The IEA changes its mind on Peak Oil

This week’s interview of the International Energy Agency’s chief economist Dr. Fatih Birol on National radio  has had a profound effect on me.  Not only was he giving official confirmation of what we have known for some years now - namely, that world crude oil production has already peaked, about five years ago, but the interview raised about as many questions as it answered.

Foremost amongst these was: why was Dr. Birol making such a stark statement, albeit buried in lots of statements that seemed to be more face-saving self-justification than fact through the antipodean media? (the ABC and Radio New Zealand).  

When I  looked on the internet I could not find any other references to this in the international media except for an article by George Monbiot who was content to merely refer to the ABC interview. I  further checked by sending an email to John Vidal, environmental editor of the Guardian and he wrote back to me: “(It) has been mentioned but we haven't interviewed Fatih directly yet.

We need ‘four Saudi Arabias’ to make up the shortfall.  I  knew I had heard this before so I checked.  Mike Ruppert said so in the movie Collapse, quoting the late Matt Simmons who had in fact said “three Saudi Arabias”.  Then he said “we are the first ones” to make a proper study of oil reserves; I knew that this work had been done years before by people like Colin Campbell, Matt Simmons and many others.

The language reminded me of Brezhnev-era reports that euphemistically warned of “shortcomings”in the Soviet economy just a few short years before collapse.

Something just didn’t add up.  Rather than rest with my indignation I decided to check a few things up.

AGENCY CHANGES ITS MIND IN 2008

Back in 2005 the executive director of the IEA Claude Mandil dismissed Peak Oilers as “doomsayers”.  He wrote: "The IEA has long maintained that none of this is a cause for concern. Hydrocarbon resources around the world are abundant and will easily fuel the world through its transition to a sustainable energy future." 

The 2007 the IEA’s World Energy Outlook (WEO) report stated: “World oil resources are judged to be sufficient to meet the projected growth in in demand to 2030” and predicted a rate of decline in output from the world's existing oilfields of 3.7% a year. This, it said, presented a short-term challenge, with the possibility of a temporary supply crunch in 2015, but with sufficient investment any shortfall could be covered. 

Yet, just a year later, at the end of 2008 the Agency was acknowledging Peak Oil and projecting a  peak in 2020. and a projected rate of decline of 6.7%. On the basis of this new report environmentalist George Monbiot who writes for the Guardian went to Paris to interview Dr. Birol and there is an excellent video    with excerts from this interview.You can see the consternation Monbiot - he has to repeat his question several times.

In his  account Monbiot writes:

“So the IEA had better be right. In the report on peak oil commissioned by the US department of energy, the oil analyst Robert L Hirsch concluded that "without timely mitigation, the economic, social and political costs" of world oil supplies peaking "will be unprecedented". He went on to explain what "timely mitigation" meant. Even a worldwide emergency response "10 years before world oil peaking", he wrote, would leave "a liquid-fuels shortfall roughly a decade after the time that oil would have peaked". To avoid global economic collapse, we need to begin "a mitigation crash programme 20 years before peaking". If Hirsch is right, and if oil supplies peak before 2028, we're in deep doodah”

Well, in 2011 it does seem not only that Robert Hirsch is right but that we have already peaked.  If the earlier predictions place us in deep doodah where does the new reality place us?

THE BACKGROUND

It turned out that there was a real story behind all of this.  I found an article from the Ecologist of last year which explained how a young 22-year old politics student Lionel Badal uncovered fraud at the IEA.  This was also covered by an earlier article in the Guardian “Key oil figures distorted by US pressure says whistleblower” (5)  I then found an account of the whole thing written by Claude Badal himself. (6)

It appears that  members of the Agency working on the 1998 WEO made a detailed assessment of future oil production  and  reached the conclusion: that oil production would peak well before 2020, around 2014.

The members of this team were Jean-Marie Bourdaire, Ken Wigley, Keith Miller and Fatih Birol.

Right from the start the team was under intense pressure and scrutiny so had to cloak their findings in some sort of code:

“A structural problem with oil as identified by the IEA team would undeniably question the sustainability of the current economic model. During the study, the IEA team realised the extent to which economic growth was correlated to the availability of abundant and cheap energy. Hence, once oil production would stop to grow and tensions appear, economic growth would become far more difficult to sustain, if not impossible. The IEA team was effectively walking on eggshells” (7)

So much so that one journalist David Fleming talked of a meeting with Fatih Birol in 1999 held in secret in a neutral location.  Apparently he even looked over his shoulder before talking.

They decided that they had to use coded language - they could not just blurt it out and say ‘We are looking at a big, permanent oil deficit, for which we can offer no solutions'.

In an open letter the Guardian Colin Campbell explained the background. (8)

In order to soften the message the team decided to add a ‘balancing item” called “unidentified conventional oil” that would suddenly appear, enough to  cancel the shortages.  This “balancing item” was a code for shortages.  It seems that pressure was brought to bear from the United States who had a vested interest in maintaining the fiction that oil was plentiful, and whose EIA reached the conclusion (without the detailed analysis of figures) that:

“ Oil prices are expected to remain relatively low, and resources are not expected to constrain substantial increases in oil demand through 2020... In 2020, world oil consumption is projected to exceed 115 million barrels per day....there is now widespread agreement that resources are not a key constraint in satisfying increases in world oil demand to 2020.”

It transpires that by revealing, albeit in code, the real situation the authors of the 1999 World Energy Outlook had got into trouble and intense pressure was put on the IEA by elements of the US administration:  Bourdaire, would have to leave the Agency while Wigley retired and Miller also left the IEA. The sole person from this team left was Dr. Fatih Birol who would go on to become the Agency’s chief economist.(9) 

It seems that he may have learned from this experience; the 2000 WEO, which he designed and managed suppressed any warning of a coming oil crunch. “The (2000) Outlook views the world oil-resource base as adequate to meet demand over the projection period... One need expect no global ‘supply crunch'.”

For almost a decade, until 2008 any findings that indicated that there was a problem with oil production or that discoveries were lower than expected were suppressed or ignored.

It seems amazing looking back now that the IEA could have told its member states in 2004 that oil prices were “assumed to remain flat until 2010, and then to begin to climb steadily to $29 in 2030 (sic)”.

The International Energy Agency was set up after the oil shocks of the 70’s to help prevent another oil shock and to provide a counterbalance to OPEC.  It has provided annual World Energy Outlooks for its member states that would help countries develop their energy policies. Basically the IEA was supposed to be a trustworthy and authoritative source of information.

Because of pressures from the US administration governments and businesses  from member states were basically misled until 2008 that oil prices would remain low - key years in which countries could have made decisions to develop renewable energy sources but didn’t because these energies were made to look uncompetitive compared to oil.

CONCLUSION

To me this statement by Dr. Birol that conventional oil has already peaked is of huge significance even if it is only confirming something that people in the Peak Oil movement have already known for some time. It seems incredible that this information from an Agency that has such importance for world governments should be largely ignored.  It seems that nobody wants to look at the true implications of this.

To quote George Monbiot again:

“To avoid global economic collapse, we need to begin "a mitigation crash programme 20 years before peaking". If Hirsch is right, and if oil supplies peak before 2028, we're in deep doodah”

Well, in 2011 it does seem not only that Robert Hirsch is right but that we have already peaked.  If the earlier predictions place us in deep doodah where does the new reality place us?