortunately, even if alternative sources of energy exist, the infrastructure to harvest and utilize them at a sufficient rate to replace the energy from oil does not exist. So contraction in economic activity is inevitable. Also unfortunately, as the energy available to society decreases, it will become more and more difficult to build the infrastructure to harvest and utilize alternative sources of energy.
Can renewables fill the gap of oil depletion in time to retain our quality of life?
If by "quality of life" you mean our rampantly consumerist and growth-fixated society that is currently supported by an enormous abundance of cheap energy from fossil fuels then the answer is no. It is not only oil decline that threatens this society but also declining availability of other resources that are essential for our high-tech civilisation - such as rare earth metals, helium (from natural gas production) and, crucially, phosphate which is irreplaceable in industrial agriculture. A "business-as-usual" continuation of our society's current trajectory is impossible whether we want to accept that idea or not. (Mother Nature does not negotiate and infinite economic growth on this finite planet was always going to be impossible.) Hydroelectricity aside, renewable sources of energy provide only about 1% of world energy production. If we threw our every available effort into energy conservation and building a renewable energy infrastructure (a wartime, crash-program effort requiring great privation in the general community as energy is diverted to the crash program) then we might (?) be able to maintain our technological society. The now famous "Hirsch Report" prepared by consultants for the US Department of Energy analysed what would be needed to mitigate the effect of a peak in oil production and found that a crash program of measures would need to be begun 20 years before the peak occurred. Instead we have arrived at the peak totally unprepared.
Besides, the study is rather pessimistic about the commercial viability of non-conventional oil (oil sands, extra-heavy oil, GTL, CTL)...
Yes, the problem is the rate of production, not the size of the resource. For example, the production of oil from oil sands requires huge energy inputs and is limited by a number of other physical factors. This was analysed in a paper titled, "A Crash Program Scenario for the Canadian Oil Sands Industry" published in Energy Policy by the Global Energy Systems group in 2006.
Did you take cognizance of the WEO 2009? What does it seem to you?
I have not had access to the full WEO 2009 report but have only seen the executive summary that is available free online. It is notable for its focus on climate change and the need to move away from use of fossil fuels. The executive summary also notes that, "The financial crisis has cast a shadow over whether all the energy investment needed to meet growing energy needs can be mobilised." In other words, the outlook for investment into future oil (and other energy) production is now worse than when the WEO 2008 report was released upon which the "Peak Of The Oil Age" paper was based. Nevertheless WEO 2009 still states, "Oil demand (excluding biofuels) is projected to grow by 1% per year on average over the projection period, from 85 million barrels per day in 2008 to 105 mb/d in 2030" which is similar to the WEO 2008 report. You should realise that the reanalysis of WEO 2008 data that was presented in "Peak Of The Oil Age" used the extremely optimistic assumption that, in effect, the weighted average rate of depletion from oilfields yet to be developed will be similar to the highest rates seen in the past. By "depletion" I am talking about the "depletion rate of remaining recoverable resources" parameter defined by the Global Energy Systems group, not the percentage annual decline in production from oilfields. The figure of 75 Mb/d of oil production in 2030 published in "The Peak Of The Oil Age" is a very, very optimistic best case. It is only about 13% lower than today's rate. Real production in 2030 will probably be considerably lower than that.
The study is available online as PDF.
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http://www.watchinghistory.com/2009/12/age-of-oil.html